No mom improvement in July

No mom improvement in July. Individual APE declined 7% yoy in July for private players; a decline similar to June. Lockdown related disruptions across channels, moderation in protection business post hike in rate hikes by most players, and weaker capital markets appetite are likely factors. Among major private players, Bajaj, HDFC Life and Tata AIA’s individual APE were up 29%, 12% and 18% yoy respectively while Max, SBI Life and ICICI Prudential Life declined 2%, 14% and 36% yoy respectively.

Mixed trends across players

Overall APE and individual APE were flat yoy in July. While private players witnessed 7% yoy decline in individual APE (similar mom); LIC was up 10% yoy (up 8% yoy in June).

Strong growth in protection business has likely moderated from peak levels with individual non-single sum assured to individual non-single premium ratio declining to 39X in July 2020 for private players (31X in July 2019); down from 45-81X in April-June 2020; this may be due to a rise in tariffs. Among other product classes, non-par and annuity likely held on well due to competitive rates offered by players (similar to TD of frontline banks). LIC’s strong growth was likely driven by traction in endowment and annuity based products.

Traditional business likely strong for HDFC Life. HDFC Life reported 12% yoy decline in individual APE in July 2020; individual sum assured was up 16% yoy. Growth in individual business was likely driven by strong traction in the flagship traditional business. The IRR offered by ‘HDFC Life Sanchay Plus’, its flagship non-par product is attractive relative to most other products and other financial substitutes (ex. term deposits). HDFC Life’s strategy to toggle between product classes has helped it to deliver better than industry.

ULIPs drag ICICI Prudential Life. ICICI Prudential Life reported 36% yoy decline in individual APE in July 2020 translating to 45% yoy decline in 4MFY21. Individual sum assured was down 24% yoy. Weakness in capital markets driving lower ULIPs (18% yoy drop in average ticket size in individual non-single business in July 2020) continues to put pressure on growth. Additionally low focus on non-par segment continues to drag growth relative to peers. On considering overall (individual and group) adjusted APE including accrued but not received premium, its APE, was down 32% yoy (down 40% yoy in 4MFY21).

SBI Life weak. SBI Life’s individual APE declined 14% yoy in July 2020. Overall APE was down 7% yoy due to strong 1.8X yoy growth in group business. Individual sum assured was flat yoy likely indicating further rise in share of protection business (a lower base compared to peers). High share of ULIPs however continues to put pressure on growth. The company pushed non-par business in 1QFY21 but indicated that its product strategy will remain dynamic during the next nine months.

Protection likely strong for Max. Max Life’ individual APE was down 2% yoy. The company has fared better than most peers during the pandemic. Individual business sum assured was up 61% yoy likely indicating strong uptick in protection business. Lower volumes through non-Axis banca channels however drag pace of growth.

Other players: Tata and Bajaj strong; Birla flat yoy. Among other major private players, Tata AIA and Bajaj Life reported strong 18% and 29% yoy growth in individual APE while Birla Sun Life was flat yoy. Individual business sum assured was up 10% yoy for Tata AIA while it jumped 2.1X yoy for Bajaj Life. While Tata AIA’s is likely attributed to strong business from a wide bouquet of endowment, annuity and while life plans, Bajaj Life’s individual APE growth is likely driven by strong uptick in the newly launched protection products (from January 2020).

Share of single premium at 54% for private players

Share of single premium was high at 54% in July 2020 for private players. This was likely driven by higher share of single premium annuity or lumpsum payout products. Among major private players, share of single premium increased for most players.

Sharp jump in group business market share to 27% in July 2020 for private players

Private players’ market share in group business jumped to 27% in July 2020. Most players recorded increase in share of group business. Thus tends to volatile due to lumpy nature of contracts.

Source: Kotak Institutional Equities Research

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