Life insurance premium growth slowing down faster than expected

As per IRDA, new business premium collection (individual non-single premium and 10% of individual single premium) for the industry declined 8.4% in April-January 2009.

LIC has shown degrowth of about 26.3% in individual new business premium collections for the period April 2008-January 2009 against about 10.9% yoy new business growth posted by the private sector.

Among stocks under our coverage, HDFC Standard Life has posted muted growth of 13% for the April-January 2009 period compared to our estimate of 35% growth for FY09. ICICI Prudential posted degrowth of about 14.7% for the same period compared to our expectation of 20% for FY09. SBI Life Insurance posted about 28% growth for April- January 2009 compared to 50% yoy growth estimated for FY09. However, note that our growth estimates are on weighted premiums (including individual premiums).

Historically, the life insurance business is back-loaded in the January-March quarter and we can thereby expect a reasonable firming of growth rates. However, given the slowdown witnessed in industry due to the steep decline in the sale of equity market linked products, we expect the growth rates to come at below our estimates.