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The Life Insurance industry reported 13% YoY decline in Retail APE, with the private sector registering a 12% drop and LIC reporting a 16% decline. Given the frenzied growth in Mar-23 on the back of impact of personal taxation changes announced in the FY24 Union Budget, the 2Y CAGR for Mar-24 Retail APE presents a better picture and, on that basis, sector Retail APE delivered 9% CAGR, with the private sector delivering 17% CAGR and LIC reporting negative CAGR of 3.8%. From the perspective of listed players, on 2Y CAGR basis, MAXF (+21.3%) and IPRU (+25.3%) impressed, while SBILIFE (+2.2%) and LIC (-3.8%) disappointed. HDFCLIFE (+18.8%) delivered a decent show. For FY24, 2Y retail APE CAGR for the industry stood at 11.6%, with the private sector delivering an impressive 15.8% and LIC witnessing a muted 3.9% CAGR. For Mar-24, the Industry reported 2Y Total APE CAGR of 2.8%, with the Private Sector delivering 2Y APE CAGR of 16.7% and LIC reporting a negative 2Y CAGR of 11.7%. Ahead, we see the sector delivering ~11-12% Retail APE growth in FY25E, with the private sector noting ~13-15% and LIC posting ~6-8% growth. With a number of headwinds now behind leading to valuations turning attractive, we maintain our constructive view on sector stocks.

Divergent growth trends in Mar-24

For March 2024, retail APE growth trends were divergent, with the private sector reporting a slower decline (at 12% YoY) than LIC (16% YoY decline), despite the March 2023 base being considerably high for the private sector. Higher number of holidays in the month seems to have affected the LIC agency-led business, thus leading to this 16% YoY decline.

MAXF and IPRU impress; SBILIFE and LIC disappoint

Looking at growth trends in the last few months, it appears IPRU has been recouping its growth mode, likely driven by the newer product launches. On 2Y CAGR basis, IPRU reported 25% Retail APE CAGR in Mar-24 to Rs15bn. Also, MAXF delivered a strong 21% 2Y CAGR in Retail APE in Mar-24 to Rs14.1bn. ULIP growth appears to be a key contributor in MAXF's March growth. On the other hand, LIC reported -3.8% 2Y CAGR in Retail APE to Rs54.6bn, and SBILIFE reported a muted 2.2% CAGR in Retail APE to Rs16.3bn. HDFC Life delivered a decent show, with 2Y Retail APE CAGR of 18.8% to Rs18.6bn during Mar-24. More holidays and higher contribution of agents in SBILIFE's March business and LIC's extremely high dependency on the agency channel seem to have played a role in the weak show. SBILIFE's focus on margin protection could also be partly responsible for the weaker show in March.

Overhangs of surrender regulation changes gone; outlook stable and valuations attractive

Life insurers have adjusted to the new realities following the taxation changes on highticket non-linked policies in FY24. With enactment of the newer product regulations, the overhang of radical changes in surrender regulations is now behind. Against this backdrop, we expect the industry to deliver retail APE growth of ~11-12% in FY25E, with the private sector delivering ~13-15% growth and LIC delivering ~6-8% growth. In light of most overhangs now gone, better visibility on growth, and favorable valuations, we maintain our positive stance on life insurance stocks.

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