HDFC Life Q1 profit jumps 21% driven by better sales, more renewals

Managing Director & CEO Vibha Padalkar attributed the rise in profits to a four-pronged strategy

HDFC Life on Tuesday reported 21 per cent rise in net profit at Rs 365 crore for June quarter 2022-23 buoyed by topline growth along with higher renewal ratio that boosted margins.

Total premium rose 23 per cent to Rs 9,396 crore during the quarter from Rs 7,656 crore a year ago, the life insurer said, adding the first-year premium income rose 27 per cent to Rs 4,776 crore.

Attributing the overall good numbers to a four-pronged strategy, Managing Director & CEO Vibha Padalkar told PTI that for one, the topline grew to Rs 9,396 crore.

Secondly, more the company sold, more margins it accrued and better sales led to higher margins at 26.8 per cent. During the quarter, the company sold a record 12 million new policies/lives covered, including the credit protection business, taking the overall lives covered to close to 60 million.

Thirdly, the overall protection business clipped at a fairly robust manner and finally the higher persistency ratio, which shows the quality of an insurer's business, grew to 88 per cent leading to higher margins, Padalkar said.

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The improving product mix, especially the annuity products, which grew 10 per cent, as against the 9 per cent de-growth for the industry, also helped the overall numbers, she added.

Asked if they will be reentering health insurance business if the regulator allows, Padalkar quipped: "100 per cent."

It makes immense sense to allow life insurers to sell health and wellness products as wellness, life and health should be a composite product, she said.

She pointed that this is the practice in most markets. Worldwide health is with life and motor is with general insurers.

"Moreover, we have been selling health products before the regulator abruptly asked us to stop selling new products in 2015," Padalkar said, adding, if the regulator allowed the company there is no question of it sitting out.

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She said before the ban, they used to sell critical care products and the segment used to contribute almost 3 per cent of the topline.

But now that business is negligible as the company encouraged customers to port out and those who stayed put are being still serviced by it.

She also said the pandemic is behind us as there has been nearly no claim for that side, but is still carrying Rs 25 crore of additional provisions earmarked earlier to meet any contingency.

Sharing more numbers, she said the annualized premium equivalent (APE) grew 22 per cent to Rs 1,904 crore in the quarter, helping it maintain the top 3 ranking amongst life insurers including LIC and of this, individual APE grew 19 per cent to Rs 1,548 crore.

The key profitability metric value of new business rose 27 per cent to Rs 4,776 crore and the high margin protection business grew 31 per cent Rs 322 crore of which the group credit protection business nearly doubled. And renewal premium grew 19 per cent to Rs 4,620 crore and the total premium was up 23 per cent to Rs 9,396 crore.

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All this has the new business margin jumping to 26.8 per cent from 25 per cent, boosting net income by 21 per cent to Rs 365 crore, she said, pushing the value of new business by 25 per cent to Rs 510 crore.

On the product mix, she said it is well balanced, with non-par savings at 35 per cent, participating products at 30 per cent, Ulips at 25 per cent, individual protection at 5 per cent and annuity at 6 per cent, based on individual APE.

The share of the protection business on APE improved from 15.7 per cent last year to 16.9 per cent in Q1 and the credit protect business clipped at 96 per cent, on the back of rise in disbursements across most of the partners.

"This has us continuing to look at overall protection growth across individual and group platforms in an agnostic manner," she said.

On the retirement front, the annuity business grew 10 per cent on received premium basis, compared to a 9 per cent de-growth for the industry in the quarter. On APE basis, the annuity business was higher by 39 per cent.

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Renewal premiums have grown by 19 per cent, supported by improving persistency which overall jumped to 88 per cent year-on-year from 86 per cent and 13th and 61st month persistency for limited and regular pay policies, is at 88 per cent and 54 per cent up from 86 per cent and 51 per cent.

New business margin grew to 26.8 per cent from 26.2 per cent on the back of profitable product mix and growth in protection business.

The company's solvency stands at 178 per cent, it said, adding, to further strengthen solvency to fuel growth, it will continue to evaluate raising equity capital as needed. Its embedded value grew 9 per cent to Rs 29,709 crore for the quarter.

Consequent to acquisition of Exide Life Insurance in January 2022 for which it has received NCLT approval, it has become a wholly-owned subsidiary of the company and the deal added Rs 20,000 crore to the AUM, taking the consolidated assets under management to over Rs 2.5 lakh crore, including the Rs 30,000 crore funds of its pension subsidiary.

The HDFC Life counter closed 1.4 per cent down at Rs 535.85 as against 0.45 percentage points gain in the benchmark Sensex.