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Shares of life insurers - HDFC Life Insurance, SBI Life Insurance and ICICI Prudential Life Insurance - that came out with results declined on Tuesday as analysts remained divided on their prospects. Shares of SBI Life slumped 3.4 per cent at ₹858 while ICICI Prudential edged down 0.3 per cent at ₹441.95 and HDFC Life slipped 2.63 per cent at ₹610.50 on the BSE.
Kotak Securities maintained its ‘Buy’ stance on SBI Life and ICICI Prudential, but advised investors ‘Reduce’ on HDFC Life.
CLSA Life has downgraded ICICI Prudential to ‘Outperform’ from ‘Buy’, but raised the target price to ₹500 (from ₹420). Protection business to drive value of new business (VNB) growth and margin, said CLSA, but downgraded the stock due to the recent run-up in stock and headwinds for ULIP business.
Q1 performance
HDFC Life Insurance reported6 six per cent increase in net profit at ₹451.09 crore in the first quarter of FY21 compared to ₹424.62 crore a year ago. Net premium income declined 11.3 per cent to ₹5,721.84 crore (₹6,451.16 crore).
ICICI Prudential Life Insurance reported almost flat growth in net profit at ₹287.59 crore (₹284.94 crore), but 10.6 per cent decline in net premium income at ₹5,551.07 crore (₹6,208.13 crore).
SBI Life Insurance reported a 5.1 per cent jump in net profit at ₹390.89 crore (₹371.90 crore) and a 14 per cent increase in net premium income at ₹7,588.09 crore (₹6,655.02 crore).
“VNB margins were weaker than expectations for most players as protection segment margins were weaker owing to inability to pass on reinsurance tariff hike completely. However, on the positive side, persistency has turned out to be better than street expectations and company assumptions. Costs have also been brought down significantly,” said Prayesh Jain, Lead Analyst – Institutional Equities, YES Securities. “We continue to prefer ICICI Prudential over other players given better risk reward," said YES Securities.
Emkay Global has retained its 'Hold' on ICICI Prudential Life, but 'Buy' on HDFC Life Insurance and SBI Life Insurance. "We believe that SBIL's margin will improve due to a gradual rise in the share of protection plans and a high share of non-par products. However, management needs to re-price its existing protection plans amid a rise in pricing for reinsurance," said Emkay Global.
Motilal Oswal, which says HDFC Life is currently ruling at a 'rich' valuations, remained 'neutral' on the stock due to a sharp run the stock price in the recent times.
It, however, retained ‘Buy’ stance on ICICI Life as “protection/annuity segments are likely to see a healthy growth and should help drive steady margins.”
HDFC Securities maintained its ‘Buy’ on SBI Life Insurance taking a longer term view on its business and the strong distribution footprint of its parent.
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