Life insurance: Private sector individual APE growth slows down in Sept

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HDFC Life reported 20% y-o-y decline in individual business post recording strong growth of 30-90% during April-August 2019.

Individual Annualised Premium Equivalent (APE) declined 3% year-on-year (y-o-y) in September as compared to 11-27% y-o-y growth in April-August 2019. Overall APE was up 3% y-o-y on the back of stronger group business. ICICI Prudential Life’s APE declined for the third month, albeit at a lower pace. Even the high-growing HDFC Life declined after five months of consistent high growth. SBI Life and Max Life continued to moderate for the second consecutive month. Net inflows to equity mutual funds dropped sharply month on month (m-o-m) as well.

Private sector individual APE
Private sector players reported 3% y-o-y growth in overall APE in September 2019, with 3% growth in individual APE. Overall individual industry dropped 3% y-o-y as LIC reported sharp 11% y-o-y decline.

ICICI Life reported 7% y-o-y decline in individual APE, despite a low base of flat y-o-y growth in September 2018; though this was lower than the 10% decline in August 2019. Average ticket size in individual non-single segment was flat y-o-y (up 2% m-o-m), while most other players have reported higher y-o-y growth. On considering overall (individual and group) adjusted APE including accrued but not received premium, its APE, was down 6% y-o-y as compared to 8% decline in August 2019. With second consecutive month of decline, it is getting challenging to ascertain the near-term growth trajectory for the company.

HDFC Life reported 20% y-o-y decline in individual business post recording strong growth of 30-90% during April-August 2019. This led to 17% decline in overall APE, its group business was up 3% y-o-y. Market sources suggest that the company reduced incentive structure in its fast selling non-par savings products.

SBI Life’s individual APE growth was up 11% y-o-y in September 2019 and a bit lower than moderation in August 2019 (up 14% y-o-y). The company had reported strong >20% y-o-y growth over February-July 2019. It has guided for about 20-22% growth for FY2020E (reported 24% in 1HFY20). As such, overall growth momentum will likely remain moderate hereon. The company will continue its focus on protection though y-o-y growth in protection will be lower in FY2020E (individual protection APE was up 2.5X in 1QFY20; 5X in FY2019).

Max Life moderates
Max Life’s growth in individual APE was muted at 2% y-o-y, down from 28% growth in August and 48% growth in July. This is despite the fact that its ticket size in individual non-single segment was up by 23% y-o-y/2% m-o-m. The company has increased focus on ULIPs in the last two years, though non-par savings business increased significantly in 1QFY20. Individual agent addition (gross) was strong at 10% yoy in 1HFY20 compared to 5% for the industry.

Birla SL slows down; TATA maintains momentum
Strong growth momentum for Birla Sun Life and Tata AIA observed in 2HFY19 has slowed down in 1HFY20. HDFC Life which was going strong till August, slowed down in September as well. Individual business for Birla Sun Life dropped 9% y-o-y in September; group business showed a steep decline at 16% y-o-y. Tata AIA, however, reported 28% y-o-y growth in individual APE, likely gaining share in HDFC Bank’s franchise, though a bit lower than 40-125% growth in April-July 2019 and higher than 13% y-o-y growth in August 2019.

Net inflows in equities drop
Net mutual fund inflows to equities dropped to Rs 46 billion (bn) in September 2019 from Rs 58-86 bn observed in the preceding three months.

Edited excerpts from Kotak Institutional Equities Research report