Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — Q1 FY24 Earnings Presentation
40 slides from Hdfc Life Insurance's earnings presentation, 2023
Slide 1: Investor Presentation – Q1 FY24
Investor Presentation – Q1 FY24
Slide 2: Executive summary: Q1 FY24
Executive summary: Q1 FY24 Revenue & Scale Profitability & Cost Customer & Capital Growth 12% CY 26.2% CY 87% Individual New Business 13th month WRP Market Margin (NBM)1 persistency PY 25.1% PY 87% 16.4% Share Rs (Bn.) 58.0 Rs (Bn.) 6.1 Overall 99.7% Renewal VNB1 Claim settlement premium Growth 18%
Slide 3: Agenda
Agenda 1 Performance Snapshot 2 Business Overview 3 Other Business Highlights 4 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 291 284 150 142 55 93 36.7 26.8 FY15 FY19 FY23 FY15 FY19 FY23 21.9 15.4 12.8 9.2 Protection new business1 Annuity new business 84.4 FY17 FY18 FY
Slide 5: Consistent performance across business cycles
Consistent performance across business cycles Change in ULIP tax Change in traditional exemption limit savings tax exemption limit Open architecture Covid-19 pandemic ▪ Tax exemption removed ▪ Tax exemption removed for for policies > Rs 2.5 lakh policies > Rs 5 lakh ▪ Banks allowed to tie up ▪ Lockd
Slide 6: Consistently outpacing industry and gaining market share
Consistently outpacing industry and gaining market share1 HDFC Life market share trend HDFC Life 19% 17% 27% 27% Growth ▪ Delivered strong performance across all Pvt. mkt 5% 8% 22% 24% growth metrics while increasing market share between Overall 6% 3% 16% 19% FY19 and FY23 Industry growth ✓ Overall
Slide 7: Robust delivery across key metrics (1/2)
Robust delivery across key metrics (1/2) Sustained performance Strong CP volumes on the back of higher disbursements1 Rs bn Individual NOP Individual WRP (in ‘000s) Pvt. mkt 15.8% 16.4% share -19% 55% 46% 37% YoY 9% 12% growth 19.0 77.4 206.9 53.0 16.9 190.6 34.2 19.6 Q1 FY23 Q1 FY24 Q1 FY23 Q1 FY24
Slide 8: Robust delivery across key metrics (2/2)
Robust delivery across key metrics (2/2) Rs bn Stable Persistency Strong VNB growth along with steady margin expansion 25.1% 26.2% 87% 87% ▪ Multiple pools of ▪ Focus on quality of profitability contributing business and providing 52% 53% to VNB accretion superior customer experience_ ▪ VNB growth o
Slide 9: Agenda
Agenda 1 Performance Snapshot 2 Business Overview 3 Other Business Highlights 4 Life insurance in India Page 9
Slide 10: Key elements of our strategy
Key elements of our strategy 1 2 3 4 Profitable growth Diversified Customer first Risk management distribution mix & board Ensuring Creating superior governance sustainable and Developing multiple product propositions profitable growth channels of growth and customer Maintaining focus on by identify
Slide 11: Focus on profitable growth
Focus on profitable growth Q1 Q1 Rs bn FY21 FY22 FY23 FY23 FY24 Profitable growth 26.2% Economic New business Margin 26.1% 27.4% 27.6% 25.1% Profit Value of new business 21.9 26.8 36.7 5.2 6.1 Profit after tax (PAT) 13.6 3.6 4.2 distribution 12.1 13.6 Diversified Accounting mix Profit Underwriting p
Slide 12: Profit emergence of Existing Business Surplus
Emergence of Existing Business (EB) Surplus Profit Emergence 80 EB Surplus emergence as a % of VIF 30% Profitable 25% 24% 24% growth 70 25% Traditional Savings Protection ULIP 20% 19% (Longer Tenure) (Ind+Grp) 60 20% 50 15% distribution Diversified 0%-1% mix 20%-25% 40 10% 30%-35% 20%-25% 55% - 60%
Slide 13: Analysis of change in IEV
Analysis of change in IEV Rs bn EVOP – 15.0 EVOP%1 - 16.0% Profitable growth 1.0 8.1 0.1 418.4 7.9 6.1 395.3 Economic ESOPs VNB Operating Unwind variances variances distribution Diversified mix 283.8 267.4 Customer first Adjusted Net worth (ANW) Value of in-force business (VIF) & governance manageme
Slide 14: Diversified distribution enabled by multiple levers
Diversified distribution enabled by multiple levers Proprietary1 Banks, NBFCs, SFBs and Other CAs 12% YoY increase in Proprietary1 Profitable growth new agent licenses 1.9L+ Agents Highest agent additions distribution in last FY Diversified 483 Branches mix 48 Digital Branches2 ~900 new HDFC Bank Ba
Slide 15: Diversified distribution mix growth strategy
Diversified distribution mix growth strategy Agency Other Key Alliances Profitable growth • Segregating Growth (tier 1) and • Gained significant experience of Focus (tier 2/3) markets working in multi-tie • Developing micro market • Tie-ups with partners with distribution Diversified strategy strong
Slide 16: Product mix across key channels
Product mix across key channels1 Q1 Q1 Q1 Q1 Segment FY21 FY23 Segment FY21 FY23 FY23 FY24 FY23 FY24 UL 27% 24% 30% 32% UL 10% 10% 12% 12% Profitable Banca 2 Agency growth Par 37% 27% 30% 26% Par 37% 33% 41% 32% Non par savings 30% 42% 33% 30% Non par savings 39% 49% 36% 44% Term 4% 3% 4% 5% Term 11
Slide 17: 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 18: Financial risk management framework
Financial risk management framework Natural hedges Product design & mix monitoring ▪ Profitable Prudent assumptions and pricing approach ▪ growth Protection and longevity businesses ▪ Unit linked and non par savings products ▪ Return of premium annuity products (>95% of annuity); Average age at entr
Slide 19: 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 20: Journey Simplification: Easier customer journey via digital integrations
Journey Simplification: Easier customer journey via digital integrations Instacheck: Easing customer journey by document collection and eligibility Profitable check at quote level itself growth distribution Diversified Improve customer experience and reduce the TATs by minimizing the mix requirement
Slide 21: Project Inspire: 'Future Proofing' HDFC Life
Project Inspire: ‘Future Proofing’ HDFC Life 01 02 03 04 Profitable growth ‘Digitally-enabled’ Improved customer- Operational efficiency Organizational agility Distribution centricity distribution Diversified mix Seamless onboarding of Evolution from customer Cross-sell, up-sell and Future-of-work r
Slide 22: Agenda
Agenda 1 Performance Snapshot 2 Business Overview 3 Other Business Highlights 4 Life insurance in India Page 22
Slide 23: Persistency trends for HDFC Life
Persistency trends for HDFC Life Across key channels (%) CY (Q1 FY24) 88 86 90 87 83 79 78 78 78 72 71 73 64 67 65 65 54 53 57 53 Agency Banca Direct Company 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (Q1 FY23) 92 88 87 87 81 82 82 75 76 78 71 74 64 65 65 67 63
Slide 24: VNB and NBM walkthrough
VNB and NBM walkthrough Including Exide Life in Q1 FY23 base Rs bn 6.1 0.7 0.0 0.1 0.1 5.2 Q1 FY23 Impact of higher APE Change in assumptions New Business Profile1 Fixed cost absorption Q1 FY24 NBM% 25.1% 0.0% 0.1% 0.5% 0.5% 26.2% Excluding Exide Life in Q1 FY23 base 1.1 0.0 0.1 0.3 6.1 5.1 Q1 FY23
Slide 25: Sensitivity analysis – FY23
Sensitivity analysis – FY23 Change in VNB Analysis based on key metrics Scenario % Change in EV Margin 1 Change in Increase by 1% -1.5% -2.4% Reference rate Decrease by 1% 0.7% 2.1% Equity Market Decrease by 10% -0.1% -1.3% movement Increase by 10% -0.3% -0.3% Persistency (Lapse rates) Decrease by 1
Slide 26: Summary of Milliman report on our ALM approach – FY23
Summary of Milliman report on our ALM approach – FY23 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 27: ESG at a glance
ESG at a glance The 5 Pillars Environment Social Governance of ESG • Launched Employee Resource Groups • ESG governed by the Board CSR & ESG • Board approved Environment and 1. Ethical Conduct & (ERGs) - Women in insurance, Life of Pride Committee and driven by the ESG Climate Change Policy Governan
Slide 28: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) Rs bn. Q1 FY24 Q1 FY23 Growth FY23* FY22 FY21 CAGR New Business Premium (Indl. + Group) 58.7 49.5 19% 290.9 241.5 201.1 19% Renewal Premium (Indl. +Group) 58.0 51.0 14% 284.5 218.1 184.8 23% Total Premium 116.7 100.5 16% 575.3 459.6 385.8 21% Individual APE 1
Slide 29: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) Q1 FY24 Q1 FY23 FY23* FY22 FY21 Overall New Business Margins (post overrun) 26.2% 25.1% 27.6% 27.4% 26.1% Operating Return on EV 16.0% 15.7% 19.7% 16.6% 18.5% Total Expenses (OpEx + Commission) / Total Premium 19.8% 19.6% 19.8% 16.5% 16.4% (1) Return on Equit
Slide 30: Segment wise average term and age
Segment wise average term and age1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) Q1FY24: 22.8 (Q1FY23: 23.2) Q1FY24: 36.0 (Q1FY23: 35.5) UL 13 UL 37 12 37 Par 35 Par 34 37 33 Non-par Health 19 Non-par Health 32 25 34 Non-par Savings 13 Non-par Savings 38 13
Slide 31: Agenda
Agenda 1 Performance Snapshot 2 Business Overview 3 Other Business Highlights 4 Life insurance in India Page 31
Slide 32: 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 33: Low levels of penetration: Life protection
Low levels of penetration: Life protection 1 3 Protection gap (2019) Sum Assured as a % of GDP 2 Trend of retail loans (Rs Tn.) 332% 83.0% 74.0% 53 71.0% 70.0% 252% 251% 61.0% 44 55.0% 34 41.0% 153% 143% 127% 24 17 85% 12 62% 23% India Malaysia Thailand China Japan Singapore Hong Singapore Japan USA
Slide 34: 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 Au
Slide 35: Government bond auctions
Government bond auctions Government Bonds – Tenorwise Issuance Rs cr 27% 21% 29% 35% 35% 28% 29% 34% 38% 73% 79% 71% 65% 65% 72% 71% 66% 62% FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24 <=15 yrs >15 yrs FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24 <=15 yrs 3,66,500 3,73,525 4,97,579 3,82,941 4,4
Slide 36: Industry new business trends
Industry new business trends 1 Product mix 61% 60% 57% 51% 51% 684 49% 49% 43% 39% 40% Individual WRP in Rs bn 452 401 356 287 291 305 FY15 FY17 FY19 FY21 FY22 245 200 208 Unit Linked Conventional 2 116 Distribution mix 63 9% 10% 14% 16% 15% 5% 3% 3% 3% 5% FY15 FY17 FY19 FY21 FY23 Q1 FY24 50% 57% Pr
Slide 37: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 22% 18% 22% 20% 0% 8% 15% 15% 22% 19% 18% 21% 17% 23% 55% 59% 52% 68% 16% 17% 67% 56% 48% 45% 41% 48% 38% 32% FY13 FY16 FY20 FY22 FY13 FY16 FY20 FY22 Financial savings Physical savings Currency & depos
Slide 38: Reasons for buying insurance – Tax as a reason has declined
Reasons for buying insurance – Tax as a reason has declined Top reasons to buy life insurance 1 Customer behaviour / trend 2 2019 rank 2013 rank Protect family in case of death 1 1 To secure child’s education/marriage 2 2 Macro-level • State of the economy Economy • Stock market Old age security/ret
Slide 39: 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 40: Thank You
Thank You
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