Sources at LIC said that the corporation has already accumulated Rs 6,300 crore of capital by not paying any dividend to the government in recent years and planning raise more though, at present it is not known how it will do it
Mumbai:
In a bid to conserve capital, IPO bound state owned Life Insurance Corporation (LIC), for the first time, has not paid any shareholder dividend to its owner, Government of India, for the last last two years, 2019-20, 2020-21.
The total profit reported by LIC during FY 2021 was Rs 2,901 crore as against Rs 2,713 crore in the previous year.
LIC had paid a dividend of Rs 2,610.74 crore to the government for fy 2018-19.
For decades,the corporation follows a well laid out ratio of 95:5 where five percent of its profit, called as surplus, goes to the government as dividend while rest 95 per cent is distributed among its participatory policy holders.
Unlike private sector life insurers. LIC distributes its entire profit between the government and its policy holders.
LIC currently has a much smaller capital base of Rs 100 crore and a small reserve, though it controls assets worth of Rs 38 trillion and services over 30 crore policies.
Though, government has increased the authorised capital base of the corporation to Rs 24,900 crore in the Budget 2021-22 in view of its planned mega IPO , it is not known when this capital will be infused into the corporation.
Sources at LIC said that the corporation has already accumulated Rs 6,300 crore of capital by not paying any dividend to the government in the last two years and planning raise more, though, at present it is not known how it will do it.
Whether the payment of large dividend by the corporation to the government will continue or not in the future, is not known yet. LIC will have a huge base retail and other institutions as new shareholders after it gets listed in the aftermath of IPO. The profits of the corporation which was distributed between the government and policy holders will have to be shared with new shareholders every year.
LIC had a investment income (Policyholder’s and Shareholder’s) including capital gains and its other income was Rs 2.79 lakh crore in 2020-21 (Rs 2.37 lakh crore in 2019-20).
The claim settlement ratio of LIC was 98.62 per cent as at March 31, 2021 compared to 96.69 per cent as at March 31, 2020 and the proportion of its claims repudiated/rejected has decreased to 1.0 per cent in 2020-21 from 1.09 per cent in the previous year.
The claim settlement ratio of private insurers was 97.02 per cent during 2020-21 (97.18 per cent during 2019-20) and the proportion of repudiations came down to 2.0 per cent in the year 2020-21 from 2.50 per cent in previous year.
During Covid- 19 pandemic, when it the industry has been saddled with large number of claims, the life insurance industry’s settlement ratio increased to 98.39 per cent in 2020-21 from 96.76 per cent in 2019-20 and the repudiation/rejection ratio decreased to 1.14 per cent from 1.28 per cent in 2019-20.
LIC paid benefits of Rs 2.86 lakh crore in 2020-21, constituting 70.85 per cent of the premium underwritten (₹2.53 lakh crore in 2019- 20, 66.62 per cent of the premium underwritten).
The benefits paid on account of surrenders /withdrawals of the life insurance industry increased to Rs 1.29 lakh crore in 2020-21 (Rs 1.17 lakh crore in 2019-20), of which LIC accounted for 61.89 per cent and remaining 38.11 per cent by private sector. ,
in case of LIC, out of the Rs 80,101 crore surrenders,ULIP policies accounted for Rs 2,619 crore (3.27 per cent) as against Rs3,106 crore (4.43 per cent) in 2019-20.
In case of the private insurers, the ULIP surrenders accounted for Rs 40,025 crore (72.82 per cent) in 2020-21 as against Rs 38,327 crore (73.96 per cent) in 2019-20.
As at March 31, 2021, the corporation has offices in 669 districts out of 735 districts in the country, covering 91 per cent of all districts in the country, whereas the private sector insurers have offices in 596 districts covering 81 per cent of all districts in the country.