Hit by a large fall in the net investment income and a rise in provisions. private life insurer HDFC Life Insurance posted a 14.5 percent year-on-year (YoY) decrease in consolidated net profit for the March quarter (Q4) at Rs 311.65 crore.
For the FY 2019-20, the net profit of the life insurer, at Rs 1,295 crore, has almost remained flat.
The life insurer earned a net premium of Rs 10,475.95 crore in Q4FY20, up 2.19 per cent from Rs 10,251.26 crore in Q4FY19.
The largest private sector life insurer, with a market share of 6.72 percent, has a total premium income of Rs 32,707 crore, up 12 per cent, in 2019-20.The life insurer’s renewal premium (Indlvidual + Group) stood at Rs 15,468 , up 9 per cent, in 2019-20.
The new business margin rose to 25.9 percent in FY20 as against 24.6 percent in the year-ago period.Protection (pure term insurance) business new business premium saw an 18 percent YoY growth to Rs 4,762 crore.The value of new business (VNB) rose by 25 percent to Rs 1,919 crore in FY20. VNB is the present value of expected future earnings from new policies written during a specified period and it reflects the additional value to shareholders expected to be generated through the activity of writing new policies during a specified period.
In the individual annualised premium equivalent (APE), the share of unit-linked products came down to 28 percent in FY20 from 55 percent a year ago. The share of non-par savings products (savings products with no profits or dividends are paid out) rose to 45 percent from 20 percent in the same period.
The 13th month persistency (renewal after first year) rose to 88 percent at the end of FY20 compared to 84 percent a year ago. The 61st month persistency rose to 54 percent in FY20 compared to 51 percent in FY19.
Vibha Padalkar, MD & CEO, HDFC Life said, "We continue to deliver growth higher than industry and register steady performance across all key metrics. We believe that insurance remains a multi-decade opportunity with significant potential."
Padalkarsaid the insurer had an impact of Rs 1,100 crore in premium collection (new business and renewal) in the last 15 days of March 2020 to Coronavirus-related lockdown. Of this, Rs 400-500 crore impact was on the first year premium.
Talking about the scenario planning in the context of Covid-19 lockdown Padalkar said the company may opt for one-man branch operations,but clarified that there would not be any job cuts in the company.
HDFC Life also filed for a term product with the IRDAI where the prices of the product has been reviosed upward.
“Though, the reinsurance cost of the term product has gone up,we wouldn't pass on the entire per centahe of hike to the customers,'' she said
For COVID-19, HDFC Life said that an additional provision of Rs 41 crore for approximately 4,500 lives has been made. This is over and above the policy level liabilities.
As on March 31, 2020, the assets under management stood at Rs 1.3 lakh crore. Here, more than 96 percent debt investments were in G-Secs and AAA bonds.
The solvency ratio ofbthe company stood at 184 percent in FY20 (compared to 188 percent a year ago) as against the regulatory requirement of 150 percent.
The Indian embedded value (EV) rose by 13 percent YoY to Rs 20,650 crore in FY20. The operating return on EV stood at 18.1 percent in FY20. The EV of a life insurance company comprises two key elements. Firstly, it includes the net asset value or the net worth of the company, which represents the market value of the company’s assets attributable to the shareholders. Secondly, EV also comprises of the present value of the company’s future expected profits from its existing business portfolio as at the date of valuation.
HDFC Life Insurance also announced raising of Rs 600 crore of funds through issuance of non-convertible debentures in the nature of subordinated debt instrument. This said the company will be in one or more tranches, on private placement basis subject to receipt of regulatory approvals..