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HDFC Life Q4 results: Net profit up 15% at Rs 411 cr on back book gain

One of the key factors is our back book profits and our costs which have been in control, said HDFC Life Insurance MD

Vibha Padalkar, managing director and chief executive officer, HDFC Life Insurance

Vibha Padalkar, managing director and chief executive officer, HDFC Life Insurance

Aathira Varier Mumbai
Private sector life insurer HDFC Life posted a 14.7 per cent year-on-year rise in net profit at Rs 411.66 crore for the quarter ended March 31, 2024, from Rs 358.66 crore in the corresponding year-ago period, mainly due to back book profit, that is policies already sold.

“One of the key factors is our back book profits and our costs which have been in control. Our back book profits have increased by 18 per cent (in Q4 FY24) from last year. Also, our new business growth has been a lot better than what we had expected on a normalized basis supporting good delivery of profits,” Vibha Padalkar, managing director and chief executive officer, HDFC Life Insurance.

Sequentially, the net profit increased by 12.76 per cent from Rs 365.06 crore in the third quarter of FY24 (Q3 FY24).

During the reported quarter, the Value of New Business (VNB) Margin contracted to 26.10 per cent from 29.30 per cent in Q4 FY23 owing to the high base effect after the removal of tax benefits on high-value life insurance policies.

“Despite the budget changes impacting high ticket-sized business this year, we delivered a healthy growth of 20 per cent for Q4 after adjusting for the one-off business of Rs 1,000 crore in March 2023. Our stated aspiration of a double-digit growth for the full year was achieved with us clocking an 11 per cent growth for FY24, on a normalised basis. We achieved individual APE growth of 1 per cent on an unadjusted basis,” Padalkar said.

For the entire FY24, the VNB Margin declined to 26.3 per cent as against 27.6 per cent in FY23.

Also, for the entire FY24, the contraction in VNB Margin was a result of a high base effect and an increase in the share of (Unit Linked Investment Plan) ULIP in the overall business. The share of ULIP in the overall business increased to 35 per cent in FY24 as compared to 19 per cent in FY23. Going forward, the company plans to maintain VNB Margin around similar levels of 26 per cent in FY25.

“So we will grow VNB in the range of 15 per cent. It could come as a combination of top line and margins. We also feel that some of this (moderation in VNB) is one-off because of last year's tax changes, so it should normalize now. So, we ended FY24 at 26.3 per cent. It should be fairly range-bound around that this year,” Padalkar added.

The net premium income in the last quarter of FY24 was Rs 20,488.11 crore, 5.46 per cent up from Rs 19,426.57 crore in the year-ago period.

The Value of New Business (VNB) in the January-March quarter of FY24 saw a contraction of 18.33 per cent to Rs 1,234 crore from Rs 1,511 crore recorded in Q4 FY23 due to a change in taxation norms. However, according to Padalkar, the number of policies (NOP) sold by the insurer during the quarter under review posted a growth of 14 per cent compared to last year, which is an all-time high.

Meanwhile, the Annualized Premium Equivalent of the company in the quarter under review declined by 8.43 per cent to Rs 4,727 crore from Rs 5,162 crore in Q4 FY23.

Though HDFC Life reported better-than-expected net profit numbers for the fourth quarter, the business performance came below market expectations. The annualized premium equivalent (APE) and value of new business (VNB) margin reflected growing competition in the insurance industry as it missed market estimates. With a strong brand parentage, we believe that the company is poised better to navigate the growing challenges in the industry,” opined Shreyansh Shah, Research Analyst, StoxBox.

The solvency ratio slipped down to 187 per cent from 203 per cent in Q4 FY24. Sequentially, it was down from 190 per cent in Q3 FY24. The persistency ratio of the insurer remained healthy with a 13th month persistency ratio at 86.2 per cent compared to 83.4 per cent in the October-December quarter of FY24.

Meanwhile, the 61st month persistency ratio was at 52 per cent in the quarter under review as compared to 51.1 per cent in Q3 FY24.

In addition, the board has unanimously approved the appointment of Keki M. Mistry as the Chairman of the board. Mistry is currently serving as the Non-Executive Director of the company. This comes after founder Deepak Parekh decided to step down as the Chairman and Non-Executive Director of the company effective from the close of business hours on April 18, 2024.

The company's board of directors has proposed a final dividend of Rs 2 per share for FY24. The payment is subject to the approval of shareholders at the annual general meeting of the company.

Deepak Parekh steps down as chairman of HDFC Life

Deepak Parekh stepped down as the chairman and non-executive director of HDFC Life Insurance effective April 18. With Parekh’s departure, the company’s board unanimously approved the appointment of Keki M Mistry as the chairman of the board. Mistry is currently serving as the non-executive director of the company. 

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First Published: Apr 18 2024 | 6:49 PM IST

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