HDFC Stan Life pegs worth at Rs 3,380 cr

21-Jul-2010

HDFC Standard Life Insurance registered a total premium income of Rs 7,010 crore in 2009-10 against Rs 5,560 crore in 2008-09. The company is planning to infuse Rs 300-350 crore of capital in this financial year compared with Rs 172 crore infused last year, according to a company official.

The conservation ratio - a measure of how many policies in value have been renewed - has improved by 500 basis points year on year due to efforts like discontinuance of certain products. The conservation ratio has increased from 65 per cent in 2008-09 to 71.6 per cent in 2009-10. In the run-up to more disclosures and transparent financials, HDFC Standard Life Insurance announced its embedded value as Rs 3,380 crore along with the financial results for the year ended March. The company is eyeing the top three positions in the private life insurance industry in terms of market share and is among the few companies that have revealed their embedded value.

"We have seen our embedded value grow from Rs 2,230 crore to Rs 3,380 crore over the past one year," Vibha Padalkar, chief financial officer of the company, said. Embedded value is the value of the business on books of the company as on date. It also factors in future profits arising out of present policies that are in force. HDFC Standard Life Insurance has adopted a market consistent approach to value their business against the traditional way, which does not factor in various risks for the business. The company is looking at reducing costs by renegotiating distribution model and by implementing a variable cost structure against a fixed one.

"We will implement a hub-and-spoke model where we will set up branches in a particular area only when the revenues are above certain levels and until then we will use the infrastructure of other companies like a CA or a law firm," Padalkar said. The operating expense ratio for the company has come down from its peak of 29.2 per cent in 2008-09 to 19.7 per cent in 2009-10. "We are renegotiating commissions to some of our distributors. Against an upfront commission or fee, we will decide it based on the amount of renewals," Padalkar said. The commission ratio has stabilised at around 7.5 per cent for the company for the financial year ended March 2010.

With the regulatory changes that have been announced with respect to unit-linked insurance policies (Ulips) by the Insurance Regulatory and Development Authority (Irda), the company's margins will be affected. "We will definitely see some impact on our margins and the break even date might get pushed a little ahead. All this will be known only when the final guidelines are out," Padalkar said. The company made a loss of Rs 280 crore in 2009-10 against a loss of Rs 500 crore in 2008-09.

The company is also waiting for the 49 per cent foreign direct investment amendment to be announced before going public. HDFC Standard Life was among the three private life insurance companies that had announced plans to go public last year. The 25 per cent public holding norm announced by the government has proved to be a dampener for the listing plan.

"We will look at IPO only next year. Both the promoters have not yet discussed how and what will be the dilution of stake during the public offering," Padalkar said. As per the memorandum of understanding (MoU) between HDFC and UK's Standard Life, the latter will continue to hold 26 per cent and it's the Indian partner that has to offload stake.

Source : www.insuremagic.com