Life insurance companies in India are likely to register a 10 to 20% year-on-year growth in value of new business (VNB) during the second quarter of FY27, even as broader discussions focus heavily on proposed regulatory guidelines rather than quarterly operational prints, according to a research report by Kotak Institutional Equities.
The brokerage noted that private life insurers under its coverage show steady underwriting performance, driven largely by solid expansion in protection plans despite moderate annualised premium equivalent (APE) growth."We expect 2QFY27 earnings call discussion and stock price performance to be centered around the impact of the proposed distribution norms and EoM guidelines, with less emphasis on the quarterly financial performance itself," the report stated.
Analyzing company-level performances across the life insurance basket, the brokerage projects private insurers to record 10 to 15% APE growth with a 6 to 18% increase in VNB, alongside net margin shifts ranging between negative 200 basis points and positive 150 basis points. State-owned Life Insurance Corporation of India (LIC) is projected to outpace private peers on profitability, delivering an estimated 320 basis points of margin expansion to 22.5% on the back of higher non-participating product share, which drives a 40% surge in its VNB.
"We expect private life insurers under coverage to deliver 10-15% APE growth with 6-18% growth in VNB. We bake in -200 to +150 bps expansion in margins. The positive drivers are high growth in the protection business, ending the controversy on margin loss due to GST exemption. We do not expect a notable product mix change in the savings business," the report said.
Regarding the wider regulatory and medium-term operational environment, the research agency highlighted that proposed caps on expenses of management (EoM) and distribution commissions represent the primary variables shaping forward outlooks.
"With sweeping changes proposed in distribution payouts and EoM cap, we expect management discussions to be dominated by the same—loss of VNB due to likely lower credit protect business, channel strategy, open or closed architecture in banks, dependence on PB and ability to meet EoM norms," the report said.
“In the meanwhile, the IRDA will draft new norms on products, customer redressal and claims; we expect IFRS 17 and RBC to also be implemented. Hence, stocks will remain under pressure of uncertainty even as valuation remains un-demanding," the report stated.
In the non-life insurance space, claims ratios in motor third-party (TP) policies will set operating trends for the quarter following judicial pronouncements regarding homemaker compensation. - ANI
