Private life insurance companies seem to be on a secured path to growth

Private life insurers experienced reasonable growth in the July-September quarter (second quarter, or Q2) of 2023-24 (FY24), and the October data is also encouraging.

The individual weighted received premium (WRP) for private players grew by 19.8 per cent year-on-year (Y-o-Y) in October.

However, Life Insurance Corporation (LIC) of India had slower growth, pulling the industry growth rate down to 13 per cent Y-o-Y.

Over April-October, private insurance players grew by 13.6 per cent Y-o-Y.

Among listed players, HDFC Life (including the Exide Life merger) posted 16.5 per cent Y-o-Y growth in October.

Max Life and ICICI Prudential Life posted strong Y-o-Y growth of 37.6 per cent and 21.1 per cent, respectively, whereas SBI Life clocked a 16.4 per cent growth Y-o-Y.

Mid-sized unlisted players Tata AIA/Bajaj Allianz reported growth of over 20 per cent. LIC reported a 1.7 per cent Y-o-Y growth in Individual WRP (4.7 per cent in September).

Over April-October, the individual WRP for LIC was flat Y-o-Y.

After reporting strong growth in March, the industry witnessed a slowdown over April-October.

The dip in performance is due to a large volume of purchases in March before the Budget became applicable.

Growth momentum in FY24 could be lower, especially since 2022-23 (FY23) was strong, creating a base effect.

LIC s market share in WRP terms improved to 33.5 per cent in October.

SBI Life (16.3 per cent) remains the largest private insurer in terms of Individual WRP over April-October, followed by HDFC Life (10.6 per cent) and Tata AIA (6.6 per cent).

Even on an unweighted basis, SBI Life was the largest private insurer, with a market share of 10.3 per cent, followed by HDFC Life (8.3 per cent) and ICICI Pru Life (4.7 per cent).

In terms of annualised premium equivalent (APE), private players reported 21 per cent growth in overall APE in October, which is at the higher end of recent month s growth rates.

ICICI Pru Life was up 21 per cent on a low base, whereas HDFC Life (17 per cent) and SBI Life (16 per cent) were relatively weaker.

Max Life (38 per cent) and Bajaj Allianz Life (27 per cent) continued to grow rapidly.

HDFC Life is not being very aggressive, and it could be waiting for the merger to stabilise before the HDFC Bank channel regains growth.

Axis Bank is aggressively pushing insurance products with a 28 per cent increase in Q2 after a weak first quarter (Q1) and a slow FY23.

Max Life has 30 per cent-plus for three months running, with 38 per cent APE growth in Q2FY24.

However, ticket sizes are down 10 per cent in October, implying lower unit linked insurance plans. But this could boost margins.

ICICI Pru Life reported 21 per cent APE growth in October.

Since it had consistently lagged and saw a decline in Q1 and only 3 per cent growth in Q2FY24, this might mean a rebound.

Analysts may make the case that the impact of tax changes has played out, and the second half of FY24 will be better for the private players based on reasonable Q2FY24 and a pick-up in WRP and APE in October.

Looking at broad trends across the industry, LIC may struggle to maintain its current market share, and it has low margins compared to the private sector.

SBI Life and Max Life could be able to claw market share, given the relative slowdown in HDFC Life, which may be temporary.

If ICICI Pru Life can maintain its encouraging October performance, it may receive better valuations on the growth turnaround.

The listed private sector life insurance stocks all seem to be viewed positively by the market. Their share prices, too, have seen gains recently.