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 India's SBI Life Insurance reported a decline in new business margin for nine months ending Dec. 31 on Thursday, hit by a rise in sales of low-margin products.

The value for new business (VNB) - the expected profit from new policies - rose 11% to 40.40 billion rupees ($486 million), the company said, although margins contracted to 28.1% from 29.6% a year earlier.

Growth in low-margin unit-linked insurance plans (ULIP) and the government's move to tax total returns of high-value policies have weighed on life insurers' VNB margins. However, SBI Life is immune to the regulation as it has the lowest share of such products, analysts said.

The increasing share for ULIPs was driven by a rally in Indian blue-chip indexes. Nifty 50 Index rose nearly 11% during the December quarter - its best quarterly performance since September 2021 - on expectations of early interest rate cuts by the U.S. Federal Reserve.

SBI Life Insurance said its net premium income for the three months ended Dec. 31 rose 16.4% to 223.16 billion rupees, compared with a 21.7% rise in the September quarter. Meanwhile, its investment income more than doubled.

Profit after tax rose 5.8% to 3.22 billion rupees in the third quarter.

Its annualized premium equivalent (APE) sales grew 17% to 143.90 billion rupees for the nine-month period. APE is a gauge of sales that gives the annualized total value of all single premium and recurring premium policies.

Last week smaller rival ICICI Prudential Life Insurance reported a decline in new business margins, hit by weaker demand for high-value policies. Meanwhile, HDFC Life Insurance's VNB margin was unchanged for the April-December period.

Shares of SBI Life Insurance extended losses to as much as 3.8%, hitting a two-month low, after the results.