'HDFC Life' Sees Better Margins in Q4

Leading private sector life insurer HDFC Life expects its margins to improve further in the fourth quarter, having already neutralised the hit it had taken from the merger of Exide Life three quarters earlier than expected. The company closed the December quarter with a new business premium margin of 26.8 per cent.

Its FY22 VNB (value of new business) margin stood at 27.4 per cent and the management is confident of reaching there or making a further improvement as it closes the current fiscal. Over the weekend, HDFC Life reported a 15.2 per cent growth in net income at Rs 315.22 crore on a net premium income of Rs 14,379.38 crore, which rose 18.6 per cent annualised from Rs 12,124.36 crore.

Its first-year premium stood at Rs 2,724.87 crore, up from Rs 2,115.97 crore, and the renewal premium soared to Rs 7,187 crore from Rs 5,543.03 crore. At 26.8 per cent, the VNB margin is already at the pre-merger level, neutralising the impact of the merger of Exide Life (in Q2 FY23) almost three quarters earlier than planned, said Vibha Padalkar, the managing director and chief executive of the insurer.

Though it is flat on-year, and down from the 27.4 per cent it had in FY22, having already neutralised it so early, the company hopes to improve it further to take it to the FY22 level of 27.4 per cent or even better it in the March quarter, Padalkar PTI over the weekend, without quantifying a number. She said the VNB climbed 20 per cent to Rs 877 crore in the December quarter, boosted by a healthy 52 per cent growth in the credit life (loan protection policies) portfolio to Rs 5,200 crore. Given the demand for such products from individual customers and NBFCs, she expects this segment to top Rs 6,000 crore by March. The other revenue booster, she said, was protection products which clipped at 13 per cent and cornered a 14 per cent income share.

Non-participating products still continue to hold the major revenue share at 42 per cent, followed by participating products and ULIPs at 22 per cent each. Annuity products got 6 per cent of the top-line. Padalkar said with a combination of data analytics, insights into customer profiles and calibrated risk retention, overall protection premium grew by over 20 per cent. On the retirement front, HDFC Life has steadily gained market share in the annuity business which grew 22 per cent on a received premium basis compared to a 1 per cent growth for the industry.

The company also recorded healthy growth in both new business premium as well as renewal premium at Rs 18,713 crore and Rs 19,194 crore so far this financial year, compared to Rs 17,075 crore and Rs 14,467 crore respectively in the same period last fiscal. Its total premium stood at Rs 37,907 crore as of December 2022 up, from Rs 31,542 crore in December 2021. Its embedded value scaled up massively to Rs 37,702 crore from Rs 29,543 crore and the value of new business rose to Rs 2,163 crore from Rs 1,780 crore.

She said if the proposed amendments to the Insurance Act, which seek to allow composite licence and a host of other pro-business changes like allowing banks to sell products of multiple insurers unlike the present cap of three, and also permitting insurers to sell all financial products, is cleared in the Budget session of Parliament, HDFC Life will shortly resume health insurance services.