Life insurance stocks rise 7-12% since March 13

Life insurance stocks have seen a significant rise of 7-12% since March 13. This increase is fueled by positive market sentiment and growth in annual premium equivalent (APE). HDFC Life is considered a strong choice due to its varied product offerings and lower reliance on unit linked insurance plans (ULIPs) compared to competitors. The APE measure reflects premium collection trends among insurance companies. For the fiscal year 2025, APE rose nearly 10% year-on-year to Rs 1,27,600 crore by February. This growth was driven primarily by private sector life insurers, which enjoyed a 15.7% increase. In contrast, the state-owned Life Insurance Corporation of India (LIC) only grew by 0.3%. However, APE for February dropped 5.9% compared to the previous year, mainly due to a 23% decline in LIC’s APE. Private insurers managed a smaller growth of 4.5% during this time. The slower APE growth is linked to decreased demand for ULIP products amid stock market volatility. ULIPs invest in equity and debt markets, making them sensitive to market changes. A report from Elara Securities noted that demand for ULIPs often lags behind stock performance, suggesting potential challenges in the upcoming quarters for insurers heavily invested in these products. The competition in the life insurance sector is increasing, especially after a Union Budget proposal allowing 100% foreign direct investment (FDI). This move could affect profit margins and premium growth. Analysts expect the growth rate of new business margins to decrease to around 15% from over 25% in previous years. Elara Securities favors HDFC Life, highlighting its diverse product range and strong distribution network. The firm is seen as well-positioned to handle regulatory changes and maintain stable profit margins.