HDFC Life Insurance Q3 Results: Profit Up 16%, Value Of New Business Falls 2%

HDFC Life Insurance Co.'s profit rose in the third quarter of fiscal 2024.

The private insurer's net profit increased 16% year-on-year to Rs 368 crore in the quarter ended December, according to an exchange filing on Friday. That compares with the Bloomberg consensus estimate of Rs 378 crore. Sequentially, earnings fell 3%.

The company's net premium rose 6% to Rs 15,273 crore.

HDFC Life Q3 FY24 Highlights (YoY, Adjusted For Exide Life)

• Revenue up 36% at Rs 26,735 crore.

• Value of new business—the present value of the future profit associated with new business written during the period—fell 2% to Rs 856 crore.

• VNB margin was at 26.83% as against 26.84%.

Other Highlights (Based on nine months of FY24)

• Embedded value rose 20% to Rs 45,173 crore.

• The return on EV was 16.5%, as against 17.5%.

• The total expense ratio stood at 19.6%, as compared with 19.4% a year earlier.

• Assets under management rose 20% to Rs 2.8 lakh crore.

• The 13th month persistency ratio—or customer retention—fell by 100 basis points to 86%; while for the 61st month, it improved to 54% from 52%.

• The solvency ratio—which measures the extent to which assets cover commitments for future liabilities—fell to 190% from 209%. It was 194%, as of Sept. 30. However, this is still above the minimum requirement of 150%.

• The company's overall product mix comprises 32% unit-linked insurance plans, 28% non-par savings, 7% annuities, 6% protection, and 28% participating policies. The share of ULIP rose 11%, annuities by 1%, and protection by 2%, while that of par fell 1% and non-par savings declined 11%.

"Our retail protection grew by 36% based on individual APE, and credit protection clocked 21% growth year-on-year," Vibha Padalkar, chief executive officer of HDFC Life, said in the filing.

The number of policies clocked a healthy growth of 9%, outpacing the private and overall industries, she said. Growth from Tier-2 and Tier-3 markets remains strong, witnessing 14% rise year-on-year.

HDFC Life announced new bancassurance partnerships with Karnataka Bank Ltd., Karur Vysya Bank and NKGSB Co-operative Bank Ltd. The company introduced a new product—Click 2 Achieve—a do-it-yourself, non-par savings product, towards the latter part of Q3 FY24. "The product has been well-received across channels and garnered Rs 100 crore within four weeks of its launch," the company said in the filing.

Management Commentary

The company's value of new business growth was down 2% in the quarter due to a lower top-line growth, Chief Financial Officer Niraj Shah told NDTV Profit.

On a nine-monthly basis, too, the VNB growth came in softer at 5%. However, overall volume growth was 9%, and for the non-par policies below Rs 5 lakh, the growth was around 17%, even as the above Rs 5 lakh segment continued to remain affected, he said.

The company continued to maintain its VNB margin almost par. This, he said, was majorly due to increased awareness regarding protection. He said that there was a 38% growth in the overall sum assured and 36% growth in retail protection that aided VNB margin, despite a shift from non-par (high-margin products) to ULIP.

For Q4, Shah said that they are looking forward to increasing their presence in Tier-2 and Tier-3 cities on the back of their newly announced bancassurance partnerships, increasing presence of HDFC Bank Ltd. in semi-urban areas, fillip from Exide Life acquisition and their plans of opening around 70 branches in Tier-2 and Tier-3 cities.

Shares of HDFC Life were trading 0.47% lower at Rs 640.65 apiece after the results were announced, as against a 1.31% rise in the benchmark Sensex as of 2:45 p.m. on Friday.