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India’s life insurance companies saw their business growth dip in November after a swift surge in the previous two months, mostly due to a base effect. HDFC Life Insurance Ltd continued to retain its top spot in growth metrics.

The latest new business data from the insurance regulator showed that private life insurers reported a 5% decline in overall new business premium. HDFC Life, however, recorded a 10.7% fall in this category. Even so, the life insurer’s growth metrics in retail business has been stellar. Its retail business showed a year-on-year growth of 20% on annualised premium equivalent (APE) basis, according to Jefferies India Pvt Ltd. This compares with a 33% decline for the industry as a whole and a 54% decline for government-owned largest life insurer Life Insurance Corporation (LIC).

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The largest private life insurer, SBI Life Insurance Company saw a decline of 6% in its retail APE, the brokerage added. “HDFC Life has likely maintained a strong focus on non- linked savings (both par and annuities), while growth in retail and credit-protect has also helped," analysts at Jefferies wrote in a note.

Analysts expect growth numbers to improve in the fourth quarter of FY21 for the industry, again due to a base effect. Recall that in March, life insurers had reported a sharp contraction because of the lockdown in the last week of the month. HDFC Life is expected to shine among peers again.

But the company’s valuations are not just buttressed by its impressive growth metrics. HDFC Life has been able to get more bang for every buck as well. Its profitability metrics continue to trump that of peers and the company September quarter performance metrics didn’t disappoint investors.

Notwithstanding the latest growth numbers, HDFC Life’s share price didn’t move much on Wednesday. This brings us to the company’s valuations vis-a-vis its peers. The stock has surpassed its pre-covid highs and trades at a multiple of 4.4 times its estimated embedded value for FY22. Analysts believe rival SBI Life’s valuations look modest. The share price is still 11% down from its pre-covid highs and trades at a multiple of 2.3 times. Both SBI Life and HDFC Life reported the highest market share gains for November. Much of HDFC Life’s performance is already reflecting in the stock, according to analysts. From here on, investors would prefer to watch for sustainability of profit margins.

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