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Informist, Wednesday, Jan. 15, 2025

By Kshipra Petkar

MUMBAI – The moderation in HDFC Life Insurance Co. Ltd.'s new business margin for the nine months ended Dec. 31 was largely on account of a change in the product mix and changes in surrender value norms, the management said in a post-earnings call with analysts Wednesday. The insurer aims to limit the impact of the surrender value norms on new business margins to 20-30 basis points on an annualised basis, the management said.

"...on an annualised basis, we expect the impact (of the changes in surrender value norms) to be closer to what you reported for nine months. It's 10 basis points because it's only been three months since the regulation has come in. But our endeavour will be to try and keep it as close to, you know, 20-30 basis points on an annualised basis going forward as well," the management said. The company's new business margin fell to 25.1% in Apr-Dec from 26.5% in the corresponding period a year ago.

The Insurance Regulatory and Development Authority of India in December 2023 issued a master circular asking insurance companies to increase the surrender value of life insurance policies, specifically for non-participating products. Surrender value is the total payout given by insurance companies when a policyholder exits the policy before maturity. These guidelines came into effect from Oct. 1.

On the product mix, the company said it had increased the share of unit-linked insurance plans and non-participating savings products and reduced the share of annuity and participating products. The management said growth of unit-linked products is likely to remain range-bound. It said there is strong correlation between unit-linked products and the markets, and maintaining a balanced portfolio is a priority for HDFC Life Insurance Co.

"If the markets remain volatile, then the sheen starts coming off ULIPs and maybe that's how it will pan out again," the management said. "That's why, regardless of what's happening in the markets, this is our stated core strategy that a balanced product mix is important for this very reason."

The management said it had closed discussions with distributors on the surrender value regulations and rolled out a combination of measures, "including deferred commission payout, clawback of commission, and reduction of commission". It said that it had been able to equitably share the impact of the new norms between the company and its partners.

On Wednesday, the life insurance company reported a net profit of INR 4.15 billion for the December quarter, up 13.7% on year. Sequentially, the bottom line fell by over 4%. The net premium income of the company in Oct-Dec was up 10.1% on year at INR 167.71 billion. The value of new business for the nine months ended Dec. 31 was up 14% on year at INR 25.9 billion.

On the "noise" around the IRDAI limiting business through the bancassurance channel, the HDFC Life Insurance Co. management said it had not heard anything from the regulator, and added that if such guidelines are issued, the regulator must also think about the advantage of the touchpoints that banks provide.

In November, the company reported a data breach and leak of customer information. The insurer said it had identified and closed the source of the leak, and there was no material impact on the company's operations from a customer servicing point of view. "...a lot of tightening has been done and we have looked at robust security across our IT environment," the management told the analysts. "We also have been working closely with a couple of external partners who are doing an independent audit and a review of our entire system."

Shares of HDFC Life Insurance Co. closed over 1% lower at INR 594.20 on the National Stock Exchange Wednesday. The company released its results after market hours.  End

Edited by Rajeev Pai

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