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Insurance Sector Focus: Non-life insurers to show better margin performance than life insurers in FY24; Find out why

Insurance Sector Focus: Non-life insurers to show better margin performance than life insurers in FY24; Find out why

ICICI Securities stated that non-life insurers are likely to show better margin performance than life insurers in FY24. Non-life insurers’ margin outperformance can be attributed to signs of revival in motor profitability compared to weaker product mix YoY for life insurers.

While the overall domestic insurance sector is on course to log in over 7 per cent annual growth over the next decade with the premium income likely to double to around $450 billion by financial year 2033-34, ICICI Securities stated that non-life insurers are likely to show better margin performance than life insurers in FY24. Non-life insurers’ margin outperformance can be attributed to signs of revival in motor profitability compared to weaker product mix YoY for life insurers. This, ICICI Securities analysis report stated, can be backed by the fact that average COR improvement of ~30 bps for top-five non-life private insurers (ex-SAHI) versus ~344 bps average VNB margin decline in 9MFY24 YoY for listed four private life insurers. 

Strong volumes of non-life insurance sector in FY24 till date

Key facts: Feb’24 number for ICICI Lombard is strong (+39 per cent), even adjusted for a weak base. FY24 YTD GDPI growth for ICICI Lombard is ~17.8 per cent. Star maintains YoY growth of ~18 per cent YTD, while Care/Niva Bupa is double that at ~35 per cent. PSU GDPI share has kept declining with 35 per cent market share in 9MFY24 versus 38 per cent in FY23. 

Per ICICI Securities, basis high contribution of SAHI to PB Fintech health segment, Q4 volumes should also be strong for PB Fintech. It said that porting could continue to impact near-term retail health market share/growth. However, health insurance could receive tailwinds in FY25/26 from: 1) Settling of competitive intensity, as more players move towards capped expense ratio; 2) favourable accounting change under IFRS; 3) revival of new business growth; and 4) possible lower claim inflation with increased talks of standardisation of hospital rates. 

Further, with CV cycle moderating, ICICI Securities expects stable growth in motor going ahead; but, with higher share in 2W/PV and new vehicle category, ICICI Lombard can gain market share. 

Total APE growth of 25%/12% in Feb’24/YTD for life private insurers

In terms of total APE, private life insurers clocked 25 per cent YoY growth in Feb’24 with IPRU Life/Max Life showing strong growth of 38 per cent/ 36 per cent YoY. BALIC (29 per cent YoY), SBI Life (24 per cent YoY) and HDFC Life (22 per cent YoY) also reported strong YoY growth while Tata AIA saw a 4 per cent YoY decline in Feb’24. 

Y24-TD outperformers, in terms of total APE, are Max Life (+26.9 per cent YoY), BALIC (+20.3 per cent YoY) and SBI Life (+19.6 per cent YoY), followed by Tata AIA (+12.5 per cent YoY), HDFC Life (+7.2 per cent) and IPRU Life (+3.9 per cent YoY). While these growth numbers are good, total FY24 growth will be lower considering the base effect of a spike in volumes last March for most players, ICICI Securities said. 

Individual APE growth of 20%/13% in Feb’24/YTD for private life insurers 

In terms of individual APE, private life insurers clocked 20 per cent YoY growth in Feb’24 with Max Life/BALIC/IPRU Life showing strong growth of 34.4 per cent/ 34.2 per cent/ 33.9 per cent. HDFC Life/SBI Life/Kotak Life also showed robust growth of 27.8 per cent/ 25.8 per cent/ 25.6 per cent in individual APE while Tata AIA remained muted at 0.1 per cent YoY in Feb’24. 

FY24-TD outperformers in terms of individual APE are BALIC (+25.9 per cent YoY), Max Life (+23.7per cent YoY) and SBI Life (+15.8 per cent YoY), followed by Tata AIA (+12.0 per cent), IPRU Life (+9.6 per cent) and HDFC Life (+9.5 per cent). While these growth numbers are good, total FY24 growth will be lower considering the base effect of a spike in volumes last March for most players, the report said.

NoP growth encouraging at 9.8% for private insurers in FY24-TD 

Number of Policy (NoP) growth is a key monitorable, said ICICI Securities. Private insurers saw 16.1 per cent YoY growth in NoP at 777k in Feb’24. IPRU Life/Max Life/HDFC Life reported strong growth in NoP of 35.9 per cent/ 25 per cent/ 21.4 per cent YoY. Bajaj Allianz Life (BALIC) and Tata AIA’s NoP grew by 16.3 per cent and 21.6 per cent YoY respectively. Among private insurers, SBI Life has the highest NoP at 173k and reported growth of 9.3 per cent YoY in Feb’24. 

LIC saw 28% growth in total APE

LIC reported a growth of 28 per cent YoY in Feb’24 total APE vs. 25 per cent YoY growth reported by private insurers. This, per the report, was attributed to strong growth in group business (+62 per cent YoY). In individual APE, LIC saw 13.3 per cent YoY growth vs. 20.4 per cent YoY growth for private insurers in Feb’24. On a YTD-basis, individual APE growth has remained modest at 2 per cent YoY while group APE declined by 8.5 per cent YoY.

YTD total sum assured to APE ratio up from 79x in Feb’23 to 86x in Feb’24 

In terms of sum assured, private insurers reported 22 per cent YoY growth in FY24-TD. In terms of Individual sum assured, private insurers saw 38 per cent/ 32 per cent YoY growth in Feb’24/11MFY24. FY24-TD outperformers, per the ICICI Securities analysis, in terms of total sum assured growth include Max Life (+75.7per cent YoY), Tata AIA (+36.4 per cent YoY), HDFC Life (+27.9 per cent YoY), SBI Life (+26 per cent YoY) and IPRU Life (-2.2 per cent YoY)              

Trends remain strong in terms of industry growth in general insurance 

ICICI Securtities said that non-life insurance companies reported total GDPI growth of 12.6 per cent/ 13.1 per cent YoY in Feb’24/11MFY24. Both, ICICIGI and Bajaj Allianz (BAGIC) grew strong, at ~39 per cent YoY in Feb’24. Standalone Health Insurers (SAHI), grew ahead of industry growth rate, at 29 per cent/ 26 per cent YoY in Feb’24/11MFY24. Star Health reported a growth of 19.3 per cent YoY in Feb’24, while other SAHI players witnessed even robust growth – Niva Bupa (+34.9 per cent YoY), Care Health (+36.9 per cent YoY) and Aditya Birla (+66 per cent YoY). 

Collectively, PSU insurers’ share receded from 38.8 per cent in 11MFY23 to 35.3 per cent in 11MFY24. BAGIC improved the best market share of 104bps YoY, up from 6.1 per cent in 11MFY23 to 7.1 per cent in 11MFY24. HDFC Ergo’s market share remained flattish at 6.3 per cent in the same period. FY24-TD outperformers in terms of total GDPI growth include Niva Bupa (+39.2 per cent), BAGIC (+32.3 per cent YoY) and Acko (+26.4 per cent YoY).

Source : Financial Express