Insurers to see 16% growth during FY17-20
Private life insurers ended the year on a strong note with 31 per cent YoY APE (annual premium equivalent) growth, while LIC grew 16 per cent YoY, leading to 23 per cent YoY APE growth for the industry.
Among major private insurers, HDFC Life (44 per cent) and Max Life (+41 per cent) gained market share in March. Private insurers gained market share in FY17 (+2pps) with SBI Life (40 per cent), Bajaj Allianz (34 per cent), ICICI Pru (27 per cent) and Birla Sunlife (30 per cent), driving the growth.
We expect strong growth of 16 per cent CAGR in APE over FY17-20E for the life insurance industry, driven by 1) strong long-term growth drivers such as a) robust double digit nominal GDP growth, b) favourable demographic profile, c) high financial savings, d) rising income levels, and e) increasing urbanisation; 2) stable life insurance penetration of 2.7 per cent; 3) recent strong runup in the equity market augers well for the sale of unit-linked products; and 4) declining interest rates reducing the competitive intensity from other saving products especially term deposits.
We continue to prefer insurers with strong bancassurance, as they will generate significantly superior operating RoEVs of c.17 per cent over FY17-19E against 8 per cent for insurers, driven by the agency channel.
Private insurers’ APE growth remained robust at 31 per cent, while LIC grew by 16 per cent, leading to a healthy 23 per cent APE growth for the industry in March.
In FY17, the industry growth stood at 21 per cent with LIC growing at 16 per cent, while private insurers’ growth remained healthy at 26 per cent.
Among the top 7 life insurers, HDFC Life (44 per cent) and Max Life (41 per cent) outperformed the industry growth in March, while growth for SBI Life (21 per cent), ICICI Pru (14 per cent), Birla Sunlife (13 per cent) and Bajaj Allianz (12 per cent) remained positive.
Private insurers market share increased 200bps YoY with SBI Life (40 per cent), Bajaj Allianz (+34 per cent), Birla Sunlife (30 per cent), ICICI Pru (27 per cent) and Max Life (26 per cent) outperforming the industry growth; growth for HDFC Life (13 per cent) remained positive, while Reliance Life (-24 per cent) witnessed a contraction YoY.
For the industry, single premium increased 72 per cent in FY17 with LIC increasing 85 per cent while private insurer single premium increased 22 per cent. Low-margin group insurance premiums for the industry increased 21 per cent in FY17 with LIC registering 21 per cent growth and private insurers growing 20 per cent YoY. The contribution of group premium to unweighted new business premiums decreased 230bps to 56 per cent for the industry in FY17.
Average APE of an individualn policy for LIC increased 2 per cent YoY to Rs 10,000 in March; while for private insurers it improved 24 per cent YoY to Rs 48,000.
Among private life insurers, HDFC Life (up 110bps) and Max Life (70bps) gained market share in March, while Reliance Life (down 50bps), ICICI Pru (40bps), Bajaj Allianz (20bps), Birla Sunlife (20bps) and SBI Life (10bps) lost market share.
For the industry, single premium increased 72 per cent in FY17 with LIC increasing 85 per cent while private insurer single premium increased 22 per cent. Low-margin group insurance premiums for the industry increased 21 per cent in FY17 with LIC growing 21 per cent growth and private insurers growing 20 per cent. The contribution of group premium to unweighted new business premiums decreased 230bps to 56 per cent for the industry in FY17. Average APE of an individualn policy for LIC increased 2 per cent to Rs 10,000 in March; while for private insurers it improved 24 per cent to Rs 48,000.