Corporate bad debt push up LIC’s NPAs

Data from Insurance Regulatory and Development Authority of India (Irdai) shows that LIC’s new business premium was Rs 1.77 lakh crore in 2019-20, reflecting a growth of 25.17% over the previous year.

Gross non-performing assets (NPAs) for Life Insurance Corporation (LIC), as a share of its debt portfolio, increased to 8.17% for 2019-20 from 6.15% a year ago. The net NPA ratio was 0.79%, up from 0.27% in March 2019. LIC’s total assets in March were Rs 31.96 lakh crore, only slightly higher than the Rs 31.1 lakh crore in FY19.

“NPAs are a natural consequence of what is happening in the economy and the rise is largely due to the downgrades and defaults in the corporate sector. The 8.17% number relates to corporate debt but as a share of total assets, the npa would come down to around 1%. We make provisions for everything,” senior LIC officials said on condition of anonymity.

In absolute terms, NPAs stood at Rs 36,694.20 crore as on March 20 against Rs 24,777.22 crore a year ago, the officials said. In the last few years, there have been a very large number of downgrades and defaults in corporate India, which has impacted the portfolios of insurers and mutual funds.

Approximately 68-70% of LIC’s total assets is invested in central and state government securities while the rest is invested in equities and corporate debt paper. LIC ended 2019-20 with a growth of 25% in first year premiums compared to private insurance players, which saw premiums grow at 11.64%.

Data from Insurance Regulatory and Development Authority of India (Irdai) shows that LIC’s new business premium was Rs 1.77 lakh crore in 2019-20, reflecting a growth of 25.17% over the previous year. On the other hand, private insurers saw their first-year premium at Rs 80,919.40 crore in 2019-20, a growth of 11.64% over the previous year.

In 2019-20, LIC’s total premium income grew 12.42% to Rs 3.79 lakh crore. The gross total income grew to Rs 6.15 lakh crore, up 9.8% over the previous year.

In a press release on Thursday, LIC stated that death claims arising due to Covid-19 are treated at par with other causes of death and payments are being made on an urgent basis. LIC has already settled Covid death claim under 561 Policies amounting to Rs 26.74 crores.

The insurer’s market share in March was 68.74%. In June, the government kick-started the process for LIC’s mega initial public offer (IPO) and had invited consultants to work as pre-transaction advisors for the IPO. Leading independent valuation firm RBSA Advisors have estimated a valuation for the insurer in the range of Rs 9.90 lakh crore to Rs 11.50 lakh crore.