Geojit Suggests Buy This Insurance Stock For 25% Gains, GPI Rose To Rs 1,442 Cr, Dividend Proposed

Improved GPI, Healthy growth in Premiums Accounts

In Q4FY22, HDFC Life Insurance Gross Premium Income (GPI) rose 17.6% QoQ and 11.7% YoY to Rs. 1,442cr, (vs. 11.1% industry growth) mainly driven by growth in renewal premium (+15.6% YoY, +32.4% QoQ to Rs. 734cr) and First year premium (+7.8% YoY, +21.7% QoQ to Rs. 257cr), while incurred claims grew (+15.7% YoY, +19.3% QoQ) maintaining the claim settlement ratio to 99.6% (+40 bps YoY). The AUM grew by Rs. 2,00,000cr (+17% YoY). APE product mix was well diversified at 26%, 33%, 5%, 6% and 30% UL / Non par savings /Annuity/ Non par protection / Par respectively. APE distribution mix was also diversified at 60%, 14%, 6% and 19% for Corp Agents/ Agency/ Broker/ Direct respectively. Individual APE posted 15% YoY growth to Rs. 8,168cr, while Overall APE grew by 17% to Rs. 9,758cr in FY22.

Robust growth in new business premium, Improvement in margin

According to the brokerage firm, "Value of New Business rose 22.7% YoY to Rs. 2,675 crore in FY22, primarily led by robust growth of 20% in new business premium in the same period and new business margin grew by 27.4% (130bps YoY). However, the effect of new merger with Exide Life seems to be neutral. However, due to lesser fatality rates of Omicron variant, the company has reduced its provisions to Rs. 91cr (vs Rs. 93cr in FY22)."

Why should you buy it? Key Highlights

HDFC Life reported a two-year CAGR of 17% which is double than the industry growth of 9%, while the new business CAGR grew by 24% over the last five years. Company now insured 54 million lives by the end of FY22 (+36% YoY). Solvency ratio dipped by 2500 bps points to 176% vs 201% in FY21 due to cash pay-out of Rs. 726 crore, as a consideration for acquisition of Exide life. To mend the solvency ratio by 600 bps points, Management approved debt raise of Rs. 326 crore and is further evaluating the capital mix decisions. The company has introduced new plans like Quick Protect to cover against three Ds (death, disease and disability), Sanchay Fixed Maturity Plan and Systematic Retirement Plan.

Brokerage's Views On Stock, Suggests Buys for Target Price of Rs 750

Macro drivers for life insurance sector remain positive, and growth can be witnessed in the significantly under-penetrated prosperous middle class for life insurance in India. Favourable regulatory environment and rapid digitalization initiatives could boost the product mix in the protection business. Hence, we reiterate our BUY rating on the stock with a revised Target Price of Rs. 750 based on 3.8x FY24E EV per share.

HDFC Life Insurance Company Ltd

HDFC Life Insurance Company Ltd, a joint venture between HDFC Ltd. and Standard Life Aberdeen, provides insurance services. HDFC Life Insurance Company is engaged in carrying on the business of life insurance. The Company offers a range of individual and group insurance solutions. The portfolio comprises various insurance and investment products such as Protection, Pension, and Savings. The company was listed on BSE on 17th November 2017. The issuer offers protection for life, health, properties and automobile, amongst others. With a market capitalisation of Rs 128,105 Crore, it is one of the leading insurers operating in India.