Life Insurers to benefit once again from low-base effect in Q1FY23





For two consecutive fiscals, have experienced low-base effects in quarter 1 (Q1) due to the Covid-19 first and second wave effect. The financial year 2022-23 (Q1FY23) is likely to see growth given the base effect. Based on the IRDA data, Life has had a standout quarter but other insurers have done reasonably well.


The low base was balanced off by an adverse environment with high inflation, elevated interest rates and volatile equity markets. While April and May benefitted from strong base effects, there was moderation in June 2022. Overall, ticket sizes declined 8 per cent year-on-year (YoY).


For FY23, total RWRP (retail weighted received premium) is estimated to see a growth of 12-13 per cent YoY, with the private sector growing in the mid- to high-teens and newly-listed Corporation (LIC) growing in the high-single digits. Listed private could see at least 20 per cent YoY growth in Value of New Business (VNB) in Q1FY23. Life will probably have far higher VNB growth rates – maybe close to 90 per cent.


Due to product diversification, better distribution mix and better cost efficiencies, listed private players should be able to keep relatively higher margins. The growth would be driven by demand for the annuity/non-participating segment and recovery in the protection business (term policies). But growth in ULIPs (unit linked insurance plans) may be soft due to the market correction.


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Individual weighted received premium (WRP) for private players grew 22 per cent YoY in June 22 (a three-year CAGR or compounded annual growth rate of 9.7 per cent). But it was moderating from 96 per cent YoY growth in May’22 when there was a very strong base effect. reported a growth of 21.2 per cent YoY (a three-year CAGR of 9.7 per cent, up 65.1 per cent in May’22) in Individual WRP. The three-year CAGR for is similar to the average for private players.


There was wide variation. Among listed players, Life posted impressive growth of 42 per cent YoY in June’22 (a three-year CAGR of 14.9 per cent), while the others were much weaker. HDFC Life reported a 6.3 per cent YoY growth (a three-year CAGR of only 0.9 per cent). ICICI Prudential Life posted a decline of 2.9 per cent YoY (a three-year CAGR of minus 7.8 per cent). MAX Life reported a decline of 1.8 per cent YoY (a three-year CAGR of 9.3 per cent).


While SBI Life remained in second rank for market share behind LIC, it may have gained some percentage points. LIC’s market share stood at 39 per cent in the individual WRP market, while SBI Life held 14.4 per cent, followed by HDFC Life (8.5 per cent) and ICICI Pru (6.1 per cent). On an unweighted basis, SBI Life held market share of 9 per cent, followed by HDFC Life (6 per cent) and Bajaj Allianz (4 per cent).


While accelerated its growth slightly in Q1, with a CAGR for retail annualised premium equivalent (APE) which equalled the private sector. But in terms of 3-year APE CAGR, the private sector is growing at 12.5 per cent while LIC’s CAGR is at 7.8 per cent.


Analysts have ‘buy’ ratings on the four listed private players and ‘hold’ ratings on LIC. While LIC stock has lost a lot of ground since listing at Rs 875 in May, Max Financial has gained slightly in the last month, and also gained over the last three months and SBI Life has gained marginally in the last month. Stocks of HDFC Life and ICICI Pru have both lost ground in the last month and last three months.

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