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Weak on high base

A high base has marred growth for private players in March 2024 (down 10% yoy) and 4QFY24 (up 4% yoy). SBI Life saw the least impact from the high base, but reported muted growth, likely reflecting moderation at the parent. ICICI Prudential Life and Max Life likely capitalized on demand from ULIPs and reported 11-13% yoy APE growth in 4QFY24. With pressure on margins, we forecast 1-32% VNB declines for 4QFY24E. 

High base affected APE growth in March 2024 and 4QFY24

The high base has affected most private players, leading to a 10% yoy decline in APE in March 2024; even the top-4 players reported 9% declines. Sunset period sales of high-ticket size policies in March 2023 led to 53% yoy APE growth for private players, leading to an elevated base; the private sector reported an 18% APE two-year CAGR. Among listed players, HDFC Life and Max Life had the highest base, with 60-94% APE growth in March 2023. HDFC Life reported a 27% decline (up 13%, adjusting one-off of Rs10 bn) in March, leading to a 19% two-year CAGR, while Max Life restricted the decline to 8% (up 19%, adjusting one-offs of Rs3.5 bn), leading to 21% two-year CAGR. SBI Life reported 1% decline in APE, despite not having an inflated base (APE up 13% yoy in March 2023). ICICI Prudential and Bajaj Allianz fared better, reporting 1% and 6% yoy APE growth, respectively, in March 2024, translating into two-year CAGRs of 26 and 28%.

A similar trend is visible in 4QFY24, with private players reporting muted 4% yoy APE growth at a two-year CAGR of 18%. Trends for listed players are mixed. SBI Life fared better than peers, reporting 17% yoy APE growth (13% two-year CAGR), while ICICI Prudential Life and Max Life reported 11-13% yoy growth (21-23% two-year CAGR).

Mixed trends for listed players

* HDFC Life reported muted 2% APE growth in FY2024, reflecting a slowdown in the agency network; bancassurance was up 18% yoy. Demand for ULIPs was strong; while other players capitalized on this to deliver better APE growth, HDFC Life capped ULIP growth for most of FY2024. Margin pressure was better contained, with a 120 bps margin compression in FY2024.

* ICICI Prudential Life reported 8% APE growth in FY2024. While growth was weak in 9MFY24 (up 5% yoy) growth picked up 4QFY24 (up 13%), despite an elevated base. However, we expect a sharp margin compression (down 1,200 bps in 4QFY24E and 800 bps in FY2024E), reflecting a shift to ULIPs and pressure from higher payouts.

* Max Life reported strong 17% APE growth in FY2024, likely driven by a pick-up in agency channel (up 44% in 9MFY24). The product mix has also shifted toward ULIPs and par from non-par, likely leading to 497 bps margin compression in FY2024E. Margin compression in 4QFY24E will likely be lower at 250 bps yoy due to a low base (down 156 bps yoy in 4QFY23).

* SBI Life reported 16% growth in FY2024—a tad lower than the guidance of 18%. Growth was strong in 1HFY24 at 18% for SBI Life, but the company moderated down to 15% in 2HFY24. With a decline in share of non-par, the margin will likely decline (down 330 bps yoy in 4QFY24 and 199 bps in FY2024), though lower than peers.

Private sector ends with 2-year CAGR of 16%, up 8% on a high base

Private sector life insurance companies delivered 8% individual APE growth in FY2024, with 5% growth for the overall sector (private sector and LIC). The weakness largely reflects a 10% decline in March 2024 and muted 1% growth in April 2024 on 53% growth in March 2023 due to sales of over Rs0.5 mn policies in the sunset tax period. Growth was moderate at a two-year CAGR 16%. The five-year CAGR was a tad lower at 13%.

Among large players, Bajaj reported a 31% two-year CAGR and 29% five-year CAGR (up 21% in FY2024); this was followed by Tata AIA at 29% and 27%, respectively (slowing down up to 5% in FY2024). Aditya Birla SL was moderate at 18% and 13%, respectively (up just 2% in FY2024), though it was a key beneficiary of securing a bancassurance partnership with HDFC Bank. HDFC Life was moderate at a two-year CAGR of 13% and five-year CAGR of 15% (up just 1% yoy in FY2024). SBI Life reported a two-year CAGR of 16% and five-year CAGR of 14%. Notably, SBI Life, despite not having a high March 2023 base, reported 13% individual APE growth and 16% overall APE growth in FY2024, lower than its guidance of ~18% growth. Max Life was a tad lower at a two-year CAGR of 13% and five-year CAGR of 12%. ICICI Prudential Life was up 7% on 2-year basis (7% both years), flat in five years.

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