homemarket Newsstocks NewsLIC shares drop 3% as fewer policyholders pay renewal premium

LIC shares drop 3% as fewer policyholders pay renewal premium

By Dipti Sharma  May 31, 2022 2:16:25 PM IST (Updated)

LIC share price: Shares of Life Insurance Corporation of India (LIC) slipped over 3 percent on Tuesday after the insurer announced its earnings for the March quarter.

Shares of Life Insurance Corporation of India (LIC) slipped over 3 percent on Tuesday after the insurer announced its earnings for the March quarter with the persistency ratios witnessing a dramatic fall compared to last year.

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Persistency ratio is the proportion of policyholders who paid their renewal premium, and the fall is an indication of them likely discontinuing their policies.
"A 5-6 percent fall in persistency ratio is a drastic one for LIC," said Purvesh Shelatkar, head of institutional broking at Monarch Networth Capital.
Persistency RatioQuarter ended March 2022Quarter ended December 2021Quarter ended March 2021
1For 13th month69.24%69.23%73.94%
2For 25th month68.23%68.64%62.73%
3For 37th month59.51%61.15%60.22%
4For 49th month57.49%58.30%57.49%
5For 61st month55.62%57.28%54.43%
Raj Kumar, MD of LIC, told CNBC-TV18 in an interaction that policyholders choosing to pay the premium after the due date can also be the reason for the persistency ratio being lower.
"Customer can pay the premium after the due date also within 30 days that is why persistency is lower. But we are looking at a long term stickiness of the customer and we are having the highest persistency at the 61st month which shows the stickiness and that adds to the profitability of the organisation," Kumar explained.
At 1245 IST, shares of LIC were trading 2.5 percent lower at Rs 816.1 on the BSE.
LIC share performance during the day so far
LIC reported an 18 percent YoY fall in the standalone net profit at Rs 2,372 crore for the quarter ended March 2022.
The company's net premium income increased to Rs 1,44,158.84 crore, up 17.88 percent from Rs 1,22,290.64 crore in the same quarter last fiscal.
The board of directors of LIC has recommended a dividend of Rs 1.50 per equity share with the face value of Rs 10 each for the year ended March 31, 2022. This is subject to the approval of the shareholders at the ensuing Annual General Meeting, it said.
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