Intermarket Securities Limited hosted the annual corporate briefing session of Jubilee Life Insurance (JLICL) last week to discuss the company’s performance and outlook. To recall, JLICL posted 9MCY20 NPAT of PKR1.97bn (EPS PKR22.53), up 26%yoy, led by a rise in the net realized capital gains (PKR6.2bn vs. loss of PKR1.5bn SPLY). This helped offset lower premiums, which were affected by (i) Covid-related lockdowns and the resultant stress on disposable incomes, and (ii) a 24%yoy increase in insurance benefits (a large number of policies written a decade ago came in for maturity). That said, JLICL’s performance has recovered sharply post lockdowns, with net premiums rising 11%yoy / 29%qoq in 3QCY20.
Within JLICL’s premium segmentation, Individual Life Unit Linked contributes 59%, followed by Individual Family Takaful (21%), Accident & Health Business (14%), Conventional Business (4%) and Others. Accident & Health premiums witnessed a rise during Covid-19, while that of Individual Life Unit Linked and Family Takaful declined.
Reduction in purchasing power of customers has posed a challenge, not only in procuring new business but also on policy renewals, where customers are finding it difficult to maintain premium levels. JLICL has extended the grace periods for installments and expects this to smoothen in time.
Challenges emanated not just from Covid-19 (impact on the direct sales model), but also the new regulations with regards to AML/CFT guidelines that resulted in additional documentation and made customer acquisition difficult for the sales team. JLICL is fully compliant on AML/CFT guidelines and the sales team is well versed with the new requirements.
The PKR amount of policy surrenders will continue to increase due to the rising cash value over the period of the policy. While the amount of surrenders has increased, surrenders as a percentage of total fund value (policyholders’ cash value) has remained very stable at around 9-10% and is expected to remain stable at this level going forward.
The bancassurance business has suffered due to Covid-19, particularly life assurance. JLICL also took measures in bancassurance to improve the overall quality of the business and have decided to do business selectively. In the retail business (new policies only), bancassurance accounts for 75% of the total new business, though down from 85% pre-Covid. Business volumes are expected to increase going forward as new products are launched.
Banca commissions have been declining as the business evolves and the market becomes more competitive. The market mechanism along with regulatory supervision will continue to keep commissions in check.
JLICL launched three new plans: the Sehat Kafala Plan and Cancer Protection plans in 2019 and Ujala Insurance Plan in October 2020. JLICL continues to increase its direct sales force and also expects that post-Covid it could see an increase in business through a change in customer behavior (higher receptivity for insurance products).
JLICL is looking into new types of products i.e. traditional individual life products (with guaranteed investment returns), in contrast to unit linked products. These would require capital commitments due to requirements of high solvency margins. That said, JLICL’s financial strength and capital base is sufficient to support such initiatives.
Going forward, JLICL will continue to look into all distribution avenues including bancassuance, direct sales force and digital. On the investments front, REITs can be a potential avenue for deploying funds going forward.
Globally, IFRS-17 implementation has been delayed beyond 2021 (mainly due to HR and business constraints posed by Covid-19). However, JLICL is ready to meet the prescribed timelines as they emerge. IFRS-17 assesses the sources of income for an insurance company and uses an embedded value approach to determine the profitability of every policy sold by the company (over the lifetime of the policy). This approach also aims at deciphering and presenting any onerous contracts that the company might have sold (at their inception).