Life Insurers bleed in April as Covid-19 shrinks new biz premium by 33%

Market leader LIC's new business premium down 32% to Rs 3,582 cr from Rs 5,268 cr a year ago; HDFC Life, ICICI Pru among top losers in private space

New business premium for life insurers contracted for a second straight month, with business significantly hit by the Covid-19 outbreak and subsequent lockdown.
 

In April, new business premium declined 32.6 per cent to Rs 6,728 crore, from Rs 9,928 crore for the same period last year.

Earlier in March, new business premium had declined 32 per cent to Rs 25,409 crore, from Rs 37,459 crore in March 2019.
 

For April, Life Insurance Corporation saw new business premium decline 32 per cent to Rs 3,582 crore from Rs 5,268 crore a year ago. Similarly, private insurers witnessed a decline of 33.3 per cent in new business premium for April, to Rs 3,146 crore, against Rs 4,714 crore in April 2019.

Further, the overall sum assured declined by 16.4 per cent to Rs 2.27 trillion in April 2020, from Rs 2.72 trillion in April 2019 (compared to an increase of 29.3 per cent in April 2019 vis-à-vis April 2018).
 

Among large private insurers, HDFC Life’s new business premium (NBP) declined 53 per cent to Rs 669 crore, while ICICI Prudential Life Insurance saw NBP decline almost 60 per cent to Rs 256 crore. SBI Life, however, saw a marginal increase of 0.5 per cent to Rs 917.43 crore. Among the large players, Bajaj Allianz Life was an outlier, recording 43 per cent growth in NBP to Rs 314 crore.
 

“If the trend continues, the life insurance segment could report negligible growth in Q1FY21, hit by the extended lock down. However, protection plans could witness an increase on account of rising awareness, and the online channel could see robust growth,” said a CARE Ratings report.

As regards annualised premium equivalent (APE), private insurers witnessed a 40 per cent decline in individual APE. This metric is the sum of the total value of regular (or recurring) premiums, plus 10 per cent of any new single premiums, written for the financial year.

According to Kotak Institutional Equities: “While April 2020 was expected to be a washout for many segments, life insurers were able to deliver 60 per cent of April 2019’s individual APE. This was better than our expectation of a 90-95 per cent decline for large players.”

“Volumes for April typically reflect some spillover of the year-end business. With a sudden pause in business activity in the last 10 days of March, the spillover may have supported business, despite the lockdown. In addition, the demand for protection policies would have likely increased due to a higher appetite for these policies post Covid-19, and the sunset period of the old pricing regime,” it added.

While HDFC Life reported a 28 per cent decline in individual APE during April, ICICI Prudential reported a 55 per cent decline in individual APE owing to the likely slowdown in the unit-linked segment.
 

Similarly, SBI Life’s individual APE declined 73 per cent, given the firm has a higher share of unit-linked products and the banca channel of the insurer — which contributes 70 per cent to its business — was hit by the disruption.