Insurance players start FY25 on a positive note as premium flows rise, say Kotak analysts

At the bourses, shares of HDFC Life has slipped over 11 percent, while LIC shares declined over 11 percent, and SBI Life shares dipped over 4 percent

Private life insurers have kicked off the fiscal year 2024-25 (FY25) on a positive note, showing a 23 percent growth in Annual Premium Equivalent (APE) in April 2024, albeit from a low base, said analysts at Kotak Institutional Equities in a recent note.

LIC, among the listed players, reported a substantial 45 percent year-on-year (YoY) APE growth, surpassing private players and boosting its market share to 35 percent from the previous 27-33 percent over the last eight months.

However, analysts anticipate this surge to be short-lived, with LIC expected to fall behind private peers and report a modest 6 percent APE growth.

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Conversely, HDFC Life and Max Life outperformed private peers, demonstrating a 14 percent 2-year APE Compound Annual Growth Rate (CAGR). On the flip side, ICICI Prudential Life and SBI Life registered a subdued 7-9 percent growth in APE (2-year CAGR).

Additionally, Aditya Birla SL and Tata AIA exhibited robust 22-25 percent 2-year APE growth, while Bajaj Allianz lagged at 15 percent.

APE, a standard metric used by insurers, facilitates comparison of premium income from policies with varying payment frequencies on an annual basis. APE allows insurers to evaluate their business performance yearly, regardless of whether premiums are paid annually, semi-annually, quarterly, or monthly.

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Kotak analysts said that HDFC Life fared better than most private players (up 11 percent on 2-year CAGR) as its base did not weaken in April last year. Usually, April tends to be a weak month for insurance and growth should pick up in subsequent months, they said.

At the bourses, shares of HDFC Life slipped over 11 percent, while LIC shares declined over 11 percent, and SBI Life shares dipped over 4 percent. In comparison, benchmark Nifty 50 dropped 3 percent during the same period.

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