Insurance: Select large players drive growth - Kotak

Select large players drive growth. Business momentum in September 2017 remained robust with 23% growth in private sector's overall APE and 19% at LIC translating into 21% growth for overall industry. Within private sector, growth was driven by select large players, viz. Bajaj Allianz, HDFC Life and PNB Metlife, while Max Life and ICICI Life witnessed moderate growth.

Private sector remains strong

Private sector reported yet another month of strong performance with 23% overall APE growth and 30% growth in individual APE. LIC reported 19% growth in overall APE largely from the group business as its individual APE growth was lower at 10% yoy. Thus, overall industry growth was moderate at 21%. On YTD basis, private sector individual growth was strong at 37% and LIC moderate at 13%.

Muted month for some as select players drive growth

- Within the private sector, growth was strong for select players while others were a bit muted. Among large players, in the individual APE segment Bajaj Life was up 31% yoy, HDFC Life 71% yoy and PNB Metlife up 31% yoy while India First was up 70% yoy. Interestingly, growth in ticket size in the individual non-single segments was moderate at 13% yoy for Bajaj Life and 11% yoy for HDFC Life. This means that these companies have grown because of sharp increase in number of policies. PNB Metlife's average policy size was up 27% yoy and India First was up 23% yoy.

- ICICI Life has moderated to 18% yoy, 14-19% in the previous two months but 100%+ in the first two months this year. The company had then guided for a higher base effect and hence moderation in growth. Its average ticket size in the individual non-single segment was down 7% yoy, though at Rs91,000 it remains about 2X of key players.

- Birla SL has reported a bit of volatility with 14-32% growth since April; the company reported 18% growth in September 2017. Birla SL's average policy size in the individual non-single segment was up 31% yoy; this means that it lost in terms of number of policies.

- Max Life moderated to 19% from 23% in August 2017 with 9% growth in average policy size in the individual non-single segment; YTD growth at Max is moderate at 19%.

- Reliance Life reported 3% decline; YTD growth was moderate at 12% yoy. This is despite the fact that its average policy size in the individual non-single segments was up 34% during the month; this means that the company has significantly reduced the number of policies.

Mutual fund inflows moderate mom

The overall inflow to financial savings remains extremely strong with mutual fund inflows to equities at Rs246 bn in September 2017, though this is marginally lower than Rs265 bn in August 2017.

Private sector comes back in group business after two months; single business remains strong for LIC

LIC continues to have high share of single premium (87% in September 2017 in its overall business); the ratio has increased 72-76% in FY2016 and FY2017. Private players have generally been selective in this segment; the share of single premium of private players was 43% in September 2017: 35-40% for past three years. The ratio has been high for Bajaj Life (87%), Birla SL (77%) and HDFC Life (61%).

In the group business, the share of private players had declined sharply to 8-9% in past two months; this has bounced back to 15% in September 2017, marginally lower than 19% in FY2017.

Source : Equity Bulls

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