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The key trends from insurance sector results in Q1FY24 were: 1) volume growth focus over margin expansion, 2) uptick in protection growth and 3) continued focus on distribution across channels. While sum assured growth had led expectations of margin increase, decline in non-par mix and increase in ULIPs and investment in channels to increase number of policies resulted in muted margin performance in Q1FY24. We do believe volume growth is a more sustainable structural lever than margins, hence growth in the number of policies becomes imperative as of now.

Key highlights of individual players include: 1) 50-100bps HDFC Bank counter share increase for HDFC Life and continued expectations in that direction. Company also registered 60bps YoY increase in its total APE market share to 15.6% and 8.5% YoY growth in the number of polices in Q1FY24; 2) 20%/21% growth in non-parent bank channels for IPRU Life in May/Jun’23; and 3) continued guidance of 20% APE growth for SBI Life in FY24 with expectations of strong growth in the agency channel. Maintain overweight stance on the sector

Volume growth performance and commentary indicate no big impact of removal of tax incentives

This is seen from: 1) the gradual volume growth in Q1FY24 (private life insurers’ APE grew 7% / 1% / 16% in Apr/May/Jun’23), and 2) guidance of companies (SBI Life guided for 20% volume growth, HDFC Life 15% excluding INR 10bn one-off in FY23, and strong growth in non-parent bank channel for IPRU).

There is growth in retail protection

Retail protection APE grew 62%, 34%, 5% YoY for IPRU, HDLI and SBI Life. The common commentary indicated a relative open stance of reinsurers towards protection underwriting in wider geographies now than in the past. This could be driven by better experience, higher prices (there has been ~50-100% hike in protection prices since Covid (Link)) and higher retention by many insurers (though investors were worried on this front initially).

There is growth in number of policies (NOP)

Number of policies of private life insurers grew 4% in Q1FY24. Leaders were BALIC, HDFC Life and TATA AIA with 18%, 8.5% and 7.2% growth respectively. This metric should be key monitorable going ahead post the change in tax regime wherein ticket-size will get curbed naturally beyond a point.

There is growth in sum assured

The retail sum assured grew 39%, 55%, 2% YoY for IPRU, HDLI and SBLI. The total sum assured grew 9%, 73%, 44% YoY for the three respective companies. The total sum assured of IPRU Life is at INR 2.4trn as of Q1FY24.

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