CLSA Sees Slowdown in Insurance Sector, Recommends Max Financial Services
Financial services firm CLSA anticipates a continued slowdown within the Indian insurance sector, compounded by ongoing regulatory scrutiny. Despite the challenging environment, CLSA has identified Max Financial Services as its preferred ‘Buy’ within the sector.
Regulatory Concerns Loom Over the Sector
CLSA’s positive outlook on Max Financial is driven by the anticipated listing of Axis Max Life, which is expected to unlock value. The brokerage noted that private insurers experienced a slowdown in premium growth in February 2025.
Private insurers exhibited a 2% growth in individual annualised premium equivalent (APE) in February 2025, and a 9% increase in total APE. This marks the slowest growth rate since March 2024. CLSA analysts suggest that volatility in the equity market may have contributed to a slowdown in Unit Linked Insurance Plan (ULIP) sales, pending further clarification.
Beyond the business slowdown, regulatory issues pose a significant risk to the sector. These include concerns about mis-selling and delays in the Insurance Amendment Bill.
Max Financial Positioned for Growth
Despite the sector-wide slowdown, Max Financial remains a top pick. Total sectoral APE growth remains intact at 9%. In February 2025, private insurance companies’ total APE rose 9% year-over-year, built on a strong base from the prior year. While individual APE growth for these firms was 2% year-over-year, individual numbers of policies decreased by 4%. CLSA estimates that retail protection sum assured saw a 44% YoY growth in January 2025, supported by a base of 45%. They added that the robust protection momentum has been maintained.
Axis Max Life and Future Prospects
In addition to Max Financial, CLSA also recommends Axis Max Life, citing potential value gains from its forthcoming stock market listing. Axis Max Life’s total APE saw an 8% YoY increase in February, albeit from a high base of 36%. CLSA highlighted a recent Indian court decision that permitted the reverse merger of an insurance company with its holding company, setting a precedence for Max Financial.
