HDFC Life up 5% to a record high on the eve of the board's fundraising meeting

Shares of HDFC Life Insurance rose 5 per cent to a new record high of Rs 758.50 on the BSE in intra-day trading on Thursday ahead of the board meeting on Friday, which is scheduled to consider the fundraising plan. The shares of the private insurer surpassed its previous high of Rs 746 on March 9, 2021.

"A meeting of the board of directors of HDFC Life Insurance Company is proposed to be held on Friday, September 3, 2021, to consider the issue of ordinary shares and/or other securities of the company in a preferential allotment," the company said in a statement.

Exness Asia  reports that the share price has outperformed the market over the past month, rising 13 per cent, compared with a 9 per cent rise in the S&P BSE Sensex index. However, it has underperformed over the past six months, adding just 5 per cent compared to the 15 per cent rally in the benchmark index.

HDFC Life is a joint venture between HDFC Ltd, India's leading housing finance institution, and Standard Life Aberdeen, a global investment company. HDFC Life is India's leading provider of long-term life insurance solutions, offering a range of individual and group insurance solutions to meet various customer needs such as protection, pension, savings, investments, annuity and health.

The current pandemic has led to increased awareness about the need for protection and inadequacy of current insurance coverage at the household level. Life insurance has become an important theme to protect the family while securing long-term financial goals.

The management believes that life insurance in India is a structural long-term growth opportunity given the lack of penetration. "In addition, pandemic awareness, changing consumer behaviour and sustained demographic trends indicate that we are well positioned to realize these multi-year opportunities," the management said in its annual report for FY 2020-21.

Meanwhile, HDFC Life witnessed a surge in death claims during April-June (first quarter of FY22), with peak claims in the second wave of Covid being about 3-4 times higher than the peak claims in the first wave. The first quarter, with gross / net claims of Rs 1,600 crore / Rs 960 crore. The company has made an additional provision of around Rs 700 crore. However, short-term uncertainty remains," Emkay Global Financial Services analysts said in the updated results.

HDFC Life continues to focus on a diversified channel to create a balanced product mix for optimum profitability. Its balanced product range provides protection against the cyclicality of the business and takes advantage of an underdeveloped protection market. Management avoids group protection plans due to the lack of profitable underwriting.

Emkay Global expects the profitability trend to remain stable with a balanced product range and a gradual increase in the share of insurance and annuity plans along with increased penetration into deeper regions. It maintains a 'buy' rating on the stock with a target price of Rs 870 per share.