General Insurance companies reported 16% yoy growth in premium in October 2019, improving from 11% in October. 

In mid-teens. General Insurance companies reported 16% yoy growth in premium in October 2019, improving from 11% in October. Motor business continues to moderate on the back of weak OEM sales and moderating TP business, while fire and health have helped offset the weakness. Large private players, ICICI Lombard (down 6% yoy, up 7% ex-crop) and Bajaj (up 8% yoy) and HDFC ERGO (down 30% yoy, up 8% ex-crop) posted weaker-than-industry numbers. Chola MS (up ~14% yoy) was in line while SBI (up ~40% yoy ex-crop) maintained robust performance.

Motor TP moderation continues; Motor OD remains weak

Motor segment reported 6% yoy premium growth in November 2019, moderating from the

15-20% growth seen in the last two months. The immediate reaction to new traffic penalties

on motor TP premiums seems have almost faded. Motor TP moderated sharply to 10% yoy (22% in October, 16% in YTD FY2020). OD business premiums were flat yoy in line with YTD run-rate after witnessing the first month of premium growth in October that was likely led by the festive season sales. Private sector continued to gain market share registering 11% yoy growth while PSUs reported a decline of 4% yoy.

• OD business was back to flat growth in November after registering 8% yoy growth in October 2019, reflecting weak OEM sales. Higher business in October was likely reflecting festive season sales. Among large private players, motor OD premium growth for Bajaj (~15% yoy) and Chola MS (~11% yoy) was better than the industry while ICICI Lombard posted 6% decline in premiums for the month- the reason for such a sharp decline for ICICI is unclear. Acko and Go Digit remained the fastest while SBI General maintained momentum at ~60% yoy growth.
• TP business moderated sharply to ~10% yoy in November 2019 to levels well below YTD run rate of ~16% yoy growth. Premiums had spiked in September (up 38% yoy) moderating to 22% in November, which was a reaction to increased traffic penalties coming into effect. Private players posted 16% growth while growth for PSU players was muted (3% yoy). Go Digit (up 3X yoy) continued to witness robust traction. Among top private players, Bajaj (up ~24% yoy), HDFC ERGO (up ~27% yoy) and Chola MS (~up 12% yoy) posted better-than- industry growth rates (~10% yoy) while ICICI Lombard has seen weakness with premiums declining ~14% yoy in November 2019. SBI General continued to record strong growth rates on a low base, up 2X yoy.

Google trends back to normalized levels. Google trends showed a sharp rise in search of the term ‘motor insurance’ in the last week of August (Exhibit 3). This likely indicated interest in buying motor TP polices, as a consequence of increase in penalties for traffic violations. The trends suggest that interest has moderated to normal levels.

Headroom limited to 6% of overall premiums. As highlighted in our recent report ‘Third  party motor insurance: Assessing headroom for growth’ link, the headroom for premium growth may be Rs100 bn i.e. 26% of TP premiums or 6% of overall industry premiums.

Rebound in health insurance in November 2019

Overall growth in health premium was robust at 28% yoy, compared to YTD run-rate of ~17%. Retail heath growth continued to improve registering 18% yoy growth in November 2019 (12% yoy in YTD FY2020)- this may be due to a better pricing environment; we need to understand this movement in greater detail. Industry trends were similar, with standalone insurers gaining market share (retail health premiums up 30% yoy) compared to single-digit growth at both PSU and private general insurers. In Group health, standalone insurers registered ~80% yoy growth while growth at private general insurers moderated to 23% yoy (~40% in 2020 YTD). PSUs continued to post declines.

Fire business robust; Crop strong led by AIC

• Crop business up ~30% yoy  led  by  AIC.  Premium in crop business was up 29% yoy during November 2019, in line with 29% growth in YTD FY2020. AIC drove all the growth while private players registered 3% yoy growth and PSU players posted declines of ~17% yoy. ICICI Lombard, Bajaj and HDFC Ergo posted negligible numbers as ICICI has defocused the crop segment while it looks like a seasonal slowdown at Bajaj and HDFC Ergo. SBI General, which is a major player in this segment posted strong numbers.
  
• Fire up 58% yoy. Premium growth in fire insurance was robust in November 2019 at 58% yoy, better than YTD 2020 run rate of 45% yoy. All major players delivered strong growth, except Bajaj at ~10% yoy. GIC had increased reinsurance rates (average rise of 2X) in eight occupancies (comprising 35% of industry volumes) which will likely drive higher volumes and profitability in FY2020E. The run rate of 45% is higher, we would expect some moderation over the next few months.

Motor weakness drags down growth for private players

Private players registered 14% yoy growth in overall premiums in November 2019, a moderation compared to YTD run-rate of ~20%. PSU general insurers reported 8% yoy growth in November 2019 (11% growth ex-crop). Standalone health insurers continue post stronger growth rates (up 29% yoy in November 2019).

• SBI posts best yoy performance, Go Digit  maintains  momentum. Among private players, SBI posted 2.8X yoy growth driven by the crop business while Go Digit continued to register strong yoy growth, up 2.5X yoy in November 2019. Large players including Bajaj ICICI and HDFC ERGO posted ex-crop numbers, weaker than private players (up ~15% yoy) in November 2019.
• ICICI Lombard: Motor weakness drags down performance.  ICICI  Lombard  overall premium growth is back in the negative territory (-6% yoy) led by weakness in motor TP. Ex-crop growth moderated to 7% yoy (~15% growth in FY2020 YTD), lower than management strategy to grow at 18-20% in focus segments. Motor business premiums (50% of total) declined ~5% yoy with motor TP (down ~14% yoy) and motor OD (up ~4% yoy). Health and fire business registered robust growth of 42% and 110% yoy respectively.
• Weakness at Bajaj GI. Bajaj reported 8% yoy growth in November 2019 on the back of weakness in Group health and fire insurance while motor insurance held up at ~15% yoy growth. Crop business was negligible in the month, in line with the previous year. Ex crop, growth momentum moderated to ~8% yoy compared to ~25% in the last two months and ~14% yoy growth in 2020 YTD. Group health dragged down overall health insurance premiums while retail health registered robust ~25% yoy in November 2019; better than industry trends (up 18% yoy). Fire business witnessed sharp moderation to ~10% yoy growth (versus ~58% industry growth). Motor insurance business maintained the momentum as strong motor TP growth (~24% yoy) offset weakness in motor OD (up ~3% yoy).
• Crop drags down  growth  for  Chola  MS;  slight  moderation  ex  crop.  Chola  MS reported 14% yoy growth in gross premiums (excluding crop insurance) on the back of strong momentum in fire and health business amid moderation in motor insurance. Motor business (~75% of total) was up 11% on the back of 12% yoy growth in TP. Health business was up 23% yoy driven solely by growth in group health.
• Strong business momentum for SBI continues. SBI reported 180% yoy growth in premium in November 2019 led by strong crop insurance premiums. Excluding crop insurance, premiums were up 41% yoy; continuing the strong momentum seen in FY2020 so far. SBI General has a more balanced product mix with ~20% contribution from fire, 20% from motor, ~10% from health, ~10% from personal accident and ~40% for crop in FY2020.

Source: Kotak Institutional Equities Research