Base Effect Leads To Slower Growth For Insurance Companies: Emkay Global

Emkay Global Financial Services has released a report on life insurance companies' performance in February 2022. The life insurance industry witnessed a slowdown in its growth rate for the month of Feb'22 due to the high base effect of previous year. The retail weighted received premium (RWRP) growing by a meagre 5.2% YoY in Feb'22. Due to lower growth in Jan-Feb'22, the sector's YTD RWRP growth has come down to 16.6% from 19.7% in 9MFY22.

On a 2-year CAGR basis, the RWRP growth in YTDFY22 is 10.5% for the private life insurers and -5.3% for LIC. This divergent growth trend has led to the private sector gaining 7% market share from LIC in the last 2 years. Given the recent slowdown in growth, a stronger base of Mar'21 and the current macroeconomic and geopolitical situation, Emkay Global expects FY22 growth to be a tad lower than YTDFY22 growth for the sector and the companies under coverage. Nevertheless, after the sharp correction in recent months, listed life insurance stocks are valued attractively, trading materially below their pre-Covid price to EV multiples. Emkay Global believes SBI LIFE is well-positioned to deliver strong, profitable growth over the coming years.

Base effect leads to slower growth for private sector: After recording impressive growth, RWRP for private players increased by ~6.9% YoY in Jan'22 (partly on account of Omicron-led disruptions) and then to ~3.7% YoY in Feb'22, leading to 30% YoY growth in RWRP in 9MFY22.

According to Emkay Global, LIC's RWRP saw a YoY growth of 8.0% in Feb'22, slightly higher than ~5.7% YoY growth seen in YTDFY22. On a 2-year basis, private life insurers saw a ~10.5% CAGR in RWRP in YTD FY22, while LIC recorded a negative 5.3% CAGR. Given the recent slowdown in growth, a stronger base of Mar'21 and the current macroeconomic and geopolitical situation, Emkay Global expects FY22 growth to be a tad lower than YTDFY22 growth for the sector and the companies in under their coverage.

SBI LIFE reports flat RWRP

RWRP growth for SBI LIFE was 0.3% YoY in Feb'22 vs. strong 33% YoY growth in 10MFY22. But this flat RWRP comes on a stronger Feb'21 base when the RWRP had grown by ~53% YoY. For YTD FY22, its RWRP growth remained robust at 29.7% YoY, supported by 17% YoY growth in the individual policy count. SBI LIFE saw a 2-year CAGR of 11.6% in RWRP in YTD FY22, better than 10.5% for the private sector. This highlights SBILIFE's powerful brand, distribution strength and consistent product strategy.

"With all its distribution engines firing and the company having relative immunity against the reinsurance price hikes in protection, SBI LIFE is well-positioned to deliver strong, profitable growth over the coming years, in our view. Our channel check suggests that the company has intensified its focus on the retail protection segment, which augurs well for its VNB margin outlook," Emkay Global has said in its report.

"Beyond the Top-4 private life insurers, Bajaj Allianz Life and the JVs of public sector banks reported impressive growth in RWRP in YTD FY22. Bajaj Allianz Life reported strong 52% YoY RWRP growth in YTD FY22, and a 34% CAGR on a 2-year basis. A large part of this growth could be attributed to its bancassurance tie-up with Axis Bank," the report said.