Value of new business (VNB) and VNB margin

What is value of new business?

Value of new business (VNB, also written VoNB) is an actuarial estimate of how much value the policies sold in a period will add for shareholders. It is the present value, at the point of sale, of the profits those policies are expected to release over their lifetime, after allowing for the cost of holding the capital they need. VNB margin is VNB divided by the annualised premium equivalent of the same business, and shows how profitable each rupee of new business is expected to be.

VNB is the main profitability measure for listed Indian life insurers. It matters more than accounting profit for new business, because Indian GAAP accounts often show a loss in the year a policy is sold (when commission and setup costs are paid) and profits only in later years.

How VNB is calculated

The appointed actuary or the insurer's actuarial team projects, for each new policy, the expected premiums, investment income, claims, maturities, surrenders, commission and expenses over the policy's life, using assumptions on mortality, morbidity, lapses, expenses and interest rates. In outline:

VNB = present value of future profits from new business minus the cost of required capital (and the time value of financial options and guarantees, where relevant)

VNB margin = VNB ÷ new business APE × 100

Indian insurers compute VNB under the Indian Embedded Value method set out in Actuarial Practice Standard 10 of the Institute of Actuaries of India. Listed insurers have VNB reviewed by an independent actuarial firm.

Worked example (illustrative numbers)

An insurer writes ₹1,000 crore of APE in a year.

If the same ₹1,000 crore came 70% from ULIPs and 10% from protection, the blended margin would fall even though APE is unchanged. Product mix, not volume alone, drives VNB.

How VNB is reported in India

Listed life insurers report VNB and VNB margin each quarter or half year, with an analysis of what moved them. SBI Life reported VNB of ₹50.4 billion for the nine months to December 2025, up 17%, at a VNB margin of 27.2% (26.9% a year earlier). Its walk from the previous period showed:

• business volume added ₹6.9 billion of VNB;
• new business mix and profile (age, term, channel) added ₹1.6 billion;
• the GST exemption on individual policies from September 2025, which removed insurers' input tax credit, reduced VNB by ₹2.1 billion and cut the margin by 1.1 percentage points.

The same release gave sensitivities: a 10% proportionate increase in lapse rates would reduce VNB by 4.8%, and a 10% increase in mortality and morbidity by 5.6%.

What VNB means for distribution

• Persistency is priced in. VNB assumes a lapse rate. Channels that beat it add value beyond their APE; channels that miss it destroy value that has already been reported. The SBI Life sensitivity shows how large that effect is.
• Channel economics show up here. Commission, sales costs and the product mix a channel sells all feed into VNB. Insurers that compute VNB margin by channel know which partners create value and which only add premium.
• Product mix is a distribution decision. Protection and non-par savings usually carry higher margins than ULIPs. Incentive structures that reward APE alone tend to push margin down.
• Cost changes move margins. Expense limits, commission rules and tax changes (such as the loss of input tax credit after the GST exemption) feed straight into VNB. IRDAI's September 2026 consultation paper on distribution economics, if adopted, would affect margins through lower expense limits.
• For partners: a distributor that can show its business has better persistency and product mix than average is bringing higher-VNB business, which is a strong argument in commercial negotiations.