HDFC Life Insurance Company has consistently trumped rivals in terms of profitability indicators. FY22 was no different as the private sector life insurer reported an enviable new business margin of 27.4 percent. Managing director and chief executive officer Vibha Padalkar spoke to Moneycontrol on the fourth-quarter results and the road ahead. Edited excerpts:
One impact of Covid-19 was the surge in death claims and you had created reserves to meet them. Do you hold any provisions still? Now that the pandemic has receded, have claims normalised?
We still have Rs 55 crore of unused reserves towards Covid and that should be adequate because the claims level has come close to normal. This does not take into account the risk of a next wave. But short of that, we feel that this level of excess mortality reserve is adequate. We will see the situation as we go along, of course. Claims will normalise to historic levels now that the pandemic has receded. I would like to mention that our claims settlement ratio is 99.6 percent. So, despite the pandemic, we have managed to end at a high level. We are at the top quartile of claims ratio in the industry and would like to maintain this.
The coronavirus pandemic has made people more sensitive to health and life risks. That meant growth for life insurers got a boost. Do you see the same level of growth sustaining post-pandemic?
I am reasonably confident of growth sustaining. If you look at GDP growth forecasts, it is still 8 percent. If growth is in that kind of range, typically the life insurance industry grows by 2x. In fact, we also see a steady upward trend in terms of most metrics for us. Our AUM (assets under management) has grown 17 percent, embedded value and new business margin are also up. We are reasonably confident of sustained growth ahead.
Talking about growth, a soft spot was protection in this quarter. Can you explain how protection has behaved?
Standalone protection business is flat versus last year, yes. But if you look at the total APE (annualised premium equivalent) including credit protection, there has been growth. Whether we are covering directly or by way of B2C by serving borrowers of banks, it is a protection business and on an overall basis it has grown. But yes, standalone protection has been flat and that is because of Omicron. During Omicron, people were going for medicals and the reinsurance part also rendered some volatility. There were four or five moving parts during that time. But individual protection growth should be in double digits going forward.
The new business margin has consistently improved in your case...
For the standalone quarter, our new business margin was 29.3 percent. But I want to state that the way we drive our strategy, it is not margin-focused. It is not just margins but also growth. To show high margins is not difficult, but at the same time, we want to show higher growth as well.
Would Life Insurance Corporation of India’s listing have an implication for private life insurers such as you?
I think there are only positive implications. There will be greater transparency for investors as far as the industry is concerned. There could be short-term issues which we encounter when a large company like this comes up for listing. But we should focus on the overall positive industry implications. On that basis, I would welcome this listing. Also, our customer segment is slightly different and there are other differences as well versus LIC.
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