How Second Covid Wave Hurt ICICI Pru, SBI Life And HDFC Life In Q1

Life insurers’ revenue and profit tumbled in the first quarter as they set aside more provisions against anticipated claims from the deadlier second Covid wave in India.

ICICI Prudential Life Insurance Co. saw the biggest sequential decline at 50% in new business premium in the quarter ended June, followed by SBI Life Insurance Co. and HDFC Life Insurance Co.’s 46% and 43% fall, respectively.

While ICICI Pru reported an operating loss and a net loss for the quarter, HDFC Life and SBI Life witnessed a fall in operating and net profit.

“We saw business disruption during the second wave of Covid,” HDFC Life’s management said in an earnings call. “While the economic restrictions were fewer and more localised as compared to the first wave, the health impact was a lot more devastating this time across the country.”

The three insurers also provided for Covid-linked claims during the quarter.

  • ICICI Pru Life set aside Rs 670 crore for additional claims and Rs 498 crore for future claims. Net claims due to Covid-19 stood at Rs 500 crore in the first quarter.

  • HDFC Life set aside excess mortality reserve of Rs 550 crore, while its net claims due to Covid-19 were Rs 155 crore.

  • SBI Life set aside Rs 440 crore as additional Covid reserves and reported net Covid claims of Rs 570 crore.

SBI Life’s growth was led by higher proportion of market-linked plans or Ulips compared with ICICI Pru Life that has a higher proportion of annuity and protection products. HDFC Life, in its earnings call, said its balanced product mix with credit protect and annuity business registered growth.

In first quarter, the growth in premiums, though muted, was driven by unit-linked products and protection plans, CARE Ratings Ltd. said in its report.

“Linked insurance products tend to have a lot of competition from various other non-insurance instruments such as mutual funds,” Nirmal Bang in its its note. “However, there is hardly any substitute for long-term insurance products which seek to address the risk of loss of life (term protection) and risk of loss of income/longevity risk (annuities, guaranteed products).”

While HDFC Life is going about in a calibrated manner in expanding its protection business, ICICI Pru Life is focused on increasing the share of this segment, the companies said in their earning calls.

“We remain curious about the difference in approach between the two large private insurers (ICICI Pru and HDFC Life) toward group protection,” Emkay Global said in a note.

Business models focusing on such opportunities have a structurally stronger growth path going ahead, according to Nirmal Bang. While unit-linked plans would continue to remain a substantial part of the overall product portfolio, the brokerage expects its share to fall gradually.


SBI Life and HDFC Life saw persistency ratio fall for the thirteenth month, suggesting customers discontinued policies in the second year. All three listed insurers saw the ratio rise for 61st month.

Despite the companies providing for mortality claims arising on account of Covid, the solvency margins were 203%, 215% and 193.7% for HDFC Life, SBI Life and ICICI Pru, respectively. That’s well above the statutory requirement of 150%.

While SBI Life has highest total assets under management, HDFC Life registered the fastest sequential asset growth at 6.2%, followed by SBI Life’s 5.3% and ICICI Pru’s 4%.

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