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ICICI Securitie's research report on HDFC Life Insurance Company
Management highlighted growth from tier-2/3 cities remains strong, witnessing 13-14% YoY growth and contributing 65% to the overall topline. On NoP basis, tier-2/3 markets contributed 75% of the business in FY24. Margin profile is similar in these cities and focus will be on selling longer-tenor products, based on mortality and persistency. HDFCLI is being very selective in tier-2/3 cities and is focusing only on top quartile of customers, based on various filters.
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Outlook
HDFC Life (HDFCLI) has successfully worked its way to improve bancassurance as well as agency while focusing on SURU markets (semi-urban and rural) in FY24. This has led to 13% YoY growth in tier 2/3 locations while overall NoP has grown 11% YoY in FY24. However, high base and change in product mix (1,500bps higher ULIPs) have led to VNB declining 5% YoY in FY24. Basis strong product and distribution efforts on a base where higher ticket size segment has already halved to 6-7%, VNB growth should pick up ahead. Maintain BUY. Risks: Overall weakness in volume growth and adverse regulations.
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