HDFC Life Posts Decent Numbers In Q2FY24, PAT Rises 15%; Here's What Investors Need To Know

HDFC Life Insurance Company has reported decent numbers in the September quarter of FY24. The life insurer recorded a net profit of Rs 378 crore, rising by 15% YoY. While its net premium income jumped 13% YoY to Rs 14,797 crore in Q2FY24. The outlook of the life insurer looks positive ahead.

In the first six months of FY24, HDFC Life registered a 15% growth in net business premium to Rs 12,970 crore, while its individual APE surged by 9% YoY to Rs 4,478 crore. Total premium stood at Rs 26,613 crore in H1FY24, registering a growth of 14% YoY. Net profits stood at Rs 792 crore in H1FY24, soaring by 15% YoY.

Asset under management (AUM) was at Rs 2,64,870 crore by the end of H1FY24, registering a strong growth of 18% from Rs 2,24,901 crore in the same period a year ago.

Vibha Padalkar, MD & CEO said, "Despite the recent budget changes that were perceived to be unfavourable for the sector, the life insurance industry has demonstrated remarkable resilience. We recorded a healthy growth of 10% in individual WRP vs 8% for the overall industry, for the half year ended September 30th, 2023. Our H1FY24 market share was 15.7% and 10.3% in the private and overall sectors respectively. We continued to grow faster than the overall industry and be ranked amongst the top 3 life insurers across individual and group businesses."

He added, "We saw an uptick of 10% in the number of individual policies sold, beating industry growth. This healthy volume growth is in line with our stated objective of broadening our customer base. We have insured more
than 3 crore lives across our individual and group businesses, which represents a YoY growth of 16%. "

Further, he explained that growth in protection was robust at 28% on a new business premium basis. Retail protection registered YoY growth of 46% in H1FY24. Sum assured recorded healthy growth, with retail and overall sum assured growing by 61% and 45% respectively.

He also said, "We continue to lead in terms of sum assured and our private market share based on overall sum assured stood at 18% for H1FY24. Annuity APE grew by 17% and the segment contributed to 18% of new business premium. Annuity and Protection put together contributed to about 55% of new business premium in H1FY24."

In the quarter, the company introduced 2 new products in the protection category viz. HDFC Life Sanchay Legacy and Click 2 Protect Elite. HDFC Life Sanchay Legacy is an industry-first whole life, return of premium protection plan with increasing life cover and is designed to cater to a middle-aged and beyond customer segment. Our other term product, C2P Elite, caters to a more affluent customer category."

On Friday, HDFC Life shares ended broadly flat but in green at Rs 625 apiece. However, the stock is nearing its 52-week high of Rs 690.90 apiece. Its market cap is over Rs 1.34 lakh crore.

What is HDFC Life's outlook?

Shreyyansh, Research Analyst, at StoxBox, said, "As expected, HDFC Life came out with decent numbers, with consolidated net profit jumping to around 15% YoY, with VNB's margin standing at 26.4%, marginally higher than the previous quarter. The net premium income and net profit came as per our expectations, which stood at Rs. 14,755 crores and Rs. 376 crores, respectively."

"We expected the VNB margin to see pressure in Q2FY24 and would continue in the third quarter due to the merger effect with Exide Life. With introducing two new products in the protection category, robust growth was seen at 28% YoY on a new business premium basis," the analyst added.

Stoxbox analyst believes that in the forthcoming quarters as well, there will be pressure seen in the VNB margins as the company's focus remains on increasing its market share, and margin neutrality will be attained from the fourth quarter onwards.

The analyst added, "This can be evident with an uptick of around 10% in the number of individual policies sold, beating industry growth. Thus, our outlook for the life insurer remains positive."

Buy Or Sell?

Meanwhile, Emkay Global analysts in their report said, "HDFC Life reported mixed performance in Q2FY24 where the company gaining strong traction in HDFC Bank came as a big positive, but the decline in broker channel and muted growth in agency channel spoiled the party, resulting in modest 9% APE growth. On the VNB margin front, a host of positive and negative factors, including increased ULIP in mix, synergy gains from Exide Life, and slower growth leading to reduced cost absorption led to flat margins YoY, minor miss versus our expectations."

On the valuation, Emkay's note added, "Management remained confident of delivering mid-teens YoY APE growth in FY24 on adjusted FY23 (~+7% on reported) and flat YoY VNB net margin. In the backdrop of H1 developments, our FY24-26E key estimates remain broadly unchanged (0.5-1.0% cut) and we reiterate our BUY rating on the stock with our Sep-24E target price of Rs740 (implied FY25E P/EV: 2.7x)."