Projections are that the insurance industry would soon reach a market capitalisation of US$100 billion as an increasing number of insurers list their shares and as the sector continues to post strong growth.
Securities broker Kotak Institutional Equities says that insurance companies are sustaining growth through adding new policies rather than merely through ticket size increases, reported The Economic Times. The broker said: “Most insurance companies have spent last 10 years building their base – be it SBI Life, HDFC Life, or even for that matter the niche that the ICICI Prudential has created for itself through unit linked investment products.”
Deven Choksey of KR Choksey said that more importantly, insurers have been able to contain cost ratios in a significant manner. The market veteran said that insurance penetration is increasing as more money is flowing through formal channels and more and more private investments are made in structured products.
JM Financial forecasts strong industry growth of 16% CAGR for the life insurance industry in APE over FY2017-20, driven by declining interest rates and resilient equity markets, which augers well for unit-linked products.
“We continue to prefer insurers with strong bancassurance, as they will generate significantly superior operating RoEVs of 17% over FY17–19E compared with 8-9% for agency dependent insurers. We expect these trends to continue and the difference in growth rates of the two players to fall,” the brokerage said.
On the listing front, India may see seven or eight listed insurance companies soon. Currently, the only insurer which is listed in India is ICICI Prudential Life.
Companies which have filed IPO applications include GIC Re, New India Assurance, HDFC Standard Life, Reliance General Insurance, SBI Life Insurance and ICICI Lombard General Insurance.