Profits of top 10 life insurers grows marginally in FY15-16

The top ten life insurers recorded a marginal growth of 2% in Profit after Tax (PAT) in FY15-16. The combined net profit of the these insurers stood at Rs. 7,423 crore in FY 2015-16 as against Rs. 7,267 crore in the corresponding period last year.

The increase in profitability was primarily due to increased sales of traditional policies, especially by LIC, said experts. Among the top ten insurers in terms of AAUM, seven life insurers saw an increase in profits.

Typically, profitability is a function of underwriting efficiencies and building good renewals. Higher persistency and more efficient underwriting can lead to higher profitability.

Kapil Mehta of Secure Now Insurance Broker attributes this growth to increased persistency ratio of the industry. He says that the retention rate of life insurance policies has increased slightly last fiscal. Persistency rate is the rate of renewal of insurance policies. It measures the number of policies retained in the books of insurers and reflects the insurer’s practices in selling different products. In addition, Mehta points out that a majority of profits have come from investments. “In FY 2015-16, RBI has cut interest rates several times. This has helped insurers to book profit on their debt investments.”

State owned LIC has overtaken ICICI Prudential once again and emerged as the most profitable life insurer for the third consecutive year. LIC’s net profit increased from Rs. 1,824 crore in FY14-15 to Rs. 2,518 crore in FY 2015-16, clocking a 38% growth. A Mumbai based financial advisor attributes this growth to strong agency penetration and good track record of LIC. According to him, LIC has opened some new branches in small cities which helped the insurer collect good premiums from these areas.

Barring LIC and Kotak Mahindra Life, no private insurer among the top ten witnessed double digit growth in profits. Kotak posted a growth of 10% PAT at Rs. 251 crore as against Rs. 229 crore in its preceding year.

ICICI Prudential’s PAT for FY 2015-16 stood at Rs. 1,650 crore, a marginal increase of 1% from the previous year at Rs. 1,634 crore. ICICI Prudential Life had the distinction of being the most profitable insurer in FY 2011-12 and FY 2012-13.

HDFC Standard Life recorded a growth of 4% by clocking a net profit of Rs. 818 crore as against a net profit of Rs. 786 crore in FY 2014-15. Similarly, SBI posted a growth of 5% in PAT at Rs. 861 crore against Rs. 820 crore in its preceding fiscal year.

Other life insurers like Birla Sun Life and Tata AIA witnessed a decline in profitability. Birla Sun Life’s profit declined from Rs. 285 crore in FY 2014-15 to Rs. 140 crore in FY 2015-16. Tata AIA Life’s PAT too declined from Rs. 264 crore in FY 2014-15 to Rs. 64 crore in FY-2015-16. Reliance Life recorded a net loss of Rs. 246 crore in FY15-16, as against a net profit of Rs. 135 crore in FY14-15.

Profits of top ten insurers

Source: Company websites