Major private sector life insurance companies are expected to witness a year-on year decline in their margins for the fourth quarter of the last financial year, impacted by the implementation of new surrender value norms.

According to estimates by analysts at broking companies, HDFC Life Insurance, ICICI Prudential Life Insurance and SBI Life Insurance are likely to post de-growth in their VNB (value of new business) margins for Q4FY25 compared to Q4FY24.

“Private life insurers have seen healthy growth in 11MFY25 (16 per cent year-on-year) and we expect the momentum to continue in March 2025 (for annual premium equivalent). Expect 4QFY25 VNB margins to be range-bound, impacted by the regulatory guidelines on early exit surrender pay-outs,” said Nirmal Bang Institutional Equities.

Margins fall

For HDFC Life, VNB margin for the fourth quarter of last fiscal would be around 26 per cent against 26.1 per cent for Q4FY24, said analysts at JM Financial Institutional Securities.

According to Nirmal Bang Institutional Equities, the margin for the life insurer is likely to fall 150 basis points at 24.6 per cent y-o-y for Q4FY25.

“We expect HDFC Life Ind APE (individual annual premium equivalent)/Total APE growth of 15.7 per cent/15.8 per cent y-o-y for 4Q25, translating into FY25e growth of 20.7 per cent/18.6 per cent…Margins for 4Q should hold up at 26 per cent with full year margins at 25.4 per cent, ahead of 25.1 per cent in 9MFY25,” JM Financial said in a report.

The broking company said VNB margin of ICICI Prudential Life is expected to decline to 19.9 per cent for Q4FY25 with reducing volumes, while full year margins hold at 21.8 per cent, down from 22.8 per cent in the first nine months of the last financial year. For the life insurance company VNB margin stood at 21.5 in Q4FY24. “Increasing competition in the agency channel might hamper growth, going ahead. We expect VNB to decline 7.5 per cent y-o-y in Q4FY25 and grow at CAGR of over 13.4 per cent over FY25e-FY27e,” said JM Financial.

According to Nirmal Bang, ICICI Prudential Life’s VNB margin is likely to fall by 200 basis points at 19.5 per cent for the fourth quarter of the last financial year.

SBI Life Insurance is expected to witness a 510 basis points decline in its margin to 23.4 per cent from 28.5 per cent in Q4FY24, said Nirmal Bang.

According to JM Financial, the insurer is expected to post a VNB margin of 27.5 per cent in Q4FY25.

“Although Ind APE for SBI Life contracted 1 per cent y-o-y in February 2025 (+18.4% y-o-y growth in Jan’25), we expect a strong growth in March, 2025 as seasonality plays out. We expect SBI Life to report Ind APE/Total APE growth of 17.4 percent/18.5 per cent y-o-y for 4QFY25, translating into FY25e growth of 14.9 per cent/13 per cent,” JM Financial Institutional Securities added.

Published on April 8, 2025