Canara HSBC Life Insurance IPO

Canara HSBC Life Insurance is promoted by Canara Bank (51.00 percent stake), one of India's largest public sector banks, and HSBC Insurance (Asia-Pacific) Holdings Limited (26.00 percent stake), a global leader in financial services. The company claims to benefit from the strong brand equity and customer base of its promoters, enhancing its ability to attract new business.

Canara HSBC Life Insurance claims to have improved its persistency ratios significantly, from 74.51 percent in FY22 to 80.73 percent in FY24 and 83.45 percent for the nine months ended December 31, 2024. The company also claims to have a high Net Promoter Score (NPS), which is a metric used to gauge customer satisfaction and loyalty. It increased from 41 in FY22 to 60 in FY24, reaching 69 on December 31, 2024.

The company claims to have an impressive claims settlement ratio, which refers to the number of claims successfully resolved versus the number of requests received in a given year. It increased from 99.05 percent in FY22 to 99.31 percent in FY24, positioning it among the top performers in the bank-led insurance segment.

Canara HSBC Life Insurance claims to utilise a robust multi-channel distribution model that includes bancassurance, brokers, corporate agents, and direct sales through digital platforms. The company claims that this strategy helps ensure a broad customer reach, particularly across tier 1, 2, and 3 cities.

The life insurer claims to have been one of the fastest to report three consecutive years of profit from the first year of operations among its peer set, and one of the fastest to generate profits in five years of operations. The company attributes this success to its strategic business initiatives and adaptability within the dynamic Indian life insurance industry. Between FY22 and FY24, its individual weighted premium income (WPI) and total business premium grew at a CAGR of 11.29 percent and 10.01 percent, respectively. (Individual WPI is defined as the sum of individual non-single new business premiums, and 10% of individual single new business premiums during the relevant financial year or period.) Additionally, Canara HSBC Life Insurance claims to have demonstrated strong investment performance, with AUM growing at a CAGR of 19.23 percent between FY22 and FY24, and reaching Rs 40,012.74 crore as of December 31, 2024.

As of December 31, 2024, the company claims that 97.26 percent of its total fixed income portfolio comprised domestic AAA-rated instruments, including sovereign instruments.

Canara HSBC Life Insurance claims to have had the third-highest share of premiums from non-linked non-participating business among its peer set in FY24. Furthermore, the company claims to have had the second-highest average premium ticket size for individual insurance among public sector bank-led life insurers for the nine months ended December 31, 2024.

The company claims that its current portfolio encompasses 17 individual products, seven group products, and two optional rider benefits, alongside policies under the PMJJBY scheme. This suite of products is designed to address protection, savings, and retirement needs. The company claims that this diversified and balanced product portfolio is crucial for driving growth and effectively meeting the diverse demands of both individual and group customers.

Canara HSBC Life Insurance Company claims to have heavily invested in Artificial Intelligence (AI), data, and automation to improve efficiency, reduce costs, and enhance customer service. Key initiatives include digitising customer onboarding, integrating with distribution partners for real-time processing, and using AI for faster underwriting and claims processing. The company claims that these strategies have led to reduced turnaround times and improved customer satisfaction. As a result, customer complaints per 10,000 new policies remained low at 49 in FY24.

The company has seen a consistent increase in profit after tax (PAT). It increased from Rs 215.37 crore in FY22 to Rs 278.06 crore in FY23, finally hitting Rs 343.88 crore in FY24.

The company operates in a heavily regulated environment and must comply with a range of laws and regulations, including those set by the Insurance Regulatory and Development Authority of India (IRDAI). Any adverse changes, such as modifications to investment restrictions, insurance product regulations, or commission caps, could impact the company’s business model or lead to financial penalties.

A significant portion of Canara HSBC Life Insurance's revenue comes from Unit-Linked Insurance Products (ULIPs), which accounted for Rs 1021.32 crore (63.07 percent) of new business premiums and Rs 954.81 crore (32.11 percent) of renewal premiums in the nine months ended December 31, 2024. This concentration exposes the company to market volatility, as ULIPs are closely tied to stock market performance. A downturn in the market or changes in investor sentiment could significantly impact premium inflows. Additionally, any regulatory changes targeting ULIPs could further affect the company’s financial stability.

The company has experienced negative cash flow from operating activities amounting to Rs 181.22 crore in the nine months ended December 31, 2024. Investors need to keep a close watch on cash flow as negative cash flows exert pressure on companies, as they would need to raise fresh funds to get over this impediment.

Canara HSBC Life Insurance's solvency ratio (a financial metric that assesses a company’s ability to meet its long-term debt obligations) declined from 281.97 percent in FY22 and 251.81 percent in FY23 to 215.00 percent, and 212.83 percent for the nine months ended December 31, 2024, and FY24, respectively. While still above the minimum regulatory requirement, if this trend continues, the company may face challenges in maintaining adequate capital and could be required to raise additional funds to meet regulatory standards, potentially leading to dilution of shareholder value or financial instability.

A significant portion of Canara HSBC Life Insurance's new business premiums from individual products is concentrated in Karnataka. It accounted for Rs 352.58 crore (21.77 percent) in the nine months ended December 31, 2024, Rs 397.87 crore (22.27 percent) in FY24, Rs 371.84 crore (20.17 percent) in FY23, and Rs 312.05 crore (17.96 percent) in FY22. Any adverse social, political, economic, or natural events in this state could result in a decline in premiums from these regions, adversely affecting the company’s financial health, growth prospects, and overall business stability.

The company, its promoters, and directors are involved in certain ongoing legal proceedings, including criminal and tax cases. Any adverse judgments in any of these cases could be detrimental to the company’s business prospects.