Indian life and health insurers see YOY net income growth in fiscal Q3 2023

Most major Indian life and health insurers recorded year-over-year profit improvement in the quarter ended Dec. 31, 2022, a trend that is set to continue thanks to rising interest rates and claims normalization.

Life Insurance Corp. of India had the largest year-over-year profit growth of eight insurers included in an S&P Global Market Intelligence analysis. The company's net income surged to 160.96 billion rupees from 2.11 billion rupees in the prior-year quarter.

Aditya Birla Capital Ltd. followed with a 475.1% year-over-year profit growth. The insurer booked a net profit of 32.85 billion rupees in the fiscal third quarter, up from 5.71 billion rupees in the year-ago quarter.

Two of the eight insurers, ICICI Prudential Life Insurance Co. Ltd. and SBI Life Insurance Co. Ltd., reported year-over-year declines in net income during the quarter.

ICICI Prudential Life reported net income of 2.22 billion rupees, down 29.0% from 3.12 billion rupees in the year-ago period, while SBI Life's fiscal third-quarter net income declined 16.5% year over year to 3.04 billion rupees from 3.64 billion rupees.

Premium income up nearly across the board

Seven of the eight Indian life and health insurers posted higher net premium income in the fiscal third quarter, while Aditya Birla's premium income data was not available.

Life Insurance Corp. of India recorded 14.5% year-over-year growth in net premium income during the period. The insurer booked net premium income of 1.123 trillion rupees during the quarter, compared with 980.52 billion rupees in the prior-year quarter.

Profit tailwinds

The Swiss Re Institute is "cautiously optimistic" about the continued normalization of Indian life insurers' earnings after pandemic-related claims impacted earnings in the first half of 2022. The institute expects full-year 2022 life insurance premium volumes to surpass US$100 billion for the first time, representing growth of 8.0% in real terms, according to a report published in January.

A series of regulatory developments introduced by India's insurance regulator could also support sector growth, the organization said, including the introduction of risk-based capital solvency requirements.

"The risk-weighted approach for capital allocation should result in a freeing up of capital in certain cases, possibly for larger insurers with more diversified underwriting portfolio, while requiring higher capital requirements on insurers underwriting more risky business," the Swiss Re Institute said in the January report.

The move to a risk-based capital approach would be "more sustainable" for Star Health and Allied Insurance Co. Ltd., allowing the company to keep growing its business because there is no pressure on solvency, CFO Nilesh Kambli said during an earnings call.

ICICI Prudential Life will "not require external equity capital in the foreseeable future," according to CEO N.S. Kannan, in light of the introduction of the risk-based capital requirement, combined with the insurer's ability to raise further Tier 2 capital and its strong solvency position.

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