Icici Prudential Life Insurance Co. Ltd. · NSE:ICICIPRULI

Icici Prudential Life Insurance — Investor Presentation (December 2018)

58 slides from Icici Prudential Life Insurance's investor presentation, Dec 6, 2018

  1. Slide 1: Investor presentation cover letter to exchanges

    flIC/CI PRLDENT1AL1~,r December 6, 2018 General Manager Vice President Listing Department Listing Department BSE Limited, National Stock Exchange of India Limited Phiroze Jeejeebhoy Tower, 'Exchange Plaza', Dalal Street, Bandra-Kurla Complex, Mumbai 400 001 Sandra (East), Mumbai 400 051 Dear Sir/Mad

  2. Slide 2: Performance update

    Performance update December 06, 2018

  3. Slide 3: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 2

  4. Slide 4: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 3

  5. Slide 5: Strategic elements

    Strategic elements Premium Growth Protection VNB Growth Productivity Persistency Customer centricity continues to be at the core 4

  6. Slide 6: Strategic elements (1/4)

    Strategic elements (1/4)  Focus on retail for long term sustainability  Diversification of distribution Premium growth  Customer centric products  Unmatched on-boarding experience  APE1 declined by 5.3% in 8M-FY2019 (5.4% in H1-FY2019)  November-2018 APE grew by 0.3% (Q2-FY2019 growth of 6.2%)

  7. Slide 7: Premium growth

    Premium growth H1- H1- Oct- Nov- 8M- 8M- ` billion FY2018 FY2019 FY2019 FY2019 FY2018 FY2019 APE 35.74 33.81 5.09 6.87 48.35 45.77 APE growth 36.8% (5.4%) (11.8%) 0.3% 30.9% (5.3%) RWRP 34.42 31.48 4.69 5.11 46.79 41.27 RWRP 38.8% (8.5%) (17.2%) (23.9%) 32.3% (11.8%) growth 6

  8. Slide 8: Strategic elements (2/4)

    Strategic elements (2/4)  Meeting the needs of both income replacement and liability cover  Comprehensive suite of products Protection focus  New partnerships  Leveraging technology for risk calibrated superior underwriting H1-FY2019 update:  Protection APE growth of 77.3%  Growth across all s

  9. Slide 9: Strategic elements (3/4)

    Strategic elements (3/4)  Drive renewal premium with the same rigour as new business Persistency  Offer convenience of multiple payment options  The single most important indicator of business quality H1-FY2019 update:  Total premium growth of 14.9%  Retail renewal premium growth of 23.1%  Imp

  10. Slide 10: Strategic elements (4/4)

    Strategic elements (4/4)  Leverage technology for process re-engineering and drive productivity Productivity  Tablet as a virtual office  Derive value from every rupee spent H1-FY2019 update:  Cost/TWRP (savings LOB) at 12.7% compared to 12.4% in H1-FY2018  Ratio expected to improve with growth

  11. Slide 11: VNB growth

    VNB growth ` billion FY2017 FY2018 H1-FY2018 H1-FY2019 Value of New 6.66 12.86 4.17 5.90 Business (VNB)1 VNB margin 10.1% 16.5% 11.7% 17.5% VNB growth 61.7% 93.1% 70.9% 41.5% 1. For full year, based on actual cost; H1: based on management forecast of full year cost 10

  12. Slide 12: Key developments

    Key developments Products New features added to our flagship term product  Limited pay option  Whole-life coverage option Distribution Partnership tie-up with Saraswat Bank  India’s largest Co-operative bank  Bancassurance agreement Technology Initiatives across the product life cycle  Natural

  13. Slide 13: Outlook

    Outlook  Strong growth potential for industry Premium  Savings premium growth expected to be higher than growth nominal GDP growth  Protection business can grow at a higher rate than Protection savings  Continued improvement in persistency and quality Persistency parameters Productivity  Produc

  14. Slide 14: Strategic elements

    Strategic elements Premium Growth Protection VNB Growth Productivity Persistency Customer centricity continues to be at the core 13

  15. Slide 15: Premium growth

    Premium growth Retail mix (%) 98.4 97.3 98.2 95.8 77.92 35.74 33.81 ` billion 66.25 FY2017 FY2018 H1-FY2018 H1-FY2019 Market share (RWRP) FY2018 H1-FY2019 Total industry 11.8% 11.4% Private sector 20.9% 20.2%  APE growth of 6.2% for Q2-FY2019  Retail AUM at 89.3% of total AUM 14

  16. Slide 16: Customer centric products

    Customer centric products ` billion FY2017 FY2018 H1-FY2018 H1-FY2019 Savings 63.64 73.45 34.23 31.14 ULIP 55.69 63.81 29.24 27.77 Par 6.38 8.46 4.38 2.71 Non par 0.72 0.40 0.15 0.26 Group 0.86 0.78 0.46 0.40 Protection1 2.60 4.46 1.50 2.66 Total APE 66.25 77.92 35.74 33.81  ULIP APE grew by 13.7%

  17. Slide 17: Multi-channel distribution

    Multi-channel distribution1 ` billion FY2017 FY2018 H1-FY2018 H1-FY2019 Bancassurance 37.72 40.75 18.32 19.01 Agency 15.41 19.79 9.69 7.46 Direct 7.98 10.54 5.14 4.00 Corporate agents and 4.07 4.70 1.96 1.92 brokers Group2 1.07 2.13 0.64 1.42 1.6% 2.7% 1.8% 4.2% Channel mix (%) 6.1% 6.0% 5.4% 5.7% 1

  18. Slide 18: Protection

    Protection ` billion 4.46 2.66 2.60 1.50 FY2017 FY2018 H1-FY2018 H1-FY2019  45.3% of retail new business policies are protection  New business sum assured grew by 39.9% to ` 1,826.31 billion 17

  19. Slide 19: Persistency (retail excluding single premium)

    Persistency1 (retail excluding single premium) Month FY2017 FY2018 H1-FY2018 5m-FY2019 13th month 84.7% 85.8% 85.7% 85.2% 25th month 73.0% 77.0% 73.6% 77.8% 37th month 65.5% 67.6% 66.3% 68.3% 49th month 58.3% 62.8% 59.8% 63.7% 61st month 53.8% 53.7% 54.4% 54.8% ` bn FY2017 FY2018 H1-FY2018 H1-FY2019

  20. Slide 20: Productivity: Cost efficiency

    Productivity: Cost efficiency FY2017 FY2018 H1-FY2018 H1-FY2019 Expense ratio (excl. commission)1 11.4% 8.2% 8.7% 10.5% Commission ratio2 3.6% 5.5% 5.4% 5.6% Cost/TWRP3 15.1% 13.7% 14.1% 16.1% Cost / Average AUM4 2.8% 2.6% 2.4% 2.7% Cost/TWRP (Savings LOB) 13.3% 11.8% 12.4% 12.7% 34.75 31.60 ` billi

  21. Slide 21: Financial update

    Financial update @ICICI PRUDENTIAL? 3, 20 pLirFe «NS UR AN CER

  22. Slide 22: Embedded Value (EV)

    Embedded Value (EV)1 187.88 192.48 ` billion 161.84 70.24 66.45 67.56 117.64 126.03 94.28 Mar-2017 Mar-2018 Sept-2018 Value of inforce (VIF) Adjusted net worth (ANW)  VIF grew by 7.1% in H1-FY2019 1. As per Indian Embedded Value (IEV) method Components may not add up to the totals due to rounding o

  23. Slide 23: Financial metrics

    Financial metrics ` billion FY2017 FY2018 H1-FY2018 H1-FY2019 Growth Retail new business 70.66 84.02 38.16 36.03 (5.6%) premium Retail renewal premium 142.19 174.97 70.32 86.59 23.1% Group premium 10.69 11.70 6.36 9.38 47.5% Total premium 223.54 270.69 114.84 131.98 14.9% Value of New Business 6.66

  24. Slide 24: VNB growth levers update (4P's)

    VNB growth levers update (4P’s) ` billion FY2017 FY2018 H1-FY2018 H1-FY2019 Growth Premium growth (APE)1 66.25 77.92 35.74 33.81 (5.4%) Protection APE 2.60 4.46 1.50 2.66 77.3% Persistency2 (13th month 84.7% 85.8% 85.7% 85.2% NA excluding single premium) Productivity (Cost/TWRP- 13.3% 11.8% 12.4% 12

  25. Slide 25: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 24

  26. Slide 26: Favourable demography

    Favourable demography Large and Growing Population Base1 High Share of Working Population1 Population of age 25-59 years: India (mn) 2017 Population (mn) 1339 1410 724 576 209 264 324 51 57 127 144 China S Korea S Africa Russia Brazil Japan Indonesia USA India 2015 2030 Rising Affluence2 Driving GDP

  27. Slide 27: Financialisation of savings: Opportunity for insurance

    Financialisation of savings: Opportunity for insurance Household savings (excl. currency)1 Distribution of financial savings (excl. currency) 2 90 66% 70% 62% 59% 58% 60% 70 51% 50% 23.8% 48% 49% 48% 25.1% 19.0% 18.8% 50% 26.7% 20.3% 45% 42% 41% 29.0% 50 41% 20.5% 34% 40% 16.0% 32% ` tn 23.3% 27% 30

  28. Slide 28: Protection opportunity: Income replacement

    Protection opportunity: Income replacement Sum assured as % of GDP1,2 Protection Gap 3,4 270% 92 56 85 33 73 78 73 56 260% 226% 166% 8.56 149% 6.58 USD tn 106% 5.30 96% 76% 1.09 0.79 0.77 0.52 0.40 India US Singapore Malaysia Japan Korea Germany Thailand India Singapore Malaysia S. Korea Indonesia J

  29. Slide 29: Protection opportunity: Liability cover

    Protection opportunity: Liability cover ` billion Retail credit 19,085 16,200 13,922 9,339 11,663 7,599 10,097 8,976 6,454 5,378 4,711 4,409 8,601 9,746 6,285 7,468 4,567 5,386 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 Home Loans Others  Retail credit has been growing at a healthy pace  Credit lif

  30. Slide 30: Protection opportunity

    Protection opportunity Gross direct premium (` bn) FY2008 FY2018 CAGR Health 50.45 378.97 22.3% Motor 130.63 593.14 16.3% Motor Own Damage (OD) 84.19 263.59 12.1% Motor Third Party (TP) 46.44 329.55 21.6%  Protection premium ~ ` 100 billion for life insurance industry in FY2018 Source: General Insu

  31. Slide 31: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 30

  32. Slide 32: Evolution of life insurance industry in India

    Evolution of life insurance industry in India FY2002 FY2010 FY2015 FY2018 New business premium1 (` bn) 116 408 15.9% 635 21.5% 550 -5.8% Total premium (` bn) 501 23.2% 2,654 4.3% 3,281 11.8% 4,583 Penetration (as a % to GDP) 2.1% 4.1% 2.6% 2.7% Assets under management 2,304 24.0% 12,899 12.6% 23,361

  33. Slide 33: Channel mix

    Channel mix1 Industry Private players 8% 9% 11% 16% 18% 23% 23% 25% 23% 54% 54% 50% 69% 66% 65% 30% 28% 28% FY2017 FY2018 Q1FY2019 FY2017 FY2018 Q1FY2019 Agency Bancassurance Others  Given a well developed banking sector, bancassurance continues to be the largest channel for private players 1. Indi

  34. Slide 34: Product mix

    Product mix1 Industry Private players 25% 27% 26% 51% 54% 51% 75% 73% 74% 49% 46% 49% FY2017 FY2018 Q1FY2019 FY2017 FY2018 Q1FY2019 Traditional ULIP  Strong customer value proposition of ULIPs  Transparent and low charges  Lower discontinuance charges compared to other savings products  Choice a

  35. Slide 35: Annexures

    Annexures @ICICI PRUDENTIAL? 3, x” pLirFe «NS UR AN CER

  36. Slide 36: Categories of products

    Categories of products Savings  Transparent Linked  Choice of asset class  Low charges and minimal lapse risk for customers  Return upside through segment surplus1 i.e. income net Par expense/reserve  High lapse risk for customers  Guaranteed returns Non-Par savings  High lapse risk for custo

  37. Slide 37: Average APE by product categories

    Average APE by product categories Average retail FY2015 FY2016 FY2017 FY2018 APE per policy (`) ULIP 129,087 149,777 169,701 180,746 Par 38,430 44,533 56,325 62,379 Non par 25,233 23,656 39,153 54,187 Protection 4,408 10,284 9,815 9,123 Total 73,047 87,194 92,735 90,620 36

  38. Slide 38: Policy term and customer age

    Policy term and customer age1 Average policy term (years) Average customer age (years) 44 26 36 12 Savings Protection Savings Protection 1. For FY2018; protection excludes credit life 37

  39. Slide 39: Channel wise product mix

    Channel wise product mix1 Channel Category Product Category FY2015 FY2016 FY2017 FY2018 ULIP 88.4% 88.9% 92.1% 89.8% Par 10.0% 9.1% 5.3% 7.3% Bancassurance Non par 0.0% 0.0% 0.4% 0.1% Protection 1.5% 2.0% 2.2% 2.7% Total 100.0% 100.0% 100.0% 100.0% ULIP 78.5% 76.4% 79.5% 81.8% Par 19.2% 19.6% 14.2%

  40. Slide 40: Retail persistency excluding single premium

    Retail persistency excluding single premium1 Persistency across Product Categories 86.8% 88.4% 88.9% 82.3% 62.1% 61.4% 63.9% 62.9% ULIP Par Non-par Protection 13th month 49th month Persistency across Channel Categories 89.8% 87.6% 88.9% 85.2% 65.2% 62.7% 58.7% 58.2% Bancassurance Agency Direct Corpo

  41. Slide 41: Retail persistency (including single premium)

    Retail persistency (including single premium) Month FY2016 FY2017 FY2018 5M-FY2019 13th month 82.4% 85.7% 86.8% 86.3% 25th month 71.2% 73.9% 78.3% 79.4% 37th month 61.6% 66.8% 68.8% 69.3% 49th month 62.2% 59.3% 64.2% 65.1% 61st month 46.0% 56.2% 54.5% 55.7% As per IRDA circular dated January 23, 201

  42. Slide 42: Fund performance

    Fund performance Benchmark Fund 14.9% 14.2% 11.9% 10.5% 10.9% 9.5% 8.5% 8.7% 8.7% 7.2% 7.1% 7.9% 3.5% 3.7% 2.3% 0.6% 1Y 5Y 1Y 5Y 1Y 5Y 1Y 5Y Preserver Protector Balancer Maximiser (Liquid fund) (Debt fund) (Balanced fund) (Equity fund) 85% of linked portfolio out performed benchmark indices since in

  43. Slide 43: Embedded Value

    Embedded Value @ICICI PRUDENTIAL? 3, 2 pLirFe «NS UR AN CER

  44. Slide 44: Embedded Value growth

    Embedded Value growth ` bn FY2015 FY2016 FY2017 FY2018 Value of In force (VIF) 82.88 84.25 94.28 117.64 Adjusted Net worth 54.33 55.14 67.56 70.24 Embedded Value1 137.21 139.39 161.84 187.88 Return on Embedded Value 15.4% 16.2% 16.5% 22.7% (ROEV)2 EV growth-pre dividend 24.8% 12.1% 20.6% 23.4% EV gr

  45. Slide 45: Analysis of movement in EV

    Analysis of movement in EV1 ` bn FY2015 FY2016 FY2017 FY2018 Opening EV 117.75 137.212 139.39 161.84 Unwind 11.70 12.58 12.21 13.72 Value of New Business (VNB) 2.70 4.12 6.66 12.86 Operating assumption changes 1.60 1.042 1.00 7.64 Persistency variance 2.01 0.99 1.53 Mortality and morbidity variance

  46. Slide 46: EV methodology

    EV methodology  EV results prepared based on the Indian Embedded Value (IEV) methodology and principles as set out in Actuarial Practice Standard 10 (APS10) issued by the Institute of Actuaries of India (IAI)  EV consists of Adjusted Net Worth (ANW) and Value of in-force covered business (VIF)  A

  47. Slide 47: Components of ANW

    Components of ANW  Required capital (RC)  The level of required capital is set equal to the amount required to be held to meet supervisory requirements  It is net of the funds for future appropriation (FFAs)  Free surplus (FS)  Market value of any assets allocated to, but not required to suppor

  48. Slide 48: Components of VIF (1/2)

    Components of VIF (1/2)  Present value of future profits (PVFP)  Present value of projected distributable profits to shareholders arising from in-force covered business  Projection carried out using ‘best estimate’ non-economic assumptions and market consistent economic assumptions  Distributabl

  49. Slide 49: Components of VIF (2/2)

    Components of VIF (2/2)  Time value of financial options and guarantees (TVFOG)  Represents additional cost to shareholders that may arise from the embedded financial options and guarantees  Stochastic approach is adopted with methods and assumptions consistent with the underlying embedded value

  50. Slide 50: Components of EV movement (1/2)

    Components of EV movement (1/2)  Expected return on existing business (unwind)  Expected investment income at opening reference rate on VIF and ANW  Expected excess ‘real world’ investment return over the opening reference rate on VIF and ANW  Operating assumption changes  Impact of the update

  51. Slide 51: Components of EV movement (2/2)

    Components of EV movement (2/2)  Operating experience variance  Captures impact of any deviation of actual experience from assumed in the opening EV during the inter-valuation period  Economic assumption changes and Investment variance  Impact of the update of the reference rate yield curve, inf

  52. Slide 52: Key assumptions underlying EV (1/2)

    Key assumptions underlying EV (1/2)  Discount rate and Fund earning rates  Set equal to reference rates which is proxy for risk free rates  Reference rates derived on the basis of zero coupon yield curve published by the Clearing Corporation of India Limited  Expenses and commission  Based on t

  53. Slide 53: Key assumptions underlying EV (2/2)

    Key assumptions underlying EV (2/2)  Mortality and morbidity  Based on Company’s experience with an allowance for future improvements in respect of annuities  Persistency  Based on Company’s experience  Taxation  Taxation costs reflect the reduction in costs due to dividend income being tax ex

  54. Slide 54: Sensitivity analysis (FY2018)

    Sensitivity analysis (FY2018) Scenario % change in EV % change in VNB Increase in 100 bps in the reference rates (2.1) (4.9) Decrease in 100 bps in the reference rates 2.2 5.2 10% increase in the discontinuance rates (1.3) (8.6) 10% decrease in the discontinuance rates 1.4 9.1 10% increase in mortal

  55. Slide 55: Economic assumptions underlying EV

    Economic assumptions underlying EV Tenor (years) Reference Rates September 30, March 31, 2017 March 31, 2018 2018 1 6.35% 6.57% 7.59% 5 7.78% 8.21% 8.62% 10 8.02% 8.31% 8.63% 15 8.03% 8.11% 8.52% 20 8.03% 7.97% 8.42% 25 8.03% 7.91% 8.35% 30 8.03% 7.88% 8.31% 54

  56. Slide 56: Glossary

    Glossary  Annualized Premium Equivalent (APE) - Annualized Premium Equivalent (APE) is the sum of annualized first year premiums on regular premium policies, and ten percent of single premiums, from both individual and group customers  Assets under management (AUM) - AUM refers to the carrying val

  57. Slide 57: Safe harbor

    Safe harbor Except for the historical information contained herein, statements in this release which contain words or phrases such as 'will', 'would', ‘indicating’, ‘expected to’ etc., and similar expressions or variations of such expressions may constitute 'forward-looking statements'. These forwar

  58. Slide 58: Thank you

    57 Thank you @ICICI PRUDENTIAL? 3, puire «NS UR AN CEE

ICICI Prudential Life Insurance Company — Investor Presentation (December 2018) on 6ix