Jio Financial Insurance: Citing media reports of Jio Financial Services’s (JFS) plans to enter the life and general insurance markets, global brokerage CLSA stated that it will be interesting to see the impact of JFS can have on industry pricing, even though the brokerage thinks that Jio Financial Services’ primary focus may be covering more lives.
“We do not have any detail on JFS’s plans regarding its broking business. However, its existent partnerships with 17 insurers means this business could be scaled up faster under Jio Financial Services,” the global brokerage said in its report.
According to media report, Jio Financial Services intends to submit applications for licences related to both life and non-Life insurance. The company has allocated a capital basis of Rs. 10 billion for each of the enterprises, according to media reports. An additional media piece said that both companies had commenced hiring, with a few former PSU officers joining Jio, as per CLSA report.
In India’s insurance market, there are more than 55 participants, of whom 26 are life insurers and 31 are general insurers (which also include five independent health insurers). Total premiums written in FY23 by Indian life insurer was US$98 billion and general insurers was at US$32 billion, as per the report.
Also Read: Jio Financials lists at ₹262 per share on NSE and ₹265 per share on BSE
Life insurance opportunity: more lives and protection a starting point
According to the brokerage’s report, life insurance is a long-term product, with premium and claim cash flows stretching over many years. Furthermore, there are a number of standards related to investments and products in this highly regulated sector.
“It has the ability to raise awareness for insurance as an investment product in deeper/wider geographies along with better pricing to improve protection penetration, and could be a key focus area for Jio. We estimate that an ₹10 billion net worth could a imply sum assured of about ₹1,200 billion- ₹1,800 billion, assuming 2.5x-1.5x solvency ratios. In comparison, SBI Life has a sum assured of ₹18 trillion as of March 2023,” said CLSA in its report.
Also Read: Jio Financial Services Listing Highlights: JFSL shares close at 5% lower circuit at ₹251.75 apiece on listing day
Non-life insurance opportunity: entry via group businesses possible
There are several separate subsectors within the general insurance industry, and each has a distinctive business model. The motor industry is quite competitive, and many new general insurers have found it to be a low-hanging fruit or a point of entrance. Health insurance is a business that is intense and takes time to scale, but it is also a compounding growth story with gradually increasing competition. The commercial segment is a high-ticket, reinsurer-dependent market that is driven by business partnerships.
“We believe Jio’s entry point could be corporate-relationship-driven segments such as group health and commercial insurance. We estimate that an Rs10 billion net-worth implies a gross premium size of about ₹25 billion- ₹35 billion. Assuming 2.2x-1.5x solvency ratios this is about 1/10th of ICICI Lombard’s FY23 premiums,” said the global brokerage in its report.
Also Read: Jio Financial Services share price hit 5% lower circuit for second straight session
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Updated: 22 Aug 2023, 09:07 PM IST
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