28 April 2020
4QFY20 Results Update | Sector: Financials
HDFC Life Insurance
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E MARCH
Net Premiums
Surplus / Deficit
Sh. PAT
NBP gr- unwtd (%)
NBP gr - APE (%)
Premium gr (%)
VNB margin (%)
RoE (%)
RoEV (%)
Total AUMs (INR t)
VNB (INRb)
EV per share
Valuations
P/EV (x)
P/EPS (x)
FY20 FY21E FY22E
322.2 371.5 452.7
9.7
11.7 15.0
13.0
12.9 16.1
15.1
18.0 22.0
18.4
18.2 23.3
12.1
14.8 21.9
25.9
26.8 27.0
20.8
18.0 19.8
12.9
21.4 16.3
1.3
1.8
2.2
19.2
22.6 28.1
102.4 124.3 144.6
4.7
75.5
3.9
75.8
3.4
60.9
HDFCLIFE IN
2,014
978.7 / 12
646 / 339
4/-3/40
2688
CMP: INR485
TP: INR525 (+8%)
Neutral
APE growth/margin moderates; Persistency ratio remains steady
Diverse business mix to help sustain healthy growth
HDFC Life’s (HDFCLIFE) results reflected weak business trends due to the
COVID-19 led lockdown and volatile markets. 4QFY20 APE growth declined
5% YoY led by ULIPs while protection business growth was strong at 28%
QoQ. Persistency ratio improved across 13-month/61-month cohorts to
~90%/~55% (v/s ~87%/~52% in FY19).
The share of the protection business in 4QFY20 improved further to 18.5%
in total APE (17.2% in FY20). VNB margins for FY20 stood at 25.9%.
We have cut our EPS estimates by 14%/8% for FY21/FY22E, mainly to factor
in the company’s softer business growth. Maintain
Neutral.
4QFY20 PAT declined 14% YoY to INR3.1b (MOSLE: INR3.3b) impacted by
weak business trends due to the lockdown in Mar’20 and higher provisions.
Net premium income growth moderated ~2% YoY with first year premium
declining 4% YoY; renewal/single premium growth was tepid at 4% YoY
each. Persistency ratio improved across 13-month/61-month cohorts to
~90%/~55% (v/s ~87%/~52% in FY19).
Individual APE
during 4QFY20 declined 5% YoY to INR17.5b while group APE
declined 3% YoY to INR3.6b. Thus, total new business APE declined 4% YoY
to INR21.1b, mainly led by decline in ULIPs (down 44% YoY). Thus, share of
ULIP in individual APE declined to 28% while share of the PAR business
improved significantly to ~34%. During 4QFY20, the share of the protection
business stood at 18.5% in total APE (17.2% in FY20).
VNB margins
moderated to 24.3% in 4QFY20 (25.9% in FY20) v/s 24.7% in
3QFY20 on the back of lower mix of non-PAR savings. Absolute VNB for
4QFY20 declined 10% YoY to INR5.1b (25% YoY growth in FY20).
Total operating expenses
(incl. commissions) grew 4% YoY, and thus, total
expense ratio stood at 15.8% (+20bp YoY) v/s 17.7% in 3QFY20. During
FY20, share of direct channel in individual APE increased to 22% (+300bp
YoY) while the share of banca channel declined to 55% (v/s 64% in FY19).
Focus on maintaining a balance mix toward saving and protection business.
The change in operating assumptions made on the back of the COVID-19
reflects experience in ULIP’s persistency and mortality rate.
The objective of the fund raise
is to keep solvency ratio around 190%. The
decline in equity markets has impacted solvency by ~10%.
ULIP demand is likely to remain muted amidst challenging macros due to
the COVID-19 pandemic while trends in PAR/individual term business
remain healthy. To maintain its market leadership, HDFCLIFE would
continue to focus on maintaining a balanced product mix across its savings
and protection business with emphasis on product innovation/superior
customer service. VNB margins have moderated over the past few quarters
and we estimate it to improve gradually to 27% by FY22E (25.9% in FY20)
while operating RoEV should remain steady at 20%. We value the stock at
INR525, which corresponds to 4.0x Sep’21E EV. Maintain
Neutral.
APE growth moderates led by ULIPs; Protection mix improves further
Shareholding pattern (%)
As On
Dec-19 Sep-19
Promoter
66.2
71.2
DII
5.0
4.4
FII
20.0
16.0
Others
8.9
8.5
FII Includes depository receipts
Dec-18
80.7
2.7
8.3
8.4
Highlights from management commentary
Valuation and view
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
Himanshu Taluja
(Himanshu.Taluja@motilaloswal.com)
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);
Yash Agarwal
(Yash.Agarwal@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
14
Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
1
Motilal
January 2020
 Motilal Oswal Financial Services
HDFC Life Insurance
Quarterly performance
Policy holder's A/c
(INR m)
1Q
Net premium income 49,947
Growth (%)
36.4%
Commission paid
1,982
Operating expense
7,246
Surplus/(Deficit)
3,388
Shareholder's A/c
Total income
4,081
PBT
3,918
PAT
3,802
Growth (%)
20.2%
Key metrics
VNB (INR b)
2.5
AUM (INR b)
1,096
EV (INR b)
157
VNB Margins (%)
24.2
Solvency ratio (%)
197.0
E:MOFSL Estimates
FY19
2Q
3Q
67,776 68,977
25.8% 27.3%
2,637
2,623
9,458
9,243
1,946
2,217
3,073
2,963
2,869
20.3%
3.6
1,132
164
24.3
193.0
2,604
2,565
2,456
18.5%
3.6
1,177
174
23.4
191.0
FY20
4Q
102,475
15.1%
3,935
12,189
5,956
6,605
3,453
3,640
5.0%
5.7
1,256
183
25.7
188.0
1Q
64,512
29.2%
3,222
8,808
3,765
4,491
4,369
4,246
11.7%
5.1
1,296
192
29.8
193.0
2Q
74,537
10.0%
3,655
10,955
2,130
3,603
3,268
3,087
7.6%
4.5
1,310
201
25.4
192.0
3Q
78,543
13.9%
3,520
10,600
2,460
2,821
2,636
2,502
1.9%
4.5
1,365
208
24.7
195.0
4Q
104,645
2.1%
4,289
12,522
1,361
5,562
2,845
3,117
-14.4%
5.1
1,272
206
27.4
184.0
FY19
289,240
23.8%
11,177
38,136
13,507
16,364
12,899
12,768
15.1%
15.4
1,256
183
24.6
188.0
FY20
FY20E
3Q
(INRm)
V/s
Est
7.8
743
-4.6
37.2
7.7
21.5
-21.7
-5.7
-521
322,236 97,031
11.4%
-5.3%
14,687 4,496
42,885 9,124
9,715
1,263
16,478
13,117
12,953
1.4%
19.2
1,272
206
25.9
184.0
4,579
3,634
3,307
-9.2%
Quarterly snapshot
Policyholder A/c
(INR b)
Net premium income
First year prem.
Renewal prem.
Single prem.
Investment income
Total income (A)
Commission paid
Operating expense
Total comm. & Opex
Benefits paid
Total Expenses (B)
PBT
Tax
Surplus/(Deficit)
Shareholder A/c
Transfer from
Policyholder a/c
Investment Income
Total income
PBT
Tax
PAT
Individual APE
ULIP
PAR
Term
Non Par savings
Total individual APE
Total APE
FY18
1Q
36.6
7.1
20.5
9.5
27.7
64.9
1.6
5.6
7.2
26.2
61.1
3.2
0.2
3.0
2Q
53.9
10.8
26.5
17.0
25.1
79.3
2.5
7.2
9.7
29.6
76.4
2.2
0.0
2.2
3Q
54.2
12.0
28.1
14.6
42.5
96.8
2.6
7.8
10.4
31.2
94.3
1.9
0.1
1.8
4Q
89.0
17.4
46.7
25.5
-9.4
81.3
4.1
11.0
15.1
44.1
74.9
5.4
1.4
4.0
1Q
49.9
8.1
23.8
18.7
18.0
68.5
2.0
7.2
9.2
29.4
64.1
3.6
0.2
3.4
FY19
2Q
3Q
67.8 69.0
12.1 12.5
32.3 33.1
24.0 24.0
10.9 23.8
79.0 93.0
2.6
2.6
9.5
9.2
12.1 11.9
33.6 29.9
75.6 89.8
1.9
2.4
0.0
0.2
1.9
2.2
4Q
102.5
17.9
52.9
32.4
37.6
143.7
3.9
12.2
16.1
46.9
137.8
4.8
1.9
6.0
1Q
64.5
13.3
26.1
26.0
20.5
85.3
3.2
8.8
12.0
36.6
79.8
3.8
0.0
3.8
2Q
74.5
14.5
35.7
25.4
11.4
86.6
3.7
11.0
14.6
42.2
83.3
1.9
-0.2
2.1
FY20
3Q
78.5
15.4
37.7
26.9
37.3
116.5
3.5
10.6
14.1
58.1
112.2
2.9
0.5
2.5
4Q
104.6
17.2
55.3
33.7
-102.3
4.2
4.3
12.5
16.8
53.3
-3.1
2.6
1.2
1.4
Change (%)
YoY
QoQ
2
33
-4
12
4
47
4
25
-372 -374
-97
-96
9
22
3
18
4
19
14
-8
-102 -103
-46
-12
-36
163
-77
-45
2.5
0.7
3.4
3.3
0.1
3.2
4.2
2.2
0.4
0.6
7.3
8.2
2.0
0.5
2.5
2.4
0.1
2.4
6.6
3.2
0.6
0.9
11.2
13.1
1.5
0.6
2.1
2.2
0.1
2.1
7.4
3.3
0.6
1.0
12.3
13.8
4.0
1.0
4.9
3.4
-0.1
3.5
6.4
3.9
0.6
1.4
12.3
20.2
3.2
0.8
4.1
3.9
0.1
3.8
4.5
2.4
0.6
0.5
8.4
10.3
2.3
0.7
3.1
3.0
0.1
2.9
7.9
2.5
0.9
0.8
12.6
14.8
1.8
0.8
2.6
2.6
0.1
2.5
7.5
1.9
0.9
1.8
12.6
15.4
4.8
1.7
6.6
3.5
-0.2
3.6
8.8
2.6
1.3
4.8
18.4
22.1
3.5
1.0
4.5
4.4
0.1
4.2
3.6
0.8
0.7
8.0
13.8
17.1
2.2
1.4
3.6
3.3
0.2
3.1
3.9
1.8
1.3
7.5
14.9
17.6
1.7
1.1
2.8
2.6
0.1
2.5
4.9
3.1
1.1
5.6
15.3
18.2
4.5
0.9
5.6
2.8
-0.3
3.1
4.9
6.0
1.8
4.1
17.5
21.1
-5
-50
-16
-18
45
-14
-44
126
43
-14
-5
-4
167
-24
97
8
-304
25
1
90
72
-27
15
16
28 April 2020
2
 Motilal Oswal Financial Services
HDFC Life Insurance
Quarterly snapshot contd.
Ratios
APE (% of total)
ULIP
PAR
Term
Non Par savings
Distribution mix (%)
Bancassurance
Individual agents
Direct
Broker
Key Ratios (%)
Operating ratios
Comm. (unwtd)
Opex (unwtd)
Total Cost
Solvency ratio
Profitability ratios
VNB margins
ROE
Op. ROEV
Persistency ratios
13th Month
25th Month
37th Month
49th Month
61st Month
Key Metrics (INR b)
VNB
EV
AUM
Eq. portion (%)
FY18
1Q
57.0
30.0
5.0
8.0
68.0
10.0
15.0
7.0
2Q
58.7
28.3
5.0
8.0
69.7
10.0
13.3
5.3
3Q
60.5
26.5
5.0
8.0
71.5
12.5
14.0
3.5
4Q
52.0
31.5
5.0
11.5
73.5
11.0
14.0
5.0
1Q
54.0
28.0
7.0
6.0
65.0
11.0
19.0
5.0
2Q
62.3
19.7
7.0
6.0
68.3
11.0
15.7
3.3
FY19
3Q
59.0
15.0
7.0
14.0
67.0
11.0
17.0
4.0
4Q
47.7
14.3
7.0
26.0
58.5
16.7
22.7
4.0
1Q
26.0
6.0
5.0
58.0
56.0
15.0
20.0
9.0
2Q
26.0
11.8
8.9
50.3
52.1
15.0
21.9
10.9
FY20
3Q
31.7
20.5
7.0
36.8
56.9
12.1
21.0
7.1
4Q
28.0
34.1
10.5
23.4
55.0
14.0
24.5
9.0
Change (%)
YoY
QoQ
-1,968 -375
1,972 1,356
351
351
-255 -1,332
-351
-266
185
500
-187
187
351
187
4.2
15.4
19.4
198
NA
NA
NA
82.5
74.7
65.7
59.1
52.3
1.7
132.2
947.5
NA
4.6
13.3
17.8
201
23.7
27.0
21.2
85.5
76.5
67.0
60.2
55.5
4.8
140.1
995
41
4.8
14.3
19.0
191
21.8
24.9
20.4
86.4
76.9
68.9
60.4
53.5
7.8
144.7
1,044
43
4.6
12.4
16.8
192
24.7
26.0
21.5
87.1
77.4
70.9
62.2
51.0
12.8
152.2
1,066
39
3.9
14.4
18.2
197
24.2
31.0
18.4
85.0
77.8
71.2
63.6
49.5
2.5
156.9
1,096
39
3.9
13.9
17.7
193
24.3
26.4
19.6
86.6
79.1
72.1
64.2
50.3
6.1
163.8
1,132
38
3.8
13.4
17.0
191
23.4
23.4
19.7
86.4
79.8
71.9
65.7
50.1
9.7
174.0
1,177
38
3.8
11.9
15.6
188
25.7
24.6
20.1
87.2
80.5
72.0
67.7
52.3
15.4
183.0
1,256
38
4.9
13.6
18.4
193
29.8
28.9
19.9
85.0
76.0
70.0
67.0
53.0
5.1
192.3
1,296
38
4.8
14.6
19.3
192
25.4
24.3
19.6
89.1
79.5
72.9
65.2
54.2
9.6
201.2
1,310
37
4.4
13.3
17.7
195
24.7
21.3
19.0
89.7
80.0
73.4
67.7
54.7
14.1
208.4
1,365
37
4.0
11.9
15.8
184
24.3
20.5
18.1
90.1
80.2
73.8
67.2
55.0
19.2
206.5
1,272
29
23
0
20
-400
-149
-410
-200
290
-30
180
-50
270
25
13
1
-900
-36
-140
-190
-1,100
-43
-80
-90
40
20
40
-50
30
36
-1
-7
-800
Note: a) Ratios are on cumulative basis for 1H, 9M and 12M
Highlights of management commentary
COVID-19 impact
Impacted both new business and renewal business as people want to maintain
liquidity in hand right now.
The decline in interest rates has led to lower EV unwind rate (decline to 7.6% v/s
8.5% earlier).
Received board approval for capital raise through Tier-II bonds.
Not declared any dividend for FY20.
Guiding customers to take loans for insurance payments (cheaper than personal
loans) rather than the policy lapsing. When the situation has normalized,
foreclosure of loan can be done at any point in time.
HDFCLIFE has provided toward COVID-19 reserves of INR0.4b after considering
analysis of both group/individual policyholders across geographies.
Persistency assumptions have been lowered in our EV calculation.
Around INR3-4b of overall business has been impacted due to the lockdown in
the last 15 days of Mar’20.
28 April 2020
3
 Motilal Oswal Financial Services
HDFC Life Insurance
Operating metrics
Impact of YES Bank additional Tier-I bond is ~INR1b.
The company has reviewed ALM approach and assessed appropriateness of
ALM
to manage interest rate risk in the non-PAR savings business. Net asset
liability change will remain positive under all stress scenarios that were tested.
The objective of the fund raise is to keep solvency ratio around 190%. Given the
equity market decline, solvency was impacted by 10%.
The change in operating assumptions made on the back of the COVID-19 reflects
experience in ULIP’s persistency and mortality rate.
Economic variance is largely
toward the decline in equity markets of INR9b.
Impairments in policyholder’ accounts is INR5.6b while in shareholders
accounts, it is INR2b. Large part of the diminution value over FY20 has been
taken during 4QFY20 itself.
Effective tax rate change will see an impact of 0.2%/0.3% on the EV/VNB
margin.
Operating cost break-up
– 50% is for distributors/variable cost; 7% is volume
related cost; 12% is toward infrastructure/technology and the rest is employee
cost.
Sensitivity on EV/VNB has declined due to balanced portfolio approach.
Business mix
Focus on maintaining a balanced mix in the savings and protection business.
People are currently staying away from investing in ULIP products.
Online channel during the last 15 days of Mar’20 grew 13% YoY due to the
lockdown.
Considering price hike on protection policies after considering mortality rate so
that risk is well balanced. Overall, margin impact would be neutral. Further, the
company does not expect any demand impact due to the price hike and would
remain competitive in the protection business
Increase in re-insurance price is mainly toward underwriting of protection
business.
Demand for non-PAR remains attractive even in a falling interest rate
environment.
Strong business trends should be visible in low-ticket sized sum-assured policies.
Some price irrationality is being witnessed in the credit life business either by
distributors/ other players. Thus, the company has exited from some of the
relationships where the risk was uneven.
28 April 2020
4
 Motilal Oswal Financial Services
HDFC Life Insurance
Key Exhibits
Exhibit 1: Proportion of Protection in NBP stood at 27%
ULIP
4%
17%
29%
4%
15%
30%
FY16
PAR
Non-PAR
4%
22%
32%
3%
14%
25%
FY17
Group Savings
9%
26%
24%
3%
12%
26%
FY18
17%
27%
24%
5%
6%
21%
FY19
Term
Annuity
16%
27%
26%
14%
6%
11%
FY20
Source: MOFSL, Company
Exhibit 2:
Share of Protection at ~8% in total individual APE
ULIP
1%
5%
8%
30%
PAR
1%
3%
8%
35%
Non-PAR savings
2%
5%
7%
28%
Term
5%
7%
15%
18%
Annuity
4%
8%
41%
19%
28%
56%
53%
57%
55%
Source: MOFSL, Company
Exhibit 3: Increased focus on proprietary channels
Group Savings
Third Party Distributors
16%
44%
9%
30%
FY15
13%
42%
14%
30%
FY16
14%
34%
20%
32%
FY17
Group Protection
Proprietary channels
17%
35%
24%
24%
FY18
23%
28%
24%
25%
FY19
24%
25%
25%
26%
FY20
Exhibit 4:
Proportion of direct channel has increased to 22%
Banca
11%
12%
5%
Brokers & others
14%
11%
5%
Agency
19%
13%
4%
Direct
22%
14%
9%
55%
72%
71%
64%
FY17
FY18
FY19
FY20
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 5: EV grew 13% YoY
EV (INR bn)
Operating ROEV(%)
Exhibit 6: Margins moderated to 25.9% in FY20
Protection % (on total APE)
18.0%
17.2%
16.6% 17.0%
16.2%
16.7% 16.7%
11.0%
NBM (%)
FY18
Source: MOFSL, Company
9M19
1QFY20
9MFY20
Source: MOFSL, Company
28 April 2020
5
 Motilal Oswal Financial Services
HDFC Life Insurance
Exhibit 7: IEV break-up during FY20
Adjusted Net worth (ANW)
19.2
1.5
13.7
Value of in-force business (VIF)
-1.2
0.4
-10.0
206.5
134.6
183.1
124.3
58.8
71.9
Source: MOSL, Company
Valuation view
HDFCLIFE is the market leader amongst private insurers. We believe the
company would continue its product innovation and superior customer service
to maintain its market leadership. We, thus, estimate APE growth at 21% CAGR
over FY20-22E. Private sector life insurance companies have 42% market share
in the overall industry’s new business APE.
HDFCLIFE has delivered strong return ratios, with average RoE/RoEV at
25%+/21.1% over FY16-19. We expect return ratios to remain strong, driven by
healthy new business margins, balance product mix, quality underwriting and
strong persistency ratios. We, thus, estimate VNB margins at ~27% for FY22E.
Due to the COVID-19 outbreak, we expect overall business trends to remain
weak, especially in the ULIP segment. However, the company’s balanced
product mix toward the protection and savings business would help it maintain
steady business growth trends.
Neutral with a target price of INR525:
ULIP demand is likely to remain muted
amidst challenging macros due to the COVID-19 pandemic while trends in PAR
and individual term business should be healthy. To maintain its market
leadership, HDFCLIFE would continue to focus on maintaining a balanced
product mix across its savings and protection business with emphasis on
product innovation/superior customer service. VNB margins have moderated
over the past few quarters and we estimate it to improve gradually to 27% by
FY22E (25.9% in FY20) while operating RoEV should remain steady at 20%. We
value the stock at INR525, which corresponds to 4.0x Sep’21E EV. Maintain
Neutral.
Exhibit 9: One-year forward P/E
Max (x)
-1SD
100
88
3.8
76
64
52
40
P/E (x)
Min (x)
Avg (x)
+1SD
97.8 86.1
73.6
61.2
54.9
74.3
Max (x)
-1SD
Exhibit 8: One-year forward P/EV
P/EV
Min (x)
6.0
5.5
5.0
4.5
4.0
3.5
3.0
5.6
5.2
4.5
3.9
3.5
Avg (x)
+1SD
Source: MOFSL, Company
Source: MOFSL, Company
28 April 2020
6
 Motilal Oswal Financial Services
HDFC Life Insurance
Story in Charts
Exhibit 10: Net premium grew 2% YoY affected by COVID-19
outbreak, which moderated business growth
First Year Premium
70%
55%
40%
25%
10%
-5%
-20%
Net Premium
Renewal Premium
100%
80%
60%
40%
20%
0%
Exhibit 11: Proportion of renewal premium increases in total
net premium income
First Yr Premium
Renewal Premium
Single Premium
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 12: Trend in PAT, existing business surplus and new
business strain
New Business Strain
Existing business surplus
PAT
Exhibit 13: Steady increase in underwriting profits
neutralized the impact of new business strain
Sh.holder's surplus
Underwriting profits
25.5
14.6 8.9
-7.1
-10.6
19.1
11.1
-16.5
12.8
29.9
12.9
83%
84%
77%
70%
84%
-19.1
17%
16%
23%
30%
16%
FY17
FY18
FY19
FY20
FY16
FY17
FY18
FY19
FY20
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 14: 13 /61 months persistency improved further
13th Month
25th Month
61st Month
th
st
Exhibit 15: Solvency ratio higher than the requirement
Solvency Ratio
Regulatory requirement
FY18
1HFY19
FY19
1HFY20
FY20
Source: MOFSL, Company
Source: MOFSL, Company
28 April 2020
7
 Motilal Oswal Financial Services
HDFC Life Insurance
Financials
capital remains strong post-merger
and Valuations
Exhibit 16:
Tier-1
Technical account (INR b)
Gross Premiums
Reinsurance Ceded
Net Premiums
Income from Investments
Other Income
Total income (A)
Commission
Operating expenses
Total commission and Opex
Benefits Paid (Net)
Change in reserves
Prov. for doubtful debts
Total expenses (B)
(A) - (B)
Tax (incl. GST)
Surplus / Deficit
Shareholder's a/c (INR b)
Transfer from technical a/c
Income From Investments
Total Income
Other expenses
Contribution to technical a/c
Total Expenses
PBT
Tax
PAT
Growth
Premium (INR b) & growth (%)
NBP - unweighted
NBP - wrp
Renewal premium
Total premium - unweighted
NBP growth - unweighted
NBP growth - wrp
Renewal premium growth
Tot. premium growth - unweighted
Premium mix (%)
New business - un weighted
- Individual mix
- Group mix
New business mix - WRP
- Participating
- Non-participating
- ULIPs
Total premium mix - un weighted
- Participating
- Non-participating
- ULIPs
Indi premium sourcing mix (%)
Individual agents
Corporate agents-Banks
Direct business
Others
Exhibit 17: Bank added 98 branches during the quarter
FY18
235.6
(1.9)
233.7
85.9
2.7
322.4
10.7
31.6
42.3
131.1
133.2
0.0
306.7
15.7
4.7
10.9
FY18
10.0
2.8
13.0
0.1
1.6
1.7
11.3
(0.2)
11.1
24%
FY18
113.5
54.0
122.1
235.6
31.7%
30.0%
12.8%
21.2%
FY18
52.4%
47.6%
24.8%
22.7%
52.5%
24.9%
31.5%
43.6%
FY18
13.2%
58.8%
19.4%
8.6%
Tier 1
FY17
194.5
(1.7)
192.7
111.4
1.4
305.5
7.9
23.9
31.8
100.0
160.5
0.3
292.7
Source: MOFSL, Company
12.9
3.4
9.5
FY17
7.9
2.3
10.1
0.7
0.4
1.0
9.1
(0.2)
8.9
9%
FY17
86.2
41.5
108.2
194.5
32.9%
14.9%
10.2%
19.2%
FY17
48.7%
51.3%
30.0%
21.5%
48.5%
25.9%
27.4%
46.7%
FY17
15.5%
61.1%
14.9%
8.6%
SA Ratio
FY19
291.9
(2.6)
289.2
90.3
4.8
384.4
11.2
38.1
49.3
139.9
175.1
0.9
365.2
19.2
5.7
13.5
FY19
12.1
4.1
16.4
0.3
3.1
3.5
12.9
(0.1)
12.8
15%
Branch Nework
FY20
327.1
(4.8)
322.2
(33.1)
3.5
292.6
14.7
42.9
57.6
190.2
24.4
5.7
277.9
14.7
5.0
9.7
FY21E
FY22E
375.5
457.6
(4.0)
(4.9)
371.5
452.7
167.7
215.1
5.4
6.2
544.5
674.0
16.9
20.6
45.9
54.5
62.8
75.1
181.6
221.3
279.6
353.2
0.0
0.0
524.0
649.6
Source: MOFSL, Company
20.5
24.3
8.9
9.3
11.7
15.0
FY21E
12.2
4.6
17.0
0.4
0.9
3.3
13.7
(0.8)
12.9
0%
FY21E
203.4
84.6
172.1
375.5
18.0%
18.2%
11.3%
14.8%
FY21E
60.0%
40.0%
27.4%
39.5%
33.2%
40.0%
12.8%
47.2%
FY21E
22.4%
52.6%
17.5%
7.5%
FY22E
16.1
4.3
20.6
0.4
1.1
3.5
17.1
(0.9)
16.1
24%
FY22E
248.2
104.4
209.5
457.6
22.0%
23.3%
21.7%
21.9%
FY22E
62.0%
38.0%
27.1%
39.1%
33.9%
40.0%
12.8%
47.2%
FY22E
22.4%
52.6%
17.5%
7.5%
FY20
11.9
4.4
16.5
0.3
1.0
3.4
13.1
(0.2)
13.0
1%
FY20
172.4
71.6
154.7
327.1
15.1%
18.4%
8.8%
12.1%
FY20
59.0%
41.0%
22.9%
39.9%
37.2%
40.0%
12.8%
47.2%
FY20
22.4%
52.6%
17.5%
7.5%
FY19
149.7
60.5
142.1
291.9
31.9%
12.0%
16.4%
23.9%
FY19
51.1%
48.9%
14.4%
38.5%
47.1%
20.0%
41.2%
38.8%
FY19
13.8%
46.7%
31.8%
7.8%
28 April 2020
8
 Motilal Oswal Financial Services
HDFC Life Insurance
Financials and Valuations
Balance sheet (INR b)
Sources of Fund
Share Capital
Reserves And Surplus
Shareholders' Fund
Policy Liabilities
Prov. for Linked Liability
Funds For Future App.
Current liabilities & prov.
Total
Application of Funds
Shareholders’ inv.
Policyholders’ inv.
Assets to cover linked liability
Loans
Current assets
Total
Operating ratios (%)
Investment yield
Commissions / GWP
- first year premiums
- renewal premiums
- single premiums
Operating expenses / GWP
Total expense ratio
Claims / NWP
Solvency ratio
Persistency ratios (%)
13th Month
25th Month
37th Month
49th Month
61st Month
Profitability ratios (%)
VNB margin (%)
RoE (%)
RoIC (%)
Operating ROEV
RoEV (%)
Valuation & key data
Total AUMs (INRb)
- of which equity AUMs (%)
Dividend %
Dividend payout ratio (%)
EPS, INR
Value of new business (INRb)
Embedded Value (INRb)
EV per share (INR)
VIF as % of EV
P/VIF (%)
P/AUM (%)
P/EV (x)
P/EPS (x)
FY17
20.0
18.1
38.4
327.8
538.0
8.7
38.2
951.1
32.5
346.9
538.0
0.5
29.7
951.1
FY17
12.6%
4.1%
17.7%
1.3%
0.1%
12.3%
16.3%
51.1%
192%
FY17
81.0%
73.0%
64.0%
58.0%
57.0%
FY17
22.0%
25.5%
41.0%
21.9%
22.0%
FY17
917
41%
11%
30%
4.5
9.1
124.5
61.8
67%
11.7
106%
7.8
108.5
FY18
20.1
27.1
47.5
423.2
546.0
35.5
46.5
1,104.8
40.7
453.5
571.9
0.2
35.2
1,104.8
FY18
8.4%
4.6%
18.4%
1.3%
0.8%
13.4%
18.0%
55.2%
192%
FY18
87.1%
77.4%
70.9%
62.2%
51.0%
FY18
23.2%
25.8%
50.1%
21.6%
22.0%
FY18
1,066
39%
14%
30%
5.5
12.8
151.9
75.4
68%
9.4
92%
6.4
87.7
FY19
20.2
36.4
56.6
536.7
605.2
39.5
51.2
1,300.3
50.5
571.2
633.8
1.1
40.4
1,300.3
FY19
7.5%
3.8%
15.5%
1.5%
1.2%
13.1%
16.9%
46.4%
188%
FY19
87.2%
80.5%
72.0%
67.7%
52.3%
FY19
24.6%
24.5%
56.8%
20.1%
20.3%
FY19
1,256
38%
16%
31%
6.3
15.4
182.7
90.7
68%
7.9
78%
5.3
76.5
FY20
20.2
49.7
68.0
652.7
508.4
42.2
49.8
1,321.6
58.6
671.9
541.8
3.0
43.1
1,321.6
FY20
-2.7%
4.5%
17.9%
1.6%
1.3%
13.1%
17.6%
59.0%
184%
FY20
90.1%
80.2%
73.8%
67.2%
55.0%
FY20
25.9%
20.8%
56.8%
18.2%
12.9%
FY20
1,272
29%
0%
0%
6.4
19.2
206.3
102.4
65%
7.3
77%
4.7
75.5
FY21E
20.2
57.5
75.8
781.6
912.6
49.9
64.7
1,884.6
67.3
822.0
912.6
3.7
53.8
1,884.6
FY21E
9.7%
4.5%
17.1%
1.9%
1.1%
12.2%
16.7%
46.6%
166%
FY21E
91.6%
82.2%
73.9%
68.6%
55.0%
FY21E
26.8%
18.0%
56.4%
20.2%
21.4%
FY21E
1,802
40%
21%
40%
6.4
22.6
250.4
124.3
68%
5.7
54%
3.9
75.8
FY22E
20.2
68.5
86.8
952.3
1,095.2
59.1
84.1
2,277.5
80.8
1,007.6
1,095.2
4.6
67.3
2,277.5
FY22E
10.2%
4.5%
16.6%
2.0%
1.0%
11.9%
16.4%
46.6%
155%
FY22E
92.4%
83.4%
75.4%
69.0%
56.1%
FY22E
27.0%
19.8%
140.4%
20.1%
16.3%
FY22E
2,184
40%
21%
32%
8.0
28.1
291.2
144.6
69%
4.9
45%
3.4
60.9
28 April 2020
9
 Motilal Oswal Financial Services
HDFC Life Insurance
NOTES
28 April 2020
10
 Motilal Oswal Financial Services
HDFC Life Insurance
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products.
MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on
www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading
Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity
& Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository
Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory &
Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are available on the
website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should
be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant
banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from
MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or
use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong
Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act"
and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and
investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for
distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document
relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule
15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order
to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities
International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in
respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of
which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives have financial interest in the subject company, as they have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
28 April 2020
11
 Motilal Oswal Financial Services
HDFC Life Insurance
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
-
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
-
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
-
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
-
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of
MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature.
The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed,
in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose
and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report
constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities
discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives,
financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document
should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including
the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be
suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial
risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions
contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as
endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and
alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect
or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment
banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and
independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other
person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of
or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject
MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category
of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors,
employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may
arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any
and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold
MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person accessing this information due to any
errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN
no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management
Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of
Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a
group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory
services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee
of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj
Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
28 April 2020
12