HDFC Life aims to more than double its embedded value to Rs 60,000 crore by FY27


Private sector insurer HDFC Life Insurance has set an ambitious target of more than doubling its embedded value to Rs 60,000 crore in the next five years, buoyed by a similar feat achieved during the past five years.

The HDFC group company has also set a target of doubling its Assets Under Management (AUM) to Rs 4 lakh crore from the present Rs 2 lakh crore during the same time period.

The company closed FY22 with embedded value at Rs 30,000 crore, up from Rs 26,617 crore in FY21, and an AUM of Rs 2.04 lakh crore which was 17 per cent higher than the preceding financial year.

The Embedded Value (EV) — a key measure of growth and profitability of a life insurer — is determined by the present value of the firm’s future profit plus adjusted net asset value.

HDFC Life’s EV was Rs 10,200 crore in FY16, which rose to Rs 12,500 crore next year, Rs 15,200 crore in FY18, Rs 20,700 crore in FY20 and Rs 26,617 crore in FY21.

This shows that the company’s EV has doubled thrice when compared to the EVs of five-year period beginning FY16.

The largest private sector life insurer SBI Life had an EV of Rs 33,390 crore in FY21 (full year numbers for FY22 are not disclosed yet), while ICICI Prudential Life had EV of Rs 31,625 crore in FY22, up from Rs 29,106 crore in FY21.

Public sector insurer LIC which got listed on the stock exchanges this week had an EV of Rs 5.4 lakh crore as of December 2021.

“We’ve doubled our embedded value over the past five years and the same stood at Rs 30,000 crore in March 2022, up from Rs 26,617 crore in FY21. Now we’ve set a target of doubling the EV to Rs 60,000 crore in the next five years. This should mostly be achieved through organic growth and may be with a few tucked-in acquisitions like we recently did with Exide Life, which should add a 10 per cent to the value on full integration with us,” Managing Director & Chief Executive Vibha Padalkar told PTI.

In the similar manner, “we also target to double our AUM to Rs 4 lakh crore in the next five years from Rs 2 lakh crore in FY22,” she added.

HFC Life, which began operations in 2000 and went public four-and-a-half years ago, had closed FY22 with an 11 per cent fall in annual net income at Rs 1,208 crore from Rs 1,360 crore due to higher mortality reserve created during the year on account of the COVID-19 pandemic.

In FY22, the insurer paid Rs 818 crore in Covid claims with the total claim settled at Rs 4,328 crore while gross annual claim stood Rs 5,804 crore.

In the fourth quarter of FY22, it had booked a net income of Rs 357.52 crore, up 12.4 per cent year-on-year.

Padalkar’s optimism comes from her assessment that the tepid sales in the past two years due to the pandemic will pass, and this year the industry and her company should do better due to the soaring inflation, which has left savers with negative interest rates.

Over all her business should grow 17-18 per cent this year and over the next five years, she said.

HDFC Life’s total premium during the year rose 19 per cent to Rs 45,963 crore from Rs 38,583 crore, taking its outstanding sum assured to Rs 7.18 lakh crore, up 25 per cent on-year, of which Rs 5 lakh crore are in group insurance.

Padalkar, who has been with the company for the past 15 years, also said they have on average more than doubled its overall 13 key metrics since the listing four-and-a-half years ago. Its Value of New Business (VNB) grew 22 per cent to Rs 2,675 crore in FY22.

VNB is the present value of future profit associated with new business written during the year and is the key profitability gauge of life insurer.

To achieve the targets, the company will be spreading its reach to small towns.

At present, a major share of the business come from top 10 cities. HDFC Life has 5.4 million policyholders.

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