Individual business for LIC was modest at 13%, following 103% growth in previous month due to sunset period of a couple of its products
Private players reported 16% year-on-year (y-o-y) growth in overall Annualised Premium Equivalent (APE) in December 2019, with 17% growth in individual APE.
Group business declined 2% y-o-y. Individual business for LIC was modest at 13% y-o-y, following 103% growth in previous month due to sunset period of a couple of its products.
ICICI Life reported 8% y-o-y increase in individual APE, on a low base (down 5% y-o-y in December 2018). The company had reported 18% and 20% y-o-y growth in October and November 2019 post struggling on growth for about 12 months. Average ticket size in the individual non-single segment was up 16% y-o-y.
APE grows for private insurers
HDFC Life reported 46% y-o-y growth (down 4% y-o-y in December 2018) on the back of strong 43% growth in November 2019. Growth revived in November post 20% and 15% y-o-y decline in September and October 2019. The newly-launched individual par savings product will likely maintain strong traction over the past two-three months. Overall APE was up 38% y-o-y, pulled down by 14% decline in group business.
SBI Life’s individual APE growth was up 17% y-o-y. Growth revived in November 2019 to 22% post three months of muted 3-14% y-o-y growth. Management has guided for about 20-22% growth for FY2020E (reported 24% in 1HFY20 and 16% in 3QFY20). The company will continue its focus on protection though y-o-y growth in protection will be lower in FY2020E (individual protection APE was up 1.3X in 1HFY20 and 5X in FY2019).
Max Life’s growth in individual APE was robust at 23% y-o-y. Similar to other players, growth had softened in September and October 2019 and picked up to 17% y-o-y in November 2019. Ticket size in individual non-single segment was up by 20% y-o-y. The company has increased focus on non-par savings business.
Bajaj Life and Tata AIA’s growth momentum moderated in December 2019. Bajaj’s individual APE increased 4% y-o-y compared to 25-54% y-o-y growth since May 2019.
Tata AIA reported 23% y-o-y growth (on a high base of 1.3X y-o-y growth in December 2018). Individual APE declined 13% y-o-y for Birla Sun Life but has been volatile. While its growth revived in November 2019, it had declined 3% and 9% y-o-y in October and September 2019. It appears that business from the bancassurance partner has dropped for Tata and Birla Sun Life as HDFC Life gains momentum.
We have tweaked our 3QFY20 estimates to reflect (1) strong growth in APE for HDFC Life in December 2019 (up 38% y-o-y), (2) lower than expected APE growth for ICICI Prudential Life (muted at 9% y-o-y in December 2019) and (3) marginal change in value of new business (VNB) margins reflecting change in product mix. Post the revision, we expect VNB growth to remain strong at 34% for HDFC Life (24% in 2QFY20) in 3QFY20E. ICICI Prudential Life will likely accelerate to 32% VNB growth, significantly higher than 16% in 2QFY20 and 27% in 1QFY20 (20% in 1HFY20), following higher APE growth.
We have raised our VNB growth estimate for HDFC Life by 2% following increase in APE growth estimates by 5% y-o-y reflecting strong APE growth in December 2019, consequently tweaking down our VNB estimate to reflect volume of protection business. We now expect HDFC Life to deliver 34% growth in VNB in 3QFY20E.
We have reduced our APE estimates by 2% for ICICI Prudential Life to reflect lower-than expected APE growth in December 2019 (up 9% y-o-y).
Edited extract from Kotak Institutional Equities Research report