How SBI Life, HDFC Standard Life And ICICI Prudential Compare On Their Q1 Results

Private insurance firms increased premium collections in the quarter ended June as growth in their annuity and protection businesses surged.

SBI Life Insurance Company Ltd. led with new business premiums growing 52 percent year-on-year to Rs 3,150 crore in the June quarter. Profit rose nearly 5 percent over last year. HDFC Standard Life Insurance Co. Ltd. and ICICI Prudential Life Insurance Co. Ltd. followed, with margin of their value of new business—a key metric for insurers—rising 30 percent and 21 percent, respectively, over the last year.

Key Highlights Of Q1 Results

SBI Life’s protection business more than doubled over last year to Rs 440 crore in Q1, with new business margin growing 20 percent.

HDFC Life’s new business premiums rose nearly 104 percent year-on-year to Rs 509 crore. The company said in a post-results conference that its pension fund business aided the annuity business.

ICICI Prudential reported strong value of new business margin led by growth in its retail and group protection businesses. Its annual premium equivalent for the protection business grew 88 percent to Rs 214 crore in Q1. Net profit was largely unchanged over last year due to the base effect and continued decline in the ULIP segment.

Persistency among private insurance firms—or when buyers of retail policies continue paying premiums—too, improved in the June quarter.

HDFC Life’s bancassurance business grew 44 percent in Q1, driven by support from HDFC Bank Ltd. Individual protection policy business through bancassurance channel increased by 316 percent over last year/quarter for SBI Life. The non-bancassurance channel contributed nearly half of ICICI Prudential’s annual premium equivalent.

HDFC Life deepened ties with Bandhan Bank Ltd., Cholamandalam Finance and Bajaj Finance Ltd. for distributing its products. It expects to engage with Bank of Baroda soon. In an interview with BloombergQuint, the insurer said it expects robust growth to continue during 2019-20, with continued focus on ULIPs and maintaining a balanced product mix.

ICICI Prudential said it aims to double its absolute value of new business over the next 3-4 years.

Here’s What Analysts Say

ICICI Securities

• Traction from SBI remains healthy. Management remains confident of growth in the ULIP business.
• Standout feature of the quarter for HDFC Life is surge in share of non-par savings mix in individual annual premium equivalent from 15 percent in FY19 to 58 percent in Q1FY20 due to successful launch of ‘Sanchay Plus’ (long-term guaranteed savings product).
• Low interest rate sensitivity to non-par portfolio along with sufficient scope of growth (product/channel) continues to posit a high-margin sustained business model.

Emkay Global Financial Services

• SBI Life’s conscious strategy of improving product mix has started to reflect in its margin profile. Its overdependence on SBI for distribution poses a risk, although we don’t see any change in this relationship in the near future.
• Believes HDFC Life will continue to deliver superior value of new business margins, driven by higher share of protection and annuity businesses in the overall mix.
• Remain positive on ICICI Prudential since it has started yielding positive results by increasing the share of high margin protection segment.

Prabhudas Lilladher

• HDFC Life has been leader in introducing innovative products making it a dominant player with strong return ratios of 25 percent, superior margins of around 30 percent and is retail driven which makes it command premium multiple than its peers. Remains a top preference pick in the insurance segment.
• Expect growth for ICICI Prudential to be lower than industry, whereas retail protection growth should be better.

Nirmal Bang Securities

• Expect robust growth for SBI Life with continued focus on protection, including annuity, single premium products and non-participating products.