Stock Market Share Picks: Insurance companies' performance alert! Sharekhan highlights THIS

Sharekhan preferred picks are Max Financial (holding company of Max Life Insurance), Bajaj Finserv (holding company of Bajaj Allianz Life), HDFC Life, and ICICI Prudential. Sharekhan believes these companies have a strong balance sheet, are well capitalised (for the long term), have healthy operating metrics, and are well placed to ride over challenges.

Sharekhan highlights that the life insurance industry’s April 2021 provisional numbers came in strong for most listed private players on annualised premium equivalent (APE) basis and new business premium (NBP) basis.

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HDFC Life NBP for April 2021 stood at Rs 1193 cr, up 78.5% yoy. APE (Calculated) for April 2021 stood at Rs 439 cr, up 90% yoy.

ICICI Prudential Life NBP for April 2021 stood at Rs 643 cr, up 151% yoy. APE for April 2021 stood at Rs 357 cr, up 88% yoy.

Max Life Insurance NBP for April 2021 stood at Rs 348 cr, up 102% yoy. APE (Calculated) for April 2021 stood at Rs 240 cr, up 123% yoy.

Bajaj Allianz Life (BALIC) NBP for April 2021 stood at Rs 424.6 cr, up 35% yoy. APE (Calculated) for April 2021 stood at Rs 167 cr, up 72% yoy

Sharekhan says that Performance for the past few months indicates that the insurance industry continues to bounce back successfully from the shadows of the pandemic. Sharekhan stays positive on the insurance sector, particularly for players with a favourable business mix (protection and retiral product segments) and strong distribution network (proprietary and bancassurance etc). Structural demand for insurance across mortality, morbidity, and longevity coverage remains high. Protection gap in India is wide, with low insurance premiums as a percentage to GDP as compared to that of developed countries. Therefore, the opportunity and scope for growth in life insurance remain large. Life insurance is a long-term oriented industry and we believe it would stay attractive in the years to come.

For private companies, APE (Calculated) for April 2021 grew by 79.5% (better than industry growth of 41% in April 2021). Growth performance is indicative of continued strong growth traction, but it is also partly attributable to a lower base effect, with April 2020 impacted by the lockdown. On an NBP basis, the private industry saw a robust increase of 55% yoy for April (better than the industry’s 45% in April 2021). The overall life insurance industry’s NBP growth was slower with PSU leader, LIC, seeing 35% y-o-y growth for its NBP for April 2021. Most private life insurance players saw positive performance. Healthy growth was seen continuing in the same vein for private life insurers’ APE.

Sharekhan expects customer preference to gradually improve for equity-market linked products (ULIPs), while traction in protection and annuity products is likely to continue, also indicated in Q4 management commentaries. Further, recovery in credit growth/bancassurance channels is likely to help inflows in ULIPs and credit protects schemes. Sharekhan sees life insurance as an attractive long-term bet with a long runway for growth, supported by India’s demographics and underpenetrated/ underinsured Indian insurance market. Sharekhan believes players with a strong balance sheet and business metrics would be able to tide over the challenges. Sharekhan believes demand for protection policies and savings products would be likely growth drivers in FY2022E.