Private Life Insurers Beat LIC In A Pandemic-Hit Fiscal

India’s private life insurers outperformed LIC in the fiscal ended March at a time the economy grappled with the Covid-19 pandemic.

While the new business premium of private companies rose 12.68% over the previous fiscal in FY21, that of Life Insurance Corporation of India remained flat, according to data compiled from Life Insurance Council. Their cumulative new business premium rose 4% to Rs 2.78 lakh crore in 2020-21 compared with a 24.01% growth in the preceding fiscal.

• The private insurers and LIC together saw their new business premium rise 36.92% and 31.31%, respectively, in the three months ended March over the same quarter a year ago.
• In just March, their aggregate new business premium rose 99.63% over the preceding month to Rs 43,416.7 crore — private companies grew at 64.62% and LIC at 124.61% over February 2021.

“The single premium policies have driven growth in FY21. The pandemic has created a rise in demand for protection plans,” CARE Ratings Ltd. said in a report. “In FY22, along with the increased awareness of insurance, a digital push for insurance and any increase in term plan premiums could drive the life premiums.”

How India’s three listed life insurers fared

HDFC Life Insurance Co.

• HDFC Life’s new business premium rose 15.36% to Rs 20,242 crore in the fiscal ended March 2021.
• It rose 30.86% year-on-year in the quarter ended March.
• Just in March, its new business premium rose 57.53% over the preceding month.

According to Nirmal Bang, the current health crisis has resulted in higher demand for protection products, benefiting HDFC Life. Long-term opportunities in the protection space will continue to provide growth tailwinds.

The launch of a new term plan, Click2Protect—which includes offers such as protection against critical illness and death over the period of the policy, and ensuring financial well-being of dependents by providing regular monthly income from age 60 onward—could be symbolic of the company’s innovation edge, Nirmal Bang said in a report.

SBI Life Insurance Co.

• SBI Life outperformed its private peers with a 21.37% yearly growth in FY21 at Rs 20,625.47 crore.
• Its new business premium rose 58.58% year-on-year in the three months ended March.
• In March alone, it surged 50.57% over the preceding month.
• The company said it’s unit linked insurance plans are picking up traction.

According to Nirmal Bang, ULIP, which makes up for a higher share of the company's business, has been able to weather capital market volatility better due to 65% of its portfolio being debt-oriented.

ICICI Prudential Life

• The company’s new business premium dropped 4.3% in 2020-21 to Rs 13032.12 crore.
• It rose 7.37% over the year earlier in the January-March period.
• In March itself, the new business premium jumped 31.88% over the previous month.

ICICI Prudential Life’s equity-oriented ULIP-heavy portfolio proved to be a major headwind as capital markets volatility kept demand low, according to Nirmal Bang. But given the recent trends and industry commentary on the run-up in equity prices, consumer confidence in ULIPs is much better now and this, along with a sharper focus on protection and non-linked savings, should set the company up for for higher growth, the brokerage said.

What Other Brokerages Are Saying

Kotak Securities

Expects value of new business margin to remain strong due to a combination of high margin savings and term products, tempered by growth in ULIPs.

Emkay Global Financial Services

• Anticipates healthy growth trend to continue in coming months due to favourable base effect of last year.
• But a surge in retail business along with the nature of products sold would be a key thing to watch out for.

Motilal Oswal

Expects strong traction in premium growth over FY22, with focus on non-par and protection segments even as ULIP trends may remain tepid.

Macquarie Capital Securities (India)

• Warns of an adverse impact on value of new business of life insurance companies in FY22.
• Rising Covid claims could result in reinsurance companies tightening the screws which could impact protection margins for life insurance companies as it doesn’t believe they can keep passing on the costs without a reduction in growth.
• Life insurance companies are mindful of adverse selection during a pandemic and hence will be cautious in chasing growth.

Source: BloombergQuint