Life Insurance Sector Update : August disappoints after strong June and July By JM Financial Services Ltd
Aug’25 saw the industry report flattish individual APE (-0.6% YoY) at INR 95bn as LIC’s individual APE declined 5% YoY. Even private life insurers reported only a 1% YoY growth in individual APE, collecting INR 69bn. YTD growth stands at 8% YoY for the private sector, on a strong base last year. On a 2-year CAGR, YTD growth as of Aug’25 stood at 15% for the private sector and 11% for the industry – in line with medium-term trends.
Amongst private players, HDFC Life reported flattish premiums (+0.7% YoY), in line with the private sector, while IPRU disappointed with a 13% YoY contraction on a strong base (+30% in Aug’24). Axis Max Life reported healthy growth of 16% YoY, whereas SBI Life contracted 4% YoY. Amongst unlisted players, Bajaj Allianz saw its individual APE contract 6% YoY and ABSLI (Aditya Birla Sun Life Insurance) reported 4% YoY growth.
1HFY26 growth looks expectedly weak on a strong base of 1HFY25, with the GST cuts likely to delay September sales as well. Management commentary in 1Q concalls suggests that some degree of normalisation is yet to come in post surrender norms. We expect FY26 to be weaker at ~12% individual APE growth for the private sector (vs. 15% for FY25).
Weak growth in Aug’25 after strong months of Jun’25 (13% YoY) and Jul’25 (14% YoY) was potentially due to delays in purchase decision given expectation of GST cuts. For FY25, YoY growth in the 4 quarters was 24%/24%/13%/7%, indicating high base of 1HFY25. We expect growth to revive from 3Q onwards as the positive impact of GST cut kicks in and the base normalises. With widening spread between fresh deposit rates and G-sec yields, coupled with the government and regulator's focus on expanding insurance through all channels, we expect growth to gradually inch up.
With pricing leeway and a product mix shift to higher-margin return guarantees, we prefer HDFC Life, trading at 2.2x FY27e EVPS, even as it trades at a 20% premium to SBI Life, as we expect both banca and agency to do well for it hereon, with the insurer expected to deliver an 18% VNB CAGR over FY25-FY28e.
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