Return to normal for life insurers in Q1


Mumbai: The first quarter ended June 30, 2022 will mark the return of a normal or business-as-usual Q1 for life insurers after a two-year gap in which lockdown in Q1FY21 and the Delta wave in Q1FY22 had severely disrupted business growth and resulted in a spike in death claims.

In the absence of exceptional mortality costs, the accounting profitability for the life insurers should return to a normal trajectory in Q1FY22, said analysts.

Private life insurer ICICI Prudential Life Insurance that announced its earnings last week reported a net profit of Rs 156 crore in the April-June quarter of 2022-2023 compared to a loss of Rs 186 crore in the year-ago period, aided by significantly lower claims and provisions due to Covid-19. However, the assets under management growth may remain muted as high interest rates may result in negative economic variance, and around a 10 per cent fall in broader equity markets could lead to a 3-5 per cent decline in assets under management.

“We expect life insurers to report robust new business premium growth year-on-year with the base effect playing out. The focus on higher-margin products (non-par, protection and annuity products) and subsequent improvement in the product mix are likely to improve the margins for life insurers. With rising rates, we could witness near-term headwinds, as an increase in discount rates could potentially impact the embedded value (EV) of life insurers,” said Axis Securities in a report.


ICICI Prudential Life Insurance’s Q1FY23 value of new business margin stood at 31 per cent. However, annualised premium equivalent (APE) growth was muted on a favourable base, raising concerns about FY23 APE growth, which is critical for the company to achieve its target of doubling FY19 value of new business in FY23 estimates.

According to Motilal Oswal Financial Services, the value of new business (VNB) for insurance players is likely to grow faster at 21-86 per cent and margins to stay healthy at 25-28 per cent barring Max Life Insurance. Life Insurance players have reported their monthly premium numbers for June 2022, which also marks the closure of 1QFY23.

New business APE for SBI Life saw a robust 77 per cent YoY growth in 1QFY23.

Total new business premium grew 67 per cent year on year. The new business APE for ICICI Prudential grew 25 per cent YoY in 1QFY23. Total NBP grew 24 per cent. The new business APE for HDFC Life grew 23 per cent YoY in 1QFY23 while total NBP growth was healthy at 29 per cent. New business APE for Max Life saw a modest growth of 11 per cent in 1QFY23 while the total NBP grew by 20 per cent.

“We expect premium growth to remain healthy (albeit on a low base) on strong demand for annuity, guaranteed, and credit life products. Protection is likely to see a gradual recovery, while Ulip is likely to remain subdued amid a volatile market,” said Motilal Oswal.

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