ValuePickr Forum

Life Insurance Companies - Comparison

([email protected]) #171

Just want to understand that no. of shares don’t have any impact on the life insurance companies???
Sbi life :100 crore shares
Hdfc life:200 crore shares
And both share trade at P/EV of 2.5

(CommonStocks) #172

In terms of profitability, HDFC Standard Life overshadowed its peers ICICI Prudential Life Insurance and SBI Life in performance. HDFC Life reported a robust 28% growth in value of new business and a huge 43% increase in new business premium. As a consequence, its value for new business margin was 24.3%, the highest among the three insurers who have reported results so far.

The share of equity-linked products continues to dominate the portfolio of all three insurers. Considering the dismal performance of equity markets over the past month, Ulips have fallen out of favour, affecting the growth rate of premiums for the insurers. ICICI Prudential Life Insurance saw its new business premium drop by 5%. That said, ICICI Prudential Life could squeeze enough bang for a buck as its value of new business surged 41.5%, unlike the other two.

I understand unlisted players like Birla Sun and Tata AIG are growing at faster rate than the listed ones. However they are on a smaller base.

(PadivalsMarketMusings) #173

Recently MOSL published a good comparison of key parameters for all the major Indian Life Insurance companies. Provides good benchmarking on all key business drivers (VNB, Persistency, Premium Growth, Protection Growth, Channel Mix etc.)

India Life Insurance_Comparison_Q2 19.pdf (369.9 KB)

Disclosure: Initiating position through SIP in IPRU and AB Capital.

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(Rupesh Tatiya) #174


The financial results of all the 4 listed life insurers are available.

Following are some thoughts/notes -

The most interesting thing I learned was about max Life-Axis Bank deal. Around 2015, Max issued 5% equity shares to the Axis Bank for the Banca deal. As a part of agreement, Max agreed to buyback 1% of shares every year till year 2020. The most interesting question to ponder is - how to account for any gains Axis Bank might make in the books of Max. Is it commission expense to Axis Bank? How does one account for this in the net worth and consequently in the EV calculation of Max?

Another interesting thing is that 54% of the APE of Max is through Axis Bank. With the former MD & CEO of best Indian life insurance company, HDFC Life, moving to Axis Bank - there is justified apprehension by the investor community towards Max Life. To deal with this channel concentration risk, Max is investing very heavily/aggressively into proprietary channels.

While going through sensitivity analysis of several insurance companies for several quarters, I noticed that increase in interest rates result in decrease in EV/VNB. This was always very counter-intuitive for me as I thought increase in interest rate would increase the spread between reference rate & actuarial reverse discounting rate leading to more value.
But the underlying asset value goes down when the interest rates go up & hence there is negative impact on existing asset value There is MTM adjustment in both the components of EV - Net Worth & Value of In-Force Business. e.g. SBI Life as MTM Loss of 1300Cr in EV in HY19.

In of the interviews, Mr. Bharat Shah explained that Gruh Finance deserves a better P/BV because of higher RoE, 30% dividend & ability to manage without equity dilution for considerable periods of time. I feel the EV multiple also need to consider this finer points. E.g. How does one look at EV multiple for higher dividend paying company vs. lower one. e.g. ICICI Life has dividend payout ratio of 50%+ for fast few years vs. 25% for HDFC Life & 15-20% for SBI Life.

Now coming to short term & long term business trends ->
It looks like HDFC Life has built really strong business which can be evident from following observations -

HDFC Group took the decision to open up HDFC/HDFC Bank to other insurers ahead of other similar insurers with bank parentage. The decision to open your business for competition itself shows resolve to strengthen it. The contribution to new business from HDFC group is down to 28%. I think this number is much higher for ICICI Pru/SBI Life e.g. Major portion of credit protect business of SBI Life is from SBI. HDFC Life has created banca partnerships with ~200 partners & that is good first mover advantage over others.

Another thing is 30% of new business premium is from protection & that is huge! The protection contribution for SBI Life is around 11-12% & they have aspiration to take it to ~20% by FY20. With 200 partnerships (and 1/3rd of them exclusive for credit life) for HDFC Life, I think credit protect business will continue to grow at a decent rate. It looks like multi-year opportunity to me with growth rate mirroring credit growth rate over long term. When asked about credit life & protection opportunity, the new MD said that - If one looks at where China is in terms of protection (Mortality/Morbidity/Longevity), there is not even a comparison! She also felt that, the margins might improve further.

Another thing I realized is - not all single/group premiums are bad. If one gets all the premium upfront for credit protect product, the risk of persistency goes away & still the margins are decent for individual credit protect product. On group credit protect product, banks pay the bulk premium to insurer and collect it from individual. Does the banks have incentive to driver the prices of group credit protect products lower?

Now coming to numbers ->

ICICI Prudential has reported degrowth in new business premium & hence the stock price has stagnated. Management said that post DeMo, they had growth rate of 50-75% in last H1 & hence it is difficult to better those numbers. HDFC Life/SBI Life has reported much better new business premium growth in the same period.

Renewal premium growth has been strongest for SBI Life & good for ICICI Pru. The number has been lower for HDFC Life but management said it will improve going further.

The VNB growth has come down for HDFC Life & SBi Life as base effect comes in for product mix. The growth has still continued for ICICI Pru because of strong protection growth with product mix changing in favor of protection.

Disc - Invested in ICICI Pru & Tracking position in HDFC Life. This is not a buy/sell recommendation, investors are advised to do their own due diligence.

(Ranga Kiran) #175

Not related with Life insurance sector but these practices have been heard in Life sector as well. A case for reputational risk.

1 Like
(hamed) #177

it is important to therefore invest in stocks where promoter has skin in game…iam invested in bajaj finserv and abcl in insurance space. though both are holding company but it is better to be in them than icici and other players who do not have proper promoter and thus could indulge in these kind of activities which could hurt their long term business…

(Dhiraj Dave) #178

I would also suggest to go further into deail about conduct of management in past, specifically with respect to Minority sharheolder rights in general, and for AB group in particular. The recent experience of minority shareholder treatment in restructuring of business group raise a concern about how group treat minority shareholder in my limited understanding. While there is defintely skin in game for the promoter of business group in insurance business as you said, whether there is alignment of interest of promter with minority shareholder is much bigger question to answer in my opinion.

Find enclosed link of article dealing with issue. While eventually the resolution got approval, still the conduct of management was definitely need attention in my opinion.

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(hamed) #179

Agree with that observation, infact i have made similar comment on ab vs bajaj in another thread, but with 21k mcap abcl looks fine to me, though my allocation on bajaj finserv is double to that, and giving benefit of doubt to birla that he might be less shareholder friendly and relatively poor manager compared to sanjiv.

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(Ranga Kiran) #180
(Ranga Kiran) #181
(Ranga Kiran) #182
(Gaurav Agarwal) #183
(Ranga Kiran) #184
(novice2014) #185

Hello Boarders,

I was comparing three second tier life insurance companies - MAX/ ABCL/ BAJAJ

Why these three ? All are non bank promoted and listed indirectly, providing opportunity to invest.

However, i am seeking opinion of others to understand the data which is released on monthly basis by IRDA.

As per the attached sheet, ABCL is approaching close to other two in terms of premium, lives covered and sum assured till february, 2019. But the BAJAJ is way ahead in terms of group scheme policies than other two (almost 10x)

As per my understanding, group schemes can provide volume but should be extremely price competitive, leading to lower profitability.

Does this suggest that MAX and ABCL has higher profitability portfolio as comapred to BAJAJ (almost same premium and sum assured, but lower lives covered --> Higher sum and premium per insured) ?

Will appreciate if learned boarders can throw some light…Life Insurance Comparison.xlsx (9.1 KB)

(pennywise) #186


This post is similar to the one on the HDFC Life insurance thread.

If the objective is to determine profitability of the portfolio of insurance then just looking at grouping of premium flows or new business performance as published by IRDA is not enough. We would need to look at (1) VoNB to ascertain profitability of new premiums (2) ability of companies to retain customers so as to justify the fixed costs of marketing (3) the expense ratios of management and commision ratios paid to distributors etc.

A good article can be found on valueresearch linked below:

I have attached a comparision of the three companies you mentioned using metrics published with IRDA.

Going by the analysis in the above screenshot, seems like max finacial is doing better than your other options on most counts.

Disc: Invested in HDFC Life

(novice2014) #187

Thanks for the reply… Certainly the data compares the three firms nicely.

Can you just let me know to which period this data belongs ? And source…

(pennywise) #188

Data is as of Q2FY18-19. I got the data from Tijori whose sources in turn point to IRDA.

(novice2014) #189

Thanks again…

I went through the link. Some data are upto Oct 2018 and some till March 2018.

However, what interested me is in comparison -->

  1. ABSL tied up with HDFC bank and bancassurance share gone beyond 50% in its new business. For Max, axis constitutes 50%.
  2. As the HDFC tie up became effective post 2018, its contribution to revenue is being reflected this year whereas contribution to profitability might reflect down the time.
  3. Because of the tie up, ABSL premium income is growing strongly on a relatively large base, same has not happened with BALIC/ MAX. (almost 50% compared to 10 - 20% for rest two)

Thanks for the reply again.

Disc: Invested in ABCL/ Looking to add HDFC life

(pennywise) #190

I think it’s because some metrics like.embedded value are updated only in annual report of companies ( but I’m not sure ). You can check with those guys cause they have a thread on value picker.