Abrdn, a UK-based investment company on Wednesday said it is likely sell its 1.66 per cent stake (35.7 million shares) in HDFC Life Insurance Limited through block deals, reported CNBC citing sources said on Tuesday.
The Edinburgh-based company, which was formerly known as Standard Life Aberdeen, has offered the shares in the price band of Rs 563.20-585.15, the report added. Further stating that BofA Securities India is the sole book runner for the sale of shares.
Abrdn is an active asset manager in the UK, with investments in equities, multi-asset, fixed income, liquidity, sovereign wealth funds, real estate, and private markets In July 2021.
Back in 2022, Abrdn Investment also divested a 5.58 per cent stake in HDFC AMC for more than Rs 2,300 crore through an open market transaction.
According to a Moneycontrol report, HDFC Life shares in the previous month have seen some action after the Reserve Bank of India (RBI) allowed HDFC Bank or HDFC Limited to increase the shareholding in HDFC Life and HDFC ERGO to more than 50 per cent.
In the meantime, Arbdn has been paring its stake sale for quite some time, and with this stake sale, the former will exit HDFC Life Insurance completely.
It is worth noting that in September 2022, the UK-based firm also sold a 2 per cent stake in HDFC, following which it held a 3.7 per cent equity stake.
For the third quarter that ended December 31, 2022, HDFC Life Insurance reported a 15 per cent year-on-year (YoY) rise in net profit. Net premium income for the quarter increased by 19 per cent YoY to Rs 14,379 crore. The first-year premium grew by nearly 29 percent on year to Rs 2,724 crore.
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Abrdn, formerly Standard Life, is looking to sell 2 per cent of its stake in private sector insurer HDFC Life Insurance Company via block trades on Tuesday.
According to the term sheet, Abrdn (Mauritius Holdings) has put on block 43 million shares of HDFC Life at Rs 564.1-Rs 578.55 per share. Shares of HDFC Life closed at Rs 580 apiece on Monday.
The share sale may fetch the UK-based financial major at least Rs 2,425.6 crore.
The promoter shareholding in HDFC Life stood at 51.2 per cent at the end of June 2022 quarter. Mortgage lender HDFC Ltd owns 47.79 per cent and Abrdn 3.7 per cent.
HDFC Life recently allotted 37.5 million shares to HDFC on a preferential basis to raise Rs 2,000 crore.
According to the term sheet, currently, the promoter entities of HDFC Life own a 52.3 per cent stake in the insurer, with HDFC owning 48.7 per cent and Abrdn (Mauritius Holdings) holding 3.7 per cent.
After the block trade, Abrdn will hold a 1.7 per cent stake in the company, and the promoter entity’s stake will come down to 50.3 per cent.
According to the insurance regulator’s norms, minimum shareholding by promoters/promoter group of the company is required to be maintained at 50 per cent of the paid-up equity capital of the company.
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Rising inflation has emerged as a key concern all across as it eats into disposable incomes of individuals. Vibha Padalkar, MD and CEO, HDFC Life, told Sandeep Singh that if the inflation is prolonged then it will start hurting demand for savings products too. Stating that the premiums should stabilise now, she also called for the regulator to permit life insurance companies to sell health indemnity as that will allow them to offer innovative solutions to customers. Edited excerpts:
How is inflation hurting the industry and what is the impact of interest rates?
Inflation remains a big concern as it has a bigger impact since it eats into the savings and reduces the disposable income. As disposable incomes reduce, customers react by going for slightly smaller cover or by not covering everyone in the family, etc. If you see the industry numbers, the impact is not much as of now. While there has been some impact on term, it is not so much on savings. However, if inflation is prolonged then it will start impacting savings products too.
As for interest rates’ rise, it is reasonably positive for us. Our transmission is faster and we can pass higher annuity rates. However, the volatility in equity markets is a downside. I think that of the other options to save, insurance continues to do well. The saving quantum itself is, however, reducing.
The industry has witnessed a rise in premium. Do you see it stabilising now?
The premiums have risen mainly for term policies and the rise has been because of pandemic. Even as there is a lot of talk around rise in premiums, I would like to state that the increase in premium over the last 10 years is less than inflation. Reinsurers have suffered huge losses because of pandemic and if they raise the charge, it is difficult not to raise it. I think, it should stabilise now.
How have Covid death claims been for you?
We have settled claims amounting to over Rs 6,000 crore in FY22 but it has now eased off. We settled close to about 4 lakh claims with gross claims of around Rs 6,000 crore and net claims of Rs 4,300 crore. As a sector I would say that even as it was significantly higher, we paid so many claims without looking too much into the clause I believe that money is important if it is timely. For almost all our non-early claims (if the policy has completed 3 years) we paid within 24 hours or max 48 hours.
While this was for saving schemes, it took around 3 months for term policies as we need to check pre-existing etc and physical checks are required to be done by local field investigator.
Are life insurers getting permission to sell health indemnity?
We have been demanding the regulator to allow us to sell health indemnity but it hasn’t been permitted yet. Our point is that worldwide health sits closer with life than with motor. However, for some reason, general insurers in India are selling health whereas life insurers are not allowed to sell it. That is not logical. We used to be allowed to sell health, but it has been taken away.
My limited point is that life insurers have the largest touch points with their branches and network, but you are not alllowing us to sell. I think the focus should be on penetration of insurance and expansion.
As of now, nothing has moved. We even asked the regulator to allow us to distribute, if you don’t allow us to manufacture. Today, banks can distribute insurance but life insurers can’t distribute health. It doesn’t make sense.
We submitted it almost 18 months ago and the regulator has said that they will look at it. I stay hopeful.
When you say innovations are possible, if you are allowed, what could they be?
Innovation can’t happen if one key piece is missing. For example: When someone is young, he needs more life insurance. Suppose a person is paying Rs 60,000 as premium, I would say that until the age of 55 (nearer to retirement) we would give him maximum of life cover. After that, since he would have built savings too, we will reduce the life cover and increase the health cover. However, for the individual, Rs 60,000 premium will stay constant.
As of now we are not allowed to club various products and sell to the customer, unless we tie up with one insurer. But even that is not seamless.
What are the growth areas for the life insurance?
Growth will come with product innovation. Retirement products are another big growth area. As a nation, pension funds as a per cent of GDP is less than 5 per cent while it is more than 100 per cent in the developed world. While it is increasing, it is not at the desired pace. People need to understand that the risk of an individual running out of money is very real because of increasing longevity.
How will the merger of HDFC Bank and HDFC limited benefit you?
It can only get significantly better. The way I see it is that today HDFC Bank is my largest distributor, but it is not my parent, so once that happens, there will be full alignment. HDFC Bank will become a financial conglomerate and will not just be a bank. It will have everything to do with any financial service products and will be the parent company of all. They will be able to tell the customer that they know them— if they have a home loan but not insurance etc so the advisory will be better.
If customers give their consent that they would like to be serviced as a single customer, they will be treated as a single customer across all HDFC Group products.
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Vibha Padalkar talks about the adequacy of reserves the company set aside for future claims and the impact of higher claims on term prices, among others
Subrata Panda |
Mumbai Last Updated at August 14, 2021 06:03 IST
The life insurance industry was gradually recovering from the first wave of Covid when the second wave struck. While the insurers were prepared, the ramifications were much more than what they had anticipated.
VIBHA PADALKAR, managing director (MD) and chief executive officer (CEO), HDFC Life, in an interview with Subrata Panda, spoke about the adequacy of reserves the company set aside for future claims and the impact of higher claims on term prices, among others. Edited excerpts: Has business picked up after Q1? We are seeing very robust trends. Last year, things had started …
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After witnessing a marginal year-on-year (YoY) rise in new business premiums (NBP) in June, following a dip in May due to the second wave of the Coronavirus (Covid-19) pandemic, the life insurance industry’s NBP has again dropped in July, mainly due to the contraction in business seen by the state insurance behemoth — Life Insurance Corporation (LIC).
In July, life insurers, 24 in total, earned a new business premium of Rs 20,434.72 crore, down 11 per cent YoY from last year. While the private insurers managed to report a 7.53 per cent increase in NBP in July 2021 over last year, LIC saw its NBP contract almost 21 per cent YoY to Rs 12,030.93 crore. In June, LIC reported an NBP of Rs 21,796. 28 crore, down 4.13 per cent on a YoY basis. Sequentially, i.e on a month-on-month basis, LIC’s NBP contracted by 44.8 per cent. The dip in LIC’s NBP was on account of a steep fall in individual single premium and group single and non-single premium.
NBP is the premium acquired from new policies in a particular year.
When compared to the pre-pandemic period (July 2019), NBP of the life insurance industry witnessed a drop of 5 per cent, with LIC’s NBP declining by 21.42 per cent, but private insurer’s NBP posting a stellar growth of 35 per cent.
On a year-to-date (YTD) basis, the life insurance industry saw a marginal 1.16 per cent YoY growth in NBP to Rs 73,159.98 crore. While LIC’s NBP till July totaled Rs 47,631.62 crore, down 8 per cent YoY, private insurers saw their NBP rise 24 per cent YoY to Rs 25,528.26 crore. In the first quarter of FY22, the premium collection of the life insurance industry was up almost 7 per cent to Rs 52,725.26 crore YoY, aided by a stellar 33.73 per cent growth registered by the private insurers. However, LIC’s NBP in Q1FY22 declined 2.5 per cent YoY to Rs 35,600.68 crore.
Due to the second wave of the Covid-19 pandemic, life insurers saw a muted Q1, but business has picked since, at least for the private insurers. While supply-side constraints remain, they are expected to ease out as restrictions are removed by local authorities.
Among the largest private-sector life insurers, while SBI Life insurance reported a 5.67 per cent YoY decline in NBP in July, HDFC Life saw a marginal 4 per cent YoY increase in NBP. On the other hand, ICICI Life reported a 36.31 per cent jump in NBP.
The life insurance industry has seen a huge spike in death claims in Q1FY22 due to the devastating effects of the second wave of the pandemic, resulting in companies taking a huge hit on their profitability to keep aside reserves to mitigate the impact of elevated levels of claims. While the claims burden has come down since Q1 but insurers are on tenter hooks with a probable third wave.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
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