1. NBFC India: Private players to deliver steady growth

NBFC India: Private players to deliver steady growth

ICICI Prudential Life delivered 100% individual annual premium equivalent (APE) growth in May 2017, pushing private sector growth to 46%, which would have been 30% otherwise.

By: | Published: June 14, 2017 3:29 AM
NBFC, NBFC India, ICICI, HDFC life, APE growth, Max Life Reserve Bank of India (Reuters)

ICICI Prudential Life delivered 100% individual annual premium equivalent (APE) growth in May 2017, pushing private sector growth to 46%, which would have been 30% otherwise. We expect ICICI Life’s high growth to moderate in 2HFY18 on a high base. On the other hand, HDFC Life’s low base will benefit from June 2017 leading to higher growth over the next 10 months. Other players continue to deliver steady growth. Most large private players reported 20-30% growth in APE; high growth at ICICI Prudential Life lifted private sector individual APE growth to 46%; excluding ICICI Prudential Life, the rest of the private sector reported 30% individual APE growth. LIC remained muted at 5% y-o-y. Overall industry was up 24% in individual APE during the month. According to the management of ICICI Prudential Life, the business is now in a secular growth mode across channels and doing away with seasonal trends. While individual APE growth was 100%, ticket size growth in individual non-single segment was 52% y-o-y, flat q-o-q, i.e; about half its y-o-y growth was driven by volumes. The company reported Rs 5.7 billion of individual APE in May 2017; it has maintained a run-rate of Rs 5-6 billion since November 2017. ICICI Life’s management expects the run-rate to continue or trend up marginally throughout the year and as such y-o-y growth rate in 2H will be lower.

HDFC Life delivered 20% y-o-y growth, following a long period of subdued growth. Its base was a bit large at 43% growth in May 2016. The company has delivered average growth of 3% between June 2016 and March 2017. As such, we expect y-o-y growth rate to be significantly higher from June 2017 onwards.

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One of the reasons for low growth for HDFC Life was slowdown at HDFC Bank due to streamlining of its KYC process; this is now back on track. HDFC Bank’s partnership with Birla SL may take away some share of the banks franchise though the terms of the agreement are not yet clear.

Max Life remains steady with 22% growth in May 2017; this compares with 25% growth in FY2017. Interestingly, its ticket size is reducing – down 11% y-o-y, 19% q-o-q. This may likely be due to increase in policies in the protection segment and lower share of unit-linked policies.

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