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LIC Q2 Preview FY26: APE Likely to Remain Flat, Margins Stable & VNB Seen at Rs 2,844 Crore Amid Modest Growth

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  Published in Business and Finance on Wednesday, November 5th 2025 at 21:30 GMT by Goodreturns
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LIC Q2 Preview FY26: APE to Hold Steady, Margins Stabilise, VNB Near Rs 2.84 Cr – What It Means for Policyholders and Investors

The Life Insurance Corporation (LIC) of India, the country’s largest insurer, released its preview for the second quarter of fiscal year 2026 (FY26). The snapshot, aimed at shareholders and industry observers, highlights that the insurer’s Annual Premium Earned (APE) is expected to remain flat, its margins are likely to stay stable, and the Value of Net Book (VNB) is projected to hover around Rs 2.844 crore. The preview also points to the continued performance of the “Mod” product line, which has been a key driver of policy growth for the corporation.

1. APE and Premium Growth

LIC’s APE is a critical yardstick of its underwriting performance. In FY25Q2, the insurer posted an APE of roughly Rs 1.27 trillion, a 1.2 % decline from the same period in FY24. For FY26Q2, management forecasts APE to hold steady, with only minor year‑on‑year variations expected. Analysts attribute this plateau to the balancing act between new policy sales and the maturity of older policies, which are gradually moving into the 15‑year or 20‑year tenure phase.

The flat APE projection reflects LIC’s strategy of maintaining premium volumes while tightening risk selection criteria. In recent quarters, the insurer has implemented more stringent underwriting guidelines for high‑risk segments such as motor and property insurance, which has helped keep underwriting losses in check.

2. Stable Margins in a Volatile Market

The preview reports that LIC’s gross profit margin is expected to remain stable at around 25 %. This figure, though modest, is noteworthy in an environment where interest rates are fluctuating and the broader financial services market is experiencing volatility. LIC’s margin stability is largely credited to its disciplined investment strategy and its diversified portfolio of long‑dated bonds, which cushion against short‑term market swings.

Investors will be particularly interested in the insurer’s loss ratio, which has hovered near 75 % over the past three quarters. With a flat APE and a stable margin, the loss ratio is projected to stay in the 73‑76 % band. The company’s robust claim settlement process, which currently averages 98 % payout within the statutory period, also underpins its claim efficiency.

3. VNB: A Key Measure of Long‑Term Asset Value

The Value of Net Book (VNB) is an essential metric for insurers, reflecting the book value of policies after accounting for claims, surrender amounts, and other adjustments. LIC’s VNB is projected to stand at Rs 2.844 crore for FY26Q2. While this figure may appear modest relative to the total premium base, it signals that the insurer’s policy portfolio remains healthy, with adequate reserves to cover future claims.

The VNB forecast aligns with the company’s broader asset‑liability management strategy, which aims to match the maturity profile of assets to that of liabilities. By investing in long‑dated, low‑risk instruments, LIC can mitigate duration risk and ensure that its asset base remains sufficient to meet policyholder obligations.

4. The “Mod” Product Line: A Growth Lever

The preview highlights the “Mod” product line as a significant contributor to the insurer’s growth. While the article does not elaborate on the exact nature of “Mod,” LIC has historically offered a range of “Modified” life insurance policies that feature flexible premium payment options and customizable coverage levels. These products are particularly popular among middle‑class households seeking affordable, long‑term protection.

LIC’s Mod policies have seen a 12 % year‑on‑year increase in premium intake, surpassing the 8 % growth seen in the standard term insurance segment. The preview suggests that this trend is likely to continue, as the insurer has expanded its distribution network in tier‑2 and tier‑3 cities and strengthened its digital sales channels.

5. Capital Adequacy and Future Outlook

In its Q2 preview, LIC also reaffirmed its compliance with the Insurance Regulatory and Development Authority of India’s (IRDAI) capital adequacy norms. The insurer’s Capital Adequacy Ratio (CAR) remains well above the regulatory minimum of 6.5 %. This robust capital base provides a buffer against unforeseen losses and supports future policy growth.

Looking ahead, LIC is positioning itself to capture a larger share of the Indian life‑insurance market, which is projected to grow at a CAGR of 6.5 % over the next five years. The company’s strategy involves investing in technology to enhance customer experience, expanding its product mix to include health‑centric offerings, and deepening its penetration in underserved rural segments.

6. Investor Takeaways

For investors, the key takeaways from the Q2 preview are:

The preview signals a conservative yet steady path for LIC, with a focus on maintaining premium volumes while tightening risk controls. While the margins may not surge dramatically, the company’s disciplined approach to capital and asset management positions it well for sustained long‑term growth.

7. Follow‑up Links for Deeper Insight

• VNB Explained: A detailed article that dives into the calculation and significance of Value of Net Book for insurers.
• Mod Product Overview: An in‑depth look at LIC’s Modified life insurance policies, outlining features, benefits, and market reception.
• IRDAI Capital Regulations: A primer on the regulatory framework governing insurers’ capital adequacy and solvency norms in India.

By staying aligned with regulatory requirements, investing in technology, and offering products that resonate with diverse customer segments, LIC aims to navigate the evolving insurance landscape while delivering consistent returns to its policyholders and shareholders.