High Growth in Fire may not be sustainable

Growth i n premium from the fire segment was high at 61% in May and 51% in April 2019. This compares with 25% in March 2019 and about 12% in FY2019. The increase may be due to (i) higher volumes of business in commercial lines YTD; it is however not clear if this can be sustained throughout the year as business environment anyway remains weak and (ii) rise in reinsurance rates in eight segments by GIC (comprising about 20-25% of total business) in this segment.

Private players fared better with 66%

growth during the month as compared to 56% for PSUs. Higher volumes benefitted ICICI Lombard, up 51% yoy as compared to about 18% in FY2019. Higher volumes due to increase in bancassurance partnerships that are driving business in the MSME segment.

Fire was up 61% yoy from higher volumes as well as tariff hikes. Strong business in fire and health segments boosted growth for Bajaj (26% yoy) and SBI Life (26% yoy) while ICICI Lombard was down 2% due to slowdown in crop; Chola was moderate at 15% yoy.

Corp premium weak: down 2% in April and 15% in May. Crop insurance premium was up 20% in FY2019. Most business in the first two months is a spillover of the Rabi season and hence may not be an accurate representation for the rest of the year. Slowdown in ICICI Lombard (down 70% yoy) and SBI Life (up 8% yoy) reflects the conservative stance of the companies in this segment. Increase in reinsurance premiums by GIC and losses faced by most players will likely lead to a slowdown in FY2020E.