HDFC Life Insurance Company

(ashit) #45

Detail interview of Padalkar



I recently presented on HDFC Life at an informal meet. Please find the presentation attached:

HDFC Life.pdf (1.3 MB)

Disc: Content is for educational purpose only and not a recommendation to buy/sell.


I am still trying to understand the various business terms of a life insurance company, hence have a lot of queries. To start with, can anyone confirm / correct my understanding as given below (data from HDFC LIFE H1 FY19 Investor presentation)

  1. Linked plan:
    I understand this as a plan that offers both life cover & investment option (of policyholder’s choice) where a part of premium goes for life cover and the rest (minus charges) is invested in debt/equity as per choice and kinda functions like a mutual fund. And only the life cover is guaranteed and the rest is market linked. Best example is ULIP. But what would be a non-linked plan? Is it any plan that doesn’t give an investment choice to policyholder (unlike ULIP)?

  2. Participating plan:
    I understand this as a plan where apart from guaranteed benefit there are additional bonuses involved. How is the premium invested by the insurance company to give returns? And ULIP cannot be a participating plan because ULIP does not pay bonuses?

  3. Protection plan:
    I understand this as a pure term insurance plan where there is no survival benefit. Can an endowment plan be considered a protection plan even when it offers survival benefit?
    Is a linked plan (like ULIP) considered a protection plan as well as it has a life cover also? Are there any other plans (apart from pure term insurance ones) that come under protection plan?

And in the chart below, may I know how the protection % (shown as 29%) calculated?


(CommonStocks) #49

H1FY19 Results - Conference call summary

  • Overview
    • H2 is usually stronger than H1
    • Market share among private sector life insurers at 21.2% up from 18.5% in HYFY19
    • Renewal premium grew at 18%
    • Industry leading NBM of 24.3%
    • PAT grew at 20%
    • Margin at 24.3% vs 22.4% last year
    • Embedded Value grew from 152B to 164B rupees
    • AUM grew by 14%
    • Focus remains on profitable growth both on channel and product basis
    • If market weakness were to sustain for a longer term it might adversely impact the velocity of flows into market link products
    • Balanced product mix should help weather the storm
    • Succession plan helped smooth transition of change in leadership
  • Distribution
    • Remain focussed on deepening distribution footprint
    • Open architecture (Bankassurance) to grow in line with industry growth; Recently tied up with Vijaya Bank, talking to another leading PSU bank.
    • Proprietary channel remains strong
    • Agency channel has grown at 26% in H1FY19; Total of 91K agents (14K added in H1FY18, highest among all insurers)
    • Direct channel which includes online platform are by 36% YoY in H1FY19
  • Product Performance
    • Focusing on mortality, mobility and longevity
    • APE Breakup between ULIP, Par and Non Par 59%, 23% 18% respectively
    • Foray in Annuity business doing well
    • Speculation on impact on margin and loss of partner tie up
    • Diversified across partners with HDFC group contributing 28% and no single partnership contributing more than 10%
    • Launched last quarter couple of products, deferred annuity product, single premium unit linked product both doing well
  • Tech and Operations
    • Self service box and insta serve providing real time fulfilment
    • Digital tool box for sales force
    • Pre approve sum assured on partner websites and app
  • Group Companies
    • HDFC Pension management company with AUM of 34B rupees
    • Market share grew from 21.4% to 24%
    • HDFC Internation Life recorded 2nd consecutive profitable quarter this year
  • Q&A
    • Aadhaar SC verdict effect - Setback for entire financial services, helped on-boarding and risk management. A good thing to happen would be If there is customer consent we should be able to ping aadhaar data and we are hopeful of that happening.
    • HDFC Bank partnering with 2 other life insurers - Might effect certain product category, but also helps us to work with new ecosystem. Penetration is quite low, lot of scope for us to grow the pie. Even with HDFC bank clear objective is to increase the overall pie. I would think initially there will be some impact over a period of time the bank itself will show a higher growth.
    • As compared to the other 2 insurer’s products that HDFC bank has started selling, we believe there is no product that is significantly better than us.
    • Have seen tax reversal, this depends on amount of dividend we received in the quarter, dividends act as a natural tax hedge
    • Have sold more pension annuity, that also has 0% tax
    • 13th month persistency ratio has improved for all cohorts
    • 61st month persistency has gone down - this is because of a particular cohort, subsequent cohorts are doing well. This should improve as that particular cohort exits the system.
    • Fixed costs are coming down, we should see in the near term reduction in headcount, faster TAT and process improvements
    • Don’t see any big ticket impact with whatever is happening in the market with NBFCs. Nothing material.
    • 96% of our debt instruments are in AAA rated instruments and government bonds
    • Growth in renewal business premium is 18%, while new business premium was at 43%. Renewal business has a dependency on as to how we grew couple of years ago. In the year of demonetisation we grew at flat growth for key distributors and over all growth was 9%, this had knock on effect. We also did some single premium products which might have contributed.

(Akash03) #50

Why company is paying less dividend as compared to its net profit?

(Naveen) #51

(eshwar) #52

(Mahendra243) #53

I dont think the results are bad…seeing the stock at almost 52 weeks low is something which is quite strange though the valuations are stretched and when has the promoter has to bring down the holding to 75% currently it is at 80%…that may cause some pressure too…If anyone had any take on valuation what would be the best price to add more…given that insurance is still under penetrated in India

(sumit680) #54

At the time of IPO, shares were sold at an EV of 4.2…so that should be the higher limit of correct valuation range because promoters who have a reputation for being honest sold their company at that price…
With the latest EV of 17400 cr, and EV of 4.2 , share price comes to at 362…

So that can be suitable entry followed with buy on dip…that’s my simple take…best price will be 25-30 pcnt lower than 362…i.e below 275…


Well, there is a segment of market which believes that Nifty is heading to 9k+ levels. This could trigger another round of ULIP exits etc. This may or may not materialise but the risk might be priced slowly. I think non-life insurers remain better bet on risk reward basis. Let’s face it, life ins companies have been finding it tough to sell high value pure term policies. I talk to folks in my circle and I don’t see any urgency to jack up their term plan coverage to 10x annual income. That will be the biggest driver whenever it comes. I think as general population becomes wealthy they would need policies to protect their wealth through health, accidental home/fire etc.

(eshwar) #56

@drgrudge, @bvr007 Looking at the last one year data from IRDAI, individual single premium is contributing more to HDFC life’s premium. So, to grow in future they have to acquire more individual customers than this year. How do you see this play out in future? Why HDFC life is not able to get good growth in Individual Non-Single Premiums? Please share your thoughts

(pennywise) #57

Nice dataset ! How are you getting it ? When I go to the IRDAI website I cannot find it in any folder. I wanted to check it historically.


Here it is…

(sko5prasad) #59

In my opinion, Non-Life Insurance Industry is more of a long term structural story. Every now and then institution do play as catalyst to make it stronger or weaker. Like recently SC made 3 year motor insurance mandatory. Whereas mindset of larger population has to be made aware about importance of life insurance for their near ones. Though Life Insurance is plagued by its own problem like mis-selling, selling for commission. Term Insurance will pick at its own time to become leader in their product portfolio. In that scenario, Insurer who has risked appropriately without affecting their Bottom line will be safe bet for future.

(ashit) #60

I think good idea to increase well trained sales force and win win situation for students and HDFC life


(Mahendra243) #61

Huge 8.3 % discount compared with current market place…i have never seen this much discount on OFS

(Peabody) #62

this is clearly upsetting news. Big loss for existing holders


Can we apply for this OFS today itself OR only tomorrow?

(aswin) #64

For retailers, OFS is 2mrw (Mar 13th). 10% of offer size.

(aerofire) #65

OFS is open now in the retail category in the trading portals.