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Insurance tracker Mar’19 – Seasonality trends lift March volumes
HDFC Life (HDFCL):
HDFCL’s Annualized Premium Equivalent (APE) growth trend continued to remain weak in March 2019 vs. its peers, registering +7.7% yoy increase to Rs10bn (+2.6% higher than our exp.). This comes on last year’s negative growth. In Q4FY19, APE grew 6.1% yoy to Rs21.1bn (vs. our exp. of Rs20.9bn). New Business Premium (NBP) rose 24.9% yoy to Rs25.5bn, better than our exp. of Rs21.1bn. Policies sold declined by 8.5% yoy in March 2019, while the retail APE ticket size rose by 10.1% yoy, reflecting a push toward ULIPs (similar trends observed in MF flows in March 2019).
ICICI Prudential (IPRU):
IPRU reported APE growth of 25.4% yoy to Rs10.7bn in March 2019 vs. our exp. of Rs8.7bn, even on last year’s high base. APE as per business presentation rose 5.4% yoy (including Rs0.8bn of positive impact in March 2018 from changes in the definition of group term insurance). In Q4FY19, APE increased by 18.6% yoy to Rs25.3bn (vs. our exp. of Rs22.5bn on an accrued basis and Rs23.2bn on a received basis). Although APE was flat at Rs80bn in FY19, growth seems to be stabilizing, helped by changes in strategy toward smaller ticket ULIPs. Given the strong MF flows and a buoyant market in March 2019, flows in ULIPs must have aided IPRU’s growth, in our view.
MAX Life (MAXL):
MAXL continued its strong business performance last month, growing APE by15.3% yoy to Rs8.8bn (a beat of 5% vs. our exp). In Q4FY19, APE rose by 21.6% (the strongest among its peers) to Rs16.7bn (vs. our exp. of Rs16.3bn). NBP increased by 15.3% yoy to Rs10.7bn. Policies sold based on retail APE went up by 10.2% yoy, while the ticket size grew by 4.5% yoy, reflecting a push toward protection and traditional products.
SBI Life (SBIL):
* SBIL’s APE growth was strong at 22% yoy to Rs12.7bn, below our exp. of Rs13.6bn. This comes on last year’s low base. Nevertheless, growth in the last four months, except January 2019, has been robust for SBIL. In Q4FY19, its APE grew by 13.9% yoy to Rs30.3bn (vs. our exp. of Rs30.4bn on an accrued basis and Rs31.1bn on a received basis). NBP rose by 9.1% yoy to Rs19.2bn. Policies sold increased by 7.5% yoy, while the retail APE ticket size went up by 19.7% yoy in the same period, reflecting a push toward ULIPs.
* Seasonality trends continued in January-February-March 2019 (JFM) period, with private players’ ~35% APE contribution coming from the fourth quarter. APE increased by 28.7% yoy in March 2019 (private players’ growth of 21% yoy, while LIC grew by 36.4% yoy, backed by a higher share of group business). However, on a retail APE basis, private players grew by 18.5% yoy, while LIC’s growth remained muted (-0.5% yoy), dragging the overall retail APE growth to 9.7% yoy. Players such as Bajaj, Tata and Birla continued their strong growth trend, picking up market share.
* We expect April 2019 to be dull, given usually the weakest month. However, we expect growth in FY20 for private players to be in mid-teens, whereas in high-teens for top private players. We like MAXF owing to its consistent premium growth delivery and SBIL due to its strong distribution reach. However, stake sale overhang to Axis by MAXL for a perpetual Banca tie-up and the reduction of promoter stake by SBIL to meet the minimum public shareholding (MPS) guidelines could limit the upside potential of these stocks. Please see our sect
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