Insurance Sector Update: Washout in August by Kotak Institutional Equities
Washout in August
Individual APE growth for the private sector was flat (up 1% yoy) in August, likely reflecting the postponement of insurance purchases, awaiting GST cuts. HDFC Life and SBI Life reported muted 0-3% APE growth. ICICI Prudential lagged peers—APE was down 9.4% on reported basis and 7% on calculated basis. Axis Max Life fared better than peers (up 17% yoy). We expect September to make up for the weakness in August as business ramps up in the last week.
Anticipation of GST rate cut weighs in on growth in August 2025
APE growth was muted at 2.7% for private players and down 1.8% yoy for the industry. Prospective policyholders likely postponed their decision in light of the heightened anticipation of the GST rate cut. The top-4 players reported muted 2.3% APE growth, while select tier-II players fared better, reporting 8.5% yoy APE growth. We expect the business to recover in September as GST cuts take effect from September 22, 2025. However, we do not rule out the cancellation of policies in the free lookup period to be replaced by cheaper (low GST) policies.
Muted growth for most players
* Axis Max Life outperforms. Axis Max Life reported 17% yoy APE growth during the month, outperforming most peers. The company has a higher proportion of monthly premium ULIP policies, which has likely supported overall APE growth. The growth in the number of policies (NoP) remained strong at 33% in August 2025 (13-26% in the previous two months). Ticket sizes were down 12% yoy due to a higher contribution of monthly policies.
* Muted growth for HDFC Life. HDFC Life reported muted 2.7% yoy APE growth in August 2025. Ticket sizes were up 18% yoy (21% in July 2025), likely driven by strong ULIP growth. A sharp decline of 15% yoy in NoP dragged down individual APE growth to 0.7% yoy.
* ICICI Prudential loses market share. ICICI Prudential Life reported a 7% yoy decline in APE due to a sharp 13% decline in individual APE; group APE was up 56% yoy. While ticket sizes were flat yoy, NoP declined 13% yoy. Market share in individual business was also down to 6.2% from 7% earlier.
* Growth to pick up for SBI Life. APE was flat yoy for SBI Life in August 2025. We expect growth to pick up for SBI Life in the coming months, as the regulatory overhangs taper off. Multiple reports of complaints on mis-selling, while unfounded, led to a slowdown in the parent bank channel for SBI Life. The Government of India’s prioritization of insurance penetration should augur well.
* Tata AIA fares better among tier-II players. Aditya Birla Sun Life and Bajaj Allianz reported muted 1-4% yoy APE growth during the month, in line with peers. Tata AIA fared better, reporting 13% yoy APE growth.
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