Indian life insurers to see 10-20% VNB growth in Q2FY27: Report

Life insurance companies in India are projected to post a 10-20% year-on-year growth in value of new business (VNB) in Q2FY27, even as discussions centre on proposed regulatory norms over quarterly performance, a Kotak Equities report notes.

Life insurance companies in India are likely to register a 10 to 20 per cent 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.

Private Sector Performance and Margin Outlook

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. "Growth in protection is supporting margins and VNB despite moderate (10-15% yoy for the private sector) APE growth. Health claims tend to inch up in 2Q, though secular improvements and higher leverage continue to drive core earnings; trends in motor TP claims provisioning will drive the performance of non-life companies for the quarter. PB will continue on a steady growth path," the report added.

Company-Level Projections: Private Insurers vs. LIC

Analyzing company-level performances across the life insurance basket, the brokerage projects private insurers to record 10 to 15 per cent APE growth with a 6 to 18 per cent 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 per cent on the back of higher non-participating product share, which drives a 40 per cent 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.

Regulatory Headwinds and Market Uncertainty

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.

Future Regulatory Landscape

It mentioned that the near-term growth outlook is likely to be strong due to the sunset period and the weakness in FY2028E (to initially adjust to new norms and then a high base) do not reflect the new normal. “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.

Non-Life Insurance Sector Trends

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)

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