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HDFC Life Q1FY23 review – Business growth healthy; merger remains overhang
What's Buzzing
HDFC Life reported healthy set of numbers in Q1FY23, wherein gross premium growth remained strong at 22.7% YoY and VNB margin expanded to 26.8% aided by balanced product mix. PAT reported strong growth of 20.8% YoY led by healthy growth in net premium.
Context
Healthy growth seen in gross premium at 22.7% YoY, led by traction across product segments. Market share remained steady at 19% while new business margin remained buoyant at 26.8%. AUM increased 10.4% YoY to Rs 200123 crore, while Embedded value (defined as sum of NAV and present value of future profits) grew by 8.7% YoY to Rs 29709 crore (rise in yields impacted QoQ EV trajectory with de growth of 1.1%).
Our Perspective
HDFC Life is a dominant player in Indian life insurance industry with strong distribution network, parentage and operating metrics. Balanced product mix with focus on high margin protection business has enabled to clock industry best margins. Given insurance under-penetration and increasing product awareness, demand for insurance is expected to remain buoyant. Focus on product innovation and diversified distribution network is set to drive HDFC Life's new business premium growth at ~22% CAGR in FY22-24E, while focus on operational efficiency and improving persistency will support earnings and growth in Embedded value at 24% CAGR in FY22-24E. Thus, underlying fundamental strength remains strong. However, weak outlook on high margin retail protection business and clarity on HDFC Ltd's stake post HDFC Bank and HDFC Ltd merger is seen to keep price movement in a range in near term.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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