LIC's Q1 FY26 Outlook Steady Growth Digital Future

• Sales Outlook: LIC anticipates decent growth in both absolute volume and Annualized Premium Equivalent (APE) for FY26, with substantial improvement expected in the second half of the year.
• Margin Outlook: The net Value of New Business (VNB) margin improved by 150 basis points year-on-year to 15.4%. Individual VNB margins are projected to be around 23-24%, driven by a growing non-par portfolio. The overall expense ratio decreased to 10.47%.

Life Insurance Corporation (LIC) reported a 5.02% year-on-year Profit After Tax (PAT) growth, reaching Rs. 10,986 Crore for the quarter ended June 30, 2025. This earnings call transcript reveals strategic pivots aimed at ensuring sustainable future growth, leveraging digital transformation, a refined product mix, and enhanced distribution channels. The company’s forward-looking commentary emphasizes improved profitability through a focus on high-margin products, greater operational efficiency, and a renewed commitment to digital engagement and agent productivity, positioning itself for long-term value creation.

Accelerating Growth Through Product and Distribution

LIC is strategically shifting its product mix towards higher-margin offerings. The Individual Annualized Premium Equivalent (APE) for non-participating (non-par) business significantly grew by 32.63% year-on-year, now constituting 30.34% of the total individual APE. This growth is a deliberate move to enhance profitability, as non-par products typically yield higher margins. The company has introduced new non-par products like Jeevan Utsav and Jeevan Shree, which have gained traction.

“Our Non Par share of Individual APE business has further grown to 30.34% for quarter ended June 30th, 2025 as compared to 23.94% for quarter ended June 30th, 2024.”

In distribution, LIC is bolstering its agency force, adding over 61,000 agents in the last year. The focus is on training existing agents and recruiting millennials to improve overall productivity and resilience. Bancassurance and Alternate Channels (BAC) are also seeing substantial growth, with New Business Premium Income from BAC increasing by 98.23% year-on-year. This multi-channel approach is crucial for expanding market reach and driving premium income.

Enhancing Profitability and Financial Health

Financial performance highlights LIC’s commitment to improving key metrics. The net Value of New Business (VNB) margin improved by 150 basis points to 15.4% for Q1 FY26, with VNB registering a 20.75% growth. This improvement is attributed to strategic product design changes, increased focus on higher-margin non-par products, and efficient expense management. The company aims to continuously increase VNB and the proportion of higher-margin products.

“The net VNB margin has improved by 150 basis points on a Year on Year basis from 13.9% for the quarter ended June 30th, 2024 to 15.4% for the quarter ended June 30th, 2025.”

Operational efficiency is also a key area of focus. The overall expense ratio decreased by 140 basis points to 10.47%, primarily due to optimized employee costs and a favorable shift in the business mix towards products like single premium, which have lower associated expenses. Furthermore, LIC's solvency ratio improved to 2.17 from 1.99 year-on-year, demonstrating strong financial health. The company targets a solvency ratio between 1.8 and 2.0 and is committed to a sustainably increasing dividend policy, balancing investor returns with capital retention for future growth and potential regulatory changes towards a risk-based capital regime.

LIC's Q1 FY26 performance underscores a clear strategy for future growth, driven by an expanding non-par portfolio, digital innovation, and strong distribution. The company is focused on enhancing profitability through margin improvement and cost efficiency, while maintaining robust solvency and a sustainable dividend policy. These collective efforts position LIC for continued success and long-term value creation in the evolving insurance landscape.