ValuePickr Forum

Life Insurance Companies - Comparison

Hello everyone…i am planning to invest in the insurance industry and comparing the two top players in terms of performance i.e HDFC and ICICI…im trying to understand the higher valuations of HDFC std life over ICICI…after my analysis following points of comparison stand out-

  1. Product mix HDFC certainly has better product mix as it has higher share of protection products which provide higher margins…ICICI has higher ULIP share but they are also trying to increase their Protection share as told in this concall…but they have a long road to cover…

  2. Distribution channel Both companies enjoy a strong banca channel and they are betting upon the direct online channel for future…however HDFC has shown greater growth in online distribution…HDFC seems to be quite strict about their margins while distributing through agents…

  3. Acturial liabilities assumptions ICICI seems to be more conservative in their assumptions when compared to HDFC…but i feel IRDAI will ensure the solvency of these companies…so the aggressive assumptions by HDFC may not be a sign of worry…

  4. Strategy ICICI is a retail focused company while HDFC has a larger share of group businesses…in terms of product mix, HDFC mgt says that their tgt is to keep ULIP share between 50-60% while ICICI mgt says that they dont have a tgt for product mix but it will depend on the opportunities…Retail products may have more margins than group buisness as disclosed by Rupesh in other thread but ULIP is certainly less profitable than Protection…

  5. Protection business Industry is well aware that protection products have better margins and thus they are leaping towards increasing the share of protection products…however the segment is hugely under penetrated and competition may not be very effective for some time in future…so growth opportunity exists for both ICICI and HDFC in protection segment…

  6. Cost efficiencies ICICI has reduced its expense ratio but for HDFC it has increased, mainly due to higher commissions to the agents…HDFC management has stated that they are working hard to create a strong agency channel with good margins…

  7. Valuations HDFC has much higher valuation than ICICI even when the growth opportunity exists for both of the companies…HDFC ssems to be leading the show with better product mix, innovative products and a much clearer vision but even than its more than double valuation than ICICI is certainly on much higher side…however the brand factor may be playing a role into it as trust factor plays a very important role in Insurance…
    But i believe that when we talk about the under penetrated market for protection products, the small and rural areas form a chunk of it where both the players might have similar brand value…

  8. Dividends I think ICICI has a policy of 40% dividend payout along with 20% special dividend while HDFC is paying out 30% of the profits…

So i feel that insurance as a theme as a good prospectus and it will be difficult to clearly select a winner out of two…for a investor like me who is entering market on a SIP kind of method, both of them can emerge as a good bet…

request for any other point of comparison and views from fellow members…


One more observation wrt top management share of stocks…during previous three years ICICI top management has been alloted 59.6 lac shares out of the employee stock option scheme…this is .4% of the total outstanding shares which is 143.6 cr…

In case of HDFC, top management has been alloted only 25.68 lac shares against a total outstanding of 201 cr shares which is just 0.1 %

I have read some where that the a large no. of shares out of ESOS should not flow towards top management but it should be meant for lower ranks…
How to interpret this…i request guidance from the seniors on this issue…


The higher valuations of HDFC standard life really cannot be justified quantitatively, no matter what acrobatics one does on a excel sheet. It is expensive, both at an absolute level and a relative to other cos level, there are no 2 ways about it. But at the same time HDFC Bank has been more expensive than other Private banks for donkey’s years and will be in the foreseeable future.

I remember a conversation with a friend in 2007 who said HDFC Bank ka premium over ICICI is not justified and a decade later look at where we are. Similarly HDFC Ltd will always command a premium over say an LIC housing Finance. It’s simply the management quality markets are paying for (to be fair the HDFC group has earned this premium the hard way). Over 10-15 years, with compounding kicking in i guess the premium will justify itself. HDFC group cos are a fill, it shut it, forget it and enjoy it stocks…

Disclosure - both HDFC Std & ICICI Pru are 2.5% of my portfolio, I am looking to add the former on corrections whenever they come.

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I read somewhere last month in one of the news articles(although don’t remember where) that HDFC life’s competitors talk highly of it… If you competitor’s talk highly of you…then its a great stock to be in. Such stocks will always remain expensive.


Can someone please explain why the VNB margins of a term insurance are in the range of 80-90%, whereas the same for ULIPs is 10%-15%, given that ticket size for a ULIP is much higher than that of a term insurance?


The top 4 life insurance companies have reported their results. Following are some observations ->


The biggest observation is all the companies are focusing on protection business & biggest component of this focus if credit life/protect portfolio.

  • Credit life business remains more profitable compared to group protection businesses. The margins are much more healthy.
  • SBI Life has moved from regular premium products in credit protect to single premium products. Due to this, premiums for entire loan duration is collected upfront & persistency risk goes away. But on APE level, accounting gets impacted. The margin also goes up for single premium products due to more premium collection vs. regular premium product.
  • HDFC Life claimed that the average rate charged to credit protect customers is 30% higher than that charged on individual protection product in lieu of limited underwriting
  • Most of the companies are seeing competitive pressure on group protect side compared to individual protection side. Max Life feels that this higher margin in credit protect may invite some regulatory action because of margin arbitrage between group protection vs. group credit protect as both are eventually mortality cover products.
  • HDFC Life has been most proactive in cracking Banca deals compared to reluctance of bank based insurers like ICICI Life or SBI Life. Almost 1/3rd of HDFC Life’s partnerships are exclusive in nature in credit life front.


  • Max Life is taking proactive steps to reduce channel distribution risks (too much dependence on Axis Bank) by looking at inorganic opportunities.
  • Max Life eventually walked out of IDBI fed deal due to some interesting reasons - wanted perpetual access to IDBI bank network, wanted exclusive access to IDBI network & clarity on terms of the deal in case change in promoter/management. There were not enough clarity forthcoming. So Max Life is taking Banca channel concentration very seriously.
  • On asked about valuation of IDBI Fed, Max said they used DCF kind of calculation with above kind of assumptions rather than plain vanilla EV multiple.


It seems like there is some tax exemption on equity dividend that insurance companies get from their investment portfolio. ICICI changed tax assumption to account for above & reported almost ~7bn increase in EV due to this. SBI Life started reporting numbers with effective tax rate (with exemption) & actual tax rate. The difference in VNB margins is meaningful due to this. Need to find out assumptions used by HDFC Life/Max Life.

There is a proposal to cap surrender charges on Traditional side of business similar to ULIP. The impact of this on business remains to be seen.

Disc - ICICI Pru forms > 5% of my portfolio. No transactions in last 90 days. This is not a buy/sell recommendation. Please do your own due diligence.


From the past claim trends from Chennai, J&K and Uttarakhand, Kerala Flood Claims can tune up to 2000-3000 crs

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

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.


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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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.


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

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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…

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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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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