State of Global and Indian Economy
The financial year 2023-24 presented significant challenges for the global economy. Multiple macroeconomic and geopolitical trends continued to create widespread uncertainty. From inflationary pressures to regulatory shifts and geopolitical tensions, the factors collectively shaped a challenging environment for businesses worldwide.
To tackle inflation, major central banks brought about a restrictive monetary policy stance in their economies, which led to economic slowdown. Despite the slowdown in the developed economies as well as in some of the emerging markets, India by contrast displayed remarkable resilience. Domestic economic activity remained strong, as evident from positive indicators such as strong credit growth, Tax and GST collections, e-way bills, rail freight traffic, and air passenger traffic, among others.
Against the uncertain global backdrop, India has increasingly been in the spotlight for being the fastest growing major economy.
I am extremely optimistic about the future of our economy. India’s economic growth has surpassed global expectations as it was better able to manage its economy due to a confluence of factors such as sound government policies, strong macro-economic fundamentals, inherent domestic demand, timely regulatory interventions, and continued reforms which have ensured India’s long-term growth.
India’s GDP grew by a whopping 8.2% for FY24 and is projected to grow at 7.2% in FY25. This compares with a GDP growth of around 4% for all emerging markets and even lower for the developed world.
The onset of the Russia Ukraine war in early 2022 saw spiraling oil prices and inflation started hitting the Indian economy from April 2022. RBI successfully reigned in inflation through a series of calibrated measures.
Core Inflation has largely been reigned in and stood at 3.13% in June 2024.
In my opinion, both the government as well as the RBI did a truly outstanding job in managing the economy during the last 4 years. This has contributed significantly to making India the fastest growing major economy in the world.
Life Insurance Industry
Let me now come to the life insurance industry. The life insurance industry in India grew by 2% both in terms of new business premium as well as number of policies during FY24. Private Insurers grew by 12% on premium basis and 9% in terms of number of policies during the year. The new business premiums of Indian life insurers reached a record high of Rs 3.78 Lakh crore for the year ending March 2024.
Opportunity for Life Insurance in India
- According to Swiss Re, India is one of the fastest growing insurance markets in the world and is forecasted to be the 6th largest market by 2032 ahead of Germany, Canada and South Korea. Currently, we are the 10th largest insurance market.
- Being a largely under-insured market, India has huge potential for growth. The overall life insurance penetration in India is fairly low at 3.2%.
- Given the low insurance penetration in the country, expansion into Tier 2 and Tier 3 cities is expected to further drive growth.
In the past couple of years, the regulator has been driving the objective of “Insurance for All by 2047”. Some of the noteworthy regulatory initiatives include:
- Increased commercial and operational flexibility due to Expenses of Management
- Increased limits of raising sub debt
- The Bima Trinity of Vistaar, Vahak and Sugam
- Introduction of state level insurance committees and
- Allowing insurers to open new branches without needing prior approval of the regulator and more recently, offering increased payouts in case of early policy surrenders by customers.
IRDAI may also consider implementing a risk-based supervision model, like in the banking industry. It will lay down principles for management of operational, market and governance risk; and the insurance companies will be responsible for monitoring the same.
These regulations would increase ease of doing business, encourage development of longer-term products, and improve persistency, thereby creating value for customers.
HDFC Life Performance Update
During the year, your Company recorded a growth of 11% on a normalized basis, and a growth of 1% on an unadjusted WRP basis. Growth in ticket sizes up to Rs. 5 lakh was a robust 19% in FY 24.
HDFC Life recorded a market share of 15.4% amongst the private sector companies and an overall market share of 10.4%. Your company has consistently ranked amongst the top three players in the industry. Our AUM stood at Rs. 2.92 lakh crore and our embedded value stood at Rs. 47,468 crores, as on March 31, 2024. Our solvency ratio was healthy at 187% and our new business margin for the year was 26.3%. We witnessed a 47% growth in individual sum assured, aided by growth in pure term products, return of premium products and higher protection cover embedded in savings and investment plans.
We deepened our customer base by insuring more than 6.6 crore lives during FY24. More than 70% of the retail customers on-boarded are new to HDFC Life and almost half of these are below 35 years of age. In-line with our stated intent to broaden the customer base, the number of policies issued during the year increased by 11%.
Renewal collections grew by 18% y-o-y, demonstrating our customers’ continued trust in us. 13th month and 61st month persistency was at 87% and 53% respectively.
Subsidiaries Update
Our subsidiary, HDFC Pension Management Company Limited, achieved a milestone by crossing the Rs. 75,000 crore AUM mark, delivering a remarkable growth of 70%. We have maintained our market leadership in the pension category, commanding a market share of 43% in the retail and corporate segment.
Additionally, we are actively pursuing our expansion plan for the gift city business through our subsidiary, HDFC International Life and Re Company Ltd. With the introduction of innovative, US dollar denominated life and health insurance products like US dollar global education plan and global student health care plan we are making strides in penetrating the NRI segment.