LIC, ICICI Pru Life, HDFC Life, SBI Life: Which life insurance stock to buy now?

The country’s private and public life insurance companies have underperformed the benchmark equity indices in the past year. With a 35 per cent fall, Life Insurance Corporation of India (LIC) emerged as the top loser on the chart. According to market watchers, LIC has been in free fall since its listing due to multiple headwinds like weak market conditions and changes in tax policy. Meanwhile, the Adani-Hindenburg issue created more pressure on the stock, which led to a further correction in the LIC's stock price.

Share price movement

Shares of LIC declined to Rs 568.40 on May 18, 2023 from Rs 876.25 last year. On the other hand, the benchmark BSE Sensex advanced 13.30 per cent during the same period. Private life insurer ICICI Prudential Life Insurance Company also lost 15 per cent in the past one year. Other private life insurers HDFC Life Insurance and SBI Life Insurance Company gained 2.2 per cent and 7.30 per cent, respectively, since May 18 last year.

Market share

Data from Life Insurance Council further showed that the total premium collected by LIC for the financial year ended March 31, 2023 increased by 16.67 per cent to Rs 2.32 lakh crore from Rs 1.99 lakh crore. Overall, the insurance behemoth continued to hold a 62.58 per cent market share in terms premium collected as of March 2023. On the other hand, the total premium collected by private life insurance companies grew 20.04 per cent to Rs 1.39 lakh crore in FY23.

HDFC Life Insurance posted a premium growth of 18.83 per cent in FY23. SBI Life and ICICI Prudential Life Insurance Companies witnessed an increase of 16.22 per cent and 12.55 per cent, respectively.

Sharing his views on life insurance companies, Akshay Tiwari, Fundamental Analyst, Religare Broking said, “LIC dominates the life insurance sector with the highest market share of more than 60 per cent on a new business premium basis. However, over the years, we have seen that the market share of private insurers has been increasing on a monthly basis. This is because the private players have been more aggressive in their product-selling strategy thereby offering customers products that suit their needs. Also, private players have managed to build a more diverse distribution channel as compared to LIC which has agency dominant channel.”

Kranthi Bathini, Equity Strategist, Wealth Mills Securities said, “Preference should be given to private life insurers at present. The reason is the management quality and productivity which is also on higher note. All the insurance companies are in a downtrend in the equity market because of the exodus of foreign portfolio investors from Indian markets.”

Financial Results

Of late, ICICI Prudential Life Insurance Company reported 25.88 per cent year-on-year growth in net profit for the quarter ended March 31, 2023. SBI Life Insurance Company also posted a 15.57 per cent YoY increase in the bottom line at Rs 776.85 crore during the quarter under review. On the other hand, the net profit of HDFC Life Insurance declined 28.49 per cent YoY to Rs 361.97 crore. Life Insurance Corporation will announce its March quarter result on May 24, 2023.

Top picks

Going ahead, Bathini believes that the government’s continuous dilution of equity can be an overhang for LIC in the medium to long term. This is one of the crucial factors while investing in the insurance behemoth. “ICICI Prudential Life is one of the preferred picks for us in the insurance space for the medium to long term. On the other hand, one can consider HDFC Life and SBI Life as investment picks for the long term,” he said.

Tiwari of Religare Broking added that they are positive on life insurance stocks like HDFC Life, SBI Life, and LIC as they believe that these companies are rightly placed to extract favourable macroeconomic tailwinds.

“HDFC Life has the most balanced product mix compared to other insurance players and is the direct beneficiary of the merger of its parent entities. Also, HDFC Life will benefit from HDFC Bank’s branch expansion plan. SBI Life has a low-cost ratio compared to other insurers and relies on SBI Bank as a Bancassurance channel. LIC being the largest player has strong agency and high penetration in tier-2 and tier-3 cities,” Tiwari said.

Also read: Bandhan Bank shares drop, Punjab National Bank gain ahead of Q4 results. Here's why

Also read: SBI shares at Rs 800? This state-run bank has answers for capital, ECL questions