Private sector life insurance firm HDFC Life Insurance was able to grow its number of policies sold by 10% in the first half of this fiscal, while the premium category below Rs. 5 lakh grew around 17-18%, said managing director and chief executive officer Vibha Padalkar. In an interview with Mithun Dasgupta, Padalkar said that the insurer’s annualised premium equivalent (APE) should grow by mid-teens in the current financial year. Edited excerpts:
HDFC Life’s net profit grew 15% y-o-y in Q2FY24. What were the factors that contributed to this growth?
Firstly, our back book has grown by 18% because of our persistency, which has been good. Secondly, our expenses were largely under control and the investment income was in expected lines. And more importantly, our product mix, where we have more margin accretive products such as credit life business. Our retail protection business grew by 45% in the second quarter and annuity business also continued to perform well. So, all of that contributed to the growth in profit.
Net premium income soared by over 12%. What led to this growth?
It grew because of our new premium growth, and the growth in single premium. HDFC Bank is doing very well for us. Our number of policies have grown in the said period and our average ticket size continues to hold despite the new tax norm (under the new income tax rule, from April 1, 2023, income from all non-ULIP products, where aggregate insurance premium paid in a year exceeds Rs. 5 lakh, became taxable). As our retail protection business grew by 45%, our sum assured posted a 65% growth.
What is the current demand scenario for the insurance industry and your company?
After April 1, when the new tax regime came into force, the market has been pleasantly surprised by the performance of the industry. We have done better than the industry. In the first quarter, we grew about 12-13% on an annualised premium equivalent (APE) basis despite the Rs. 5 lakh taxability and so on. We continue to grow faster than the industry in Q2 as well in terms of both individual and group business. Another very noteworthy aspect is that we have been able to grow the number of policies by 10% in H1, which is in line with our stated objective to broad-base the customer base. This was better than the flat growth recorded at the industry level. We are growing very well in tier-II and III towns, which is something new for us. Earlier, we used to be largely focussed on tier-I and the top 10 metros in India. Now, about two-third of the number of policies we sell are coming from other than the top 10 cities. And the growth there is also fairly robust.
What kind of change are you witnessing for non-Ulip policies worth over Rs. 5 lakh in annual premium?
We are witnessing a change in demand pattern as expected. For above Rs. 5 lakh policies, the demand is slower, naturally, as that segment has got impacted. We have seen de-growth in this financial year against the business we did last year for above Rs. 5 lakh policies. However, below Rs. 5 lakh the growth has been very robust. For the first half of the year, the below Rs. 5 lakh category grew around 17-18% for us. So, our focus is on the mass affluent segment as well as tier-II and III cities, and to cover more lives rather than only focussing on the higher ticket size and salaried individuals from metro cities. That is good because our regulator has very clearly said that by 2047 every Indian should have insurance cover. Hopefully, as a sector, we are able to push it sooner rather than later.
What is the outlook for APE growth this fiscal?
Mid-teen growth is the range where we should grow. This is, of course, ignoring the additional business that we saw in the month of March, which was about Rs 1,000 crore. That was because of the tax withdrawal. The industry also saw it because demand came in the last couple of weeks of March. But on a normalised basis, we should grow in the mid-teens. And in the next financial year, we will be back to the usual growth pattern of 17-18%, which in a way translates to us consistently doubling our APE in every four years. So, we will get back on track for that.
Value of new business margins stood at 26.2% for H1FY24. What is the guidance for the full year?
In Q2 we grew VNB margin versus Q1 in a very difficult economic environment. We have given a guidance of double-digit growth and plan to hold our VNB margin. We are on track for that.
