Improved GPI, healthy growth of Premium accounts
In Q4FY22, HDFC Life Gross Premium Income (GPI) increased by 17.6% QoQ and 11.7% YoY to Rs. 1,442cr, (vs. 11.1% sector growth) mainly driven by growth in renewal premium (+15.6% YoY, +32.4% QoQ to Rs. 734cr) and first year premium (+7.8% YoY, + 21.7% QoQ at Rs. 257cr), while incurred claims increased (+15.7% YoY, +19.3% QoQ), maintaining claims settlement rate at 99.6% (+40 bps year-on-year). AUM increased by Rs. 2,00,000cr (+17% YoY). The APE product line was well diversified at 26%, 33%, 5%, 6% and 30% UL/Non-Participating Savings/Annuity/Non-Participating Protection/Participating respectively. The APE distribution mix was also diversified at 60%, 14%, 6% and 19% for corporate agents/agency/broker/direct respectively. Individual APE showed an annual growth of 15% to Rs. 8,168cr, while overall APE grew by 17% to Rs. 9,758cr in FY22.
Robust new business premium growth, margin improvement
According to the brokerage firm, “new business value increased by 22.7% year-on-year to Rs. 2,675 crore in FY22, driven mainly by robust 20% growth in new premiums. business over the same period and new business margin increased by 27.4% (130 bps yoy). However, the effect of the new merger with Exide Life appears to be neutral. However, due to mortality rates lesser of the Omicron variant, the company reduced its provisions to Rs. 91cr (from Rs. 93cr in FY22).
Why should you buy it? Highlights
HDFC Life recorded a two-year CAGR of 17%, double the industry growth of 9%, while new business CAGR increased 24% over the past five years. The company now insured 54 million lives at the end of FY22 (+36% year-on-year). The solvency ratio fell by 2500 basis points to 176% from 201% in FY21 due to the cash payment of Rs. 726 crore, in return for the acquisition of Exide Life. To fix the solvency ratio of 600 basis points, management has approved an increase in debt of Rs. 326 crore and further assess decisions on capital mix. The company has introduced new plans like Quick Protect to cover the three Ds (death, illness and disability), Sanchay Fixed Maturity Plan and Systematic Retirement Plan.
Brokerage view on stock suggests buys for target price of Rs 750
Macroeconomic factors in the life insurance industry remain positive, and growth can be seen in India’s affluent middle class that is significantly underpenetrated for life insurance. A conducive regulatory environment and rapid digitization initiatives could boost the product mix in the protection industry. Therefore, we reiterate our BUY rating on the stock with a revised target price of Rs. 750 based on 3.8x FY24E EV per share.
HDFC Life Insurance Company Ltd.
HDFC Life Insurance Company Ltd, a joint venture between HDFC Ltd. and Standard Life Aberdeen, provides insurance services. HDFC Life Insurance Company is engaged in life insurance business. The Company offers a range of individual and group insurance solutions. The portfolio includes various insurance and investment products such as pensions, pensions and savings. The company was listed on the BSE on November 17, 2017. The issuer offers protection for life, health, property and auto, among others. With a market capitalization of Rs 128,105 Crore, it is one of the leading insurers operating in India.