HDFC Life Q2 net profit up 15.5% to Rs 376.77 crore; VNB margins moderate

For the April-Sep period, net profit increased 15 per cent year-on-year to Rs 792 crore on the back of a healthy back book surplus

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Private sector life insurer HDFC Life posted 15.5 per cent year-on-year (Y-o-Y) rise in net profit at Rs 376.77 crore in the September quarter. The numbers were driven by improvement in volume despite the change in taxation rules.

“There was a concern at the beginning of the year because of the over Rs 5 lakh ticket size getting compromised after the Budget. However, we have maintained the volume growth and average ticket size (ATS) from last year which led to the performance of the company,” said Niraj Shah, chief financial officer (CFO), HDFC Life Insurance.

The net premium income was Rs 14,755.96 crore compared to Rs 13,110.91 crore in the year ago period, seeing an increase of 12.54 per cent.

Sequentially, net profit declined by 9.29 per cent.

The Value of New Business (VNB) margin in the July-September quarter saw a contraction to 26.4 per cent from 27.1 per cent recorded in the year ago period due to change in product mix and increase in investment.

Analysts expect the margin pressure to continue in the third quarter of FY24 due to the merger impact from Exide Life Insurance and its continued focus on increasing market share.

“We believe there will be pressure seen in the VNB margins as the company’s focus remains on increasing its market share, and margin neutrality will be attained from the fourth quarter,” said Shreyansh Shah, research analyst, StoxBox.

In terms of the product mix, there have been some changes in the September quarter with a rise in the protection, annuity and Unit Linked Insurance Plans (ULIP), whereas participating products stayed around last year levels. The share of non-participating products has seen moderation due to the change in tax mandate.

The total annualized premium equivalent (APE) of the second largest private insurer rose 9 per cent to Rs 5,373 crore during the first half of FY24 from Rs 4,914 crore in the first half of FY23.

For the Aprilil-September period, profit increased 15 per cent on year to Rs 792 crore on the back of a healthy back book surplus.

“The profit after tax for H1FY24 was Rs 792 crore which is a year-on-year increase of 15 per cent with a robust growth of 18 per cent in profit emergence from the back book,” said Vibha Padalkar, managing director and CEO of HDFC Life Insurance, during the post earnings analyst meet.