Life insurance: Upward trend in premium growth for private players

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Buoyant capital markets supporting the Ulips recovery and continued strong momentum in the non-participating savings and annuity segments are likely drivers

Private life insurers reported a gradual improvement in Individual Annualized Premium Equivalent (APE) growth over the past few months, up 39% year-on-year (year-on-year) in August 2021, 31% YoY in July 2021 and 16% YoY in June 2021 on a low base of declines of 6% YoY in August 2020 and 7% YoY each in July 2020 and June 2020.

So a low base and improving trends month over month (mom) support strong growth. The two-year individual APE CAGR increased to 14% in August 2021, from 10% in July 2021 and 4% in June 2021, indicating an improvement in mother trends. The dynamism of capital markets supporting the revival of unit-linked insurance schemes (Ulips) and the continued strong momentum of the non-participating savings and annuity segments are likely drivers for private players.

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As the base effect gradually fades, year-on-year growth is expected to slow slightly, although strong demand for some products should support robust growth in the coming months. Thus, overall growth trends remain encouraging. The group’s APE is down 1% year-on-year in August 2021 for private players.

Performance of life insurers
Overall LIC Individual APE decreased by 5% YoY in August 2021 (down 4% YoY in July 2021 and up 1% YoY in June 2021). However, the base is higher than that of private players. The two-year individual APE CAGR was low at -2% versus 14% for private peers. The robust growth of 18% YoY in the group’s APE, however, led to a moderate growth of 2% YoY in the overall APE.

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HDFC Life holds up well despite a high base. It saw 17% YoY growth in overall APE, driven by strong 27% YoY growth in individual APE, even though group APE was down 32% YoY . The two-year individual APE CAGR at 20% was above the private peer average at 14%. The sharp decline in the group’s APE likely reflects a cautious stance in the group’s term insurance business.

The recovery of ICICI Prudential Life is on track as it recorded 36% YoY growth in overall APE, driven by 34% YoY growth in individual APE and 59% YoY growth. % YoY Group APE. Individual two-year APE CAGR was low at -2% due to lower volumes in fiscal 2021 (-10% to -11% year-over-year decline in the past two months and 15% decline). % at T1FY22). The diversification of the product mix and the new bancassurance partnerships have enabled a gradual relaunch of the APE.

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Max Life saw modest 9% year-on-year growth in individual APE; Individual 10% over two years for August 2021 and 6% for July 2021 are below the average of private peers with growth of 14% and 10%, respectively. Even though Max Life has outperformed the industry in terms of growth since the start of the pandemic, it seems to have slowed down a bit over the past three months.

Edited excerpts from the Kotak Institutional Equities Research report

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