LIC profit grows 5% despite lower equity gains in a volatile Q1
"The slowdown in net profit growth is mainly due to lower capital gains from equity markets. However, the core insurance operating profit remains strong," LIC MD & CEO R Doraiswamy said in a post-earnings call. LIC did not offer growth guidance for FY26 but said it is aiming for double-digit profit expansion for full year.
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"That is the level we consider respectable and we are targeting that," Doraiswamy added. The yield on policyholders' funds (excluding unrealized gains) declined to 8.45% in Q1 FY26 from 8.54% in Q1 FY25. LIC booked 15% growth in equity market profits on quarter. Its total equity market sales were upwards of ₹50,000 crore.
The value of new business (VNB) rose 20.75% to ₹1,944 crore, while the VNB margin went up by 150 basis points to 15.4%. Doraiswamy attributed the margin boost to product changes and other initiatives.
"Our margin improved to 15.4% in Q1, up from 13.9%, primarily due to a rise in non-par business, which now stands at 30.34%," said Doraiswamy. "Several interventions contributed including product modifications, changes in margin structures, and revisions in minimum ticket sizes and premiums to improve persistence." Annualised premium equivalent (APE) rose 9.45% year-on-year to ₹12,652 crore. The share of non-participating (non-par) APE within individual business jumped to 30.34%, up from 23.94% in the same period last year, as the insurer continued to boost non-par business post-IPO.
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"Since the IPO, the focus has been on scaling up non-par," said LIC Managing Director Dinesh Pant. "Non-par share has climbed from just 7% at the time of listing to 30% now." The company has not introduced new participating products since the IPO but now plans to develop the segment with an expected growth rate of 5-10%, he said. Pant said that while LIC is operating within a 40-60% non-par to non-par directional mix, this will continue to evolve based on market conditions and profitability.
Persistency ratios, a key metric of policy renewals, dropped to 75.63% for the 13th month against 78.23% and rose to 63.85% from 61.62% for the 61st month on a premium basis. Short-term persistence saw some decline, largely driven by lapses in lower ticket-size policies sold under the earlier regulatory regime. "Many of these are revived later," an LIC executive said.
On health insurance front, LIC said it is still exploring options for its proposed health insurance joint venture. "We are evaluating multiple possibilities and awaiting clarity on changes in the insurance Act and other regulatory developments," said Doraiswamy.
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