Insurance Q4 FY25 outlook: Muted quarter likely owing to margin pressure, weak growth

General insurance companies' growth projection for FY26

India’s insurance sector is poised to post a tepid performance for the fourth quarter of FY24, weighed down by margin pressure in life insurance and continued claims intensity in the general insurance space, according to estimates by analysts at Yes Securities Limited.

According to analysts, life insurers are expected to see compression in value of new business (VNB) margins due to a shift in product mix away from high-margin savings and protection products.

On the other hand, general insurers are likely to report muted profitability despite growth in premiums, as elevated loss ratios in the health and motor portfolios continue to impact underwriting performance.

Among the life insurers, SBI Life is likely to report annual premium equivalent (APE) growth of around 4 percent year-on-year, supported by strength in the annuity and group segments. However, the VNB margin is expected to compress to nearly 24 percent, compared to 26.6 percent in the same period last year, due to lower contributions from high-margin retail protection and non-par products.

HDFC Life is also expected to post muted APE growth in Q4, according to analysts, primarily due to its greater exposure to individual non-par savings and protection segments, both of which have seen sluggish momentum. This shift in product mix is expected to weigh on VNB margins, though metrics such as persistency and cost ratios are likely to hold steady.

ICICI Prudential Life Insurance, analysts predicted, may fare slightly better on the topline, with expected APE growth of 11 percent year-on-year. This is largely driven by continued traction in the annuity and credit life businesses. Despite the improvement in volumes, the company is likely to report a decline in VNB margin due to an increased share of low-margin products in its portfolio.

Similarly, Max Life is expected to report APE growth of approximately 8 percent over the year-ago period. However, its VNB margin may remain largely flattish, as growth in credit life and annuity is offset by continued weakness in protection.

The general insurance segment, meanwhile, remains under pressure from elevated claims, particularly in the motor and health portfolios.

ICICI Lombard General Insurance is expected to report healthy gross direct premium (GDP) growth of around 12 percent year-on-year, supported by both the motor and health portfolios. However, the company continues to face pressure on its underwriting profitability, with loss ratios in the health segment remaining elevated. The combined ratio is expected to remain above 100 percent, signalling continued stress in managing claims relative to premiums collected. Analysts noted that the improvement in top line is being offset by persistent claims intensity and rising medical inflation.

New India Assurance is also likely to face headwinds in the fourth quarter, analysts said. The company is expected to report underwriting losses, largely due to its high exposure to group health and commercial lines, where pricing remains weak. Premium growth is expected to be moderate, but with combined ratios likely to stay elevated, profitability may remain elusive. While some stability in motor third-party claims has emerged, it is yet to translate into meaningful improvement in underwriting performance across the board.

The quarter also coincides with a period of transition for the industry, as players prepare for regulatory changes from the Insurance Regulatory and Development Authority of India (IRDAI).

From April 1, the new Expenses of Management (EoM) framework has come into force, providing insurers more flexibility on cost allocation across product lines.

However, analysts noted, the short-term impact on margins may remain negative to neutral, as insurers recalibrate their strategies.

Analysts said they expect these changes to have a more pronounced impact from FY26 onwards.