While Q1 is generally considered a slow quarter, Emkay said that FY20 has started on a strong note with private players registering APE growth of 30.5 percent in the June quarter
Listed companies in the life insurance sector are likely to post an annualised premium equivalent (APE) growth of 32.4 percent in Q1FY20, according to research from Emkay Global Financial Services. These include HDFC Life, ICICI Prudential Life Insurance, Max Financial (Max Life) and SBI Life.
While Q1 is generally considered a slow quarter for the life insurance sector, the Emkay report said FY20 has started on a strong note with private players registering APE growth of 30.5 percent in the June quarter. The report quoted the insurance regulator (IRDA) as the source for this data.
APE refers to 100 percent of regular premium business and 10 percent of single premiums.
“We expect private players to continue to gain market share from Life Insurance Corporation of India (LIC) through better product offerings with the focus on volume game (sale of unit-linked insurance plans) and margin accretion via a sale of protection and other traditional products (annuities).
As per the Emkay report, within their life insurance coverage universe, they expect gross written premium of 23.3 percent and value of the new business (VNB) margins expansion of ~20 basis points over FY19. This, it said, will be driven by improving product mix, focus toward protection/annuity products and improving persistency.
VNB is used to measure the profitability of the new business written in a period. It is the present value of all future profits to shareholders measured at the time of writing of the new business contract.
“We expect HDFC Life and SBI Life to report a very strong set of numbers in Q1 with APE growth of 57 percent and 37 percent YoY,” Emkay said in the report.
ICICI Prudential Life growth will remain modest vis-à-vis peers on the back of its strategy of focusing on higher margin lower ticket size protection segment and also focusing on lower ticket size Ulips in tier 2 and tier 3 cities to mass customers, as per the report.
The fourth quarter is generally considered the most crucial, in terms of business growth of life insurers. This is because a lot of salaried individuals buy life insurance for tax saving purpose in the March quarter.
Among the companies, Emkay said HDFC Life will deliver superior VNB margins, led by protection business and increased traction in the annuity businesses.
With respect to SBI Life, Emkay expects the company to report strong growth in Q1FY20 helped by its strong distribution strength and ramp-up of new tie-ups with Allahabad and Syndicate Bank. For Max Life, the report said that the ramping up of agent workforce through a strategic partnership with New York Life is structurally positive.
