HDFC Life on Tuesday reported a 21 per cent rise in net profit of Rs 365 crore for the June 2022-23 quarter supported by underlying growth combined with a higher renewal rate that boosted margins.
Gross premiums 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 that first-year premium income rose 27 per cent to Rs 4,776 crore.
Attributing the overall good numbers to the four-pronged strategy, Vibha Padalkar, Managing Director and CEO of PTI said that on the one hand, the base line grew to Rs 9,396 crore.
Second, the company’s increased sales increased profit margins and improved sales led to a 26.8 percent increase in profit margins. During the quarter, the company sold a record 12 million covered policy/life, including credit protection business, resulting in a total cover life of nearly 60 million.
Third, the overall protection business snapped up fairly aggressively, and eventually the higher perseverance ratio, which shows the quality of the insurance company’s business, grew to 88 percent resulting in higher profit margins, Padalkar said.
It added that improving the product mix, especially premium products, which grew by 10 percent, versus a 9 percent decline in industry growth, also helped boost the overall numbers.
When asked if they would return to the health insurance business if the regulator allowed it, Padalkar quipped: “100 percent”.
She said it makes a lot of sense to allow life insurance companies to sell health and wellness products, as wellness, life and health should be a composite product.
She noted that this was the practice in most markets. Worldwide health with life and auto with general insurance companies.
“Moreover, we were selling health products before the regulator suddenly asked us to stop selling new products in 2015,” Padalkar said, adding that if the regulator allowed the company there is no doubt it should not be ruled out.
She said before the ban, they were selling intensive care products and the part was used to contribute about 3 percent of the product line.
But now this business is negligible as the company has encouraged customers to move out and those who remain are still serving it.
She also said the pandemic is behind us as there has been almost no claim to this aspect, but it still holds Rs 25 crore of additional provisions which were previously set aside to meet any emergency.
Sharing more numbers, she said the annual premium equivalent (APE) grew by 22 per cent to Rs 1,904 crore in the quarter, which helped it maintain the 3rd position among life insurance companies including LIC and in that spirit, individual APE grew by 19 per cent to Rs 1,548. crore.
The value of the key profitability measure of new business increased by 27 per cent to Rs 4,776 crore and the high margin protection business grew by 31 per cent to Rs 322 crore which nearly doubled the credit protection business of the group. The renewal premium grew by 19 per cent to Rs 4,620 crore and the total premium rose by 23 per cent to Rs 9,396 crore.
All this brought the new business margin to 26.8 per cent from 25 per cent, increasing net income by 21 per cent to Rs 365 crore, it said, pushing the value of new business by 25 per cent to Rs 510 crore.
In terms of the product mix, she said it’s well balanced, with 35 percent asymmetric savings, 30 percent participating products, 25 percent Ylips, 5 percent individual protection and 6 percent annual payment, on an individual monkey basis. .
The share of APE’s protection business improved from 15.7 percent last year to 16.9 percent in the first quarter and the credit protection business shrank by 96 percent, on the back of a rise in payments across most partners.
“This has made us continue to look at the overall growth of protection across individual and collective platforms in a neutral way,” she said.
On the retirement front, the premium business grew 10 percent on a receiving premium basis, compared to a 9 percent growth decline for the industry in the quarter. On an APE basis, annual employment was 39 percent higher.
Renewal premiums grew 19 percent, buoyed by improved persistence that overall jumped to 88 percent year-over-year from 86 percent and 13 and 61 month continuity for limited and regular payment policies, up 88 percent and 54 percent from 86 percent and 51 percent.
New business margin grew to 26.8 percent from 26.2 percent on the back of profitable product mix and growth in the protection business.
The company’s solvency is 178 percent, she said, adding that to further enhance the solvency to support growth, it will continue to assess the equity capital increase as needed. Its embedded value grew by 9 per cent to Rs.29,709 crore for the quarter.
As a result of the acquisition of Exide Life Insurance in January 2022 for which it received NCLT approval, it became a wholly owned subsidiary of the company and the transaction added Rs 20,000 crore to AUM, bringing the consolidated assets under management to over Rs 2.5. lakh crore, including Rs.30,000 crore from the funds of its affiliate pension company.
The HDFC Life counter closed 1.4 per cent lower at Rs 535.85 versus 0.45 percentage point in the Sensex Index.