A Healthy Start

Life Insurance industry reported a robust 22% YoY (Private: 25%; LIC: 18%) retail APE growth in Apr-24 and, adjusting for the abnormally low base of Apr23 due to pre-buying in Mar-23 post taxation changes in the Union Budget, sector CAGR came in at 9.1% (Private: 10.9%; LIC: 6%) on 2Y CAGR basis. Against the backdrop of higher number of holidays as well as electoral activities, such growth marks an impressive start to the year. Among listed players, on 2Y CAGR basis, HDFCLIFE (+17.8%) and MAXF (+12.7%) exhibited a notable performance, and IPRULIFE (+8.7%), SBILIFE (+6.5%), and LIC (+6%) posted a decent show. For Apr-24, the industry posted 22% YoY growth on APE basis, clocking 2Y CAGR of 7.1% – On APE basis, the private sector saw 11.4% 2Y CAGR, whereas LIC posted a muted show with 2Y CAGR of 1.6%. Looking ahead, we see the sector delivering ~11-12% Retail APE growth in FY25E, with private sector growth at ~13-15% and the LIC growth at ~6-8%. With the recent corrections, share price of life insurers seems to have priced in any adverse regulatory developments while ignoring franchise strengths and the long runway of opportunities, esp. in the areas of protection and retirement.

For Apr-24, the industry posted a robust retail APE growth of 22.2%, with the private sector growing 24.7% and LIC 18%. This growth comes on the back of a low base during Apr-23 owing to pre-booking of non-linked policies in Mar-23 because of the taxation changes announced during the FY24 Union Budget. On 2Y CAGR basis, the industry saw a decent 9% Retail APE growth, with the private sector growing ~11% and LIC 6%.

IPRU makes a strong growth revival; HDFCLIFE and MAX post robust show - HDFCLIFE posted a strong 30% YoY growth/17.8% 2Y CAGR during Apr-24, on Retail APE basis. Maintaining its growth trend in Retail APE, Max Life reported a robust 32% YoY growth/12.7% on 2Y CAGR. Though IPRU reported a strong Retail APE growth of ~72% YoY, its 2Y CAGR stood at 8.7% due to decline during Apr-23. SBI Life registered a decent 20% YoY growth/6.5% on 2Y CAGR during Apr-24. Among private unlisted players, Bajaj Allianz Life delivered a 2Y Retail APE CAGR of 14.7%, whereas Birla Sun Life saw a robust 21.2% 2Y CAGR. On total APE basis, Max Life (+15.5%) and HDFC Life (+12.8%) reported a good 2Y CAGR. SBI Life reported 6.3% 2Y APE CAGR, whereas IPRU Life saw a muted 2.9% 2Y CAGR.

April is generally a lighter month and contributes ~5% of the annual retail business. And the Apr-24 show does not lead to any change in our FY25 view. We expect the industry to deliver retail APE growth of ~11-12% in FY25E, with the private sector achieving ~13- 15% growth rate and LIC delivering ~6-8% growth. The recent underperformance in life insurers’ shares seems to be pricing in the worst of regulatory concerns, if any (surrender regulation changes; corporate taxation changes, etc), while ignoring the franchise strength and the long opportunity runway, especially in protection and retirement. Leveraging their strong brand, extensive distribution network, and continuous product innovation, we foresee enhanced growth visibility in Life Insurers. With risk-reward looking considerably favorable, we maintain our positive view on life insurance shares