Life Insurance Corporation of India (LIC) reported encouraging results for the April-June quarter (Q1) of FY26.
Illustration: Dominic Xavier/Rediff
The net premium income of India’s largest life insurer was Rs 1.2 trillion, up 5 per cent year-on-year (Y-o-Y), in Q1.
Renewal premium grew 6 per cent Y-o-Y to Rs 59,900 crore, while first-year and single premium grew 1 per cent and 4 per cent Y-o-Y respectively to Rs 7,500 crore and Rs 51,900 crore.
The new business APE (annualised premium equivalent) rose 9 per cent Y-o-Y to Rs 12,700 crore with individual APE growing 9 per cent Y-o-Y to Rs 7,060 crore and group APE rising 16 per cent Y-o-Y to Rs 5,590 crore.
Individual APE growth of 9 per cent Y-o-Y was driven by 33 per cent Y-o-Y growth in non-par (non-participating) APE to Rs 2,140 crore, which was offset by a 4 per cent Y-o-Y decline in par (participating) APE to Rs 4,920 crore.
Non-participating plans provide fixed premiums and guaranteed benefits without the potential for additional returns to the policyholders.
The Absolute VNB (value of new business) grew 21 per cent Y-o-Y to Rs 1,900 crore.
The VNB margin improved Y-o-Y to 15.4 per cent (13.9 per cent in Q1FY25).
The Solvency Ratio improved to 217 per cent in Q1FY26 from 199 per cent in Q1FY25.
The non-par contribution rose to 16.9 per cent (14 per cent in Q1FY25) of total APE.
Commission expenses declined 3 per cent Y-o-Y to Rs 4,950 crore and operating expenses fell 10 per cent Y-o-Y to Rs 7,550 crore.
Income from investments in policyholders’ accounts grew 7 per cent Y-o-Y to Rs 1.03 trillion, while it increased 52 per cent Y-o-Y to Rs 1,780 crore in shareholders’ accounts.
Total AUM grew 6 per cent Y-o-Y to Rs 57 trillion.
Yield on investment for policyholders’ accounts declined slightly to 8.45 per cent (8.54 per cent in Q1FY25).
Individual VNB margin improved to 23-24 per cent in Q1FY26 from 21 per cent in Q4FY25.
Monthly premium mode accounts for 10-15 per cent of policies.
Apart from its 1.5 million agents, LIC has tie-ups with 94 bancassurance partners, 295 brokers and 177 corporate agents.
The contribution from agency channel was 92.3 per cent in Q1FY26 (95.8 per cent in Q1FY25), with individual NBP (new business premium) growing 2 per cent Y-o-Y.
Individual NBP from bancassurance grew strongly by 72 per cent Y-o-Y, with contribution growing to 4.2 per cent (2.6 per cent in 1QFY25) with a strong focus on building an omni-channel distribution network.
The company is also working on enhancing its digital capabilities.
Management pointed to rising proportion and demand of non-par products, which carry higher margins and redesigning of non-par guaranteed products following IRDAI regulation changes.
VNB margins have stabilised or improved, with the most notable gains in individual non-par.
The average ticket size has risen 23 per cent and sum assured has increased 15 per cent.
LIC’s individual and group market shares stood at 38.76 per cent and 76.54 per cent, respectively (vs. 39.27 per cent and 76.59 per cent in Q1FY25).
The number of policies sold declined 15 per cent Y-o-Y, impacted by changes in surrender value regulations but this also led to a shift to higher ticket-sizes.
Policy sales via the Ananda app rose 39.4 per cent Y-o-Y, reflecting digital adoption.
Dividend payouts have increased consistently from Rs 1.5 per share in FY22 to Rs 12 per share in FY25.
LIC aims to maintain solvency in 1.8-2.0x range. Economic assumptions were impacted (50-75bp) by interest rate changes.
Digital transformation is in focus, with AI/ML being integrated into decision-making across departments.
LIC is currently evaluating a health insurance foray through acquisition of a stake in a standalone health insurer.
However, this is contingent on regulatory developments on the composite license proposal.
The government’s stake in LIC is targeted to reduce to 90 per cent by 2027.
Management expects premium growth to recover in 2HFY26.
VNB margin improvement will be driven by a shift in product mix to non-par, with higher contribution from high-ticket size products.
Management continues to guide for sustained improvement in APE growth through FY26 as its agency force adjusts to higher-ticket products (and also boosted by lower 2HFY25 base).
This could lead to rerating as the stock is low-valuation compared to the private sector.
The stock gained a little over 3 per cent to Rs 912.55 post the Q1 results.
According to Bloomberg, 14 out of 15 analysts polled post Q1 are bullish; one has a sell rating.
Their average one-year target price is Rs 1,133.20.
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