Life insurance: Private insurers’ premium collections up 27%

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Updated: December 13, 2019 2:34:59 AM

Private players reported 29% y-o-y growth in overall APE in November 2019, with 27% growth in individual APE and 53% y-o-y growth in group business. Overall industry APE was high at 67% y-o-y owing to 1X y-o-y rise in individual APE for LIC and 1.4 X y-o-y increases in group business.

Life insurance, Private insurer, premium collection, Insruance, APE, ICICI Life, HDFC Life, SBI Life, Max LifeWe don’t think high growth in APE will sustain over the next few months.

Individual annualised premium equivalent (APE) increased 27% year-on-year (y-o-y) in November for private players, bucking the 2-4% y-o-y growth trend of the past two months. Almost all players reported strong performance, partially aided by a low base. Life Insurance Corporation (LIC) almost doubled its premium, a change from muted performance in recent months. HDFC bounced back after a decline in October and ICICI Life reported a second consecutive month of high-teen growth. SBI crossed 20% growth after three months. Interestingly, equity mutual funds reported net outflows.

Growth rebounds
Private players reported 29% y-o-y growth in overall APE in November 2019, with 27% growth in individual APE and 53% y-o-y growth in group business. Overall industry APE was high at 67% y-o-y owing to 1X y-o-y rise in individual APE for LIC and 1.4 X y-o-y increases in group business.

ICICI Life reported 20% y-o-y increase in individual APE, on a low base of 24% y-o-y drop in November 2018. Average ticket size in the individual non-single segment was up 69% y-o-y (down 9% m-o-m). On considering overall (individual and group) adjusted APE including accrued but not received premium, its APE was down 5% y-o-y, against 16% growth in October 2019.

HDFC Life reported 43% y-o-y growth in individual business post recording a 15-20% y-o-y decline over the past two months. A low base (20% decline in November 2018) appears to have helped. Overall APE was up 49% y-o-y on the back of 81% y-o-y growth in group business.

SBI Life’s individual APE growth was up 22% y-o-y higher than 3-14% y-o-y growth observed in the past three months. In any case, management has guided for about 20-22% growth for FY2020E (reported 24% in 1HFY20 but has been weakening since). November performance suggests that it may be on track to achieve its target. The company will continue its focus on protection though yoy growth in protection will be lower in FY2020E (individual protection APE was up 1.3X in 1HFY20 and 5X in FY2019).

Max Life’s growth in individual APE was modest at 17% y-o-y; down from 28% growth in August and 48% growth in July but higher than 2-3% y-o-y growth in the past two months. Ticket size in individual non-single segment was up by 8% y-o-y (up 4% m-o-m). The company has increased focus on non-par savings business significantly in 1HFY20.

Strong growth momentum for Birla Sun Life and Tata AIA observed in 2HFY19 had slowed down in the past two months but revived in November 2019. Individual business for Birla SL increased 63% y-o-y, most likely led by strong traction in the bancassurance channel. However, Tata AIA reported 50% y-o-y growth in individual APE, higher than 22% in October. Thus, all the three banca partners of HDFC Bank fared well in November. LIC almost doubled its individual APE in November post 6% growth in October and decline in September.

LIC agents seem to have pushed their paddle hard since it was the sunset month for some of LIC’s popular products —Jeevan Lakshya, Jeevan Umang and Jeevan Labh (all three par products ). These products are being re-priced. We would expect weakness in its growth hereon.

Growth may not sustain
We don’t think high growth in APE will sustain over the next few months. Growth in the previous two months was moderating and raising concerns of weak FY2020E. After a strong November, it now seems that mid-to-high teens growth may hold.

Edited extracts from Kotak Institutional Equities Research report

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