📢 5 STEPS TOWARDS WEALTH 🚀 The Indian Stock Market Way
HDFC LIFE: CMP: 752: Premium GROWTH LT: 18% | Q2_FY25: 12% Result Update
(Demand is good along with improving profits)
### *About the Company:* HDFC Life:
The Insurance Regulatory and Development Authority (IRDA) was constituted in 1999 as an autonomous body to regulate and develop the insurance industry. The IRDA opened up the market in August 2000 with the invitation for application for registrations. HDFC Life was established in 2000 becoming the first private sector life insurance company in India. The company has over 80 products catering to diverse customer needs and benefits from its widespread distribution network and strategic partnerships. The company was a joint venture between Housing Development Finance Corporation Ltd (HDFC), one of India's leading housing finance institutions and Abrdn, a global investment company. Now the holding of HDFC has transferred to HDFC Bank.
### *Industry Outlook:*
- **Growth Drivers**: Increasing financial literacy, rising middle-class income, regulatory reforms, and growing awareness of insurance benefits.
- **Challenges**: Regulatory changes, economic fluctuations, and competitive pressures.
- **Future Prospects**: The life insurance sector is poised for robust growth driven by demographic trends, economic growth, and evolving customer preferences.
### *Peer Group Comparison:*
- **Major Peers**: SBI Life, ICICI Prudential, Max Life, Bajaj Allianz, Tata AIA.
- **Market Position**: HDFC Life holds a strong position with significant market share and consistent growth across key financial metrics.
- **Size Comparison**: In terms of AUM, HDFC Life is among the top players, with substantial growth in new business and renewal premiums.
### *Historical Performance:*
Today HDFC LIFE has the top Market cap in Life Insurance Companies and yes it should be viewed for long-term wealth.
- **FY_2010**: Gross Premium of 7000 Cr and Net Loss of 275 Cr
- **FY_2014**: Gross Premium of 12000 Cr and Net Profit of 725 Cr
- **FY_2017**: Came with the IPO. Gross Premium of 20000 Cr and Net Profit of 900 Cr
- **FY_2019**: Gross Premium of 30000 Cr and Net Profit of 1300 Cr
- **FY_2023**: Post Covid initially due to high claims and later due to low yield in Debt market we did not saw their Profit growth. Gross Premium of 57000 Cr and Net Profit of 1400 Cr
- **FY_2024**: Last Year: Gross Premium of 62000 Cr and Net Profit of 1600 Cr.
It shows around 18% CAGR growth during the last decade. However profits affected during and post covid till Fy_24. Yes, they are able to grow and cash the boom of Insurance. Since the IPO we saw the premium growth of 16%, but Profit growth was less just 4% due to high Covid claims & low investment income recently. If invested 5 Years back the return was 6% CAGR even during this highly affected time. Last 5 Years were highly challenging and this even continued this year. We saw Rise in Claims during Covid_19, Change in ULIP tax exemption limit as Tax exemption removed for policies > Rs 2.5 lakh during fy_22, Fy_23 we saw interest increasing which decreased the big investment income due to low bond yields & now last year we saw the change in traditional savings tax exemption limit, Tax exemption removed for policies > Rs 5 lakh which again affected their 10-12% New Premium income. Hence we say that last few years were challenging for Insurance industry causing low growth and profits
*HDFC Life Insurance: H1_fy25 Results*
### 1. **Premium Growth H1 FY25 vs H1 FY24** 📈
- **New Business Premium**: Grew by 12% YoY, from ₹12,970 crore in H1 FY24 to ₹14,497 crore in H1 FY25.
- **Renewal Premium**: Increased by 12%, from ₹13,643 crore in H1 FY24 to ₹15,242 crore in H1 FY25.
- **Total Premium**: The total premium for H1 FY25 reached ₹29,738 crore, compared to ₹26,613 crore in H1 FY24, reflecting a 12% growth.
### 2. **Market Share** 🏆
- HDFC Life's **overall market share** grew to 11%, from 10.3% in H1 FY24, showing strong growth.
- **Private sector market share** (individual WRP) expanded by 60 basis points to 16.3% in H1 FY25.
### 3. **AUM Growth** 💼
- The **Assets Under Management (AUM)** for HDFC Life stood at ₹3.25 lakh crore as of September 30, 2024, a growth of 23% compared to ₹2.65 lakh crore as of September 30, 2023.
### 4. **Profitability** 💰
- **Profit After Tax (PAT)** for H1 FY25 was ₹911 crore, which is a 15% increase from ₹792 crore in H1 FY24.
- **Value of New Business (VNB)** grew by 17.4% YoY to ₹1,656 crore.
- **New Business Margins** decreased slightly to 24.6% from 26.2% in H1 FY24, but HDFC Life maintained a solid profitability profile.
### 5. **Key Ratios** 📊
- **Persistency Ratios**:
- **13th month persistency** improved to 88% (up from 86% last year).
- **61st month persistency** saw a significant increase to 60% from 53%.
- **Solvency Ratio**: Improved to 192% post subordinated debt raise of ₹1,000 crore, comfortably above the regulatory requirement of 150%.
### 6. **Valuations** 📉
- HDFC Life’s **Embedded Value (EV)** crossed ₹50,000 crore, with an **operating return on EV** of 16%.
- This positions HDFC Life as a well-valued company in the life insurance sector, with a consistent track record of EV growth and strong margins.
### *Action*:
Those bought during the IPO till now we saw low growth due to covid, but considering good growth and increasing margin now addition can be done during any fall near 586 while target for next year could be 1035 which is a new lifetime high giving the breakout.
### **Future Outlook** 🔮
- **Growth Drivers**: HDFC Life’s diversified product mix, strong presence across Tier 1, Tier 2, and Tier 3 cities, and a focus on innovation will help sustain its growth trajectory. The company's continued investments in digital transformation and customer-centric innovations will also bolster its leadership position.
- **Challenges**: Regulatory changes may impose short-term pressures, but HDFC Life is well-positioned with the relaunch of 40+ products to comply with revised regulations.
We may expect 1 Lakh Cr Premium in the next few years till FY_28. Multi Year rally along with consistent profits and dividends could be expected. Definitely a wealth creator.
Strong 52% Promoter Holding, 6% MF & Insurance companies holding while 30% FII holding.
#### *Disclosure:*
We are not a Tip Provider, do not buy or sell before watching and understanding the data on your own.
