Life Insurance: Pvt insurers see strong growth in premiums

Individual annualised premium equivalent (APE) growth was strong at 23% year-on-year (y-o-y) in February 2020; higher than -7% to +14% y-o-y change over June 2020-January 2021. Pick-up in unit-linked insurance plans (Ulips) and strong demand for non-par savings are likely drivers. SBI Life reported stellar 53% y-o-y growth in individual life followed by Max Life at 32% y-o-y. ICICI Prudential Life was up 6% y-o-y; decline has likely been arrested due to a change in base (down 15% y-o-y in February 2020). HDFC Life was strong at 16% y-o-y (despite high base).

Individual APE growth strong for private players
Individual APE for the private sector increased 23% y-o-y in February 2020; higher than -7%-15% y-o-y change since June 2020. Base was weak with only 4% y-o-y growth in February 2020, likely following a strong December-January 2020. Pickup in individual business indicates further increase in demand for Ulips led by rally in capital markets and strong demand for non-par savings products.

Moderation in growth of protection business from peak levels seems to have been arrested (individual non-single sum assured to individual non-single premium for private players was flat month-on-month m-o-m at 25X compared to 23X in December 2020.

Overall APE was up 21% y-o-y as group APE was muted at 2% y-o-y; while group credit business likely picked up further, group employee-employer volumes tend to be volatile. Group sum assured was up 35% y-o-y. LIC’s individual APE growth was low at 9% y-o-y despite a low base (down 7% y-o-y in February 2020).

Highlights of key companies
ICICI Prudential Life: It reported 6% y-o-y increase in individual APE. Its low base (down 15% y-o-y in February 2020) seems to have caught up. With increasing partnerships with new banks and low base sustaining till July 2021, headline growth might remain strong. Individual protection declined 25% y-o-y indicating weakness in protection. Overall APE was down 4% y-o-y owing to 49% y-o-y decline in group APE.

SBI Life: Individual APE was up 53% y-o-y; significantly higher than -6%-14% y-o-y change post September 2020. Pickup in Ulips, traction in the newly launched par product and robust growth in non-par savings are likely drivers. Individual sum assured was up 30% y-o-y; retail protection has likely held on better than industry average (individual sum assured down 18% y-o-y for private players in February 2021 while individual APE increased 23% y-o-y). Group APE was up 59% y-o-y; group sum assured up 9% y-o-y.

Max Life: Individual APE was up 32% y-o-y while individual sum assured was down 1% y-o-y indicating that growth was likely driven by non-par. Group APE was up 38% y-o-y while group sum assured increased 3.3X y-o-y indicating strong traction in credit protect business; this is margin accretive for the company.

HDFC Life: Reported 16% y-o-y increase in individual APE in February 2021 (24% in January 2021) on a high base of 29% y-o-y growth in February 2020. Group APE was up 34% y-o-y likely reflecting traction in the newly launched group protection product; group sum assured was muted at 5% y-o-y.

Edited excerpts from Kotak Institutional Equities Research report