VNB reality check
Beyond this technical factor, another valuation aspect warrants close attention. LIC’s reported price-to-earnings (P/E) multiple of less than 10x based on FY26 earnings may appear inexpensive on the surface. But for life insurers, earnings per share (EPS), derived from reported profit after tax, does not fully capture performance because costs are recognized upfront while profits from issued policies are earned over several years. Hence, economic profit, also known as the value of new business, or VNB, is considered a more relevant measure than accounting profit. VNB is used to derive the Price/VNB ratio, similar to the P/E ratio.
