Visit http://indiaer.blogspot.com/ for complete details • Sep-10- premiums contracted by 23% m/m: Premium collections
contracted 14% y/y and 23% q/q for the private insurers reflecting the
slowdown post the introduction of new ULIP products. Premiums
contracted for LIC as well post a very strong Aug-10. Overall
premium collections for the industry contracted by ~60% m/m.
• But it is not over yet: Our interactions with various managements
indicate that Sep-10 has not yet fully reflected the contraction in
premium collections due to spillover premiums from Aug-10. Hence it
is premature to compare contraction numbers across insurers to access
post Sep-10 trends. Managements have not ruled out a q/q fall again in
Oct-10 which would reflect the full impact. We believe it would take
2-3 months before sales stabilize.
• Adjust insurance valuations for growth and rollover: We have
adjusted our valuations on insurance companies as we rollover to Sep-
11 and lowered our FY11 growth for the industry to 5% from 10%
earlier (Table 3 below).Contribution of insurance subsidaries (as a % of
our PT) remains low at 3-7% but is the highest for ICICI Bank. We
maintain our cautious stance given increasing regulatory intervention.
• More regulatory intervention: Negative news continues on the sector
with IRDA now banning ULPs (Universal life policies) after ULIS.
ULPs are a mix of traditional and ULIP products but did not have a cap
on charges and hence were being pushed as ULIP alternative. Many
large insurance companies like ICICI, HDFC did not have a ULP plan,
but for some players ULPs, though a small part of the overall book,
contribute a large proportion of their incremental sales.
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