Life Insurance coverage Corp. (LIC) has taken a success of ₹1,400 crore as a result of lack of enter tax credit score after sure life and well being plans had been exempted from the products and providers tax (GST).
Nevertheless, the nation’s largest insurer managed to largely offset the affect by means of a rise within the share of margin-accretive non-participating insurance policies and by rationalizing the expenditure, managing director and chief govt officer R. Doraiswamy stated through the firm’s earnings name after the October-December quarter outcomes.
The federal government exempted life insurance coverage and particular person medical insurance insurance policies from GST, efficient September 2025. Whereas that makes insurance policies cheaper for patrons, the following lack of enter tax credit score profit has elevated operational bills for insurers.
“Our total expense ratio has been coming down. Because of this, the affect of GST enter tax credit score has been subsumed into the general bills, that are getting rationalised. So, we’re in a position to handle,” Doraiswamy stated. Topline progress, which is predicted to get a lift from elevated affordability following the GST cutsmust also assist cut back the general expense ratio even because the expectation is that the worth of recent enterprise margin (VNB) will enhance “a bit extra” from the present stage, he added.
Total expense ratio for the nine-month interval ended 31 December fell by 132 foundation factors to 11.65%. The worth of recent enterprise (VNB) for the interval was up 28% on-year at ₹8,288 crore, whereas the online VNB margin elevated 170 bps to 18.8%.
The life insurer posted a consolidated web revenue of ₹12.930 crore for the quarter, up 17% on 12 months and 28% on quarter. For the nine-month interval ended December 2025, the revenue after tax was 16.7% larger at ₹29,138 crore.
Commissions are optimum
Days after the Financial Survey for 2025-2026 referred to as for a discount in fee paid to insurance coverage distributors and intermediaries, Doraiswamy stated that LIC’s commissions are at an “optimum stage” and the insurer sees no purpose to revise its fee construction in the mean time.
The latest dialog round fee payouts pertains extra to different personal gamers and the sector as a complete, and doesn’t essentially pertain to LIC, he stated.
“We’re kind of on the optimum stage of fee construction. But when the regulation provides another instructions, we can be totally compliant to that as properly,” Doraiswamy stated. “We aren’t trying to do something on our personal within the instant future. However in fact, if the laws prescribe one thing which is lesser than what we’re doing, we can be totally compliant on that.”
Because the GST exemption, a number of insurance coverage corporations have recommended passing on a part of the elevated bills to ecosystem companions by reducing commissions. On 29 January, the Financial Survey stated that top insurance coverage distribution prices are stopping a ‘widening’ of the danger pool of shoppers, and appearing as a structural constraint on the sector’s progress. “The high-cost mannequin poses a threat to the core monetary energy of insurers, with escalating acquisition and administrative prices leading to elevated working bills throughout each life and non-life insurance coverage.”
Doraiswamy can also be glad that the latest Insurance coverage Modification Invoice didn’t embrace the proposal to mandate an open structure for insurance coverage distribution. LIC has the most important insurance coverage community within the nation of 14.72 lakh brokers as of 31 December, comprising 45.3% of complete brokers for the life insurance coverage sector.
“Our place is obvious that we’re not terribly inclined in direction of that (open structure) to be launched. So, we’re very pleased that that is not half of the present act, which has been notified,” he stated, including that that is within the curiosity of the nation and policyholders as it’ll make sure that brokers will not be guided by “which firm pays how a lot” however by what’s the most fitted product for a buyer.
In the meantime, LIC can also be working to develop its bancassurance community to cut back reliance on bodily brokers. The share of coverage distribution through bancassurance rose to 4.5% from 3.4% a 12 months earlier, and from alternate options and digital advertising and marketing to three.7% from 1.9%.
Stake sale plan
On the federal government’s plan to divest a part of its shareholding in LIC to adjust to public shareholding norms, Doraiswamy stated that given the deadline of FY27, he expects the federal government to begin offloading its stake in tranches within the subsequent monetary 12 months.
“I’m 100% positive that the federal government is taking a look at doing that in tranches within the months to return. It’s a name of timing by the federal government,” he stated, including that when the federal government approves it, LIC would possibly undertake some preparation by way of roadshows for buyers.
“The exercise will rely on what kind the subsequent tranche of offloading goes to occur in, whether or not it will be an OFS (provide on the market) to the general public or whether or not it will be a QIP,” he stated, including that it’s prone to take a minimum of 2-3 months for the primary trance of stake sale to occur. The federal government is required to convey its stake in LIC down by 10%, of which 3.5% was divested through the insurer’s IPO in Could 2022.
On the approval for the Nationwide Inventory Alternate’s IPO, Doraiswamy stated that LIC will see how the general public provide pans out earlier than deciding on its shareholding. LIC holds 10.7% within the bourse.
The understanding, he stated, is that the IPO will take one other 6-7 months, which implies LIC has sufficient time to determine on whether or not it plans to dump any stake and the way a lot. “We proceed to be a strategic investor, and we’re a promoter, little question. So, it’s a name to be taken. It isn’t last as of now.”