Private insurance players may struggle to grow in FY20, say experts; SBI Life remains top pick

"Product stance has been quite different in the past year from key players which has helped growth to stay up but has been difficult to maintain momentum, hence we closely watch changing trends in the Insurance sector. Q4 start has been slow and we need to watch for any sentimental impact for recent announcements on growth front in the near term," explained Prabhudas.

For January 2020, life insurance companies showcased a strong annual premium equivalent (APE) growth for the industry at 41 percent YoY mainly led by LIC growth of 80 percent. However, private players saw growth slowdown to 10.5 percent YoY.

A report by Prabhudas Lilladher noted that the key players like SBI Life Insurance delivered stable 17 percent YoY growth while HDFC Life Insurance and Max Life witnessed slower growth of 12 percent and 15 percent YoY respectively and ICICI Prudential de- grew 5 percent YoY.

Though private players lost around 20 percent market share, MoM, in January 2020 to LIC in a bid of one-off growth, the report mentioned that amongst the top three players – SBI Life, ICICI Prudential, and HDFC Life continued to retain their respective market shares with minute changes and leading over 50 percent market share amongst private players.

Max Life, Tata AIA and Bajaj also have been able to maintain market share with very gradual improvements as growth on an average basis have been better than industry, it added. Going ahead, Prabhudas maintains that despite challenges insurance sector will remain favoured for growth and improving margins and prefers SBI Life in this space.

Emkay also expects better growth in the consecutive months but believes that private insurance players are unlikely to see any significant shift in premium growth due to the recent announcements made in the Union Budget 2020 (tax savings sale dropping off under the new tax regime), given a diversified product suite and evolving distribution ecosystem.

It is also 'overweight' on SBI Life backed by a strong distribution channel and management’s focus on protection, annuity, and non-par savings products, with core focus shifting back to protection in Q4FY20.

While cutting APE for ICICI Prudential, Max Life, SBI Life, and HDFC Life fo FY21, HDFC Securities' top pick also remains SBI Life with a 23 percent upside for 12-months. It also added that Max Life offers an attractive risk-reward at a target of Rs 563 per share.