The life insurance industry reported 10% growth year-on-year in annual premium equivalent (APE) in May. State-run Life Insurance Corporation of India (LIC) bettered the industry growth average by registering 16% year-on-year growth at Rs 2,494.7 crore, data from Kotak Institutional Equities showed.

Senior officials in the insurance industry say that in the first two months of the current fiscal, businesses have been weak, largely due to the holiday season and volatile equity markets.

“We don’t read much into growth rates of April-May as the first two months of the year tend to be weak and may not be indicative of any trends for the year, and the base for past two months was high with private sector individual APE up 86% in April 2017 and 46% in May 2017 from delayed benefits of demonetisation; overall growth in the next 10 months was lower at 21%,”says the report by Kotak Institutional Equities.

Other players like HDFC Standard Life Insurance, Reliance Nippon Life, SBI Life Insurance and Max Life Insurance continued to see positive APE growth.

“With equity markets being volatile we are witnessing more business from the traditional protection business. However we are witnessing a trend where individual single premium growth is more compared to individual non-single premium business,” said a top official from a leading insurance company.

According to the data from the Insurance Regulatory and Development Authority of India (Irdai), first year premiums in the first two months of current fiscal of life insurance companies surged by 7.08% at Rs 20,118.22 crore as against Rs 18,788.39 crore in the corresponding period last fiscal. According to the Kotak Institutional Equities report, “Moderation in capital markets and rise in interest rates will likely reduce the intensity of inflows into capital market financial savings—mutual fund inflows for the past two months have been stable at Rs 13,200-13,600 crore as compared to the peak of Rs 26,500 crore in August 2017.

We hence expect inflows into ULIPs to be moderate in FY2019E. Most large life insurance companies are increasingly balancing their portfolio and shifting a bit towards traditional policies.