HDFC Life, SBI Life, ICICI Pru Life shares: Nirmal Bang picks its top ideas ahead of Q1 results

In its Q1 results preview for life insurers, Nirmal Bang Institutional Equities expects VNB (value of new business) margins to be subdued for the quarter due to elevated ULIP share and continued investment in growth. New regulatory guidelines on early exit surrender pay-outs are likely to hurt insurers’ margins, it warned.

Stock valuations remain undemanding with listed life insurers trading 1.8-2.2 times FY26E P/EV, it said while maintaining its positive stance with SBI Life Insurance Company Ltd and ICICI Prudential Life Insurance Company Ltd.

The brokerage noted that life insurers have seen strong growth in April-May and it expects the momentum to continue in June as well, driven by Protection, NPAR and Annuity.

HDFC Life reported 22 per cent YoY growth on YTD basis. Nirmal Bang expects the momentum to sustain in June on the back of growth in tier 2/3 markets. The life insurer has added many regional partners, banks and agents in SURU markets over the past few months and will continue to see offshoots from these investments. 

"While the softness in Credit Protect is expected to continue, NPAR volume is seeing a pick-up on the back of Click 2 Achieve. The company has guided for an impact of ~100bps on FY25 VNB margin due to higher surrender pay-outs on early exits. Since this is applicable from Oct’24, we expect 1QFY25 VNB margin to be similar to 4QFY24 levels as ULIP share continues to be elevated," it said.

For SBI Life, Nirmal Bang expect 1QFY25 growth run-rate to be maintained at 17 per cent YoY, led by ULIP, Protection and low-ticket NPAR. The company has recently launched new products (TROP and pure protection) and is focusing on maintaining a healthier product mix, which is likely to be reflected in margins, it said.

In the case of ICICI Prudential Life Insurance, the insurer has seen pick-up in volume in April and May and the trend is seen continuing in June on the back of strong growth in retail protection, credit life and annuity. "We expect margins to be subdued as the company continues to invest in the franchise," Nirmal Bang said.

Max Life, meanwhile, has consistently performed well (32 per cent YTD growth) on the back of strong growth in proprietary channels and Nirmal bang expects a similar trend in 1QFY25. 

"New launches - SWAG, STEP, SWAG Elite and SWAG Pension - continue to see strong traction. Expect VNB margins to remain rangebound at 26-27 per cent," it said.

The FY24 growth for life insurers was dominated by low-margin ULIP products, resulting in a lower VNB margin trend for all listed insurers. Nirmal expects ULIP share to normalise over the coming quarters.