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The insurance industry, reeling under the impact of macro-economic conditions and low penetration, now has reason to cheer. Insurance firms have seen a higher profit margin for FY13, compared to the previous financial year. The life insurance industry, which has witnessed a slowdown in new business premium collection, has also fared better in terms of profitability.
The largest private life insurance company, ICICI Prudential Life Insurance, the life insurance arm of ICICI Bank, posted a 8.09 per cent rise in profit after tax (PAT) for the full year ended March 2013. The private life insurer posted net profit of Rs 1,496 crore, compared to Rs 1,384 crore for the full-year ended March 2012.
In terms of premiums, ICICI Life's annualised premium equivalent (APE) increased by 13 per cent to Rs 3,532 crore in FY13 from Rs 3,118 crore in FY12. The assets under management (AUM) at March 31, 2013 were Rs 74,164 crore ($13.7 billion).
The general insurance arm of ICICI Bank has also performed better than FY12. The gross premium income of ICICI Lombard increased by 19.8 per cent - from Rs 5,358 crore in FY12 to Rs 6,420 crore in FY13. ICICI Lombard General Insurance posted a net profit of Rs 306 crore for the year ended March, compared to a loss of Rs 416 crore for FY12.
The commercial third-party motor pool was dismantled from April 2012 and a declined risk pool was put in place. This has led to reduction in losses for general insurers, who had made high provisioning for this segment. With an increase in premiums, it is expected that this loss will be brought down further.
SBI Life Insurance posted a profit of Rs 622 crore for FY13, an increase of 12 per cent over the previous financial year. Atanu Sen, managing director (MD) and CEO of SBI Life Insurance, had said that despite the continued tough environment, the company was able to change the business mix and sustain a profitable growth thanks to its brand strength, multi-distribution model and high productivity of retail channels.
Bancassurance has been a major driver of growth for the insurance companies. Insurers, backed by bank partners, have seen not just higher premiums, but also an increase in profit margins. IDBI Federal Life Insurance, which achieved break-even in its fifth year operation in FY13, has about 74 per cent of its premium coming from its bank channel.
Another leading life insurer, HDFC Life, has seen a 66.5 per cent growth in net profit at Rs 451 crore in FY13.
The company recorded 16 per cent positive growth in new business premium income (individual business) and 11 per cent growth in total premium income.
However, profitability has not just been restricted to insurers with bank partners. Bajaj Allianz General Insurance, for example, saw a 138.6 per cent growth in net profit in FY13 over the previous financial year.
Rajesh Sud, CEO and MD of Max Life Insurance, said, "Our continued focus on fundamentals and efforts to differentiate in the market place based on our advice based sales, diversified distribution architecture and comprehensive product portfolio, helped us achieve a profitable growth in a tough year for the industry."
Public general insurers have also seen a significant rise in profitability, apart from a double-digit increase in the annual premium growth. New India Assurance posted PAT of Rs 843.6 crore for FY13, compared to net profit of Rs 179.3 crore posted in FY12. The company collected total premiums of Rs 10,038 crore in India, recording a growth rate of 18 per cent.
Similarly, private general insurer HDFC ERGO General Insurance posted net profit of Rs 154.49 crore for the year ended March 31, 2013, compared to a net loss of Rs 39.69 crore posted in the previous financial year.
While the general insurance industry expects the growth momentum to continue, life insurers expect some challenges for the current financial year, too.
According to Max Life's Sud, while the company would see growth in the first half of the current financial year, in the second half, it would have to manage the regulatory changes.
"This year will continue to be a tough one for the industry. We have delivered against the set targets, but we would not look to build the top-line at any cost," said Amitabh Chaudhry, MD & CEO, HDFC Life.
According to the monthly data from the Insurance Regulatory and Development Authority (Irda), life insurers collected total premiums of Rs 4,965.37 crore for April this year, a 0.57 per cent rise over the same period last year.
General insurers, on the other hand, saw a 22.01 per cent rise in premium collection for April this year at Rs 7,890.40 crore, against Rs 6,467 crore in April 2012.
