JPMorgan, India Life Insurance Tracker Jan-11 : Volumes continue to disappoint

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India Life Insurance Tracker
Jan-11 : Volumes continue to disappoint


• Jan-11- Volumes remain weak: Premium collections in Jan-11 were
weak after a marginal pick up in a seasonally strong Dec. Premiums
for private insurers contracted by ~32% y/y in Jan-11 with YTD
contraction now at 13% y/y. Private insurers’ market share continues
to decline with YTD share at ~40% v/s 56% in FY10.

• FY11 premium may contract ~15%y/y: YTD premium contraction
for private insurers is ~13% and with >30% y/y contraction continuing
we expect >15% y/y premium contraction (v/s 6% earlier) for private
insurers in FY12.
• HDFC relatively better among private insurers: Most private
insurers continue to report y/y premium contractions with
SBI/Bajaj/Birla reporting ~30% YTD contraction. HDFC and Max
New York are among the few private insurers which have reported
growth in premium collection YTD. With relatively smaller
contraction, market share for ICICI Pru has inched up 1%.
• Revise valuations by -11 to 9%: We revise down our valuations for
insurance subsidiaries by -11 to 9% for lower premium growth but roll
over to Mar-11 (6mnts) privides some net off. Valuations are impacted
more for SBI Life (-115) as growth contraction has been higher than
expected. Valuation impact on listed parents is limited to <1% as
insurance contributes just 3-7% of our PT for coverage universe.
• Industry still under pressure: Volumes remain weak with higher than
expected premium contraction. NBAP margins would continue to
remain under pressure and higher service tax proposed in the budget
could further pressure margins. Also, under the current circumstances
with severe growth and margin concerns, we think passing of the
Insurance bill (higher FDI at 49% v/s 26% currently) would largely be
irrelevant.