29 April 2020 SECTOR UPDATE General Insurance - HDFC ... Insurance...29 April 2020 SECTOR UPDATE General Insurance HSIE Research is also available on Bloomberg ERH HDF &

29 April 2020 SECTOR UPDATE

General Insurance

HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters

Mar-20: GDPI declines due to Lockdown

Pvt. multi-line insurers’ Mar-20/FY20 GDPI grew -16.2/+11.7% YoY to Rs

67.1/911.8bn. Decline in Mar-20 was along expected lines as new policy sales

have declined as a result of the lockdown and renewals have been impacted

by the forbearance (until 15-May-20) given by IRDAI on premium payments,

and extra time (until June-20) allowed for claiming deduction under the IT

Act, for the purchase of health cover.

The risk of non-renewal of motor TP policies during the lock-down period

remains; some lapses may occur, while we expect most policies to be

renewed as lockdown is relaxed/ended. We expect premium growth to

recover as lockdown is eased. Overall for the year we expect companies to

enjoy higher underwriting margins on most segments except for health.

Investment incomes will get mildly impacted by lower float and interest

rates.

For Mar-20, motor OD/TP saw steep drops at 9.0/5.4% YoY, while health

premiums declined 10.7% YoY. Purchase of new retail health policies seems

to have fallen as prospective customers delayed buying decision due to the

additional 3 months granted for claiming IT benefit u/s 80D. SAHI’s

outperformed with a growth of 8.5% YoY.

With a long run-way of growth, improving regulatory environment, and

strong innovation opportunities, we remain positive on the general

insurance sector. Regulatory crack-down on motor TP pricing is key risk.

Growth: robust for Property, moderate for Health, and negative for motor.

Property (fire) segment reported robust Mar-20/FY20 growth at 12.5/35.3%

YoY; price hike mandated by GICRE is the key driver of growth.

Motor OD segment declined 9.0% YoY, as lockdown impacted new sales.

While BAGIC/ICICIGI/NIA reported declines of 26.8/12.0/19.5% YoY,

Acko/Go-digit continue to grow at -0.7/20.5% YoY, increasing market share.

Motor TP segment declined 5.4% YoY, as new vehicle sales slowed and

renewals were deferred. Newer players such as Acko/Go-digit/SBI continue

to grow ahead of market at 21.3/50.2/166.8% YoY. BAGIC/ICICIGI/NIA

reported declines of 24.7/21.2/14.7% YoY.

Health segment declined by 10.7% YoY in Mar-20. For FY20 growth was

tempered at +13.5% YoY. SAHIs maintained the growth momentum as GDPI

for Mar-20/FY20 was up 8.5/28.3% YoY.

Companies:

BAGIC: Declines across segments caused Mar-20 GDPI to fall 28.7% YoY.

ICICIGI: For Mar-20 GDPI (ex-crop) declined 16.1% YoY to Rs 8.0bn- as

motor OD and TP and health lines declined. We have a REDUCE on ICICIGI

with a TP of Rs 1,100 (Mar-22E P/E of 26.7x and a P/ABV of 4.4x). Company

currently trading at a FY21/22E P/E of 34.0/29.9x and P/ABV of 7.3/6.2x.

NIACL: Led by declines in health, and motor, Mar-20 total GDPI declined

21.1% YoY to Rs 20.1bn. We have a REDUCE on NIACL with a TP of Rs 111

(0.6x Mar-22E ABV (less 10% discount for expected 10.4% supply). NIACL is

currently trading at a FY21/22E P/E of 11.1/10.0x and P/ABV of 0.6/0.6x.

Company MCap

(Rs bn)

CMP

(Rs) Reco.

TP (Rs)

ICICIGI 560 1,231 SELL 1,100

NIACL 198 120 REDUCE 111

Madhukar Ladha

[email protected]

+91-22-6171-7323

mailto:[email protected]

Page | 2

General Insurance : Sector Update

Segment wise Industry GDPI and growth

Segments (Rs mn) GDPI

Mar-20 YoY (%) FY20 YoY (%)

Fire 11,683 12.5 158,836 35.3

Marine Cargo 1,485 -8.6 26,526 9.4

Marine Hull 702 54.3 8,664 6.0

Engineering 2,537 -1.0 26,349 6.7

Motor OD 20,521 -9.0 265,525 0.3

Motor TP 36,748 -5.4 426,556 12.3

Health 48,596 -10.7 516,378 13.5

Aviation 465 39.3 6,873 26.3

Liability 1,847 13.3 27,212 11.2

P.A. 3,744 -53.5 51,597 -4.5

Other Misc. (including crop) 30,270 -20.0 378,501 10.8

Total GDPI 158,598 -11.2 1,893,018 11.4

Industry GDPI (ex-crop) 128,328 -8.9 1,514,516 11.5

Source: GIC, HSIE Research

Private insurers GDPI declined 16.2% YoY in Mar-20

(Rs mn) GDPI

Mar-20 YOY (%) FY20 YOY (%)

Bajaj Allianz 7,277 (28.7) 127,798 15.6

Cholamandalam MS 3,699 (21.3) 43,983 (0.7)

HDFC ERGO 8,503 16.7 93,084 8.1

ICICI Lombard 7,438 (17.3) 133,129 (8.1)

IFFCO Tokio 6,195 (31.6) 79,610 13.7

Reliance General 4,751 (7.2) 74,650 20.6

Royal Sundaram 2,412 (14.8) 36,671 15.6

SBI General 5,716 (22.3) 67,970 44.4

Tata-AIG 5,305 (20.1) 73,871 (4.6)

Universal Sompo 2,553 97.0 28,591 1.0

Others 13,218 (20.2) 152,410 34.1

Private Insurers 67,066 (16.2) 911,766 11.7

National 16,374 (18.3) 151,790 1.0

New India 20,118 (21.1) 266,994 11.7

Oriental 13,611 (13.1) 136,631 3.1

United India 16,946 6.7 175,004 6.8

Public Insurers 67,049 (13.0) 730,419 6.5

General Insurers Sub Total 134,115 (14.7) 1,642,185 9.4

Aditya Birla 1,049 37.5 8,720 75.5

Apollo Munich 3,212 (6.3) 25,217 14.9

Cigna TTK 626 13.7 5,762 18.8

Max Bupa 1,583 15.7 12,429 31.2

Reliance (0) NA 60 NA

Religare 2,221 34.3 23,890 30.9

Star Health 9,989 4.6 68,624 26.8

SAHI Sub total 18,679 7.8 144,702 27.3

AIC (Crop) 5,065 85.9 95,379 32.9

ECGC (Export & Credit) 739 (50.2) 10,752 (13.8)

Specialized Insurers Sub Total 5,804 38.0 106,131 26.0

Grand Total 158,598 (11.2) 1,893,018 11.4


New policy sales and

renewals have declined as a

result of the lockdown.

During Mar-20, PSU

insurers performed better

than pvt. counterparts.

Page | 3


Motor OD GDPI decreased 9.0% YoY

(Rs mn) GDPI


Acko General 56 -0.7 673 145.1

Bajaj Allianz 1,513 -26.8 20,994 -0.2

Cholamandalam MS 850 -26.5 10,886 5.2

Go Digit 424 20.5 4,876 108.2

HDFC ERGO 1,194 -27.4 15,702 -4.0

ICICI –Lombard 2,873 -12.0 36,888 8.2

IFFCO –Tokio 1,445 -10.4 16,443 3.1

Royal Sundaram 932 -17.3 11,661 -5.2

SBI General 513 -13.7 7,531 25.6

Tata-AIG 1,628 -7.5 18,089 -3.4

Private total 14,939 -14.3 190,475 6.5

National 1,395 NM 18,935 -16.6

New India 2,142 -19.5 27,884 -7.5

Oriental 850 -37.4 12,019 -18.6

United India 1,195 -32.6 16,212 -10.8

PSUs 5,582 9.0 75,050 -12.5

Industry total 20,521 -9.0 265,525 0.3


Moto TP growth declined 5.4% YoY

(Rs mn) GDPI


Acko General 111 -3.9 1,515 216.6

Bajaj Allianz 2,455 -24.7 31,311 13.7

Cholamandalam MS 1,849 -23.8 21,560 9.7

Go Digit 1,584 21.3 14,204 129.0

HDFC ERGO 2,458 50.2 18,179 27.6

ICICI –Lombard 2,562 -21.2 30,989 2.8

IFFCO –Tokio 1,753 -8.9 18,824 13.0

Royal Sundaram 874 5.3 9,156 8.3

SBI General 573 166.8 8,155 157.8

Tata-AIG 1,923 -7.4 22,283 16.2

Private total 21,930 -4.2 247,531 21.7

National 3,087 207.1 38,438 0.4

New India 5,478 -14.7 61,354 5.2

Oriental 2,485 -23.2 30,015 -1.8

United India 3,768 -28.7 49,219 0.0

PSUs 14,818 -7.1 179,025 1.5

Industry total 36,748 -5.4 426,556 12.3


Acko/Go-digit continue to

grow at -0.7/20.5% YoY,

consolidating their market

share.

Steep decline witnessed as

new vehicle sales slowed.

The risk of non-renewal of

motor TP policies during

the lock-down period

remains.

HDFC Ergo and SBI

General have picked up

high market share most

likely by discounting OD

premiums.

Renewals have been

impacted by the

forbearance until 15-May-

20 granted by IRDAI.

Page | 4


Health: PSU multi post negative growth of 24.6%YoY

(Rs mn) GDPI


Acko General 141 228.0 961 226.6

Bajaj Allianz 1,301 -19.8 22,015 -5.8

Cholamandalam MS 253 -20.1 3,187 15.4

Go Digit 36 228.2 361 136.5

HDFC ERGO 959 -16.2 12,930 1.1

ICICI -Lombard 1,460 -18.1 28,303 16.0

IFFCO -Tokio 1,361 46.7 13,195 64.2

Royal Sundaram 327 -5.4 3,980 11.2

SBI General 716 1.4 7,437 44.6

Tata-AIG 828 26.9 10,257 28.1

Private total 9,515 -3.6 131,677 17.8

National 4,247 -66.8 52,445 -11.5

New India 6,569 -24.5 94,008 13.9

Oriental 5,473 73.3 46,458 17.2

United India 4,755 46.0 53,340 -0.8

PSUs 21,045 -24.6 246,251 4.7

Aditya Birla 944 38.8 7,555 78.4

Apollo Munich 3,102 -4.8 23,848 18.4

Cigna TTK 619 14.8 5,682 21.0

Max Bupa 1,515 13.7 11,790 28.9

Reliance Health 0 -101.6 60 46.2

Religare 2,070 39.2 22,317 32.7

Star Health 9,787 5.2 67,198 27.1

SAHI total 18,036 8.5 138,451 28.3

Industry total 48,596 -10.7 516,378 13.5


ICICIGI Segment wise GDPI and growth



Fire 425 36.9 15,502 42.9

Marine Cargo 137 -19.6 3,964 17.8

Marine Hull 6 55.6 882 -17.6

Engineering 178 2.4 3,136 10.1

Motor OD 2,873 -12.0 36,888 8.2

Motor TP 2,562 -21.2 30,989 2.8

Health 1,460 -18.1 28,303 16.0

Aviation 53 369.9 855 19.9

Liability 211 29.3 4,224 16.3

P.A. 120 -72.6 5,017 -5.2

Other Misc. (including crop) -586 2.3 3,370 -88.2

Total GDPI 7,438 -17.3 133,129 -8.1

GDPI (ex-crop) 8,024 -16.1 129,759 11.5


Purchase of new retail health

policies seems to have gotten

impacted as prospective

customers delayed buying

decision due to the additional

3 months granted for claiming

IT benefit u/s 80D.

SAHI’s outperformed with a growth of 8.5% YoY.

Motor OD, TP and health

witness steep drops.

EX. Crop GDPI for FY20

grows 11.5% YoY.

Page | 5


Key segments monthly GDPI trend for ICICIGI


BAGIC: Segment wise GDPI and growth



Fire 939 5.9 12,257 29.5

Marine Cargo 78 -27.7 1,660 10.2

Marine Hull 9 59.3 106 3.0

Engineering 125 8.1 1,527 8.1

Motor OD 1,513 -26.8 20,994 -0.2

Motor TP 2,455 -24.7 31,311 13.7

Health 1,301 -19.8 22,015 -5.8

Aviation 27 1,946.2 261 10.6

Liability 101 -19.3 3,268 5.4

P.A. 190 -30.9 2,734 5.1

Other Misc. (including crop) 539 -69.0 31,665 56.5

Total GDPI 7,277 -28.7 127,798 15.6

GDPI (ex-crop) 6,738 -20.5 96,132 6.4


Key segments monthly GDPI trend for BAGIC


Declines across segments

caused Mar-20 GDPI to fall

28.7% YoY.

.

0.3

3.9

1.0

1.1

1.0

0.8

0.7

1.4

0.8

1.3

2.0

1.0

0.4

3.3

2.8

2.8

2.5

2.5

2.5

2.7

4.4

3.9

3.2

3.6

3.1

2.9

3.3

2.3

2.2

2.1

2.1

2.1

2.7

3.6

3.4

2.5

2.7

2.6

2.6

1.8

3.5

2.3

1.9

2.2

2.2

2.1

2.2

2.3

2.3

3.4

2.3

1.5

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Ma

r-1

9

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-

19

Au

g-1

9

Sep

-19

Oct

-19

No

v-1

9

Dec

-19

Jan

-20

Feb

-20

Ma

r-2

0

Fire Motor OD Motor TP Health ICICIGI GDPI (Rs bn)

0.9

1.9

1.0

0.8

1.2

0.6

0.7

1.1

0.6

0.8

1.7

0.9

0.9

2.1

1.7

1.7

1.7

1.6

1.8

1.8

2.2

1.8

1.9

1.8

1.5

1.5

3.3

2.2

2.3

2.5

2.6

2.5

3.5

3.0

2.8

2.6

2.6

2.4

2.5

1.6

3.6

1.6

1.5

1.5

1.5

2.2

2.3

1.5

2.0

1.8

1.3

1.3

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Ma

r-1

9

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-

19

Au

g-1

9

Sep

-19

Oct

-19

No

v-1

9

Dec

-19

Jan

-20

Feb

-20

Ma

r-2

0

Fire Motor OD Motor TP Health BAGIC GDPI (Rs bn)

Page | 6


NIACL: Segment wise GDPI and growth



Fire 2,338 54.1 30,633 37.5

Marine Cargo 319 -8.1 4,317 9.7

Marine Hull 142 -41.7 3,044 -3.4

Engineering 696 -4.2 5,634 9.1

Motor OD 2,142 -19.5 27,884 -7.5

Motor TP 5,478 -14.7 61,354 5.2

Health 6,569 -24.5 94,008 13.9

Aviation 81 37.6 2,520 50.4

Liability 417 -2.9 4,662 9.4

P.A. 273 -78.5 3,451 -34.4

Other Misc. (including crop) 1,663 -47.0 29,486 31.6

Total GDPI 20,118 -21.1 266,994 11.7

GDPI (ex-crop) 18,455 -17.5 237,508 9.6


Key segments monthly GDPI trend for NIA


Motor and health

segments decline on

account of lockdown and

extension of timeline by

IRDAI for renewal

premiums.

.

1.5

5.0

2.8

2.1

1.6

1.6

2.2

2.6

2.6

2.2

3.2

2.3

2.3

2.7

2.4

2.4

2.3

2.2

2.1

2.2

2.5

2.2

2.7

2.4

2.3

2.1

6.4

4.4

4.7

4.4

4.7

4.9

5.7

5.5

4.9

5.1

6.0

5.6

5.5

8.7

12

.9

4.9

12

.1

5.6

6.3

9.9

5.2

7.1

10

.9

6.0

6.5

6.6

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Ma

r-1

9

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-

19

Au

g-1

9

Sep

-19

Oct

-19

No

v-1

9

Dec

-19

Jan

-20

Feb

-20

Ma

r-2

0

Fire Motor OD Motor TP Health NIA GDPI (Rs bn)

Page | 7


Disclosure:

I, Madhukar Ladha, CFA, author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect

our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also certify

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the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material

conflict of interest.

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Documents

29 April 2020 SECTOR UPDATE General Insurance - HDFC ... Insurance...29 April 2020 SECTOR UPDATE General Insurance HSIE Research is also available on Bloomberg ERH HDF &