homeearnings NewsReinsurance retention limit increase will not impact solvency, says HDFC Life; rules out immediate price hike
Reinsurance retention limit increase will not impact solvency, says HDFC Life; rules out immediate price hike
HDFC Life Insurance Company posted its Q3 earnings. To discuss the same, CNBC-TV18 spoke to Vibha Padalkar, MD and CEO of the company. She cited that the company has received an increase of 40 percent in reinsurance rates along with an increase in retention limit. She believes the reinsurance retention limit increase will not impact solvency. She further mentioned that the company is not eyeing any more price hikes over the next 2 quarters.
HDFC Life Insurance Company reported a profit after tax of Rs 273.7 crore for the December quarter, up 3.3 percent on a year-on-year basis. Its net premium income increased 27.8 percent on year to Rs 12,124.4 crore. The company posted a total annual premium equivalent (APE) of Rs 2,597 crore for the third quarter of FY22, up 20.4 percent on a year-on-year basis.
In an interview with CNBC-TV18, Vibha Padalkar, MD and CEO of the company shed light on its recent performance and outlook.
On reinsurance, she cited that the company has received an increase of 40 percent in rates. She added that an increase of 50 percent in reinsurance rates will be margin neutral for the company. She elaborated that the company has doubled its reinsurance retention limit. Padalkar explained that the increase in the said limit has been gradual. She is confident that the increase in reinsurance limit will not impact solvency. HDFC Life will now be retaining Rs 40 lakh on a Rs 1 crore policy vis-à-vis its earlier limit Rs 20 lakh, she mentioned.
"We have received an increase of about 40 odd percent from the reinsurers. At every stage, we have increased it very gradually. One point I want to make is that it has no impact on solvency although it is counter intuitive because the regulations reserving calculation anyway takes into account as if we are retaining up to 50 lakhs. So 40 lakh retention is not going to impact solvency at all," she said.
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On price hikes, she highlighted that the company has increased its term insurance prices by 10-25 percent. She believes this hike will suffice for the company at this point as the increase will put it in a margin neutral position. Padalkar explained that the company is not eyeing a further hike over the next 2 quarters.
"We have increased our prices between 10-25 percent. So the 10 to 25 percent price increase against a backdrop of 40 percent increase by the reinsurers leaves us margin neutral," she said.
"We believe the price increase undertaken by us is sufficient for us. We do believe that right now, based on the reinsurance rates that we've locked, and the experience that we are seeing along with the retention that we are doing, this leaves us in a margin neutral position. I don't see an increase (in prices) would be required over the next couple of quarters," she added.
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Watch the video for the full interview.
(Edited by : Dipikka Ghosh)
First Published: Jan 24, 2022 11:31 AM IST
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