Life insurance: Upward trend in premium growth of private players

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September 13, 2021 1:00 AM

Buoyant capital markets supporting revival in Ulips and continued strong momentum in non-par savings and annuity segments are likely drivers

Buoyant capital markets supporting revival in unit-linked insurance plans (Ulips) and continued strong momentum in non-par savings and annuity segments are likely drivers for private players.Buoyant capital markets supporting revival in unit-linked insurance plans (Ulips) and continued strong momentum in non-par savings and annuity segments are likely drivers for private players.

Private life insurance companies reported gradual improvement in individual annualised premium equivalent (APE) growth over the past few months, up 39% year-on-year (y-o-y) in August 2021, 31% y-o-y in July 2021 and 16% y-o-y in June 2021 on a low base of 6% y-o-y decline in August 2020 and 7% y-o-y decline each in July 2020 and June 2020.

As such, low base and improving month-on-month (m-o-m) trends support strong growth. The two-year individual APE CAGR increased to 14% in August 2021 from 10% in July 2021 and 4% in June 2021, indicating improving m-o-m trends. Buoyant capital markets supporting revival in unit-linked insurance plans (Ulips) and continued strong momentum in non-par savings and annuity segments are likely drivers for private players.

As base effect gradually recedes, y-o-y growth is likely to taper down a bit although strong demand for select products is set to support robust growth over the next few months. As such, overall growth trends remain encouraging. Group APE was down 1% y-o-y in August 2021 for private players.

Performance of life insurers
The overall individual APE of LIC declined 5% y-o-y in August 2021 (down 4% y-o-y in July 2021 and up 1% y-o-y in June 2021). The base is, however, higher than that of private players. Two-year individual APE CAGR was weak at -2% versus 14% for private peers. Robust 18% y-o-y growth in group APE, however, led to muted 2% y-o-y growth in overall APE.

HDFC Life holds up well despite a high base. It reported 17% y-o-y growth in overall APE led by strong 27% y-o-y growth in individual APE even as group APE was down 32% y-o-y. Two-year individual APE CAGR at 20% was higher than average of private peers at 14%. Sharp decline in group APE likely reflects cautious stance in the group term business.

ICICI Prudential Life’s recovery is on track as it reported 36% y-o-y growth in overall APE led by 34% y-o-y growth in individual APE and 59% y-o-y growth in group APE. Two-year individual APE CAGR was weak at -2% due to lower volumes in FY2021 (-10% to -11% y-o-y decline over the past two months and 15% decline in Q1FY22). Product mix diversification and new bancassurance partnerships have led to gradual revival in APE.

Max Life reported modest 9% y-o-y growth in individual APE; 10% two-year individual for August 2021 and 6% for July 2021 is lower than average for private peers at 14% and 10% growth, respectively. Even as Max Life outperformed the industry on growth since the start of the pandemic, it seems to have slowed down a bit over the past three months.

Edited extracts from Kotak Institutional Equities Research report

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