HDFC Life Q2 net profit up 15.5% to Rs 376.77 crore; VNB margins moderate
Private sector life insurer HDFC Life reported a 15.5% year-on-year rise in net profit to Rs 376.77 crore for the quarter ended September 30, led by an improvement in volumes despite a change in tax rules.
“There was a very big concern at the beginning of the year as the ticket amount above Rs 5 lakh was compromised after the budget. However, we have maintained the volume and average ticket size (ATS) growth from last year, which has driven the company’s performance,” said Neeraj Shah, Chief Financial Officer, HDFC Life Insurance.
Net premium income in the second quarter was Rs 14,755.96 crore, compared to Rs 13,110.91 crore in the year-ago period, registering an increase of 12.54 percent.
Consistently, the net profit decreased by 9.29 percent.
The value of new business (VNB) margin in the July-September quarter reported a contraction to 26.4% from 27.1% recorded in the previous period due to a change in product mix and increased investments.
Analysts expect margin pressure to continue in Q3FY24 due to the impact of Exide Life Insurance’s merger and its continued focus on increasing market share.
“We believe there will be pressure on VNB’s margins in the coming quarters as well as the company’s focus remains on growing its market share and margin neutrality will be achieved from the fourth quarter onwards,” said Shreyansh Shah, research analyst at StoxBox.
In terms of product mix, there were some changes in the second quarter with an increase in protection, annuities and unit-linked insurance plans (ULIPs), while participating products remained around last year’s levels. The share of non-participating products is moderately noticeable due to the change in the tax mandate.
The second-largest private insurer’s total annual premium equivalent (APE) rose 9 percent to Rs 5,373 crore in the first half of FY24 from Rs 4,914 crore in the first half of FY23.
For the April-September period, net profit rose 15 percent year-on-year to Rs 792 crore on the back of a stable surplus in the books.
“Profit after tax for H1FY24 was Rs 792 crore, up 15% year-on-year with a robust growth of 18% in profit from previous book,” said Vibha Padalkar, managing director and chief executive officer, HDFC Life Insurance , during the post-earnings analyst meeting.
Going forward, the insurer is aiming for mid-single-digit or mid-double-digit APE growth, which will require APE in H2FY24 to be in the mid-teens.
Solvency ratio eased to 194 percent from 210 percent in Q2FY23. However, the insurer was confident that it would be able to grow without external capital for the next three years.
The Board further approved the re-appointment of Bharti Gupta Ramola as Independent Director for a second term of five years commencing February 12, 2024, subject to shareholder approval.