Overview of Life insurance industry. Date :

Size: px

Start display at page:

Download "Overview of Life insurance industry. Date :"

Constance Lucas
5 years ago
Views:

1 Overview of Life insurance industry Date :

2 INDEX 1. Meaning 2. Glossary 3. Type of Life insurance 4. How they earn 5. Industry evolution 6. World Data 7. Domestic Data 8. Risk 10. Data about major private life insurers 11. Annexure

3 1 Meaning

4 Life Insurance : Life Insurance Business means the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on or the happening of any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent on human.

5 2 Glossary

6 Term APE (Annualized Premium Equivalent) Bonus (to policyholders) Expense of Management Embedded Value (EV) Description APE (Annualized Premium Equivalent) is the sum of annualized first year premiums on regular premium policies, and ten percent of single premiums, on the new business written during any period from both our individual and group customers. The APE is adjusted for any new business cancellations effected during the period. The non guaranteed benefits added to a participating policy and represents the share of surplus distributed to the policyholders Cost or total cost refers to total expenses including commission and including provision for doubtful debts and bad debts The measure of the consolidated value of shareholders interest in the existing life insurance business. It represents the present value of shareholders interests in the earnings distributable from the assets allocated to the business after sufficient allowance for the aggregate risks in the business and is generally expressed as a sum of Adjusted Net worth and Value of In-force of business. Embedded value determined as per the requirements and principles prescribed in the Actuarial Practice Standard 10 issued by the Institute of Actuaries of India is referred to as Indian Embedded Value.

7 Term Description Persistency Ratio The ratio of policies remaining in force to all policies issued in the period 13 month/25 month etc, prior to the date of measurement and is referred to as 13th month/25th month persistency etc It is the percentage of policies that have not discontinued paying premiums or surrendered. It can be measured in terms of number of policies or in terms of premium. Value of new business (VNB) and VNB margin VNB is the present value of expected future earnings from new policies written during any given period and it reflects the additional value to shareholders expected to be generated through the activity of writing new policies during any given period. VNB for any period reflects actual acquisition costs incurred during that period VNB margin is the ratio of VNB to APE for any given period and is a measure of the expected profitability of new business

8 3 Type of Life Insurance

9 Participating Participating Life Insurance Participating Pension Term Insurance Types of insurance Non- Participating (Non Linked) Health Insurance Endowment Linked Pension Annuity Non Participating (Unit Linked) Linked Life Linked Health

10 4 How they earn

11 Depends on Bonus Declared to policy holders on annual basis. 1/9 th of the bonus is transferred to shareholders Participating Product Non Participating (Non linked) Profit arise from premium and income from investments Profit Primarily arise from charges levied on the policyholders funds net of expenses & claims Non Participating (Unit Linked) Health insurance Same like medicaim

12 5 Industry Evolution

13 IRDA Establishment Insurance industry privatised once again 26% FII permission in equity Major changes in regulation of linked and nonlinked products(reduction in commission, cap on surrender charges, increase in lock in period) Licencing of Bancassurance agents % FII permission in equity Corporate agents allowed to tie up with more than one player

14 6 Story in Chart- World Insurance Data

15 WORLD LIFE INSURANCE MARKET Life insurance market Share Population Share 3% 8% 23% 8% 2% 16% 1% 1% 10% 38% 33% 58% ASIA LATIN AMERICA NORTH AMERICA AFRICA OCEANIA EUROPE

16 LIFE INSURANCE PREMIUM MARKET SHARE Advanced economies Emerging economies 3% 7% 18% 97% 93% 82%

17 16.7% 16.2% LIFE INSURANCE PENETRATION AS % OF GDP 7.2% 7.6% 7.4% 6.1% 5.5% 4.7% 3.7% 3.0% 3.5% 3.2% 3.0% 2.8% 2.7% 2.3% 2.3% 0.6% 0.5% 0.3% 11.5%

3700.03 3598.70 3033.30 2894.50 2803.00 LIFE INSURANCE DENSITY IN US$ 2227.00 2049.

18 LIFE INSURANCE DENSITY IN US$

19 7 Story in Chart- Domestic Insurance Data

20 48.10% 51.80% 51.50% 49.50% LIFE INSURANCE COVERAGE SUM ASSURED AS % OF GDP 49.40% 47.40% 59.00% 60.50% 62.60% 63.20%

21 LIFE INSURANCE PREMIUM HISTORY Rs. In Bill Renewal Premium New Business Premium Total Premium Expon. (Total Premium)

22 35% TOTAL PREMIUM GROWTH( YOY %) 30% 25% 20% 15% 10% 5% 0% -5% 29% 19% 14% 11% 10% 12% 9% 5% -1% 0%

23 PREMIUM PROFILE Non Linked Linked 36% 46% 41% 44% 37% 24% 17% 12% 13% 13% 13% 64% 54% 59% 56% 63% 76% 83% 88% 87% 87% 87%

24 PRIVATE PLAYER-MIX Linked Non Linked 17% 12% 13% 14% 21% 35% 46% 55% 55% 55% 56% 83% 88% 87% 86% 79% 65% 54% 45% 45% 45% 44%

25 TREND IN MARKET SHARE-INDIVIDUAL WRP PREMIUM LIC Private Sector 64% 36% 50% 57% 43% 52% 48% 54% 46% 63% 62% 62% 37% 38% 38% 51% 49% 52% 54% 48% 46%

26 INDUSTRY MARKET SHARE TOTAL PREMIUM 5% 5% 9% 3% 2% 5% 72% LIC ICICI Pru Life HDFC Standered SBI Life Max Life Bajaj Allianz Others

27 5% 4% 10% 2% 2% 6% INDUSTRY MARKET SHARE NBP 71% LIC ICICI Pru Life HDFC Standered SBI Life Max Life Bajaj Allianz Others

28 PRIVATE PLAYER-MARKET SHARE TOTAL PREMIUM 32% 5% 9% 18% 19% 17% ICICI Pru Life HDFC Standered SBI Life Max Life Bajaj Allianz Others 18 Players

29 PRIVATE PLAYER-MARKET SHARE NBP 34% 16% 17% ICICI Pru Life HDFC Standered SBI Life Max Life Bajaj Allianz Others 18 Players 6% 7% 20%

30 8 Risk

31 Changes in regulations Variation in persistency experience Interest rate fluctuations Concentration Risk

32 9 Data of Major Private Sector Life insurers

33 Business Performance Data of Key Private Players Click Here : This document contains comparative analysis of five biggest private sector life insurers of India

34 10 Annexures

35 Sources of information : 1. IRDA 2. Company Reports 3. Swiss Re Reports

36 Basic Premium Calculation Table :

37 Commission structure for regular premium based insurance products linked and non-linked : Premium paying Terms Maximum Commission or Remuneration in any form as % of premium 1st Year years or more Renewal Premiums

38 Brochure of ULIP Policy : Click here to see the PDF of brochure *Just for illustrative purpose only.

39 Sample of financial statement of Life insurance company: Click here to see the PDF of brochure

40 Disclosure: I,/We, Jasmin Akbari authors and the names 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. CSPL has no material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research Analyst or his/her relative or CONCEPT Securities Pvt. Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or CONCEPT Securities Pvt. Ltd. or its Associate does not have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or CONCEPT Securities Pvt. Ltd. or its associate does not have any material conflict of interest. CONCEPT Securities Pvt. Ltd. (CSPL) is a SEBI Registered Research Analyst having registration no. INH Disclaimer: This report has been prepared by CONCEPT Securities Pvt. Ltd. and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject CSPL or its affiliates to any registration or licensing requirement within such jurisdiction. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. CSPL may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. CSPL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. CSPL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. CSPL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report. CSPL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither CSPL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. CSPL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the Subject Company or third party in connection with the Research Report. This report is intended for non-institutional Clients only. The views and opinions expressed in this report may at times be contrary to or not in consonance with those of Institutional Research or PCG Research teams of CONCEPT Securities Pvt. Ltd. and/or may have different time horizons CONCEPT Securities Pvt. Ltd., SEBI Reg. No.: NSE-INB , BSE-INB , SEBI Research Analyst Reg. No.: INH , CIN - U25199GJ1995PTC024306

SBI Life Insurance Company

SBI Life Insurance Company Industry Life Insurance CMP Rs. 689.25 Recommendation Buy at CMP and Add on Dips Add on dips to Rs. 689-642 Target Rs. 840 Time Horizon 4 Quarters HDFC Scrip Code SBILIF BSE Code 540719 NSE Code Bloomberg