However, margin expansion may be held back due to increase in reinsurance rates. Analysts are also monitoring residual Covid claims in the second quarter after a sharp jump in the first quarter, leading to an increase in provisions.
Elara Securities expects top four life insurance companies –
, ICICI Prudential Life, Max Life and — recording annual premium equivalent (APE) growth of between 14% and 34% in the second quarter.
Elara said, “Despite strong equity markets, most life insurers are expected to report steady-to-improving share in traditional product segments. Protection from supply-side constraints and hike in reinsurance rates is expected to deter growth. Chances are.”
APE is a common measure of detection of new business viability in the life insurance industry. It is the sum of the regular annual premium from the new business plus 10% of the first single premium in a given year.
Elara expects margins to improve based on the value of new business (VNB) because of higher volumes and increase in group policies. VNB helps in estimating the value of an insurer based on the new business received in the previous year.
Motilal Oswal also expects premium growth to pick up on the back of a strong recovery in unit linked insurance plans, coupled with strong demand for guaranteed and credit life products designed to pay off the borrower’s outstanding debt in the event of an untimely death. Huh.
Motilal expects SBI Life and ICICI Pru Life to grow by 38-39% in APE, while Max Life will grow 26%. HDFC Life is expected to expand at a slow pace at 15%.
“Due to delay in reporting, Covid claims are likely to remain high, though the impact should be controlled,” Motilal said.
The devastating effects of the second wave of the pandemic were felt in India by both life and general insurers as hospitalizations and casualties increased across the country.
In an interview to ET last month, ICICI Lombard CEO Bhargava Dasgupta had said that the general insurance industry alone had settled claims worth around Rs 30,000 crore in the first quarter. However, tragedies have also underscored the importance of insurance cover, which is likely to benefit the new business.