ICICI Prudential Life, Max Financial shares top bets in listed life insurance space
Mumbai: ICICI Prudential Life Insurance Co. Ltd and Max Financial Services Ltd are the top bets in the listed insurance space, making a case for private firms and strong prospects for the life insurance industry.
ICICI Prudential Life, which is tracked by 16 analysts, had 14 of them rating it a buy or outperform, while two gave it hold ratings, data from Bloomberg showed.
“There are not too many attractive options in general insurance space. Underpenetration in the life insurance sector is higher than general insurance, indicating that there are stronger prospects of growth in the former,” said Vishal Rampuria, research analyst at HDFC Securities Ltd.
“India’s Life Insurance sector is poised for strong growth, driven in part by the financialisation of savings post demonetisation,” he added.
The tide seems to be in favour of private life insurers, data showed.
In a note on 12 December, JM Financial Institutional Securities Ltd pointed out that private insurers’ average premium equivalent (APE) market share increased to 51.2% in November driven by strong APE growth of 30% over a year ago, compared with industry growth of 24%.
This has come in addition to the higher base in November 2016 on account of demonetisation.
IIFL initiated coverage on ICICI Prudential Life with a buy rating on 21 September, with a 12-month target price of Rs480.
ICICI Prudential Life stock has delivered relatively moderate gains since its listing in September 2016. It saw a weak listing, adding 14.67% from the offer price.
“IPru Life is well positioned to capture growth opportunities arising from the buoyant equity markets, given its predominant positioning as seller of unit-linked products (Ulips),” IIFL said in the note.
“A well-established franchise, upbeat growth outlook, improving profitability metrics, and a strong capital position place IPru Life favourably among private sector life insurers,” IIFL had said in September.
Also, Max Financial Services, the holding company of Max Life Insurance Co. Ltd, has 11 buy or outperform ratings, and one hold rating.
In a note on 28 December, HDFC Securities initiated coverage on Max Financial with a buy rating, saying it has a well-balanced product mix with a focus on longer duration products, and it benefits from exclusive bancassurance tie-ups with Axis Bank Ltd and Yes Bank Ltd.
On the other hand, all the seven analysts tracking SBI Life Insurance Co. Ltd and all the four brokerages tracking HDFC Standard Life Insurance Co. Ltd have a buy or outperform rating on the respective stocks.
Axis Securities initiated coverage on SBI Life with a buy rating on 7 December, citing the company had an unparalleled distribution network, leadership in new business premium (NBP) among private insurers, strong management team and top quartile service ratios.
On 20 December, Morgan Stanley started coverage on HDFC Standard Life with an “outperform” rating, despite high valuations.
“While near-term upside appears limited following strong share price performance since HDFC Life’s listing on Nov 17, 2017 ( around 13% upside relative to our Rs425 price target), our positive rating is driven by HDFC Life’s superior franchise and high focus on protection,” Morgan Stanley analysts added.
HDFC Standard Life shares debuted at a 18.71% premium—the most among listed insurers, and are currently 34.41% higher than the issue price, at Rs389.80 a share.
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