See huge scope for protection policy biz; flows into industry continue: HDFC Life
Amitabh Chaudhry, MD & CEO, HDFC Life said it has been a very pleasant journey for them since the day of listing. He said investors seemed to have liked their story but more so because of the power of HDFC brand that represents quality of business and consistent in performance and they expect that out of HDFC Life. So going forward, they hope to meet the very high expectation, he said.
The growth rate for the insurance industry in October was around 28 percent and the question is this kind of growth rate sustainable. Chaudhry said in fact October growth was less compared to the year to date growth of 36 percent.
However, two things have transpired since demonetisation and with financialisation of savings, the insurance industry like the mutual fund industry has got higher inflows, which gets reflected in sales numbers, he said in an interview to CNBC-TV18.
He said one is keenly watching for how the numbers from November to March would be for the industry, and whether the growth rate is sustainable because of the higher base effect.
However, in terms of absolute numbers, he is confident the growth numbers would be good.
There is likely to be an overhaul in direct tax law and a task force is expected to submit the report in next six months. The proposals include that Life Insurance companies will have to pay income tax at corporate tax rate of 25 percent. The current corporate tax rate is 14.3 percent.
Commenting on the above, Chaudhry said it would be too early to talk about the impact but if they are hiked then there will be a clear impact on embedded value (EV) and margins of the company, which they had already declared in the RHP. The impact on EV would be about 7 percent and that on margins around 2 percent, he said.
However, for them it could be a bit less than other players in the industry, he said.
He said it is unlikely that they would pass on the hike in taxes by hiking their product prices because the competition is quite severe. So, one should not assume that the only step the industry would take is to go an increase product prices, he said.
When asked about protection policy business, he said it constitutes 22 percent of their portfolio and see a huge growth potential for that business. The company continues to invest in a big way to ensure share of protection business continues to grow. “We are overinvesting in products, overinvesting in technology, and customer journeys and experiences, to ensure that we can counter the competition and continue to increase our share,” he added.
When asked if he had evidence of flows into MFs declining, he said, his friends in the MF industry haven’t indicated that the flows into MFs are slowing down, although October numbers were less, the November numbers could be better.
According ot him, the trajectory of absolute numbers will continue in the same manner although growth may be a bit subdued.