Improving near-term prospects suggest more gains ahead for LIC stock

Q3 FY26 net premium income was Rs 1.3 trillion, up 18 per cent year on year

Life Insurance Corporation of India (LIC) reported very encouraging results for the October-December quarter of 2025-26 (Q3FY26) with annualised premium equivalent (APE) growth up 16 per cent year-on-year (Y-o-Y) due to a big upmove in individual premiums. Value of new business (VNB) grew 28 per cent Y-o-Y and VNB margins rose 170 bps Y-o-Y due to better product mix.

 

There is strategic focus towards higher sum-assured, non-participating (non-Par) policies. These contributed 28 per cent of new business in FY25 and a further shift was seen after the new surrender guidelines were implemented (October, 2024). Apart from the product mix shift, a favourable yield curve contributed to VNB margin, despite an estimated negative 2.8 per cent impact of goods and services tax (GST).

 

The Q3FY26 net premium income was ₹1.3 trillion, up 18 per cent Y-o-Y. Renewal premium grew 7 per cent Y-o-Y to ₹69,300 crore and single premium was up 31 per cent Y-o-Y to ₹45,900 crore. New business APE grew 50 per cent Y-o-Y to ₹15,000 crore. Individual APE grew 61 per cent Y-o-Y to ₹10,380 crore, and group APE grew 31 per cent Y-o-Y to ₹4,590 crore. In 9MFY26, APE grew 16 per cent to ₹44,000 crore. The VNB margin expanded to 21.2 per cent from 19.4 per cent in Q3FY25 and for 9MFY26, VNB grew 28 per cent Y-o-Y to ₹8,300 crore, with margin at 18.8 per cent.

 

While all the numbers beat consensus comfortably, management hopes for premium growth in line with industry trends, with higher-ticket sizes and also volume growth post GST exemption. The GST impact will be offset by the better product mix and cost optimisation. 

 

The non-par contribution to APE also continues to rise since individual APE growth of 61 per cent Y-o-Y was driven by a 49 per cent Y-o-Y growth in Par and 87 per cent Y-o-Y growth in non-Par APE to ₹6,570 crore and ₹3,810 crore respectively. The non-Par APE contributes 25.5 per cent (up from 20.5 per cent in Q3FY25). In the 9MFY26, the product mix shift has pushed VNB margin up 2.6 per cent.

 

During 9MFY26, within non-Par, LIC saw 102.6 per cent Y-o-Y growth in ULIPs APE, and 30.5 per cent Y-o-Y growth in individual savings APE, and 18 per cent Y-o-Y growth in protection APE. The annuity business saw a decline of 7.5 per cent Y-o-Y.

 

Commission was nearly flat Y-o-Y at ₹6,010 crore, while operating expenses grew 13 per cent Y-o-Y to ₹9,570 crore. The expense ratio rose 110bp to 12.4 per cent in Q3FY26 but declined 132bp Y-o-Y in 9MFY26. The solvency ratio stood at 219 per cent -- it was 202 per cent in Q3FY25. The 13th month, 37th month and 61st month persistency were 69.4 per cent, 61.4 per cent and 54.6 per cent in Q3FY26.

 

Income from investments in policyholders’ accounts grew 14 per cent Y-o-Y to ₹1.1 trillion, and it grew 41 per cent Y-o-Y to ₹2,250 for shareholders’ accounts. The AUM grew 8 per cent Y-o-Y to ₹5,920 crore. Yield on investment for policyholders’ accounts was flat Y-o-Y at 8.8 per cent for 9MFY26.

 

LIC has the largest agency force of nearly 1.5 million and 92 bancassurance partners (banca), 304 brokers, and 173 corporate agents, in its huge network. Contribution from the agency channel was 91 per cent in Q3FY26 and 93.2 per cent in Q3FY25, with individual new business premium (NBP) up 25 per cent Y-o-Y. Individual NBP from banca was up 29 per cent Y-o-Y, and contribution share was stable at 4.7 per cent. The direct and broker channels saw growth of 94 per cent and 177 per cent Y-o-Y respectively.

 

The management pointed to structural cost optimisation via workforce rationalisation, and digitisation. LIC may look at health insurance acquisition but there is no fixed timeline for any stake acquisition. Management is committed to dividend payouts. The government’s stake is expected to reduce to 90 per cent by 2027.

 

The Ananda app now has over 1.45 million policies sourced through the platform. Banca is a growth driver, for non-Par products, where it contributes 90 per cent of sales with banks also showing strong persistency of above 90 per cent. Management concedes market share may decline as more players enter.

 

The VNB margin expansion, increasing share of non-Par business and good results have led to a spike in the share price and sharp upgrades by analysts. The higher-ticket sizes, and continued growth in various channels points to more demand post-GST-exemption.

 

According to Bloomberg, 16 out of the 19 analysts polled post Q3 results are bullish, while two are neutral and one is bearish. Their average one-year target price is ₹1,101.26 for the stock that jumped 7.26 per cent to close at ₹901.50 on the BSE on Friday.