LIC Fails To Impress As Brokerages Bet Big On Private Insurers

The Life Insurance Council's data for November 2024 has highlighted stark divergence in the life insurance sector, with private insurers outshining Life Insurance Corp. across key metrics. As the industry adjusts to new regulations and changing consumer preferences, brokerages are turning increasingly bullish on select private players.

LIC reported a 27% year-on-year decline in total premium collections to Rs 11,751 crore in November 2024. A 12.4% decline in individual Annualised Premium Equivalent and a 41% fall in policy count has also raised concerns about the insurer's ability to adapt to regulatory changes.

Brokerages remain cautious about LIC's outlook. Nuvama Institutional Equities noted that LIC's retail APE growth for fiscal 2025-to-date was 7.3%, far below the private sector's 21.2% growth. Emkay Global highlighted LIC's inability to capitalise on group business opportunities, where it posted a 36.5% decline in Group APE, further dragging down its performance.

Nirmal Bang Institutional Research's analysts echoed similar concerns, stating that LIC is increasingly losing market share to nimbler private players. They expect LIC to grow retail APE by just 6-8% in fiscal 2025, compared to an industry average of 13-14%.

Private insurers have emerged as the darlings of the sector, as they outperformed LIC in November. ICICI Prudential Life Insurance Co. delivered strong growth across key metrics.

IPRU Life posted a 28.1% year-on-year growth in retail APE in November, with total APE surging by 58.4%. Group business was the standout performer, growing a whopping 243.4% year-on-year.

Emkay maintained a 'hold' rating on IPRU Life, with a target price of Rs 740, an implied growth potential of 9%, citing its consistent market share gains and ability to tap into high-growth segments.

Nirmal Bang is more optimistic, with a 'buy' recommendation and a target price of Rs 850, indicating a 13% potential upside, highlighting IPRU's improving margins and fiscal 2025-to-date growth of 35.4%.

While HDFC Life's growth was muted at 2.7% year-on-year for individual APE, it remains a top pick for many brokerages. Emkay reiterated its 'buy' rating with a target price of Rs 830 and a potential upside of 29%, noting the insurer's five-year individual APE CAGR of 16% and solid fundamentals.

SBI Life's individual APE grew by 8.5% year-on-year in November, supported by balanced growth across retail and group segments. Emkay retained a 'buy' call with a target price of Rs 2,280, which implies a 55% potential uptick, highlighting SBI Life's attractive valuation and improving market position.

Brokerages attribute the outperformance of private players to their ability to adapt to regulatory shifts and focus on high-margin segments. Emkay noted that private insurers are gaining market share in the individual APE segment, which stood at 68.9% for fiscal 2025-to-date.

Nuvama emphasised that the private sector's group APE grew by 44% year-on-year in November, while LIC's fell by 36.5%, further amplifying the divergence. Private insurers have also been more successful in leveraging bancassurance and digital channels to drive growth, according to analysts.

Brokerages are bullish on the life insurance sector, particularly private players, for the medium term. Emkay projects 16% retail APE growth for private insurers in FY25, compared to just 6-8% for LIC. Nuvama expects overall industry growth of 13-14%, with private insurers continuing to outpace LIC.

However, the new surrender regulations, alongside uncertainty around the Insurance Amendments Bill and direct tax reforms, could weigh on the sector in the near term. Analysts advise caution, especially with LIC, which faces a steeper road to recovery.