Earnings Transcript of the Conference Call between HDFC Life Insurance Management and Analysts on Q4FY20 and full year performance. Listen in to the full transcript.
Call Participants: Ms. Vibha Padilkar - CEO & MD, Mr. Suresh Badami - Executive Director, Mr. Niraj Shah - Chief Financial Officer, Mr. Srinivasan Parthasarathy - Appointed Actuary, Mr. Kunal Jain - Vice President, Investor Relation
Introductory Remarks from Vibha Padilkar
Good evening everyone! Thank you for joining us for the discussion on our results ended March 31, 2020. I will run through the key highlights of our FY20 results and would be happy to take questions post that.
Key Highlights for Q4FY20
- Starting with an update on the current situation, as a result of this pandemic, human lives have been disrupted and organizations around the world are witnessing challenging times. As a responsible corporate citizen the safety and wellbeing of our employees, customers and partners and ensuring uninterrupted service to our customers are our foremost priorities. The impact of the outbreak has been seen across both new business and renewal collection. The customers want to conserve cash till clarity emerges.
- While it might take some more time for things to settle down and a new normal to emerge, we believe that the structural stories for insurance remains intact and we expect business to emerge stronger at the end of this pandemic
- Our existing suite of digital assets has enabled us to continue to avoiding a seamless experience to the end customer from a new business and servicing perspective
- On the servicing front, adoption of our digital serving avenue has seen an overall increase of 67% during the lockdown period while usage of our box across WhatsApp, Twitter has increased by 70%
- We have settled around 3,000 maturity claims, Around 300 debt and health claims
- Made nearly 21,000 annuity payouts and processed close to 95,000 transactions in the first 15 days of lockdown
- With regards to new business, we have seen a jump in the adoption of assets such as chat based identification tool, pre-conversion verification chat which allows customers self authenticate their details
- Our virtual frontline sales model enabled our sales representative to connect with customers via video calling and complete the sales process
- Next on business performance, while there was disruption in the last 10 days of March, we have been able to exhibit steady performance and delivery across all key metrics in FY20
- Overall, new business premiums have grown at 15% in FY20, leading to a market share of 21.5% among private players
- We grew 19% based on individual WRP compared to private industry growth of 5% and overall industry growth of 6%. This led to a 170 basis point increase in market share from 12.5% in FY19 to 14.2% in FY20
- We have maintained our leadership position in the group segment with a market share of 29%
- Our new business margin for FY20 was 25.9%, an increase of 130 basis points over the same period, last year
- Value of new business grew by 25%, increasing from Rs 1,537 crores in FY19 to Rs 1,919 crores in FY20
- Operating return and embedded value reduced by 200 basis points to 18.1% compared to 20.1% last year
- In anticipation of the possibility of worsening mortality due to COVID-19, we have created a Covid reserve, the adequacy of which would be reviewed at regular intervals
- Our profit after tax for marginal increase over the previous year to Rs 1,295 crore. This is after providing Rs 106 crores for the YES Bank 81 bonds held by us
- New business trend was offset by our robust backbook surplus which grew by 17%
- Our solvency position remains strong at 184% compared to 188% a year ago, the withdraw due to fall in equity market
- We have received board approval to raise thereto capital via subordinated debt. It is an enabling resolution and the extend in timing of the fund raise will be assessed in due course
- The stock debt would provide greater ability to increase our protection business and additional cushion against further market volatility
- Additionally, in line with the IIBI circular to conserve capital, we have not declared any dividend for FY20
- A share of proprietary channels have increased to 36% for FY20 from 22% in the previous year
- We remain focused on strengthening our relationship with all our bank insurance partners including HDFC Bank and maintain our market share with HDFC Bank
- Additionally, our broker channels crossed the milestone of Rs 500 crore APE, growing by more than 1.5x over FY19
- We continue to diversify our mix beyond the traditional modes of distribution and have deepen our relationship across 270 partners including more than 40 in the new ecosystem space
- Moving on to the product performance, our focus on maintaining a balance for this mix has helped us get multiple business cycle and we continue to actively pursue the same
- Our savings business grew by 18% while protection grew by 22% in FY20
- We continue to address longevity risk for customers through our annuity and long term income proposition
- Protection remains a key focus area for us and accounted for 27.6% of our business in terms of lieu business premium and 17.2% on weightage premium basis
- Individual term protection was at 7.6% of individual APE and grew by 33% over previous year
- We continue to monitor consistency in this difficult period for customers, specially for ULIP segment
- We have also strengthened our assumption in anticipation of any weakness in persistency
- To conclude, we believe that while there are challenges in the short term, I have detailed in our IR presentation, there would also be opportunity in terms of increased demand for protection, inorganic growth and our reimagining insurance framework such as work from home and offering innovative digital solutions to customers
- We are preparing for multiple scenarios to pan out this year and we will dynamically review and react with agility as events unfold
- We endeavour to protect our downside risks while staying well to spot demand revival as the devastation caused by Covid-19 recedes.
General Updates:
- Against the degrowth in the month of March of 28%, the online channel grew by 13% and similarly, term APE is growing
- Slightly smaller ticket size is emerging
- Getting a lot more enquiries on group term insurance from lots of employers. Unfortunately this is not the time to only cover Covid, it needs to be a more holistic level of coverage that employers should be looking for all their employees
- We are looking for more reduction. For example in the annuity business.
- At least some of the geographies are showing signs of lockdown ending
- Apart from the metros, we are willing to engage in a conversation with slightly lower ticket sizes
- Apart from Unit Link, we are able to give a loan against policy specially after premiums have been paid. The over the counter loan can be paid by the policyholder once the immediate cash stress scenario eases off
- We are telling our policyholders that rather than surrendering relaxing the policy, they should take a temporary loan which can be foreclosed anytime as there is no minimum tenure. Cannot say anything on Unit Link policyholders right now. Tenure loan is much cheaper than a personal loan
- Solvency has been impacted by 10% because of Covid-19
- Lockdown progressively starts disappearing but at the same time, equity market remains extremely volatile
