Life insurance coverage corporations reported 1% progress in annualised premium equal (APE) in February 2020, translating to 22% progress for eleven months of FY20. Whereas LIC was weak with 7% decline, non-public sector was not sturdy both, up 8% year-on-year (y-o-y).
Particular person APE was down 1% y-o-y throughout the month with 7% decline for LIC and 4% progress for personal gamers. Amongst main gamers, HDFC Life (particular person APE up 29% y-o-y doubtless pushed by its conventional enterprise push) and Bajaj Life (up 23% y-o-y) have been sturdy whereas others have been weak — ICICI Life was down 15%, SBI Life down 5%, Birla SL down 2% and Max Life up 1%. LIC had reported sturdy progress (particular person APE up 99% y-o-y) in January because of the sundown interval of a few of its merchandise; on this base, enterprise momentum slowed down in February.
Apparently, whereas unit-linked insurance coverage (Ulips) appeared weak, influx to fairness mutual funds picked as much as Rs 96 billion from Rs 72 billion in January 2020 and `44 billion in February 2019. We anticipate March 2020E to be stronger as Ulip progress could doubtless decide up with a lag and enormous gamers will doubtless push safety insurance policies within the sundown month of present pricing regime.
Two headwinds on VNB margins
We discover two headwinds on worth of recent enterprise (VNB) margins of life insurance coverage corporations viz: Improve in efficient tax charge attributable to removing of DDT, and secondly, improve in reinsurance charges which will not be totally handed on by insurance coverage corporations attributable to aggressive pressures.
We don’t discover any important impression of removing of Part 80C advantages, because the share of This autumn enterprise for many insurance coverage corporations has decreased over the previous few years. Google tendencies, nonetheless, counsel in any other case, i.e., ratio of searches for insurance coverage sector-related phrases stay steady in This autumn.
Market sources counsel that reinsurance corporations will improve charges from April 2020. The quantum of rise and the power of insurance coverage corporations to cross on the rise, in gentle of sturdy competitors within the sector, will decide VNB margin motion. At this stage, it’s a bit difficult to estimate the identical.
Supply: Edited extracts from Kotak Institutional Equities Analysis report