Insurance Monthly Update – July 2009

Indian Life Insurance industry, after reporting a decline for the last two months, staged a recovery in July ’09. The industry’s total Annual Premium Equivalent (APE)# clocked a growth of 6.1% yoy on back of a strong 28.9% yoy growth by LIC. LIC continued to outperform the private players, since December ’08 (posted a growth of 37.9 percentage points over and above the private players in July ‘09). Although private players reported a decline of 9% yoy, the fall was substantially lower than 24% yoy reported in the previous two months. IRDA is actively regulating ULIP norms, which dominate insurance sales for most players, to safeguard investors’ interest. Recently, IRDA issued clarity on exclusion of mortality and morbidity charges for computing the overall cap, which provided some relief to the players for controlling their ULIPs overheads. Further, the regulator is keen to increase ULIPs lock-in-period from three to five years, to ensure a higher return for investors.

Key observations

• After reporting a decline for two successive months, Indian Life Insurance industry reported a growth of 6.1% yoy in July ‘09. This growth was mainly driven by LIC who reported a growth of 28.9% yoy. Private players, third time in a row, witnessed a decline (9% yoy for July ’09). However on a mom basis, private players posted a growth of 9.2%, whereas industry witnessed a growth of 16.7%.

• In July ’09, LIC mobilized Rs52.3bn vis-à-vis Rs32.7bn in July’08, up by 60% yoy. Out of this, individual single premium saw a growth of 23.2% at Rs15.9bn as against Rs12.9bn last year. Even on a mom basis, LIC witnessed strong inflows up by 42%, whereas private player’s first year premium witnessed a meager growth of 8.2%.

• Among the top ten private players, only four posted APE growth for July month. Tata AIG was the biggest gainer with 42% yoy growth. It was followed by SBI Life 18.3% yoy, HDFC Standard 5.2% yoy and Max New York 3.6% yoy. In July ’09, top players posted disappointing numbers. Kotak Mahindra OM Life declined the most by 36.5% yoy closely followed by ICICI Prudential (-33.2%yoy), Bajaj Allianz (-30.5% yoy) and Reliance Life (-12.4% yoy).

• ICICI Prudential Life lost its APE market share by 846bps, highest among the top ten on YTD basis. Since April, ICICI Prudential has been continuously losing its market share. SBI Life, which replaced ICICI Prudential Life at the beginning of FY10, strongly holds the top position among the private players. In July ‘09, SBI Life gained the most by 341bps in terms of market share. Reliance Life also witnessed a decent increase in APE market share at 9.4%, up by 144bps in July ‘09. LIC APE market share increased by 8 percentage points at 46% vis-à-vis 38% to same period last year. Even in the last month LIC gained 1.1 percentage points over the private players.