Insurance: Life volumes were strong in March

March/Q4FY21 growth was 7%/9% for pvt insurers on 2-yr CAGR basis; momentum revival for SBI Life and IPRU

We continue to monitor the impact of a second COVID-19 wave on growth.
We continue to monitor the impact of a second COVID-19 wave on growth.
India’s life insurance industry registered strong volumes in Mar-21, largely aided by a favourable base (-40% y-o-y in Mar-20) with 56-120% y-o-y growth for top private insurers (private insurers +89% y-o-y). Flows were strong in March across insurers and AMCs reported positive net flows as well. On a 2-yr CAGR basis, Mar-21/Q4FY21 growth was 7%/9% for private insurers with: (i) momentum picking up for SBI Life following a weak H1FY21, (+12.6%/13%) and (ii) HDFC Life continued to deliver well with 13%/ 16% growth while Max Life delivered 0/ 8% growth with some moderation seen in Mar-21. IPRU also saw a pick-up in growth off a weak base, but remained lower than FY19 levels, a -3% CAGR over Q4FY19.

For FY21, the industry saw a 5% CAGR, with private players delivering 6% CAGR (10% excluding IPRU). On a 2-yr CAGR basis, HDFC Life delivered strong 18% growth; Max Life also performed well, delivering 12% growth; SBI Life delivered a relatively muted 7% CAGR while IPRU saw a 12% CAGR decline over two years. With this, HDFC Life and Max Life gained 130-110bp market share in FY21, while SBI Life and IPRU lost 60bp/ 370bp market share.

Our view: With a lower base effect playing out now (from March) over H1FY22, growth will optically look better; thus we find the 2-yr CAGRs to be a more appropriate metric to gauge the industry’s performance. Life insurers delivered relatively robust growth in a pandemic year (10% 2-yr CAGR ex IPRU for the private players). Margins trends have also been strong for companies under our coverage. We continue to monitor the impact of a second COVID-19 wave on growth.

Player-wise performance
SBI Life (SBILIFE IN, Buy) – strong momentum: SBI Life delivered individual APE of +119% y-o-y in Mar-21. On a 2-yr CAGR basis, Q4FY21 APE was 13.1%. We remain positive given the stock’s reasonable valuation for a strong distribution, solid pick-up in growth, improvement in margins and low-cost franchise.

HDFC Life (HDFCLIFE IN, Neutral) – strong performance: HDFC Life saw +75% y-o-y in individual APE in Mar-21. This implies a 13%/16% 2-yr CAGR for Mar’21/Q4FY21 (strongest among peers).

Max Life (MAXF IN, Buy) – relatively soft: Max Life’s Individual new business APE was +56% y-o-y. This implies a flattish 2-yr CAGR for Mar-21 and 7.5% 2-yr CAGR for Q4FY21. We remain positive on Max, given its steady growth, healthy structural margins and consistent RoEVs.

IPRU Life (IPRU IN, Buy) getting back on its feet: IPRU delivered 98% y-y growth on a weak 50% y-o-y decline base. On a 2-yr CAGR basis – Mar’21/Q4FY21 volumes were flat/down 3%. Mar’21 volume performance gives us confidence that growth has bottomed out. We turn incrementally positive on stock given cheap valuations and growth showing initial signs of recovery.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.