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HDFC Life’s Q1 net falls 33% on higher provisions and claim payouts

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

This has been attributed to higher provisioning to mitigate the impact of higher claims and additional claims due to the pandemic. It has set up additional reserves of Rs 700 crore to meet further claims.

The insurer said it has settled around 70,000 claims in Q1FY22, with gross and net claims of Rs 1,598 crore and Rs 956 crore respectively. “In the last quarter, we saw a massive increase in death claims, with claims during the second wave at 3-4 times the peak claim volume during the first wave,” the company said.

It added that the provision of Rs 165 crore made after Q4FY21 was sufficient to meet the liability arising out of additional death claims in Q1FY22.

“We have witnessed a gradual pick-up in economic activity across the country, over the past one month, with signs of the second wave subsiding. We see increased interest in greater customer engagement and life policies,” the company said.

Total premium grew 31 per cent year-on-year (YoY) to Rs 7,656 crore, with new business premium and renewal premium accounting for 44 per cent and 20 per cent, respectively. The new trade margin for Q1FY22 is 26.2 per cent, up from 24.3 per cent in Q1FY21 and 26.1 per cent in FY21. The value of the new business was Rs 408 crore, which is 40 per cent higher than the previous year.

Total Annual Premium Equivalent (APE) increased by 22 per cent year-on-year to Rs 1,561 crore, with individual APE rising by 22 per cent in the same period. Assets under management rose 30 per cent to Rs 1.81 lakh crore.

The solvency ratio stood at 203 per cent at the end of the first quarter of FY22. “The company has also assessed its solvency position as on the balance sheet date, which is above the prescribed regulatory limits of 203 per cent and 150 per cent. Further, based on the current assessment of the Company’s conduct of business in the next one year, it expects the solvency ratio to remain above the minimum threshold prescribed by the regulator,” it said.

The insurer’s 13th month persistence remained steady at 90 per cent in Q1FY22, and similarly the 61st month persistence stood at 53 per cent. For an insurer, the firmness ratio is defined as the ratio of policies receiving premium payments on time to the total number of policies written.

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