Expect improvement in 61-month persistency ratio going ahead: HDFC Life

He also mentioned that bank sales impacted in FY17 due to demonetisation.

Chaudhry said that 61-month persistency ratio has dropped. 13-month persistency ratio was also lower in 2013. However, expect improvement in 61-month persistency ratio going ahead.

Below is the transcript of the interview.

Q: Give us some more perspective on your premiums?

A: If you look at our overall premium, they grew at 20 percent but if you have to break down that number into various elements, our individual WRP grew at a rate of 46 percent, our group credit protect which is our protection side of the business from a group perspective grew at 57 percent. Our annual premium growth was about 10 percent and our group funded side of the business was flat, it did not grow but that is reflective of what the industry is. So, our overall number was Rs 146 billion of premium income which came in in comparison to Rs 122 billion of last year. For the first 9 months we had a pretty robust and a solid growth quarter in comparison to the industry.

If you were to break down into some of the other metrics, I think we are quite delighted with what we have delivered. Our margins were at 22.2 percent in comparison to 22 percent last year. Our return on embedded value was 20.4 percent compared to 18.4 percent last year. Return on equity was close to 25 percent, persistency moved up from 83 percent to 86 percent, embedded value grew by 26 percent. We declared a dividend of Rs 330 crore in this quarter. Our solvency margin was at 190 percent.

So, if you look at the overall kind of misc of financial metrics, we are very happy with where we are.

Q: What would be some of the factors to which you would want to attribute this strong growth to, is there any sort of change in the strategy which you are working with, which has led to this growth, which would be some of those factors?

A: Couple of things which worked in our favour, first is that, our last year was not such a great year for us because our bankassurance channel which accounts for a big portion of our sales did not do as well for some very obvious reasons which have been outlined in the past. So, there is a bit of a base effect which is kicking in. Second and more importantly we had said in our IPO and we have said in our investor presentations that in this year we are going to invest in certain businesses in a very big way. So, agency has been an area of investment for us, online has been an area of investment forever, we are the pioneers in that space. Group credit protect is something which we have taken the market by storm and we are a market leader by a margin.

So, as we have invested in certain channels, as we have invested in and continue to add more bankassurance partnerships, they went up from 125 to 139, our new ecosystem partners went up by 7 to about 21 partners. So, we continue to add to our bankassurance space, we continue to invest in some of the other channels and we also saw a little bit of growth in ULIP reflective of what is happening in the market.

So, all these factors added to a very good growth for the first 9 months.

Q: Talking about the persistency ratio, your 61 month persistency ratio slightly dropped on a sequential as well as on year on year basis. What were the key reasons for that drop which we saw there?

A: Our 61st month persistency did drop but the reason why it dropped is, if you go back to 2013, the products which we sold at that time, the 13th month persistency was also lower, so this is this particular cohort of business which we did in that last year which is playing through in 13, 25 and now 61st month.

As this business goes off, our 61st month persistency – the 49th month will become 61st month next year and that number is doing very well. So, the 61st month persistency will come back.