Indian life insurance premium to see around 15% CAGR up to FY31: report

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NEW DELHI : Emkay Global Financial Services released a report on the growth prospects of life insurance companies in the listed space. The analysis period is 2020-2030.

The favorable underlying demand factors for life insurance will drive overall premium growth of around 15% per annum over the next decade, resulting in an approximately 4-fold increase in total premiums for life insurance. life insurance at ??24 lakh crore per FY31.

In fiscal year 01-11, premiums increased at a surprising 24% CAGR, then followed an anemic CAGR of around 8% over the next 10 years. However, Emkay Global is now more confident about its future growth due to a number of underlying factors.

#The latest slowdown was brought on by big changes in product regulation. Now, with the majority of changes made, a stable regulatory environment is expected.

#Nominal GDP per capita has broken through levels of around $ 2,000 and this change in nominal GDP from around $ 2,000 to $ 5,000 (FY31), is expected to lead to significant savings and investment capacity. for the masses.

# Insurers’ tailor-made product offerings in the mortality protection and retirement savings segment should help them differentiate their products from other financial products.

# Continued positive perception of insurance as a savings and investment tool (as evidenced by Sebi investor surveys).

#This premium growth will be the result of the increase in the number of policies in force and the increase in the average note size (result of the increase in the nominal size of the notes on a comparable basis and the increasing share high-cost retirement savings products).

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Source: IRDA, Swiss Re, Emkay Research

India’s life insurance industry, twenty years after liberalization, is at an inflection point. It is about to enter an era of rebounding growth over several decades, fueled by economic growth and favorable demographic changes amid a gap in mortality protection and longevity savings (retirement). very high and growing.

According to the report, India has one of the highest and widest mortality protection and retirement funding gaps in the world. The mortality protection gap in India is around $ 16.5 billion and is around 7% in 2020-30E, but is only 83% of what is needed. Meanwhile, the retirement funding gap is expected to reach $ 85 trillion by 2050, at a CAGR of around 10%. These dual challenges offer life insurers an opportunity for significant growth over several decades. These structural growth drivers should ensure that the life insurance industry will continue to generate a total premium CAGR above 15% over the next two decades. In our view, the formidable combination of brand and distribution reach, coupled with innovations in offerings, should help large private players continue to gain market share with greater profitability as the benefits of changes in the product mix and operating leverage are being felt.

Medium term 20% CAGR + NAV: Aided by the favorable FY21 base, private life insurers are expected to post strong new business growth in FY22. However, beyond FY22, the underlying structural factors of demand should help them generate growth above 15%. This, along with a gradual margin expansion resulting from product line changes and operating leverage, should propel VNB growth to> 20%.

Preference for Equities: SBI LIFE is the first choice, for which Emkay predicts a very strong increase in VNB over the next three years, driven by SBI’s main distribution channel and agency-led expansion. HDFC LIFE should continue its coherent composition, driven by innovative products. Max Life is expected to experience continued and stable growth to more than offset any potential dilution of the Axis Bank stake. Emkay rates ICICI Prudential as Hold because, according to him, with the stabilization of the margin profile, ICICI Pru will need strong revenue growth to maintain the VNB growth momentum of recent years.

Source: Emkay research

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Source: Emkay research
Source: Emkay research

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Source: Emkay research

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