SBI Life Insurance, HDFC Standard Life Insurance hit new highs

Shares of life insurance companies were trading higher in otherwise subdued market with SBI Life Insurance Company and HDFC Standard Life Insurance Company hitting their respective new highs on the BSE on Wednesday.

ICICI Prudential Life Insurance Company (IPRU) has surged 11% to Rs 460, extending its Tuesday’s 7% gain after the company reported better than expected results for the financial year 2017-18 (FY18). On comparison, the S&P BSE Sensex was trading 0.16% lower at 34,563 points at 12:03 pm.

SBI Life was up 2% to Rs 762 in intra-day trade today, after gaining 4% on Tuesday. The stock trading at its highest level since listing on October 3, 2017, was up 9% against its issue price of Rs 700 per share.

HDFC Standard Life too hit a new high of Rs 512, up 2% on the BSE in intra-day trade today. Since listing on November 11, 2017, the stock rallied 45% as compared to 4% rise in the benchmark index. The company issued shares at price of Rs 290 per share.

New Business (NB) annual premium equivalent (APE) growth slowed down for the life insurance industry at 16% year-on-year (YoY) in FY18 (Vs 21% YoY FY17) as group business APE grew merely 1% YoY (Vs 21% YoY in FY17). Individual business APE continued to grow better at 19% YoY (21% YoY in FY17) as key private players such as SBI Life and HDFC SL clocked over 30% YoY growth.

Analysts at Prabhudas Lilladher believe new business APE growth to remain more or less at these level for FY19E as ULIPs which was driving the growth is likely to see lower growth this year) due to low demand as markets have turned more volatile and certain key players are not likely to be aggressive to grow in this segment as they look to maintain balanced product mix. Growth will be led mainly by protection products both individual and group; however ticket sizes are quite low for the individual segment.

The brokerage firm continue to like HDFC Standard Life and SBI Life due to strong growth while maintaining balanced product mix coupled with strong distribution and improving operating metrics.

“We have a BUY rating for SBI Life with target price of Rs 865 at 3.1x P/EV FY20E. However, HDFC SL has had a strong outperformance in the last six months compared to its peers. We believe that the valuations are fully priced in and we see very limited upside in medium term. We continue to like the company due to its strong operating metrics and see positive returns in long term,” the brokerage firm said in Indian Life Insurance sector update.