HDFC Life's Q1 FY25 results: Net profit rises 15% to Rs 479 crore

The company is looking to raise Rs 2,000 crore in non-convertible debentures to shore up its solvency

HDFC Life on Monday reported a 15 per cent year-on-year (Y-o-Y) increase in net profit to Rs 478 crore in the April-June quarter of FY25 (Q1FY25), aided by healthy 18 per cent Y-o-Y growth in its back book.

Its value of new business (VNB) increased 18 per cent Y-o-Y to Rs 718 crore in Q1FY25 as against Rs 610 crore in the corresponding period a year ago. VNB is the present value of future profits to shareholders measured at the time of writing the new business contract.

However, the company reported a contraction in the VNB margin at 25 per cent in Q1FY25 compared to 26.2 per cent in the corresponding period last year. The VNB margin is a measure of profitability of life insurance companies.

Analysts anticipated a contraction in the margin of private insurers, given the increased sales of unit-linked products during the quarter due to buoyant equity markets.  

Meanwhile, the company’s new business premiums grew by 9 per cent Y-o-Y to Rs 6,400 crore, against Rs 5,869 crore in the year-ago period. And, its annualised premium equivalent (APE) was up 23 per cent Y-o-Y to Rs 2,866 crore during this period. APE is the sum of annualised first-year regular premiums plus 10 per cent weighted single premiums.

The company plans to raise Rs 2,000 crore through non-convertible debentures in one or more tranches. This will be on a private-placement basis over one year, which is subject to necessary approvals to maintain solvency levels.

The fundraise will ensure solvency levels above 180 per cent owing to an increase in the protection business, which requires a significant amount of capital. The funds will help to maintain solvency levels when risk-based capital comes and will aid in expanding operations, said Niraj Shah, executive director and chief financial officer, HDFC Life.

In Q1FY25, the solvency ratio of HDFC Life is posted at 186 per cent against 200 per cent in the year-ago period. The persistency ratio of the insurer remained healthy with the 13th month persistency ratio at 88 per cent while the 61st month ratio stood at 56 per cent in the quarter under review.