LIC’s Q2 earnings seen muted on decline in VNB margins
Life Insurance Corporation (LIC) of India is expected to post muted results for Q2 FY24 owing to compression in VNB (value of new business) margins across the sector on the back of decline in the share of high-margin non-participatory products.
However, overall premium growth is expected to remain steady led by a broad-based growth, especially in protection, retail, and annuity products.
“Demand for annuity, non-par, and credit life segments is likely to fare relatively better, while protection is witnessing a gradual recovery,” Motilal Oswal Securities said.
The slight uptick in the protection business is likely to cushion the pressure on the margins, Kotak Securities said, pegging margin compression at 110-400 bps for most life insurers. Emkay Global expects the VNB margin for LIC to decline to 14.6 per cent from 15.2 a year ago.
Further, while Annualized Premium Equivalent (APE) grew for most private insurers supported by ULIP products amid gains in the equity market during the quarter, that for LIC is expected to fall due to the decline in group business premiums, analysts said.
LIC reported a 27.47 per cent decline in new business premium to ₹18,126 crore in September 2023 as against a 10.68 per cent increase for for private insurers to ₹12,590 crore.
As per market data, industry APE grew five per cent in October whereas LIC continued to decline, shrinking 11 per cent for the month to ₹3,800 crore.
In terms of individual APE front, the sector grew by 13 per cent, with private insurers growing 19.8 per cent and gaining market share from LIC.
Shares of LIC were trading higher in the first half of the day but trended 0.2-0.3 per cent lower in the second half, ahead of the earnings which are scheduled to be declared post market hours on Friday.