19-08-2020
Similar mom trends
Insurance AlertssSimilar mom trends
Similar mom trends. General insurers reported 7% yoy growth in premiums (excluding crop) in July 2020, almost similar to 8% growth in June. July growth was led by 33% yoy growth in fire and robust 18% yoy growth in health, although offset by 6% yoy decline in motor premiums. Retail health was up 48% yoy. Among key players, SBI reported strong growth across most segments (up 39% ex-crop) while ICICI Lombard and Tata AIG were up 12% yoy (ex-crop). Bajaj witnessed sharp spike in crop insurance (ex-crop down 5% yoy). Chola MS was down 3% yoy (ex-crop) led by weakness in the motor segment.
Motor remains weak. Motor premiums declined 6% yoy in July 2020 versus 1% growth in June. Lower new vehicle sales (4Ws down ~5% yoy and 2Ws down ~15% yoy) continue to drag overall premiums. In TP business (total premium down 8% versus 4% growth in June), private players’ premiums were down 6% yoy while PSUs were down 11% yoy. In the motor OD segment (premium down 3% in July and June), PSUs were down 10% yoy while private players were flat. The overall muted environment for new auto sales continues to put pressure on motor premiums. Go Digit, SBI and ICICI Lombard fare better than the rest. Among key players, new age players Go Digit reported strong 18% yoy growth. SBI reported stellar 55% yoy growth in motor led by ~1.1X yoy jump in TP; the company reported better than industry growth for the third consecutive month in a row. ICICI Lombard was up 10% yoy. Acko was down 2% yoy.
Strong traction in retail health. Overall growth in the health business was robust at 18% yoy (10% yoy in 4MFY21). Even as growth in retail health was strong at 48% yoy and group health at 25%, 63% yoy decline in government health premiums was a drag. Standalone health insurers reported 45% yoy increase in health premiums led by 69% yoy increase in the retail health business. Private players were up 25% yoy while PSUs were flat yoy. Increasing risk aversion among consumers, strong uptick in demand for new Covid-related policies (‘Corona Kavach’ and ‘Corona Rakshak’) and penetration among mass segments through the newly launched ‘Arogya Sanjeevni’ plan are likely drivers. Growth in retail heath was strong at 48% yoy. Investment by health insurers in digital renewal of policies has likely paid off. Standalone health insurers reported strong 69% yoy growth in retail health in July 2020 (higher than 12% yoy in FY2020). Private players were up 50% yoy in retail health insurance premiums with 1.7X yoy growth for Reliance General, 99% for Tata AIG and 60% for Iffco Tokio. Chola MS, ICICI Lombard and Bajaj General reported 51% yoy, 60% yoy and 45% yoy growth in retail health, respectively. PSU players were up 21% yoy.
Fire retains strong growth trends. Fire insurance premiums grew 33% yoy in July 2020. This was likely driven by rise in reinsurance rates by GIC. The reinsurer increased property reinsurance rates in March 2019 (average rise of 2X) for eight occupancies (comprising 35% of industry volumes) and subsequently for all 291 occupancies from January 2020. Unlike other segments, PSUs reported strong 30% yoy growth in fire insurance. Private players were strong as well, up 36% yoy.
Bajaj drives growth in crop. Crop reported strong 1.1X yoy growth led by 1.6X jump for private general insurers and 65% yoy growth for specialized insurers. The majority of growth in crop insurance was driven by Bajaj General and SBI General. Bajaj constituted 31% of overall premiums in the month (premiums of Rs11.9 bn in July 2020 compared to Rs876 mn in July 2019).
Key highlights for select players
- Aditya Birla Health and Star Health maintain strong momentum. Premium for standalone health insurers was up 41% yoy led by strong growth for most players except HDFC Ergo Health (down 1% yoy). Aditya Birla Health and Star Health continued to witness strong growth, up 88% yoy and 62% yoy respectively in July 2020 (76% yoy and 42% yoy respectively in 4MFY21). } ICICI Lombard: Motor holds on; retail health picks up pace.
- ICICI Lombard’s ex-crop business was up 12% yoy in July 2020 on the back of strong growth in fire (up 77% yoy), better-than-industry growth in motor (up 10% yoy) and strong traction in retail health (up 46% yoy). ICICI Lombard’s market share in retail health has been in the range of 2.5- 3% over the past year.
- Bajaj GI: Crop was the major driver; weak across other segments. Bajaj GI’s overall (excluding crop) premiums were down 5% yoy on the back of 19% yoy decline in motor premiums. Health insurance premiums were up 7% yoy led by 45% yoy growth in retail health. Crop insurance increased 13X yoy to Rs11.9 bn. Management had guided that Bajaj will participate in bidding for the Kharif season. Unlike its peer, ICICI Lombard, Bajaj GI will continue to prudently play in the crop segment.
- Chola MS: Motor yet to revive; strong uptick in health. Chola MS reported 3% yoy decline in gross premiums (ex-crop) despite 15% yoy decline in motor business. Strong traction in retail health (up 51% yoy), group health (up 2.5X yoy) and fire (up 39% yoy) supported overall growth.
- SBI: Another month of stellar growth. SBI reported 39% yoy growth (excluding crop) in July 2020 led by strong growth across most segments. Motor was up 55% (6% yoy decline for the overall industry) while health increased 92% yoy (1.4X yoy growth in group health and 33% yoy increase in retail health). The company reported strong growth in crop in June 2020 at 1.8X yoy. The company reported 18% yoy growth in premiums (excluding crop) in 4MFY21 (1% yoy decline for the overall industry); higher than most players (except Go Digit).
- Acko weak; Go Digit maintains momentum. Among new age private players, Acko reported 8% yoy decline in premiums in July 2020; while motor was muted at 2% yoy, health segment declined 16% yoy. Go Digit reported strong 53% yoy growth in premiums led by 13X yoy jump in health premiums and 18% yoy growth in motor premiums
Source: Kotak Institutional Equities Research
