INSUBCONTINENT EXCLUSIVE:
competitive guaranteed returns, could face reversals once the rate cycle begins to head north, making bank deposits relatively more
attractive to savers.
Global brokerage Jefferies, which sounded cautious on the sector, also highlighted high valuations and downside margin
risks for private life insurers
said.
Positive investment sentiment in the market for life insurers in the current fiscal has helped drive stocks by more than 50%
The gains have been aided by healthy margin expansion from an increasing mix of return guarantee products, it said.
SBI Life, HDFC Life and
ICICI Prudential have seen their market caps rally 61%, 50%, and 40%, respectively, in the first eight months of the ongoing fiscal year
In the same period, the savings business for these companies has grown a combined 13.3 percentage points
this segment is an opportunistic play by life insurers at a time when bank deposit rates are low
an insurance on savings that promises a predetermined return on investment once the policy matures
In a period of negative interest rate cycle, these products have become popular low-risk investments.
The Value of New Business (VNB), a
metric used to gauge the value of profits emerging from new businesses, rose by nearly 40% annually between FY17 and FY19
Jefferies forecasts these margins to significantly taper in the next five years even in the best-case scenario
