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4QFY25E trends will likely remain weak for life and non-life players. The slowdown in ULIPs weighs in on growth for life players, while non-life players are impacted by the implementation of the 1/n rule. Trends in VNB margins are mixed, driven by product mix and base period adjustments.

Weak VNB trends for most listed life insurers

VNB trends will likely remain weak for most players in 4QFY25E, reporting (-)9% to +3% yoy growth. HDFC Life will likely remain an outlier, reporting strong 16% VNB growth during the quarter; trends between players are divergent.

* Axis Max Life (VNB up 3% yoy) to report moderate growth and sharp yoy decline in margins. APE growth of Axis Max Life will likely moderate to 11% from 17% in 3QFY25 and 31% during 1QFY25-2QFY25, likely following a slowdown at the parent bank. VNB margins will likely improve qoq to 26% from 23% in 3QFY25, reflecting seasonal trends, though down 200 bps yoy. The company apportions fixed costs equally across quarters, leading to seasonality in margins. High ULIPs and surrender value guidelines drive lower yoy margins.

* HDFC Life (VNB up 16% yoy) to fare better than peers. HDFC Life will likely report mid-teen APE growth and 40 bps yoy expansion in margins to 27%. The company has reported 15% yoy APE growth in January and February, which will likely sustain in March 2025. Margins remain rangebound for the company; the share of ULIPs will likely decline a bit qoq.

* Muted (1%) VNB growth for ICICI Prudential Life. ICICI Prudential Life reported flat APE trends yoy in the first two months of the quarter. High base (March 2024) will likely weigh in, leading to a 5.5% yoy APE decline in 4QFY25E. Margins remain rangebound at ~22-23%, a low base leading to ~150 bps yoy expansion.

*  LIC remains weak; VNB down 9% yoy. LIC’s APE will likely decline for the second consecutive quarter, down 17% yoy in 4QFY25E and 24% in 3QFY25. The product mix shift will likely continue to support margins, leading to ~175 bps yoy expansion to 19%.

* Muted growth and flat margins for SBI Life; VNB up 2% yoy. SBI Life will likely report muted APE growth of 5.5% yoy and flat VNB margins of 27% qoq. SBI Life reported flat APE numbers in the first two months of the quarter. With a low base in March 2024, we pen down 15% APE growth for the month.

Regulatory changes impact growth and profitability of non-life players

Gross written premium (GWP) growth of non-life players will likely be muted at 3-5% yoy during 4QFY25E due to the impact of the 1/n rule. Growth in net earned premium (NEP) will be higher at 11% yoy for Star Health and 13% yoy for ICICI Lombard. Elevated medical claims inflation and the impact of the 1/n rule will lead to muted profitability for Star Health during the quarter. ICICI Lombard will fare better, reporting a combined ratio of 103.2% and 18% yoy PAT growth

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