Life insurance growth drops to 4%

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Life insurance players are also feeling the heat of the crash in the stock market, since they are highly dependent on equity linked schemes for premium income.

The industry has reported mere 4% growth in new business collection during the first half of FY 09 (Apr-Sep 08).

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In the first half of FY09, the industry has managed premium collection of Rs 34,599 crore against Rs 33,159 crore collected in the same period of previous year, which shows just 4% growth. During first half of FY08, it has recorded 12% growth in premium income as against 162% growth in the same period during FY 07.

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The first year premium collection of Life Insurance Corporation (LIC) has fallen by 16% to Rs 19,091 crore during Apr-Sep, 08 against the figure of Rs 22,761 crore during the corresponding period last year.

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"Considering the sustained downturn in equity markets, weak outlook and dependence on ULIPs for premium income, we have cut our growth expectations sharply for all the players," said Manish Karwa, analyst, Motilal Securities Ltd. Around 40% of total annual premium collections take place during the fourth quarter of every year and first half of the year accounts for less than 40% of annual collections.

However, following the market meltdown, the insurance companies would also find it difficult to maintain their growth momentum in the second half of the fiscal, said Karwa. In FY08, the industry has managed 23% growth with premiums of Rs 92,989 crore while the growth rate for FY07 was 110%.

Situation is not different for private players, too. Falling equity markets have also dented their premium collections. However, they have managed to outperform their public sector counterparts. During the first half of the current fiscal, these companies have posted 49% growth in premiums income to Rs 15,508 crore against Rs 10,398 crore recorded in the corresponding period last year.

Reliance Life is the best performer among all the private players with 126% growth in premium collections to Rs 1,473 crore followed by Kotak Life and SBI Life, which have managed growth rate in excess of 100%. Bajaj Allianz was the only private sector company, which has reported negative growth in premium collections to Rs 2,016 crore against Rs 2,271 crore previously.

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Figure of premium collections by Kotak Life stands at Rs 925 crore, which is 98% higher than Rs 467 crore it managed in the corresponding period last year.

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