Life insurers set for profit gains; general insurers face claims pressure | Insurance News

Life insurance companies are expected to report an improvement in profitability in the July-September quarter of FY27 (Q2FY27), supported by growth in retail protection products and a favourable product mix. General insurers, on the other hand, could face pressure on profitability due to higher claims ratios, according to analysts.

Management commentary on the consultation paper proposing changes to insurance distribution norms, including commission payouts and expense of management (EoM) limits, is also likely to be a key focus during the earnings season, they said.

For life insurers, value of new business (VNB) — a key measure of profitability — is expected to improve on the back of higher sales of protection products and a shift in product mix towards non-participating (non-par) and term life policies. However, growth in annualised premium equivalent (APE), a measure of new business premiums, is likely to remain modest.

“We expect private life insurers under coverage to deliver 10-15 per cent APE growth with 6-18 per cent growth in VNB. We bake in -200 to +150 basis points expansion in margins. The positive drivers are high growth in the protection business, ending the controversy on margin loss due to GST exemption,” analysts at Kotak Institutional Equities said.

Emkay Global Financial Services also expects modest APE growth, with VNB margins remaining stable or improving, supported by a favourable shift towards non-par and term life products, along with higher rider attachment.

Among private insurers, SBI Life Insurance’s VNB margin is estimated at 27.3 per cent in Q2FY27, compared with 28 per cent a year earlier. HDFC Life Insurance’s margin is expected to improve to 24.8 per cent from 24.1 per cent, while ICICI Prudential Life Insurance’s margin is projected to rise to 25.5 per cent from 24.4 per cent in Q2FY26. Axis Max Life Insurance’s margin is estimated to increase to 25.9 per cent from 25.5 per cent.

For Life Insurance Corporation of India (LIC), the VNB margin is expected to expand to 23.2 per cent from 19.3 per cent in the year-ago quarter, according to Emkay estimates.

In the general insurance segment, profitability is likely to remain under pressure from aggressive pricing in commercial lines and intense competition in motor insurance. Health insurers, however, are expected to fare better.

Nomura said the impact of seasonal diseases was likely to emerge during the quarter, although the intensity could be lower than last year. It also expects one-off provisions for motor insurance in Q2FY27.

Emkay estimates ICICI Lombard General Insurance’s combined ratio at 104.9 per cent, compared with 105.1 per cent in Q2FY26. Star Health and Allied Insurance’s combined ratio is projected to improve to 99 per cent from 100.5 per cent, while Go Digit General Insurance’s ratio is expected to worsen to 113.1 per cent from 111.4 per cent.

A combined ratio above 100 per cent indicates an underwriting loss, as claims and operating expenses exceed premium income.