Life insurance sector chugging along the growth path

Private life insurers reported 8.9 percent on year growth in individual APR and 17.6 percent y-o-y growth in total APE in August 2022. Total APE growth for LIC was lower at 12.5 percent on year but its YTD growth was higher than that of the industry

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Indian private life insurance providers had a strong showing in August despite a high base last year. Experts see the momentum continuing in the remaining four months of the calendar year 2022.

According to data released by the Insurance Regulatory & Development Authority of India (IRDAI) for August, private life insurers reported y-o-y growth of 8.9 percent in individual annual premium equivalent (APE), while the growth in total APE stood at 17.6 percent on year. The FY23 year to date (YTD)  growth in both individual and total APE remained robust at 25.3 and 31 percent, respectively.

India’s largest life insurer, the Life Insurance Corporation of India (LIC), had a slightly subdued August, with a total APE growth of 12.5 percent. However, on a YTD basis, the growth in total APE at 37 percent was higher than that of the industry.

Player-wise performance

August 2022 was a strong month for most private players, excluding three large listed ones. HDFC Life fared well among its listed peers, with 19 percent APE growth, while Max Life Insurance saw its APE fall 11 percent on year. ICICI Pru Life witnessed a decline of eight percent and the APE of SBI Life was down two percent y-o-y.

Bajaj Allianz, with a y-o-y growth of 40 percent, and Tata AIA Life Insurance, with 54 percent growth on year in total APE, were the outperformers in August 2022.

The rest of the sector, i.e., beyond the top four players, was up 31 percent y-o-y, despite a high base (up 38 percent y-o-y in August 2021).

HDFC Life­: the company managed a strong showing during the month and insulated itself from the slowdown witnessed by its three listed peers. The company also exceeded the industry growth on a three-year CAGR basis, with 18 percent growth compared to 13 percent for the industry. It has, however, delivered a YTD total APE growth of 14 percent, which is lower than the overall private sector growth of 27 percent.

“It is too early to say if the company can outperform the sector, even as we expect the momentum at HDFC Bank to pick up”, said a note from Kotak Institutional Equities. The brokerage firm ICICI Securities has a ‘buy’ on the company

SBI Life: the company was weak for the third consecutive month as its individual business was down five percent and overall APE was lower by two percent on a monthly basis, but due to bumper business in the first two months of the year, its total APE YTD growth is strong at 31 percent.

“We expect some pick-up in the next few months as business targets / management guidance for the year remain strong,” said a report from Kotak Institutional Equities. “Previous trends suggest that State Bank of India’s performance has sharp episodic movements with a few very strong months, followed by a few weak months, and again subsequent pick-up.”

Kotak expects SBI Life will likely gain further market share in the remaining months of FY23. ICICI Securities has a ‘buy’ on this stock.

Max Life: the company was down 12 percent in the individual segment and 11 percent in overall APE. However, the company is up two percent YTD.

“Management has highlighted that the change in business mix at Axis Bank branches in favour of Bajaj Life has led to the decline,” said the note from Kotak. Bajaj Life, the other partner of Axis Bank, reported strong 38 percent growth in the individual segment for the month.

“While the relative shares have been stable in the past few months, their base effect will be visible in the second half of the current fiscal and as such, Max Life will likely remain weak for the next few months,” said Kotak’s report.

ICICI Prudential Life Insurance: the firm’s performance in August continued to be weak and it lost share with a 14 percent y-o-y decline in individual business, and an eight percent decline in overall APE. On a YTD basis, the company witnessed a growth of seven percent compared to a growth of 27 percent for the private sector.

“The slowdown at ICICI Bank remains the key drag even as new partnerships have fared well, and we do not rule out further loss of market share as we do not have any visibility of a sharp turnaround,” said the report from Kotak. The company will continue to focus on high-margin non-par, and protection businesses in the interim. The brokerage firm, ICICI Securities has recommended this stock for investment with a ‘buy’ rating.

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