HDFC Life Insurance Q2 Results: Profit Up But Misses Estimates On Higher-Than-Expected Covid-19 Claims

HDFC Life Insurance Co.'s second-quarter profit missed estimates as the company received higher-than-expected Covid-19 claims.

The private insurer's profit rose 2% sequentially to Rs 275.9 crore in the quarter ended September, it said in an exchange filing. Analyst estimates compiled by Bloomberg forecast a profit of Rs 387.7 crore.

The company earned a net premium of Rs 11,445.5 crore, a 52% rise over the preceding quarter. Growth in new business premium was aided by a healthy uptick in annuity or participating insurance policies. Renewal premiums contributed around 44%.

• Revenue rose 52% sequentially to Rs 20,478.5 crore. The consensus estimate was Rs 10,858.5 crore.

• Operating income rose 1% sequentially to Rs 278.1 crore. That’s 20% lower than the Bloomberg consensus forecast.

• Ebidta margin stood at 1.4% against 1.9% in the previous quarter and the estimate of 3.2%.

• The 13^th and 61^st month persistency ratios—or customer retention—improved over the preceding three months.

• The company's solvency ratio—that measures the extent to which assets cover commitments for future liabilities—stood at 190% at the end of the second quarter against 203% in the prior quarter.

The company incurred net Covid claims worth Rs 2,466 crore in the first half of the fiscal against an anticipated Rs 1,690 crore, the management said in a post-earnings call. The excess Rs 776 crore was paid out of reserves, which stood at Rs 204 crore as on Sept. 30.

Net Covid-19 claims in the first quarter stood at Rs 956 crore. Meaning, the company incurred Rs 1,510 crore on net claims in the second quarter.

This reserve should be sufficient to meet any future claims barring the impact of a third wave which has not been considered, Vibha Padalkar, managing director and chief executive officer at HDFC Life, said.

• After-tax profit fell 26%. According to Padalkar, that was because of "higher claims reserving warranted by the second wave of the pandemic".

• The product mix comprised non-participating savings at 32%, participating products at 30% and unit-liked plans at 26% on annualised premium equivalent basis.

• Value of new business rose 30% to Rs 1,086 crore.

• New business margin was at 26.4% versus 25.1%.

• Solvency ratio fell to 190% from 203%; it's well above the minimum solvency requirement of 150%.

• Renewal premiums rose 18% while new business premium on individual and group basis grew 22%.

• Assets under management were at Rs 1.91 lakh crore, a rise of 27%.

• Persistency ratios for the 13^th, 25^th, 37^th, 49^th and 61^st months improved.

Padalkar is optimistic about the second half of FY22 citing new bancassurance partnerships and agency channels.

On the acquisition of Exide Life Insurance Co., Padalkar expects HDFC Life to receive the approval from the regulator by late third quarter or early fourth quarter.