Thread by @MlnDollarMinds

#HDFCLife at a webinar organised by Kotak Securities

Time for thread 👇🏻👇🏻👇🏻

@dmuthuk

@Kiran24Rajput

(1/n)

Balanced product mix helped HDFC Life fare better than industry average in 9MFY21. The company increased its market share in individual APE by >210 bps in 9mFy21.

(2/n)

Usually, most companies have a diversified product bouquet but focus on select product segments only. However, HDFC Life has enabled its feet-on-street to switch between product classes.

(3/n)

The new par product is one of the most profitable par products in the country. HDFC Life pushed this product in 9MFY21 while others went slow in par.

(4/n)

Term insurance reported strong growth in 1HFY21 due to heightened risk aversion. However, the initial euphoria has reduced leading to moderation in protection growth. As such protection mix growth is likely to stabilize at 15-20% over the medium term.

(5/n)

While customers were averse in going for medical check-ups and hospitals were not carting out health check-ups in select cases, it has started to pick up over the past few months. This is however expected to support growth in protection.

6/n)

Reinsurers will likely continue to monitor changes in mortality risks; as such, the management does not rule out further price hikes. Mortality rates in protection vary depending on customer cohorts and geographies compared to distribution channels.

(7/n)

Login to underwriting ratio in term insurance is ~50%. While medical underwriting is a discussed topic, financial underwriting constrains swift growth in retail protection. CO. maintains a cautious stance in underwriting it. The market is relatively underdeveloped.

(8/n)

Non-Covid deaths have declined significantly leading to customers deferring purchase of term insurance. Thus, overall reported deaths are similar to pre-Covid levels. Once mobility increases further, sales to probable buyers is expected to pick up.

(9/n)

Impact of tax changes on high-ticket ULIPs is negligible. According to mgmnt, the impact of tax changes on high-ticket ULIPs will be limited to 3% of APE & negligible impact on VNB. The company expects ULIPs to remain strong compared to MFs as the proposition is different

(10/n)

The flagship ‘Click2Invest’ has delivered higher IRR compared to most equity-oriented funds in the country over the past five years. As such, demand for ULIPs is expected to remain strong.

(11/n)

VNB margin has likely not peaked out. Management expects VNB margin 2 remain strong over medium term likely reporting marginal increase yoy. Product innovation and expense management (variable cost is likely to grow in line with overall APE growth) will be key drivers.

(12/n)

Focus of the management is on maintaining comparable margins across channels. As such VNB growth is likely to stabilize around 20% over the long term.

(13/n)

Digital channels remained strong in 9MFY21. The traditional agency and broker channel reported subdued volumes in 9MFY21. Banca picked up from 2QFY21 as footfalls increased. Digital channels reported strong growth during the pandemic.

(14/n)

The company however continues to focus on growing agency business. This channel incur high fixed cost, operating leverage kick in as productivity increases. The co has launched ‘digital agents’ whereby on-boarding, training & sales r carried out through digital channels.

(15/n)

Higher lay-offs in hospitality, entertainment industry, etc. have provided a talented pool of agents whose adoption to insurance sales is significantly higher. The company has witnessed 54% yoy growth in MDRT agents (high productive agents).

(16/16)