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HDFC Life provisions Rs 700 crore as of June-end; COVID 3rd wave not factored in

Updated : July 20, 2021 13:01:54 IST

HDFC Life Insurance is on the radar after its first quarter earnings. HDFC Life reported a 33 percent decline in its net profit to Rs 302 crore for the quarter ended June 30, 2021. The insurer had posted a net profit of Rs 451 crore in the corresponding quarter of the previous fiscal. The total premium during Q1 FY22, however, increased by 31 percent to Rs 7,656 crore as against Rs 5,863 crore in FY21. The insurer also witnessed a big 40 percent jump in the value of new business (VNB) margin and a 20 percent growth in renewal premium in April-June of FY22.

The company has revised the COVID provisioning figure significantly. To talk about that, the quarterly performance and the business outlook, CNBC-TV18 spoke with Vibha Padalkar, MD & CEO, HDFC Life Insurance.

Talking about provisions, Padalkar said,” The way we have gone about this is we have set up provision of Rs 700 crore as of June 30. At the start of the pandemic, we had set up a provision of Rs 41 crore, March of year before, and March of 2021 we raised it to Rs 165 crore, which we thought was sufficient. However, the devastating impact of second wave in India, especially in the months of April and May - the claims continued to remain extremely elevated almost 3 to 4 times at the peak of wave one. So, we thought it would be better for us to remain cautious at the end of Q1.”

“Although we had around Rs 69 crore leftover from Rs 165 crore, we thought it would be prudent for us to top it up and have this robust amount of Rs 700 crore, which includes both individual as well as group claims,” said Padalkar.

However, she clarified that while making this provision they have not taken into account the third wave if that is very acute. “If the third wave is less potent than the first wave or similar to the first wave, we will still be okay but if it is worse than the second wave then that is not what we have expressly provided for. It might still be enough but right now, it has not been factored into our explicit calculations,” she added.

The profits for the company in Q1 saw a sharp drop, both on quarter-on-quarter and year-on-year basis. Throwing light on that, Padalkar said, it is nothing but the extra mortality reserve. Of the Rs 700 crore, some of it has hit profit for the quarter, there is nothing more to that. “All our other metrics, whether you look at topline, whether you look at expense ratio, whether you look at overall investment performance, the regular policy claims there is nothing unusual except the extra mortality reserve,” she said, adding that the company will assess how much of the extra mortality reserve of Rs 700 crore has utilised at the end of the Q2 and Q3.

(With inputs from PTI)

For the full interview, watch the accompanying video.
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