HDFC Life Insurance Co Ltd (NSE:HDFCLIFE) Q2 2025 Earnings Call Highlights: Strong Growth ...

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Wed, Oct 16, 2024, 1:00 AM 4 min read

Individual Weighted Received Premium Growth: 28% growth in H1 FY25.
Market Share Amongst Private Players: Increased by 60 basis points to 16.3%.
Overall Market Share: Reached 11% for H1 FY25.
Individual APE Growth: 31% year-on-year growth.
Number of Policies Sold: Increased by 22% with a 7% ticket size expansion.
Retail Sum Assured Growth: 31% year-on-year growth.
Product Mix (Individual APE): ULIP 36%, Non-par Savings 38%, Participating Policy 15%, Term 6%, Annuity 5%.
Retail Protection APE Growth: 27% in H1 and 36% on a two-year CAGR basis.
Value of New Business (VNB): INR1,656 crores, 17.4% year-on-year growth.
New Business Margins: 24.6%.
Embedded Value: INR52,114 crores as of September 30, 2024.
Operating Return on Embedded Value: 16%.
Profit After Tax: INR911 crores, 15% year-on-year growth.
Solvency Ratio: 181%, improved to 192% post subordinated debt issue.
Renewal Collections Growth: 12% year-on-year.
Persistency Improvement: 13th month at 88% and 61st month at 60%.
Bancassurance Channel Growth: 32% growth.
Proprietary Channel Growth: 27% growth.
HDFC Pension AUM: Crossed INR1 lakh crore, market share of 43.6% in H1.

Warning! GuruFocus has detected 4 Warning Sign with MBWM.

Release Date: October 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

HDFC Life Insurance Co Ltd (NSE:HDFCLIFE) achieved a robust growth of 31% in individual APE on a YoY basis, outperforming the private sector growth.
The company recorded a 22% increase in the number of policies sold, with a ticket size expansion of 7%, indicating strong demand across various geographies.
HDFC Life's market share among private players increased by 60 basis points to 16.3%, and overall market share reached a new peak of 11%.
The company maintained a strong solvency ratio of 192% after raising INR1,000 crores in subordinated debt, ensuring financial stability.
HDFC Life's subsidiary, HDFC Pension, crossed the INR1 lakh crore milestone in assets under management, showcasing significant growth in the pension fund management sector.

Negative Points

The company's new business margins compressed to 24.6%, primarily due to product mix changes and deferment in repricing of certain traditional products.
Annuity business growth was slower due to aggressive and unsustainable pricing by competitors, impacting overall profitability.
The credit protect segment experienced softness due to calibration in disbursements across some partners and business lines.
There is uncertainty regarding the impact of new surrender regulations on margins, with potential for further margin compression.
Competitive intensity in the annuity and credit life segments poses challenges, with some competitors offering aggressive pricing.

Q & A Highlights

Q: Can you provide an outlook on growth for the second half of the year, considering the strong growth in the first half and potential challenges with new product launches? A: Vibha Padalkar, CEO, stated that they are revising their growth outlook to 18%-20% for the full year, feeling confident about this target. Regarding unit-linked insurance plans (ULIPs), they expect them to remain range-bound in the 30% range, not reaching previous highs of 50%. The focus will be on maintaining a balance between growth and value of new business (VNB) growth, with some flexibility on margins due to market conditions.

Q: How do you see margins evolving in the second half, considering the new surrender regulations and other factors? A: Vibha Padalkar explained that margins will be an outcome of their growth and VNB objectives. They anticipate some flexibility in margins due to changes in surrender regulations and market dynamics. The company is not aiming for high margins at the cost of growth and customer acquisition, but they will maintain a floor for margins.

Q: What impact do you expect from the new surrender regulations on margins, and how are you addressing competitive pressures? A: Vibha Padalkar noted that the new surrender regulations could impact margins by about 100 basis points. However, they are negotiating with partners to mitigate this impact through commission adjustments. The company is focused on maintaining sensible pricing and leveraging strong relationships with partners to navigate competitive pressures.

Q: Can you elaborate on the impact of deferred pricing on non-par products and its effect on margins? A: Niraj Shah, CFO, mentioned that the deferred pricing on non-par products had a 30-40 basis points impact on margins. This was due to prioritizing compliance with new regulations over immediate repricing. The impact was more pronounced in the second quarter.

Q: How is the company handling the competitive intensity in the annuity and credit life segments? A: Vibha Padalkar stated that the company is adopting a calibrated approach to growth in these segments, focusing on maintaining pricing discipline. They expect some of the aggressive pricing by competitors to moderate due to changes in surrender charges, which should help level the playing field.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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