India Life Insurance Tracker Aug-11 : Volumes remain weak:: JPMorgan

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 Aug-11: Sluggish volumes: Volumes continue to remain sluggish due
to weak capital markets with just 2% m/m growth. The y/y
comparison is impacted by a high base impact. Our estimate of 5%
contraction for FY12 implies ~25% growth for the next 7mnts, which
we believe is achievable given positive growth expected after Sep-11
when base impact turns favorable.
 Base impact to turn favorable; most positive for ICICI/Reliance:
SBI Life gained sequential market share as HDFC/Max New York lost
share. Large insurers (ICICI/HDFC/SBI) has seen tick-up in market
share over last 3mnts. We expect positive volume growth for private
insurers from Oct-11, with base impact turning most favorable for
ICICI/Reliance.
 Product mix: Share of traditional policies continue to remain high at
~40%. In ULIP, there is a shift to NAV guarantee products given weak
capital markets. Ancedotal evidence from our recent visit to ICICI Pru
Life's branch in Kerala (South India financials trip) indicate that
agency force is now adjusting to new product mix and reduced ULIP
commission payouts but higher share of traditional policies have aided
overall agent incomes given higher commision payouts.
 Weak capital markets and high base impact continue to affect
growth. Though y/y growth is expected to improve, capital market
sluggishness may cap a sharp rebound in volumes. Reliance Capital
is the purest play on insurance with ~40% value from insurance -
Our conservative valuations for Rcap implies significant upside but
discounts may persist in the near term due to weak sentiment.