LIC Shares Fall 4% on Q2 VNB Estimate Miss, Weak APE Growth

LIC’s Profit Growth Meets a More Demanding Test on New Business

Higher premiums lifted earnings, but softer-than-expected new-business value and modest APE growth kept investors focused on the quality of LIC’s expansion.

The share-price response points to growth concerns

LIC fell 4.1% to an intraday low of ₹391.6 on Friday and was down 3.6% at ₹393.4 at 11:13 a.m. on the NSE. The move came as the Nifty 50 was up 0.33%, suggesting the session’s weakness was more closely tied to the insurer’s results than to the broader market.

The contrast within the results helps explain the reaction. Net profit rose 20.12% year on year to ₹12,076 crore, while net premium income increased 16.2% to ₹1.47 trillion. Yet APE, a measure of new annualised premium business, grew only 3.8% to ₹17,004 crore. Jefferies said the September-quarter VNB missed its estimates because of lower APE and VNB margin. For investors, the concern is not simply whether earnings grew, but whether new business is expanding at a pace that can sustain future value creation.

Premium growth has not removed the new-business gap

Net investment income rose nearly 2.5% to ₹1.15 trillion, while first-half APE increased 5.72% to ₹30,696 crore. Individual APE, however, grew just 0.31% to ₹17,224 crore in the first half. These figures show why the headline profit increase should be read alongside the measures of new-policy momentum.

Systematix calculated VNB at ₹37.1 billion, up 17.1% year on year and 18.3% sequentially. Its estimate of the VNB margin expanded 249 basis points year on year to 21.8%, but eased 109 basis points from the previous quarter. The brokerage said a better product mix helped sequentially, while a change in the RFR had a negative margin impact of around 120 basis points. The different comparisons underline that VNB growth and the quarterly margin trajectory need to be assessed together.

Product mix and distribution remain central to the outlook

LIC’s product mix shifted towards participating policies in the reported period: non-par products accounted for 34.03%, down from 36.31% a year earlier, while par products rose to 65.98%. Jefferies described LIC as diversifying into non-par products, whose share it said had increased 1.6 times over two years. The figures suggest the transition is ongoing rather than a one-way shift; investors will want to see how mix changes translate into margins and VNB.

Systematix said management had reduced the share of monthly-mode ULIP business from 24% to 14% over the past year, while focusing on higher-ticket ULIPs. It also cited healthy group APE growth, supported by group annuity and other group products, but noted the segment’s exposure to interest-rate movements, competition and large international business. Management expects APE growth to improve in the second half, supported by ULIPs, non-par savings and protection, and recently launched products. That expectation is a key measure to watch, not a result already established.

Brokerage targets differ, while execution remains key

Both Jefferies and Systematix retained Buy ratings, with price targets of ₹510 and ₹470, respectively. Jefferies pointed to LIC’s government backing, market leadership, agency network and potential benefits from distribution reforms. It expects APE growth of 11% until FY29 and margins to reach 23%. These are brokerage forecasts, not assured outcomes; the share-price reaction shows that investors remain sensitive to whether growth and margins meet expectations.

Key Highlights

• LIC’s Q2FY27 net profit rose 20.12% to ₹12,076 crore.
• Net premium income grew 16.2% to ₹1.47 trillion; APE rose 3.8% to ₹17,004 crore.
• Jefferies said VNB missed its estimates on lower APE and margin.
• Systematix calculated VNB at ₹37.1 billion, with a year-on-year margin improvement but a sequential decline.
• Management expects APE growth to improve in H2FY27, supported by several product lines.

Investor Note: LIC’s profit growth and improving year-on-year VNB margin are constructive, but modest APE growth and the quarterly margin decline warrant attention. Investors may wish to track second-half new-business momentum, product mix and VNB margins against management expectations, while treating brokerage targets as estimates rather than guarantees.