HDFC Life (HDFCLIFE IN): Well Placed to Drive the Growth of Protection Business

Senior investment analyst

Pallavi Deshpande

Equity Bottom-Up

<p>We expect <a href="https://www.smartkarma.com/entities/26004" target="_blank" data-smartkarma-citation="entities:26004:1">Hdfc Standard Life Insurance (HDFCLIFE IN)</a> (HDFC Life) next phase of growth to be driven by the agency channel driving growth in the individual segment. It plans to roll out a revamped agency model in 2018 and we expect the quality of its agency network to be a key differentiator going forward. However, the share of savings linked products is a concern and we believe investors are likely to be disappointed by the pace at which we see a shift to the core business going forward. New business margins (NBM) stagnated at 22.2% in 3Q18 (+20 bps over FY17), after increasing 350 bps over FY15-17. In our view, HDFC Life stock (up 27% in last 3 months) is fairly valued. As such, there is no need to take an aggressive stance on the stock.  </p>

We expect Hdfc Standard Life Insurance (HDFCLIFE IN) (HDFC Life) next phase of growth to be driven by the agency channel driving growth in the individual segment. It plans to roll out a revamped agency model in 2018 and we expect the quality of its agency network to be a key differentiator going forward. However, the share of savings linked products is a concern and we believe investors are likely to be disappointed by the pace at which we see a shift to the core business going forward. New business margins (NBM) stagnated at 22.2% in 3Q18 (+20 bps over FY17), after increasing 350 bps over FY15-17. In our view, HDFC Life stock (up 27% in last 3 months) is fairly valued. As such, there is no need to take an aggressive stance on the stock.  

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