Trading On margin

Total APE seen at Rs 18.2 billion, VNB margin at 28.0%

Result date: 19e July 2022
Recommendation: Add
Target price: Rs540

One of India’s leading private life insurers, HDFC Life Insurance Company (HDFC Life) is expected to post strong results for the June quarter of 2022.

Its Total Annualized Premium Equivalent or APE could grow 16.5% from the prior year quarter amid continued momentum. The company’s balanced product mix, healthy growth in new premiums and strong trends in annuities and PAR products will contribute to overall performance.

Lower COVID-related claims and mortality-related reserves will help overall profitability in the quarter. The value of the new business margin or the VNB margin could improve by 180 basis points on an annual basis, in line with the robustness of the turnover. The company’s expense ratio may see a slight uptick in the quarter.

Important management information to monitor:
Demand trends across all segments
Update on market share gains
Improved retention rate

(billions of rupees)

Estimates June 2022

Annual change
New company bonus 48.5 28.8%
Renewal bonus 45.3 16.4%
Total APE 18.2 16.5%
APE savings 15.2 15.9%
EPA protection 2.9 19.9%
VNB 5.1 24.5%
VNB Margin 28.0% 180 basis points

Source: IIFL Research