Motor revs, retail health moderates

Motor revs, retail health moderates. General insurers reported 7% yoy growth in premiums (excluding crop) in October 2020 (marginally lower than 10-11% yoy growth over the past two months). Motor recovered to 3% yoy (down 13% yoy in 1HFY21) while retail health moderated to 30% yoy (up 43% yoy in 2QFY21). Among key players, SBI reported stellar ex-crop growth of 39% (up 23% yoy in 7MFY21; higher than 1% yoy for general insurers) while ICICI and Tata AIG were up 11% and 32% yoy (up 3% yoy and 8% yoy in 7MFY21). Bajaj’s ex-crop business remained weak; down 4% yoy. Chola MS was muted at 3% yoy (ex-crop).

Motor picks pace

Motor premiums increased 3% yoy (down 4% yoy in 2QFY21) in October 2020 on the back of rising new vehicle sales (4Ws up ~20% yoy in October 2020 and 2Ws up ~15% yoy). Robust festive demand and a gradual rise freight volumes and utilization rates supported premiums.  Motor OD was up 2% yoy while motor TP was up 4% yoy (decline of 5-8% yoy over the past three months). Motor premiums have gradually improved from trough levels observed in April and May and will likely improve further.

New age players strong, SBI, Tata and ICICI perform better than the pack. Among key players, new age players like Acko and Go Digit witnessed strong growth in the motor business during the month, up 40% yoy and 24% yoy respectively post reporting weak overall growth in September 2020. SBI reported stellar 48% yoy growth in motor led by 94% yoy jump in TP; the company reported better-than-industry growth for the sixth consecutive month. ICICI Lombard was up 12% yoy; tie-ups with new OEMs and diversification of channels driver growth in motor. Tata AIG was up 28% yoy; continued improvement over the past few months.

Retail health moderates

Overall growth in the health business was muted at 6% yoy (up 24% yoy in 2QFY21) led by a moderation in the pace of growth in retail health to 30% yoy from 43% yoy in 2QFY21 and a sharp 9% yoy decline in group health (up 29% yoy in 2QFY21); we note that October does tend to be a weak month for group health business. A slowdown in growth in retail health was likely an interplay of (1) slowdown in daily new Covid-19 cases in India and (2) lower volumes during the festive season. Standalone health insurers reported a 32% yoy increase in health premiums, led by a 43% yoy increase in the retail health business. Private players were up 3% yoy in the health business (up 17% in retail health) while PSUs were down 7% yoy. Among major private players, SBI, Tata AIG and ICICI Lombard witnessed strong growth in retail segments at 49% yoy, 21% yoy, 95% yoy and 32% yoy respectively; Star Health and Aditya Birla Health up 45% and 58% yoy respectively.

Fire insurance strong

Fire insurance premiums was strong at 30% yoy in October 2020 (on a high base; up 33% yoy in October 2020). Overall fire premiums moderated a bit to 28% yoy in 2QFY21 versus 37% yoy in 1QFY21 but revived marginally in October 2020. Among major private players, Bajaj Allianz, ICICI Lombard, SBI General and Tata AIG reported strong growth at 29% yoy, 28% yoy, 32% yoy and 95% yoy, respectively.

Crop down 25% yoy

Crop premiums tend to be volatile. Overall crop premium was down 42% yoy in October 2020 (down 2% yoy in 2QFY21), down 91% for PSU general insurers and 54% for private general insurers. Among major players, crop premiums declined were negligible for SBI General and while HDFC Ergo General was strong at Rs1.9 bn (9% of overall volumes in October 2020).

Key highlights for select players

•  Aditya Birla Health and Star Health retain strong momentum. Premium for standalone health insurers was up 32% yoy led by strong growth for all players; this has however moderated slightly over the past few months (36-42% yoy over the past four months). HDFC Ergo Health was muted at 1% yoy. Aditya Birla Health and Star Health continued to see strong growth; up 56% yoy and 45% yoy respectively in October 2020 (up 71% yoy and 45% yoy respectively in 7MFY21).
•  Acko weak; Go Digit revives. Amongst new-age private players, Acko was down 8% yoy in October 2020 (similar mom) led by lower volumes in liability insurance. Motor insurance reported strong 40% yoy growth (down 20% yoy in September 2020). Go Digit revived to 39% yoy (muted at 9% yoy in September 2020) led by recoveries in motor segment. Motor premiums were up 24% yoy in October 2020 compared to 2% yoy decline in September 2020. Health premiums slowed to 1.4X yoy growth (up 8.9X yoy in 2QFY21), led by a slowdown in group health.
•  ICICI Lombard: Motor better than industry average, retail health at par. ICICI Lombard’s ex-crop business was up 1% yoy in October 2020; higher than industry growth of 7% yoy. Retail health was in line with the industry average (up 32% yoy), while strong motor business (up 12% yoy) supported overall premiums. Motor TP was strong at 16% yoy while motor OD was up 10% yoy. Group health was muted at 2% yoy (down 9% yoy for the industry). Fire was up 29% yoy.
•  Bajaj GI: Weak across other segments. Bajaj GI’s overall (excluding crop) premiums were down 4% yoy on the back of a 2% yoy decline in motor premiums; the company’s performance has been weak over the past few months on ex-crop basis. Health insurance premiums were down 24% yoy despite 16% yoy growth in retail health (group health down 4% yoy and the company did not any have any premiums from government business during the month). The company continues to lag growth in motor business which has put significant pressure on overall growth.
•  Chola MS: Motor muted. Chola MS reported muted 3% yoy growth in gross premiums (ex-crop) in October 2020. Motor was muted at 2% yoy. Retail health slowed down during the month (down 46% yoy). Fire was robust at 29% yoy.
•  SBI: Continuous top-class growth. SBI reported 39% yoy growth (excluding crop) in October 2020, led by strong growth across most segments; similar to the trends observed over the past six months. Motor was up 48% (up 3% yoy for the overall industry) while health increased 65% yoy (83% yoy growth in group health and 49% yoy increase in retail health). Crop was muted in October 2020; this however tends to be volatile. The company continues to deliver best-in-class growth in ex-crop premiums (up 23% yoy in 7MFY21 compared to 3% yoy growth for the industry).

Source: Kotak Institutional Equities Research

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