Life insurers to get annuity boost, general cos to endure a tepid Q4 – Economic Times

Mumbai: Life and general insurance companies may see a divergence in their fourth-quarter earnings as life insurers are expected to continue seeing robust demand for annuity schemes that will help offset declining revenue share from unit-linked plans (ULIPs). General insurers, by contrast, should report tepid growth as business activity is still weak.

“For life insurers, APE (annual premium equivalent) growth may be moderate with modest VNB (value of new business) margin unlike the third quarter, which witnessed stable margins for insurance companies. ULIP products are likely to be slower while annuity and credit life products are likely to have robust demand during the quarter.

“Further, the demand for protection is also expected to remain subdued,” said BNP Paribas-owned brokerage Sharekhan. It expects the VNB margin to remain at 3-8% in the quarter ended March 2022.

APE is calculated by taking into account both the single premium and regular premium to give a better picture of the growth in premiums. VNB is the profit margin of a life insurance company and is calculated by dividing the new business value by the annualised premium equivalent.

Analysts, however, expect the slower ULIP growth to be offset by robust demand for guaranteed income and credit life products. “Protection demand is likely to remain subdued, although some improving trends are likely. SBI Life and HDFC Life would post APE growth of 8%/4% YoY, while Max Life and ICICI Prudential Life would see a decline of 4%/6%, respectively, in the quarter ended March 2022,” Motilal Oswal said in a report. Motilal expects VNB growth to remain in a modest range of 3-8% across the industry, with margins likely to expand sequentially.

YES Securities expects SBI Life to report an APE de-growth of -4.1% for two months of January and February 2022 over October and November 2021. It expects a marginal APE margin expansion of around 10 bps due to expected business mix changes. One basis point is 0.01 percentage point.

ICICI Pru Life is expected to report an APE growth of 9.9% for January and February 2022 with APE margin deteriorating slightly on a sequential basis based on business mix change as the company is likely to remain cautious on retail protection. While for HDFC Life, APE growth is expected to be at 12.1% with margin expanding slightly on a sequential basis, YES Securities said.

Sharekhan expects ICICI Lombard General Insurance to report a growth of around 8% year-on-year, aided by strong health, fire, motor third party, and personal accident segments.