HDFC Life Q3 Results: Topline and the bottom-line fail to meet street estimates.

Profits marginally up, miss estimates - HDFC Life quarterly results reported a 3.3% YoY increase in its Net Profit for Oct to December quarter. The net profit reported was Rs 273.7 crore. Sequentially, the net profit was flat. In Q2FY22, it reported a profit of Rs 275 crore. Analysts' have earlier estimated a net profit of Rs 310 crore.

Increase in total premium received YoY - The total premium received for the Oct-Dec quarter increased by 27.8% YoY to Rs 12,124 crore. Sequentially, premiums increased by 5.9%, it was Rs 11,445 crore in the last quarter.  

New and Renewal Business - New business margin (NBM)  expanded to 26.7 percent from 26.4% in the year-ago quarter. The VNB margins were above Street's expectations of 26.4%. Value of New Business stood at Rs 1,780 crore in 9M FY22, an increase of 26% over the same period last year. Renewal premium contributed around 46%.

Annualized Premium Equivalent (APE) - Annualized Premium Equivalent (APE) is the sum of annualized first-year regular premiums and 10% weighted single premiums and single premium top-ups. Total APE grew 22% year on year to Rs 6,709 crore while individual APE rose 20% year on year to Rs 5,577 crore in 9MFY22. 

AUM & Income from the investment - Asset Under Management (AUM) for the December quarter stood at Rs 1.95 lakh crore, an increase of 18% from the corresponding quarter last year. Income from investments net of amortization slumped 82% on-year to Rs 1,981.8 crore in Q3FY22.

Solvency Ratio - It measures the extent to which assets cover commitments for future liabilities. It stood at 190% in Q3FY22 against 202% in Q3FY21.

Covid Claims - On the claims front, the company honored close to 3 lakh claims during 9M FY22. Gross and net claims were recorded at Rs 4,657 crore and Rs 3,406 crore, respectively. 

Update on Exide Merger - The board approved merging Exide Life Insurance with it. Effective January 1, 2022, Exide Life has become a fully wholly-owned subsidiary as part of the overall merger process. In the nine months ended December 31, Exide Life’s WRP grew 31%, comfortably higher than the industry growth of 20%.

Review

HDFC Life has reported another quarter number below estimates due to increasing claims. Both the topline and the bottom-line failed to meet Street estimates. However, the company continues to deliver consistent and robust growth of 21% in 9MFY22, resulting in a private market share of 15.2% in terms of Individual WRP. On a 2-year CAGR basis, the company registered a growth of 14%, compared to a 5% growth for the

overall life insurance industry. Shares of HDFC Life closed at Rs 643.25 apiece on BSE, down 0.95% from the previous close.