India's LIC Q2 profit halves on lower premiums, shareholders' fund transfer

BENGALURU (Reuters) -Life Insurance Corp of India's second-quarter profit halved, it reported on Friday, hurt by a fall in income from insurance premiums and as it transferred a smaller amount to its shareholders' fund for the period.

LIC, India's largest insurer, said profit after tax fell to 79.25 billion rupees ($951.4 million) in the second quarter, from 159.52 billion rupees a year ago.

Net premium income dropped 18.7% to 1.07 billion rupees.

LIC's value of new business (VNB) -- the expected profit from new policies and is a key gauge for growth -- fell 10.1% to 33.04 billion rupees in the first half of the financial year.

While LIC did not break out VNB for only the second quarter, it had reported VNB fell 6.8% in the first quarter.

VNB margins were flat at 14.6% for the half year, following a slight increase in the first quarter.

Total group business premiums dropped 30.9% year-over-year in the first half, after a 7.2% decline in the first quarter.

Its smaller peers, such as ICICI Prudential Life Insurance and HDFC Life Insurance, have reported a rise in second-quarter profit on higher premium income.

Also hurting LIC's bottom-line was a roughly 56% drop, to 62.77 billion rupees, in the amount LIC transferred from its non-participating fund to a shareholders fund in the quarter.

The premium LIC collects from 'non-participating' policies, which have fixed returns, is parked in a non-participating fund.

Since last year, it has been transferring some of this every quarter to its shareholders' fund. The accounting effect is a higher profit.

LIC had said the transfers were to shore up its solvency margin.

Its solvency ratio, the measure of an insurer's ability to meet its long-term debt obligations, improved to 1.90 in the first half from 1.88 a year ago.

While LIC has been making such transfers each quarter, it said that the July-September quarter results are not comparable with the year-ago period due to the transfers, without specifying a reason. ($1 = 83.2970 Indian rupees)

(Reporting by Sethuraman NR in Bengaluru; Editing by Janane Venkatraman and Savio D'Souza)