Brokerages Have Mixed Outlook On Indian Life Insurers' New Business Growth

Brokerages have mixed view on Indian life insurers with the value of new business, or VNB, of SBI Life Insurance Co. raised while those of HDFC Life Insurance Co. kept unchanged.

Morgan Stanley has lowered its VNB outlook on ICICI Prudential Life Insurance Co. while Nomura remains 'neutral' on the company's stock.

The total annual premium equivalent, or APE, of ICICI Prudential grew the highest at nearly 47% in the first quarter of fiscal 2025, followed by HDFC Life at 29% and SBI Life at 21%.

Nomura maintains a 'buy' rating on SBI Life, stating that its VNB margins will improve as the product mix shifts towards the non-participating and protection segments. Nomura continues to favour the company because of its consistent growth in market share and the multiple levers that ensure its margins remain intact.

SBI Life's APE at 18% beats Morgan Stanley’s estimates of 17%, prompting the brokerage to raise the forecast of the company's VNB to 11% versus 10% previously.

Nomura maintains a 'buy' rating on HDFC Life, as their numbers show that VNB growth will remain largely in line with APE growth. Morgan Stanley estimates show that APE has surpassed its expectations (22% versus 17%). Individual APE growth was also better, and it is likely due to faster growth in unit-linked insurance plans (lower margins), given the strong equity markets. 

As a result, the investment bankers' revised VNB margin forecast is 80 basis points lower at 25.3% versus 26.1% previously. The revised VNB forecast is largely unchanged for the June quarter of fiscal 2025, and they estimate VNB growth of 17%.

Nomura remains 'neutral' on ICICI Prudential Life due to its strong numbers for the June quarter. The brokerage expects margins to remain stable (versus FY24) as long as the product mix remains the same. However, it is also willing to lower margins (if required) in order to generate strong absolute VNB growth.

ICICI Prudential Life's overall APE growth aligned with Morgan Stanley's estimates, but its group APE, which accounts for a higher blended margin, showed a lower YoY growth of -16% compared to Morgan Stanley's growth of 5%. The banker attributed this to the strong equity markets driving ULIP (lower margin). As a result, the revised VNB margin forecast is 50 basis points lower at 22.5% versus 23% previously. Thus, the revised VNB forecast for June quarter fiscal 2025 is 1% lower, and the VNB growth estimate is 1% versus 2% growth estimated previously.