Motor weak; retail health holds on

Motor weak; retail health holds on.  General insurers delivered 10% yoy (ex-crop) growth in premiums in January 2021, slowing down from 17% yoy growth in December 2020. Muted growth in motor (up 3% yoy) and slowdown in fire on a high base (up 14% yoy compared to 27-48% yoy over August-December 2020) were key drivers. Retail health held on (up 19% yoy) while group health was weak (down 3% yoy). Among major private players, SBI General and Tata AIG continued to deliver stellar growth (up 35% and 43% yoy ex-crop). Chola MS was at par with industry average (up 11% yoy) while ICICI Lombard and Bajaj General lagged industry average (up 4% and 65% yoy respectively). Standalone health insurers up 29% yoy (ex-HDFC Ergo Health).

Motor muted

Motor premiums slowed down to 3% yoy growth in January 2021 from 7-14% yoy growth over the past two months. Flat sales in 2W were the likely reason for slowdown in motor premium growth. Growth in PVs was likely stable mom while CVs continued to inch up from troughs. GIC Council has bifurcated motor premium into (1) motor OD, (2) motor TP and (3) motor package products. While the mix is non-available across a time series, motor packages products were down 2% yoy in January 2021 and constituted 82% of overall motor premiums in 10MFY21 (87% in 10MFY20).

Retail health moderated from peak levels

 Retail health was up 19% yoy in January 2021 (17-24% yoy over the past two months compared to 30-43% yoy over June-October 2020). Moderation in retail health is led by gradual lowering in risk aversion and lower sales of Covid-19 policies. Private players (excluding HDFC Ergo General) were up 14% yoy. PSU players have slowed down over the past few months to 8% yoy growth in January 2021 (11-17% yoy over the past three months compared to 21-24% yoy over July-September 2020). Government business reported strong 1.5X yoy growth for PSUs.

Premium for standalone health insurers (excluding HDFC Ergo Health) was up 29% yoy in (17-26% yoy over the past two months); this has slowed down from peak levels of 57-66% yoy growth observed over August-October 2020. Retail health insurance for standalone health insurers was up 31% yoy in January 2021; similar to growth trends observed over November-December 2020; moderating from 40-48% over June-September 2020.

Fire moderates for private insurers on a high base

Growth in fire insurance premiums moderated to 31% yoy in January 2021 for private life insurers from 32-46% yoy growth over July-December 2020 (barring November 2020). High base of November 2019 and January 2020 are key reasons for weaker growth in November 2020 (up 24% yoy) and January 2021 (up 31% yoy). Among major private players, Bajaj Allianz, Chola MS, ICICI Lombard, SBI General and Tata AIG reported strong growth at 27% yoy, 42% yoy, 17% yoy, 28% yoy and 65% yoy. Fire was down 11% yoy for PSUs.

Crop down 16% yoy in January 2021

Overall crop premiums were down 16% yoy in January 2021 (down 13-25% yoy over September-December 2020 and 10% yoy in 10MFY21). Crop premiums have been weak for PSU general insurers (down 50% yoy in January 2021 and 54% yoy in 10MFY21). Among major private players, crop premiums increased 2.3X yoy for SBI General while it declined 56% yoy for Bajaj General (on a high base). SBI General, Bajaj General, HDFC Ergo General, IFFCO Tokio, Reliance General and Universal Sompo are the key underwriters in this segment (44% of overall crop premiums in 10MFY21 compared to 37% in 10MFY20 and 71% of overall crop premium for general insurers in 10MFY21 compared to 54% in 10MFY20).

Key highlights for select players

Ø  Star Health strong, Aditya Birla Health improves mom. Among standalone health insurers, Star Health insurance reported 31% yoy growth in retail health insurance (up 28-29% yoy over the past two months). Growth in retail health has however slowed from peak levels of 47-56% yoy over August-October 2020; lower risk aversion among buyers is the key driver. Aditya Birla Health’s gross premiums picked up marginally to 32% yoy in January 2021 compared to 23-27% yoy over the past two months. Retail health was up 17% yoy (high base of 97% yoy growth) compared to 9-11% yoy over the past two months.

Ø  Acko and Go Digit strong in motor. Amongst new age private players, Acko was up 39% yoy (up 22-35% yoy over the past two month). Strong 36% yoy growth in motor insurance and 85% yoy growth in group health supported overall premiums. Go Digit’s premium growth was strong at 60% yoy (on a high base of 96% yoy growth in the base quarter). Strong growth was led by robust increase in motor premiums. Motor premiums were up 61% yoy in January 2021 compared to 21-38% yoy growth over the past three months. Health premiums slowed down further (down 42% yoy) on a high base; this was led by weakness in group health.

Ø  ICICI Lombard: Motor weaker than private industry average; health at par. ICICI Lombard’s ex-crop business was up 4% yoy in January 2021; lower than industry average of 9% yoy for private players. Growth in retail health was broadly at par with industry growth at 18% yoy. Group health was down 18% yoy, significant lower than industry average. The company continues to maintain a cautious approach due to pricing pressure and is focused on origination higher share of business from SMEs. Fire was up 17% yoy.

Ø  Bajaj GI: Growth lags industry average. Bajaj GI’s overall (excluding crop) premiums were up 6% yoy; lower than 10% yoy for the industry. Weaker than industry growth in motor (up 5% yoy compared to 9% yoy for private players) and retail health (up 5% yoy compared to 19% yoy growth for the industry) are the key drivers. Overall growth in health was however marginally lower than industry average at 18% yoy due to strong 48% yoy growth in group health (down 15-24% yoy over the past two months). The company booked Rs1 bn of crop business during the month (9% of overall crop premium by general insurers and 6% of overall crop premiums for January 2020). The company has been a major underwriter for crop segment during 10MFY21 (16% of overall crop premiums of general insurers).

Ø  Chola MS: In line with industry, motor inches up. Chola MS’s overall premiums (excluding crop) were up 11% yoy; marginally higher than industry average of 10% yoy. The company reported 12% yoy growth in motor segment; growth in motor segment has started to improve from trough levels. Fire was up 42% yoy. Growth in retail health was muted at 3% yoy while it was strong at 83% yoy in group health.

Ø  SBI GI: Retains strong growth trajectory. SBI reported 35% yoy growth (excluding crop) in January 2021; broadly similar to trends observed over the past three months. Strong growth was driven by 2.5X yoy growth in group health (high base of 2X yoy in January 2020) while motor and retail health slowed down on a high base. Motor was down 11% yoy on a very high base (up 4X yoy). Retail health was muted at 3% yoy (high base of 80% yoy growth in January 2020). Crop premiums were high at Rs5 bn (up 2.3X yoy); this however tends to be volatile. The company continues to deliver best-in-class growth in ex-crop premiums (up 27% yoy in 10MFY21 compared to 6% yoy growth for the industry).

Source: Kotak Institional Equities Research