HDFC Life Insurance Company Limited — Q1 FY27 earnings call

If you were to look at FY16 onwards, there has been a steady FY16, FY18, every 2 years, FY20 till FY22, there was almost linear growth in margins, almost between 100 to 150 basis points increase in margins exactly to your point. And this happened as recently as FY22. Thereafter, there were three very significant either regulatory or government-related impact on the sector, which we have called out to say first one between FY22 to FY24. There was a 90 basis point decline in our margins and thereafter because of the withdrawal of 80C or the INR 500,000 lakhs and above would be taxed, very significant impact also because some of our customers were perhaps the more affluent segment and so we were operating at a higher ticket size.

Analyst questioned the company's margin expansion relative to peers and its own historical trend, prompting management to detail specific regulatory and product mix impacts that affected margins.

Asked by Avinash

Now as the bank continues to grow and we continue the momentum of our market share increase going forward as well, we are very confident of getting good growth from HDFC bank as well.

Addressed a key concern about the subdued performance of a major distribution channel, with management expressing confidence in its recovery.

Asked by Avinash

outlook for the rest of the year on the product mix is going to be not very different from what you see now. Protection as a percentage is likely to stay there or thereabouts. We expect a higher level of growth in the next nine months. So lower ticket size protection products may not be able to match in terms of the mix percentage. So that's something that you could see. Annuity as a segment, we expect that to continue, which will be significantly higher than last year. Non-par also meaningfully higher than last year. We don't know where it kind of settles. But mid-20s looks like a fairly good base from where we would like to build. Unit-linked again, not very different from last year. We don't expect any meaningful elevation from here neither do we expect a very significant downward movement from here on.

Sought clarity on the expected evolution of product mix and its implications for margins, especially given the competitive environment.

Asked by Shreya Shivani

Is it fair to say that compared to last year in current year or at least for first 3-4 months, you are operating in a relatively better environment in HDFC Bank compared to what you witnessed in FY26. So probably, if the bank comes back with the growth, you will invariably do very well in the particular channel? Vibha Padalkar: Yes. I think you more or less captured it.

Confirmed that the competitive intensity in the HDFC Bank channel has eased, suggesting a more favorable environment for HDFC Life.

Asked by Sanketh Godha

Yes. So, it's a combination. Our focus has been on non-par and you will agree that we have shown a fair bit of traction on non-par from the late teens to moving -- exit rate, like we said, around 25%. So, some of that has happened. But also, I think the overall operating environment, there are preferences of customers where there is a lot more of market volatility, there is some level of relooking at guaranteed products, that is for some part of people's portfolio as they should, plus aided by a favorable yield curve environment. So, the combination of all of those.

Clarified that the shift away from par products was a strategic decision driven by a focus on non-par, customer preferences for guaranteed products, and a favorable yield environment.

Asked by Sanketh Godha

On the persistency, it's a combination of things. The 88% or 89% persistency was seen when the segment had a large proportion of high-ticket-sized cases. Post the withdrawal of the tax exemption for beyond INR 5 lakhs policies, the ticket size has been reducing. The persistency also has been lower. One other thing that has happened in the last year, which we had alluded to in the previous calls, was that there was one product feature which was resulting in a lower persistency. We have taken actions to ensure that the feature is moderated, and also engaging the distribution channels, as well as the customers, to improve the persistency.

Addressed the moderation in persistency, attributing it to changes in ticket size post-tax exemption withdrawal and specific product features, with actions being taken to improve it.

Asked by Nidhesh Jain

So based on where the industry is at this point in time, the 15-17% kind of a number. If we continue with that base case, the requirement for us for the remaining nine months is to grow maybe a percentage higher than the industry for the full year basis. If the growth is lower then the delta required for us over the industry will be smaller. But I think if the current growth momentum continues, then 15% industry growth can be a base case, and we'll probably have to grow at a little over 16% over the next nine months to get to industry-level growth.

Provided the underlying industry growth assumption for HDFC Life's 'in line with industry' guidance and clarified the interplay between growth and margins.

Asked by Prayesh Jain

One branch typically takes about 18 months to break-even and start delivering margins and positive profits. And in about 2.5 years, it becomes more mature, that's a typical cycle for a branch. We have already done a significant expansion and the Phase 1 and 2 were focused on widening our reach and Phase 3 of the branch expansion was focused on deepening our reach. Right now, we have slowed down the expansion only in selective cohorts, where we clearly feel that there is a gap and we need to do it, we are doing it in this year.

Provided insights into the company's branch expansion strategy, its focus on reach and deepening, and the typical break-even period for new branches.

Asked by Mohit Mangal