Thread by @MlnDollarMinds

#HDFCLife (HDFLife) at #AshwamedhIndiaConclave organised by #ElaraSecurities

Time for thread 👇🏻👇🏻👇🏻

@dmuthuk

1

Easing business conditions: With opening up of the economy and increased movement across the country following the easing of lockdown measures, the on-the-ground situation for the company looks positive. Business activity is improving MoM.

2

The credit protect business is witnessing growth on the back of increased disbursements. HDFC Group forms less than 30% of the credit protect business. In the non-HDFC Group segment, no single entity accounts for more than 5% in the product mix

3

Exide Life add sto agency channel: Over the years, Exide Life Insurance has built a strong agency franchise, which compliments HDFCLIFE in terms of geographical presence. The acquisition reduces the time to go to market with an increased agency force by about 2-3 years.

4

The company wants to reduce dependence on bank partners and increase share of proprietary business. Exide Life will add ~41% to the agency base of HDFCLIFE despite being only 8% of HDFCLIFE’s annualized premium equivalent (APE) as on FY21.

5

The company aims to increase agency share from 7% of new business premium (NBP) Q1FY22 to ~20% of NBP over three years.

6

Overlap of agents between HDFCLIFE and Exide Life will be ~10-15%. Acquisition of Exide Life is expected to be completed within the next 4- 6 months post which the subsidiary will be merged over FY23

7

Exide Life adds to customer base for cross-sell opportunities: The acquisition opens doors to cross sell opportunities to ~0.8-1.0mn customers in a segment that was earlier not in HDFCLIFE’s priority list

8

Adds to HDFC LIFE’s EV: ExideLife will add ~INR ~2.7bn (~1% of HDFCLIFE’s FY21EV). The company is comfortable with quality of the value in force (VIF) and believes the adjustment will be only of 3-5%

9

Exide Life’s protection business: A major portion of ~11% protection business of Exide Life constitutes individual protection with return of premium. Exide Life has adopted a risk averse strategy and kept pricing on the higher side. Also, risk retention also has been lower

10

Exide Life profitability: Management says variable cost of Exide Life is in line with that of HDFCLIFE while fixed cost can be rationalized. HDFCLIFE expects company-level margin from Exide Life over ~18 months from completion of the acquisition, ie, ~January 2022

11

Current trends: ULIP continues to be In the range of 2530%. Traction has picked up in some pockets, but the company does not see significant movement in the category in the near term. HDFCLIFE continues to see demand for NPAR products.

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Additionally with adequate supply of FRA, the supply of NPAR products remains unconstrained. Competitive pressures arise from time to time but are managed well as the company focuses on spread

13

COVIDprovisioning:Individualmortalityclaimscontinuetobeinlinewithexpectations.For the group business, the company has witnessed moderate delay in claim filings. HDFCLIFE will be able to comment on adequacy of provisions only at end of September 2021

14

Reinsurance rate hikes: HDFCLIFE has yet to receive any intimation from reinsurers on rate hikes; however, the company believes rates will be hiked in the near term, given the increasing protection base and widening demographics

15

Protection growth to remain subdued-Given tightening reinsurance standards, reluctance of customers to carry out medical tests as well as increased rates of protection business growth is expected to remain subdued. Company expects protection business to pick up more in Q4

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