HDFC Life shares up 2% despite IRDAI regulations on special surrender value, firm expects 100 bps hit to new business margin

“We are confident in our ability to largely mitigate this impact without compromising the value proposition for our customers. We expect these measures to positively impact the long-term growth prospects for the industry,” the firm said in a statement.

HDFC Life’s statement comes after the Insurance Regulatory and Development Authority (IRDAI) issued the final regulations on surrender value to be paid by life insurance companies to policy-holders in case of early surrenders of policies. The special surrender value (SSV), which has to be paid as early as the first year itself, has been kept at higher levels.

Despite this, shares of HDFC Life were trading 2.5% higher on Thursday. One of the reasons that the market may be discounting the negative news is because of the fact that a bulk of the policies tend to continue beyond the early years.

Moreover, according to a media report, analysts stated they anticipate companies to defer commission payouts to take care of this change which will see a margin moderation of up to 200 bps. A conclusion to the looming uncertainty over the regulatory norms also appears to have come as a relief for insurers and market participants.

HDFC Life reported a 15% year-on-year (YoY) rise in its net profit at ₹1,569 crore during the fiscal year 2024. Its new business premium increased 2% to ₹29,631 crore during the year while the new business margin declined to 26.3% from 27.6% in the previous fiscal. Renewal premium increased by 18% to ₹33,445 crore during the year.

Shares of the company have lost nearly 10% since the beginning of the year. The stock has traded flat in the last one year.