India Insurance: 1Q27E preview: Mixed bag

Research evidence excerpt

India Insurance: 1Q27E preview: Mixed bag

and PAR business (volatile equity markets), with some pick-up in

NPAR business (as rates had firmed up in 4Q). Higher bond yields in 4Q, a

higher share of protection in the mix, and repricing are likely to reduce the

impact of non-availability of ITC on GST (vs. the base quarter). We expect

margins to be mixed with improvement likely for AMLI and LIC. Absolute

VNB is likely to grow higher in the range of 6.6%-62.5% YoY. A reduction in

bond yields during 1Q and improving equity market returns (Nifty 50: +6.9%

QoQ) are likely to result in positive economic variances for all companies

under our coverage. Investors are likely to watch out for commentary around

business growth, product mix, and potential regulatory changes on distribution

payouts and implementation of IND-AS.

• Non-Life. We expect competitive intensity in the motor segment to fall,

especially from PSU general insurers easing pressure on CORs; this will be

adversely impacted by price pressure and lower reinsurance prices seen in the

B2B segments (mainly property). The industry is yet to have any dialogue

around price hikes in major business lines (motor TP). The general insurance

industry has been operating at high expense-of-management ratios since the

de-capping of commissions (beginning FY24). We expect discussion on high

competitive intensity and commentary from insurers on any potential

regulations around commissions and/or any tighter implementation of expense

management regulations to dominate earnings calls. At this stage, the overall

strategy appears to be to minimize underwriting losses. Investment income

should see a modest recovery driven by improved performance in 1Q (Nifty 50:

+6.9% QoQ). We forecast 1Q27 combined ratios of 102.4% (-0.5%pt YoY) for