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Informist, Monday, Jul 15, 2024

 

--HDFC Life Apr-Jun net profit 4.78 bln rupees  

--HDFC Life Apr-Jun net profit 4.78 bln rupees vs 4.15 bln 

--HDFC Life solvency ratio at 186% as on Jun 30 

--HDFC Life Apr-Jun net premium income 125.10 bln rupees 

--HDFC Life Apr-Jun net premium income 125.10 bln rupees vs 114.8 bln 

--HDFC Life: Board OKs raising up to 20 bln rupees via NCDs 

--HDFC Life 13th month persistency at 87.3% Jun 30 vs 86.2% qtr ago 

--HDFC Life: New business margin at 25% Apr-Jun vs 26.2% a year ago 

--HDFC Life value of new business 7.18 bln rupees Apr-Jun, up 18% YoY 

--HDFC Life: AUM at 3.1 trln rupees as on Jun 30, up 22% on year 

--HDFC Life: Embedded value at 496.11 rupees Jun 30, up 19% on year 

--HDFC Life:See share of unit-linked insurance plans moderate further 
--HDFC Life: High surrender norms have no impact on margins 

--HDFC Life: Going through a massive overhaul of products at present 

--HDFC Life: Bancassurance channel via HDFC Bank should go up 

--HDFC Life: Seeing traction in policies above, below 500,000 rupees 

--HDFC Life:Added 60 branches in tier-2, tier-3 mkts to push agency ops 

--HDFC Life: Want to raise funds via subordinated debt ahead of time 

 

By Subhana Shaikh

 

MUMBAI – A rise in income from investments and healthy growth in the value of new business helped HDFC Life Insurance Co Ltd report a year-on-year increase in net profit of 15% for the June quarter at 4.78 bln rupees, lower than analysts' expectations of 5.2 bln rupees. On a sequential basis, the life insurer's profit after tax rose over 16%.

 

Initially, shares of the insurance company fell following the earnings announcement, but they came off the lows to close 0.4% higher at 638.05 rupees on the National Stock Exchange. While healthy growth in the value of new business and annual premium equivalent comforted investors, the fall in new business margins could have triggered the choppiness in the stock.

 

During Apr-Jun, HDFC Life Insurance Co's net income from investments was up almost 22% on year at 141.24 bln rupees. On quarter, the company's net income jumped 95%. The value of new business, which means the present value of future profits associated with new business written during the year, recorded a growth of 18% on year to 7.18 bln rupees.

 

Net premium income saw decent growth of 9% on year to 125 bln rupees. Within the gross premium income, the first year premiums rose 27% on year to 23.58 bln rupees and renewal premiums were up nearly 11% on year at 64.11 bln rupees. Single premium was marginally up by 0.6% on year to 40.42 bln rupees.

 

In line with its guidance, the company recorded double-digit growth in annual premium equivalent by clocking growth of 31% on year to 24.7 bln rupees despite the changes instituted in last year's Budget affecting the high-ticket business. Padalkar said that the company is seeing traction in policies above and below 500,000 rupees. Annualised premium equivalent is a measure of new business written by an insurance company.

 

The new business margin was 25% in the June quarter, against 26.2% in the same period a year ago. At the post-earnings conference call, Managing Director and Chief Executive Officer Vibha Padalkar said the company will be flexible and tread with caution on margins within a range to pursue its growth objective.

 

While the company has welcomed the Insurance Regulatory and Development Authority of India's move to increase the surrender values for non-linked products, Padalkar said HDFC Life Insurance expects to take a hit of about 100 basis points to its new business margin from higher surrender value payable on early exits. She, however, added that the impact on the company would be limited because of its balanced approach towards business.

 

On the channel mix, bancassurance continued to contribute the lion's share at 65% in Apr-Jun, followed by agency channels at 17%. Direct channels continued to contribute 11%, and brokers and others 7% during the quarter. Parent HDFC Bank continues to contribute 41% to the life insurer's bancassurance channel and Padalkar said she expects this route to pick up further. She also said the company expanded 60 branches in tier-2 and tier-3 cities to boost agency channels.

 

In terms of product mix under individual annualised premium, the share of unit-linked insurance plans rose sharply to 38% in the June quarter, compared with 25% a year ago. The share of non-participating products rose to 35%, from 33% a year ago, while participating products contributed 16%, against 26% a year ago. Annuity also declined to 5% from 9% a year ago.

 

"The ULIP mix was initially elevated, but moderated during the second quarter with the launch of products across other categories. Non-par products bounced back, clocking a 41% YoY increase," according to the press release. Padalkar expects the share of ULIPs to moderate further.

 

For the June quarter, HDFC Life recorded a strong increase in the number of policies and saw expansion in ticket sizes as well. "Growth resurgence was experienced in tier 1 markets whilst maintaining strong growth in tier 2 and 3 geographies, which continue to account for a significant portion of the business," according to the press release. Padalkar added that the company is currently overhauling its products.

 

The company's assets under management remained steady, with growth of 22% on year to 3.10 trln rupees. On the persistency front that tracks customer stickiness, the 13th month persistency ratio was up slightly at 88%, against 87% a year ago. The 61st month persistency ratio also rose to 56% from 53% a year ago.

 

As of Jun 30, the solvency ratio of the private life insurer was 186%, against 200% a year ago. To improve its solvency performance, the life insurer's board has approved raising up to 20 bln rupees through the issuance of non-convertible debentures in one or more tranches. The management said it plans to raise funds through subordinated debt ahead of time to manage growth.

Padalkar said the company, a Nifty 50 constituent, expanded its branch network, taking the total number to around 600. She added that the company is expanding its presence in GIFT City through its subsidiary in Dubai and is already witnessing encouraging results through the non-resident Indian segment.  End

 

Edited by Rajeev Pai

 

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