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Moderate growth of non-life insurers

Kotak Institutional Equities
non-life insurers, insurance, general insurance, Health, Motor insurance premium, industry news

The general insurance industry reported moderate premium growth of 16% in May 2019 (15% YTD). Health reported high growth at 28%, largely from group and government business; retail health was up only 7% year-on-year (y-o-y). Motor was weak at 8%. Fire was up 61% y-o-y from higher volumes as well as tariff hikes. Strong business in fire and health segments boosted growth for Bajaj (26% y-o-y) and SBI Life (26% y-o-y) while ICICI Lombard was down 2% due to slowdown in crop. Motor own damage weak Motor insurance premium for the month was up 8% y-o-y, vs 1% in April 2019. This was driven by 11% growth in motor third-party (TP) premium.

Motor own damage (OD) segment reported 4% growth in premium, versus a 5% decline in April 2019 (flat in FY2019). While private players were up 13%, PSUs were down 12% y-o-y. Digit, Chola (up 27%), ICICI Lombard (up 17%), Reliance (up 24%, 15% YTD) and Universal Sampo (up 38%) were key drivers of growth in private sector, most of them benefitting from a lower base and increasing franchise with dealers. Bajaj Allianz (up 4%) and SBI General (down 15%) restrained business due to declining profitability in this segment.

Motor third-party better Growth in motor TP premium was somewhat better at 11% y-o-y. While PSUs were down 5%, private players were strong at 28% y-o-y, gaining market share by 750 bps to 55%. Bajaj Allianz was up 18% yoy, largely focusing on CV (38% of total motor premium). Higher growth in other players – Chola (29%), ICICI Lombard (20%) track their growth in the OD segment, reflecting comprehensive insurance plans. IRDA raised TP tariffs in the last week of May; the impact of the same will be reflected from June.

Group, govt business drive health Health insurance premiums were up 28% yoy, up from 16% in April 2019. Private sector was up 28% yoy and specialized health insurance companies were up 61% yoy. PSUs up 11% yoy lost 600 bps market share to 40%. Higher growth during the month was largely from two players viz. Birla (up 108% yoy) and Religare (215% yoy). Excluding these two players, overall health segment growth was 21% in May (15% in April) i.e. in line with FY2019. Birla has reported 71% growth in retail health and 176% growth in group health. Religare has delivered 34% growth in retail health, 30% growth in group health and reported large government business (NIL in May 2018) which has high driven its yoy growth.

Overall retail health premium was up just 7% yoy. Chola MS reported 5% decline in retail health after 80% growth in April; this is the segment it is focusing on in FY2020E and hence a decline during the month is surprising. As for ICICI Lombard, some of the B2C business was reclassified under B2B, resulting in an 80% decline in retail business and 111% growth in group health. SBI continued to grow aggressively and reported 165% growth in retail health (98% growth in FY2019, 230% in April 2019).