The market share of private players in group business decreased further by about 580 bps month-on-month to 14 per cent on the back of strong growth in LIC's group business.
Private sector individual annual premium equivalent (APE) was up 17 per cent year-on-year in December, moderating from 27 per cent in November 2019. According to a report published by Kotak Institutional Equities, all major private players reported strong performance, though Bajaj Life, Birla Sun Life and Tata AIA insurance moderated. APE is a measure of the total premium collected by the insurance company after adjusting for the single premium received during the period.
HDFC Life and ICICI Prudential Life performance were better than other players. HDFC Life’s individual business was up 46 per cent year-on-year and even ICICI Prudential Life remained in the positive. Kotak Institutional Equities value for new business (VNB) forecasts, incorporating December trends, now stand at 19 per cent- 34 per cent year-on-year growth for top players with 34 per cent year-on-year growth for HDFC Life and 32 per cent for ICICI Life (higher than 16 per cent in 2QFY20). In addition to Embedded Value, VNB is an important parameter in measuring the insurer’s valuation.
Some of the other important findings of the report are:
Private players reported 16 per cent year-on-year growth in overall APE in December 2019, with 17 per cent growth in individual APE. Group business declined 2 per cent year-on-year. Individual business for LIC was modest at 13 per cent year-on-year, following 103 per cent growth in the previous month due to sunset period of a couple of its products.
The performance of ICICI Prudential Life was slower than November but positive. ICICI Life reported 8 per cent year-on-year increase in individual APE, on a low base (down 5 per cent year-on-year in December 2018). The company had reported 18 per cent and 20 per cent year-on-year 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 per cent year-on-year (down 2 per cent mom). On considering overall (individual and group) adjusted APE including accrued but not received premium, its APE, was up 4 per cent year-on-year.
In December, HDFC Life remained strong, the second month in a row. HDFC Life reported 46 per cent year-on-year growth (down 4 per cent year-on-year in December 2018) on the back of strong 43 per cent year-on-year growth in November 2019. Growth revived in November post 20 per cent and 15 per cent year-on-year decline in September and October 2019. The newly-launched individual par savings product will likely maintain strong traction over the past 2-3 months. Overall APE was up 38 per cent year-on-year, pulled down by 14 per cent year-on-year decline in group business.
There was a modest 17 per cent year-on-year growth in SBI Life’s individual business. SBI Life’s individual APE growth was up 17 per cent year-on-year. Growth revived in November 2019 to 22 per cent post three months of muted 3-14 per cent year-on-year growth. According to the report, management has guided for about 20-22 per cent growth for FY2020E (reported 24 per cent in 1HFY20 and 16 per cent in 3QFY20); 4Q growth, given its large volumes, assumes importance. The company will continue its focus on protection though year-on-year growth in protection will be lower in FY2020E (individual protection APE was up 1.3X in 1HFY20 and 5X in FY2019).
Max Life’s business has started to pick pace. Max Life’s growth in individual APE was robust at 23 per cent year-on-year. Similar to other players, growth had softened in September and October 2019 and picked up to 17 per cent year-on-year in November 2019. Ticket size in the individual non-single segment was up by 20 per cent year-on-year (up 15 per cent mom). The company has increased focus on non-par savings business.
Growth for Bajaj, Birla and Tata AIA’s has moderated. Bajaj Life and Tata AIA’s growth momentum moderated in December 2019. Bajaj’s individual APE increased 4 per cent year-on-year compared to 25-54 per cent year-on-year growth since May 2019. Tata AIA reported 23 per cent year-on-year growth (on a high base of 1.3X year-on-year growth in December 2018). Individual APE declined 13 per cent year-on-year for Birla Sun Life but has been volatile; while its growth revived in November 2019, it had declined 3 per cent and 9 per cent year-on-year in October and September 2019. It appears that business from the bancassurance partner has dropped for Tata and Birla SL as HDFC Life gains momentum.
Strong growth in LIC’s group business
The market share of private players in group business decreased further by about 580 bps month-on-month to 14 per cent on the back of strong growth in LIC’s group business. LIC’s group business was up 1.1X year-on-year in December 2019; similar to November 2019 (up 1.4X year-on-year). Private players reported per cent year-on-year decline in group business. Among major private players, HDFC Life, Bajaj Life and Birla Sun Life lost 260 bps month-on-month, 210 bps month-on-month and 80 bps month-on-month market share respectively.