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Slower growth and regulatory uncertainty could keep insurance sector volatile, AMCs appear attractive

ICICIdirect Research 25 Apr 2025 DISCLAIMER

In the current scenario, life insurance looks to be available at historically lowest multiples, however, the same needs to be seen in light of changes in the external headwinds including implementation of surrender regulations, introduction of new tax regime (wherein no deductions are allowed) which has capped valuation of listed life insurance players.

Anticipated reduction in GST rates on term insurance could remain beneficial for life insurers, timing of the announcement and impetus to growth in the business due to the same needs remains watchful. Overall, lie insurance industry growth to remain at 12-14% with VNB margins in a narrow range ahead.

Life insurance business remains a business with many levers including business growth, traction across product segments driving VNB margins, external metrics impacting embedded value (which remains an important metrics for valuation).

Investors can look at AMCs which are relatively easier business model with favorable regulations (introduction of new asset class with minimum ticket size of ₹10 lakhs) and a large structural growth opportunity (given low penetration level). Thus, at current juncture, investors can enter stocks in a staggered manner to benefit from anticipated volatility in the equities market and thus valuation of AMCs. Prefer players with healthy operational metrics coupled with steady market share and distribution strength.

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