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.

"Post the slowdown in APE in Q1FY24 owing to bumper sales of non-par products in Q4FY23, we expect listed private life insurance players to deliver decent APE growth in H1FY24E, driven by robust growth momentum in Q2FY24," Emkay Global analysts Avinash Singh and Mahek Shah wrote in their insurance Q2 preview report.

SBI Life is expected to see 10-12% growth in profit with the margin likely to fall by 3 percentage points on year. It is likely to report VNB growth of around 18% YoY.

Max Life is projected to achieve a 31% APE expansion due to better performance in July and August 2023, aided by an uptick in sales through the Axis Bank channel. Motilal Oswal analysts Nitin Aggarwal and Disha Singhal expect a 32% increase in its VNB.

LIC is expected to report a 12% fall in APE due to a change in product mix and a 0.5-0.7-percentage-point decline in margin to 14.6%.

Premium growth among listed companies in private general insurance is expected to be 18%, primarily driven by the retail health and crop insurance segments. In general insurance, the motor segment remains competitive. Also, the combined ratio, which is the measure of profitability in general insurance companies, is expected to improve with the new commission and expense of management regulations in place.