Motor declines; health up in a challenging

Motor declines; health up in a challenging month. General insurers delivered 11% yoy growth in premiums in May 2021, versus 22% growth in April 2021, reflecting the impact of the lockdown. Unsurprisingly, motor was down 14%, despite 23% decline in May 2020; health (up 31% yoy) was the key growth driver. Standalone health insurers (up 37% yoy), new age players like Acko and Digit (up 234% and 39% yoy respectively) and SBI GI (up 16% yoy) outperformed while Baja GI (up 2% yoy), ICICI Lombard (up 6% yoy) and Chola MS (down 15% yoy) lagged industry average.

Motor declined 14% yoy in May 2021

Motor premiums declined 14% yoy in May 2021 despite the low base of 23% yoy decline in May 2020. Decline in motor premium was led by tepid new vehicle sales in May 2021 and delayed renewals (likely reflecting lower mobility). Private players (down 8% yoy) fared better than PSUs (down 24% yoy).

SBI and Acko continue to maintain their strong growth momentum; SBI up 35% yoy and Acko up 84% yoy. Market share of PSUs increased from 32.4% in April 2021 to 34.9% in May 2021. We expect motor premiums to gradually pick up over the next few months led by easing of lockdown related disruptions though premium growth remains contingent on (1) increase in auto sales (on a low base), (2) any unforeseen rise in Covid-19 cases driving movement restrictions, lockdowns and (3) hike in motor TP premiums (flat since FY2020).

Health supports overall premium growth

Health premiums increased 31% yoy in May 2021 led by strong growth in retail health (up 36% yoy) and group health (up 33% yoy). Private players were up 43% yoy while PSU players were up 22% yoy in May 2021. Standalone health insurers (excluding HDFC Ergo Health) were up 60% yoy. The month of May posed challenges for health agents to approach clients as well, some of the policies may be on account of COVID, sold online or executed with a lag.

In the retail health segment, private players (up 83% yoy) outperformed PSUs (up 20% yoy). Standalone health insurers (SAHI) continue to dominate the retail health segment. Market share of standalone health insurers (excluding HDFC Ergo Health which is classified under private sector this year, SAHI last year) in retail health increased to 48.6% in May 2021 from 46.3% in April 2021. In the group health segment, PSUs (up 30% yoy) outperformed the private players (up 24% yoy excluding HDFC Ergo Health)-this however tends to be volatile.

Fire remains muted

Fire insurance premiums were muted (up 2% yoy) in May 2021 because of a high base of 22% yoy growth in May 2020. Universal Sompo and IFFCO Tokio reported strong growth of 36% yoy and 24% yoy respectively in May 2021 despite the high base of 56% yoy and 98% yoy respectively in May 2020. Market share of PSUs increased to 47.4% in May 2021 from 35% in April 2021. ICICI lost the market share mom (down from 15.5% in April 2021 to 8.7% in May 2021).

Crop up 17% yoy

Crop premiums increased 17% yoy in May 2021 on the low base of 48% yoy decline in May 2020. Private players reported strong 66% yoy growth led by elevated volumes of Reliance General (up 45% yoy). PSU players were down by 83% yoy despite the low base of 81% yoy decline in May 2020.

Key highlights for select players

• Standalone health insurers: Stellar performance. Standalone health insurers (excluding HDFC Ergo Health) reported 60% yoy growth in May 2021. Investment in channel expansion, product innovation and geographic diversification are the key drivers. Standalone health insurers (excluding HDFC Ergo Health) continue to dominate the retail health segment. Market share of standalone health insurers (excluding HDFC Ergo Health) in retail health increased to 48.6% in May 2021 from 46.3% in April 2021.
• New age players: Acko strong on a low base, Digit retains steam: Acko reported strong 234% yoy growth (low base of 1% yoy decline in base month) and Digit was up 39% yoy growth in May 2021; significant higher than industry growth of 11%. In the motor segment, Acko reported strong 84% yoy growth and Digit was up 10% yoy; higher than 14% yoy decline for the overall motor segment. Acko and Go Digit’s market share in motor segment increased to 4% in May 2021 from ~3% in May 2020.
• ICICI Lombard: Growth lags industry average. ICICI reported 6% yoy growth in May 2021; lower than the industry average of 11% yoy (up 9% yoy for private players excluding crop). Weakness in the health segment led to slower growth. 19% yoy growth in health was lower than overall industry average of 13% yoy growth. The market share of ICICI in the health segment decreased to 5.4% in May 2021 from 6% in May 2020 (6.1% in April 2021)-slower growth in group health. Motor premiums were down 12% yoy; marginally weaker than 8% yoy decline for private players. Fire was muted at 3% yoy growth in May 2021.
• Bajaj GI: Growth remains muted. Bajaj’s 2% yoy growth in May 2021 was lower than 11% yoy for the industry. Lower than the industry growth in group health (up 14% yoy compared to 33% yoy growth for the industry) was the key driver. Retail health was up 41% yoy; higher than industry growth of 36% yoy. Motor premiums declined by 10% yoy; lower than 8% yoy decline for private players.
• SBI GI: Growth higher than the industry average. SBI reported 16% yoy (excluding crop) in May 2021; higher than the industry average of 11% yoy. Growth was primarily driven by the motor (up 35% yoy) and group health (up 59% yoy). Retail health was muted at 6% yoy growth while fire declined by 5% yoy in May 2021.
• Chola MS: Poor performance. Premiums declined 15% yoy in May 2021; significant lower than 11% yoy growth for the industry owing to sharp decline in motor (down 18% yoy) and group health premiums (down 34% yoy). Health was down 6% yoy while the segment was up 31% yoy.

Source: Kotak institutional equities research