How HDFC Life, SBI Life, ICICI Prudential differed in their Q2 results
The pressure on Ulips of HDFC Standard Life, SBI Life Insurance and ICICI Prudential Life Insurance was patently visible in the September quarter
The September quarter (Q2) saw different shades of performance by life insurance companies and the pressure on their unit-linked products was patently visible. In terms of profitability, HDFC Standard Life overshadowed its peers ICICI Prudential Life Insurance and SBI Life in performance. HDFC Life reported a robust 28% growth in value of new business and a huge 43% increase in new business premium. As a consequence, its value for new business margin was 24.3%, the highest among the three insurers who have reported results so far.
Not just individuals, but companies also grabbed the insurer’s products as it saw a 36% growth in its group new business premium. But the key gain was in the margin-friendly protection business (term plans), the share of which grew to 16.2% from 11.8% in the overall annualized premium equivalent. Protection business has been the focus of many insurers mainly due to its potential to increase profitability and the stability it lends to the product portfolio.
In this aspect, HDFC Life’s portfolio mix is superior to its peers. The share of protection in the annualized premium equivalent of ICICI Prudential Life Insurance was 7.9% for the six months ended September.
The share of equity-linked products continues to dominate the portfolio of all three insurers. Considering the dismal performance of equity markets over the past month, Ulips have fallen out of favour, affecting the growth rate of premiums for the insurers. ICICI Prudential Life Insurance saw its new business premium drop by 5%. That said, ICICI Prudential Life could squeeze enough bang for a buck as its value of new business surged 41.5%, unlike the other two. The insurer even reported an impressive value for new business margin, at 17.5%.
SBI Life continued to report strong growth metrics despite being the largest insurer. Its new business premium grew 30% while the value of new business premium rose by 22%. Analysts believe that at roughly two times its estimated embedded value for FY20, SBI Life’s stock is reasonably valued. The valuation of HDFC Standard Life however is viewed as stretched, with some brokerages having a sell call on the stock.