Indian private life insurers expanded their value of new business (VNB) margins in the first quarter of FY27 despite losing input tax credit following the GST exemption on insurance premiums, with stronger protection business, favourable product mix and improving operating leverage supporting margins.
Several private life insurers reported strong VNB growth in Q1FY27, while margins expanded for most players. Protection and annuity growth, favourable product mix, improving operating leverage and interest-rate movements supported margins, even as the loss of input tax credit following the GST exemption created a cost drag, according to Kotak Institutional Equities.
Aditya Birla Sun Life Insurance reported a 153% year-on-year increase in VNB to Rs 1.7 billion, while its VNB margin nearly doubled to 15.1% from 7.5% a year earlier. APE grew 26% to Rs 11.1 billion, with partnership channels rising 34%. The product mix also shifted towards annuity and protection products, which grew 219% and 50%, respectively.
Axis Max Life reported 33% growth in VNB, while APE increased 15%. Its VNB margin expanded by more than 300 basis points, helped by a 57% increase in protection business, which accounted for 15% of APE. Higher operating leverage and changes in interest rates also supported the margin expansion.
Bajaj Life reported an 87% increase in VNB, while APE grew 30%. Its VNB margin expanded 480 basis points year-on-year to 15.9% after the GST reset. The improvement was supported by individual term insurance, which grew 57%, higher rider attachment, a favourable savings mix and improving operating leverage.
ICICI Prudential Life reported 25% VNB growth, supported by a 46% increase in protection APE. Its VNB margin rose to 26.7% from 24.5% a year earlier. Individual protection APE increased 60%, while group protection grew 38%, supported by improving momentum in the microfinance business.
SBI Life reported 30% growth in VNB to Rs 14.1 billion, while APE rose 36%. Its VNB margin stood at 26.2%. Non-par products accounted for 21% of APE and grew 24%, while individual protection APE increased 19%.
HDFC Life was an exception to the broader growth trend, reporting 9% VNB growth on similar APE growth. Savings growth was muted at 6%, while bancassurance rose only 2% as business through HDFC Bank remained subdued. The rest of the business grew 17%.
Retail protection remained a key growth driver across insurers. Protection APE increased 57% at Axis Max Life, 43% at HDFC Life, 60% at ICICI Prudential Life and 19% at SBI Life. Higher rider attachment also supported protection growth following the GST exemption.
Savings trends
Traditional savings trends were more mixed, with growth varying across participating, non-participating and annuity products. Non-par savings grew strongly at HDFC Life and SBI Life, while Axis Max Life and Bajaj Life reported declines due to a high base and product-mix changes. Annuity growth remained healthy across several players.
The improvement in margins came despite higher cost ratios for most insurers, partly because of the loss of input tax credit, the impact of the new labour code and continued investments in distribution. Improving scale and expense rationalisation are expected to provide some offset through the year.
Private life insurers are expected to deliver 14-19% operating RoEV over FY2027-29, while APE growth is expected to remain in the 14-20% range. Improving persistency is expected to provide a key source of operating improvement over the medium term.
The Q1 performance indicates that protection growth, product mix and operating leverage are becoming important drivers of margin expansion for private life insurers, helping offset the near-term cost impact of the GST exemption.
Source from: https://bfsi.economictimes.indiatimes.com/articles/life-insurers-expand-margins-despite-gst-related-input-tax-credit-hit/133372397
