More investments expected to flow in the Indian insurance sector as IRDAI approves guidelines for PE Funds to become promoters. (Photographer: Akio Kon/Bloomberg)

Private Life Insurers Will Continue To Lead The Rally, Nomura Says

Shares of private life insurers may continue to lead the rally in their sector, riding on tie-ups with banks.

That’s the word coming from Japanese brokerage Nomura, which believes that new business growth for private life insurers has sustained despite a higher base effect during the demonetisation period.

Private insurers’ individual annualised premium rose 22 percent last month, beating the 19 percent industry average, and 9 percent faster than Life Insurance Corporation of India. With further profitability and robust growth, valuations are unlikely to get cheaper in the near term, the brokerage said.

Private Life Insurers Will Continue To Lead The Rally, Nomura Says

Share of private players’ business also increased to 64 percent in December 2017 as against 54 percent for the year ended March 2017.

Nomura believes that most large private players have witnessed robust growth because of bancassurance tie-ups. For instance, SBI Life Insurance Co. Ltd., which has the highest market share among private players of 27 percent as of December 2017, registered a growth of 34 percent year-on-year, while HDFC Standard Life Insurance Co. Ltd. posted a robust 85 percent growth in the premium received.

ICICI Prudential Life saw a contraction of 2 percent last month year-on-year, largely due to high base after demonetisation, however number of policies sold increased by 10 percent during the same period.

Private Life Insurers Will Continue To Lead The Rally, Nomura Says

Nomura believes that HDFC Life has outperformed since it initiated coverage on the stock, while it expects ICICI prudential and SBI Life to offer higher returns going ahead. The brokerage believes that private sector growth is led by increase in both volumes and ticket size.

Agency-led insurers such as TATA AIA Life Insurance Co. Ltd., Aditya Birla Sun Life Insurance Co. Ltd. as well as Bajaj Allianz Life has been growing in line with private insurers at an annualised rate of 29 percent over the past two years, while Reliance Life Insurance Co. continues to lose market share.