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Private life Insurers saw strong growth in August; LIC's first-year premium dropped

The life insurance sector's Annual Premium Equivalent grew at 15 percent y-o-y in August 2021.

September 13, 2021 / 06:51 PM IST

Private life insurers posted strong growth in August 2021 thanks to a low base effect and a strong month-on-month growth.

Overall, the insurance sector’s Annual Premium Equivalent (APE) grew at 15 percent y-o-y in August, whereas private life insurers' APE rose by 41 percent. APE is a measure used to determine business sales in the life insurance industry.

APE is the total regular annualised premium from new business in addition to 10 percent of the first single premium. The private players posted a strong growth with SBI Life leading at 55 percent with a market share of 12 percent. Bajaj Allianz Life posted a growth of 51 percent, ICICI Prudential Life at 30 percent and HDFC Life at 18 percent whereas Max Life recorded 9 percent growth on a y-o-y basis.

SBI Life outperformed on a month-on-month basis with an individual APE growth of 10 percent. It also saw the highest growth in the number of policies sold at 31 percent till date in FY22, as compared to overall private life insurers at 2.5 percent.

“The increased demand for term covers, especially at private-sector companies, contributed to the rise in the first-year premium for the sector even as LIC’s business continued to remain subdued, despite a lower base,” said Vishal Balabhadruni, Research Analyst at CapitalVia Global Research- Investment Advisor.


LIC enters slow lane

India’s largest life insurance company, Life Insurance Corporation’s (LIC) first-year premium decreased by 3.8 percent in August 2021 as compared to a strong growth of 15.2 percent in August 2020. Private life insurers in the same period witnessed a growth rate of 20.9 percent in August 2021 as compared to 13.7 percent in August 2020.

On the year till date growth for August 2021, LIC posted a drop of 6.8 percent as compared to a growth of 23.1 percent reported by the private life insurers. This decline in the new business premium seems to be the main reason for subdued growth in LIC, Balabhadruni adds.

According to Care Ratings, in Q1FY22 the life insurance sector witnessed significant claims due to the second wave, and profitability suffered as companies made provisions or reserves to alleviate the impact of the claims.

These reasons (reduced NBP and increased reserves/provisions) seem to have arrested the growth of LIC while its counterparts in the private sector have grown reasonably well, Balabharduni pointed out.

While LIC continues to be the largest player in the first year premium at 65.9 percent as compared to private players at 34.1 percent, it continued to cede ground to the private sector given the pace of growth of private players, Care Ratings said in a note.

Two Year CAGR better metric?

According to analysts, since the national lockdown in the first half of FY20, which resulted in lower sales and slow recovery, could have been a reason for different growth rates along with low base effect, a two-year CAGR will be a better metric to measure the performance.

ICICI Securities in a report said, among large players, the outperformers based on 2-year CAGR are Tata AIA (28 percent), HDFC Life (20 percent), Bajaj Allianz (22 percent) followed by Max Life (16 percent) and SBI Life (13 percent). LIC on a two-year CAGR metric posted 4 percent growth.

Key risks such as a delay in the economic recovery and resurgence of COVID cases, i.e., a third wave, could negatively impact premium growth, and rise in the premium rates of term plans, Care Ratings said in a note.
Ishan Shah
first published: Sep 13, 2021 06:51 pm

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