Insurance: LIC plays the sunset card, yet again

LIC plays the sunset card, yet again. LIC gained significant market share with 99% yoy growth in individual APE as compared to muted (10% yoy) growth reported by the private sector in January 2020. Strong agency push to sell select products, prior to reprising in February, was the likely reason. Most large private players reported muted performance – ICICI Prudential Life slipped back in the red (down 3% yoy), HDFC Life was weak at 12% yoy, SBI Life moderate at 17% yoy and Max Life was up 15% yoy. New Equity MF inflows picked up to Rs72 bn from Rs32 bn of inflow in December and net outflow of Rs32 bn in November, supported by higher gross inflows to pure equity funds.

LIC steals the show, once again

Private players reported 11% yoy growth in overall APE in January 2020, with 10% yoy growth in individual APE. Industry-wide growth in overall APE was robust at 41% yoy almost entirely driven by LIC, up 79% yoy. LIC has re-priced a coupled of its products from February. Our channel checks suggest that its agents seem to have pushed some of its flagship products like ‘Jeevan Umang’ and ‘Jeevan Labh’ as sunset-period offerings. Notably, even in the month of November, LIC reported 104% growth in individual APE due to the sunset period of a couple of its products.

•  ICICI Prudential Life slips to red. ICICI Prudential Life reported 5% yoy decline in individual APE. While growth revived to 18-20% yoy in October and November 2019, it moderated in December to 8% yoy. Lower ULIP volumes continue to drag overall growth in 3QFY20; it appears that the trend is playing out in January 2020 as well. On considering overall (individual and group) adjusted APE including accrued but not received premium, its APE, was down 4% yoy (muted at +4% yoy in December 2019).
•  HDFC moderates. HDFC Life reported 12% yoy growth in individual APE; moderating from 43-46% yoy growth observed over the past few quarters, most likely led by a slowdown in the non-par business. The newly-launched participating product likely supported growth through the bancassurance channel in 3QFY20. Overall APE was up 13% yoy on the back of 27% yoy rise in group business, likely reflecting higher growth in group credit business.
•  Modest 17% yoy growth in SBI’s individual business. SBI Life’s individual APE growth was up 17% yoy. Growth revived in November-December 2019 to 17-22% post three months of muted 3-14% yoy growth, translating to 15% in 3QFY20 and 19% in 10MFY20. Management has guided for about 20-22% growth for FY2020E. The current trend suggests that the company may just about make it to ~20%, unless it aggressively pushed ULIPs through the agency channel- a repeat of Nov-Dec 2019.
•  Moderate 15% yoy growth in Max’s individual business. Max Life’s growth in individual APE was moderate at 15% yoy. Similar to other players, growth softened in January 2020 post recording 17-23% yoy growth over the past two quarters. Ticket size in individual non-single segment was up by 18% yoy (up 2% mom). The company has focused on improving productivity of active agents; as such overall individual agents have declined by 3,473 (yoy) to 40,910.
•  Bajaj and TATA strong; Birla weak. Bajaj Life and Tata AIA reported strong growth in individual business at 21% and 31% yoy, after moderating in December 2019. Non-par products most likely led to strong growth for Bajaj and Tata in January 2020. Individual APE declined 3% yoy for Birla Sun Life (muted at 2% yoy over the past five months). It appears that business from its bancassurance partner has moderated.

Equity inflows picked up mom

Equity mutual funds reported net inflows of Rs72 bn in January 2020; higher than Rs32 bn in December 2019. Redemptions in balanced hybrid/aggressive hybrid and value/contra funds remained high at (Rs39 bn in January 2020 compared to Rs20 bn in December 2019 and Rs49 bn in November 2019) leading to muted net inflows.

Share of single premium at 52%

The share of single premium in overall business for private players increased to 37% in January 2020 from 33% in December 2019; albeit lower than 40-55% observed over April 2019-November 2019. Among major private players, the share of single premium increased mom for Bajaj Life, HDFC Life and ICICI Prudential Life.

Strong growth in group business for private players

The market share of private players in group business increased to 25% in January 2020 from 14% in December 2019 led by strong 25% yoy growth in January 2020. LIC’s group business was muted at 1% yoy. Among major private players, most players reported 20-360 bps mom gains in market share in the group business.

Source: Kotak Institutional Equities Research