HDFC Life Insurance Company Ltd is a long-term life insurance provider with its headquarters in Mumbai, which offers individual and group insurance services. The company was incorporated on 14th August 2000. The company is a joint venture between Housing Development Finance Corporation Ltd (HDFC), and Abrdn which is a global investment company. As of 31 March 2020, the promoters; HDFC Ltd. and Standard Life (Mauritius Holdings) 2006 Ltd. hold a 51.69% and 34.75% stake in HDFC Life respectively. The remaining equity is held by public shareholders.
HDFC Life Insurance Company is engaged in carrying on the business of life insurance. The Company offers a range of individual and group insurance solutions. The portfolio comprises of various insurance and investment products such as Protection, Pension, Savings.
Quarterly Earnings Growth
HDFC Life reported their consolidated net profit for the quarter which ended on 30th September 2022 at Rs 326 crore which is a growth of 19 percent as compared to the same quarter of the previous year.
Net premium income for the company was at Rs 13,137 crore, up by a 14.5 percent.
“We continue to be excited about the growth prospects of the industry, on the back of renewed support and encouragement from the regulator. We are enthused by the regulator’s vision of significantly improving the global ranking of Indian life insurance from its current no. 10 position to no. 6 and look forward to being a meaningful contributor in this journey,” said Vibha Padalkar, MD & CEO, HDFC Life Insurance.
Considering the first half of the fiscal, the company has reported that its annual premium equivalent has grown by 11 percent. The company said that it has grown with standard industry performance and fared better than its listed peers in this quarter. Hence this has contributed to its market share improvement from 14.6 percent in Q1 to 15 percent in Q2.
The company on October 14 completed the merger of Exide Life with HDFC Life Insurance.
Business growth
Considering the current fiscal year, LIC has grown very fast as compared to its private peers in terms of APE (annualized premium equivalent), which is a measure of establishing business sales in the life insurance industry.
SBI Life is the largest private life insurer of India with an industry market share (including LIC) of 7 percent and 23 percent among private players (excluding LIC) in terms of new business premium.
HDFC Life has been growing its market share consistently and it is the second-biggest insurer in the private space, the company gets placed after SBI Life.
ICICI Prudential Life has been lagging in terms of business growth amongst the private life insurers.
Valuation
| ICICI Prudential Life | HDFC Life | SBI Life | LIC | |
| Embedded value (as of Sep 2022) | 32650 | 33000 | 41400 | 544300 |
| Market Capitalization (as of Dec 2022) | 64182 | 122417 | 124543 | 434867 |
| Fair value multiplier | 1.9 | 3.7 | 3 | 0.8 |
HDFC Life has the most well-balanced product range and diversified distribution channel. The company has proven itself over the past years and its premium valuations in the insurance ecosystem appear to be highly justified on this basis.
The expensive valuation hinders the upside in its share price. Investors need to observe the margin trajectory after the merger with Exide, and sales through HDFC Bank in upcoming years.
While the management has insisted that the acquisition of Exide will be margin-neutral, any improvement due to joint association or cost savings will bring positivity to the market and can move the stock higher.
Sales through HDFC Bank have lessened in the current fiscal and presently HDFC Bank accounts for about 47 percent of HDFC Life’s sales. With the merger getting implemented, HDFC Bank will become the parent and can no longer take the relationship for granted. The bank might have to grant sovereignty to HDFC Life. Hence this aspect can bring bullishness to the stock.
Technical Analysis
HDFC Life stock price has corrected from its lifetime high of Rs 775. The price has faced heavy resistance while it tried to move above the 38.2% retracement level. The price is currently trading below the 100-day exponential moving average which marks it as oversold but the MFI is at 69 points which is close to being overbought. Considering the performance and quarterly growth of the company, and having stronger valuations as compared to its peers, HDFC Life seems to be a great large-cap insurance company for the portfolio.
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