HDFC Life profit falls 16% in Q2 on account of high Covid-19 claims

Private sector insurer HDFC Life insurance reported a 16 per cent year-on-year (YoY) fall in standalone net profit in the July-September quarter (Q2) of FY22 on account of high Covid-19 claims. Its net profit was Rs 274.16 crore compared to Rs 326.09 crore in the corresponding period last year.

The company has added Rs 60 crore to its excess mortality claim reserve in Q2, taking the unutilised reserve to Rs 204 crore. The life insurer had set up an excess mortality claim reserve of Rs 700 crore, of which it has utilised Rs 556 crore. It has settled around 200,000 claims in H1FY22, with gross claims amounting to Rs 3,640 crore and net claims to Rs 2,470 crore.

“While individual claims tapered off, group claims intimation was high in Q2. The overall experience has been well within our projections,” said Vibha Padalkar, MD & CEO, HDFC Life. “The Rs 204-crore provision, we believe, is adequate for the deaths that have happened but have not been intimated to us. What we have not accounted for is the third wave,” she added.

Net premium increased 14 per cent to Rs 11,443.96 crore against Rs 10,045.44 crore a year ago. Its new business margin, a measure of profitability, was at 26.5 per cent in Q2 against 25.6 per cent a year ago. The value of new business was at Rs 685 crore in the reporting quarter. 

In H1FY22, the company reported a 23 per cent YoY rise in total annualised premium equivalent (APE) to Rs 4,112 crore. Assets under management (AUM) increased 27 per cent to Rs 1.91 trillion, while embedded value saw a 23 per cent rise to Rs 28,703 crore. 

The company’s solvency was at 1.9x against the regulatory requirement of 1.5x. The thirteenth-month persistency improved to 91 per cent at the end of H1, on the back of 18 per cent growth in renewal premium. 

On the imminent term premium hike, Padalkar said, “We have received the intimation on re-pricing and this is expected to come into effect in Q4. We are discussing it with the reinsurers and the final quantum of the premium hike is yet to be finalised. We will follow a risk-based pricing approach rather than passing on everything to the customer,” she added. 

The premium hike may be in the range of 10-15 per cent, she said.