ULIP sales may help insurers post strong premium growth in Q2
Insurance companies are set to shrug off their tepid first-quarter performance and report strong premium growth in the three months through September, as a strong equity market propelled sale of unit-linked insurance plans. While new business growth is expected to be robust for Max Life Insurance and HDFC Life, it could remain static for state-owned Life Insurance Corporation of India.
LIC may face a decline in annualised premium equivalent (APE) due to a contraction in its group business.
APE is the sum of regular annualised premium from the new business plus 10% of the first single premium in a given period, and is a common measure to ascertain business sales in the life insurance industry.
Motilal Oswal Research expects premium growth to maintain stability in Q2 following a subdued first quarter, as the demand for annuity, non-participating, and credit life products remained strong.
Among the listed life insurers, HDFC Life is expected to report a 15% increase in net profit, 8% growth in the value of new business (VNB) and flat VNB margin. VNB is a metric that measures the present value of the future profits generated from new insurance policies, while VNB margin represents the percentage of VNB relative to the premium income from those policies.
ICICI Prudential Life Insurance is projected to report around 25% growth in net profit aided by a rise in APE.
However, margins are expected to be 1 percentage point lower at 30% due to a change in product mix driven by a withdrawal of tax benefit for high-value policies starting April 1, 2023. Also, ICICI Prudential Life's VNB growth is likely to remain unchanged from a year earlier.
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