Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — 9M FY23 Earnings Presentation
61 slides from Hdfc Life Insurance's earnings presentation, 2023
Slide 1: Investor Presentation – 9M FY23
Investor Presentation – 9M FY23
Slide 2: Executive summary: 9M FY23
Executive summary: 9M FY23* Revenue & Scale Profitability & Cost Customer & Capital Rs.Bn 68.3 CY 26.5% CY 87% Individual New Business 13th month WRP Market Margin (NBM) persistency PY 26.5% PY 87% 15.8% Share Renewal CY 191.9 CY 21.6 Overall 99.6% VNB (Rs Bn.) Claim settlement Premium (Rs PY 17.8 r
Slide 3: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Our approach to ESG 4 Annexures 5 Life insurance in India Page 3
Slide 4: Consistent, predictable, sustained performance
Consistent, predictable, sustained performance Rs bn Holistic growth Consistent track record over multiple periods New business premium Renewal premium VNB 242 218 113 80 122 40 26.8 21.9 19.2 FY14 FY18 FY22 FY14 FY18 FY22 12.8 9.2 7.4 Protection APE2 Annuity new business 13.2 48.7 FY16 FY17 FY18 FY
Slide 5: Demonstrating resilience in the current environment (1/2)
Demonstrating resilience in the current environment (1/2) Rs bn Strong, sustainable growth Strong CP volumes on the back of higher disbursements1 Overall 8.1% 9.2% 9.3% 10.3% mkt share Pvt. mkt 14.2% 15.5% 14.8% 15.8% 17% YoY growth share in Q3 FY23* 17% -19% 55% 52% YoY 19% 17% 16% 13%* growth _ 53
Slide 6: Demonstrating resilience in the current environment (2/2)
Demonstrating resilience in the current environment (2/2) Rs bn Stable Persistency1 On track to achieving margin neutrality for FY232 87% 26.4% 26.5% ▪ Multiple pools of 87% ▪ Focus on quality of profitability contributing business and providing to VNB accretion 53% 52% superior customer experience_
Slide 7: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Our approach to ESG 4 Annexures 5 Life insurance in India Page 7
Slide 8: Key elements of our strategy
Key elements of our strategy 1 2 3 4 5 Focus on profitable Diversified Market-leading Reimagining Quality of Board growth distribution mix innovation insurance and management Ensuring Developing multiple Creating new Market-leading Seasoned sustainable and channels of growth product digital capabili
Slide 9: Focus on profitable growth
Focus on profitable growth FY20 FY21 FY22 9M FY22 9M FY232 Rs bn Profitable growth 26.5% Economic New business Margin 25.9% 26.1% 27.4% 26.5% Profit Value of new business 19.2 21.9 26.8 17.8 21.6 distribution Diversified Profit after tax (PAT) 13.0 13.6 12.1 8.5 10.0 Accounting mix Profit Underwriti
Slide 10: Analysis of change in IEV
Analysis of change in IEV EVOP – 42.3 Rs bn EVOP1% - 17.5% Profitable growth 21.6 1.1 11.6 16.7 377.0 19.6 Operating 329.6 VNB variances Economic Dividend & distribution mix Unwind variances Capital Diversified infusion 251.6 228.3 innovation Market- leading Adjusted Net worth (ANW) Value of in-forc
Slide 11: Diversified distribution mix enabled by multiple levers
Diversified distribution mix enabled by multiple levers Proprietary1 Banks , SFBs, Other CAs NBFCs, MFIs Brokers & Aggregators Profitable growth 1.5L+ Agents distribution Diversified mix 500+Branches 48 Digital Branches2 www.hdfclife.com innovation HDFC Life App Market- leading Group, Pension & Inte
Slide 12: Bancassurance powered by innovation, technology and people
Bancassurance powered by innovation, technology and people Partner Profitable Product Tech & Capability building & growth experience & Distribution proposition Digitization resourcing engagement Comprehensive Defined Strong presence One stop solution Learning on the product suite engagement across m
Slide 13: Balanced product mix in Agency enabled by technology and training
Balanced product mix in Agency enabled by technology and training Profitable Secure communication platform for all FAME growth agency stakeholders Agency Life AI & ML based customer interactions Contest launch, updates, qualification, Skilling and engagement and opportunities The Selling Skills rewa
Slide 14: Addressing customer needs at every stage of life
Addressing customer needs at every stage of life <25 years 25-35 years 36 – 50 years 50+ years Risks Addressed Profitable Objective Simple Savings Borrowing Investments Asset Drawdown growth Pay off mortgage Mortality distribution Diversified Medical care mix Morbidity First Job Medical care Net Wor
Slide 15: Our approach to retiral solutions
Our approach to retiral solutions 1. NPS Profitable growth ▪ Largest Pension Fund Manager (PFM) in Retail ▪ Market share grew from 36.5% in Dec’21 to 40.2% in Dec’22 and Corporate NPS segment, with AUM of Rs amongst all PFMs 399 bn1 ▪ Company has ~1.4 mn PFM customers ▪ Registered strong YoY growth
Slide 16: Product mix across key channels
Product mix across key channels1 Segment FY20 FY21 FY22 9M FY23 Segment FY20 FY21 FY22 9M FY23 UL 12% 10% 16% 11% Profitable UL 32% 27% 29% 26% growth Par 34% 37% 33% 37% Agency Par 18% 37% 33% 28% Banca 2 Non par savings 44% 30% 33% 38% Non par savings 40% 39% 39% 42% Term 4% 4% 4% 3% Term 12% 11%
Slide 17: Aligned to make life simpler for customers
Aligned to make life simpler for customers Profitable growth 1 3 5 distribution Diversified mix Give me a Accelerate SERVICE Give me PLATFORMS simple journey JOURNEY SIMPLIFICATION frictionless Nudge me in independent from purchase SIMPLIFICATION for connect and my world buying / service personaliza
Slide 18: Partnering with Start-ups to innovate
Partnering with Start-ups to innovate Profitable growth An industry first start-up connect program launched in June 2019, now in its 5th phase. distribution Diversified mix Futurance program has witnessed over 450 applications innovation Market- leading 20+ Start-ups shortlisted till date to connect
Slide 19: New in-house automated underwriting rule engine
New in-house automated underwriting rule engine Developed in-house automated rule engine to replace existing externally sourced rule engine Profitable growth Benefits Complete control - No dependencies on external rule engine service distribution Diversified provider mix Highly efficient, scalable &
Slide 20: Journey Simplification
Journey Simplification Credit Bureau, ITR & EPFO Integration aiding better throughput Empowering a seamless customer onboarding journey Benefits Profitable growth Hassle free customer onboarding experience distribution Diversified mix Proposal Bureau/ITR/EPFO Financial UW by Enhanced risk assessment
Slide 21: Strengthening underwriting and simplifying customer journey
Strengthening underwriting and simplifying customer journey Cardiac risk assessment (CRA) at home for Home medicals for NRI customers medical underwriting Profitable growth Convenience to individuals who have to undergo medicals while applying for an HDFC Life insurance policy distribution Diversifi
Slide 22: Governance framework
Governance framework Board of Directors Profitable growth Independent and experienced Board Committees Risk Policyholder Nomination & Corporate Social Stakeholders’ Audit Investment With Profits Capital Raising Board Management Protection Remuneration Responsibility Relationship Committee Committee
Slide 23: 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 ▪ Defe
Slide 24: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Our approach to ESG 4 Annexures 5 Life insurance in India Page 24
Slide 25: ESG at a Glance
ESG at a Glance ESG Focus Areas ESG Score Highlight: Highest rated Indian insurance company in the ESG assessment by S&P Global 25
Slide 26: Ethical Conduct & Governance
Ethical Conduct & Governance • ESG Management Committee, led by the Chief Financial Officer oversees the policy implementation and operational controls for environmental risks including Climate change • The overall accountability for the ESG issues lies with the CSR Committee of the Board • Performa
Slide 27: Ethical Conduct & Governance (contd.)
Ethical Conduct & Governance (contd.) Information / Cybersecurity Policies and Frameworks • Anti-bribery & Anti-corruption Policy • Risk oversight by Board Risk Management Committee and risks • Anti Money Laundering (AML) Policy reporting done on a quarterly basis • Board Diversity Policy • Code of
Slide 28: Responsible Investment
Responsible Investment Responsible Investment Policy Sustainable Equity Fund Objective What is Sustainable Equity fund & why invest in it? To generate optimal risk adjusted returns over the long term This fund shall seek to generate returns from investing in Actuarial companies with high ESG standar
Slide 29: Employee Engagement & Diversity, Equity and Inclusion
Employee Engagement & Diversity, Equity and Inclusion (DEI) Special Recognition Employee diversity, equity & inclusion o Great Places to Work – 39th amongst top 100 Best Places o Promoting DEI ally ship: leadership o Best workplaces for Women 2021– development, communication, Great Place to Work Ins
Slide 30: Holistic Living: Inclusive Growth
Holistic Living: Inclusive Growth FY22 Sector-wise budget break-up 3% Customer Highlights CSR Numbers CSR Numbers 24% 21% Claim settlement ratio (individual & group) Number of lives covered 99.6% 5.4 crore Rural sector Customer Satisfaction 1,89,147 52% Score for March’22 Social sector 88.9 % 1,00,8
Slide 31: Holistic Living: Delivering superior customer experience
Holistic Living: Delivering superior customer experience Customer Centricity Simplifying buying journeys through platforms Online claim processing for eligible Journey simplification – like LifeEasy (online term purchase) customers via EasyClaims platform frictionless sales and Actuarial service Doc
Slide 32: Sustainable Operations
Sustainable Operations Energy and water Digitization - Reduction of Paper Usage Waste management o Introduction of E-business cards & o Since 2014 only 3 or 5 ID cards star rating air – conditioners used o Online /e-forms for customers Actuarial o 94% of branches use LED o Annual report FY20, FY21 a
Slide 33: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Our approach to ESG 4 Annexures 5 Life insurance in India Page 33
Slide 34: Persistency trends for HDFC Life
Persistency trends for HDFC Life1 Across key channels (%) CY (9M FY23) 88 86 90 87 83 78 76 78 71 70 73 71 62 65 64 64 55 53 56 52 Agency Banca Direct Company 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (9M FY22) 89 93 86 87 80 81 79 77 73 76 69 71 67 66 66 63 6
Slide 35: Improving VNB trajectory for both existing and acquired businesses
Improving VNB trajectory for both existing and acquired businesses Rs bn Actuarial 2.0 1.5 3.9 0.6 21.6 17.8 Financial 1 9M FY22 Impact of higher Change in New Business Profile Fixed cost 9M FY23* ESG APE assumptions absorption NBM% 26.5% 0.0% -0.7% 2.5% -1.8% 26.5% 1. Reflects the impact of differe
Slide 36: Sensitivity analysis – H1 FY23 (Pre-Merger basis)
Sensitivity analysis – H1 FY23 (Pre-Merger basis) Change in VNB Analysis based on key metrics Scenario % Change in EV Margin 1 Change in Increase by 1% -1.4% -2.3% Reference rate Decrease by 1% 0.7% 1.9% Equity Market Decrease by 10% -0.2% -1.4% movement Increase by 10% -0.5% -0.4% Persistency (Laps
Slide 37: Capital position
Capital position Rs bn 230% 209% 200.0 201% 210% 184% 190% 176% 150.0 142.5 170% 40.0 150% 94.3 97.7 100.0 130% 14.3 70.8 24.0 34.2 110% 27.8 13.1 23.4 50.0 19.2 90% 68.3 55.6 38.5 46.9 70% - 50% Mar 31, 2020 Mar 31, 2021 Mar 31, 2022 Dec 31, 2022 ASM1 RSM @100% Incremental RSM @150% Surplus Capital
Slide 38: Assets under management
Assets under management* Rs bn Debt: Equity 62:38 71:29 64:36 68:32 UL:Traditional 50:50 43:57 43:57 35:65 Actuarial 2,150 17% 37% 1,650 1% 2,338 Financial 2,042 1,150 1,738 650 1,272 150 Mar 31, 2020 Mar 31, 2021 Mar 31, 2022 Dec 31, 2022 ESG YoY Growth ▪ ~99% of debt investments in Government bond
Slide 39: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Our approach to ESG 4 Annexures 5 Life insurance in India Page 39
Slide 40: Growth opportunity: Under-penetration and favorable demographics
Growth opportunity: Under-penetration and favorable demographics Life Insurance penetration 1 Life Insurance density US$ 2 (FY 2022) (FY 2022) 19.2% ▪ India remains vastly under-insured, both in 8,433 terms of penetration and density 14.0% 5,414 ▪ Huge opportunity to penetrate the 7.6% 3,772 underse
Slide 41: Low levels of penetration – Life protection
Low levels of penetration – Life protection 172 mn 68 mn 1.7 mn Protection gap 2 (2019) 83.0% 76.0% 74.0% 71.0% 70.0% ▪ India has the highest protection gap in 61.0% the region, as growth in savings and life 55.0% 55.0% 54.0% insurance coverage has lagged behind 41.0% economic and wage growth ▪ Prot
Slide 42: Macro opportunity – Retiral solutions
Macro opportunity – Retiral solutions India’s pension market is under-penetrated at Improvements in life expectancy will lead to an average post 3%* of GDP retirement period of 20 years Life expectancy at age 60 146.2 20 19 18 17 18 17 98.3 16 15 90.1 54.0 31.3 3.0 India Japan Hong Kong Canada USA A
Slide 43: Macro opportunity – Rising Middle Income Population
Macro opportunity – Rising Middle Income Population Household Distribution by Income in India Sum Assured as a % of GDP 332% 256 286 321 385 1% 2% 3% 9% 252% 16% 251% 21% 32% 47% 153% 143% 127% 83% 76% 85% 65% 44% 62% 23% FY12 E FY17 E FY22 E FY30 P Singapore Japan USA Malaysia Thailand South India
Slide 44: Government bond auctions
Government bond auctions Government Bonds – Tenorwise Issuance Rs cr 100% 90% 80% 70% 62% 65% 65% 65% 71% 73% 72% 73% 60% 79% 50% 40% 30% 20% 38% 35% 35% 35% 29% 27% 28% 27% 10% 21% 0% FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 9M FY23 <=15yrs 3,86,000 3,66,500 3,73,525 4,97,579 3,82,941 4,44,000 10,01
Slide 45: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 22% 18% 20% 22% 3% 8% 12% 15% 22% 19% 18% 19% 17% 23% 47% 65% 60% 17% 68% 17% 67% 56% 50% 53% 38% 32% 35% 40% FY13 FY16 FY19 FY21 FY13 FY16 FY19 FY22 Financial savings Physical savings Currency & depos
Slide 46: Industry new business trends
Industry new business trends1 Sensex Private Players LIC 600 70,000 551 500 60,000 452 420 434 Individual WRP in Rs bn 401 50,000 400 357 315 325 40,000 304 292 291 305 288 273 285 287 278 300 262 245 233 Sensex 230 227214 30,000 200208 200 175 178 172 20,000 100 10,000 0 - FY10 FY11 FY12 FY13 FY14
Slide 47: Private industry: Product and distribution mix
Private industry: Product and distribution mix Product mix 1 Distribution mix 2 Individual Agents Corporate Agents - Banks Corporate Agents - Others Brokers Direct Business Unit Linked Conventional 61% 60% 57% 9% 10% 10% 12% 14% 56% 16% 16% 15% 54% 3% 52% 51% 51% 5% 4% 3% 3% 3% 3% 3% 3% 48% 49% 49%
Slide 48: Appendix
Appendix 48
Slide 49: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) 9M FY23* 9M FY22 FY22 FY21 FY20 CAGR Rs bn. New Business Premium (Indl. + Group) 187.1 170.7 241.5 201.1 172.4 18% Renewal Premium (Indl. +Group) 191.9 144.7 218.1 184.8 154.7 19% Total Premium 379.1 315.4 459.6 385.8 327.1 19% Individual APE 68.7 55.8 81.7 7
Slide 50: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) 9M FY23* 9M FY22 FY22 FY21 FY20 Overall New Business Margins (post overrun) 26.5% 26.5% 27.4% 26.1% 25.9% Operating Return on EV 17.5% 16.2% 16.6% 18.5% 18.1% Operating Expenses / Total Premium 14.7% 12.2% 12.3% 12.0% 13.1% Total Expenses (Opex + Commission)
Slide 51: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Rs bn Revenue A/c1 Profit and Loss A/c1 9M FY23* 9M FY22 9M FY23 9M FY22 Premium earned 379.1 315.4 Income Reinsurance ceded (5.7) (4.4) Interest and dividend income 4.8 3.7 Income from Investments 114.1 178.2 Net profit/(loss) on sale 0.4 2.7 Other Income 1.7 0.9 Trans
Slide 52: Balance sheet
Balance sheet Dec 31, 20221 Dec 31, 2021 March 31, 2022 Rs bn Shareholders’ funds Share capital (including Share premium) 58.6 26.8 86.7 Accumulated profits 67.4 63.7 67.3 Fair value change 1.0 1.4 0.8 Sub total 127.0 91.9 154.8 Borrowings 9.5 6.0 6.0 Policyholders’ funds Fair value change 25.0 25.3
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) 9M FY23: 22.8 (9M FY22: 25.1) 9M FY23: 35.5 (9M FY22: 35.7) 12 37 UL UL 12 36 37 33 Par Par 41 33 17 32 Non-par Health Non-par Health 23 32 13 38 Non-par Savings Non-par Saving
Slide 54: Summary of Milliman report on our ALM approach – FY20
Summary of Milliman report on our ALM approach – FY20 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 pr
Slide 55: 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 56: 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 57: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions Forward rates % Spot rates % Years As at Dec 31, 2021 As at Dec 31, 2022 As at Dec 31, 2021 As at Dec 31, 2022 1 4.04 6.80 3.96 6.58 2 5.42 7.40 4.62 6.86 3 6.29 7.70 5.11 7.05 4 6.94 7.81 5.51 7.17 5 7.41 7.83 5.84 7.24 10 8.26 7.55 6.80 7.32 15 8.03 7.45 7.15 7
Slide 58: 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 59: 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 60: 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 (“HDFC Life” or the “Company”) in India, the United Stat
Slide 61: Thank You
Thank You me 21 YEARS
HDFC Life Insurance Company — 9M FY23 Earnings Presentation on 6ix