General Insurance: Motor third party premium growth falls

Updated: January 20, 2020 2:39:13 AM

Premium collections growth of general insurers down to 6% in December.

insurance, general insuranceThe motor segment reported premium growth of 6% y-o-y in December 2019, moderating from the 15-20% growth seen in September-October 2019.

General insurance companies reported weak growth (6%) in premiums (ex-crop business) in December 2019, down from 11-18% during the past five months. Two key reasons: (1) fire business finally slowed down (down 10% year-on-year (y-o-y) vs 34% growth in YTD FY2020) and (2) further slowdown in motor third-party (TP) (up 3% y-o-y vs 10-38% y-o-y growth in the past five months).

Motor third-party down

The motor segment reported premium growth of 6% y-o-y in December 2019, moderating from the 15-20% growth seen in September-October 2019. The immediate reaction to new traffic penalties on motor TP premiums seems to have completely faded out. Motor TP moderated to 3% y-o-y, all the way down from 40% in September 2019, now translating to 15% in YTD growth. On the other hand, the own damage (OD) business witnessed best monthly performance FYTD, still modest at 11% yoy during the month. Private sector continued to gain market share, registering 10% y-o-y growth while PSUs reported flat numbers.

OD business growth picked up to 11% y-o-y compared to 1% growth in YTD FY2020, the best y-o-y performance in the past 12 months. Most large private players posted weaker-than-industry numbers.

Retail and group health strong

Overall growth in health business moderated to 12% y-o-y, compared to YTD run-rate of 17% mainly due to weakness in government and overseas businesses. Retail health maintained strong momentum at 18% y-o-y growth in December 2019 (13% in YTD 2020) while group health business was up 34% y-o-y (17% in YTD 2020). Market share movement trends continued, with standalone insurers gaining (health premiums up 25% y-o-y) compared to single-digit growth at both PSU and private general insurers.

Fire cools off

Fire insurance premiums declined 10% y-o-y in December 2019 after 10-11 months of strong (25-60%) growth. Large private players including ICICI Lombard (down 40% y-o-y), HDFC Ergo (down 50% y-o-y) and Bajaj (flat y-o-y) posted sharp declines in growth rates, except SBI General, which grew at 30% y-o-y. GIC had increased reinsurance rates (average rise of 2X) in eight occupancies (comprising 35% of industry volumes), which has likely driven higher volumes in the past few months; nevertheless, such high growth was anyway not sustainable. YTD growth remains healthy at 38% y-o-y.

Private players registered 1% y-o-y decline in overall premiums (up 7% ex crop) in December 2019, significantly lower compared to YTD run-rate of 17% (20% ex-crop) led by weakness in most segments. PSU general insurers reported a better 12% y-o-y growth mainly led by crop insurance (3% growth ex-crop). Standalone health insurers continue to post stronger growth rates (up 25% y-o-y in December 2019).

Edited excerpts from Kotak Institutional Equities Research report

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