 "LIC. life insurance corporation")
Life Insurance Corporation of India (LIC) is aiming for a double-digit growth in annual premium equivalent (APE) in the current financial year (FY25) aided by product launches and strengthening of agency channels. The firm will also explore buying a stake in a standalone health insurance company, the management said during post-earnings call.
APE is a measure of new business sales in the life insurance industry. It is calculated as annualised regular premiums plus 10 per cent of single premiums.
Speaking to analysts, LIC Chairman Siddhartha Mohanty said that incremental growth in FY25 will be both on the product and channel mix. “Last year, because of a directional change, we launched some products in the non-par segment, and we have got the desired result,” he said.
The share of non-participating (non-par) products in the APE during FY24 rose to 18.32 per cent year-on-year (Y-o-Y) from 8.89 per cent. The share of participating products dropped to 81.68 per cent from 91.11 per cent Y-o-Y.
“In the current year (FY25), the focus on non-par products will continue but we will have certain products catering to particular segments. So, this year we will find different varieties of products to cater to various segments,” he said.
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On the channel front, the life insurance giant has undertaken an agency transformation program in FY24. Further, the company expects to have a stronger presence in rural areas this year, and looks to appoint at least one LIC agent in every gram panchayat.
The company added 271,000 agents in FY24 compared to 179,000 in FY23 with the recruitment expected to continue in FY25. Agency channels account for 96 per cent of LIC’s business whereas bancassurance and others account for 3.61 per cent. LIC officials expect the share of bancassurance and other channels in total business to grow between 5 and 6 per cent.
The profitability of the life insurance company demonstrated a marginal improvement with value of new business (VNB) margin growing 16.8 per cent in FY24 Y-o-Y from 16.2 per cent.
According to analysts, even though LIC has been able to strengthen its share of individual non-par business, several other factors have prevented strong growth in the VNB margin.
“There has been a decline in the par and group (business) margin. One of the factors is the southward movement of risk-free rate, which impacted all segments negatively. The other factor which impacted group business margin negatively is the revision of annuity rates, with more benefits being given. There is also significant competitive pressure in group business,” said Shivaji Thapliyal, head of research & lead analyst, YES Securities.
LIC management said that going forward, they are employing a conscious strategy to balance growth and margin.
Mohanty also said that LIC would explore opportunities to enter the health insurance space along with acquiring a stake in a standalone health insurance company when the composite licence is approved.
In February 2024, a parliamentary panel recommended the introduction of a composite licence which will allow insurers to undertake life, general, or health insurance under one entity, aiming to increase insurance penetration in the country.
Many other life insurance companies have said they are open to entering the health insurance sector once the regulation allows the same.
