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Profit Rises 59%, Beating Estimates

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HDFC Life Insurance Co.’s fourth-quarter profit rose beating estimates.

The private insurer’s profit surged 59% year-on-year to Rs 506 crore in the quarter ended March, according to an exchange filing. That compares with the Rs 360-crore consensus estimate of analysts tracked by Bloomberg. Sequentially, the bottom line expanded 84%.

The company earned a net premium of Rs 15,625 crore, a 21% increase over a year earlier. Of this, renewal premiums contributed around 53% of the net premium amount.

Q4 FY22 Highlights (YoY)

  • Revenue, however, declined 8% to Rs 17,682 crore. Still, it was ahead of the estimated Rs 14,789 crore.

  • The top line fell due to a 72% fall in investment income to Rs 1,689 crore.

  • Operating income rose 52% year-on-year to Rs 473 crore. That compares with the Bloomberg consensus estimate of Rs 855 crore.

  • Profit before tax margin stood at 2.7% against 1.6% a year ago. The estimate stood at 5.8%

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  • The 13th and 61st month persistency ratios—or customer retention—improved over the year earlier to 86.8% and 54.4% respectively.

  • Solvency ratio—that measures the extent to which assets cover commitments for future liabilities—fell to 176% as of March 2022 versus 201% a year earlier. It’s still above the minimum requirement of 150%.

Vibha Padalkar, managing director and chief executive officer, said in the filing, “Despite very trying times during the two-year pandemic, our two-year CAGR of 17% was almost 2 times industry growth of 9%. Overall protection grew by 24% in terms of APE and 47% in terms of new business premium.”

This, she said, was largely led by a 55% growth in credit life new business premium, on the back of higher disbursements. On the retirement side, their annuity business recorded 24% growth against the industry’s 3%. “Annuities now contribute over a fifth of our new business premiums, with us almost doubling our business in the last three years.”

HDFC Life settled close to 3.9 lakh claims during FY22. Gross and net claims were at Rs 5,804 crore and Rs 4,328 crore, respectively. As on March 31, they carry reserves of Rs 55 crore into FY23 as a prudent measure towards Covid, said Padalkar.

Exide Life recorded a healthy growth of 22% based on individual weighted received premium in FY22 compared with the growth of 16%. Its embedded value as on March 31 was Rs 2,910 crore.

“The merger process has been initiated with NCLT and is expected to be completed in the second half of this financial year. Our endeavor is to be able to remain margin neutral at the merged company level by the end of FY23 and resume margin expansion thereafter, “Padalkar said.

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