Life Insurance Sector Sees Profit Decline in Second Quarter of FY 2082/83

Nepal’s life insurance sector recorded a decline in overall profitability in the second quarter of the current fiscal year 2082/83, reflecting the growing impact of falling interest rates and investment returns. According to financial data up to the end of Poush, total net profit of life insurance companies dropped by 4.72 percent compared to the same period last year, raising concerns about earnings sustainability in the sector.

During the review period, 14 life insurance companies collectively earned a net profit of Rs 3.32 billion. In contrast, the same companies had reported Rs 3.48 billion in profits in the corresponding period of the previous fiscal year. Although nine companies posted profit growth, declines in several major firms outweighed the gains, resulting in an overall contraction in sector earnings.

Among the companies reporting declining profits were Rastriya Jeevan Beema Company, Himalayan Life Insurance Company, Nepal Life Insurance Company, MetLife Nepal, and Prabhu Mahalaxmi Life Insurance. These five companies experienced varying degrees of profit contraction, highlighting uneven financial performance within the industry.

Rastriya Jeevan Beema Company recorded the steepest fall, with profits declining by 52.5 percent. Its net earnings dropped from Rs 8 million in the previous year to Rs 3.8 million in the current period. Similarly, Himalayan Life’s profit fell by 45 percent, declining from Rs 376.2 million to Rs 206.7 million. Nepal Life, Prabhu Mahalaxmi, and MetLife also reported decreases of 27.45 percent, 27 percent, and 8.54 percent respectively.

Industry executives attribute this downward trend mainly to declining bank interest rates. According to Kapil Kumar Dahal, Chief Executive Officer of Himalayan Life, more than 73 percent of life insurance companies’ investments are placed in fixed deposits. As of Poush-end, insurers had deposited over Rs 600 billion in banks and financial institutions. With such heavy reliance on interest income, falling rates have directly weakened profitability.

Over the past few years, deposit rates in the banking sector have been on a steady decline. In the last year alone, average commercial bank deposit rates dropped from 4.75 percent to 3.56 percent. Development banks saw rates fall from 5.56 percent to 4.06 percent, while finance companies’ rates declined from 6.66 percent to 5.57 percent. This reduction has significantly lowered returns on fixed deposits, shrinking insurers’ investment income.

Despite the overall decline, nine life insurance companies reported profit growth during the period. Life Insurance Corporation Nepal led the sector with a remarkable 58.43 percent increase in profit. Other gainers included Sanima Reliance Life Insurance with 19.21 percent growth, Reliable Nepal Life Insurance with 13 percent, and Asian Life Insurance Company with 5.27 percent.

Additional profit growth was recorded by Suryajyoti Life Insurance, National Life Insurance Company Nepal, Sun Nepal Life Insurance, IME Life Insurance, and Citizen Life Insurance, though their growth rates remained modest.

In terms of absolute profit, Reliable Nepal Life emerged as the top performer, posting the highest net profit of Rs 395.8 million during the period. Nepal Life followed with Rs 339.6 million, while National Life and Sun Nepal Life secured third and fourth positions with profits of Rs 286.8 million and Rs 285.4 million respectively.

Analysts say the mixed performance reflects structural challenges in the life insurance industry. While premium collection has remained relatively stable, investment income—traditionally a major revenue source—has weakened due to low-interest conditions. At the same time, rising operational and regulatory costs have added pressure on margins.

Experts believe that unless insurers diversify their investment portfolios and strengthen underwriting efficiency, profitability may remain under strain in the coming quarters. With interest rates expected to stay low in the near term, companies may need to focus more on product innovation, risk management, and long-term investment strategies to sustain growth.

The second-quarter results suggest that Nepal’s life insurance sector is entering a more competitive and challenging phase. While stronger players continue to expand profits, weaker performers are struggling to adapt to changing financial conditions. How companies respond to these pressures will determine the sector’s stability and growth trajectory in the years ahead.