How India’s Three Listed Private Life Insurers Fared In First Quarter

India’s three listed private life insurers saw their new business premium contract in the first full quarter affected by the coronavirus pandemic that froze economic activity.

ICICI Prudential Life Insurance Co.’s annual premium equivalent—a sum of first-year premium and single-premium policies—fell 44% year-on-year in the three months ended June, according to exchange filing. That’s the biggest decline among peers SBI Life Insurance Co. and HDFC Standard Life Insurance Co.

Insurers couldn’t sell policies through agency and bancassurance, their biggest distribution channels, as all businesses, barring essential services remained shut in April and most of May before the government began to ease curbs. But a rise in demand for high-margin pure term plans as Indians look to cover risk during the pandemic, which has already infected close to 12 lakh people and killed over 28,000, cushioned some blow.

• The share of protection policies in the individual annual premium equivalent for HDFC Life rose to 11% in the quarter ended June from 5% a year ago.
• The share of protection policies in annual premium equivalent for ICICI Prudential Life rose to 26% from 14.6% a year ago.
• For SBI Life, however, the share of protection policies in new business premium fell to 10% from 14% a year ago.

Also, profit of all three private insurers rose in the reported quarter, aided by cost cuts.

Here’s how India’s three listed private life insurers performed in the quarter ended June:

HDFC Life

Performance

• The company’s value of new business and margin dropped in the first quarter because of high base of guaranteed products.
• While its VNB margins declined by more than 5 percentage points, the value of new business fell 43% over the year ago to Rs 291 crore.
• It continues to maintain the highest persistency ratio—a measure of how long a customer continues with their policy—compared to peers.
• HDFC Life’s 13th-month persistency stood at 87% during the reported quarter compared with 88.8% a year ago.

Management Commentary

“Business has started to pick up on a month-on-month basis, and we are seeing higher traction, especially in the individual protection business,” Vibha Padalkar, managing director and chief executive officer at HDFC Life, said in a media statement. “As the situation begins to normalise, we expect life insurance to emerge as an important avenue for both protection and long-term savings, and help attract a higher quantum of inflows from Indian households.”

Brokerage View

HDFC Life’s balanced product mix provides a cushion against any business cyclicality, while taking advantage of the grossly underpenetrated protection market, according to Emkay Global .That prompted the brokerage to expect the trend in margins to improve gradually with the rising share of protection plans as well as increasing penetration across geographies.

ICICI Prudential Life

Performance

• The company’s VNB margin improved by 3 percentage points year-on-year, the most among peers, led by an increase in share of high margin protection business.
• The value of new business declined by 35% over the year-ago period to Rs 201 crore.
• Its 13th-month persistency stood at 84% in the quarter ended June against 86.1% a year ago.

Management Commentary

ICICI Prudential Life maintained its guidance on doubling the absolute value of new business over three to four years from financial year 2019. The company has also launched a new protection product in July, and expects margin to improve as the new product pricing is 10-25% higher than the old policy, it said in a post-earnings conference call.

Brokerage View

The continued buoyancy in the protection business, along with a gradual recovery in Ulips should drive business or VNB growth in the near term even as persistency moves in a narrow range, according to Motilal Oswal.

SBI Life

Performance

• The VNB margin remained flat. Its value of new business declined 30% over the year-ago period to Rs 260 crore.
• The company’s 13th-month persistency stood at 82% in the first quarter compared with 84.46% a year ago.

Management Commentary

SBI Life expects better demand for protection products and aims to increase the share of such plans by focusing on credit protection, a creditors’ group insurance that’s used to payout mortgage or loan balance, it said in a post-earnings conference call.

Brokerage View

Though June has seen a significant pick-up in business, Nirmal Bang Securities remains cautious on the full-year growth outlook for SBI Life.