Recommendation from Insurance Sector
This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.
Hdfc Life Insurance: Protecing Clients, Profits, And More
HERE IS WHY
β Strong market share
β Robust financial position
β Huge growth opportunities
HDFC Life Insurance is one of the leading private players in long-term life insurance providers in India. The company is a joint venture between HDFC Ltd. and Standard Life Aberdeen which is a global investment company. The company caters to both individuals and groups and offers 30 individual and 13 group products to serve various needs of customers. The portfolio comprises of various insurance and investment products such as protection, pension, savings, investment, annuity and health. The company reported total earned premium of Rs 38,583 crore in FY21 compared to Rs 32,707 crore in FY20. That is a growth of nearly 18 per cent.
It had sold 9.8 lakh policies which is higher by 10 per cent than the previous year. It also witnessed 19 per cent growth in renewal premiums. Another notable point is that the company has a wellbalanced product mix such that no single product dominates the portfolio. Also, the PAT stood at Rs 1,360 crore while it stood at Rs 1,295 crore in FY20. PAT increased by 5 per cent. During the fiscal 2021, the company insured close to 4 crore people and settled over 2.9 lakh death claims that resulted in the beneficiaries cumulatively being paid over Rs 3,000 crore.
A strong cash balance was witnessed with a growth of nearly 41 per cent as can be seen in the cash flows from operating activities increasing from Rs 7,388 crore in FY20 to Rs 9,703 crore in FY21. Total premium earned for H1FY22 stood at almost Rs 19,287 crore. That’s a growth of 20 per cent on YoY basis. The net profit number stood at Rs 577 crore, a decrease of 26 per cent YoY which was due to higher claims warranted by the second wave of the pandemic. The new business margin stood at 26.4 per cent while in H1FY21 it was 25.1 per cent. It recorded 27 per cent growth in AUM to Rs 1.91 lakh crore.
On the returns front, this private insurer has delivered good returns for its stakeholders. The ROE and ROCE stood at 17.65 per cent and 16.9 per cent, respectively. The company is almost debtfree with debt-to-equity ratio of just 0.07. In the insurance business, solvency ratio is an important measure to determine a company’s ability to meet long-term liabilities. The company has a solvency ratio of 1.9 which is well above the regulatory requirement of 1.5. The insurance giant has a pan-India presence with 390 branches and HDFC Life has tied up with 300+ partners for selling ‘credit protect’ policies.
The company’s customer first approach is reflected by a high claim settlement ratio of 99.4 per cent. Digitalisation has led to more than 90 per cent of policies being issued online. HDFC Life has an established market position within the life insurance industry. It has been among the top three players within the private sector space as it enjoys a considerable market share of 22.3 per cent in new business premium as of H1FY22. The pandemic has brought about a huge awareness regarding health and the need for insurance protection. India has a life insurance penetration of less than 3 per cent. This provides challenges to bring further awareness but also presents immense opportunity to expand the company’s business. With changing lifestyle and demographics along with digitalisation, the industry as a whole is expected to be a big thing in coming times. Considering all such factors, we recommend our readerinvestors to BUY the scrip.
