The net profit of Life Insurance Corporation of India rose to Rs 234.91 crore in the third quarter of the current financial year from Rs 0.91 crore recorded in the corresponding period of last year.
For the first nine months of the current financial year, LIC has posted a net profit of Rs 1,642.78 crore as against a paltry Rs 7.08 crore net profit recorded during the corresponding period of 2020-21.
The sharp jump in LIC profit is largely due to the change in the surplus distribution model. The LIC Act has been amended to bring its surplus distribution model at par with private life insurers.
Before the amendment, the LIC had a single ‘Life Fund’. Now it has been segregated into two. One is known as participating policyholders’ fund, while the other is called non-participating policyholders’ fund.
The surplus generated under the participating policyholders’ fund will be divided between policyholders and shareholders in a ratio of 90:10, wherein 90 per cent will go to the policyholders and the remaining 10 per cent to the shareholders.
In the case of non-participating policyholders’ fund, 100 per cent of the surplus will go to the shareholders.
This amendment will significantly boost LIC’s profitability.