can anyone please share research report on hdfc life (like nirmal bang et al) ?
HDFC Life Insurance Company Ltd will replace Vedanta Ltd in the Nifty 50 index starting 31 July.
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Management interview
Sustained market leadership, led by balanced product mix
Strong risk management to enable sustainable growth
We hosted Ms Vibha Padalkar, MD & CEO – HDFC Life Insurance, as a part of the CEO Track at AGIC 2020. Here are our key insights from her session:
The opening up of the sector in the early 2000s led to product innovation and an increase in the types of channels. HDFC Life has been at the forefront in terms of
product innovation and has a diversified channel mix.
The operating variance for the company has been positive for the past 12 years,
reflecting strong underwriting and risk management.
The company’s interest rate book is fully hedged and unexposed to interest rate
risk as the risk is mitigated through managing cash flows through various hedging mechanisms such as FRAs / partly paid bonds etc.
Footfall has been at ~20% of normal levels and is expected to increase gradually.
Overall, the company expects flattish to low-single-digit growth in new business
premiums for the industry, while it expects better growth than the industry.
Growth is likely to be seen across products; no single product would gain
disproportionately.
Credit Life: While the company is gaining traction, it is expected to remain under
pressure as lending activity remains muted.
Interest rate remains challenging; the company is thus being selective about
growing its savings products. Surrender rates also remain challenging, with the company actively engaging with its customers.
Channel-level margins have been higher than company-level margins. The
company monitors its acquisition cost closely under channels to be operationally
effective.
It will continue to have a balanced product mix strategy with emphasis on product innovation. In the near term, protection will remain a key focus while ULIP to continue witness some pressure.
Investments in technology have positively impacted key operating metrics, with
TAT having reduced significantly. The policy issuance TAT has dropped to <4
hours from 2 days earlier.
On the persistency front, ULIP to witness pressure while remains strong for the
protection segment.
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Disc - invested.
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i hope it is not insurance against yes bank 
Disc - invested.
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Quarterly results are out
https://www.bseindia.com/corporates/anndet_new.aspx?newsid=d3b0418b-8532-49d6-85dc-ddb949433746
Good Results !
The company witnessed significant expansion in market share.
Expects a healthy growth in the annuities segment.
Sees positive APE growth in a month’s time.
Q2 numbers far better than Q1, recovery visible post-COVID
Full Interview: HDFC Life Insurance MD & CEO Vibha Padalkar On Q2 Earnings - Solid Surge In Premium Income
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The HDFC Life story is good - product mix, digital, distribution, sustained growth, etc.
Apart from sky high valuations, one thing that is bothering me is the low tax rate compared to its peers. While its peers ICICI Pru & SBI Life are paying 10% & 20% respectively, HDFC Life is paying only 1% tax?! Please see the screengrab table from screener. What am I missing?
A question I wanted to ask everyone here is as follows:
From my p.o.v. modi govt is trying to remove all exemptions and rebates from income tax.
Wouldn’t such a change result in huge downsides to this life insurance business.
But as we are seeing, life is returning back to normal so will people take covid-19 as a lesson and this business will increase its penetration multiple times OR the usual tax exemption purpose will continue ?
Sir @hitesh2710 , do you track this business .
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Being from Insurance industry, I can share my views about the changing preferences of the clients while buying insurance specially life and health.
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Tax breaks no longer is an incentive for buying insurance, people now buy as per their needs.
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Huge awareness has come in during last few years and people understand the importance of life cover and savings for future.
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The Tier 2, 3, 4 cities are now adding to the growth in business dor insurers.
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Last but most importantly people now realise the importance of Term Insurance or Pure Insurance and opt for very high coverage amounts.
India is still a very under penetrated market as far as Life Insurance is concerned and there is a long way for good companies to thrive and shine here.
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Has this trend already, or buying insurance policy is after effect of Covid.
Thanks for sharing your thoughts. As you are from Insurance industry, wanted to know your perspective on this point as a long term risk for insurance companies as the covered amounts gradually become huge?
Also, do you see annuities part of business as a long term risk with interest rates gradually and surely declining in India?
Thanks
The COVID has resulted in spike in Health Insurance. People are now taking health covers with high sum assured.
Life insurance coverage surge is now for quite a few years, 3-4 years to be precise.
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An Insurer acts as an intermediary who places the risk with reinsurers, it’s their ability to do it efficiently is the key. Term insurance is a business of large numbers, it’s pooling the money taken from a lot of people as premium and paying it to a few who incurs a claim.
For driving large numbers you need a great distribution team which helps you penetrate the length and width of the country, here companies like HDFC Life scores for not only having the parent as one of the biggest financial powerhouse but also cracking the distribution part because of their experience on financial services.
Wrt Annuity part of business and risk of falling interest rates, a good insurer will love to have a mix of all products to mitigate risk and make the business viable. The insurers hedge their interests pay outs and the same is continued with rise and fall of interest rates. So they run no risk of falling rates.
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Thanks, few points come to my mind here. Would be good to know your thoughts -
- The few claims today may increase with passing years as penetration increases. But as you said the number of people getting themselves insured would also increase proportionately, so the risk management would be a thin line and a game of probability. Wanted to know how much of it is probability and how much is actual mathematical model, if at all such model exist and from example of developed countries - Have their top quality life insurers been accurate in calculating such risks over very long term?
As a matter of fact, a Term insurance is a product which will always be claimed, the question is when it will be claimed… and how do life insurers model this over say a 50 year period of their business? (Insurers think very long term, I would assume)
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How much of the risk is passed on to the reinsurers in case of Life Insurance? Is there any government regulations on this front as leading reinsurer is government owned. What I am aware is an insurer passes only a part of this risk to the reinsurer. Even the part which it keeps for itself would be sufficient to ruin things for it if the risk management was not proper in the first place. So, we cannot brush aside this point by thinking that the risk is passed on to the reinsurer so we are good.
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Long term success story of private banks have been as much the capturing of PSU banks market share as the growth of market itself. In case of insurers, they have a much formidable and strong government contender in terms of LIC. Every year/Q the metrics of LIC is almost same or better than top private players. Will this shift from PSU to Private play for insurance also? LIC doesn’t seem to loose market share easily
Disc: Not a recommendation to buy /sell. HDFC life part of core portfolio hence biased and concerned.
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