HDFC Life Insurance Q4 net profit up 12%, new business margin improves

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HDFC Life Insurance Company Ltd reported resilient profitability metrics for Q4FY22, which was reflected in the more than 1 percent increase in the company’s stock price after the release of the results.

The life insurer reported a net profit of Rs 357.52 crore, up 12.4 percent from a year ago. Street expectations were of a profit after tax of Rs 355 crore for the said quarter. The net profit came on the back of 11 percent growth in net premium income, which stood at Rs 14,289.6 crore.

Expenses of management rose 15 percent even as net commissions fell by 3.88 percent to Rs 620.7 crore for the quarter. Operating expenses as a percentage of total premium rose marginally to 12.3 percent from 12 percent a year ago.

More importantly, the life insurer’s value of new business grew by 22 percent for FY22, higher than the 14 percent growth seen in FY21. Yet another important profitability metric, the new business margin, showed a sharp improvement as well. New business margin rose to 27.4 percent for FY22 from 26.1 percent the previous year. HDFC Life has consistently shown improvement in its new business margin and at the current level, the company’s margins are highest in the industry. “For the quarter, our new business margin is 29.3 percent. We are very proud of our achievement here,” said Vibha Padalkar, managing director and chief executive officer of the company said in an interaction with Moneycontrol.

The life insurer was also able to sustain growth, and gained 10 basis points in market share during the quarter. HDFC Life’s retail weighted received premium grew by 16 percent and on an annualised premium equivalent (APE) basis the growth was 15 percent year-on-year. Total APE witnessed a growth of 17 percent for FY22. That said, the life insurer’s growth metrics were below the private sector life insurance industry’s growth of 22 percent for the year. Part of the reason could be a slight deceleration in its protection business. Protection showed a growth of 24 percent in terms of APE but on a shrunken base. In FY21, protection had slipped 16 percent.

That said, a favourable mix of policies ensured that the company’s new business margins showed improvement. The share of market linked plans increased marginally to 26 percent while that of participatory products decreased to 30 percent from 34 percent a year ago.

HDFC Life not only could get more customers but also could make them stick with it. Persistency ratios improved in FY22 across tenures. The 13^th month persistency ratio improved to 92 percent from 90 percent in FY21.

The company expects profitability growth to sustain going ahead but has kept Rs 55 crore of excess mortality reserves as a cautionary step towards any more pandemic related surprises. In FY22, HDFC Life had witnessed a sharp surge in death claims due to covid-19 and had set aside Rs 1,200 crore worth of excess mortality reserves to meet these claims.