HDFC Life, SBI Life Among DRChoksey's Top Picks In Life Insurance Stocks Ahead Of Q3 Results; Here's Why

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Deven Choksey Research Report

In Q3 FY25E, the business growth is expected to remain steady, with life insurers under our coverage universe likely to report an 18.4% YoY increase in annual premium equivalent, aided by strong demand for ULIPs and improved traction in the protection segment despite regulatory changes regarding surrender value.

In Q3 FY25E, we expect the gross premium for life insurers under our coverage to grow by 15.5% YoY.

Valuation

The Indian life insurance sector is poised for steady growth in FY26E, supported by rising premium collections, proactive regulatory measures, an increased push towards protection products, enhanced distribution capabilities, product innovation, and improving macroeconomic indicators.

Continued investments in digital platforms for sales and service delivery are enhancing operational efficiencies and customer experience. Increased focus on tier-2 and tier-3 markets, aided by digital channels and partnerships, is unlocking growth potential in underpenetrated regions.

The growing middle class, increasing awareness of insurance, and regulatory tailwinds provide a long-term growth runway for the sector.

Insurers are effectively navigating new surrender value regulations and recalibrating distribution strategies, mitigating potential adverse impacts.

Key parameters to monitor this quarter include:

1. the business outlook for FY26E,

2. anticipated performance in high-margin segments,

3. VNB margin projections for FY26E, and

4. any adjustments in pricing strategies.

For FY26E, the average P/EV of the listed companies under our coverage is 1.9x, which is still lower than the industry's historical average of 2.8x.

We remain positive on HDFC Life due to its strong brand recognition, diversified product portfolio, and enhanced business strategies. Similarly, SBI Life stands out for its robust long-term growth prospects and healthy balance sheet strength.

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