Weak despite a low base

Weak despite a low base. Private life insurers reported weak individual APE growth at 5% yoy in May 2021, on a low base of 31% yoy decline in May 2020. Two-year individual APE CAGR decline at 16% is similar to trends observed in April 2021, impact of lockdown-related disruptions. We don’t find any specific trend – even as players like ICICI Prudential Life (up 28% yoy in individual business), Bajaj (up 32%) and HDFC Life (up 17%, 22% on overall basis) were strong, Max Life was up 12% and SBI Life was down 6%.

Highlights of key companies

•  ICICI Prudential Life: strong on a normalized base. On yoy basis, ICICI Prudential Life’s individual APE growth at 28% yoy was significantly higher than 5% yoy growth for private players; overall growth was lower at 15% due to 43% yoy decline in the group business. A normalized base and strong growth from new bancassurance partnerships are likely drivers. On 2-year CAGR basis, individual APE was down 22%. We expect strong growth trends incrementally, reflecting channel and product mix diversification.
•  HDFC Life: overall business stronger on the back of strong group. HDFC Life reported 17% yoy growth in the individual business and 22% growth in overall APE, as the group was up 120%. Two-year individual APE saw 12% compounded decline, better than 16% decline for private players. HDFC Life’s ability to toggle between product classes and continued focus on product innovation, however, helped it outpace most private peers over FY2017-21.
•  SBI Life: weak; impact of seasonality and Covid-19. SBI Life reported 6% yoy decline in individual APE in May 2021 on a low base of 46% yoy. The company was down 29% on 2-year CAGR basis versus private sector decline of 16%. The impact of lockdown-related disruptions on SBI Life’s business was higher in April 2020 (2-year individual APE CAGR decline of 36% compared to 16% for private players). We would like to highlight that SBI Life had ~0.5-5% lower market share in May for individual APE in any year compared to the annual market share (since FY2010). In other words, the company catches on its market share in 2H.
• Max Life: moderate growth despite a stronger base. Max Life reported 12% yoy individual APE growth in May 2021 (5% growth for private sector), on a base of 20% decline in May 2020 as compared to 32% decline for the industry. Thus, it continues to outperform the private life insurance market. Investments in the agency business and strong sales of non-par products are likely drivers.
• Bajaj and Tata strong on a low base. On a low base, Bajaj Allianz Life and Tata AIA Life reported better individual trends compared to private peers; Bajaj Allianz Life was up 4% and Tata AIA Life down 2% compared to 16% decline for private players, on 2-year CAGR basis. Bancassurance tie-ups (Axis Bank for Bajaj Allianz Life and HDFC Bank for Tata AIA Life) are likely driving business for these players.
•  LIC weak in May 2021 unlike May 2020. LIC reported 13% decline in individual APE (2-year CAGR). While the company reported 3% decline in May 2020, better than 32% decline for private players, it lost out in May 2021 with 22% decline as compared to 5% growth for private players.

Source: Kotak Institutional Equities Research