HDFC Life Insurance completed the acquisition of Exide Life Insurance on October 14 following the final approval from IRDAI, and in 14 months from the announcement of the deal in September 2021.

With work underway in term of cost rationalisation and improving margins for Exide Life, HDFC Life MD and CEO Vibha Padalkar expects the whole transaction to be “digested” over the next year.

“When we acquired them, they were low single digits on margins. They’ve already reached high single digits of about 8-odd per cent margins. We are reasonably confident that middle of next year, we will be margin neutral, which means that the combined entity will continue to move upwards on new business margins,” Padalkar told businessline.

The merger of Exide Life has added 1.3 per cent to the insurer’s standing, taking its market share to 16.1 per cent.

The combined product mix will constitute 30 per cent or one-third participating products, and 40 per cent non participating products. “Unit-linked is something that we want to be about 20 per cent of our business, with no cap on how much protection and annuity will be,” she said.

Merger synergies

Padalkar said that there has been minimal attrition owing to the merger, with all key distributors of Exide Life having joined HDFC Life due to access to its large product bouquet and strong brand.

“We should start seeing productivity upside in what the Exide Life agents are able to do,” she said, adding that down the line, HDFC Life will also start selling some of Exide Life’s products.

“That is a big armoury for us because we do need new products from both sides — for their agents and our products and vice versa. Right now we have the entire bouquet, and over the next 12-15 months we should have a good sense as to what we want to keep”.

The life insurer has identified 80-100 branches of both the companies for rationalisation. It has also retained Exide Life’s key leadership team and will look to redeploy people wherever there is an overlap, Padalkar said.

Growing agency channel

An important aspect of the merger is acquiring Exide Life’s strong agency network which has added about 30 per cent to HDFC Life’s network of agents, Padalkar said, adding that the company will benefit from Exide Life’s strong presence in tier-II and tier-III towns — something that HDFC Life did not have a stronghold in.

“They’re strong in the South. But we’re seeing as to how we can replicate that in the West and North” she said. HDFC Life is looking at aspects such as how to improve persistency ratios and new business margins, and how to introduce features such as digital services suite and other services that Exide Life branches don’t have.

HDFC Life has also partnered with India Post Payments Bank, which has about 650 branches across the country, and is expected to help expand and strengthen the insurer’s footprint in non-metro locations, she added.

The share of the agency network has gone up to 18 per cent from 14 per cent post the Exide Life merger, and the insurer aims to increase this to 20 per cent in the medium term.

“1/5th of our business should be agency channel, and then it will continue to grow maybe every two years by 1 per cent or along those lines,” Padalkar said.