HDFC Life Q3 Review — Margin Surprise Served With Some Growth Issues; 'Add' The Stock Says Yes Securities

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Yes Securities Report

We maintain an ‘Add’ rating on HDFC Life Insurance Company Ltd. with a revised price target of Rs 700.

Value of new business margin – Impact from surrender rule changes contained at 30 bps, while product level margins improve:

The implementation of surrender value rules has negatively impacted VNB margin by 30 bps for the quarter and 10 bps for 9M FY25. The earlier guidance of 100 bps impact was a gross impact if no mitigating steps were taken. The company has shared the impact with distributors through clawbacks, deferments and reduction of commission and the eventual impact is expected to be contained within 30 bps.

For the quarter, calculated VNB margin increased 174 bps QoQ to 26.1%. However, on a like-for-like basis, VNB margin is up 60 bps on sequential basis.

In Q2 FY25, there was a one-time negative impact on VNB margin of 110 bps due to delay in repricing of products. The net sequential margin expansion was driven by improved product level margin across the board but especially for ULIP product. The VNB growth guidance remains at 15% plus, with management guiding for broadly stable margin in the last quarter

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