Result Preview - Life Insurance - Insurers to witness moderate new business growth in Q1FY19

We expect growth to continue in the latter quarters owing to structural changes and high penetration potential.

Jul 21, 2018 09:07 IST India Infoline News Service

Life insurance companies are expected to report moderate growth in Q1FY19 on account of higher base and cyclicality during the current quarter. However, we expect growth to continue in the latter quarters owing to structural changes and high penetration potential.

New Business Premium (NBP) for the quarter is backed by a pick-up in retail growth. The rising share of protection business across various companies coupled with the improvement in persistency for renewal premiums is expected to maintain the VNB margins of the companies. Monthly business numbers indicate increasing traction under the protection business.

Top picks: ICICI Prudential Life Insurance, SBI Life Insurance

1 Bajaj Finserv (in Rs cr) Q1FY19E yoy qoq
Net Revenue 8,309.6 27.0% -5.9%
Adjusted PAT 851.5 30.0% 24.2%
Bajaj Finserv's consolidated net revenue is expected to increase by 27% yoy in Q1FY19. This is backed by an increase in AUM under the lending business by more than ~30% yoy and a traction in health and motor insurance segment under general insurance. Life insurance business is expected to witness a steady rate of new business premium coupled with improvement in persistence. We estimate net profit to grow by ~30% yoy driven by Bajaj Finance's lending business, a consistent combined ratio of less than 100% under general insurance segment (Bajaj Allianz General Insurance), and flat performance under life insurance segment (Bajaj Allianz Life Insurance).

2 SBI Life Insurance (in Rs cr) Q1FY19E yoy qoq
Net Premium Income 4,515.1 20.0% -51.1%
Adjusted PAT 344.8 10.0% -9.6%
SBI Life Insurance is expected to witness a 20% increase in net premium income led by growth in single premium and improvement in persistency for renewal premium. APE growth is expected to be ~25% yoy during the quarter. Considering traction in policyholder's funds, we expect PAT to increase by ~10% yoy in Q1FY19.

3 ICICI Prudential Life Insurance (in Rs cr) Q1FY19E yoy qoq
Net Premium Income 5,398.7 12.0% -39.0%
Adjusted PAT 345.0 -15.0% 1.3%
ICICI Prudential Life Insurance (IPru Life) is expected to witness a reduction in the new business premium on account of a higher base last year. Renewal premium is expected to remain strong with balanced persistence. We expect expansion in VNB margins on account rise in persistency, traction under protection business, and cost optimization.

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