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ICICI Prudential Life boosts
industry growth.
ICICI
Prudential Life delivered 100% individual APE growth in May 2017, pushing
private sector growth to 46%, which would have been 30% otherwise. We expect
ICICI Life’s high growth to moderate in 2HFY18 on a high base. On the other
hand, HDFC Life’s low base will benefit from June 2017 leading to higher (20%
yoy in May 2017) growth over the next 10 months. Other players continue to
deliver steady (about 20-30%) growth.
High growth for most; ICICI Life pulls up industry
growth rate
Most large
private players reported 20-30% growth in APE; high growth at ICICI Prudential
Life (up 100% yoy) lifted private sector individual APE growth to 46%;
excluding ICICI Prudential Life, the rest of the private sector reported 30%
individual APE growth. LIC remained muted at 5% yoy. Overall industry was up
24% in individual APE during the month.
ICICI Prudential Life will moderate in 2H
According to
the management of ICICI Prudential Life, the business is now in a secular
growth mode across channels and doing away with seasonal trends. While
individual APE growth was 100%, ticket size growth in individual non-single
segment was 52% yoy, flat qoq, i.e. about half its yoy growth was driven by
volumes. The company reported Rs5.7 bn of individual APE in May 2017; it has
maintained a run-rate of Rs5-6 bn since November 2017. ICICI Life’s management
expects the run-rate to continue or trend up marginally throughout the year and
as such yoy growth rate in 2H will be lower.
Behavioral pattern of deposits
and interest rates is not straightforward
As against
the expectations of a strong inverse correlation between savings deposit growth
and interest rates and a positive correlation between growth in term deposits
and interest rates, the data too are not playing out in India. Urban/metro
region shows this relationship in savings but not term (see Exhibits 32-33).
Rural and semi-urban shows in term deposits but not in savings (see Exhibits
28-31). We believe that a combination of new depositors coming to the fold,
especially in rural and semi-urban as well as weak performance by
nonhouseholds, especially in urban markets, could explain this contradiction.
20-30% growth in individual APE for most large players
* HDFC Life
delivered 20% yoy growth, following a long period of subdued growth. Its base
was a bit large at 43% growth in May 2016. The company has delivered average
growth of 3% between June 2016 and March 2017. As such, we expect yoy growth
rate to be significantly higher from June 2017 onwards. One of the reasons for
low growth for HDFC Life was slowdown at HDFC Bank due to streamlining of its
KYC process; this is now back on track. HDFC Bank’s partnership with Birla SL
may take away some share of the banks franchise though the terms of the
agreement are not yet clear.
* Max Life
remains steady with 22% growth in May 2017; this compares with 25% growth in
FY2017. Interestingly, its ticket size is reducing – down 11% yoy, 19% qoq.
This may likely be due to increase in policies in the protection segment and
lower share of unit-linked policies.
* Reliance
Life delivered moderate (15%) growth; the company has been shifting its focus
on traditional business from unit-linked policies leading to slow growth/yoy
decline in last few months. Interestingly, the company reported 47% growth in
average ticket size in the individual non-single segment even as its ticket
size at Rs28,000 is lowest amongst large players.
* Bajaj Life
and Birla SL remained strong with 67% and 32% growth respectively. Both
reported about 35% growth in average ticket size.
Private sector up in group business; single business
remains strong for LIC
LIC
continues to have high share of single premium (81% in May 2017in its overall
business)
; the ratio
has been stable for last two years.
Private
players have generally been selective in this segment; the share of single
premium of private players was 40% in May 2017: 35-40% for last three years.
The ratio has been highfor Bajaj Life, Birla SL and HDFC Life at about 60%.
In the group
business, the share of private players has been stable at about 18-19%.
increased to
25% from 19% in the last two financial years. Bajaj Allianz Life lost share to
ICICI
Prudential Lifeon mom basis.
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