HDFC Life Won’t Chase Growth At The Cost Of Profit Margins, Says CEO Vibha Padalkar
HDFC Life Insurance Co. is confident of being able to maintain profit margins at northwards of 70% as forecasted by brokerages even as the second wave of Covid-19 threatens to affect the industry and the economy.
The company would rather say no to some business than give up margins and grow at 50%, Vibha Padalkar, managing director and chief executive officer at HDFC Life, told BloombergQuint’s Niraj Shah. “We may grow by 15-17% year-on-year but it's okay as we might be able to protect [profit] margins.”
HDFC Life would be more cautious in chasing growth in the protection segment as it requires a deeper assessment of financial and medical risks, which is getting more complicated due to pandemic. “We want to ensure that book we underwrite is acceptable to our balance sheet as well as the reinsurers’ balance sheet."
The insurer, however, would like to "press the peddle" with annuity products. The company has identified a huge opportunity in the retiral segment, which has grown 46% in FY21, she said. It also sees growth potential in savings.
- HDFC Life’s individual weighted received premium grew 17% for the year ended March 2021. That compares with 8% for the private industry, and came on a 19% growth in FY20.
- The new business margin rose 26.1% in FY21 against 25.9% in FY20.
- The value of net business grew 14% to Rs 2,185 crore in FY21.
- Embedded value stood at Rs 26,617 crore in FY21 with the EV operating return at 18.5% against 18.1% in the previous fiscal.
Padalkar said the numbers point to growth momentum beyond FY22.
The risk of price hike by reinsurers, however, is not entirely inconceivable as the long-term effects of Covid on mortality are unknown, she said. But there are no active discussions so far.
HDFC Life does not pass on all price hikes to customers unlike its peers and follows a risk-calibrated approach on raising prices which worked well for it in FY21.
The focus is on a diversified product mix. She would want to increase the contribution of protection and annuity products from the current 12%.