{"id":2326,"date":"2021-10-26T11:58:12","date_gmt":"2021-10-26T11:58:12","guid":{"rendered":"http:\/\/www.assetmultiplier.co.in\/blog\/?p=2326"},"modified":"2021-10-26T11:58:12","modified_gmt":"2021-10-26T11:58:12","slug":"confident-of-maintaining-15-20-growth-in-vnb-hdfc-life","status":"publish","type":"post","link":"https:\/\/www.assetmultiplier.co.in\/blog\/2021\/10\/26\/confident-of-maintaining-15-20-growth-in-vnb-hdfc-life\/","title":{"rendered":"Confident of maintaining 15- 20% growth in VNB \u2013 HDFC Life"},"content":{"rendered":"<p><strong>Update\u00a0on the Indian Equity Market:<\/strong><\/p>\n<p>On Tuesday, NIFTY ended higher at 18,268 (+0.8%) as it closed near the intraday high level of 18,310. Among the sectoral indices, REALTY (+3.6%), METAL (+2.7%), and MEDIA (+2.6%) ended higher, whereas PRIVATE BANK (-0.2%) was the only sector that ended lower. Among the stocks, TATAMOTORS (+6.0%), TATASTEEL (+4.2%), and SBILIFE (+3.8%) led the gainers while INDUSINDBK (-1.9%), ICICIBANK (-1.2%), and POWERGRID (-0.8%) led the losers.<\/p>\n<p><u>Excerpts of an interview with Ms. Vibha Padalkar, MD and CEO, of HDFC Life Insurance (HDFCLIFE) with CNBC TV18 on 25<sup>th<\/sup> October 2021:<\/u><\/p>\n<ul>\n<li>The company is bullish on prospects of the life insurance industry, assuming no covid 3<sup>rd<\/sup> wave takes place. As people get comfortable with the status quo, the company expects the demand for life insurance to come back.<\/li>\n<li>The company has grown at a rate of 20%, which is faster than the industry growth rate and it is confident that it will continue to grow at this rate. VNB (Value of New Business) growth between 15-20% is possible.<\/li>\n<li>From the product mix, Unit linked, participating, non-participating, annuity, and protection contribute around 26%, 30%, 32%,5%, and 7% of the APE (Annualised Premium Equivalent) respectively.<\/li>\n<li>The company has paid out 2,456 claims worth Rs 5,560mn in 1HFY22, and it maintains an additional \u00a0Rs 2,000+ mn of provisions in case it needs to pay out any additional claims.<\/li>\n<li>The company expects a 10-15% price hike in reinsurance products and it is in negotiation with its reinsurance providing partner over the price hikes. This will be done by the end of 3QFY22.<\/li>\n<li>Individual term insurance doesn\u2019t disproportionately contribute to the VNB of the company. The reinsurers charge HDFC life for the product over the lifetime of the policy, whereas the customers pay premium under the limited pay for 5-6 years altogether. As the period between these 2 differs, the company hasn\u2019t yet figured out the cost it will pass on to its customers.<\/li>\n<li>The company\u2019s cash will go down by 12 to 14% after the acquisition and merger of Exide Life. HDFC life\u2019s solvency may go down to 175-180% from the current 190-195%, but the profits from the next two quarters may get added on to the solvency and help bridge the gap.<\/li>\n<\/ul>\n<p><strong>\u00a0<\/strong><\/p>\n<p><strong>Asset Multiplier Comments<\/strong><\/p>\n<ul>\n<li>As Exide Life\u2019s agency channel will add 40% to the company\u2019s current agency channel, the company will benefit from the effect of operating leverage. This will help improve the company\u2019s margins.<\/li>\n<li>The company has posted 20.8% YoY growth in APE and 23.6% YoY growth in VNB (Value of new business) numbers in 2QFY22. Given its better than industry growth rate, and the management&#8217;s confidence in maintaining it in the future, this might have a positive impact on the company\u2019s fundamentals.<\/li>\n<li>Increase in reinsurance costs will likely drive term insurance rates higher in the next few quarters. This may have impact on its future profitability.<\/li>\n<\/ul>\n<p><strong>Consensus Estimate<\/strong>: (Source: market screener website)<\/p>\n<ul>\n<li>The closing price of HDFCLIFE was \u20b9 690\/- as of 26-Oct-2021.\u00a0 It traded at 100x\/ 76x\/ 64x the consensus earnings estimate of \u20b9 6\/ 9\/ 11\/- for FY22E\/FY23E\/FY24E respectively.<\/li>\n<li>The consensus target price of \u20b9 787\/- implies a PE multiple of 74x on FY24E EPS of \u20b9 10.7\/-.<\/li>\n<li>In the case of life insurance companies, the embedded value per share is the correct multiple for valuing the company. The consensus estimate of this metric is not available on any of the websites.<\/li>\n<\/ul>\n<p>Disclaimer: &#8220;The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.&#8221;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Update\u00a0on the Indian Equity Market: On Tuesday, NIFTY ended higher at 18,268 (+0.8%) as it closed near the intraday high level of 18,310. Among the sectoral indices, REALTY (+3.6%), METAL (+2.7%), and MEDIA (+2.6%) ended higher, whereas PRIVATE BANK (-0.2%) was the only sector that ended lower. Among the stocks, TATAMOTORS (+6.0%), TATASTEEL (+4.2%), and [&hellip;]<\/p>\n","protected":false},"author":13,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[549],"tags":[],"_links":{"self":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/2326"}],"collection":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/comments?post=2326"}],"version-history":[{"count":1,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/2326\/revisions"}],"predecessor-version":[{"id":2327,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/2326\/revisions\/2327"}],"wp:attachment":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/media?parent=2326"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/categories?post=2326"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/tags?post=2326"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}