Overall inflows to equity mutual funds were better month-on-month (m-o-m) but broadly still muted. Against this backdrop, the sustenance of such high growth is crucial.
The month of May 2019 was a strong month for most of the private sector life insurance companies with 27% year-on-year (y-o-y) growth in overall annual premium equivalent (APE) (26% y-o-y in April 2019). Excluding ICICI Prudential Life (overall APE up 4% y-o-y), other large players reported 25-55% growth.
A low base and focus on unit-linked insurance plans (ULIPs) coupled with moderate appetite for equity investments were the likely reasons. Overall inflows to equity mutual funds were better month-on-month (m-o-m) but broadly still muted. Against this backdrop, the sustenance of such high growth is crucial.
Private sector individual APE growth was strong
Private sector players reported 27% y-o-y growth in individual APE in May 2019, significantly higher than 12-18% during the past three months. Overall industry growth was 13% as LIC reported 3% y-o-y decline.
HDFC Life reported strong increase in individual APE for a second straight month at 59% y-o-y in May 2019 (31% in April 2019) after witnessing muted growth from November 2018 to March 2019. This pulled up its overall APE growth to 57%. Average ticket size in individualnon-single segment was up 56% y-o-y and 7% m-o-m.
ICICI Prudential Life reported 1% y-o-y growth in May 2019 in individual APE; this compares with 2% in April 2019 and 14% in March 2019. Average ticket size in individual non-single segment was down 4% yoy but up 5% m-o-m. On considering overall (individual and group) adjusted APE including accrued but not received premium, its APE, according to a company release, was up 5% y-o-y as compared to 9% in April 2019.
SBI Life’s individual APE growth was strong at 37% yoy in May 2019, despite a high base of 27% yoy growth in May 2018. The company moderated its overall growth momentum in 9MFY19 due to its focus on productivity and protection business. The overall business momentum picked up since December 2018 with 30-50% y-o-y growth in individual APE. SBI Life has guided to continue its focus on protection though y-o-y growth in protection will be lower in FY2020e (individual protection APE was up 5X in FY2019); in that sense, savings business APE will likely remain strong.
Max Life’s growth in individual APE was strong at 23% y-o-y, somewhat lower than 28% growth in April 2019. The company has increased focus on ULIPs in recent quarters. Its ticket size in individual non-single segment was up moderately by 14% y-o-y.
Birla Sun Life reported 31% y-o-y growth in individual APE, lower than 46% growth in April 2019, as it continued to make inroads in HDFC Bank. Tata AIA was up 74%, higher than 50% growth observed in 4QFY19 though lower than 125% in April 2019. In its earnings call, Birla Sun Life guided that it will continue to grow at a rapid pace within the bank though it may maintain FY2019 growth rates.
Net mutual fund equity inflows improve
Mutual fund inflows to equities improved marginally, with inflows at Rs 27 bn in May 2019 versus Rs 20 billion in April 2019 due to higher gross inflows. This compares to Rs 95 billion in March 2019, Rs 44-66 billion in December 2018-February 2019 and Rs 86-107 billion in the preceding six months. Interestingly, systematic investment plans (SIPs) are broadly stable over the past few months at Rs 80-82 billion; this meant that the non-SIP flows reported large net outflow.
Edited excerpts from Kotak Institutional Equities Research report