Exide Life shows how to ‘insure’ profits from COVID-19

Private life insurer Exide Life Insurance reported an 89 percent growth in FY20 to Rs 28.3 crore when other insurers saw COVID-19 severely hitting their businesses.

In the same period, many bigger players had started slipping into the red. While ICICI Prudential Life Insurance posted a 6.3 percent year-on-year (YoY) decline in FY20 net profit, HDFC Life saw a flat profit after tax of Rs 1,297.45 crore.

In Exide Life’s case, it was not only able to maintain a steady top-line and bottom-line but also paid out bonuses to participating business policyholders.

A participating policy is one in which insurers share profits with customers. These profits are paid out as bonuses or dividends.

In FY20, Exide Life saw a 13.1 percent Y-o-Y growth in bonus pay-outs to participating business policyholders to Rs 324 crore.

Even though the lockdown situation is improving across the country, Exide Life has applied brakes on its expansion plans. “The focus is now on cost-efficiency,” said Kshitij Jain, MD & CEO, Exide Life Insurance, in an interview to Moneycontrol.

“In February 2020, the plan was to double the industry growth. That scenario changed once the lockdown was announced. Now, it is all about cost-efficiency. We will be ready for expansion when the market situation is conducive. But we are still cautious on costs,” he added.

The man behind the growth

Jain’s contribution to the company's growth cannot be understated. Part of the founding team, he came on board in December 2000 and was initially leading sales and distribution.

He was promoted as MD & CEO in June 2006. The company has been reporting profits for eight consecutive years. This was achieved mainly by reducing operating costs and focussing on traditional businesses like protection (term plans) that offer higher margins.

Not only has Jain been able to steer the company from losses to profits, he was also the CEO in January 2013, when ING announced its exit plans from Exide Life by selling its stake to joint venture partner Exide Industries.

ING’s exit from the Indian life insurance joint venture was part of the intended divestment of ING’s Asian Insurance and Investment Management businesses.

Since then, Exide Industries has a 100 percent shareholding in the life insurance company. Now, it is among a handful of life insurers without any foreign partner.

Exide Life had reported a 10.7 percent year-on-year growth in new business premiums for FY20 at Rs 888.65 crore.

Jain explained that FY20 was a good year as far as solvency was concerned as well. It stood at 210 percent versus the regulatory requirement of 150 percent.

“All stakeholders were looked after. There are three things we are looking after in this business: quality of business, proprietary channel and product mix. We had a strong show in all these segments. With respect to distribution, we saw a growth in business for both agency channel and from direct channel,” he added.

Several bank-led insurers saw a steep decline in business in FY20 due to a focus on unit-linked insurance plans (Ulips), which fell out of favour with customers after COVID-19 hit India. Exide Life has 95 percent business coming in from traditional plans, and these products have seen traction even amidst the lockdown.

Take ICICI Prudential Life for instance. Almost 60-65 percent of its new business comes from Ulips. Bank-led insurers have large presence in the Ulip portfolio with account holders being cross-sold these products, which have a higher ticket size.

But, Exide Life has not been completely unaffected by COVID-19. The life insurer saw a 34.3 percent Y-o-Y decline in new premiums to Rs 101.83 crore in Q1FY21. Other financial numbers are not yet available for the June quarter.

Exide Life is a smaller player, primarily since it is not promoted by large banks and relies on agency channels and direct business and co-operative banks to write business.

“We saw a significant decline in premium as corporate agents and brokers who often rely on face-to-face interactions saw a decrease in business. Agents and direct channels did not feel much of an impact,” he added.

COVID-19 lessons

Jain said that the company has learnt some important lessons from COVID-19. The company did not lose even one day of operation, post the lockdown, since Exide Life had adopted a digital-first approach two years ago.

“The lockdown has taught us that there are big possibilities for increasing productivity due to the lockdown through our digital push. Our agents and direct channel had adapted to this quickly. Even underwriting has moved to video calls,” he said.

Going forward, Jain said that Exide Life will be on the lookout to get new distribution channels to sell their products. Among the new-age payments firms, Exide Life is already tied up with Fino Payments Bank.