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The life insurance industry delivered healthy retail APE growth of 14.4% for Aug-23, led by the private sector growing strongly at 20.7% and LIC posting a muted show at 3% YoY for Aug-23. For YTDFY24, the private sector delivered decent 12.7% retail APE growth; however, LIC’s flat performance (+0.1% YoY) resulted in the overall industry delivering 8% YoY retail APE growth. Healthy growth in retail APE among private players is expected to be driven by traction in the retail protection segment. Amid the slowdown in non-par savings products on account of changes in the Income Tax Act, the industry’s performance for Aug-23 remains impressive. Among listed private players, Max Life (+48.5% YoY) and SBI Life (+34.1% YoY) delivered strong growth in retail APE for Aug-23, backed by their leading bancassurance partners and powering proprietary channels. HDFC Life (+15.9% YoY) and IPRU Life (+12.3% YoY) delivered decent retail APE growth during Aug-23. Considering the robust performance in FY23 and the impact of taxation on high-value non-linked policies, we expect the life insurance sector to achieve single-digit growth in retail APE during FY24. Specifically, we foresee the private sector delivering low double-digit growth, while LIC is expected to experience low single-digit growth. Given the recent performance of life insurance stocks, the life insurance sector's valuations remain appealing. We prefer private-listed life insurers SBILIFE, MAXF, HDFCLIFE and IPRU, in that order.

Life insurance industry reports healthy retail APE growth for Aug-23

The life insurance industry delivered 14.4% retail APE growth for Aug-23, driven by 20.7% YoY growth by the private sector. However, on a total APE basis, the industry reported muted 2.4% YoY growth for Aug-23, backed by 12.9% YoY growth for the private industry and LIC declining by 11% YoY for Aug-23. Group APE declined by 23% for the industry, 28% for LIC, and 15% for the private sector during Aug-23, which resulted in muted total APE growth for the industry. Given the slowdown in retail APE during Q1FY24, healthy growth in retail APE during July-August 2023 resulted in the industry reporting 8% YoY retail APE growth for YTDFY24.

Max Life and SBI Life see robust growth, HDFC Life and IPRU Life deliver a decent show:

Among private listed players, Max Life reported strong retail APE growth of 48.5% during Aug-23, leading to 17.6% YoY growth for YTDFY24. SBI Life registered 34.1% retail APE growth for Aug-23, driven by the bancassurance and proprietary channels and leading to 16.8% YoY growth for YTDFY24. HDFC Life and IPRU Life posted decent 15.9% and 12.3% retail APE growth during Aug-23, which resulted in 8.9% and 2.6% YoY growth, respectively, for YTDFY24. Additionally, mid-tier players reported diverging trends, with Bajaj Allianz posting 33.5% retail APE growth, TATA AIA Life reporting muted 6.9% retail APE growth and ABSLI’s retail APE declining 3.4% YoY during Aug-23.

Considering the recent performance of life insurance stocks, the life insurance sector's valuations remain attractive, as all companies are currently trading below their five-year averages. We maintain our preference for SBILIFE, MAXF, HDFCLIFE and IPRU, as we believe they offer a promising risk-reward ratio in the foreseeable future.

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