Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — FY2020 Earnings Presentation
60 slides from Hdfc Life Insurance's earnings presentation, 2020
Slide 1: HDFC Life Insurance Investor Presentation – 12M FY20
HDFC Life Insurance Investor Presentation – 12M FY20
Slide 2: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Managing Covid-19 4 Customer Insights 5 Annexures 6 India Life Insurance Page 2
Slide 3: Performance Snapshot
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 1 Performance Snapshot
Slide 4: Executive summary: FY20
Executive summary: FY20 Scale Profitability Customer centricity Rs (Bn.) 74.1 New CY 25.9% CY 88% Company 13th month Business APE Growth 18% PY 24.6% persistency1 PY 84% Margin CY (%) 21.5 Rs (Bn.) 47.6 Overall NBP PY (%) 20.7 IEV Rs (Bn.) 206.5 Growth 18% CY (%) 14.2 EVOP Growth 18.1% Rs (Bn.) 12.7
Slide 5: Consistent performance across key metrics (1/2)
Consistent performance across key metrics (1/2) Leadership in new business premium (Rs Bn) CAGR: 28% Number of lives (Mn) CAGR: 41% 15.8% 17.2% 19.1% 20.7% 21.5% 61.3 51.4 172.4 149.7 113.5 33.2 86.2 20.9 64.9 15.4 FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 Private Market Share Maintaining ba
Slide 6: Consistent performance across key metrics (2/2)
Consistent performance across key metrics (2/2) Strong growth in VNB, Industry leading VNB margins CAGR: 27% Healthy growth in Embedded Value CAGR: 19% Rs Bn. 19.9% 22.0% 23.2% 24.6% 25.9% 20.7% 21.7% 21.5% 20.1% 18.1% 206.5 183.0 152.2 124.7 19.2 102.3 65% 68% 15.4 68% 12.8 67% 9.2 68% 7.4 32% 35%
Slide 7: Our Strategy
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 2 Our Strategy
Slide 8: Key elements of our strategy
Key elements of our strategy 1 2 3 4 5 Focus on profitable Balanced Market-leading Reimagining Quality of Board growth distribution mix innovation insurance and management Ensuring sustainable Developing multiple Identifying latent Market-leading digital Seasoned leadership and profitable growth cha
Slide 9: Focus on profitable growth
Focus on profitable growth FY17 FY18 FY19 FY20 Rs Bn. Profitable growth New business Margin 22.0% 23.2% 24.6% 25.9% Economic Profit Value of new business 9.2 12.8 15.4 19.2 distribution mix Profit after tax (PAT) Balanced 8.9 11.1 12.8 13.0 Accounting Profit Underwriting profits 7.5 8.5 9.0 10.9 Sha
Slide 10: Analysis of change in IEV
Analysis of change in IEV1 Rs Bn. EVOP – 33.1 Profitable EVOP1% - 18.1% growth 1.5 -1.2 19.2 -10.0 0.4 206.5 13.7 Operating Change in distribution mix 183.0 Economic ESOP Balanced variances Operating Post over- variances exercises assum ptions Unwind run VNB 134.6 124.3 innovation leading Market Adj
Slide 11: Balanced distribution mix
Balanced distribution mix Increasing share of proprietary channels 1 Strong and diversified network of 230+ traditional partners Banks NBFCs and MFIs SFBs Profitable growth 11% 14% 19% 22% 12% 11% 5% 5% 13% 14% 4% 9% distribution Balanced mix 72% 71% 64% 55% FY17 FY18 FY19 FY20 innovation leading Ma
Slide 12: Update on channel performance
Update on channel performance Agency HDFC Bank Profitable growth 32% - Increase in agent productivity driven by greater 49% - Share of digital new business with YoY growth of 23% engagement and ease of doing business 11% - Share of new business getting achieved through alternate distribution 91% - R
Slide 13: Addressing customer needs at every stage of life
Addressing customer needs at every stage of life 20 – 30 years 30 – 40 years 40 – 50 years 50+ years Profitable Objective Simple Savings Borrowing Investments Asset Drawdown growth Pay off Risks mortgage Addressed distribution Balanced Medical care Mortality mix First Job Medical care Net Worth Morb
Slide 14: Expanding market through consistent product innovation
Expanding market through consistent product innovation Profitable Guaranteed returns, with growth Retirement Woman option for life long income & pension FY15 FY17 FY18 FY19 FY20 distribution Balanced mix Lifelong regular income with payout flexibility and Youngstar innovation whole life cover leadin
Slide 15: Our approach to retiral solutions
Our approach to retiral solutions Opportunity to grow the current retiral corpus2 of ~Rs 360 bn to 3x in the next 5 years Profitable growth 1. NPS 2. Individual income plans 1 ▪ Ranked #1 amongst private owned Pension ▪ Providing long term retiral solutions Fund Managers in terms of AUM ▪ Catering a
Slide 16: Product mix across key channels
Product mix across key channels1 Segment FY17 FY18 FY19 FY20 Segment FY17 FY18 FY19 FY20 UL 26% 33% 26% 12% Profitable UL 61% 64% 67% 35% growth Par 57% 48% 40% 34% Agency Par 30% 26% 14% 17% Banca 2 Non par savings 8% 8% 15% 44% Non par savings 6% 5% 17% 40% Term 1% 1% 2% 2% Term 11% 11% 12% 12% An
Slide 17: Simplifying the customer journey using building blocks
Simplifying the customer journey using 5 building blocks Profitable growth Platforms and Partner Journey Service Data Enrichment Ecosystems Integration Simplification Simplification and Analytics Insurance beyond digital: Products and services built on Customer sales journeys Simplified solutions fo
Slide 18: Journey Simplification: Digital agent on-boarding and platform solutions
Journey Simplification: Digital agent on-boarding and platform solutions InstaPRL – Mobile app for on-boarding of prospective LifeNext – End-to-end portal for group partners creating a agents through journey simplification seamless journey with plug-n-play integration 1,200+ PRLs 3,600+ unique users
Slide 19: Service Simplification: NLP based WhatsApp bot
Service Simplification: NLP based WhatsApp bot Get started by scanning this QR Code Illustrative queries What is my fund value Fetch my policy details Status of my policy Or simply, send ‘Hi’ on WhatsApp to +91 82918 90569 How do I get bonus Powered by: What is mortality charge An omnichannel conver
Slide 20: Governance Framework
Governance Framework Board of Directors Profitable Independent and Experienced Board growth Committees Corporate Board Risk Policyholder Nomination & Stakeholders’ Audit Investment With Profits Social Management Protection Remuneration Relationship Committee Committee Committee Responsibility Commit
Slide 21: Financial risk management framework
Financial risk management framework Natural Hedges Product design & mix monitoring ▪ Protection and longevity businesses ▪ Prudent assumptions and pricing approach ▪ Unit linked and non par savings products ▪ Return of premium annuity products (>95% of annuity); Average age at entry ~59 years ▪ Quan
Slide 22: Summary of Milliman report on our ALM approach
Summary of Milliman report on our ALM approach1 Scope of review Portfolios reviewed • Assess appropriateness of ALM strategy to manage Portfolio 1: Savings and Protection – All non-single premium interest rate risk in non-par savings business non-par savings contracts and group protection products
Slide 23: Performance of wholly-owned subsidiary companies
Performance of wholly-owned subsidiary1 companies HDFC Pension AUM, Rs Bn. HDFC International Life and Re 82.7 51.7 11.6 0.5 Mar'15 Mar'17 Mar'19 Mar'20 Fastest growing PFM (Pension Fund Manager) under the Registered growth of 72% in gross reinsurance premium NPS architecture (YoY growth of 60%
Slide 24: Managing Covid-19
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 3 Managing Covid-19
Slide 25: Approach to manage impact of the COVID-19 outbreak
Approach to manage impact of the COVID-19 outbreak Immediate measures taken: Opportunities Accelerated Digital selling Reinvent operating Higher demand for Consolidation of Focus on selling products with end to model protection market share end digital customer journeys Enhanced focus on I
Slide 26: Managing impact of COVID-19 on business
Managing impact of COVID-19 on business New business / Customer Employee / Partner purchase interaction engagement ▪ Digital sales journey - End-to-end ▪ Seamless support experience - ▪ e-learning platform - 7,500+ agents digital sales, from prospecting till Agency conversion, including customer ins
Slide 27: Enabling end to end digital journey: Servicing
Enabling end to end digital journey: Servicing Renewal Collections Maturity / Claims payout Policy Servicing ~85% of renewal payments made Email, Whatsapp and customer portal 'My 73% increase in adoption of web and app digitally via Website, Mobile app, Quick Account‘ enabled to upload necessa
Slide 28: Enabling end to end digital journey: New Business (1/2)
Enabling end to end digital journey: New Business (1/2) Suite of mobile apps to Faster integration with new Pre-conversion Verification Simplified insurance buying facilitate customer on-boarding partners and self service via Chat through a 3-click journey Mobility API1 Integration Chat PCV Pre- App
Slide 29: Enabling end to end digital journey: New Business (2/2)
Enabling end to end digital journey: New Business (2/2) Complete integration with key Lean front-end sales Gamification of buying Ecosystem for retirement channel partners journey for POS1 products journey planning HDFC Bank Journey POSP1 Hello Selfie Life99 Ease of customer acquisition Complete
Slide 30: Customer Insights
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 4 Customer Insights
Slide 31: Customer Insights – Customer Behaviour/Preferences
Customer Insights – Customer Behaviour/Preferences Top reasons to buy Life insurance Customer behaviour / trend 2019 rank 2013 rank The future intent to buy Life Insurance is the Protect family in case of death 1 1 highest amongst financial products driven To secure child’s education/marriage 2 2
Slide 32: Some additional customer insights
Some additional customer insights1 Buying behaviour Household Distribution A repeat buyer is usually a metro 40% of families have exposure to Contribution of online customers resident, with income > Rs 10 only one product category with income bracket >Rs 15 lakhs lakhs and age > 35 years (Par/
Slide 33: Annexures
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 5 Annexures
Slide 34: Individual persistency for key channels and segments
Individual persistency for key channels and segments1 Across key channels (%) CY (FY20) 91 92 85 88 83 83 78 79 77 76 74 72 71 69 68 69 66 64 54 48 Agency Banca Direct Company 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (FY19) 91 88 83 81 84 80 77 72 75 72 74 75
Slide 35: VNB and NBM walkthrough
VNB and NBM walkthrough Rs Bn. 1.05 0.36 19.19 2.82 -0.41 Growth of 25% 15.37 vs. FY19 VNB FY19 Impact of higher Change in New Business Expense impact FY20 APE assumptions Profile 1 NBM% 24.6% 0.0% -0.6% 1.4% 0.5% 25.9% 1. Reflects the impact of difference in mix of segment/distribution channel/tenu
Slide 36: Sensitivity analysis: FY20
Sensitivity analysis: FY20 % Change in Change in VNB % Change in Analysis based on key metrics Scenario VNB 1 Margin 1 EV Change in Increase by 1% -2.8% -0.7% -1.2% Reference rate Decrease by 1% 0.9% 0.2% 0.6% Equity Market Decrease by 10% -0.3% -0.1% -1.1% movement Increase by 10% -2.1% -0.5% -0.7%
Slide 37: Stable capital position
Stable capital position Rs Bn. Dividend paid 2.6 3.3 4.0 - 120.0 230% Impact on FY20 Solvency ratio NB premium growth 33% 32% 32% 15% 210% 100.0 192% 192% Solvency as on 188% Feb 29, 2020 194% 184% 190% 80.0 70.8 170% Yes Bank AT1 62.7 -2% bonds 150% 52.1 13.1 60.0 12.7 42.1 130% Equity market 19.2
Slide 38: Assets under management
Assets under management Assets Under Management Change in AUM 1 Rs Bn. Debt 59% 61% 62% 71% Equity 41% 39% 38% 29% 189 17 14 24% 82 16% 18% 1,550 1% 30% 95 1,350 93 -20% 67 1,150 -70% 950 -145 750 1,256 1,272 -120% 1,066 917 550 350 -170% 31st Mar 2019 31st Mar 2020 150 -220% Net Fund inflow Net inv
Slide 39: Committed to Sustainability
Committed to Sustainability Governance Social Environment Corporate governance policy Swabhimaan - giving back to society - 23 CSR Water conservation and energy efficiency - Self-assessment of Board Performance projects in education, health, environment, goal- oriented initiatives adopted
Slide 40: India Life Insurance
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 6 India Life Insurance
Slide 41: Growth opportunity: Under-penetration and favourable demographics
Growth opportunity: Under-penetration and favourable demographics Life Insurance penetration 1 Life Insurance density US$ 2 (2018) (2018) 17.5% 16.8% 6.756 India remains vastly under-insured, both in terms of penetration and density 6.7% 4,195 6.2% 3,835 Huge opportunity to penetrate the 3.6% 2,
Slide 42: Low levels of penetration – Life Protection
Low levels of penetration – Life Protection 172 mn 68 mn 1.7 mn Protection gap 2 (2014) 92.2% 88.3% 78.4% 73.3% 72.5% 70.2% India has the highest protection gap in 56.3% 56.0% the region, as growth in savings and life insurance coverage has lagged behind economic and wage growth 16.4% Protection
Slide 43: Macro Opportunity of Pension Segment
Macro Opportunity of Pension Segment India’s pension market is under-penetrated at Improvements in life expectancy will lead to an average post 4.8% of GDP retirement period of 20 years Pension Assets / GDP Ratio Life expectancy at age 60 130.7 22 22 120.5 20 19 18 18 17 16 56.4 60.8 43.2 4.8 India
Slide 44: Government Bond Auctions
Government Bond Auctions Government Bonds – Tenorwise Issuance Rs Bn. 29% 27% 34% 34% 38% 35% 35% 71% 73% 66% 65% 62% 65% 65% FY14 FY15 FY16 FY17 FY18 FY19 FY20 >15yrs 1,93,000 2,06,000 2,25,000 1,54,520 1,80,529 2,04,000 2,38,000 <=15yrs 3,75,500 3,86,000 3,66,500 3,73,525 4,97,579 3,82,941 4,44,00
Slide 45: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 23% 25% 22% 17% 3% 11% 11% 10% 12% 9% 13% 20% 18% 15% 51% 52% 26% 17% 67% 60% 65% 67% 50% 54% 49% 48% 33% 40% FY07 FY10 FY13 FY18 FY07 FY10 FY13 FY18 Financial savings Physical savings Currency & depos
Slide 46: Industry new business trends
Industry new business1 trends Individual WRP in Rs bn Sensex Private players 50% 57% 52% 46% 37% 38% 38% 49% 52% 54% 56% 58% 57% Market share Growth % Private 86% 1% 7% -20% -24% 2% -3% 16% 14% 26% 24% 12% 5% LIC 0% -22% 29% 4% 11% -4% -2% -27% 3% 15% 13% 5% 8% Overall 31% -10% 17% -9% -5% -2% -3% -
Slide 47: Private industry: Product and distribution mix
Private industry: Product and distribution mix Product mix 1 Distribution mix 2 Unit Linked Conventional Individual Agents Corporate Agents - Banks Corporate Agents - Others Brokers Direct Business 67% 7% 9% 10% 10% 12% 57% 56% 14% 18% 54% 5% 4% 3% 52% 51% 51% 49% 5% 3% 3% 3% 3% 49% 4% 3% 3% 3% 3% 4
Slide 48: Appendix
Appendix
Slide 49: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) FY20 FY19 FY18 FY17 CAGR Total Premium 327.1 291.9 235.6 194.5 19% New Business Premium (Indl. + Group) 172.4 149.7 113.5 86.2 26% Renewal Premium (Indl. +Group) 154.7 142.1 122.1 108.2 13% Individual APE 61.4 52.0 48.9 37.4 18% Overall APE 74.1 62.6 55.3 41.
Slide 50: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) FY20 FY19 FY18 FY17 Overall New Business Margins (post overrun) 25.9% 24.6% 23.2% 22.0% (1) Operating Return on EV 18.1% 20.1% 21.5% 21.7% Operating Expenses / Total Premium 13.1% 13.1% 13.5% 12.6% Total Expenses (OpEx + Commission) / Total Premium 17.7% 17.0
Slide 51: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Revenue A/c Profit and Loss A/c Rs Bn. FY20 FY19 FY20 FY19 Premium earned 327.1 291.9 Income Reinsurance ceded (4.8) (2.6) - Interest and dividend income 3.6 2.9 Income from Investments (33.1) 90.3 - Net profit/(loss) on sale 0.8 1.1 Other Income 2.1 1.2 Transfer from S
Slide 52: Balance Sheet
Balance Sheet Mar 31, 2020 Mar 31, 2019 Rs Bn. Shareholders’ funds Share capital (including Share premium) 24.2 23.8 Accumulated profits 45.7 32.7 Fair value change (1.9) (0.0) Sub total 68.0 56.6 Policyholders’ funds Fair value change 0.5 11.1 Policy Liabilities 652.7 536.3 Provision for Linked Lia
Slide 53: Segment wise average term and age
Segment wise average term and age1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) FY20: 19.6 (FY19: 14.6) FY20: 37.2 (FY19: 37.5) 12 UL 37 UL 38 11 Par 35 27 37 Par 15 Non-par Health 33 18 35 Non-par Health 10 Non-par Savings 38 11 35 Non-par Savings 13 34 N
Slide 54: Indian Embedded value: Methodology and Approach (1/2)
Indian Embedded value: Methodology and Approach (1/2) Overview Indian Embedded Value (IEV) consists of: Adjusted Net Worth (ANW), consisting of: – Free surplus (FS); – Required capital (RC); and Value of in-force covered business (VIF): Present value of the shareholders’ interest in the earnings
Slide 55: Indian Embedded value: Methodology and Approach (2/2)
Indian Embedded value: Methodology and Approach (2/2) Components of Value in-force covered business (VIF) Present value of future profits (PVFP): PVFP is the present value of projected distributable profits to shareholders arising from the in-force covered business determined by projecting the sha
Slide 56: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Mar 31, 2020 As at Mar 31, 2019 As at Mar 31, 2020 As at Mar 31, 2019 1 4.69 6.63 4.58 6.42 2 5.69 6.99 5.06 6.59 3 6.52 7.31 5.48 6.74 4 7.04 7.58 5.81 6.88 5 7.29 7.80 6.06 7.01 10 7.18 8.32 6.55 7.43 15 7.03 8.31 6.64
Slide 57: Glossary (Part 1)
Glossary (Part 1) APE (Annualized Premium Equivalent) - The sum of annualized first year regular premiums and 10% weighted single premiums and single premium top-ups Backbook surplus – Surplus accumulated from historical business written Conservation ratio - Ratio of current year renewal premi
Slide 58: Glossary (Part 2)
Glossary (Part 2) Operating expense - It includes all expenses that are incurred for the purposes of sourcing new business and expenses incurred for policy servicing (which are known as maintenance costs) including shareholders’ expenses. It does not include commission. Operating expense ratio -
Slide 59: Disclaimer
Disclaimer This presentation is for information purposes only and does not constitute an offer or invitation to sell or the solicitation of an offer or invitation to purchase any securities (“Securities”) of HDFC Life Insurance Company Limited (formerly HDFC Standard Life Insurance Company Limited)
Slide 60: Thank you
Thank you
HDFC Life Insurance Company — FY2020 Earnings Presentation on 6ix