Tag: Exide Life

HDFC Life to cap policies, channels’ share in sales, BFSI News, ET BFSI

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MUMBAI: As part of its strategy to grow consistently, HDFC Life Insurance has decided to keep a cap on the share of products and distribution channels. According to the CEO of the country’s most valuable life insurer, Vibha Padalkar, the Exide Life acquisition is aimed at increasing the share of agents and reducing dependence on HDFC Bank’s distribution.

Speaking to TOI, Padalkar said that HDFC Life has managed to survive volatility in macro-economic conditions and regulatory changes better because of portfolio diversification. As a result, the company does not want to increase the share of unit-linked insurance plans (ULIPs) to beyond the present level of 25% despite surging markets. Even when it comes to the company’s best-selling investment product Sanchay Plus, it has decided to cap the extent of sales.

“Bancassurance used to be around 75% of our business at one time. It’s hovering around 50% of the business. I am not saying that it will not grow. I am saying that other channels should grow faster purely from a diversification point of view,” said Padalkar.

On Friday, HDFC Life had announced that it will buy Exide Life Insurance for Rs 6,687 crore.

According to Padalkar, it is product diversity that has helped HDFC Life survive the shift in the regulation of ULIPs in 2010 that resulted in several other insurers losing market share. She added that it was this strategy that helped the company increase sales of protection policies during the pandemic.

“Our share of agency business had shrunk because we had focused on persistency of agents and reducing complaints, which we have got right. The Exide Life acquisition helps us to expand our agency force by 40%,” said Padalkar. Pointing out that the trend was for insurance to be sold through company advisers, she said that HDFC Life had all the tools in place to improve the productivity of agents.“Exide agents would be excited to have the bouquet of products that we have to offer because we are seen as a product innovator or product factory. We have the technology for our agents to quickly onboard customers or allow them to offer a pre-approved sum assured to the client,” she said. The private insurer, which has made huge investments in digital technology and artificial intelligence, has the capability of profiling the customer and their needs once his basic information is updated.

“We have a digital agent platform where they can do business without ever attending office. We have a Google-like tech solution, using which agents can get any product-related questions. This question can be asked in regional languages and forms can be filled in regional languages,” she said.



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HDFC Life acquires Exide’s insurance arm for Rs 6,687 crore, BFSI News, ET BFSI

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MUMBAI: HDFC Life has agreed to buy Exide Life Insurance for Rs 6,687 crore, of which Rs 726 crore would be paid in cash. The rest would be paid by issuing 8.7 crore shares of HDFC Life to the target company’s parent. This makes it the biggest insurance M&A deal in India.

Announcing the acquisition, HDFC Life Insurance CEO Vibha Padalkar said that the core reason behind the deal was its decision to grow its proprietary distribution channel. HDFC Life has developed scale largely on the back of the distribution strength of HDFC Bank. While initially banks were allowed to sell policies of only one company, Irdai has relaxed the rule in recent years.

“Adding 40% to our agency force would have taken 2-3 years. Today, our propriety channel is 15% of our business and we want to increase that to 30-35%. If you look at other parts of Asia, the proprietary channels dominate. Over a period of time, the reliance on bancassurance has gone down and companies have built their tied agency model. That is the core of this deal… to grow our own proprietary channel,” said Padalkar.

The acquisition will add 10% to HDFC Life’s embedded value (EV) — a measure for the worth of a life company that takes into account future earnings from policies that the company has issued. The acquisition price is less than 2.5 times the EV of Exide Life. Also, given that Exide Life has a sound solvency position of 225%, it will add to HDFC Life’s solvency. However, the cash payout, when it happens, will have a 15% impact on solvency margins.

“There is an advantage if one is trading at expensive valuations. Acquiring a company using your stock becomes less onerous and less of a drag…so, HDFC Life, trading at about 6x trailing EV, used largely its stock, resulting in just 4% dilution and got Exide life which added 10% to EV,” said Macquarie Capital research analyst Suresh Ganapathy.

According to Padalkar, the company has a good deal as the average valuation of listed and proxy listed companies (excluding HDFC Life) is 3.5 times their EV, while the deal values Exide Life at less than 2.5. She said that the business would complement that of HDFC Life in terms of geographical distribution as well, since Exide Life is present in tier-3 cities where the acquirer is yet to make inroads.

She said that the company was open to more acquisitions as long as it had a credible distribution, a decent sized EV and strong risk management in its DNA. Padalkar said that the first stage of the transaction — turning Exide Life into a wholly owned subsidiary — would take place by December-January. Thereafter, she expected consolidation to take 8-9 months.

Exide Life Insurance has its origins as ING Vysya Life Insurance. The company lost both its original promoters — ING, which decided to exit a few years after the global financial crisis in 2013, and Vysya Bank which was acquired by ING and later by Kotak Mahindra Bank. After ING’s exit, the Rajan Raheja-owned auto battery-maker Exide became the owner of Exide Life Insurance. The company was seen to be an acquisition target for several years as it had not managed to achieve scale. Exide on Friday informed the stock exchanges that the total investment of the company in the life subsidiary was Rs 1,679 crore.



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HDFC Life buys Exide arm for ₹6,687 crore in cash, equity deal

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HDFC Life Insurance Company (HLIC) on Friday announced the acquisition of 100 per cent share capital of Exide Life Insurance Company for a total consideration of ₹6,687 crore.

This move comes about four years after the proposed merger of Max Life with HDFC Life was called off as it did not pass muster with the insurance regulator.

Of the total consideration, ₹725.97 crore will be payable in cash and the balance by way of issue of about 8.7 crore equity shares of HDFC life, with a face value of ₹10, issued at ₹ 685 a piece to Exide Industries Ltd (the holding company of Exide Life), HDFC Life said in a regulatory filing.

The issue of shares to Exide Industries will be on a preferential allotment basis for non-consideration. The completion of the proposed issue is subject to shareholder approval and subject to receipt of all regulatory approvals.

HDFC Life is acquiring Exide Life at about 2.47 times the latter’s embedded value (EV) of ₹2,711 crore (as at June-end 2021). EV is the value of business currently on an insurer’s books. Upon completion of the transaction, Exide Industries will hold 4.1 per cent in HDFC Life.

Vibha Padalkar, MD & CEO, HDFC Life, said the transaction will be a two-step process, with Exide Life first becoming a subsidiary of HDFC Life by December/January. Thereafter, depending on NCLT approval, which could take up to nine months, Exide Life will be merged with HDFC Life. She emphasised the subsidiarisation of Exide Life will help HDFC Life gain control of its business, making value preservation easier.

Use of Exide brand

Padalkar said that as part of the deal, HDFC Life is allowed to use the Exide brand for two years until it is transitioned out. The Assets Under Management (AUM) of HDFC Life is expected to increase by approximately 10 per cent, taking it beyond ₹2-lakh crore, she added.

Exide Life posted a turnover (total premium for FY 2020-21) of ₹3,325 crore (₹3,220 crore for FY2019-20). Its AUM as on June 30, 2021, totalled ₹18,780 crore, per the filing.

In a joint statement, the two companies said: “Exide Life complements HDFC Life’s geographical presence and has a strong foothold in South India, especially in Tier 2 and 3 towns, thus providing access to a wider market. Further, a good quality, predominantly traditional and protection focussed business, will augment the existing embedded value of HDFC Life by approximately 10 per cent.”

‘Landmark transaction’

Deepak S Parekh, Chairman, HDFC Life, said, “This is a landmark transaction, first of its kind, in the Indian life insurance space. It would enhance insurance penetration and further our purpose of providing financial protection to a wider customer base.”

The shares of HDFC Life were down 3.21 per cent to close at ₹734 a piece on Friday on the BSE. Exide Industries shares were up 6.3 per cent at close on Friday on BSE. “One of the major sticking points with investors in relation to Exide Industries was its investment in non-related life insurance business. This issue seems to be now resolved and should lead to significant re-rating of the stock,” said analysts at Investec Securities

Exide Industries had recently announced its intention to foray into lithium-ion cell manufacturing over and above its existing battery pack manufacturing plant at Gujarat in partnership with Leclanche of Switzerland. The proceeds from the sale of Exide Life should help fund the capital requirement

 

 

 

 

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Average ticket size for life insurance increasing: Exide Life CEO

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Not only are more people buying life insurance but the average premium and cover size has also increased, said Kshitij Jain, Managing Director and CEO, Exide Life Insurance, adding that despite the second wave of the Covid-19 pandemic, he expects the life insurance sector to do well this fiscal. “We are selling more policies than last year and we are selling bigger premiums. More people are taking bigger covers. Overall in premium term, industry will see growth this year,” Jain told BusinessLine in an interaction.

On an industry-wide basis, the average premium size has increased every year for the last three years, he said, attributing it to the attractive guarantee products that life insurers are offering. “Over the last three years at Exide Life Insurance, we have increased the average ticket size by as much as 40 per cent. My expectation is that this year, we will grow it by another 20 per cent,” Jain further said.

Upbeat about prospects

Jain is also upbeat about prospects for the life insurance industry this fiscal. “The growth will be a combination of two things. We see a clear trend of customers wanting to buy more protection that they used to. Also, over the last few months, a number of players including our company, are offering attractive long-term guarantees to customers,” he said, adding that the first five to six months of the fiscal will also benefit from the low base of 2020-21.

“Given the Covid-19 pandemic, we have recorded a rise in our protection business. Protection currently makes for close to 18 per cent of our customer acquisition. With increasing awareness about term insurance, we expect this number to go up further,” he further said.

Also read: Exide Life Insurance drops ambition of ‘breakneck’ growth in FY21: CEO

The company expects new business premiums to rise by about 30 per cent this fiscal. The life insurance industry is also well prepared to meet the rising claims due to Covid-19, he further said.

Till March 31, 2021, the company received close to 750 Covid-19 claims and has settled all of them. “Approximately 11.5 per cent of our total claims are on account of Covid-19 and we may witness further increase through the next few months if the pandemic intensifies across the country,” he said.

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