HDFC Life Insurance reported a decent performance in 2QFY24, with annualised premium equivalent (APE) in line with our projections at Rs 30.5 billion, representing a 7% y-o-y increase. However, there was a slight 3.4% shortfall in value of new business (VNB) and a 40 bps decrease in VNB margins. The APE growth of 7% y-o-y to Rs 30.5 billion was driven by the strong performance of ULIP, term, and annuity products, while non-par products saw a decline of 30% y-o-y. VNB increased by 4% y-o-y, with a marginal 3.4% miss, and margins declined by 80bp y-o-y to 26.2%.
Embedded value (EV) also exhibited a 3% q-o-q growth, reaching Rs 429 billion. In the H1 of FY24, APE, VNB, and PAT grew by 9%, 10%, and 15% respectively, reaching Rs 54 billion, Rs 14.1 billion, and Rs 7.9 billion. The Q2 PAT of Rs 3.8 billion was in line with our expectations, marking a 15.5% y-o-y increase. Looking ahead, we anticipate HDFCLIFE to deliver an approximate 18% CAGR in VNB from FY23-FY25, with margins to improve to around 28.5% by FY25.
However, the VNB margin decreased by 80 bps y-o-y to 26.2%, remaining flat on a q-o-q basis. In terms of distribution, the banca channel’s share increased to 61% based on individual APE, while the agency channel held a 20% share. This growth came at the expense of the direct channel, which faced intense competition, resulting in a decline in its share from 22% in 1QFY23 to 12%. Total EV grew by 3% q-o-q to Rs 429 billion.
HDFCLife prioritises a well-balanced product portfolio, placing a strong emphasis on innovation and exceptional customer service. The protection segment is gaining momentum, and we anticipate a gradual resurgence in non-par growth. Credit life insurance is expected to maintain its robust performance, driven by strong disbursement activity among lending institutions.