ValuePickr Forum

Life Insurance Companies - Comparison

@newone , Can you please post the source of Q1FY 18 EV figures?

In my view, HDFC Life has the advantages:

  • better product mix (not skewed towards ULIPs)
  • more group business (more sticky?)
  • higher margins (more protection and group business)

Otherwise IMO I don’t see why it should command a substantial premium over ICICI Pru Life or SBI Life. I think we can’t value like HDFC Bank vs SBI/ICICI Bank when we value HDFC Life vs SBI/ICICI Pru Life. But then we will see very soon how HDFC Life and SBI Life is priced.


@drgrudge, please refer to the DRHP IPO prospectus for the Q1 numbers. It is a big document, so you can do a search for EV

Page no. 531 in the DRHP

1 Like

Today I read an web news about Insurance company IPOs where it is mentioned that the HDFC Life IPO could be worth 20000 crores (that is for 15% of the company). So we are seeing estimates from 7500 to 20000 crores for the 15% they want to offload via IPO. Seems to be big interest building up for HDFC Life & all upcoming insurance IPOs in general where big stock market experts even mentioning that insurance companies will become bigger than banks. Not sure how to process all these information.

Very nice take on Persistency Ratio

1 Like

I see the definition of persistency ratio as given below when I googled it

"Percentage of an insurance company’s already written policies remaining in force, without lapsing or being replaced by policies of other insurers. Since persistency is a critical factor in the viability and success of insurance companies, they constantly look for ways to increase this percentage"
Not sure what it means by “being replaced by policies of other insurers”…can a life insurance policy be transferred to some other insurer?

No, insurance portability has not started yet, IMHO.

Since most of the insurance policies (barring single premium policies etc) are issued for a tenure of 1 year only - (after which these are renewed) - what it means is, either the customer is allowing the policy to lapse or opting a similar (or better ?) policy from some other insurance service provider.


1 Like

Ok. Why do they calculate persistency ratio for 1, 2 and upto 5th year only for life insurance products? Normally their duration is 15 years and more.

It also seems to be related to how the ratio is calculated - A mix of both sets of reasons I guess

1 Like

5th year persistency is important since ULIP lock in gets over by that time and we would know how many are renewing the policy.

If you see the annual report of the companies you would see that most of them (at least the ones I track - SBI, HDFC and ICICI) are improving their persistency ratios. Nonetheless it is an important metric to keep track of.

1 Like

Ok and you are right about the improving ratios. I noticed HDFC Life improving 61st month ratio to 58%. Lots to learn in understanding this business, which is a very good thing as well :slight_smile: I am quite interested in HDFC Life. Let’s see the price / valuation at which is lists.

Actually in my opinion, you could not go wrong with either SBI/ICICI/HDFC Life. Maybe I’m biased since me and my family members own ICICI Pru Life since IPO and bought in secondary market too, but if you see the comparison there is hardly any out performance by any single company to warrant a huge premium over ICICI Pru Life. I think we can’t value like HDFC Bank vs SBI/ICICI Bank when we value HDFC Life vs SBI/ICICI Pru Life.

Having said that even I like HDFC Life out of the three but IMO the maximum premium over ICICI Pru Life that I can pay now is 20-25%. ICICI Pru Life is available for 3.9 times EV.

Yes but there seems to be lot of euphoria building up for the upcoming insurance company IPOs. HDFC Life IPO is for roughly 30 crore shares out of their equity base of roughly 200 crore shares, so that is 15%. And I have seen IPO estimates for that 15 % ranging from 7500 crores to 20000 crores which values the whole company at 50000 Crores to 1,30,000 crores. Naturally, the range looks strange but that seems to be the euphoria building up.

1 Like

One of the news article -

Also it seems PNB Metlife is planning for IPO now -

Wonderful thread about sector in which i am working, In a very simplified way one can say thay first 3 years of premium paid in any of the conventional policy covers the cost incurred by the insurer in canvassing the policy i. e. Agent’s, Dev. Officers commission, Publicity, lssuance of bonds and other management charges. Renewal premiums received after the completion of three years has less overhead such as commission and management expense and from here- real earning for insurer starts. So the companies having less lapsation ratio will have large investable fund and earns more and will be in batter position then their peers in the sector. Generally it is seen that ULIP policies becomes more popular when the stock market is booming (just like mutual funds) but ones the market starts falling, it becomes more vulnerable then mutual fund as total investable fund after the deduction of ‘risk premium’ (part of premium that covers probability associated with life assured 's death in that age segment) is less, So generally during this recession period people starts loosing interst in ULIP and lapsation becomes high… That is not the case in conventional policies and here the LIC has a great advantage over others…IMHO it is obvious that once the insurance company stabilizes and starts improving the investment pool then there is no looking back and can be a multi multi bagger… Hope i am adding value to this thread… Thanks…


Hi bvr,

Nice write-up, what metrics will point towards a stable insurance company? When you say investment pool are you referring to float?

What is your opinion about Max Financials/Max Life? Where do you put them in comparison with ICICI Pru? Knowing HDFC Life was interested in them, it seems they are good company.

Disclosure - invested in Max Financials from last one year

1 Like


Since Max Life is not listed, the public disclosures are not that informative to keep track of them. However from what I’ve seen (and my opinion too) is that Max Life is a small player compared to the biggies. Their parameters (ROE, ROIC, Persistency, premium growth, etc.) are not something to get excited about. Where Max Life excels is that their product mix is somewhat balanced and not skewed towards ULIPs. The mix of par products is high. Maybe they were concentrating into merging with HDFC Life and didn’t concentrate on the business.

Just because HDFC Life was interested does not make it investment worthy. Maybe they wanted a higher market share, get into the top three, wanted banca business from Axis Bank (they are also banca partners of LIC now), etc. Don’t get me wrong, I like life insurance companies and even Max Life is not a bad company - just that when you can own the best why settle for next best? :smiley:

If you want some comparison with the best private players, please look into the DRHP of SBI Life.


Though i am not expert in investment part of the insurance section, but as far as I know insurance companies can earn most of it’s profit by collecting premium for the risk it covers and as the chances of resulting it in to the death claims are very low in that particular homogeneous group - the amount that remains after covering all the expenses including claims incurred is called underwriting(selection process- whether to accept the risk and if accepted at what rate i. e. Premium ) profit… Hence prudent underwring is very important for long term solvency of the company… 2)As life insurance policy is a long term contract (i. e more then 10 years) hence company has a large pool of amount or 'float ’ that remains with them after deducting all the operating expenses which can be used for investment in stocks, bonds etc. as per the guideline set by IRDA. It’s obvious that profit from investment is huge in comparison of underwring profits. For new insurance companies specially during the initial period, expense of office setup, distribution channel organizations ,product development and marketing is quite high. Creating reputation is most important here as insurance is the business of selling the ‘promise’ for paying tomorrow for that uncertain event for which policy holder pays the charge as a premium today… Not all the company succeeds in establishing the brand image through customer satisfaction by keeping claim rejection ratio to the minimum, and thats why M&A like max and HDFC takes place… Where big fish captures the small fish and progress further. Hope it helps.Thanks… and sorry for the long answer… !


ICICI Lombard & SBI Life have received approvals and plan to launch their IPOs in this month itself. Any takers? :slight_smile: