Marketing Stratagy
HDFC Life is focused on sales quality and enjoys significant cross-selling opportunity through
HDFC and HDFC Bank. Though efficiency ratios look weak (as the company is in investment mode), we believe it will be able to deliver return ratios in line with comparable peers (SBI Life and ICICI Prudential).
HDFC Life: ‘Need-based sales’ focus to continue
With persistency and operating risks spiralling, following new product guidelines, most insurers have adopted a conservative stance and have cut costs and adjusted product mix to contain risks. However, HDFC Life has maintained its focus on ’need-based sales’, in order to maintain its sales quality and build a strong retail franchise. HDFC Life saw single premium exposure jump by
9ppts (to 17%), vs the 19ppt increase (to 30%) of private insurers. Further, unlike peers, the insurer maintained its product mix with ULIPs forming 86% of NBP (83% in FY10).
HDFC Life: Striking a balance between growth and profitability
After lowering operating expenses in FY10, management focused on network consolidation in
FY11 which helped contain operating expenses (flat yoy). We believe the benefits of measures in
FY11 will continue to flow through in FY12F. Management is not keen on cutting expenditure at the cost of future growth and intends to gradually invest in expansion (subject to periodic market reviews). Unlike ICICI Prudential and SBI Life, we believe HDFC Life will have to keep tabs on expenses to contain opex growth below 5% over FY12-14F.
HDFC Life: Bancassurance focus to continue
In response to new guidelines, HDFC Life changed its distribution mix – its bancassurance contribution to new business premium rose to about 66% in FY11 from 55% in FY10. Over the next two to three years, considering the need to control costs, we expect bancassurance to remain the dominant channel.
We increase our target price for HDFC on an increased valuation for HDFC Life
We increase our valuation of HDFC Life from Rs95bn earlier to Rs103bn
HDFC and HDFC Bank. Though efficiency ratios look weak (as the company is in investment mode), we believe it will be able to deliver return ratios in line with comparable peers (SBI Life and ICICI Prudential).
HDFC Life: ‘Need-based sales’ focus to continue
With persistency and operating risks spiralling, following new product guidelines, most insurers have adopted a conservative stance and have cut costs and adjusted product mix to contain risks. However, HDFC Life has maintained its focus on ’need-based sales’, in order to maintain its sales quality and build a strong retail franchise. HDFC Life saw single premium exposure jump by
9ppts (to 17%), vs the 19ppt increase (to 30%) of private insurers. Further, unlike peers, the insurer maintained its product mix with ULIPs forming 86% of NBP (83% in FY10).
HDFC Life: Striking a balance between growth and profitability
After lowering operating expenses in FY10, management focused on network consolidation in
FY11 which helped contain operating expenses (flat yoy). We believe the benefits of measures in
FY11 will continue to flow through in FY12F. Management is not keen on cutting expenditure at the cost of future growth and intends to gradually invest in expansion (subject to periodic market reviews). Unlike ICICI Prudential and SBI Life, we believe HDFC Life will have to keep tabs on expenses to contain opex growth below 5% over FY12-14F.
HDFC Life: Bancassurance focus to continue
In response to new guidelines, HDFC Life changed its distribution mix – its bancassurance contribution to new business premium rose to about 66% in FY11 from 55% in FY10. Over the next two to three years, considering the need to control costs, we expect bancassurance to remain the dominant channel.
We increase our target price for HDFC on an increased valuation for HDFC Life
We increase our valuation of HDFC Life from Rs95bn earlier to Rs103bn