Indian insurance sector off to a strong start in 2008, says Macquarie Research news
11 March 2008

The Insurance Regulatory and Development Authority (IRDA) released first year premium numbers for life insurers for January.

While Private sector sales continued to be robust at 119 per cent YoY, the month also saw LIC make up some lost ground by growing faster than the insurance segment at 133 per cent YoY.

According to Macqurie Research, theses numbers relate to individual policies. "We think the companies' group figures are inconsistent and do not add significantly to the valuations of the life insurance companies," its report on the sector said.
Private sector grows more than 100 per cent for the sixth consecutive month.

Private sector first-year weighted premium income (adjusted for singlepremium policy sales) grew 119 per cent YoY, up from 118 per cent YoY last month - the sixth consecutive month when private player sales have grown by more than 100 per cent.

Growth for cumulative April 07 - Jan 08 sales was 99 per cent, underscoring the industry's robust health. We believe that private sector growth will continue its strong momentum as distribution rolls out.

League tables - ICICI Prudential strengthens its position at the top. The league tables are largely unchanged However, ICICI Prudential strengthened its position at the top of the heap by increasing its market share by 4 per cent in the month. Among the larger players, Reliance, SBI Life and Birla Sun Life continued to be the rising stars with the fastest YoY growth rates (see Figure 5 ) we expect this trend to continue as all three companies are beefing up distribution very significantly.

Ticket size for the private players contracts but trend remains on the up.

Average premium per policy for the private players contracted by 11 per cent in January following the 10 per cent MoM growth the previous month. However, the trend for ticket size remains on the up.

Year to date, the average premium per policy has increased by 15 per cent for the private sector. "This is contrary to our expectations - we have been expecting ticket sizes to shrink as incremental growth is being driven by smaller towns and health products. We like this trend  (see Figure 6) however, because we believe larger ticket sizes are margin-accretive as they reduce processing costs," the report observes.

"We maintain our bullish view on the life insurance industry's growth prospects. We think that sector growth is being driven by fundamental changes in India's demographics and fills a serious gap in India's retail savings industry - especially given the lack of social security products in the country. As private player roll out distribution into the smaller towns, we expect the sector's strong growth to sustain."

While none of the life insurance companies are listed, the sector can be played through their listed parents.

"We think that the best plays on the sector are Reliance Capital, ICICI Bank, HDFC Ltd and Kotak Mahindra Bank," the report adds.

(See: India Insurance Eye: Strong start to 2008)

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Indian insurance sector off to a strong start in 2008, says Macquarie Research