HDFC Life's net profit jumps 12% to Rs 357 cr; VNB margins at 29.3%

The firm settled some 390,000 claims in FY22, with gross and net claims paid of Rs 5,804 cr and Rs 4,328 cr, respectively. It was carrying excess mortality reserves of Rs 55 cr at the end of Q4

Private sector life insurer, HDFC Life, reported a 12.6 per cent jump in net profit to Rs 357 crore in the January–March quarter (Q4FY22), from Rs 317 crore in the year ago period as the impact of Covid on profits has started to wane.

Its new business margins expanded 240 basis points year-on-year (YoY) to 29.3 per cent in Q4FY22 from 26.9 per cent in the year-ago period. For the full year (FY22), the insurer reported a new business margin of 27.4 per cent compared to 26.1 per cent last year. New business margin indicates the profit margin of a life insurance company.

Value of new business (VNB) of the insurer witnessed  a 15 per cent growth to Rs 895 crore in Q4. And, total annualised premium equivalent (APE) was up 6 per cent to Rs 3,049 crore. For the year, total APE was up 17 per cent to Rs 9,758 crore. Net premium income of the insurer was up 11 per cent in Q4 to Rs 14,289.66 crore compared to Rs 12,868 crore.

“In Q1, we had a big impact of Covid and had kept reserves of Rs 700 crore, followed by another Rs 60 crore in Q2. Hence, the profits dropped in a big way and now things are starting to normalise. We should get back to normalised profits from here on,” said Niraj Shah, Chief Financial Officer, HDFC Life told Business Standard.  

The company settled close to 390,000 claims during FY22, with gross and net claims paid to the tune of Rs 5,804 crore and Rs 4,328 crore respectively. It is still carrying excess mortality reserves to the tune of Rs 55 crore at the end of Q4.

“Overall, we had created Rs 815 crore of additional mortality reserves in FY22, out of which we have used Rs 760 crore. On the individual claim side, we have seen complete normalisation of claims. On the group side, there is a bit of delayed impact but now that has also normalised fairly significantly. We are holding on to the reserve just as a precaution,” Shah added.

Solvency of the company at the end of FY22 stood at 176 per cent compared to 201 per cent in FY21, due to the cash payout of Rs 726 crore to Exide Industries as a part-consideration for the acquisition of Exide Life. “After getting the CCI, Irdai approvals, approval of the exchanges came in a few days back and now we have filed for a merger with the NCLT last week. We expect the merger to get completed within this calendar year, hopefully in the next six months,” Shah said.

The company's board has recommended a final dividend of Rs 1.70 for FY22.