Life Insurers Escape A Washout In April
Individual new business premium for all life insurance companies put together fell 44% in March and April, IRDAI data shows.
Life insurance companies saw their business contract as India remained in lockdown to contain Covid-19 outbreak. But unlike some other sectors of the economy, they escaped a complete washout.
The individual new business premium for private insurers fell 40 percent in March and April, according to monthly data by the insurance regulator and BloombergQuint’s calculations. For all players put together , it declined 44 percent. That came as businesses remained physically shut in the second half of March and entire April.
Still, it wasn’t as bad as feared, Kotak Institutional Equities said in a note. The brokerage had estimated the new business premium to plunge 90-95 percent. While April was expected to be a washout for many segments of the economy, life insurance companies were able to deliver 60 percent of the annualised premium equivalent registered a year earlier, the brokerage said.
What cushioned private life insurers is the high-margin protection business or term insurance. Increased awareness helped them improve margins in the fourth quarter ended March and spillover from the previous fiscal end is a likely driver in April, according to Kotak.
HDFC Life: A higher share of protection and annuity business cushioned HDFC Life from the impact of lockdown. The management said in a concall after the fourth-quarter earnings that its share of protection business is expected to increase by 200-300 basis points in FY21 from 8 percent as of March.
ICICI Prudential: While protection continued to gain traction, volatility in equity markets impacted ICICI Prudential Life's unit-linked business, according to Kotak report.
SBI Life: Weakness in the bancassurance channel impacted SBI Life Insurance Company Ltd.’s premium income as sales at bank branches took a hit due to the lockdown, Kotak said.
Max Life: Its performance was driven by improvement in the individual policies sold, while the group premiums remained under stress, according to its disclosures to the Insurance Regulatory and Development Authority of India.
Private insurers gained share at the cost of Life Insurance Corporation in April. They now have 58 percent share compared with 55 percent a year earlier. LIC’s share has come down from 45 percent to 42 percent. HDFC Life gained the most followed by ICICI Prudential Life.
Though the share of SBI Life and ICICI Prudential Life declined on a year on year basis, other non-listed private players such as Tata AIA Life and Bajaj Allianz contributed to the private player’s gain.
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Morgan Stanley: While it expects the first quarter ending June to be seasonally weak for insurers, the pack of recovery will be the key thing to track as the lockdown is lifted.
Nirmal Bang Securities: Expects volatile capital markets to impact sales of savings and investment-related products, especially Ulips, in the near term.
Kotak Institutional Equities: Demand for protection policies would have likely increased after Covid-19 outbreak as prices are likely to increase as the old pricing regime ends. Ability of insurance companies in managing end-to-end product delivery (digital presence) also assumes importance in the current period, it added.