Non-life insurance: Retail health, motor insurance moderate

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Published: September 23, 2019 1:33:48 AM

General insurers reported slowdown in premium growth in August due to moderation in motor and retail health segments

Crop business indicates new green shoots. (Illustration: Shyam Kumar Prasad)Crop business indicates new green shoots. (Illustration: Shyam Kumar Prasad)

General insurance companies reported marginal slowdown in premium growth to 17% in August from 23% in July 2019 (11% down from 17% in July on ex-crop basis) due to moderation in motor and retail health segments. Fire, group health and crop continue to hold on well. Among private sector players, large players reported mom slowdown, viz. ICICI Lombard (down 16% from 9% in July), Bajaj Allianz (up 17% from 27%), IFFCO-Tokio (up 14% from 47%); exceptions were SBI General Insurance (up 101% year-on-year) and HDFC ERGO (up 30% from 5%).

Crop and fire strong, motor muted driven by weak OD
Crop business indicates new green shoots. Premium in crop business was up 33% y-o-y during August 2019, versus 14% growth in YTD 2020. Most of the growth during August was delivered by AIC while PSU and private players were up 23%. Among private players, Bajaj Allianz, SBI General and HDFC Ergo delivered strong growth. ICICI Lombard continues to reduce focus in this segment.

Fire across players
Premium growth in fire insurance remained strong in August 2019 at 35% y-o-y, although weaker than YTD 2020 run rate of 50% y-o-y. Almost all players delivered strong growth. ICICI Lombard was up 1.5X, SBI was up 37% while Shriram (down 35% y-o-y) and Chola (0% y-o-y) were the only weak players. Notably, GIC increased reinsurance rates (average rise of 2X) in eight occupancies (comprising 35% of industry volumes), which will likely drive higher volumes and profitability in FY2020E. However, in light of weak economic activity, 50% growth was anyway not sustainable.

Motor OD remains weak; TP moderates a bit
Motor insurance premium decelerated to 7% from 10% growth in July but in line with YTD run-rate of 6%. Growth in private sector moderated to 13% in August, lower than 17% y-o-y growth in YTD 2020. PSUs were down 3%, although better than 10% decline YTD 2020. Own damage (OD) business remained weak with 1% growth for private players and 14% decline for PSUs, leading to a 4% decline for the industry. Motor OD premiums for Bajaj, ICICI Lombard, SBI General and HDFC ERGO were flat to down y-o-y.

Retail health weak
Growth in health accelerated to 21% from 16% in July 2019 driven by strong traction in group health (up 24% y-o-y) and government schemes (up 1.5X y-o-y).

Retail health business was muted at 9% y-o-y (decelerating from 16% in July 2019). Growth in retail health was largely driven by standalone health insurers (up 27% y-o-y). PSU players reported a muted 3% growth while private players continued to report declines (down 14% y-o-y in August from 7% decline in July).

In the overall health business, private players maintained momentum (20% y-o-y growth, in line with the industry) while PSU players (14% y-o-y growth in August) ceded market share to standalone health insurers (34% growth in August). Improvement in tariffs in the group business attracted some private players last year, the momentum seems to be sustaining.

Edited excerpts from Kotak Institutional Equities Research report

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