Life Insurance stks in focus; ICICI Prudential Life, SBI Life gain up to 7%

Analysts remain certain that demand for pure protection is tend to rise, with individual customers getting more educated toward the risk that such insurance covers

Shares of listed life insurance companies were trading actively at the bourses today, ralling up to 7 per cent on the BSE, after SBI Life Insurance reported a good set of numbers for the quarter ended March 2020 (Q4FY20).

Analysts believe that the overall insurance penetration in India is likely to rise post-Covid-19 scenario with individual as well as corporate customers becoming more cautious toward such crisis. They also remain certain that demand for pure protection is tend to rise, with individual customers getting more educated toward the risk that such insurance covers.

SBI Life Insurance gained 5 per cent in the intra-day trade today, to hit a high of Rs 750, thereby surging 9 per cent in the past two trading days on the BSE. On the other hand, ICICI Prudential Life Insurance (ICICI Pru) jumped 7.5 per cent to Rs 403, and HDFC Life Insurance Company was up 4 per cent to Rs 498 on the BSE. In comparison, the S&P BSE Sensex was quoting 1 per cent higher at 31,766 points at 01:35 pm.

SBI Life reported improvement in Value of New Business (VNB) margins at 18.7 per cent (+102bps yoy), with a shift in the product mix toward the non-par business as well as a gradual rise in protection plans.

Analysts at Emkay Global Financial Services expect the trend to improve further, with the rising share of protection plans as well as the elevated share of non-par businesses. The management, they caution, needs to re-price its existing protection plans since most of reinsurance companies have already opted for a price hike.

"Management has confirmed that the current protection plans are being priced cheaper to HDFC Life. However after the price hike, the competition from it would surely play an important role," the brokerage firm said in company update.

“Though persistency trends have generally held up for FY20, along with improvement across cohorts, we think that FY21 would be a challenging year in terms of maintaining the renewal pipeline. With customers going into cash conservation mode and a weak economic outlook, drop in persistency could be a risk to margin, embedded value (EV) and fair value estimates,” analysts at Nirmal Bang Institutional Equities said in a post result note.