Questions across 8 calls

Vibha Padalkar

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HDFC Life Insurance Company Limited

HDFC Life Insurance Company Limited CC-Apr26.pdf · 2026-04-16

I'll take the HDFC Bank question and then pass it on to Eshwari on par questions. On HDFC Bank, see, I would be more worried if there were some very different product innovation or some massive digital, great technology initiative. Really on competition on price point, we don't believe that that is sustainable on a long-term basis, whether it's aggression on pricing and/or on underwriting. And clearly, it is visible on ground. So, what will change? I think IFRS is a good segue into what I'm saying because onerous contracts start becoming very apparent. Also given that RBC possibly has now taken a back seat to IFRS, what all of us thought that RBC would get rolled out first , but if it gets delayed all of this aggression does consume capital as well. So , there's only so far that some of this can be bankrolled. Plus, we haven't stayed quiet. We have introduced, like I said, products such as our AGNI product (variable annuity), some of the tweaks that we have done on even non-par, is what you will see being rolled out as we speak. Some of that will again go back in terms of our ability to capture the mind of customers, especially against these fairly elevated levels of volatility and some weaning away from the unit -linked playbook. So that is what gives us the kind of confidence. Also, we are very granular in terms of discussions with our parent in terms of which are the branches wherein our share is lower than what might be at an acceptable level. Why is that happening? Is it because there is a flooding of additional people, and our manpower share? So, the correlation is fairly strong that where our manpower share is lower than 50% our counter share goes down. So, is there an optimal level of manpower given all AI and other digital assets? Is there a play to reduce manpower share overall for all three players and can we look at having more digital offerings? Or part of the journey being digital? And once that happens, I do believe that counter share, just given brand synergies, being a market leader in products, I think all of that, I can't share everything that we're doing, but that's what gives us the confidence.

Yeah, and that's an important point. We are very cognizant of the opportunities that we let go because if ab initio it doesn't make commer cial sense as to why are we selling this kind of product, then –we will take a back seat exactly like what happened in protection. We did that and that has paid us very good dividends in terms of the pricing power. We had to bide our time. We did many thi ngs, some are behind the scenes which I don't want to call out. But many things on protection that today makes us get hold of the kind of profiles that we want to get hold of, rather than just market dynamics saying whatever protection of whatever quality business, let me get that in. Moving away from that to controlling the narrative to step back to say what kind of lives and what kind of business do I really want, and to recalibrate too many things to get there. So that is really, we are in the process o f doing similar kind of interventions on non -par and par like we did with protection.

HDFC Life Insurance Company Limited CC-Mar25.pdf · 2025-07-15

Yes, so I will take the in-between question of what I was sounding like last quarter. If I recall, I was saying that margins will remain range bound and growth at that time seemed like it's going to be somewhat muted because of the macroeconomic scenario, which I think will probably continue for another quarter as well based visible slowdown in consumption as well as the tariff situation still being up in the air. So, I think we have delivered well. In fact, if you look at slide 14, which shows the margin walk, we started off with a handicap at the beginning itself of 25.0% really being 24.7% because of the impact of surrender charges. So, there has been an expansion of margins of 40 basis points to get to 25.1%. That is one. And second is, something that I had mentioned earlier, last year first quarter , we grew by 31%. So, again there was a base effect, which we had called out. And so , against that base effect, growt h of 13% is very much along expected lines. But just the mathematics of that will mean that there is a fixed cost absorption and the impact is 0.6%, which should, as the year pans out, that fixed cost absorption’s negative impact should disappear. So, I think very much in line is how I see things. Niraj, over to you in terms of the shift in mix.

Yes, and one other point, just going back a quarter, we had expected some moderation in unit- linked. There were many things on the political front also happening. There was a lot of uncertainty that was just an overhang. But that does not seem to be the case and unit-linked still has fairly robust demand. So, that is a reality. And like Niraj said, we have worked on some of the product profiles to increase the inherent profitability of some of these products.

HDFC Life Insurance Company Limited CC-Dec24.pdf · 2025-01-15

Yes. Thanks, Avinash. So, I'll take it in seriatim. The first one on growth. Like I said in the past, I said 15% would be on the upper side, but we will revise it because the sector was going for a change in terms of surrender regulations and also getting settled into the new normal of a n elevated an equity market. So, I think 18% to 20% revision in our outlook on a full year basis is something we feel reasonably confident about. Coming to second question on rethinking on unit-linked, Our thought process is as follows. It is a new normal in equity markets wherein we are witnessing each dip being lesser in intensity and the bounce back being higher in intensity because of global factors. So how do we make it range bound? I have articulated it before that in the fir st half, we have grown comfortably higher than the industry. We grew almost 400 -odd basis points higher than the private sector. So, faster growth than the industry is something that we will drive. That is number one. And within that unit-linked will continue to remain range -bound. It is unlikely to reach the levels of 50% that is quite common in our sector , but it will be range-bound in the 30s. Second aspect is VNB growth because that's clearly the volume of cash that as an insurance company we are accreting to our embedded value and that is delivering value. So th at kind of increase in VNB is ou r second priority. And I'm happy to share that we have delivered on what we said, which is about 17%-18% growth; 17.6% on H1 basis.. We will continue to deliver on a full year basis in that range. Maybe this could be a little bit lower or higher, but roughly in the 15% to 17% range in terms of VNB growth. And then third point is on margins. I've said in the past and I want to reiterate that some level of flexibility on margins with the first two objectives being sharply defined will be there only because of a couple of things. One is a very significant changeover that as a sector we are going through as far as surrender regulat ions are concerned ; and all aspects , the customer, the manufacturer as well as the distributor, ever yone is bein g affected by it. So how that settles down, and then unit-linked and credit life segment is also something that needs to be observed, like you mentioned. So, there are a few balls up in the air, and so margin will be an outcome. At the same time, we're not talking about unit-linked reaching 50%. We are also not talking about kitchen sinking the margins, but there will be a floor. What that floor is, we will determine, but it will be range -bound. And that's really what we have delivered in H1 of this year.

So a few things on the co mparison of H1 '24 versus H1 '25. See, in H1 '24, our unit-linked was 28% of overall versus 36% in H1 of this year. So quite a significant tilt, like I've alluded before, on the realities of what we are seeing right now. We can choose to give easily 26 -plus percent margins , but not grow. And this is something that I' ve been articulating over the last 6 -7 months or so; this conundrum that exists. And when I look at my new to HDFC Life custo mers, over 70% of my growth is from new customers, meaning first-time buyers. And some of them are coming on the back of unit -linked. So, with my ability to cross -sell to them, the conundrum is do I say no to them or do I have a balance ? And hence, I'm saying it will be range-bound, a little bit on the upper side, instead of it being slightly lower than 30%, it is in the mid -30s, and that is a conscious call that we have taken. At the same time, I think there' s a lot of focus on one metric that perhaps is an outcome. And the reason I'm calling that out is, yes, the margins are a shade lower. But if I were to look at growth in H1 of l ast year, I grew 9% versus H1 of this year, I grew 31%. If I were to look at the VNB, like I said, VNB is really cash, do I say no to generation of that cash and hence accretion to my embedded value just because I want to stay range-bound in margin. I have no doubt in my mind that as an d when there's a little bit more calibration in equity markets, unit -linked like we have seen, will go down in terms of popularity. That will happen and that's when given our balanced product mix and our ability to switch amo ngst all our sa les force fairly will seamlessly happen, wherein slightly higher-margin products will start gaining centre stage. So, this we see as a market phenomenon, that's not likely to stay forever. And we have to react and adapt to the markets and we very sharply focus that as long as I'm making money out of the business that I'm selling, I think it is good business.

HDFC Life Insurance Company Limited CC-Sep24.pdf · 2024-10-15

Yes. Thanks, Avinash. So, I'll take it in seriatim. The first one on growth. Like I said in the past, I said 15% would be on the upper side, but we will revise it because the sector was going for a change in terms of surrender regulations and also getting settled into the new normal of a n elevated an equity market. So, I think 18% to 20% revision in our outlook on a full year basis is something we feel reasonably confident about. Coming to second question on rethinking on unit-linked, Our thought process is as follows. It is a new normal in equity markets wherein we are witnessing each dip being lesser in intensity and the bounce back being higher in intensity because of global factors. So how do we make it range bound? I have articulated it before that in the fir st half, we have grown comfortably higher than the industry. We grew almost 400 -odd basis points higher than the private sector. So, faster growth than the industry is something that we will drive. That is number one. And within that unit-linked will continue to remain range -bound. It is unlikely to reach the levels of 50% that is quite common in our sector , but it will be range-bound in the 30s. Second aspect is VNB growth because that's clearly the volume of cash that as an insurance company we are accreting to our embedded value and that is delivering value. So th at kind of increase in VNB is ou r second priority. And I'm happy to share that we have delivered on what we said, which is about 17%-18% growth; 17.6% on H1 basis.. We will continue to deliver on a full year basis in that range. Maybe this could be a little bit lower or higher, but roughly in the 15% to 17% range in terms of VNB growth. And then third point is on margins. I've said in the past and I want to reiterate that some level of flexibility on margins with the first two objectives being sharply defined will be there only because of a couple of things. One is a very significant changeover that as a sector we are going through as far as surrender regulat ions are concerned ; and all aspects , the customer, the manufacturer as well as the distributor, ever yone is bein g affected by it. So how that settles down, and then unit-linked and credit life segment is also something that needs to be observed, like you mentioned. So, there are a few balls up in the air, and so margin will be an outcome. At the same time, we're not talking about unit-linked reaching 50%. We are also not talking about kitchen sinking the margins, but there will be a floor. What that floor is, we will determine, but it will be range -bound. And that's really what we have delivered in H1 of this year.

So a few things on the co mparison of H1 '24 versus H1 '25. See, in H1 '24, our unit-linked was 28% of overall versus 36% in H1 of this year. So quite a significant tilt, like I've alluded before, on the realities of what we are seeing right now. We can choose to give easily 26 -plus percent margins , but not grow. And this is something that I' ve been articulating over the last 6 -7 months or so; this conundrum that exists. And when I look at my new to HDFC Life custo mers, over 70% of my growth is from new customers, meaning first-time buyers. And some of them are coming on the back of unit -linked. So, with my ability to cross -sell to them, the conundrum is do I say no to them or do I have a balance ? And hence, I'm saying it will be range-bound, a little bit on the upper side, instead of it being slightly lower than 30%, it is in the mid -30s, and that is a conscious call that we have taken. At the same time, I think there' s a lot of focus on one metric that perhaps is an outcome. And the reason I'm calling that out is, yes, the margins are a shade lower. But if I were to look at growth in H1 of l ast year, I grew 9% versus H1 of this year, I grew 31%. If I were to look at the VNB, like I said, VNB is really cash, do I say no to generation of that cash and hence accretion to my embedded value just because I want to stay range-bound in margin. I have no doubt in my mind that as an d when there's a little bit more calibration in equity markets, unit -linked like we have seen, will go down in terms of popularity. That will happen and that's when given our balanced product mix and our ability to switch amo ngst all our sa les force fairly will seamlessly happen, wherein slightly higher-margin products will start gaining centre stage. So, this we see as a market phenomenon, that's not likely to stay forever. And we have to react and adapt to the markets and we very sharply focus that as long as I'm making money out of the business that I'm selling, I think it is good business.

HDFC Life Insurance Company Limited CC-Mar24.pdf · 2024-07-15

I just want to add here that there was a particular reason why the rate is 12.5% plus surcharge. I won't go into the technicalities of it, but I think it is somewhat misunderstood given that the last three terms DTC has not been talked about. There was a particular reason like I said the rate was what it was, going back ~25 years, there was an IRDAI Committee which then subsumed the way policyholders and shareholders profit together , Because the intention was not to tax profits emerging from policyholders’ funds and to tax shareholders. So, this was seen as an amalgamated or an averaged-out percentage. I think a lot of younger people who are tracking it perhaps don't know the back story on why it is what it is a s against just that there was a random rate that possibly is b eing applied in life insurance, but like I said, this is probably not the forum to get into the details. If anyone is interested, we can always go back in history as to why the overall landed cost is at ~14.5%. On your next question, Suresh you want to take this.

To add here on the pricing and irrationality sometimes and we will stay fairly balanced on this. In the past on credit life where it doesn't make sense, we have exited certain lines of coverage and then down the line the partner has come back to us because that can't continue forever by a new insurer. There will be penetrative pricing, but down the line if they raise prices then due to partner’s strong relationship with us in the past means that they will come back. So , we just have to build this brick by brick and that's why it will always be two steps forward, one step back, but we are in there for the long haul in terms of the relationship.

HDFC Life Insurance Company Limited CC-Jun24.pdf · 2024-07-15

I just want to add here that there was a particular reason why the rate is 12.5% plus surcharge. I won't go into the technicalities of it, but I think it is somewhat misunderstood given that the last three terms DTC has not been talked about. There was a particular reason like I said the rate was what it was, going back ~25 years, there was an IRDAI Committee which then subsumed the way policyholders and shareholders profit together , Because the intention was not to tax profits emerging from policyholders’ funds and to tax shareholders. So, this was seen as an amalgamated or an averaged-out percentage. I think a lot of younger people who are tracking it perhaps don't know the back story on why it is what it is a s against just that there was a random rate that possibly is b eing applied in life insurance, but like I said, this is probably not the forum to get into the details. If anyone is interested, we can always go back in history as to why the overall landed cost is at ~14.5%. On your next question, Suresh you want to take this.

To add here on the pricing and irrationality sometimes and we will stay fairly balanced on this. In the past on credit life where it doesn't make sense, we have exited certain lines of coverage and then down the line the partner has come back to us because that can't continue forever by a new insurer. There will be penetrative pricing, but down the line if they raise prices then due to partner’s strong relationship with us in the past means that they will come back. So , we just have to build this brick by brick and that's why it will always be two steps forward, one step back, but we are in there for the long haul in terms of the relationship.

HDFC Life Insurance Company Limited CC-Dec23.pdf · 2024-01-12

A couple of things and I'll come to the draft circular later On a standalone basis, I have no doubt in my mind about getting the mojo back and that is very evident in a few things. One is like I mentioned that below 5 lakhs is growing, we have already grown by 17% and continue to grow. That is number one. Number two is that, it's also a function of equity markets and unit link. We have always used a balanced product strategy and so we will remain calibrated until some of that happens and it's bound to happen in the timeframe you're talking about. A little bit of calibration in terms of exuberance and getting back to principles of broader asset allocation. Another point is that, in terms of the counter share at HDFC Bank also because this year that counter share was not there for the full year. You will have a full year impact of counter share . We continue to solidify and make inroads in the bank. Fourth point is, all the onboarding of new relationships, three I have mentioned and there are some smaller ones that I haven't mentioned, all of those will start kicking in . Wherever we have gone in with the ne w relationship, we have ended up with a counter share between 30% to 40% over a span of the first 15 months. That also will start happening given the strength of our product offering. If you were to look at our agency channel, you will see that there's 75 new branches that we are adding which will start seeing traction

Suresh, since you are talking about peers, we would like to point out that we have not drop ped margins versus peers, who have seen fairly significant margin drop. So, if there's a margin drop, then selling more unit linked and perhaps more aggression on other products is not very difficult. We continue to stay focused on triangulating all objectives, whether it is in terms of growth in term, annuity, credit life, or renewal premium. If you look at assets under management, while numbers are yet to be out, we have grown by 20%. So, the quality of business and protection of the business that has already come in and for us to continue with that . If you look at number of policies sold, we are the market leaders in terms of retail number of policies sold. They have grown by 9%. The reason I'm pointing out all of this is , that is the holistic score card. It is not very difficult to grow EPI just for the sake of growing EPI. The philosophy that I want is to tick in every box because it's not just growth for this year , growth for this year will hamper growth for next year. If I don't grow on number of policies then it is going to hamper how much I'm able to mine next year. So, sowing those seeds, s owing Tier-2 and Tier-3 and broad basing is important. Even if you look at another metric on agency , we are right up ther e on number of agents added; 50,000 plus agents that we have added this year. So, there is no let up at all in terms of the number of agents that we are able to add and attract, which gives us the confidence. Yes, this year we have reconstructed below 5 lakhs and above 5 lakh s businesses and we are quite confident that whether it's high single digits or 11 %-12%, the gap will get made up. Another aspect I want to mention which is important is that overall sum assured grew by 38% and again it's not just one quarter, every quarter we have been the market leaders on sum assured. If you look at retail sum assured, that has grown by ~50%. So, very strong in terms of retail sum assured. All of that is making it possible for us to be neutral on margins, continue to give growth in value of new business and grow step by step. I think that core of our business ultimately is in protection. While we will grow in savings, we will calibrate all of these measures.

HDFC Life Insurance Company Limited CC-Sep23.pdf · 2023-10-13

Avinash, all what you said is absolutely right. There are many things going on. We talked about Exide Life starting off with low single-digit margins. We said we will nevertheless move towards subsuming that into our business and reaching margin neutrality. Individual protection is doing exceedingly well. Credit life has always been doing well, and that continues to trend well. So that gives us that margin kicker. Our costs are reasonably under control despite some of the investments that I talked about. Unit Linked has seen a little bit of uptick to about 28% as against the 25% range that we would like it to be in. At the same time, counter share at HDFC Bank has gone up. Considering all of these, there are pluses and minuses which even out and that's why we are margin neutral. It is slightly better than Q1 margin but more or less flat is how we see H1 , and that's what we also guided towards at the start of the year. This year is a mixed year , in terms o f digesting tax changes and investing in people, so that we can grow number of policies , and all of that is panning out. We expect flattish margin s, which would be a good outcome given everything that’s going on including the continued degrowth in the abo ve INR5 lakh ticket size. Next year, this would be behind us as a sector, and we should continue on the upward trajectory on margins. Anything you want to add, Niraj?

And to add here, it has lesser to do with GTI business, which you alluded to. Economics of the credit life business hasn’t changed. It's just that , is it a single premium policy or a regular premium policy. That's about it.