In the recent April-June quarter, insurance companies posted impressive gains in their net profits, with most of them achieving double-digit growth. However, there was a noticeable dip in the Value of New Business (VNB) margin for many companies during this period. Moneycontrol conducted an analysis of six insurance companies, both in life and non-life sectors, and the results revealed an average net profit growth of 22 percent compared to the same quarter last year. Notably, the state-owned Life Insurance Corporation (LIC) of India and New India Assurance reported exceptional profit surges of 1,299 percent and 120 percent, respectively, primarily due to increased income from investments and higher total income.
SBI Life recorded a net profit of Rs 381 crore, marking a 46 percent increase, while private sector insurer HDFC Life saw a 15 percent rise in profit, reaching Rs 415 crore. Similarly, ICICI Prudential's net profit increased by 15 percent to Rs 207 crore, and ICICI Lombard's net profit grew by 12 percent to Rs 390 crore.
The insurance landscape underwent significant changes following the pandemic. Insurance providers absorbed some costs without passing them on to policyholders, demonstrating resilience. However, this phase of adaptation was followed by a period of sensitivity, during which more people sought insurance products, according to Kiran Boosam, Vice President and Head of Global Insurance Strategy and Portfolio at Capgemini.
The decrease in the VNB, a crucial metric that measures the profit margin of new business written by life insurance companies, was a notable trend in the April-June FY24 quarter. Experts attribute this decline to market volatility, increased competition, and regulatory changes in the sector. Alok Rungta, Deputy Chief Executive Officer and Chief Financial Officer at Future Generali India Life Insurance, stated that heightened competition, market volatility, regulatory uncertainties, changes in customer preferences, and shifts in product offerings were the main reasons for the dip in VNB during Q1.
LIC's VNB decreased by 7 percent to Rs 1,302 crore from Rs 1,397 crore in April-June FY23. The state-owned insurer's VNB margin remained at 13.6 percent, nearly matching last year's 13.7 percent margin. SBI Life experienced a marginal 1 percent reduction in VNB, reaching Rs 870 crore, and its margin decreased from 30.4 percent last year to 28.8 percent this year. ICICI Prudential's VNB dropped by 7 percent to Rs 438 crore, and its VNB margin dipped by 1 percent compared to the previous year, settling at 30 percent.
In contrast, HDFC Life Insurance was the only life insurer to report an increase in VNB, with an 18 percent rise to Rs 620 crore. The company's VNB margin improved to 26.2 percent from 25.1 percent the previous year.
There were mixed signals regarding growth in the total annual premium equivalent (APE), a metric used to measure new business sales growth. LIC and ICICI Prudential reported declines in total APE for the April-June FY24 quarter. LIC reported a total APE of Rs 9,532 crore, a 7.19 percent decrease from Rs 10,270 crore the previous year. ICICI Prudential's total APE stood at Rs 1,461 crore, dropping by 4 percent from Rs 1,520 crore.
In the motor insurance segment, ICICI Lombard's premium portfolio grew to Rs 1,875 crore from Rs 1,782 crore the previous year, while New India Assurance's motor segment increased to Rs 2,341 crore from Rs 1,918 crore.
Experts believe that the Indian insurance sector has opportunities for growth, thanks to favorable economic conditions. With a younger demographic, the challenge lies in raising awareness and appreciation for insurance. Insurers must simplify products, use digital channels to attract a younger audience, and leverage the increasing data from digital programs, according to Kiran Boosam. Alok Rungta highlighted a mixed outlook for the sector, citing potential impacts from prolonged low interest rates and intense competition through online channels. Nevertheless, he sees growth potential through digital transformation, personalization, and innovative product offerings.
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