On Friday, HDFC Life Insurance Company reported an almost 16% increase in third-quarter earnings, buoyed by greater investment income as premium growth moderated. Profit after tax for the three months ending Dec. 31 increased to 365 crore rupees ($44.02 million) from 315 crore rupees the previous year.
Investment income is an important source of revenue for life insurance businesses because the time lag between premium payments and customer claims allows insurers to earn returns on investments.
HDFC Life's investment income more than doubled to 11,370 crore rupees during the quarter, while net premium income increased by 6% year on year. In the previous two quarters, it grew by 12.5% and 16.5%, respectively.
According to analysts, demand for larger-ticket size insurance has been muted as a result of tax reforms made on such products earlier this year.
Its new business value, which measures expected profit from new premiums, increased 5% in the nine months to December, but new business margins stayed steady at 26.5 percent year on year.
The insurer also recorded a 5% increase in total annual premium equivalent (APE) sales from April to December.
According to Kotak Institutional Equities, the insurer's APE growth may have been hurt by a probable slowdown in earnings growth at its parent company, HDFC Bank. Following the results, the company's stock dropped 1%.
