Fire and motor TP recover

Fire and motor TP recover. General Insurance companies reverted to moderate premium growth (10% yoy ex-crop) in January 2020, recovering from the 6% level of December 2019. Two key reasons: (1) Motor TP recovered (up 18% yoy vs 3-10% yoy in previous two months) and (2) fire business recovered (up 24% yoy vs -10% in December 2019). ICICI Lombard was up 12% yoy; Bajaj (up 3% yoy) and Chola MS (up 5% yoy) posted weaker-than-industry numbers on ex-crop basis. SBI (up 109% yoy ex-crop) maintained robust momentum along with Acko and GoDigit.

Motor TP picks up in January 2020; motor OD growth steady

The motor segment reported premium growth of 15% yoy in January 2020 (Exhibit 2), reverting to the 15-20% levels seen in September-October 2019 after the introduction of new traffic penalty rules. Motor TP (18% yoy growth in January 2020) drove the recovery after falling to 3% yoy growth in December 2019 from 38% in September 2019, now translating to 15% in YTD growth (Exhibit 1). On the other hand, OD business growth was steady at 10% yoy during the month. Private players continued to gain market share on YTD basis, reporting 18% yoy growth while PSUs reported flat numbers (Exhibit 8).

• High TP growth, though large players lose share. TP growth in January 2020 reverted to levels seen before September 2019 (when new traffic penalty rules were introduced). Private players posted 19% yoy growth, while PSU players’ premiums grew 17% yoy (Exhibit 10). SBI General delivered the best performance (up by >800% yoy, though on a low base). Go Digit (up 74% yoy) continued to gain market share. Interestingly, large private players including ICICI Lombard (down 8% yoy), Bajaj (up ~8% yoy) and Chola MS (flat yoy) posted weak numbers and lost share.
• OD business steady mom. OD business growth was steady at 10% yoy in January 2020 compared to 2% growth in YTD FY2020. PSU players delivered the second consecutive month of yoy growth after eight months of contraction in FY2020 (Exhibit 9), resulting in YTD FY2020 growth rate of -13% vs 9% for private players. Most large private players posted weaker-than-industry numbers, except ICICI Lombard (up 10% yoy) and SBI General (up 178% yoy). Premiums for Bajaj GI and Chola MS declined yoy by 2% and 1%, respectively.

Retail health steady, but group health moderates

Overall growth in the health business moderated to 3% yoy (Exhibit 1), compared to YTD run-rate of 15% due to weak business from government schemes. Retail heath maintained strong momentum at 17% yoy growth in January 2020 (~13% in YTD FY2020) while group health business was up 13% yoy (17% in YTD 2020). Market share movement trends continued (Exhibit 11), with standalone insurers gaining (health premiums up 29% yoy in January 2020) compared to general insurers – be it PSU (down 15% yoy) or private (up 22% yoy).

Crop business flat yoy in January 2020; up 28% yoy in YTD FY2020

Premium in the crop business was flat (down 1% yoy) during January 2020, but up 28% YTD FY2020 (Exhibit 13). Growth was led by PSU players (up 84% yoy on YTD basis) while private players preferred to stay out. Bajaj booked the highest crop business among general insurers in January 2020.

Fire revives

Fire insurance premiums grew 24% yoy in January 2020, reverting closer to the ~25-60% growth levels seen in March-November 2019 (Exhibit 7) after posting a decline of 10% in December 2019. Large private players including ICICI Lombard (up 37% yoy), HDFC Ergo General (up 60% yoy) and Bajaj (up 19% yoy) posted sharp recovery in growth rates from their December levels. SBI General, however, slowed down to grow at 6% yoy (slowest since April 2018). GIC had increased reinsurance rates (average rise of 2X) in eight occupancies (comprising 35% of industry volumes) early this year; the reinsurer has rates for other occupancies as well. As such, YTD FY2020 growth remains healthy at 36% yoy.

Private and PSU general insurers slow down; standalone health insurers steady

Both private and PSU general insurers registered ~3% yoy growth (Exhibit 4) in overall premiums in January 2020; slowdown for private players was largely due to their stance to go slow/withdraw in the crop business. On an ex-crop basis (Exhibit 6), private general insurers posted 18% yoy growth, whereas premiums of PSU players contracted by 2%. Standalone health insurers continue post stronger growth rates (up 28% yoy in January 2020).

• Acko, GoDigit and SBI remain top performers (ex-crop). Among private players, Acko (132% yoy) and Go Digit (90% yoy) registered swift ex-crop growth (Exhibit 6), while SBI maintained the strong momentum at 109% yoy growth. Large players including Bajaj (up 3% yoy), ICICI Lombard (up 12% yoy) and Chola MS (up 5% yoy) posted growth lower than private players’ average (up 18% yoy), on ex-crop basis.
• ICICI Lombard: Core business recovers from negative territory. ICICI Lombard’s ex-crop (Exhibit 16) business growth (up 12% yoy in January 2020) recovered from the negative territory (down 2% yoy in December 2019), while still lower than the management’s target of 18-20% growth in focus segments. This was led by continued weakness in its motor TP business. Motor business premiums (49% of FY2020 YTD business) were flat yoy with motor TP (down ~8% yoy) offset by motor OD (up ~10% yoy). Fire insurance (~12% of FY2020 YTD business) was up ~37% yoy, in line with 40% growth in YTD FY2020. 22% decline in the retail health business was more than offset by 36% growth in group health business, resulting in overall 15% growth in the health business.
• Bajaj GI: Crop drags business for the month. Bajaj reported 27% yoy decline (Exhibit 14) in January 2020, led by 66% decline in crop insurance premiums (22% of FY2020 YTD business) amid weakness in motor and health insurance. Even ex-crop premiums were up just 3% yoy compared to ~11% yoy growth in FY2020 YTD. Motor insurance business moderated sharply to 4% yoy growth – slower than industry growth in the month. Health insurance premiums were down ~4% yoy led by 27% decline in the group health business (contributes 9% to FY2020 YTD business). Retail health held up momentum at ~18% yoy growth in January 2020 (in line with industry trends). Fire business grew 19% yoy compared to 32% FY2020 YTD growth.
• Chola MS: Weakness persists. Chola MS reported 5% yoy growth (Exhibit 6) in gross premiums (ex-crop) as motor (74% of YTD FY2020 business) was flat. This was partly offset by fire (up 44% yoy) and health (up 17% yoy). Within the motor business, neither OD nor TP premiums saw noticeable growth.
• Strong business momentum for SBI continues. SBI reported a 117% yoy growth (Exhibit 17) in premium in January 2020, driven mainly by 156% yoy growth in crop and 418% growth in motor business; continuing the strong momentum seen in FY2020. SBI General has a balanced product mix with ~20% contribution from fire, 20% from motor, ~10% from health, ~10% from personal accident and ~35% from crop in FY2020.

Source: Kotak Institutional Equities Research

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