LIC Q1 FY27 Earnings Call: VNB Margin Expands 750 Bps to 22.9%, Guides Mid-20s VNB Margin by FY End (LICI)

Life Insurance Corporation of India held its Q1 FY27 earnings call on August 06, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Record PAT, Expanding Margins, Stable Solvency

• Total premium income of Rs.1,27,250 crore — up 6.75% YoY in Q1 FY 2026-2027; individual new business premium grew 14.48% to Rs.14,351 crore.
• Net VNB margin improved 750 bps YoY to 22.9% — net VNB rose 61.32% to Rs.3,136 crore in Q1 FY 2026-2027, driven by business mix shift and assumption changes.
• Profit after tax of Rs.13,492 crore — up 22.81% YoY in Q1 FY 2026-2027, supported by strong non-par surplus contribution that appears quarterly in the P&L.
• Total APE grew 8.22% YoY to Rs.13,692 crore — non-par share of individual APE increased to 32.49% from 30.34% in Q1 FY 2025-2026.
• Market share by first year premium stood at 60.10% — down from 63.51% in Q1 FY 2025-2026; individual market share at 38.89% and group market share at 70.90% (as per IRDAI).
• Solvency ratio improved to 2.42 — as of Jun 30, 2026, up from 2.17 a year ago; AUM reached Rs.59.39 lakh crore (+4.1% YoY).

750 bps Improvement Driven by Mix Shift and Assumption Changes

• Business mix shift contributed +6.5% to VNB margin — driven by 59.24% YoY growth in individual non-par savings and 43.59% growth in protection business in Q1 FY 2026-2027.
• Assumption changes added net +2.9% to VNB margin — risk-free rate (RFR) changes contributed a positive +5%+, while withdrawal experience revisions were negative, partially offsetting the gain.
• Expense assumptions dragged VNB margin by -1.9% — including the loss of GST input tax credit and higher other operating expenses in Q1 FY 2026-2027.
• Segmental VNB margins for Q1 FY 2026-2027: par segment at 19.4% (37.1% of APE), non-par individual at 49.3% (Rs.1,678 crore APE), and group business at 29.4% (45% of APE).
• VNB margin improved across all product lines — with individual non-par savings and term assurance contributing most positively; par and group also showed positive margin improvement.
• Assumption changes based on experience from Q4 FY 2025-2026 and Q1 FY 2026-2027 — positive economic variance of +500 bps (RFR-related) offset by negative persistency and mortality assumption adjustments.

Non-Par and Protection Drive Value-Accreting Growth

• Individual non-par savings premium surged 59.24% YoY — and protection business grew 43.59% YoY in Q1 FY 2026-2027, forming the core of LIC's post-IPO value-accretive strategy.
• Par segment remains a key franchise — accounting for 37.1% of APE with a 19.4% VNB margin, while non-par individual delivers 49.3% margins on a smaller base.
• ULIP premium declined YoY in Q1 FY 2026-2027 — attributed to market volatility; management expects recovery when market conditions normalize, with no cannibalization risk to non-par growth.
• Group business contributed 45% of APE — with a VNB margin of 29.4% in Q1 FY 2026-2027, reinforcing its importance in the product mix.
• Management reiterated post-IPO strategy — to grow the non-par segment (higher margins) while maintaining strength in par business, with product mix expected to evolve based on customer needs.

Bancassurance Weakness Offset by Agent-Led Protection Surge

• Individual protection business grew 40%+ YoY — in Q1 FY 2026-2027, driven primarily by the individual agents channel; management expressed confidence that the increase in protection sales will continue for the next few quarters.
• Bancassurance policies sold grew 16.3% — but individual NBP grew only 5.3% in Q1 FY 2026-2027, due to a decline in average ticket size from the minimum sum assured increase (Rs.1 lakh to Rs.2 lakh) and adverse impact from the West Asia conflict on remittance-linked annuity and ULIP sales.
• Agent count decreased — due to exits of non-serious candidates from the Bima Sathi scheme; management is weeding out such agents while focusing on rural growth.
• Bima Sathi initiative covered 62% of gram panchayats — with 2.87 lakh appointees as of Jun 30, 2026, supporting rural penetration.
• Digital initiatives launched in April 2026 — MyLIC and Super Sales Sathi apps introduced to enhance customer and agent experience.
• Management expects balanced bancassurance recovery — in subsequent quarters of FY 2026-2027, with a commitment to perform better than FY 2025-2026 for the full year; the Q1 weakness was attributed to a delayed start in finalizing marketing plans with some bank partners.

GST Headwind Flowing Through; Expense Ratio Creeps Up

• Expense ratio rose marginally to 10.63% — in Q1 FY 2026-2027 from 10.47% in Q1 FY 2025-2026, with expense variance of -190 bps in the VNB walk.
• GST input tax credit loss contributed -1.9% to VNB margin — in Q1 FY 2026-2027; this impact is expected to persist for Q2 FY 2026-2027 comparisons vs the prior year, but normalize thereafter.
• The bulk of the GST impact should fade by H2 FY 2026-2027 — assuming no further assumption changes later in the year, management noted.
• 13th-month persistency (premium basis) stood at 75.33% — in Q1 FY 2026-2027, with overall persistency assumption change being marginally negative based on experience on both the individual and group sides.
• Ring-fenced Available Solvency Margin (ASM) fund at Rs.1,80,000 crore — (book value) as of Q1 FY 2026-2027; market value fluctuates.
• Non-par surplus appears quarterly in the P&L — while par surplus is transferred only in Q4 FY 2026-2027 upon annual valuation, explaining the large non-par surplus contribution in early quarters.

Targeting Mid-20s VNB Margin by FY End; Growth Recovery Expected

• Management targets mid-20s VNB margin by end of FY 2026-2027 — confirmed on the call, with expectations for margins to settle around the industry average as the focus on value-accreting policies continues.
• No formal VNB margin guidance issued — but management expects margins to improve from the Q1 FY 2026-2027 base over subsequent quarters, contingent on RFR movements, improved operating efficiency, lower expense ratios, and a continued shift toward value-accretive business lines.
• APE growth expected to increase over subsequent quarters of FY 2026-2027 — Q1 was softer due to a shift in focus towards regular premium policies; management guided that margins should improve as the non-par savings and protection push continues.
• RFR components are out of management's control — a key variable in VNB margin outcomes, with RFR assumption changes contributing a positive +5%+ in Q1 FY 2026-2027.
• Bancassurance weakness attributed to a delayed start with bank partners — management expects this to be covered up in subsequent quarters, with a commitment to perform better than FY 2025-2026 for the full FY 2026-2027.
• Management agreed to examine feasibility of monthly AP reporting — in response to an analyst request for better visibility into the quarterly trajectory.