Growth in new business for private life insurers slows down

financialexpress.com:

The value of new business (VNB) for private sector life insurers in the first quarter of FY24 seems to be in the slow lane.

For example, SBI Life Insurance and ICICI Prudential Life Insurance witnessed a fall of 1% and 7%, respectively, in their VNB in the first quarter of FY24 on a year-on-year (YoY) basis. While HDFC Life Insurance reported a growth of 18%, the percentage increase on a YoY basis was lower than Q1FY23, at 25%. In addition, for the life insurance major, the VNB margin in the first quarter was lower than the company’s full-year guidance as well.

The numbers are significantly lower than the trend seen the last five years. That is, the VNB compound annual growth rate (CAGR) over the past five financial years (FY18-23) for most large private sector players has been closer to 30% versus sub 20% five years ago.

Macquarie Equity Research feels that VNB margins of the privatelife insurance companies have more or less peaked. Additionally, another dampener for life insurers has been the new tax liability on policies with over Rs 5 lakh premium. This is quite likely to have reduced investor interest in such policies and have an adverse impact on the purchase of new policies for tax-saving purposes.

For HDFC Life Insurance, whose business was expected to be impacted by 10-12% after the new tax ruling, saw its VNB margin grow by 110 basis points YoY at 26.2%, marginally lower than 27.6% in the last financial year.

Talking to FE, the insurance company’s executive director & chief financial officer, Niraj Shah, said the volume of policies above

Rs 5 lakh got impacted in Q1FY24 as expected due to the government’s move to tax incomes from such policies from this financial year. “But that is something which is more than