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Insurance premium trends are going strong. This is evident from the 25% YoY growth in total APE (21% for private insurers), 20% YoY rise in total sum assured in life insurance and 16% growth in GDPI in non-life insurance, FY23-TD. The last 5-year CAGR (for Apr-Nov period) (including two covid-impacted years) stands at 14% for private life insurers’ total APE and 30% non-life GDPI (ex-PSUs). The growth has happened alongside price hikes in key segments such as protection, fire, group health as well as retail health. Against this backdrop, the regulator has taken strong steps to increase insurance penetration in India – such as: (1) improving ease of doing business, (2) improving capital availability, and (3) improving distribution efficacy. As such, we remain constructive on the Indian insurance companies.

* FY23-TD individual/total APE growth has been 17%/25%. Among listed players, SBI Life has outperformed in the individual segment (20% growth) while LIC has outperformed in terms of total APE (30% growth) during FY23-TD. Assuming 15% growth for the remaining 4 months of the year, FY23E industry total APE growth could be 20% YoY.

* Total sum assured growth remains strong. Total sum assured will be the quintessential driver for long-term VNB growth in India. FY23-TD sum assured growth has been 9% for individual and 20% for total industry. While the retail growth is modest, the need to insure is better measured by total sum assured growth. The structural construct of underpenetration remains an important growth driver for the industry. Individual sum assured growth has been strong for Tata AIA, Bajaj Allianz and SBI Life in FY23-TD.

* Product preference incrementally more towards non-linked segment. This is evident from the mix of linked segment within the product universe. Overall linked product mix (NBP terms) has declined from 24% in FY22 to 22% in FY23-TD. FY23-TD too is witnessing continuation of that trend considering the growth of 4% in the linked segment during the period vs 17% in the non-linked segment (NBP terms).

* Non-life insurance growth is also back on track in FY23-TD. Total premium income, motor insurance and health insurance have grown by 16% YoY, 17% YoY and 22.5% YoY respectively in FY23-TD. Retail health grew 15% YoY (on high base of FY22) vs 27% YoY for group. Standalone health insurers (SAHI) reported total health GDPI growth of 27% YoY in FY23-TD driven by strong 40% growth in group business, while retail GDPI has grown 23% YoY during the same period. Star Health reported 12% total health GDPI growth in FY23-TD – of which, retail health has grown 20% YoY while group has declined 42% YoY. ICICIGI total GDPI is up 23% YoY in FY23-TD. Segmentally, ICICIGI saw strong growth in health segment (42% YoY) driven by group business while motor/fire GDPI is up 11% each in the same period. PSU market share has declined from 40.3% in FY22 to 38.5% in FY23-TD.

* Life Insurance Corporation (LIC) has done particularly well in FY23-TD; could potentially lead to estimate upgrades. Total APE growth in FY23-TD for LIC has been strong at 30.5%. Even if the company reports 10-15% YoY growth for the remaining months of the year, its total APE growth would be 21-23% in FY23. This could potentially lead to upgrades in earnings estimates, especially considering that there are levers for margin growth ahead (e.g. mix change towards non-par, mix change within group to annuity/term, increase in surplus distribution in par segment). Stable markets could further provide support given that there may not be any negative variances in H2FY23. We have a BUY rating on LIC with a target price of Rs917 based on 15x FY24E VNB of Rs98bn and 0.7x FY24E EV of Rs6.2trn. ? Regulator has taken several steps to increase insurance penetration in India. These steps span across: (1) improving ease of doing business, (2) improving capital availability, (3) introduction / inclusion of products, (4) improving distribution efficacy, and (5) easing of compliance burden.

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