HDFC Securities: Life Insurance - ULIP Versus Mutual Fund

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..HDFC Securities Report.Life insurers procure business by incurring high acquisition costs, which are expensed upfront.This depresses reported profitability, especially when the new business premium is growing.Given this accounting methodology, reported profitability of life insurers cannot be directly compared with that of asset managers.We have carried out a few adjustments to determine the true profitability of life insurers.Our analysis reveals that the profitability of life insurers (pre-tax approximately 45-90 basis points operating profit to average asset under management) is higher than that of asset management companies (23-40 basis points).Additionally, the profitability of life insurers has improved over FY17-20 as costs of acquisition of new AUM have reduced.Further, we estimate that the linked savings business has delivered return on invested capitals (RoICs) between 7.715.7% for FY20.This is significantly lower than the computed RoICs of asset managers HDFC Asset Management Company Ltd./Nippon Life India Asset Management Company Ltd. at 443.8/99.4%.We estimate linked savings business of life insurers would be valued between 9-12.7% of AUMs, contributing between 4.4-19.6% to target prices..Click on the attachment to read the full report:.DISCLAIMERThis report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the brokerage and do not represent the views of BloombergQuint..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

HDFC Securities: Life Insurance - ULIP Versus Mutual Fund

HDFC Securities estimates linked savings business of life insurers at 9-12.7% of AUMs, contributing 4.4-19.6% to target prices.

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