LIC FY26: Profit rises 19%, VNB margin expands to 21.2%

Life Insurance Corporation of India closed FY26 with higher scale, better new business profitability, and visible progress on cost and persistency, even as market share edged down. Total premium income rose to 5,35,984 crore, up 9.80% year on year. Profit after tax increased to 57,419 crore, a 19.25% jump over FY25. Assets under management expanded to 57,29,396 crore, up 5.08%, supported by a stronger investment yield in the policyholders’ fund.

The year’s numbers point to a familiar LIC pattern: the franchise continues to be built on renewal strength and a vast distribution footprint, while management pushes mix improvement through non-par offerings, better expense discipline, and digital service adoption. Market share in premium stood at 56.66% versus 57.05% in FY25, and market share in policies was 65.16% versus 65.83%. The small drift matters because it sets the context for LIC’s FY27 priorities: regain or enhance share in select categories and geographies, consolidate non-par momentum, and deepen bancassurance and alternate channels.

Growth came from both group momentum and a steady retail base

Premium growth in FY26 was not a one leg story. Group business premium increased 16.26% to 1,96,609 crore, reinforcing LIC’s leadership in group. Individual new business premium also rose, up 8.29% to 1,67,676 crore. On the retail side, renewal premium in individual business grew 5.91% to 2,71,699 crore, highlighting the durability of the in-force book.

In claims, LIC paid more maturity claims and slightly fewer death claims. The total number of death claims in individual business fell 2.09% to 8,30,399, while death claims paid rose 1.91% to 24,885 crore. Maturity claims volumes increased 11.33% to 2,41,25,943, and maturity claim payout rose 17.97% to 2,79,951 crore. The death claim settlement ratio improved marginally to 99.44%.

This combination of growth and service metrics strengthens the underlying proposition: LIC is operating at a scale where execution quality and operating ratios often matter as much as top-line expansion. FY26 showed that in the key ratio set, with a better conservation ratio and lower expense and commission ratios.

Profitability improved as operating levers moved the right way

Two FY26 signals stand out for investors tracking LIC as a large, maturing insurer. First, investment yield improved for the policyholders’ fund. Yield on investment for policyholders’ fund rose to 8.92% from 8.65%. This matters because the policyholders’ book dominates the balance sheet and earnings pool. Second, operating efficiency improved: overall expense ratio fell to 11.91% from 12.42%, and commission ratio reduced to 4.55% from 5.18%. Conservation ratio increased sharply to 92.33% from 89.71%.

Asset quality also improved. Total gross NPA ratio declined to 1.21% from 1.46%. At LIC’s scale, small changes in credit quality and yield can translate into meaningful profit sensitivity.

The headline profit number was backed by higher transfers from the policyholders’ account to shareholders, and higher investment income in the shareholders’ account. In the standalone shareholders’ statement of profit and loss, amounts transferred from the policyholders’ technical account rose to 58,032 crore from 49,507 crore. Total income in that statement increased to 66,620 crore from 55,498 crore.

From a balance sheet perspective, shareholders’ funds expanded through reserves and surplus, which rose to 1,69,925.81 crore as of March 31, 2026 from 1,20,095.76 crore. Total funds for future appropriations increased to 58,65,825.98 crore from 55,75,154.56 crore.

Embedded value stayed stable, but new business value accelerated

LIC’s Indian embedded value at March 2026 was 7,89,185 crore, up 1.58% from 7,76,876 crore a year earlier. The embedded value bridge shows a large expected return on existing business of 74,748 crore and EV operating earnings of 92,639 crore, partly offset by economic assumptions changes and variances of -72,740 crore and dividend payout of -7,590 crore.

The more investor-relevant story in FY26 sits in new business profitability. Total APE rose 17.83% to 66,961 crore from 56,828 crore. Net VNB increased 41.63% to 14,179 crore from 10,011 crore. Net VNB margin expanded to 21.2% from 17.6%, an improvement of 3.6 percentage points.

Growth was broad-based across individual and group APE. Individual APE rose 13.39% to 43,335 crore. Group APE rose 26.95% to 23,626 crore.

Within individual, non-par APE growth was strong. Individual non-par APE increased to 15,214 crore from 10,581 crore, a 43.78% rise. ULIP APE climbed 63.48% to 6,150 crore. Protection APE rose 33.77% to 309 crore, albeit from a small base. Individual par APE was stable at 28,121 crore, up 1.75%.

LIC’s VNB margin walk attributes the shift from 17.6% to 21.2% to business mix impact of 3.0 percentage points and economic assumption impact of 3.4 percentage points, partly offset by operating assumptions impact of -2.8 percentage points.

One caution is that embedded value sensitivity remains meaningful to macro moves. The sensitivity table shows a 10% equity market decline reduces embedded value by 6.2%. A higher assumed tax rate to 25% reduces embedded value by 9.6%.

Product mix and persistency remain the key operating battleground

LIC launched several individual products in FY26, including non-par endowment plans, micro insurance, money back and term offerings, and riders such as critical illness and a female critical illness benefit rider. Two new group products were introduced in February 2026: a group term plan and a group benefits secure plan. The product push aligns with management’s stated priority: consolidate gains in non-par share within individual business.

The presentation includes a view on non-par share and how it is evolving. In individual new business premium for FY26, non-par constituted 60.83% and par 39.17%. But in number of policies, non-par was only 19.88%. This split highlights a strategic trade-off: non-par and unit-linked products tend to have higher ticket sizes or different premium profiles, so the premium mix can shift faster than the policy count.

Persistency, another driver of long-term value, showed a mixed pattern depending on the month bucket and whether it is measured by number of policies or premium. For example, 13th month persistency on number of policies improved to 64.87% from 64.12%, and 37th month improved to 55.29% from 52.66%. But 25th and 61st month ratios weakened. On premium basis, 37th and 49th month improved while 25th and 61st month softened.

For investors, the message is that LIC is improving retention in certain cohorts while still facing pressure in longer duration buckets, which is not unusual in a market that is getting more competitive and more price transparent.

Distribution scale is intact, but channel diversification is still early

LIC’s competitive moat is distribution. As of March 31, 2026, LIC had 14.57 lakh agents. The agency force remains large, though the chart in the presentation indicates that the broader industry agent count outside LIC has grown faster in recent years.

LIC is leaning on training and process to protect productivity. It reported 716 training infrastructure units and said 7,81,321 agents were trained in FY26, including 1,99,472 newly recruited agents trained. It also reported 4,667 agents meeting MDRT criteria.

A notable operational and social initiative is Bima Sakhi Yojana, launched in December 2024 as a Mahila Career Agent scheme. Up to March 31, 2026, LIC reported 3.45 lakh MCAs appointed, 21.94 lakh policies sold, and new business premium procured of 2,848.36 crore. A majority of policies and premium under the scheme came from rural areas.

Channel diversification is improving but remains a small share. Distribution mix by individual new business premium shows agency at 91.75% in FY26, down from 93.87%. Banks rose to 4.67% from 4.12%, alternates rose to 2.84% from 1.47%, and digital marketing to 0.74% from 0.53%. Total share of banks, alternates and digital marketing increased to 8.25% from 6.12%. The absolute individual NBP through bancassurance and alternate channels rose 45.19% to 5,076 crore.

This is progress, but it also shows the starting point. Management’s focus on consolidating bancassurance and alternate channels is sensible because it can add incremental growth without fully depending on agent expansion.

Digital execution is becoming a measurable lever

LIC’s operational story in FY26 is not only about size. It is also about modernizing servicing and new business flow. The presentation highlights multiple digital tools: a digital app for policyholders, agent apps such as ANANDA and Super Sales Saathi, and service tools like Aadhaar-based digital life certificate for pensioners, an AI chatbot, online document submission, and premium payment without login.

Adoption metrics show scale. WhatsApp services started in December 2022, and 2.42 crore customers opted in until March 2026. App users increased to 91.48 lakh in FY26 from 83.95 lakh in FY25, with an app rating of 4.56 out of 5.01 as of March 31, 2026.

On collections, the transaction mix is shifting. NACH and direct debit increased to 31.49% from 28.24%. Cash counter share declined to 19.65% from 21.02%. Other apps increased to 18.01% from 16.72%. LIC portal and app was 8.22% versus 9.50%.

Agent digital onboarding is also rising. Under ANANDA, total policies completed increased to 2,301 thousand from 1,474 thousand, agents activated increased to 381 thousand from 294 thousand, and the share of ANANDA policies rose to 12.48% from 8.49%.

These shifts matter for three reasons. They can reduce servicing cost over time, improve turnaround times and customer experience, and create better data for underwriting, persistency actions, and cross-sell. The operational efficiency objective in management’s focus areas fits well with these trends.

The market opportunity remains large, but competition is steady

LIC’s investor deck anchors the long-term opportunity in India’s macro growth, household savings, and underinsurance. It also highlights the protection gap for India at 83% as of 2019, and low life insurance penetration and density in India at 2.7% and 72 US dollars for FY2024.

But the near-term operating reality is competitive. In FY26, LIC’s share of total new business premium across the industry was 56.66%, with private sector at 43.34%. In policy count, LIC held 65.16%. The group segment remains a stronghold, with group market share by premium at 70.11% in FY26 versus 71.19% in FY25.

This is why LIC’s stated strategy is framed around targeted actions rather than broad ambition. The company’s focus areas include digital transformation, non-par share consolidation, distribution gains through banks and alternates, an agency transformation project, rebuilding market share in select categories and geographies, maximizing investment yield with balanced risk, and aligning human resources with new skills.

Takeaways for investors

FY26 for LIC reads like a year of better quality growth. Profit after tax rose 19%, and operating ratios improved. New business value grew faster than APE, driving a VNB margin of 21.2%. Group business stayed strong, and the retail renewal base continued to expand.

The trade-offs are visible. Market share drifted slightly, and persistency improved in some cohorts but weakened in others. Channel diversification is improving but still small relative to the agency base.

The core theme is disciplined execution at scale. LIC is using mix shift toward non-par, tighter expense and commission control, and digital adoption to protect profitability while keeping growth intact. If management can sustain VNB momentum and improve longer-duration persistency while stabilizing market share, the FY26 trajectory offers a credible base for steady compounding.