Which life insurance stocks to buy in March? LIC, SBI Life, or ICICI Life

In its latest report, Emkay said, the life insurance industry posted a muted Retail APE growth of 10.5% YoY for Feb-23, with the Private sector growing at 18.2% and LIC’s retail APE declining by 3%YoY over the same period. The divergent growth trend for the month led to increasing divergence in Retail APE growth for YTDFY23, with the private sector at 18.1% YoY versus LIC at 9.3% YoY.

It added that this muted show for Feb-23 resulted in YTDFY23 retail APE growth for the industry moderating to 14.9% YoY in Feb-23, from 15.4% in Jan-23. Such developments come on expected lines, where Emkay has maintained overall Industry retail APE growth of 14-15% in FY23, with the private sector delivering a high-teen growth and LIC at ~10% growth.

According to the brokerage, the retail APE growth in February was largely driven by size growth, with overall average ticket size for Retail Regular Premium policies growing by 32% YoY. Here, LIC posted more than 24% growth, while the private life insurers saw about 17% growth YoY.

It said, “This ticket size led growth should be seen in the context of a likely pre-booking of high-ticket (>Rs5lakh) non-ULIP policies in Feb-Mar 2023, to escape the impact of taxation change as proposed in the FY24 union budget.”

Further, in February, among the private players who are listed, HDFC Life was a star performer with a strong growth of 27% in retail PE, while it posted a growth of 19% in ticket size and 8% in policy count. While ICICI Prudential Life recorded 10% growth in retail APE, and 20% in ticket size, but a decline of 9% in policy count.

Max Life registered a growth of 7% in retail APE and 15% in ticket size but a drop of 7% in policy count in February 2023. As for SBI Life Insurance, the company witnessed a subdued performance in retail APE, while ticket size posted a marginal upside of 1%, however, a 1% drop was seen in policy count.

In Emkay’s view, these numbers reflect good traction of high-ticket guaranteed products for HDFCLIFE, IPRU, and MAX Life, likely backed by higher guarantees and aggressive marketing campaigns. The numbers also suggest a likely sluggishness in growth for Max Life in the Axis Bank channel and for IPRU in the ICICI Bank channel. For SBILIFE, the flat ticket size reflects relatively weaker traction of high-ticket guaranteed products.

For FY24, Emkay said the GoI proposed withdrawal of the tax exemption on Maturity proceeds of Non-ULIP policies purchased after 1 April 2023, with an aggregate annual premium above Rs5lakh. Against the backdrop of the Budget, the industry, especially private players, is expected to continue witnessing strong growth in Mar-23, led by the strong sale of the high ticket-size policies being tax-exempt up to 31 March 2023. Hence, given such developments, the focus now shifts to FY24.

However, the report also added, though the impact of the sale of policies entailing a >Rs5lakh-premium is estimated to be in the range of 2-15%, the main attention now swings to what changes Life insurers bring to their product mix which, in turn, will affect VNB margins.

Overall, Emkay expects life-insurance stocks to remain range-bound in the near term, supported by valuations amid the current uncertain environment, with the effect of such changes being visible and measurable by H2FY24.

Accordingly, Emkay has set targets on listed life insurance stocks:

– HDFC Life Insurance: “Hold” rating for a target price of ₹560.

– Life Insurance Corporation of India (LIC): “Hold” rating for a target price of ₹700.

– ICICI Prudential Life Insurance: “Buy” rating for a target price of ₹510.

– Max Financial Services: “Buy” rating for a target price of ₹880.

– SBI Life Insurance: “Buy” rating for a target price of ₹1400.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.