Solid Private-sector growth led by SBI Life in insurance sector: IIFL Capital Services

8 Sep 2023 , 12:20 PM

Private sector continues to see acceleration in APE growth for the fifth consecutive month in this fiscal year, despite strong growth in March ’23 on taxation changes. In August, the sector saw a YoY growth of 20% in total APE and 21% in retail APE. LIC grew 3% YoY in its retail APE; however, a sharp decline of 33% YoY in group APE resulted in the overall APE declining 13% YoY. SBI Life outperformed listed peers, with total/retail APE registering a growth of 30%/34% YoY respectively. IPRU’s retail APE recorded double-digit growth of 12% YoY; its growth trajectory continues to improve with the drag from ICICI Bank channel bottoming out. HDFC Life posted a strong performance in August, clocking total/retail APE growth of 18%/16% YoY, (adjusting for Exide Life). In analysts of IIFL Capital Services view, Life Insurance valuations are attractive, while it is well placed to grow healthily through FY24, despite the impact of taxation on high-ticket traditional products. Prefer SBILI, IPRU.

Private sector retail APE witnesses 21% YoY growth: 

Life insurance Private sector’s total APE and retail APE witnessed a growth of 20%/21% YoY respectively, maintaining the double-digit growth trajectory for the fourth consecutive month. Analysts of IIFL Capital Services note that this growth comes off a healthy base of last year when total and retail APE for the Private sector grew 11% and 9% YoY, respectively. 

SBI Life outperforms with retail APE witnessing a strong growth of 34% YoY — slightly brought down by group APE declining 6% YoY, resulting in a 30% YoY growth in total APE. Retail NBP grew 28% YoY, and overall NBP grew by 16% YoY, brought down by weak group premiums. This month, SBI Life saw 17% YoY growth in volumes. 

HDFC Life posted a strong performance in August after a weak July, clocking total APE/retail APE growth of 18%/16% YoY post adjusting historical figures for Exide Life’s numbers. Retail NBP grew 13% YoY; whereas total NBP grew 25% YoY, boosted by a 39% YoY growth in group NBP (adjusting historical figures for Exide Life’s numbers). HDFC Life’s strong product portfolio and distribution engines and realisation of synergies arising from the acquisition of Exide Life, should support growth going forward in FY24. This could be further boosted by an increase in their counter share in the HDFC Bank channel. HDFC Life also saw a strong 17% YoY volume growth, adjusted for Exide Life. 

IPRU’s retail APE recorded double-digit growth of 12% YoY, indicating an improvement in the growth trajectory vs July growth of 8% YoY and YTD growth of 3% YoY. Total APE witnessed a modest growth of 6% YoY. Growth was led by other channels (ex-ICICI bank), which grew 9% YoY in total APE terms. ICICI Bank channel witnessed a decline of 7% YoY in total APE in August 2023. The weakness seems to be bottoming out vs the 17% YoY fall in July 2023 and 25% YoY decline for YTD 2023. IPRU’s retail NBP grew 3% YoY, brought down by weak single premiums; whereas total NBP declined 5% YoY due to weak group premiums. IPRU also saw a 6% YoY growth in volumes. 

LIC registered a decline of 35% YoY in NBP, driven by 45% YoY decline in group business. LIC’s Retail NBP grew 5% YoY. LIC’s volumes improved 3% YoY in August. BALIC recorded growth of 34%/33% YoY on a total/retail APE basis on a tough base; its NBP jumped 38% YoY. Policy volumes rose 30% YoY for BALIC, indicating strong operational performance by BALIC’s distribution channels. Max Life’s overall and retail APE grew by 49% YoY on a weak base; policy volumes rose 60% YoY. Tata AIA witnessed some normalisation in growth, with both total and retail APE growing 7% YoY on a tough base. 

Valuations attractive; growth accelerating: 

Following a muted start to the fiscal, Life Insurance has maintained the growth momentum witnessing the fourth consecutive month of double-digit growth. In analysts of IIFL Capital Services view, the sector remains well placed to grow healthily through the year, despite the impact of taxation on high-ticket traditional products helped by sanguine savings growth. SBILI (BUY) remains analysts of IIFL Capital Services top pick and should continue to benefit from its strong customer and distribution base. IPRU’s (BUY) product mix is improving and is starting to demonstrate sustainable premium growth. HDFCLI commands premium valuations for its diversified and profitable product mix and focus on distribution; is a good stock to own in the long term.