LIC Eyes Health Insurance Market After Record Dividend Payout

In order to support its intended development into the health insurance sector, the Life Insurance Corporation of India (LIC) is looking into possible acquisitions. This initiative follows a proposal to introduce composite insurance companies, allowing insurers to offer both life and health insurance products.

Record-Breaking Dividend Payout

This year, Life Insurance Corporation of India (LIC) proposed a record-breaking final dividend of Rs 6 per share for the fiscal year 2023-24, with the payout record date set for July 19. Since last year's dividend of Rs 3 per share was doubled, this is the largest dividend distribution in LIC's history.

Proposal for Composite Insurance Licence

A composite insurance license was suggested by a legislative commission in February as a way to save expenses and lessen the burden of compliance for insurers. The only long-term health benefits that life insurance companies can now provide are those.

An amendment to the Insurance Act would be necessary to enable them to provide hospitalization and indemnity coverage.

Under-Penetrated Insurance Market

India’s insurance market remains significantly under-penetrated. At the close of the fiscal year 2022–2023, 550 million people were covered by fewer than 23 million health insurance plans.

Two hundred million of these came from group insurance, while over 300 million came from government-sponsored programs. It is anticipated that LIC's prospective entry into the health insurance market would support efforts by the government and regulatory bodies to increase health coverage.

LIC's Q4 Financial Performance

LIC posted a marginal 2 percent increase in net profit at Rs 13,763 crore in the fourth quarter that ended March 2024, up from Rs 13,428 crore in the corresponding quarter a year earlier. The insurer made provisions for a wage hike during this period.

Comparing the same time of the previous fiscal year, the overall income for the quarter increased to Rs 2,50,923 crore from Rs 2,00,185 crore.

Premium Income Growth

LIC’s income from first-year premiums also improved to Rs 13,810 crore in the January-March quarter, compared to Rs 12,811 crore in the same period of the preceding fiscal year. From Rs 76,009 crore to Rs 77,368 crore last year, the revenue from renewal premiums increased.

Annual Financial Performance

For the entire financial year ended March 2024, LIC earned a profit of Rs 40,676 crore, compared to Rs 36,397 crore in the previous fiscal year. The total premium income for the year was Rs 4,75,070 crore, slightly up from Rs 4,74,005 crore in the year ended March 2023.

LIC sold a total of 2,03,92,973 policies in the individual segment in FY24, a slight decrease from 2,04,28,937 policies sold in the previous fiscal year.

Dividend and Market Leadership

The LIC board recommended a final dividend of Rs 6 per share for 2023-24, subject to shareholder approval. Earlier in the year, an interim dividend of Rs 4 per share was declared and paid, bringing the total dividend for the year to Rs 10 per share.

LIC continues to be the market leader in the Indian life insurance business with an overall market share of 58.87 percent.

Strategic Focus and Future Plans

LIC Chairman Siddhartha Mohanty highlighted the company’s focus on maximizing market share across various categories while creating superior value for stakeholders. Key initiatives include distribution channel enhancements and digital transformation.

LIC aims for double-digit top-line growth in the current financial year, driven by new product launches and agency force transformation projects.

Value of New Business (VNB) Growth

The Value of New Business (VNB) for FY24 was Rs 9,583 crore, up from Rs 9,156 crore in the previous year, representing a growth of 4.66 percent. The net VNB margin increased to 16.80 percent from 16.20 percent the previous year. Additionally, the solvency ratio improved to 1.98 from 1.87 on March 31, 2023.

Conclusion:

LIC's strategic move into health insurance, combined with a record dividend payout and solid financial results, positions the company for growth in an under-penetrated market. The initiative aligns with regulatory efforts to expand health coverage, promising significant impact on the Indian insurance landscape.