Private sector life insurers’ new premium income grows 8% in FY21

MUMBAI: Contrary to expectations, private sector life insurers logged in a stellar 40 per cent new premium growth in the fourth quarter of FY21, driven by a still higher 90 per cent growth in March, according to an industry analysis.

The better-than-expected Q4 growth has helped the industry, except LIC, log in an 8 per cent annual growth in the just concluded financial year, according to an analysis by Kotak Securities. It attributed low base effect for the better-than-expected show in the March quarter and also for the month.

The brokerage also expects the low base effect to help companies log in better numbers for the next few months. Life insurers reported stellar individual annual premium equivalent (APE) growth of 90 per cent in March due to low base, translating into a 40 per cent growth in Q4 and a full 8 per cent for FY21, said the report. It, however, added that the two-year individual APE growth was a modest 6 per cent for the year.

The overall good numbers were driven by SBI Life, HDFC Life, Bajaj Allianz Life and Tata AIA Life, which delivered 13 per cent, 12 per cent, 11 per cent and 17 per cent two-year individual APE growth, respectively, while ICICI Prudential Life and Max Life were flat. Another growth driver was the strong traction in non-par savings businesses, revival in Ulips and credit life businesses, said the report adding that it expects the low base to support growth over the next few months.

Stating that the 8 per cent annual growth was significantly better than initial expectations at the start of the pandemic, it said. The report added that two-year individual APE annual growth was modest at 6 per cent, which is lower that the four-year annual growth of 12 per cent in the preceding four years.

However, the APE growth would have been higher had it not been for the low 2 per cent two-year individual APE in 2020-21 for LIC, which led its loss of market share over the past few years by 350 basis points (bps) over FY18-21 to 40 per cent.

Demand for non-par savings retained strong momentum throughout the year, likely reflecting investor preference to lock into a fixed rate in a falling rate regime, coupled with a rise in the insurers’ appetite to underwrite such products. Credit life was weak in the first half due to lower disbursement volumes but picked up swiftly in the second half.