3 life insurance stocks to BUY as recommended by Sharekhan

Owing to the increase in new business premiums, brokerage company Sharekhan has given a bullish outlook on the life insurance sector. HDFC Life (Target price: ₹740), Max Financial Services (Target price: ₹1,100), and ICICI Prudential Life (Target Price: ₹660) are the brokerage's top recommendations with a buy rating.

According to Sharekhan for May 2022, new business premium for the industry grew strongly by 89% y-o-y and 37% m-o-m on a lower base of May 2021, which saw muted growth on account of lockdowns. The growth in premium was primarily aided by private players whose NBP increased by 114% y-o-y in May 2022. Among the listed and other large players, SBI Life Insurance (SBI Life) reported the fastest new business premium growth in May 2022 (rose by ~136% y-o-y and 23% m-o-m). While LIC witnessed premium growth of 77% y-o-y and ~35% m-o-m.

ICICI Prudential Life Insurance reported at par industry growth in premium (up ~87% y-o-y and 37% m-o-m). Max Life Insurance witnessed premium growth of 62% y-o-y and 32% m-o-m in May 2022. While HDFC Life Insurance reported premium growth of 62% y-o-y (4% m-o-m). Likewise, total annual premium equivalent (APE) for SBI Life Insurance saw strong growth of 182% y-o-y and 16% m-o-m. LIC saw its total APE growing by 79% y-o-y and 37% m-o-m. Total APE for Max Life Insurance rose by 73% y-o-y (39% m-o-m). For HDFC Life Insurance, APE grew by 54% y-o-y and 25% m-o-m in May 2022. For ICICI Prudential Life Insurance, APE grew by 40% y-o-y (flat m-o-m), Sharekhan has further said in a report.

The brokerage has claimed in a note that “We believe that after witnessing muted growth in business premiums in January and February 2022, the life insurance industry is witnessing heathy recovery. The protection segment for life insurers is expected to continue to gain pace as supply-side issues subside and non-par and annuity segments are likely to witness strong growth. While ULIPs are expected to remain affected by volatility in capital markets. Further, after witnessing underperformance for the past two years, the insurance sector is poised to return to a healthy growth trajectory. Factors such as a large protection gap and expanding per capita income are key long-term growth drivers for the sector. In this backdrop, we believe strong players armed with the right mix of products, services, and distribution are likely to gain from this opportunity.”

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.