Planning to invest in insurance stocks? Jefferies lists its top picks

Updated : July 20, 2020 01:16 PM IST

Jefferies expects listed private insurers to deliver an 11 percent CAGR in retail premium.

It has 'buy' calls on HDFC Life and SBI Life and has a 'hold' rating for Max Financial Services.

Life insurers will benefit from monetisation of opportunity in life-protection schemes with rising awareness due to the COVID-19 pandemic, said global brokerage house Jefferies in a report. Penetration of protection is low at 10 percent of the addressable population with scope for the market to double in five years, the brokerage estimated in the report.

With that in mind, the brokerage has assumed coverage on India's life insurers with a positive view as listed players are set to monetise opportunity in protection and share gains. Jefferies added that it is positively biased due to steady growth, better profitability, limited balance sheet risk and low incremental need for capital.

It expects listed private insurers to deliver an 11 percent CAGR in retail premium as compared to 7 percent for LIC and 9 percent for the sector as a whole.

However, it noted that listed players may also need capital for inorganic growth and/or strong ramp-up in protection premiums that are more capital intensive.

Talking about individual stocks, Jefferies believes that ICICI Prudential Life offers better risk-reward. "The stock offers better risk-reward with scope for profitability improvement, lower risks from guarantees and valuation discount to peers," noted the brokerage.

It has 'buy' calls on HDFC Life and SBI Life and has a 'hold' rating for Max Financial Services.

Planning to invest in insurance stocks? Jefferies lists its top picks

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