LIC's Forward Vision: Growth, Margins, Innovation

Ashwin Thakker

17 Aug 2025 — 2 min read

Sales Outlook: Anticipates decent growth in absolute volume and Annualized Premium Equivalent (APE) for FY26, with substantial improvement projected for the second half.
Margin Outlook: Net VNB margin improved to 15.4% (Q1 FY26 from 13.9% Q1 FY25), with a strategic focus on increasing the proportion of high-margin Non-Par products for overall margin expansion. Non-Par APE share grew to 30.34%.
Expense Optimization: Overall expense ratio decreased by 140 basis points to 10.47%, indicating continued cost optimization efforts.
Digital Transformation: Major AI/ML-integrated sales and customer applications are slated for pan-India rollout within the next 5 to 6 months, aiming for digital leadership.
Distribution Strategy: Focus on training existing agents, recruiting millennial agents, and continued strong growth from Bancassurance and Alternate Channels.

Life Insurance Corporation of India (LIC) has announced a robust start to FY26, with Q1 VNB margin improving significantly. The earnings call highlighted the company's clear strategic direction, focusing on sustainable growth, enhanced profitability through product mix optimization, and a comprehensive digital transformation.

Strategic Profitability Enhancement

LIC's Q1 FY26 performance indicates a clear push for enhanced profitability. The net Value of New Business (VNB) margin rose 150 basis points year-on-year to 15.4%. This improvement stems from a deliberate pivot towards higher-margin non-participating (Non-Par) products. The Non-Par share of Individual Annualized Premium Equivalent (APE) significantly increased to 30.34% in Q1 FY26, up from 23.94% previously. This shift in product mix is a key pillar for sustaining future margin expansion and aligning with evolving customer preferences.

Accelerating Growth and Digital Transformation

Looking ahead, LIC anticipates 'decent growth' in both absolute volume and Annualized Premium Equivalent (APE) for FY26, with 'substantial improvement' expected in the second half. Growth is supported by enhancing agent productivity and recruiting millennial talent. Bancassurance and Alternate Channels are also strong contributors, showing nearly 100% year-on-year growth in New Business Premium. Operational efficiency remains a core focus, reflected in a 140 basis point reduction in the overall expense ratio. The company's comprehensive digital transformation, including AI/ML-integrated app rollouts within '5 to 6 months,' signals its vision to lead in digital service offerings.

LIC's Q1 FY26 call outlines a forward-looking strategy centered on improving VNB margins through product mix shifts and driving overall business growth. Key initiatives include digital transformation, agent force enhancements, and continued expense optimization. The company appears well-positioned to sustain its growth trajectory, deliver value to stakeholders, and reinforce its market leadership in the evolving insurance landscape.

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