HDFC Life sees QoQ margin expansion in Q3 led by improved product margins, persistency

HDFC Life delivered stronger-than-expected third-quarter results for fiscal year 2024-25 (Q3FY25), driven by robust growth in retail insurance policy sales and a sequential improvement in margins. During its analyst conference call, the company highlighted significant improvements in persistency and higher level of protection in unit-linked products played a pivotal role in enhancing margins for the quarter.

The insurer reported a value of new business (VNB) margin of 25.1 percent for the nine months ending December 31, down from 26.6 percent in the same period last year. However, it showed a marked improvement from 24.6 percent in Q2FY25, as the company focused on driving sales of higher-margin policies.

"Margin expansion was primarily driven by better product margins, particularly in the unit-linked segment. This improvement was due to two key factors: a notable rise in persistency and an increased level of protection attached to our unit-linked products compared to last year. However, the implementation of surrender value regulations reduced margins by 30 basis points, which partially offset the gains. On a net basis, this brought the margin from 24.3 percent in Q2 last year to around 26 percent this year. When normalising the previous period's margin to 25.3 percent, the overall improvement stands at 60 to 70 basis points," the management elaborated.

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