Can Canara HSBC Life Insurance IPO offer value for long-term investors?

ET Intelligence Group: Canara HSBC Life Insurance plans to raise upto ₹2,518 crore through an offer for sale. The promoter stake will fall to 62% from 77% after the IPO. The company has the lowest Value of New Business (VNB) margin among peers due to high operating expenses. The issue is priced at a discount to its peers, making it suitable for long-term investors seeking exposure to the insurance sector.

Business
Incorporated in 2007, Canara HSBC Life Insurance is the third-largest life insurer led by public-sector banks with 43,639.5 crore assets under management (AUM) as of June, 2025. The insurer's share of bancassurance in new business premium (NBP) increased to 92% in June 2025 from 57% in March 2023. The share of ULIP products in NBP increased to 55% in FY25 from 37% in FY23 amid a bullish equity market. Its market share of individual weighted premium income (WPI) rose to 1.8% in FY25 from 1.6% in FY24. The number of individual policies issued rose to 1.9 lakh in FY25 from 1.9 lakh in FY23.

Financials
Net profit grew by 13.3% annually to ₹117 crore in FY25 from ₹91.2 crore in FY23. It is well capitalised, with a solvency ratio of 200% as of June 30, 2025, well above the regulatory minimum of 150%. Its Embedded Value (EmV) rose to ₹6,110.7 crore at the end of March 2025 from ₹4,271.9 crore as of March 2023. The WPI increased to ₹2,178.6 crore in FY25 from ₹1,657.5 crore in FY23. The company's VNB margin was 19% in FY25, lower than HDFC Life's 25.6%, ICICI Prudential Life's 24% and SBI Life's 27.8%. Its operating expenses to gross written premium ratio was 12.4% in FY25, above the peer range of 5-9%. The total cost ratio was 18.7% in FY25, higher than ICICI Prudential and SBI Life but lower than HDFC Life.

Valuation
At the upper price band, the issue is valued at a price-to-embedded value (P/EmV) multiple of 1.6. This compares with 2.9 times for HDFC Life, 2.5 times for SBI Life, 1.8 times for ICICI Prudential Life.