Budget key trigger for life insurance companies' stocks in near term

The data for individual weighted received premium (WRP) showed divergent trends for life insurers in December 2024.

 

Overall, the industry’s individual WRP grew 4.8 per cent year-on-year (Y-o-Y); LIC’s individual WRP declined 13 per cent while private players saw 11.4 per cent growth.

 

Among listed players, individual WRP for SBI Life witnessed the fastest growth at 16 per cent, while Max Life, ICICI Prudential Life and HDFC Life saw growth of 11 per cent, 9 per cent and 12 per cent, respectively.

 

Bajaj Allianz saw a muted 2 per cent growth. The industry’s new business premium (NBP) fell 22 per cent in December 2024 owing to a 41 per cent decline reported by LIC. Private players reported growth of 7 per cent.

 

In terms of NBP, SBI Life, ICICI Prudential Life, Max Life and Bajaj Allianz reported growth of 15.2 per cent, 4 per cent, 3 per cent and 9.7 per cent, respectively. HDFC Life saw a decline of 4.6 per cent.

 

Premium growth may be volatile for the rest of FY25 due to surrender value regulations.

 

Nevertheless, over the medium term, these changes may be favourable for customers and help trigger growth.

 

On an individual WRP basis, private players’ market share improved month-on-month (M-o-M) by about 370 basis points (bps) to 77.7 per cent in December 2024.

 

On a year-to-date (YTD) basis, the market share of private players improved 140 bps to 70.3 per cent.

 

For December 2024, SBI Life maintained the top position with 27.1 per cent market share with respect to individual WRP.

 

It was followed by HDFC Life at 10.2 per cent and Tata AIA at 7.9 per cent.

 

On an unweighted premium basis, SBI Life was the largest private player with a market share of 17.6 per cent. It was followed by HDFC Life at 9 per cent and ICICI Prudential Life at 5.1 per cent.

 

On an individual WRP basis, the combined market share of listed players — SBI Life, HDFC Life, ICICI Prudential Life, and Max Life — accounted for 60 per cent of the private insurance industry. It was 41.8 per cent of the overall industry as of YTD this financial year.

 

Among other prominent private insurers, the unlisted Tata AIA and Bajaj Allianz hold market share of 7 per cent and 5.8 per cent, respectively.

 

In Q3FY25, business growth is expected to remain steady, with life insurers likely to report an 18.4 per cent rise in annual premium equivalent (APE).

 

It will be aided by strong demand for unit-linked insurance plans (Ulips) and improved traction in the protection segment despite regulatory changes regarding surrender value.

 

Expanding distribution networks and digital channels in smaller towns and rural areas may contribute to premium growth.

 

Hybrid products catering to varied customer needs are attracting a broader customer base.

 

Growth in group insurance policies, particularly from corporates focusing on employee benefits, may boost premium collections.

 

The bancassurance channel will continue to remain a healthy contributor and improving performance from the agent network will open underserved areas.

 

The non-par segment is expected to see a gradual improvement.

 

Value of new business (VNB) growth is expected at 14.9 per cent Y-o-Y, with VNB margins seeing minor improvement.

 

The new surrender regulations for non-linked (par and non-par) savings products came into effect from October 2024. This means higher payouts or better terms for lapsing policyholders.

 

Regulatory uncertainty will continue to affect fundamentals in the near term. But clarity may emerge after the Budget.