HDFC Life, SBI Life and other large private life insurance players grow stronger

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New Delhi | Published: October 19, 2018 1:09:30 AM

HDFC Life saw 20% y-o-y growth in individual APE and similar growth in overall APE in Sept 2018

hdfc life, kotakHDFC Life reported 20% y-o-y growth in individual APE and similar growth in overall APE in September 2018.

Private sector individual annual premium equivalent (APE) continued to rise upwards, increasing 18% year-on-year (y-o-y) in September 2018 and 16% yoy in 2QFY19. While HDFC Life recovered to 20% post a few months of sluggish performance, ICICI Life was flat y-o-y. SBI Life picked up as well with 23% y-o-y growth while Max remained strong at 30%.

On the mutual fund side, while outflows from liquid funds were high, inflows to equities (including SIP) were moderately up month-on-month (m-o-m). With focus shifting to protection and other high-margin policies, value of new business (VNB) growth of large players will remain strong and in that sense APE growth trends are less relevant.

Most large players strong

HDFC Life reported 20% y-o-y growth in individual APE and similar growth in overall APE in September 2018. This is an improvement over its single-digit growth over the last three months. This was largely driven by a higher ticket size in individual non-single business (up 37% y-o-y and 41% m-o-m); in all probability the product profile during the month was skewed to Ulips.

SBI Life reported 23% growth in individual APE (up from 6-10% y-o-y in the last three months). Growth was likely driven by volumes with ticket size in individual non-single business up 2% y-o-y. The company has focused on streamlining its processes and increasing the share of its protection business. While near-term growth will be modest (versus 30% in the past), rise in penetration will drive business in the medium-term.
Max Life continued its momentum and delivered 30% growth in individual APE likely on the back of higher growth in Ulips (43% of APE in 1QFY19 from 29% in 1QFY18). Unlike other large players, ICICI Prudential Life reported flat individual APE y-o-y. The company is reducing focus on Ulips which are down to 82% of APE in 1QFY19 from 87% in 1QFY18.

Birla Sun Life reported 70% growth in individual APE in September 2018, increasing market share to 2.3% from 1.5% in September 2017. This is likely driven by making strong inroads in HDFC Bank. The 59% rise in ticket size in the individual non-single segment during September 2018 (up 19% in 1HFY19) suggests that a large part of the growth may be from higher-ticket Ulips. Tata AIA reported 61% growth in individual APE during September 2018, leading to 53% growth YTD. Its market share increased to 2.9% (up 80 bps). In fact, 8% y-o-y decline in average ticket of individual non-single segment suggests that growth is driven by an increase in volume.

Equity inflows rise

Mutual fund inflows to equities increased, though modestly, to `117 billion post three months of flat inflows at around Rs 100 bn. Systematic Investment Plans (SIPs) continued to rise m-o-m in September; though the increase was modest. This is positive in the backdrop of concerns of large redemption from equity investments.

Inflows to liquid funds saw a sharp rise in redemption in September 2018 worth Rs 2 lakh crore. While this may be driven by recent events in debt markets, we would like to highlight that liquid fund inflows generally tend to be volatile with net redemption in six of the last 12 months; however, the quantum of redemption in September was high.

Edited extracts from Kotak Institutional Equities Research report

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