Top three private insurers outperform mkt estimates
Strong bancassurance networks, improved agency productivity, and the push towards a digital environment will give the country’s top listed private life insurers the fundamentals to continue outperforming the market’s estimates, say analysts. ADVAIT RAO PALEPU writes
Strong bancassurance networks, improved agency productivity, and the push towards a digital environment will give the country’s top listed private life insurers the fundamentals to continue outperforming the market’s estimates, say analysts.
New business margins for the top three listed private life insurance companies have improved in 2016-17 and 201718, with analysts expecting growth in margin expansion to slow over the next few years.
However, analysts say, the fruits of digitisation, which will provide a boost to insurers’ sales and operating efficiencies, are yet to be realised. But losses in mass public insurance schemes on account of extraneous factors can dampen the momentum. Yashish Dahia, chief executive officer of Policybazaar, told Business Standard: “Over the past year we have seen these companies come up with exciting products and offers. In terms of products we see more and more term plans and unit-linked insurance plans being sold.”
The table above shows the performance of three life insurance companies: HDFC Standard Life (HDFC Life), SBI Life Insurance (SBI Life) and ICICI Prudential Life (IPRU).
The premium revenue of HDFC Life grew 21.2 per cent to ~235.6 billion at the end of 201718 over 2016-17, and the insurer’s profit after tax (PAT) increased by 24.3 per cent to ~11.1 billion in 2017-18.
Premium from new businesses grew to ~113.5 billion, and new business margins increased by 120 basis points (bps) to 23.2 per cent at the end of 2017-18. A SBICap Securities report says the company’s growth in margins “was largely driven by increased protection
offsetting the negative impact of increased. The management remains committed to deliver profitable growth by leveraging its brand and distribution advantage and proactively investing in technology and people to drive future growth.”
Improved productivity and profitability in the individual agent channel have started giving results, says the SBICap report.
The operating expense ratio of HDFC Life increased to 13.5 per cent in 2017-18 from 12.6 per cent in 2016-17. SBI Life saw its premium grow 20.7 per cent to ~253.5 billion at the end of 2017- 18 compared to 2016-17, and profit after tax increased by 20.5 per cent to ~11.5 billion. SBI Life’s new business margins increased by 80 bps to 16.2 per cent at the end of 2017-18.
Avinash Singh, lead analyst with SBICap, along with other authors, said in a report: “The new business margin increased in FY2018 notwithstanding some negative impact from adverse mortality experience in One Year Renewable Group Term Assurance (OYRGTA) and Pradhan Mantri Jeevan Jyoti Bima Yojna (PMJJBY).”
The operating expense ratio has come down from 7.8 per cent in 2016-17 to 6.8 per cent at the end of 2017-18, despite the company investing heavily in information technology, digital services, and sales force expansion. The premium revenue of ICICI Prudential Life increased by 21.1 per cent in 2017-18 to ~270.69 billion, but its PAT for the year decreased by 3.7 per cent to ~16.2 billion.
And new business margins for ICICI Prudential Life increased by 640 bps to 16.5 per cent at the end of 2017-18.
ICICI Prudential Life, unlike the other two companies, is the only insurer whose solvency ratio deteriorated over the year by 29 bps to 252 per cent.