Life insurance: Strong growth momentum in individual business

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Published: August 16, 2019 12:10:42 AM

HDFC Life, Max Life, Tata AIA, Birla Sun Life & Bajaj Life delivered strong growth in individual APE in July

ICICI Prudential Life’s individual APE growth was flat y-o-y while SBI reported 24% y-o-y rise. (Illustration: Shyam Kumar Prasad)ICICI Prudential Life’s individual APE growth was flat y-o-y while SBI reported 24% y-o-y rise. (Illustration: Shyam Kumar Prasad)

Modest annualised premium equivalent (APE) growth (20% year-on-year) in July 2019 for private players was driven by 22% individual APE growth while the group business was flat year-on-year (y-o-y). HDFC Life, Max Life, Tata AIA, Birla SL and Bajaj Life delivered strong growth in individual APE. ICICI Prudential Life’s individual APE growth was flat y-o-y while SBI reported 24% y-o-y rise.

Private sector individual APE growth strong
Private sector players reported 22% y-o-y growth in individual annualised premium equivalent (APE) in July 2019. Overall industry growth was 17% as LIC’s growth was moderate at 10% (y-o-y). On a month-on-month (m-o-m) basis, individual APE growth for LIC was stronger at 14% compared to 5.4% for private players. ICICI Life reported 1% (y-o-y) decrease in July 2019 in individual APE. Average ticket size in the individual non-single segment was up 6% (y-o-y) but down 3% m-o-m (on a high base).

SBI Life’s individual APE growth was up 24% (y-o-y) in July 2019, flat m-o-m. The overall business momentum picked up since December 2018 with 25-45% (y-o-y) growth in individual APE. The company has guided continuing its focus on protection although y-o-y growth in protection will be lower in FY2020E (individual protection APE was up 2.5X in 1QFY20; 5X in FY2019). Max Life’s growth in individual APE was strong at 48% y-o-y, higher than 20-25% y-o-y growth observed in 1QFY20. The company has increased focus on ULIPs in the past two years although non-par savings business increased significantly in 1QFY20.

HDFC Life reported sharp increase in individual APE for a third straight month at 58% y-o-y (31% in April, 59% in May and 87% y-o-y in June 2019) after witnessing muted growth from November to March 2018. This pulled up its overall APE growth to 51%. Average ticket size in individual non-single segment was up 61% y-o-y (down 5% m-o-m). Birla Sun Life reported 40% y-o-y growth in individual APE as it continued to make in-roads in HDFC Bank and focused on improving productivity of individual agents. Tata AIA was up 40% y-o-y, similar to average trends observed over the past few months.

Mutual fund, insurance trends converging
Net mutual fund inflows to equities improved significantly to Rs 91 billion in July 2019 from Rs 20 billion in April 2019 and Rs 27-58 billion in May-June 2019. SIPs increased to Rs 83 billion in July 2019, marginally higher than Rs 81-82 billion in the past two months. Thus, trends in growth between individual business of insurance companies and mutual funds now seem to be converging.

Edited extracts from Kotak Institutional Equities Research report

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