HDFC Life Insurance Q4 Results: Profit Falls, Misses Estimates
The company earned a net premium of Rs 19,469 crore, which is a surge of 25% over the previous year.
HDFC Life Insurance Co.'s fourth-quarter profit declined even as the company reported higher premiums but fell short of analysts' estimates.
The private insurer's after-tax profit fell 28% year-on-year to Rs 362 crore in the quarter ended March, according to an exchange filing. That compares with the Rs 398 crore consensus estimate of analysts tracked by Bloomberg. Sequentially, the earnings rose 15%.
The company earned a net premium of Rs 19,469 crore, which is a surge of 25% over the previous year.
Of the gross premium earned, first-year premiums grew 55% over last year, and single premiums were 30% higher. The renewal premium grew by just 11%.
HDFC Life Q4 FY23 Highlights (YoY)
Revenue rose by 21% to Rs 21,471 crore.
The 13th-month persistency ratio—or customer retention—fell by 150 basis points to 85.3%. For the 61st month, it fell by 190 basis points to 52.5% from 54.4%.
The solvency ratio—that measures the extent to which assets cover commitments for future liabilities—rose to 203% from 176% last year on the back of an equity infusion in the second quarter of FY23. While it's above the minimum requirement of 150%, it fell from 209% in Q3 FY23.
The unusual growth in new business premiums, for single and first-year premiums for the quarter, could be attributed to high-ticket policy sales—non-par policies with premium contributions exceeding Rs 5 lakh—whose payouts were made taxable for purchases after April 1, except in cases of death, as per the Budget 2023 announcement.
The company had higher exposure to such high-ticket policies. The move could have a 10–12% impact on the company's top line, with a lesser impact on its profitability post-Q4, Vibha Padalkar, managing director and chief executive officer at HDFC Life Insurance, told BQ Prime.
The board has recommended a final dividend of Rs 1.90 per equity share.
Yearly Highlights (YoY)
The after-tax profit rose 3% to Rs 1,368 crore.
The value of new business—the present value of the future profits associated with new business written during the period—grew 37% to Rs 3,674 crore.
VNB margins were at 27.6% post-merger, as against 27.4%.
Embedded value grew 20% to Rs 39,527 crore post-merger.
The return on EV was 19.7% as against 16.6%.
Post-merger, the product mix consisted of 45% non-participating savings, 5% annuities, 4% protection, 27% participating products, and 19% unit-linked plans on an annualised premium equivalent basis.
Operating expenses stood at 14.8% as against 12.3% a year ago.
Assets under management were at Rs 2.4 lakh crore, a rise of 17% post-merger.
Persistency ratios for the 13th month were unchanged at 87%, while the 61st month’s persistency ratio fell by 200 basis points to 52%.
The Insurance Regulatory and Development Authority of India had approved the acquisition of a 100% stake in Exide Life Insurance Co. on Oct. 13. Thus, the financial results for the year include the impact of the acquisition and are not comparable to the base period.
"We closed the year with a strong growth of 27% in individual weighted received premium, with a market share of 16.5% and 10.8% in the private and overall sectors, respectively, clocking expansions of 40 and 70 basis points, respectively," said Padalkar in the exchange filing.
"In terms of individual WRP, we have outpaced the private industry over multiple time frames, including in the past three, five, and seven years, thereby consistently demonstrating growth leadership."
She said that there was an increase in protection share in total new business premium from 24% in FY22 to 29% in FY23, and overall protection APE grew by about 20% in FY23. Retail protection trends remain encouraging, with sequential growth being over 50% and year-on-year growth being over 40% in Q4, Padalkar said.
Their new business margin for the year was 27.6%, thereby delivering a value of new business of Rs 3,674 crore, which is a growth of 37%, she said. "Margin neutrality, after considering the acquired business, was achieved well ahead of target."
In another development earlier this week, the RBI allowed HDFC Bank Ltd. to raise its stake beyond 50% in the insurer, which Emkay Global said was a "double booster shot in HDFC Life's arm."
It would have removed a potential supply overhang on the stock had HDFC Bank been asked to lower its stake by 18.65% to 30%. Also, with the bank becoming the promoter, the declining counter-share at HDFC Bank in terms of share in insurance sales could abate, Morgan Stanley said in a note.
Padalkar said, "We look forward to collaborating with our parent-to-be, towards creating value for all stakeholders."
Shares of the company closed 0.34% higher prior to the results announcement on Wednesday, as compared with a 0.28% rise in the benchmark Sensex.
