Private insurers saw 5% y-o-y growth in overall annualised premium equivalent in September.
Individual annualised premium equivalent (APE) growth saw a second consecutive month of weakness with 5% year-on-year (y-o-y) increase in October following 3% y-o-y decline in September, versus 11-27% y-o-y growth in April-August 2019. Overall, APE was up 9% y-o-y, with 36% increase in LIC’s group business. ICICI and HDFC swapped trends as the former reported 18% individual APE growth (up 21% overall APE) while the latter was down 15% (down 12% overall APE), partially explained by the base effect. Tata, Max, SBI and Birla moderated from peaks even as Bajaj held on.
Private sector individual APE growth muted
Private sector players reported 5% y-o-y growth in overall APE in September 2019, with a 4% growth in individual APE. Overall, individual industry was up 9% as LIC reported a sharp 13% y-o-y growth.
ICICI Life reported an 18% y-o-y increase in individual APE, off a low base of a 17% y-o-y drop in October 2018. Average ticket size in individual non-single segment was up 31% y-o-y (up 12% month-on-month) while most other players reported lower y-o-y/m-o-m growth. On considering overall (individual and group) adjusted APE including accrued but not received premium, its APE, was up 16% y-o-y as compared to a 6% decline in September 2019. HDFC Life reported a 15% y-o-y decline in individual APE post recording a strong growth of 30-90% during April-August 2019. This led to a 12% decline in overall APE, its group business was up 3% y-o-y. A higher base (37% y-o-y individual APE growth in October 2018) and lower incentives in its fast-selling non-par product were the likely reasons.
SBI Life’s individual APE growth was up 3% y-o-y in October 2019, lower than 11% in September 2019 and 14% in August 2019. The company had reported strong >20% y-o-y growth over February-July 2019, it has guided for about 20-22% growth for FY2020E (19% in YTD). Overall, growth momentum may remain in mid-to-high teens hereon. It will continue its focus on protection though y-o-y 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 muted at 3% y-o-y (2% y-o-y in September 2019); down from 28% growth in August and 48% growth in July. Ticket size in individual non-single segment was up by 19% y-o-y (down 10% m-o-m). The company has increased focus on non-par savings business significantly in 1HFY20.
Strong growth momentum for Birla SL and Tata AIA observed in 2HFY19 slowed down in the past two months. Individual business for Birla SL dropped 3% yoy (9% yoy in September). Tata AIA reported 22% yoy growth in individual APE, less than the 40-125% growth seen in April-July 2019.
(Edited extract from Kotak Institutional Equities Research report)