HDFCLIFE - HDFC LIFE INSURANCE COMPANY LIMITED Share Price

During the earnings conference call on July 15, 2025, HDFC Life management shared a positive outlook alongside forward-looking points for FY26. Key takeaways from the management's outlook include:

1. Growth in Individual APE: The Individual Annualized Premium Equivalent (APE) increased by 12.5% year-on-year, reflecting a robust 2-year CAGR of 21%. The company expects to continue outperforming the overall life insurance industry.

2. Market Share Gains: HDFC Life's market share grew by 70 basis points, reaching 12.1% overall and 17.5% within the private sector. This suggests strong competitive positioning.

3. Value of New Business (VNB): The VNB for Q1 FY26 was Rs.809 crore, up 12.7% year-on-year with a new business margin steady at 25.1%. Management aims to maintain these margins while investing in distribution and technology.

4. Embedded Value: The embedded value rose to Rs.58,355 crore, demonstrating solid financial health with a strong operating return on EV of 16.3% over 12 months.

5. Product Mix Dynamics: The company anticipates a shift in product mix over the year, as demand for ULIPs remains strong, accounting for 38% of the product mix, with life products gaining traction due to macroeconomic conditions.

6. Strategic Investment: HDFC Life added 117 branches in FY25, with investments in distribution and technology projected to enhance long-term capability, particularly in Tier 2 and Tier 3 markets.

7. Regulatory Environment: The management expressed optimism about the regulatory framework evolving towards stability, which will support long-term growth.

8. Expectations for H2 FY26: Management maintains that growth may pick up in H2 FY26 as they focus on outpacing industry averages while navigating macroeconomic challenges.

The management remains dedicated to strategic reinvestments and adapting to market dynamics to reinforce HDFC Life's competitive stance moving forward.

Q&A Section Summary

Question 1: Avinash Singh (Emkay Global): "Could you explain the margin support related to product-level changes and persistency?"

Answer: The margins have remained strong due to a 40 bps increase to 25.1%, despite initial challenges. Our growth of 12.5% in APE is respectable given last year's base effect of 31%. We anticipate better margins will be achieved as fixed cost absorption stabilizes. The fall in 13-month persistency, primarily due to large ticket sizes, was expected and accounted for. The improvement in 61-month persistency is promising, contributing positively to our operating variances.

Question 2: Shreya Shivani (CLSA): "Why is HDFC Life continuing to excel in ULIPs when others face slowdowns?"

Answer: Our ULIP performance is stabilized by protecting customer preferences and enhancing product features based on feedback. Although we've refined our offerings, no significant design changes in the immediate quarter led to this traction. Our mix historically aligns with industry trends, indicating robust customer confidence in our ULIPs, unlike some peers whose demand has dropped sharply.

Question 3: Supratim (Ambit): "What drove the recent 20% growth in group protection amid long-term declines?"

Answer: The growth in group protection is largely due to a shift from the declining MFI segment to non-MFI partnerships, which we strategically expanded. We also brought in new partners, compensating for MFI losses. Our agency channel experienced typical industry fluctuations, but we see room for improvement, enhanced by our ongoing transformation initiatives.

Question 4: Nitin Jain (Fair View Private Limited): "What is the expected product mix and margin impact for the rest of FY26?"

Answer: Non-par mix has decreased while par has risen, stabilizing margins. We expect par products to remain over 25% as non-par inches back into the mid-20s range. Growth for the remainder of FY26 is anticipated to improve, benefiting from a better economic backdrop as the year progresses while still targeting sustainable margin levels.

Question 5: Prayesh Jain (Motilal Oswal): "How will product mix affect margins, considering fixed costs?"

Answer: We anticipate neutral effect from product mix changes this year due to fixed cost absorption. With par and non-par margins being increasingly aligned, increased non-par contribution can boost profitability. The industry dynamics suggest margins will remain broadly stable at around 25%, while still expecting some upward flexibility over the long term.