Online retail and new categories drive devote recovery. Card devote was up 11% YoY but new card acquisitions have been down 8% YoY. Both retail and corporate segments saw devote recovering to normalised levels. Online devote in non-travel categories (up 35-50% vs pre-COVID-19 level) are driving development. The share of revolver loans continued to decline from 38% (pre-COVID-19) to 28%. Thus, the decline in interest yields more than offset the advantage of minimizing funding charges. NIM, thus, declined to 13.2% (vs 14.5% in 3Q and 16.6% in 4Q20). Furthermore, larger opex development (up 5% y-o-y) kept operating earnings muted (down 1% y-o-y).
Much like ICICI Pru Life, HDFC Life’s investment variance (10% RoEV enhance) and ~1,000bps larger development assumptions based on self-confidence spurred by its March month-to-month disclosures cascade into a 15%/19% uptick in our FY22E/23E EV. It lifts our target value to `720 (`610 earlier) with the various unchanged. This coupled with the muted stock functionality drives the upgrade to ‘hold’.
Non-par savings, annuity and participating items continued to print robust development in Q4FY21. Added momentum in par as properly as non-par is also due to an enhanced functionality of bancassurance in FY21. Focus on the massive chance in the retirement segment led to development of 46% in Q4FY21 in the annuity business enterprise.
It now types 5% of general APE and 20% of total NBP. Management expects this segment to turn out to be as massive as protection (13% of APE) more than the medium term. The pension subsidiary clocked robust development of 98% in AUM to more than Rs 160billion.
In contrast to peers, the firm had taken a cautious stance in Q3FY21 and slowed down development of protection book to concentrate on constructing a top quality book. This cautious strategy would be fuelled in the wake of adverse mortality hit in EV to the tune of Rs 1.8billion.
Over the course of the year, the firm has settled more than 290,000 death claims (covid plus non-covid) and paid in excess of INR30bn. While close to-term challenges on the provide side, reluctance of shoppers to undergo healthcare verify-ups and pricing headwinds stay, we are pretty confident of the company’s medium-term development story driven by beneath-penetration of life insurance coverage and the pandemic-induced ‘mindset reset’ on the thought of protection.