FINANCIAL MANAGEMENT CIA 3

Analysis on Capitalisation, Leverage and Dividend

policy

Submitted To: Prof. Santosh Baheti

Submitted By: Adit Bohra (2120889)
Gourish Jain (2120883)
Meet Raisinghani (2120845)

INDEX

1
 Page
S No. Content Nos.

1 About the Industry 3

2 Company 1 – Life Insurance 4-9

Corporation ( By -Adit Bohra)

Company 2 – HDFC Life 10-17

3 Insurance (By – Gourish Jain)

4 Company 3 – SBI Life 18-25

Insurance (By – Meet
Raisinghani)

5. Comparative Analysis of three 25-28

companies

The Insurance Sector in India

2
India’s Insurance industry is one of the premium sectors experiencing upward growth. This
upward growth of the insurance industry can be attributed to growing incomes and increasing
awareness in the industry. India is the fifth largest life insurance market in the world's
emerging insurance markets, growing at a rate of 32-34% each year. In recent years the
industry has been experiencing fierce competition among its peers which has led to new and
innovative products within the industry. Foreign Direct Investment (FDI) in the industry
under the automatic method is allowed up to 26% and licensing of the industry is monitored
by the insurance regulator the Insurance Regulatory and Development Authority of India
(IRDAI).

The insurance industry of India has 57 insurance companies - 24 are in the life insurance
business, while 34 are non-life insurers. Among the life insurers, Life Insurance Corporation
(LIC) is the sole public sector company. There are six public sector insurers in the non-life
insurance segment. In addition to these, there is a sole national re-insurer, namely General
Insurance Corporation of India (GIC Re). Other stakeholders in the Indian Insurance market
include agents (individual and corporate), brokers, surveyors and third party administrators
servicing health insurance claims.

India Insurance market stands at a $131 Bn as of Financial Year 2022.The Indian insurance
industry grew at a CAGR of 17% over the last two decades and is expected to continue its
commendable growth trajectory in the future years.

IMG 1

Source: https://www.ibef.org/industry/insurance-sector-india

3
 Company No.1 – LIC
Life Insurance Corporation of India (LIC) is an Indian central public sector
undertaking headquartered in Mumbai, Maharashtra, India. It is under
the ownership of Ministry of Finance, Government of India. The Life Insurance Corporation
of India was established on 1 September 1956, when the Parliament of India passed the Life
Insurance of India Act, nationalizing the insurance industry in India. Over 245 insurance
companies and provident societies were merged together. LIC reported 290 million
policyholders as of 2019, a total life fund of ₹28.3 trillion and a total value of sold policies in
the year 2018–19 of ₹21.4 million. The company also reported to have settled 26 million
claims in 2018–19. It ranked 98th on the 2022 Fortune Global 500 list with a revenue
of ₹775,283 crore (US$97 billion) and a profit of ₹4,415 crore (US$550 million).

Finance Minister Nirmala Sitharaman announced a proposal to conduct an initial public

offering for LIC in the 2021 Union Budget. The IPO is expected to occur in 2022, and the
Government of India will remain the majority shareholder after the public listing. Ten percent
of shares are proposed to be allotted to existing LIC policyholders. In year 2021, the
government of India had proposed to significantly enhance the authorised capital of the LIC
of India, to ₹250 billion (US$3.1 billion) to facilitate its public listing scheduled for the next
fiscal year which will begin on 1 April. Due to the scale of the offering and the LIC's
ownership structure, the deal has been referred to as "India's Aramco moment" in reference to
the comparable 2019 IPO of Saudi Aramco.

The LIC announced it would open its IPO to the public on 4 May 2022, and the process
would be concluded on May 9. Through this IPO, the Government of India is now aiming to
raise ₹21,000 crore, as opposed to raising between ₹65,000 crore to ₹70,000 crore by
diluting the 5% equity earlier. As per the IPO price band for 3.5% stakes for ₹21,000 crore,
the valuation comes to around ₹6 lakh crore.

4
 Capitalisation Of LIC

(Table 1.1)
The government has proposed to significantly increase the authorised capital of Life
Insurance Corporation of India (LIC) to Rs 25,000 crore to facilitate its listing slated for the
next fiscal. Currently, the paid-up capital of the life insurance company with over 29 crore
policies is Rs 100 crore. Starting with an initial capital of Rs 5 crore in 1956, LIC has an
asset base of Rs 31,96,214.81 crore. The authorised share capital of LIC shall be Rs 25,000
crore divided into 2,500 crore shares of Rs 10 each, as per the amendments proposed in
the Life Insurance Corporation Act, 1956. The amendments proposed as part of Finance Bill
2021 will lead to the setting up of a board with independent directors in line with listing
obligations. According to one of the 27 proposed amendments, the central government will
hold at least 75 per cent in LIC for the first five years post the IPO, and subsequently hold at
least 51 per cent at all times after five years of the listing. Up to 10 per cent of the LIC IPO
issue size would be reserved for policyholders, Minister of State for Finance Anurag Thakur
had said last month.
According to Mr. Kumar the state run Life Insurance Corporation of India (LIC) is well
capitalised. Kumar said LIC's potential investors should not worry about government control
post the IPO as decisions in the country's largest insurance company are taken by its board and
not by the government, which will hold 95% of stake post the IPO.
LIC is planning to sell a 5% stake to raise about $8 billion next month, which could make it
India's largest IPO by far.

5
To capitalize is to record a cost or expense on the balance sheet for the purposes of delaying

full recognition of the expense. In general, capitalizing expenses is beneficial as companies

acquiring new assets with long-term lifespans can amortize or depreciate the costs.
Key Ratios

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(The above tables 1.2,1.3,1.4 represent the comparison between the financial years
2020,2021,2022).
Source: https://www.moneycontrol.com/financials/lichousingfinance/ratiosVI/LIC

LEVERAGE
Particulars FY 2022 FY 2021

Sales 427419 402844

(- variable cost) 0 0

Contribution 427419 402844

(- fixed cost) 30829.25 27280.57

EBIT 396589.75 375563.43

(-interest) 85.31 112.49

EBT 396504.44 375450.94

Table 1.5

 Operating Leverage: Contribution/EBIT

 Financial Leverage: EBIT/EBT
 Combined Leverage: Operating Leverage * Combined Leverage

Leverage FY 2022 FY 2021

Operating Leverage 1.077 1.072

Financial Leverage 1.002 1.000

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 Combined Leverage 1.079 1.072

Table 1.6
Dividend Policy
LIC share dividend record date is August 26, as per the exchange filing. It means
that shareholders having LIC shares in their Demat account on the record date will be eligible
for receiving the dividend amount. Dividend payment is one of the corporate actions.
For the year ending March 2022 Life Insurance Corporation of India has declared an equity
dividend of 15.00% amounting to Rs 1.5 per share. At the current share price of Rs 627.70
this results in a dividend yield of 0.24%.
LIC reported a 17 per cent drop in consolidated net profit to Rs 2,409 crore for Q4 from Rs
2,917 crore in the same quarter a year ago, while sharing its first earnings after listing in the
bourses. The total income of the insurer increased to Rs 2,12,230 crore, from Rs 1,90,098
crore in the same period of the previous fiscal year.

The state-owned insurer made its debut on the stock exchanges on May 17, 2022, at a
discounted price. LIC shares were allotted to the investors at Rs 949 apiece. The stock is now
about 34 per cent down from its IPO issue price of Rs 949.

What is a dividend policy?

A dividend policy is a policy a company uses to structure its dividend payout to its
shareholders. Management must decide on the divided amount, timing, and various other
factors that influence dividend payments.
The dividend decision of a firm depends on the profits, investment opportunities in hand,
availability of funds, industry trends in dividend payment, and the company’s dividend
payment history.

Source: https://www.moneycontrol.com/company-facts/lifeinsurancecorporationindia/
dividends/LIC09#:~:text=For%20the%20year%20ending%20March,a%20dividend%20yield
%20of%200.24%25.

8
 Future Plans Of LIC
 The largest issuer in the nation, LIC, plans to increase its market share in non-
participating insurance products and broaden the mix of distribution channels.
 In the company's annual report for FY22, LIC chairman M. R. Kumar stated, ‘’We
plan to enhance our market share in the non-par business and broaden the channel mix
while ensuring that our agents remain the key distribution pillars of our products’’
 The chairman stated that in order to meet the preferences of the numerous segments
with both current and emerging demands, "digital interventions, data analytics, and
process flow modifications to exploit the potential of the changing times would be
embarked upon."
 The I.T processes between the banks and LIC will be strengthened as they engage
with all of their partner banks.
 For the last 62 years LIC showing growth rate every year. Even after opening Life
Insurance to Private sector for over a 2 decades LIC is the Market Leader capturing
two thirds of Market Share. LIC is going to occupy No.1 position in terms of Market
capitalization in stock Market. LIC will become much stronger and continue it's
leadership in Life Insurance Market.

IMG 1

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Source: https://www.policyx.com/life-insurance/lic-of-india/best-lic-plans-to-invest.php

COMPANY 2

HDFC Life Insurance Company Ltd.

IMG 1
HDFC Life Insurance Company Limited ('HDFC Life' / ‘Company’) is a joint venture
between HDFC Ltd., India’s leading housing finance institution and abrdn
plc (formerly Standard Life Aberdeen plc) a global investment company.

Established in 2000, HDFC Life is a leading long-term life insurance solutions provider in
India, offering a range of individual and group insurance solutions that meet various
customer needs such as Protection, Pension, Savings, Investment, Annuity and Health. As on
September 30, 2021, the Company had 38 individual and 13 group products in its portfolio,
along with 7 optional rider benefits, catering to a diverse range of customer needs.

HDFC Life continues to benefit from its increased presence across the country having a wide
reach with 372 branches and additional distribution touch-points through several new tie-ups
and partnerships. The count of our partnerships is over 300, comprising traditional partners
such as NBFCs, MFIs and SFBs, and including new-ecosystem partners.

HDFC Life sells policies through a multi-channel network. This includes direct sales through
own branches, Insurance agents, Partner Banks and through other financial institutions.
HDFC Life has over 414 branches and 15,406 full-time employees located across India.
Company has over 58,147 individual agents.

IPO- HDFC Life IPO opens on Nov 7, 2017, and closes on Nov 9, 2017.

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Source ;https://www.moneycontrol.com/india/stockpricequote/lifehealth-insurance/
hdfclifeinsurancecompany/HSL01

The objects of the issue are:

1. To achieve the benefits of listing the Equity Shares on the Stock Exchanges and
2. To carry out the sale of Offered Shares by the Selling Shareholders.

Promoters And Management:

1. Housing Development Finance Corporation Limited ("HDFC")

2. Standard Life (Mauritius Holdings) 2006 Limited ("Standard Life Mauritius")
3. Standard Life Aberdeen plc ("Standard Life Aberdeen").

Table 1
Board Member –

1. Mr Deepak S Parekh - Non Executive chairman

2. Mr Keki Mistry - Non Executive Director
3. Ms. Renu Sud Karnad - Non-Executive Director
4. Mr. Prasad Chandran - Independent Director
5. Mr. Vish Viswanathan - Independent Director
6. Mr. Sumit Bose - Independent Director

Capitalisation

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 Capitalisation refers to the sum of all the funds raised from various long-term sources, it
can be debt, equity or debt-equity mix. The capitalisation of a company helps in
determining whether the company is over capitalized, under-capitalized or fairly
capitalized. The capitalization also has an impact on Earning Per Share, as debt up to a
certain amount helps in increasing the EPS.
The capitalisation position of HDFC LIFE ltd. for the past 3 years consists of:
(All figures in cr)
Particulars F.Y. 2022-21 F.Y. 2021-20 F.Y. 2020-19
Equity Share Capital 2112 2020 2018
Reserves and Surplus 13497 9171 4782
Borrowings 60000 0 0
Table 2

HDFC LIFE Insurance is fairly capitalized because the company was having almost
negligible debt in the preceding years and also it has the largest market share in the private
insurance sector. It is fairly capitalized because the business has employed the correct amount
of capital and its earnings are same as the average rate of earnings.

Debt Equity Ratio

The debt-to-equity ratio or D/E ratio is an important metric in finance that measures the
financial leverage of a company and evaluates the extent to which it can cover its debt. It is
calculated by dividing the total liabilities by the shareholder equity of the company.

Years Debt to Equity Ratio

F.Y. 2022-21 0.04
F.Y. 2021-20 0.00
F.Y. 2020-19 0.00
Table 3

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Source: https://www.hdfclife.com/about-us/leadership

Capital Structure of HDFC LIFE -

Table 4

Leverages
All figures in
cr.
F.Y. 2022-21 F.Y. 2021-20
Sales 45396.45 38122.20
(Less: Variable Cost) 0 0
Contribution 45396.45 38122.20
(Less- Fixed Cost ) (2114.92) (1744.82)
EBIT 43281.53 37377.38
(Less – Interest) (7512) 0
EBT 35769 37377.38
Operating Leverage 1.0488 1.0199
Financial Leverage 1.21002 1

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 Combined Leverage 1.2690 1.0199

Table 5

Calculation
Fixed cost – Employee benefit expenses + Finance cost + Depreciation and amortisation
Expenses

FY2022 -21 = 2039.5 + 23.04 + 52.38 = 2114.92 crores

FY 2021- 20 = 1675.8 + 18.41 + 50.61 = 1744.82 crores

Operating Leverage = Contribution/EBIT

FY 2022-21= 45396.45/43281.53 = 1.0488

FY 2021-20 = 38122.20/37337.38 = 1.0199

Financial Leverage = EBT/EBIT

FY 2022-21 = 43281.53/36769 = 1.21002

FY2021-20 = 37377.38/37377.38 = 1

Combined Leverage = Operating Leverage x Financial Leverage

FY 2022-21 = 1.0488 x 1.21002 = 1.2690

FY2021-20 = 1.0199 x 1 = 1.0109

Cost of Capital

Cost of equity (K e) = Dividend/ Market Share price

o F.Y. 2022-21 = 1.7/542.5 =0.0031%

o F.Y. 2021-20 = 2.02/521 =0.0038%
o F.Y. 2020-19 = 1.63/405=0.0042%

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(Note: Market prices of the share are taken as closing price on 31 st March, i.e., last date of the
financial year)

Source: https://learn.financestrategists.com/finance-terms/debt-to-equity-ratio/

Cost of Debt -: The coupon rate on bonds, or the flat interest rate marketed on loans is not
the true cost of debt to the company, it’s may too be higher or lower depending on the tax
deduction, number of times interest is given, discount on issue, premium on issue and
premium on redemption.

Cost debt = Debt Financing cost / Borrowings

FY 2022 – Debt financing cost = Rs 7512 Crores and Borrowings = 60000 Crores,

K d = 7512/6000 = 12.52%

And borrowings for HDFC LIFE Insurance in the year 2021-22 and in 2020-21 was

Dividend Policy
A dividend is basically a return that one earns on the investment, and mostly the tax is
applicable on dividends. Dividend decision is one of the three major decisions and one of the
most important dimensions of financial management. Dividend decision is deciding what to
do with the surplus, i.e., whether the surplus should be distributed as dividend or retained
back. Dividend can also be received in various ways like Cash dividend, Bonus share, share
repurchase, property dividend, scrip dividend and liquidating dividend.

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 Dividend (Rs)
2.5

1.5

0.5

0
31st May 2022 30th June 2021 14th March 2019 15th December 2017

Chart 1

Source: https://www.capitalmarket.com/Company-Information/Financials/Balance-sheet/
HDFC-Life-Insurance-Company-Ltd/21997

Future Plans, Trend and Financial Position of HDFC LIFE INSURANCE

a) Low Penetration- The ratio of premium to Gross Domestic Product (GDP) in India is only
2.7 percent compared to a world median of 3.5 percent, or Thailand’s 4 percent or South
Africa’s 11 percent. This makes Life insurance an exciting high growth sector. So this
market HDFC life insurance can capture
b) Underinsurance- Hdfc life that not only we have the issue of lower penetration, but also
under-insurance. People who are aware and have taken an insurance policy are grossly
underinsured. Both these factors mean faster growth opportunities.

c) Fastest growing economy which can lead to buying more insurance products - Our
population is only growing at about 1.2 percent. This means, the per capita income will
grow at a much more rapid pace. This leaves space for fast growth. In this HDFC LIFE is
launching new products to increase their market share.

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d) The long term capital gain gifts- This year’s budget exempted the investments through
Unit Linked Insurance Plan (ULIPs) from the Long Term Capital Gains (LTCG) tax.
While direct equity and mutual fund units will bear the LTCG impact, the ULIPs will be
exempted. This gives the ULIPs a tax differential, which will make them a preferred
vehicle of equity investments. As more money flows into ULIPs the Assets under
management (AUMs) of these insurance companies will rise, enabling them to improve
their returns to their shareholders.

e) High Growth- New business in life insurance premium has increased at a Compound
Annual Growth Rate (CAGR) of 24.3 percent for 2015-17. Life insurance companies
enjoy a lower corporate income tax rate of 14.3 percent.

HDFC Life had acquired 100% stake in Exide Life Insurance Company from its parent Exide
Industries for ₹6,687 crore. And According to our great mentor and Investor Saurabh
Mukharejea, as banking sector was revolutionized by private banking companies in a similar
way Insurance sector will be changes by private insurance companies who have greater share
in the market. LIC market share is dropping constantly on a yearly basis. It was 69% in 2019
which decreased to 62% in 2022 according to data.

17
SBI LIFE INSURANCE

IMG 1

INTRODUCTION
The company got incorporated as a public limited company in Mumbai on 11 October 2000
and received Certificate of Commencement of Business from the RoC on 20 November 2000
and got registered with the IRDAI for carrying out business of life insurance on 29 March
2001. SBI Life is listed on BSE And NSE (Stock Exchanges in India) and is a leading Life
Insurance company in India. SBI Life started as a joint venture with BNP Paribas Cardif
S.A,which is the life and property & casualty insurance arm of BNP Paribas, one of the
strongest banks in the world, in 2001. While in its initial stage its business was mainly
from bancassurance channel, and gradually developed an agent network consisting of 108261
Insurance Advisors (IAs)and 825 offices across the country as on March 31, 2018 for selling
its life insurance products and also collaborated with other distributions channels which
include direct sales and sales through corporate agents brokers insurance marketing firms and
other intermediaries.
The company offers products in individual and group category which includes savings and
protection plans addressing the insurance needs of diverse customer segments and has a
comprehensive range of plans in life insurance and pension schemes. During financial
year 2004-05 company's Assets Under Management (AUM) crossed Rs 1000 crore mark and
in January 2005 it launched unit-linked product.[5] In subsequent financial year of 2005-06 it
became the first new generation private life insurance company registering profit and posted
profit after tax of Rs 2.03 crore for that year. Its Gross Written Premium (GWP) crossed the
milestone of Rs 5000 crores and AUM crossed the milestone of Rs 10000 crore and it also
achieved cumulative breakeven wiping out all accumulated losses and also its share capital
increased by Rs 500 crore to Rs 1000 crore during financial year 2007-08. Its GWP crossed
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the milestone of Rs 10000 crore during financial year 2009-10 and in 2010-11 SBI Life's
branch network crossed the milestone of 500 branches all over country and further during the
financial year 2011-12 the company achieved the milestone of profit after tax (PAT) of Rs
500 crores as it reported PAT of Rs 556 crore for that year declaring a maiden dividend of
5%.
The company's AUM crossed the milestone of Rs 50000 crore and the total number of
branches in the country crossed 750 during the financial year 2012-13.The company's GWP
crossed the milestone of Rs 15000 crores during the financial year 2015-16 and in the
subsequent financial year in 2016-17 SBI Life's renewal premium collection crossed the
milestone of Rs 10000 crore and during the year two companies, Value Line Pte Ltd and
McRitchie Investments Pte Ltd. bought stake of 1.95% each in the company from SBI.

BUSINESS AREA OF THE COMPANY

SBI Life offers a comprehensive range of life insurance and pension products at competitive
prices, ensuring high standards of customer service and world class operating efficiency. The
Company offers individual and group products which include savings and protection plans to
address the insurance needs of diverse customer segments. SBI Life has a wide range of
products catering to various customer needs in the life, health, pension & micro-insurance
segments. These products are customer centric, simple to understand and have competitive
features. The products include Individual Life Insurance Plans and Group Insurance Plans.

MANAGEMENT

Name Designation

Abhijit Gulanikar President - Business Strategy

Ashwini Kumar Tewari Nominee Director

AVS Siva Rama Krishna President

Deepak Amin Independent Director

Dinesh Kumar Khara Chairman

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G Durgadas President

M Anand President

Mahesh Kumar Sharma Managing Director & CEO

Narayan K Seshadri Independent Director

Pranay Raniwala Compliance Officer

Prithesh Chaubey Actuary

Ravi Krishnamurthy President

Sangramjit Sarangi CFO & President

Seema Trikannad Executive Vice President

Shobinder Duggal Independent Director

Subhendu Kumar Bal Actuary & Chief Risk Officer

Tejendra Mohan Bhasin Independent Director

Usha Sangwan Independent Director

Table 1
LEVERAGES

Particulars FY 2022 FY 2021

Sales 27208410 23735534

(-variable cost) 0 0

contribution 27208410 23735534

(-fixed cost) 1556695 297543

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 EBIT 25651715 23437991

(-interest) 5898864 5211067

EBT 19752851 18226924

Leverage FY 2022 FY 2021

Operating 1.060 1.012

Financial 1.298 1.285

Combined 1.375 1.300

Table 2
Operating Leverage- Operational leverage, a cost-accounting technique, evaluates how
much a business or project may increase operating profitability by increasing revenue. A
business with high operating leverage generates revenues with low variable costs and high
gross margins. Operating leverage is concerned with the company's fixed costs, such as rent,
lease, salaries, etc., and how these components affect the profitability of the organisation.
Financial Leverage- Financial leverage is a metric that shows how much a company
depends on debt to finance its operations. Sales and profits must be high enough to offset the
added debt that a company with high levels of leverage shows on its balance sheet. Financial
leverage demonstrates how financial costs affect profits. The finance cost is comprised of the
costs of the debenture, preference share, and loan.
Combined Leverage- Leverage (OL + FL) is a measure of the entire risk a company faces in
relation to operating leverage, financial leverage, and the net effect on EPS. When sales and
earnings are rising, leverage benefits a company as well as investors.

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COST OF CAPITAL
Cost of capital quantifies the compromises investors make in order to invest in the hopes of
earning a respectable return in exchange for delaying their immediate needs. Cost of capital,
however, refers to the fee paid to the investor for using the money he gave from the
standpoint of the business utilising the capital. Therefore, the cost of capital serves as
payment for the use of capital.
The weighted average cost of capital for SBI LIFE INSURANCE is 13.4%. ROIC for SBI
LIFE Insurance is 0.00%
Cost of Equity 13.4%
Cost of Debt 0.00%
WACC 13.4%
ROIC 0.00%

[Source-Guru Focus]

CAPITALISATION
The term capitalisation is derived from word ‘capital’. Capital in business usage is mostly
taken to mean total assets required to operate in a business and the money needed to acquire
such assets. Based on this, a company may be over or undercapitalised. Overcapitalisation
refers to a situation where in the value of a company’s capital is more than its total assets
which put in words there is more debt and equity compared to value and assets.Whereas
undercapitalisation refers to a condition in which a company does not have sufficient capital
to conduct normal business operations and to pay the creditors.
Capital structure is the particular combination of debt and equity used by a company to
finance its overall operations and growth. Equity capital arises from ownership shares in a
company and claims to its future cash flows and profits. Debt comes in the form of bond
issues or loans, while equity may come in the form of common stock, preferred stock, or
retained earnings. Short-term debt is also considered to be part of the capital structure.
Capitalisation ratio=Total debt divided by Total equity plus total debt
The capitalisation ratio for the company for the last two years is as follows-

Year Equity Debt

2021 1000.7 0

22
2022 1000.37 0
Capitalisation Ratio 0 0

Table 3
Source- https://www.moneycontrol.com/

The higher a company’s capitalization ratio , the more it’s capital structure is implied to be
comprised of debt rather than equity. Therefore there is a greater risk of defaulting and
becoming distressed , since the company is riskier due to its reliance on financial leverage.
By contrast, a lower capitalization ratio – which is viewed more favorably from a credit risk
perspective – indicates that the company is less dependent on debt.
The relationship between the capitalization ratio and default risk is as follows:
Higher Capitalization Ratio → More Default Risk
Lower Capitalization Ratio → Less Default Risk
As in case of SBI LIFE INSURANCE-the capitalisation ratio stands at 0 because the
company is virtually debt free which is a very positive sign for any company and also we can
interpret that the company is fairly capitalised.

DIVIDEND POLICY
A dividend is the distribution of a company's earnings to its shareholders and is determined
by the company's board of directors. Dividends are often distributed quarterly and may be
paid out as cash or in the form of reinvestment in additional stock. Common shareholders of
dividend-paying companies are eligible to receive a distribution as long as they own the
stock before the ex-dividend date. SBI LIFE INSURANCE has an average dividend yield of
0.16 percent of its share price. The below table shows the dividend declared history of the
company-

Year 2018 2019 2020 2022

Amount 2 2 2.5 2
Table 4
Source- https://www.moneycontrol.com/
The average dividend yield of 0.16 percent is comparatively very low in comparison to it’s
peers HDFC life insurance and Life corporation of India(LIC) which have dividend yield of

23
0.31 and 0.24 respectively .Usually those companies which have attained a high growth and
have very low scope of further expansion have high dividend yield where as companies
which have a lot of growth and expansion prospect pay very low dividend as the company
emphasizes more on the development and the growth of the business. With the same point of
view , one can interpret that over the years SBI LIFE INSURANCE has paid more emphasis
on its business expansion. The companies average CAGR for the past one year stands at 7.8
percent which also supports the same as the growth and development of any company is also
visble in its share price which is denoted by its CAGR.

TREND AND FINANCIAL POSITION

In the recent quarterly results of the company that is Q2FY23 , the statistics were as follows-
Net Sales at Rs 27,717.15 crore in September 2022 up 8.12% from Rs. 25,635.71 crore in
September 2021.Quarterly Net Profit at Rs. 376.74 crore in September 2022 up 52.76%
from Rs. 246.62 crore in September 2021.SBI Life Insurance EPS has increased to Rs. 3.77
in September 2022 from Rs. 2.47 in September 2021. The below image shows the share
price movement of SBI LIFE INSURANCE-

IMG 2
In its recent initiatives , the company has launched new pension product with added features
for better customer experience. The broaden the reach SBI LIFE INSURANCE has tied up
with Indian post payments bank limited which will help it to tap unserved markets. Total 9.3
lakh policies were issued as of September 2022.Focus on agent addition to pedal premium

24
growth. .The company has offset the impact of the pandemic on business growth to
a large extent. Indians bought life insurance policies with the pandemic making
them even more willing buyers. SBI Life’s retail new business premium growth
showed a 36.5% sequential jump, offsetting the loss of business of the first
quarter.
So , overall , the company , in current scenario is very well poised in the indian
market and is to emerge as leading company offering a comprehensive range of
life insurance and pension product at competitive prices ensuring high standard
of customer service and world class operating efficiency.

COMPARATIVE ANALYSIS

Life Insurance Corporation of India (LIC), SBI Life Insurance (SBI Life) and HDFC Life are

three of the top life insurer stocks in India. LIC was listed in May this year and is not only the
largest life insurance firm in the country but also the biggest competitor of the latter two.

While SBI Life has risen 18 percent in the last 1 year, HDFC Life has lost 12 percent in this
period. However, since listing in May, LIC has fallen 25 percent till date.

About the firms

LIC provides life insurance products in India, Fiji, Mauritius, and the United Kingdom. It
provides individual products, including participating insurance products; and non-
participating products comprising savings insurance, term insurance, health insurance,
annuity and pension, and unit-linked insurance products. It is the oldest life insurer,
incorporated in 1956.

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LIC stock price trend
SBI Life Insurance Company Limited operates as a private life insurance company in India.
The company’s life insurance business comprises of individual life and group business,
including participating, non-participating, pension, group gratuity, group leave encashment,
group superannuation, group immediate annuity, unit-linked and variable insurance products,
health, and micro insurance. It was incorporated in 2000 and is a subsidiary of State Bank of
India (SBI).

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SBI LIFE STOCK TREND

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HDFC Life Insurance Company Limited provides individual and group insurance solutions in
India. It offers insurance and investment products, such as protection, pension, savings,
investment, annuity, and health, as well as term, retirement, investment, children’s, and unit
linked insurance, NRI, and group insurance plans. It was also incorporated in 2000.

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HDFC LFIE STOCK TREND

Earnings

LIC reported nearly 232 times year-on-year (YoY) growth in standalone net profit at ₹682.88
crore for the quarter ended June 30. It had posted a standalone profit of ₹2.94 crore in the
corresponding quarter last year. However, its performance was disappointing on a quarter-on-
quarter (QoQ) basis. Its net profit declined 71.2 percent on quarter to ₹2,371.6 crore, while
standalone total premium contracted 31.6 percent to ₹98,351.8 crore. Meanwhile, on a YoY
basis, the net premium income of LIC increased by 20.35 percent to ₹98,351.76 crore.

SBI Life reported 18 percent year-on-year (YoY) growth in its net profit at ₹263 crore in the
April–June quarter (first quarter, or Q1) of 2022-23 (FY23), aided by a healthy jump in gross
written premium. In the corresponding period a year ago, the company's net profit was to the
tune of ₹223 crore. On a sequential basis, however, net profit was down almost 60 percent.

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Its gross written premium - the sum of new business premium and renewal premium - was up
35 percent YoY to ₹11,350 crore in Q1FY23.

HDFC Life reported a 21 percent rise in net profit at ₹365 crore for June quarter 2022-23
buoyed by top line growth along with a higher renewal ratio that boosted margins. Total
premium rose 23 percent to ₹9,396 crore during the quarter from ₹7,656 crore a year ago, the
life insurer said, adding the first-year premium income rose 27 percent to ₹4,776 crore.

 LIC, SBI Life and HDFC Life collected the highest premium in FY2020-2021, as per
IRDAI data. They were ahead of peers in both new business and renewals.

 LIC collected a total of Rs. 4 lakh crore as life insurance premium in FY 2020-2021.
Of this, 46% was new business premium and the rest 54% came through renewals.

 The next biggest life insurers — SBI Life and HDFC Life — reported a similar new
business premium at Rs. 20,624 crore and Rs. 20,107 crore, respectively. However,
SBI Life is much ahead of HDFC Life in total premium collection, thanks to a much
higher premium collection through renewals.

 Data reveals that despite the success of numerous private players, LIC still holds the
lion's share of the market. Its yearly premium collection is eight times that of the
nearest competition — SBI Life. LIC has a 64% share in the total premium collection
of the industry.

 Overall, the life insurance industry collected Rs. 6.3 lakh crore as premium in FY
2020-2021. Of this, Rs. 2.8 lakh crore was new business premium and the rest Rs. 3.5
lakh crore was renewal premium

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