Having entered the Rs1 trillion market capitalization elite league, HDFC Standard Life Insurance Co. Ltd’s stock was looking expensive if not priced to perfection. In comparison to peers, the stock was an outlier with a strong run, partly due to the fortunes of the respective groups to which they belonged.

But the private sector insurer’s results for fiscal year 2018 (FY18) clearly show that it can on its own justify why the stock trades at more than four times the embedded value even now without borrowing the goodwill of investors for the HDFC Group.

For FY18, the insurer’s new business premium grew 32%. That along with a strong growth of 13% in renewal premium and an improvement in persistency ratios across tenures shows that not only are its products flying off the shelf but customers are sticking to their choices. This is a sweet spot for a life insurer and if the company wants to continue basking in the love of its investors, it would do well to safeguard this spot.

Another cheerful metric is that HDFC Standard Life has succeeded in increasing the share of protection products in the overall portfolio to 26% from 22% a year ago on a new business premium basis as brokers and agents pushed this product. Protection products are good for margins and hence profitability of the insurer. The company’s value of new business thus rose by 39% to Rs1,280 crore and margins also improved to 23.2% from 22%.

Nevertheless, HDFC Standard Life did have some help from market circumstances in its business growth. The growth in new business premium got a push from market-linked products, predominantly in the fourth quarter. That is because the government levied a long-term capital gains tax on profit made through shares but with a caveat that gains up to March-end will be grandfathered. However, insurance products linked to shares were kept out of the purview of this tax.

What investors may find a concern is the rise in the ratio of expenses-to-premium income of the private sector insurer. The ratio rose to 13.5% for FY18 from 12.6% in the previous year. Commissions as a percentage of total premium also rose to 4.6% from 4.1%. Given that the insurer intends to invest in technology to push its products through online channels, the relief from expenses would be hard to come immediately.

HDFC Standard Life’s product mix is without doubt superior to its peers’ simply because of the large share of margin-friendly protection products. Nevertheless, compared to its peers, the stock trades at a value that has priced in superior performance.