HDFC Life, SBI Life And ICICI Pru See Business Grow Amid Covid-19 Caution

Life insurers saw business grow in September and the first half of the fiscal amid a cautious approach as claims rose during the pandemic.

New business premiums of life insurers rose 12% in September over August, aided by the revival in group policy renewals for the second month, according to the data filed with the Insurance Regulatory and Development Authority of India.

Private insurers continue to lead industry growth.

• Total revenue rose 25% over a year earlier to Rs 31,001 crore.

• The top line increased 48% over the pre-pandemic month of September 2019.

The half-yearly revenues of HDFC Life Insurance Co. and ICICI Prudential Life Insurance Co. were higher than the previous year by 23% and 38%, respectively.

Private insurers like HDFC Life have been cautious about protection or term plans during the pandemic as death claims spiked and companies set aside more provisions for Covid-19-related payouts. Higher claims also means term plans are turning costlier.

A Motilal Oswal report said there has been a healthy pickup in growth over the past few months, with September witnessing healthy trends across most players. "We believe premium growth would see strong traction over FY22, with continued focus on non-participating/annuity, while unit-linked insurance plans would see gradual recovery."

According to data filed with IRDAI:

• The number of policies sold rose 2.8% sequentially and 6.8% year-on-year.

• The count of group single-premium policies and group yearly-renewable policy sold rose 23% and 25%, respectively, over the previous month.

• The revenue from policies sold by private life insurers rose more than 40% sequentially and over a year earlier to Rs 12,481 crore.

• State-run Life Insurance Corp.'s revenue contracted sequentially while growing 16% over a year earlier to Rs 18,520 crore.

"Developments in FY22 validate the long-term trend of a gradual shift of the retail life insurance market towards private players, with a strong brand and distribution reach," Emkay Global said in its note.

Premium income grew 46% sequentially in the quarter ended September on a low base as the second wave disrupted performance in April and May.

• The industry clocked a total revenue of Rs 79,256.6 crore this quarter, a growth of 11% over a year earlier.

• Private insurers' revenue rose 74% sequentially to Rs 29,744.7 crore and increased 23% year-on-year.

• LIC's new business premium grew 33% sequentially and 5.4% over a year earlier to Rs 49,511.9 crore in July-September.

How private insurers fared:

• The company reported revenue of Rs 2,788.84 crore in September, up 73% over August, aided by strong growth in group single premium policies. The year-on-year growth was 44%.

• The second-quarter top line jumped 74% sequentially and rose 12% year-on-year to Rs 6,626.8 crore.

• Half-yearly revenue grew 23% on an annual basis to Rs 10,441.4 crore.

Brokerage View

• Emkay Global said the two-year retail-weighted received premium CAGR was strong at 12%, and seems to be largely driven by ticket size growth as the individual policy count was down about 8% year-on-year.

• This indicates that the share of Ulips and non-participating savings has increased in the individual business.

• Nomura said the company's valuations (3.6 and 32 times the Sep 2023 embedded value and value of new business) are turning favourable.

• Annuity segment will be the key growth driver for HDFC Life in the future, said KR Choksey. The diversified product, channel mix and consistency are positive, it said.

• Monthly revenue rose 28% over August to Rs 2,905 crore, the highest among private peers. It was supported by a strong uptick across all group premium policy categories. Year-on-year, it rose 23%.

• A close second to HDFC Life by market share.

• Quarterly new business premium more than doubled (104%) sequentially to Rs 6,943.5 crore. It rose 11% over a year earlier.

• Half-yearly revenue up 9% at Rs 10,287.4 crore.

Brokerage View

• Retail weighted received premium growth was aided by 29% year-on-year growth in the individual policy count, highlighting its powerful brand and distribution strength, Emkay said.

• Nomura prefers SBI Life citing that margin levers (non-participating mix of 11-12% and strong traction in protection) remain the strongest and the valuation at 2.4 times the Sept 2023 embedded value is "undemanding".

• KR Choksey is optimistic about improving margins, diversified and balanced distribution channel mix, improvement in productivity, and higher demand.

• The risk-reward tradeoff is positive for SBI Life, KR Choksey said.

• The September revenue rose 13% sequentially to Rs 1,468.7 crore. It increased 11% year-on-year.

• Quarterly revenue jumped 55% over the previous three months and and 27% over a year earlier to Rs 3,902 crore.

• The company's half-yearly revenue stood at Rs 6460.6 crore, up 38%.

Brokerage View

• Emkay said the insurer's retail weighted received premium growth seems to be largely driven by an increase in the policy ticket size as the number of policies has only grown 4% fiscal to date.

• This indicates increased sales of non-participating savings and Ulips in ICICI Prudential’s new business, Emkay said.

• Nomura does not see any meaningful market share gain in the first half of FY22.

• The base remains benign for ICICI Prudential in Q3 as well, and its market-share stability should be seen as a positive, said Nomura.

• According to KR Choksey, premium growth was strong with a higher protection mix. The market share has improved in the year and is well-positioned for traction, it said.