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  • Insurance: Expects capital allocation and consolidation of public sector general insurers

    The first-year premium income of the life insurance sector surged 37.5% to Rs 25079.79 crore in December 2019. The private life insurers reported 13.4% increase in the premium collection at Rs 8217.81 crore, while Life Insurance Corporation (LIC) showed 53.4% jump to Rs 16861.98 crore in December 2019.

    During April-December 2019-20, the private insurers reported 20.8% rise in the first-year premium income to Rs 57296.08 crore, and LIC posted 45.6% spike to Rs 137034.91 crore. The overall life insurance first year premium collection increased 37.3% to Rs 194330.99 crore in April-December 2019-20.

    Among the 22 private life insurers, 8 players have recorded drop in new premium collection during December 2019. On the other hand, premium collection of 14 private insurers increased in the range of 1.1% to 69.5% in December 2019.

    Among the private life insurers, the premium collection of SBI Life jumped 19.0% to Rs 2071 crore, followed by Kotak Mahindra Life at 69.5% to Rs 583 crore, ICICI Prudential Life 16.1% to Rs 1112 crore and Tata AIA Life 41.0% to Rs 399 crore in December 2019.

    The premium collection of Max Life also moved up 22.1% to Rs 637 crore, HDFC Life at 5.8% to Rs 1504 crore, PNB Metlife Life 23.3% to Rs 199 crore and Bajaj Allianz Life 8.5% to Rs 418 crore in December 2019. Further, the premium collection of Canara HSBC Oriental Bank Of Commerce Life gained 28.7% to Rs 147 crore, Star Union Dai-Ichi Life 26.2% to Rs 106 crore, Exide Life 31.9% to Rs 88 crore, Reliance Nippon Life 15.3% to Rs 114 crore, Shriram Life 22.8% to Rs 77 crore and Edelweiss Tokio Life 1.1% to Rs 44 crore in December 2019.

    However, the premium collection of Aditya Birla Sun Life declined 23.7% to Rs 319 crore, IDBI Federal Life 54.0% to Rs 48 crore and Pramerica Life also fell 46.6% to Rs 40 crore, Indiafirst Life 14.6% to Rs 156 crore and Future Generali India Life 22.5% to Rs 59 crore in December 2019.

    Sales of life insurance policies

    The life insurers sold 26.48 lakh policies in December 2019, registering a rise of 5.3% compared over December 2018. The private players together posted 4.0% growth to 7.59 lakh policies, while the policies sold by LIC moved up 5.8% to 18.89 lakh policies.

    Life insurers have sold 205.76 lakh policies in April-December 2019-20, showing an increase of 14.2% against last year. The sales of policies from LIC jumped 17.8% to 155.64 lakh policies, while all private players together sold 50.11 lakh policies, recording an increase of 4.3%.

    Among private life insurers, the policy sales of Tata AIA Life increased 49.8% to 0.56 lakh, followed by SBI Life 10.0% to 2.00 lakh, Canara HSBC Oriental Bank of Commerce Life 60.4% to 0.22 and Shriram Life 40.4% to 0.28 lakh. Further, the policy sales of Indiafirst Life moved up 30.2% to 0.18 lakh, Edelweiss Tokio Life 27.6% to 0.09 lakh, Max Life 2.5% to 0.63 lakh and Kotak Mahindra Life 3.0% to 0.40 lakh, while that of Bharti Axa Life also gained 5.2% to 0.15 lakh, Exide Life 3.0% to 0.19 lakh, Aviva Life 3.7% to 0.02 lakh in December 2019.

    However, the policy sales of IDBI Federal Life declined 66.0% to 0.03 lakh, ICICI Prudential Life 6.7% to 0.80 lakh, Aegon Life 72.4% to 0.02 lakh, Reliance Nippon Life 18.7% to 0.19 lakh, Aditya Birla Sun Life 11.4% to 0.27 lakh in December 2019.

    Non-life insurers posts strong growth in premium collection

    The gross premium underwritten by non-life insurers (including specialized PSU insurers), increased 11.5% to Rs 15981 crore in December 2019 against December 2018. General Insurers reported rise of 4.0% in premium collection to Rs 14038 crore in December 2019, while premium collection of Stand-alone Private Health Insurers increased by 16.3% to Rs 1258 crore in December 2019. Specialised PSU insurers have recorded premium collection to Rs 685 crore in December 2019.

    The non-life insurance sector reported 15.4% increase in the premium collection to Rs 142024 crore in April-December 2019-20.

    Among the general insurers, the public sector general insurers have posted 11.2% growth in the gross premium underwritten to Rs 6342 crore, while that of private sector general insurers declined 1.3% to Rs 7696 crore in December 2019.

    Among, public sector insurers, New India Assurance Company posted 13.3% growth in premium collection to Rs 2740 crore, followed by United India Insurance Company at 23.2% to Rs 1590 crore, National Insurance Company 1.4% to Rs 952 crore and Oriental Insurance Company 0.2% to Rs 1060 crore in December 2019.

    Among, private sector general insurers, Bajaj Allianz General Insurance Company posted 25.7% growth in premium collection to Rs 1255 crore, followed by Go Digit General Insurance at 144.9% to Rs 229 crore, Royal Sundaram General Insurance Company 36.9% to Rs 356 crore and Bharti AXA General Insurance Company 52.4% to Rs 246 crore in December 2019.

    The premium collection of Reliance General Insurance Company also moved up 19.8% to Rs 506 crore, Future Generali India Insurance Company 34.1% to Rs 272 crore, Liberty General Insurance 41.5% to Rs 114 crore, Shriram General Insurance Company 4.2% to Rs 198 crore and IFFCO Tokio General Insurance Company 0.4% to Rs 622 crore in December 2019.

    However, the premium collection of Tata AIG General Insurance Company declined 49.0% to Rs 551 crore, Universal Sompo General Insurance Company 19.7% to Rs 629 crore and SBI General Insurance Company 20.5% to Rs 400 crore, while that of HDFC Ergo General insurance Company declined 8.2% to Rs 674 crore, Cholamandalam MS General Insurance Company 10.1% to Rs 332 crore and ICICI Lombard General Insurance Company 2.9% to Rs 1104 crore in December 2019.

    Among the health insurers, the premium collection of Star Health & Allied Insurance Company gained 10.5% to Rs 580 crore, Apollo Munich Health Insurance Company 16.2% to Rs 224 crore and Aditya Birla Health Insurance Company 48.2% to Rs 90 crore, while that of Max Bupa Health Insurance Company also moved up 32.2% to Rs 114 crore and Religare Health Insurance Company 11.8% to Rs 204 crore in December 2019.

    Among the specialised insurers, the premium collection of Agricultural Insurance Company of India gained to Rs 587 crore, while that of Export Credit Guaranteed Corporation of India declined 10.0% to Rs 98 crore in December 2019.

    Industry Expectations:

    Enhanced deduction of Life Insurance Premium: Section 80C of the Act basically provides for a deduction up to Rs 150,000 for investments made in various savings instruments such as mutual funds, bank deposits along with long term savings in life insurance plans, pension plans, etc. Various other expenditures like tuition fees etc have also been included. Due to such inclusion, share of investment for allowable deduction is reduced to large extent. In order to encourage growth in the life insurance segment it is recommended that the Government should increase the limit of deduction for life insurance premium/by creating a separate limit for deductibility of life insurance premium.

    Extension of carry forward and set-off of losses period: The insurance industry has a long gestation period and it takes a long time to achieve a break-even. Accordingly, the limit of 8 years for carry forward and set off of business losses is not sufficient, which needs to be extended to indefinite period.

    Increase tax exemption limit for health insurance: An increase in tax exemption limit for health insurance segment would benefit the sector. The waiver of service tax on health insurance premium would be positive for insurance industry

    Roadmap on corporate tax rate on life Insurance companies: The government may hike tax rate for insurance companies and provide some details on the timelines of tax rate increase on life insurance companies. It will be overall negative for life insurance businesses operating at lower tax rates. An increase in tax rate from current 15% will impact EV and VNB of life insurers.

    Exemption of insurance policies from GST: After the implementation of GST, the prices of insurance products have gone up. Abolition of GST will give a strong boost. Life insurance penetration is low in India and GST of 18% on insurance premium is a drag.

    Roadmap for consolidation of PSU general insurance companies: The government has infused Rs 2500 crore in the three insurers - National Insurance, Oriental Insurance and United India Insurance - through first supplementary demands for grants for 2019-20. There could be potential announcement around roadmap of consolidation of PSU general, which will be positive helping to build efficiencies

    Higher coverage under Fasal Bima Yojana: Government may announce the details around increasing the coverage under PMFBY, which will be positive for general insurance companies as this will provide additional trigger for growth.

    Higher FDI: An increase of FDI limit in insurance sector from the existing 49% would allow capital flow in the sector. Also, the transmission of best practices from foreign partners would benefit insurers.

    Key stocks to watch

    ICICI Prudential Life Insurance, HDFC Standard Life Insurance, SBI Life Insurance, New India Assurance, General Insurance Corporation

    Outlook

    There is significant need to enhance insurance penetration in India. The insurance industry has continued to demand separate limit of deduction for life insurance premium. There is a need for providing further impetus to life insurance companies for enhancing the insurance penetration in the country. In the general insurance segment, the announcement on capital allocation and consolidation of public sector general insurers is likely in the budget.

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