HDFC Life's Q1 net falls 33% due to higher provisions and claim payout

The company said it has settled around 70,000 claims in Q1FY22

Private sector life insurer HDFC Life has reported a 33 per cent decline in net profit to Rs 302 crore in the June quarter (Q1FY22).

This has been attributed to higher claims owing to the pandemic and more provisioning to mitigate the impact of excess claims. It has set up an additional reserve of Rs 700 crore to service further claims.

The insurer said it has settled close to 70,000 claims in Q1FY22, with the gross and net claim amounting to Rs 1,598 crore and Rs 956 crore, respectively. “In the quarter gone by, we witnessed a steep rise in death claims, with peak claims during the second wave at 3-4x the peak claim volumes during the first wave,” the company said.

It added that the provision of Rs 165 crore, created after Q4FY21, was adequate to meet the liability arising out of extra death claims in Q1FY22.

“With signs of the second wave receding, we have, over the past month, seen a gradual pick-up in economic activity across the country. We see greater customer engagement and increased interest in life policies,” the company stated.

Total premium was up 31 per cent year-on-year (YoY) at Rs 7,656 crore, with new business premium and renewal premium up 44 per cent and 20 per cent, respectively. New business margin for Q1FY22 stands at 26.2 per cent, higher than the 24.3 per cent in Q1FY21 and 26.1 per cent in FY21. The value of new business amounted to Rs 408 crore, a growth of 40 per cent over last year.

The total annualised premium equivalent (APE) rose 22 per cent YoY to Rs 1,561 crore, with individual APE logging a 22 per cent rise in the same period. Assets under management increased by 30 per cent to Rs 1.81 trillion.   

Solvency ratio, at the end of Q1FY22, stood at 203 per cent. “The company has also assessed its solvency position as of the balance sheet date, which is at 203 per cent and above the prescribed regulatory limit of 150 per cent. Further, based on the company’s current assessment of business operations over the next one year, it expects the solvency ratio to remain above the minimum limit prescribed by the regulator,” it said.

The 13th-month persistency of the insurer remained stable at 90 per cent in Q1FY22, and so did the 61st-month persistency at 53 per cent. For an insurer, persistency ratio is defined as the ratio of policies receiving premium payments on time to the total number policies underwritten.