Private life insurers have seen growth during fiscal 2025, with Morgan Stanley positive on life insurers, given strong performance across major players. However, HSBC is more cautious due to regulatory changes and margin concerns.
Morgan Stanley's highlighted positive growth in the private sector life insurance market, with a notable 11% year-on-year growth in individual Annual Premium Equivalent for December 2024, a figure that mirrors the growth seen in December 2023.
While, HSBC's analysis noted a slowdown in the individual APE growth for the third quarter. This moderated to 5% YoY from 21% in the last quarter.
Morgan Stanley On SBI, HDFC And ICICI
Specific companies like SBI Life, HDFC Life, and ICICI Pru Life all showed solid performances, with SBI Life growing by 16%, HDFC Life by 12%, and ICICI Pru Life by 9%.
In the third quarter, the private sector's APE growth was 13%, and specific companies like IPRU Life showed the highest growth at 18%. Overall, industry retail premiums grew 5% year-on-year in December 2024, supported by a strong two-year CAGR of 7%.
Growth trends in the private sector for the fiscal 2025 show a robust 14% year-on-year increase, with the third quarter showing 5% growth. HDFC Life and IPRU Life displayed stable growth, with HDFC Life's retail premiums growing 12% year-on-year and ICICI Pru Life's by 9%.
However, despite strong growth in APE for some firms, there were variations in their performance across channels, with certain pockets of the sector seeing more subdued growth, the brokerage said. For the fiscal, the private sector showed a healthy 19% year-on-year growth, reflecting a promising outlook.
HSBC On SBI And LIC
HSBC noted a slowdown in third quarter, attributing it to new product regulations and weak equity markets. Insurers with a high reliance on bank and insurance company tie ups, such as SBI Life Insurance, experienced more significant growth impacts, compared to those with diversified distribution channels.
However, this is a temporary disruption, and the growth trend is expected to normalise once the new product regulations are fully implemented, according to HSBC.
SBI Life Insurance Co. performed well, reporting a healthy 16% year-on-year growth in APE in December 2024, surpassing expectations. It was noted that the insurer conducted more monthly business than LIC for the first time. Strong growth is also highlighted in the number of policies sold by ICICI Pru and Tata AIA Life, while growth remained muted for others.
The insurance industry continues to gain market share at the expense of smaller players like LIC, according to the brokerage. Margins remain a key concern, with HSBC anticipating continued compression due to the change in product mix towards linked products and revised surrender value norms.
However, insurers are expected to adjust the margin pressures through better product mixes and adjustments in commission structures.
Additionally, any policy changes in the upcoming Union Budget, such as exemptions on GST for term insurance, is set to have a direct impact on the space.
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