LIC to decide on health insurer stake purchase in 2-3 months

“The discussion is almost at a final stage. We will go to our board, and the board will take a call very soon. I think within 2-3 months, some decision will be taken by the board," managing director and chief executive officer Siddhartha Mohanty said in the insurer’s earnings call for the fourth quarter of FY25.

The insurer had previously guided that it would foray into health insurance by acquiring stake in an existing health insurance company in FY25. Asked about the delay in the stake purchase, Mohanty said there was no issue and the insurer had already conducted due diligence and should be able to take the proposal to the board soon.

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“When you buy some stake or acquire some company, certain formalities are there. So those things we are now completing one after another," Mohanty said. “Once those are over, we will go to the board because ultimately the board, shareholder and other stakeholder consent is required." 

Once the board gives its go-ahead, LIC will begin the formalities for regulatory clearance, which could take another couple of months, he said.

Currently, there are seven standalone health insurance companies in the country, with Star Health Insurance, Niva Bupa Health Insurance and Manipal Cigna Health Insurance seen as the main contenders for stake acquisition by LIC.

Premium income growth muted

The country’s largest insurance company posted a net profit of ₹19,013 crore in Q4, a rise of 38% on-year. For FY25, the profit after tax was ₹48,151 crore, up 18.4% on-year. However, growth in total premium income was muted at 2.75% to ₹4.9 trillion for FY25. The insurer declared a dividend of ₹12 per share for FY25.

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The management said that due to the regulator’s new surrender-value norms, effective October 2024, the insurance had a “challenging Q3" and some of that impact spilt into Q4. While the insurer did not see a hit on profitability, it led to a slowdown in the volume of policies being sold as the insurer looked to recalibrate some lower-ticket policies, impacting the first-year premium. 

“Whatever negative variation was there in Q3, that has drastically reduced in Q4 because our agents had to adjust to the new product regulations. There were also new product designs introduced, so that took some time and that's why a little fall is there," Mohanty said, adding that he is hopeful of growth picking up in the current financial year. The number of policies sold by LIC fell 12.8% on-year to 1.8 crore in FY25.

Group business premium also fell 1.3% on-year to ₹1.7 trillion. As a result, total annualized premium equivalent (APE) fell marginally by 0.3% to ₹56,828 crore for FY25.

Growth in assets under management was also in single digits, up 6.5% to ₹54.5 trillion as of 31 March. The slower AUM growth was largely owing to the drop in the fair value of the insurer’s investments, given volatility in the equity portfolio. Higher benefit payouts to policyholders and flattish growth in premium income also weighed on AUM growth, the management said.

LIC made equity investments of ₹1.85 trillion in FY25, up 41% on-year, on which it made a profit of ₹73,000 crore, higher by 19%. Investments in corporate bonds during the year were at ₹80,000 crore, accounting for around 13% of the incremental debt investments in FY25.

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The 13th-month persistency ratio, a measure of customer stickiness, deteriorated to 74.8% on a premium basis from 77.7% a year earlier. Based on the number of policies, the persistency ratio at 64.1% was worse than 67% in the previous year.

The management said there is a dip in the persistency because it typically tracks the policies issued a year ago. The revamp in the product portfolio due to the new product guidelines also impacted persistency due to the change in policy premium sizes. However, since then in FY25, the insurer has taken several steps to improve this ratio, including building the average ticket size and focusing on higher persistency segments, the result of which should be seen in the current financial year, it said.