State-owned Life Insurance Corporation of India (LIC) allocated a record Rs 59,725 crore as bonus to holders of participating life insurance policies in FY26, up about 6% from Rs 56,331 crore in the previous financial year, reflecting higher surplus generation and improved operating performance. The insurer retained its market leadership during FY26, accounting for 56.66% of the industry's first-year premium income and 65.16% of all policies sold in the country, according to its FY26 Annual Report released on Friday.

The insurer's FY26 annual report, released on Friday, showed it also paid an interim bonus of Rs 8,356.71 crore during the year, sharply higher than Rs 3,075.80 crore in FY25. The bonus is credited to eligible holders of participating (with-profit) policies and forms part of the benefits payable on maturity or death. Participating policies allow policyholders to share in the insurer's surplus through bonus payouts.

The higher bonus declaration came in a year when LIC reported a sharp improvement in profitability. Its Value of New Business (VNB) rose 42% to Rs 14,179 crore in FY26 from Rs 10,011 crore a year earlier, while the VNB margin expanded to 21.2% from 17.6%. Annual Premium Equivalent (APE), a standard measure used to compare life insurance sales, increased to Rs 66,961 crore, supported by strong growth in higher-margin products.

The insurer accelerated its shift towards higher-margin non-participating (non-par) products even as traditional participating products such as endowment, money-back and whole-life plans continued to dominate its portfolio. Individual Non-Par APE surged 43.8% to Rs 15,214 crore in FY26 from Rs 10,581 crore a year earlier, helping improve the profitability of new business.

The report, however, showed some weakness in policy retention over the longer term. LIC's 61st-month persistency ratio on a premium basis declined to 59.31% in FY26 from 63.12% a year earlier, while the ratio based on the number of policies fell to 46.88% from 50.31%. In contrast, first-year retention remained stable, with the 13th-month persistency ratio standing at 74.64% on a premium basis, compared with 74.84% in FY25.

LIC said it has stepped up efforts to improve policy persistency by linking it to employees' and agents' key performance indicators, strengthening customer engagement programmes and leveraging digital channels such as the MyLIC app and WhatsApp-based premium collection to encourage timely renewals.

The insurer's Embedded Value (EV), a key measure of its long-term economic worth, increased to ₹7.89 lakh crore as of March 31, 2026, from Rs 7.77 lakh crore a year earlier, while its solvency ratio improved to 2.35, comfortably above the regulatory minimum of 1.50.