HDFC Life Insurance stock slips after Q1 net profit falls to Rs270cr

HDFC Life recorded a 17.8% market share among private insurers and now ranks second only to SBI Life among private insurers.

Jul 20, 2021 03:07 IST India Infoline News Service

HDFC Life Insurance stock is trading lower after posting Q1 numbers. The company posted a sharp 40.17% fall in net profits on a yoy basis and a 15.52% fall in net profits on a sequential basis.

HDFC Life recorded a 17.8% market share among private insurers and now ranks second only to SBI Life among private insurers. Value of new business grew by 40%, while new business margins stood at 26.2%. Renewal collections with 13th-month persistency also improved significantly from 87% to 90% on a yoy basis.

In the first quarter ended Jun-21, the AUM was up 30% while the value of the India Embedded Value was up 21% yoy. The solvency ratio improved yoy from 190% to 203% even as operating expenses as a share of total premium was up 100 bps at 12.5%. Overall, it looks like a one-off bad quarter, with basic business metrics still robust.

Commenting on the current situation, Vibha Padalkar, MD & CEO said “The pandemic has impacted lives across the world. For most organizations it has been a test of resilience and agility to adapt to the ever evolving situation. As a leading Life Insurance company, we are determined to help our customers and support our employees and other stakeholders during these trying times.”

Commenting on the Q1 FY22 performance, Padalkar said “Against the backdrop of disruption in business on account of localised lockdowns, and surge in cases during the second wave, we recorded 22% growth and market share of 17.8% in private sector in terms of Individual WRP. We clocked 40% growth in terms of value of new business and we achieved a New Business Margin of 26.2% in Q1. Our product mix continues to remain balanced and our annuity business witnessed strong growth of 61% in this quarter. In comparison to Q1 of last fiscal, the Company clocked higher renewal collections, with 13th month persistency improving from 87% to 90%."

In the quarter gone by, we witnessed a steep rise in death claims, with peak claims in wave 2 at around 3-4 times of the peak claim volumes in the first wave. We paid over 70,000 claims in Q1. The gross and net claims provided for amounted to Rs. 1,598 crore and Rs. 956 crore respectively. Based on our current claims experience, we have set up an additional reserve of Rs. 700 crore to service the claims intimations expected to be received. Our endeavour is to promptly settle every bonafide claim. Our Profit after Tax stands at Rs. 302 crore (33% lower than Q1 FY21), on the back of higher claims reserving towards heightened claims intimation expected in Q2 and Q3. The strength of our balance sheet and back book surplus has enabled us to absorb the shock of heightened claims, whilst continuing to deliver growth.

"With signs of the second wave receding, over the past month, we have seen a gradual pick-up in economic activity, across parts of the country. We see greater customer engagement and an increased interest in life insurance policies,” Vibha Padalkar said.

The stock is currently trading at Rs664.25 down by Rs14.35 or 2.11% from its previous closing of Rs678.60 on the BSE. The scrip opened at Rs678 and has touched a high and low of Rs681.70 and Rs664.25 respectively.

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