Premium Growth Of Life Insurance Companies Continues To Slow In August
Life insurer’ individual annual premium equivalent grew at 14 percent year-on-year in August against 22 percent a year ago.
The growth in premium of Indian life insurance companies slowed further in August as performance of private insurers moderated.
The individual annual premium equivalent—sum of annualised first-year premiums on regular policies and 10 percent on single premiums—grew at 14 percent year-on-year last month, according to data compiled by BloombergQuint from the Insurance Regulatory and Development Authority of India. That compares with 22 percent growth in August 2018. New business premiums of life insurance companies grew at 17 percent in July—the slowest pace in five months.
The year-on-year growth of private insurers stood at 11 percent in August compared with 22 percent in July. That, according to Nomura, may be partly because of higher sales of Life Insurance Corporation of India’s single premium policy, Jeevan Shanti. India’s largest insurer grew at 18 percent over last year in August.
Among private insurers, while HDFC Standard Life Insurance Company Ltd. continued to outperform peers, its growth has been falling at least for the last three months.
A reduction in guarantee rates of its new savings product “Sanchay Plus”—an insurance-cum-investment plan that guarantees investment return upfront—led to moderation in growth of HDFC Standard Life, Nomura said. Over the medium term, the “current product mix of Sanchay Plus may not be sustainable”, it said.
Last month, brokerage Prabhudas Lilladher had said sales of Sanchay Plus that led to higher growth in the first quarter “is now settling down”.
Growth of SBI Life Insurance Company Ltd. and ICICI Prudential Life Insurance Company Ltd., according to Nomura, fell mostly because of greater focus on unit-linked insurance plans—schemes where part of the premium money is invested in capital markets. The equity market has remained volatile since the beginning of the year.
While Citi said it prefers SBI Life Insurance and has a negative view on ICICI Prudential Life Insurance, according to Nomura it’s too early to extrapolate the slow APE growth of August.
“Given the recent re-rating of life insurers, Nomura would keep a close watch as most companies seem to be pricing in sustainability of robust growth now,” analyst Adarsh Parasrampuria wrote in a report.
Morgan Stanley expects premium growth of the private sector to be in mid-teens over the next two years compared with 9 percent in 2018-19. Better macro situation, improving financial inclusion, and a stabilising regulatory environment may help the insurers, it said in a note.
JM Financial forecasts the industry APE to grow at annualised growth of 16 percent over financial years 2019-2021, driven by investments into online/direct distribution channels, and lower competition among other saving products due to fall in interest rates. Also, according to the brokerage, lower penetration of insurance products may offer a higher growth potential.
Market Share
The trend reversed after months as LIC gained market share in August and private insurers lost.
Private insurance companies had 56 percent share last month, a drop of 1.8 percent over last year and 5 percent from July. On the other hand, LIC’s market share rose about 2 percent year-on-year and 7.3 percent sequentially to 44 percent in August.