Insurance: Business traction remains weak ::Kotak Sec

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Insurance
India
Business traction remains weak. Despite the benefit of a low base in October 2011,
private insurance companies continued to report a decline in APE collections. APE was
down 26% mom for private players which maintained focus on single and group
businesses. Notably, ULIP mobilizations remain weak as within the non-single individual
business, the impetus was more on traditional business. The current YTD trend and
investment climate clearly poses downside risk to premium estimates for 2012E.
Premium collections disappoint
Insurance companies are unable to catch up with last year’s business volumes although the low
base (on account of new IRDA regime) kicked in from October 2010. APE for private sector was
down 12% yoy in October 2011 despite the low base as these companies reported 26% mom
decline in APE. While mom decline in October is a seasonal trend, the decline this year seems fairly
high in the context of a low base. YTD growth is down to 39% yoy.
Higher group business in October 2011
Insurance companies resorted to group business in October which increased by 80% yoy, the
share of group business increased to 38% to total premium collection as compared to 19% in
October 2010. The individual non-single premium reported higher decline of 29% mom.
Wide disparity in trends between companies
Private players reported about -30% to +30% growth in APE. The yoy growth was determined by
the base effect; the business in October 2011 reported wide variations as this was effectively the
first month in which the IRDA regime was implemented.