Insurance Q3FY19E result preview: New business margin likely to improve further

The private insurers have gained market share with APE growth of 10% yoy in Q3FY19

Jan 16, 2019 08:01 IST India Infoline News Service

Insurance Concept
The private sector annual premium equivalent (APE) under life insurance increased by 10% yoy during the quarter. Amongst the listed players, SBI Life and Max Life witnessed an increase in APE by ~17% and ~13% respectively during Q3FY19. Most of the large insurance companies are shifting towards traditional policies with a focus on high-margin protection business. The value of new business margin of listed players has improved on account of this change in segment mix.

The general insurance business is expected to continue maintaining its traction under motor insurance business (mandatory new vehicle policy and compulsory insurance). This is likely to lead to higher new business premium during the quarter. The combined ratios for companies like Bajaj Allianz General Insurance and ICICI Lombard are expected to improve with change in business mix. Overall, the net earnings are expected to remain strong for the general insurance players based on above factors and stable investment yields.

Bajaj Finserv (Rs cr) Q3FY19E YoY QoQ
Net Revenue 9,756 27% 1%
Adjusted PAT 886 18% 26%

Bajaj Finserv's consolidated net revenue is expected to increase by 27% yoy in Q3FY19. This is backed by increase in AUM under the lending business by ~35% yoy, 15-20% growth yoy due to traction across health and motor segments under general insurance. Life insurance business is expected to witness marginal recovery with increase in annual premium equivalent (up ~13% during 9MFY19) and likely improvement in persistency ratio. We estimate net profit to grow by ~18% yoy driven by Bajaj Finance, consistent combined ratio of less than 100% under general insurance segment and earnings recovery under life insurance segment.

SBI Life Insurance (Rs cr) Q3FY19E YoY QoQ
Net Premium Income 8,872 31% 16%
Adjusted PAT 295 28% 18%

SBI Life Insurance is expected to witness 31% yoy increase in net premium income in Q3FY19 led by growth in single premium and improvement in persistency for renewal premium. APE growth for Q3FY19 is ~17% yoy. Improvement in VNB margin and operating leverage is expected to lead to an increase in PAT by ~28% yoy in Q3FY19.

ICICI Prudential Life (Rs cr) Q3FY19E YoY QoQ
Net Premium Income 7,874 16% 4%
Adjusted PAT 385 (15%) 28%

ICICI Prudential Life Insurance (IPru Life) is expected to an increase of ~16% yoy in net premium income driven by higher renewals due to stable persistency levels and higher single new business premiums during Q3FY19. The annual premium equivalent for IPru Life has reduced by ~13% yoy in Q3FY19 on account of higher base last year and shift in mix towards protection leading to decline in per policy ticket size. We expect expansion in VNB margins on account of rise in persistency, traction under protection business and cost optimization. However, due to subdued new business premium, we expect PAT to decline by ~15% yoy in Q3FY19.

HDFC Standard Life (Rs cr) Q3FY19E YoY QoQ
Net Premium Income 7,140 32% 5%
Adjusted PAT 255 23% (11%)

HDFC Standard Life (HDFC Life) is likely to witness traction in net premium income in Q3FY19 by ~32% yoy backed by increase in new business single premium and stable renewals. The annual premium equivalent increased marginally by ~5% yoy during Q3FY19. We expect share of protection business to increase further, thereby improving VNB margin. As a result, we expect PAT to increase by ~23% yoy in Q3FY19.

ICICI Lombard (Rs cr) Q3FY19E YoY QoQ
Net Premium Income 2,340 34% 5%
Adjusted PAT 274 18% (7%)

ICICI Lombard (ILom) is likely to witness traction in net premium income during Q3FY19 by ~34% yoy majorly on account of traction under the motor segment due to regulatory changes. We expect share of motor business to increase further, thereby improving combined ratio of the company. As a result, we expect PAT to increase by ~18% yoy in Q3FY19.

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