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HDFC Life: Leader in a fast growing, yet underpenetrated sector

HDFC Life’s return on embedded value at around 20 per cent is one of the highest in the sector.

, ET Bureau|
Last Updated: Dec 23, 2019, 08.48 AM IST
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HDFC Life was an early mover in the pure protection business, which is the highest-margin segment for the company.
Insurance is at a stage where the banking sector was 20 years ago. The penetration level is low but growing rapidly. For instance, life insurance premium collected as a percentage of GDP in India is 2.7 per cent now compared with more than 6 per cent in Asian countries such as Japan, Singapore and Taiwan. Insurance density, or premium paid per person, is also low at $55 compared with above $2,400 for the above countries.

Having a brand and parentage like HDFC, a vast distribution reach and investment in new technologies, HDFC Life Insurance Company looks well poised to take advantage of rising awareness among Indians about the importance of insurance. HDFC Life was an early mover in the pure protection business, which is the highest-margin segment for the company.

It accounts for 27 per cent of its premium, compared with under 6 per cent for the peers. Recently, the company also entered into the retirement products business.

Its margin on new business (VNB) increased to 27.5 per cent in the end of September 2019 from 22 per cent in March 2017. It is expected to further expand to 30 per cent by March 2020. Embedded value (EV), which is shareholders’ capital and accumulated premiums less costs, increased from Rs 12,000 crore to Rs 20,000 crore between March 2017 and September 2019. HDFC Life’s return on embedded value at around 20 per cent is one of the highest in the sector.
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