Page 47 - Insurance Times May 2022

31 March 2021, which was 7.2 times the number of individual 6.35 million from 8.21 million in the fourth quarter of fiscal
agents of the second largest life insurer. 2019. The sales in the first quarters of fiscal 2021 and fiscal
2022 were down 46.20% and 34.93% respectively.
LIC paid agents in commission Rs. 9,815.2 crore in six months
ending September 2021. In the fiscal ending March 2021, LIC acknowledges that it may lose more of its market share if
the figure stood at Rs. 22,358 crore. it does not offer its products on third party websites, signaling
that dependence on the agent network for distribution may
Operating expenses have to reduce in future for sustainability and growth.
For FY19, FY20, FY21 and the six months ended 30 September
2021, LIC’s operating expenses related to insurance business Covid impact on claims

to premium ratio (as a percentage of premium) was 8.33%, LIC’s insurance claims by death increased during the
8.99%, 8.66% and 10.08%, respectively, on a consolidated pandemic. For FY19, FY20, FY21 and the six months ended 30
basis. Total expenses (including commissions paid to agents) September 2021, its insurance claims by death in benefits
for LIC has been steadily worsening from Rs. 28,331.6 crore paid (net) were Rs. 17,128.84 crore, Rs. 17,527.98 crore, Rs.
in FY19 to Rs. 34,425.88 crore in FY20 to Rs. 35,162.21 crore 23,926.89 crore and Rs. 21,734.15 crore, respectively, on a
in FY21. Total expense for the six months of FY22 was Rs. consolidated basis, which were 6.79%, 6.86%, 8.29% and
18,906.36 crore. LIC reported negative cash flows from 14.47% of its total insurance claims, respectively.
operating activities in the first half of FY22 at Rs. 11,114.3
crore due to high other operating expenses. It reported Equity investment
positive cash flows in the previous three financial years. Cash
LIC’s realized investment income in equities for the six months
on its balance sheet has reduced substantially from Rs.
ended 30 September 2021 was Rs. 35,987 crore. For FY21,
67,899.5 crore in fiscal 2019 to Rs. 26,050 crore in the first
ended 31 March 2021, its realized equity investment income
half of fiscal 2022.
(including interest, dividend and amortization and realized
gains or losses) was Rs. 49,659 crore, up from Rs. 29,702
LIC versus Indian peers crore in FY20.
Private life insurance companies’ assets under management
grew by over 15% CAGR over the past three years. On the In FY19, its realized investment income from equities was
other hand, LIC’s AUM (comprising policyholders’ investment, higher at Rs. 34,799 crore. For context, equity markets were
shareholders’ investment and assets) on a standalone basis down at the end of FY20 as fears around the new covid wave
increased at 10.92% CAGR. began to spread.

Though it is the market leader, LIC lags listed insurance peers NPAs
in earnings per share (EPS). For fiscal 2021, it reported an EPS
LIC said that its gross NPA stood at 7.78% for FY21 while Net
of Rs. 4.70, compared to an EPS of Rs. 14.55 for SBI Life
NPA stood at 0.05%. This is only for its debt portfolio. It disclosed
Insurance, Rs. 6.73 for HDFC Life Insurance and Rs. 6.66 for
NPA only for policy holders’ funds, not shareholders’ funds.
ICICI Prudential Life Insurance.
Erosion of market share Dividend
LIC paid Rs. 2,663 crore of dividend to the government in
LIC has gradually lost market share in individual new business
fiscal 2019 and retained its share of the surplus in fiscal 2020
premiums. Its share has dropped from 56% in fiscal 2016 to
and 2021 for the issuance of bonus equity shares to the
44% in the first half of fiscal 2022. In the group new business
premium segment, its share has reduced from 81% in fiscal government.
2016 to 77% in the first half of fiscal 2022.
Litigation
The pandemic and related lockdowns played a big role in As on 6 February, LIC is involved in as many as 26,919 criminal,
LIC’s falling market share. Sales of individual policies consumer, civil proceedings, tax proceedings and actions
decreased in the fourth quarter of fiscal 2020 by 22.66% to taken by statutory or regulatory authority. (Source: Mint)

The Insurance Times, May 2022 47