Glossarytaught in M5.03
Value of new business margin
Also called VNB margin, value of new business.
The value created by the policies sold during the year, as a percentage of the annualised premium equivalent. It is the measure of whether new business is worth writing.
An insurer generating ₹840 crore of new business value on ₹3,000 crore of annualised premium equivalent reports a 28% margin, which is in the strong range of 25% to 30% and above.
Product mix drives it more than anything else, so the margin and the mix disclosure are always read together. Protection and non-participating savings products carry high margins because the insurer keeps the risk and the return. Unit-linked products carry low ones because the policyholder does. A margin falling while premium grows means the company is selling more of the wrong thing.
Read margin and mix together, always.
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