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

Icici Prudential Life Insurance — Q1 FY2018 Earnings Presentation

50 slides from Icici Prudential Life Insurance's earnings presentation, Jul 25, 2017

  1. Slide 1: Q1FY2018 performance review

    Q1FY2018 performance review July 25, 2017

  2. Slide 2: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 2

  3. Slide 3: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 3

  4. Slide 4: Strategy: Market leadership + Profitable growth

    Strategy: Market leadership + Profitable growth  Leverage market opportunity for saving products through Segmented  Delivery of superior customer value through better products, approach to tap market customer service, fund performance and claims management opportunity-  Focus on key local markets

  5. Slide 5: Key Highlights

    Key Highlights ` bn FY2016 FY2017 Growth Q1FY2017 Q1FY2018 Growth APE1 51.70 66.25 28.1% 10.12 17.04 68.4% Savings APE 50.31 63.64 26.5% 9.55 16.27 70.4% Protection APE 1.39 2.60 87.1% 0.58 0.77 32.8% Value of New Business 4.12 6.66 61.7% NA 1.824 (VNB)2,3 VNB Margin2,3 8.0% 10.1% NA 10.7%4 1. Annua

  6. Slide 6: New business

    New business @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee

  7. Slide 7: Market share

    Market share1 ` bn FY2015 FY2016 FY2017 Q1FY2018 RWRP 45.96 49.68 64.08 16.36 YoY Growth 41.3% 8.1% 29.0% 74.7% 28.0% 23.0% 21.9% 22.3% Within total 15.3% industry 11.3% 11.3% 12.0% Within private sector FY2015 FY2016 FY2017 Q1FY2018 Market leaders in private sector since FY2002 1. Retail weighted r

  8. Slide 8: Premium summary

    Premium summary ` bn 223.54 48.85 10.69 2.55 191.64 17.10 70.66 35.60 153.07 18.22 2.49 8.03 54.60 49.32 10.72 142.19 119.95 28.08 95.71 22.39 FY2015 FY2016 FY2017 Q1FY2017 Q1FY2018 Retail renewal premium Retail new business premium Group premium 8 Components may not add up to the totals due to roun

  9. Slide 9: Product mix

    Product mix1 Product mix1 FY2015 FY2016 FY2017 Q1FY2018 Savings 98.4% 97.3% 96.1% 95.5% ULIP 83.1% 80.8% 84.1% 85.7% Par 13.2% 14.1% 9.6% 8.3% Non par 0.9% 0.6% 1.1% 0.5% Group2 1.3% 1.8% 1.3% 0.9% Protection3 1.6% 2.7% 3.9% 4.5% ` bn 2.60 0.77 6.38 1.58 0.25 1.42 1.39 Protection 0.76 1.25 6.26 1.02

  10. Slide 10: Channel mix

    Channel mix Channel Mix1 FY2015 FY2016 FY2017 Q1FY2018 Bancassurance 58.4% 57.3% 56.9% 48.6% Agency 24.4% 23.8% 23.3% 30.5% Direct 8.8% 9.9% 12.0% 14.2% Corporate Agents 7.0% 7.0% 6.1% 5.2% and Brokers Group 1.4% 1.9% 1.6% 1.5% ` bn 4.07 0.88 Corporate Agents 7.98 2.42 and Brokers 3.61 3.32 15.41 4.

  11. Slide 11: Quality parameters

    11 Quality parameters @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee

  12. Slide 12: Persistency

    Persistency1 Month FY2015 FY2016 FY2017 2MFY2018 13th month 79.0% 82.4% 85.7% 86.7% 25th month 65.9% 71.2% 73.9% 74.6% 37th month 64.3% 61.6% 66.8% 68.1% 49th month 54.4% 62.2% 59.3% 60.1% 61st month 14.5% 46.0% 56.2% 55.9% 12 1. As per IRDA circular dated January 23, 2014

  13. Slide 13: Cost efficiency

    Cost efficiency FY2015 FY2016 FY2017 Q1FY2017 Q1FY2018 Expense ratio (excl. 11.6% 11.0% 11.4% 17.2% 9.4% commission)1 Commission ratio2 3.8% 3.5% 3.6% 3.9% 4.8% Cost/TWRP3 15.4% 14.5% 15.1% 21.1% 14.2% Cost / Average AUM4 2.5% 2.5% 2.8% 2.6% 2.0% ` bn 31.60 6.88 25.45 6.38 22.50 7.59 1.26 Commission

  14. Slide 14: Superior fund performance across cycles

    Superior fund performance across cycles 16.9% 15.6% 13.2% 13.8% 13.3% 12.5% 11.5% 11.0% 13.5% 12.1% 11.1% 8.3% 8.3% 9.6% 7.0% 6.9% 1Y 5Y 1Y 5Y 1Y 5Y 1Y 5Y Preserver Protector Balancer Maximiser (Liquid fund) (Debt fund) (Balanced fund) (Equity Fund) Fund Benchmark 88% of funds have outperformed benc

  15. Slide 15: Assets under management

    Assets under management Linked Mix (%) Equity Mix (%) 74.6 72.4 71.5 71.2 48.0 46.3 46.8 46.5 ` bn ` bn 1,265.91 1,265.91 1,229.19 1,229.19 1,039.39 1,001.83 1,039.39 1,001.83 364.98 350.41 588.05 286.44 575.20 254.06 480.86 481.04 900.92 878.78 677.86 747.78 752.96 653.99 520.97 558.35 FY2015 FY201

  16. Slide 16: Profitability

    16 Profitability @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee

  17. Slide 17: Profit after tax

    Profit after tax Solvency Ratio (%) 337 320 281 Profit after tax (` bn) 16.82 4.05 4.06 16.34 16.50 FY2015 FY2016 FY2017 Q1FY2017 Q1FY2018  Well capitalized for growth opportunities  Solvency ratio as on June 30, 2017 is 288.6% 17

  18. Slide 18: Summary

    Summary India: High growth  Low penetration1 vs mature economies and even lower density 1 potential  One of the fastest growing large economy in the world with strong growth drivers Consistent  #1 in private sector on RWRP2 basis for every year since FY2002 2 Leadership Across Cycles  Significan

  19. Slide 19: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 19

  20. Slide 20: Favourable demography

    Favourable demography High Share of Working Population1 Large and Growing Population Base1  Indian economy 2016 Population (mn) Population of age 25-59 years poised to head (in mn) 1,324 1,404 towards sustained 724 576 growth fuelled by 261 322 favourable 56 128 144 208 51 demographics, rising affl

  21. Slide 21: Share of Insurance in Savings Expected to Rise

    Share of Insurance in Savings Expected to Rise Share of insurance in household savings Household Savings1 Distribution of financial assets1 60 60% 48% 45% 21.1% 41% 17.0% 40 40% 15.4% 19.6% 36% 36% 18.3% 33% 26.2% 31% ` trillion 14.4% 20 9.19 10.82 20% 6.43 7.34 8.32 7.75 2.47 14.23 14.99 14.49 16.2

  22. Slide 22: Protection opportunity

    Protection opportunity Sum assured as % of GDP1,2 Protection Gap3,4 % 92 56 85 33 73 78 73 56 270% 260% 226% 8.56 6.58 166% USD tn 149% 5.30 106% 96% 70% 1.09 0.79 0.77 0.52 0.40 Japan Korea Germany US India Thailand Singapore Malaysia India Thailand S. Korea Malaysia Singapore Japan Indonesia Austr

  23. Slide 23: Protection opportunity

    Protection opportunity Gross direct FY2007 FY2017 CAGR premium (` bn) Health 33.19 307.65 24.9% Motor 106.97 502.45 16.7%  Protection premium was ~ ` 67 bn for Life insurance industry in FY2017 23 Source: IRDAI, General Insurance Council and company estimate

  24. Slide 24: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 24

  25. Slide 25: Evolution of life insurance industry in India

    Evolution of life insurance industry in India FY2002 FY2010 FY2017 New business premium1 116 21.5% 550 -0.5% 532 (` bn) Total premium (` bn) 501 23.2% 2,653 6.7% 4,181 Penetration (as a % to 2.1% 4.1% 2.8% GDP) Assets under 2,304 24.0% 12,899 12.7% 29,806 management (` bn) In-force sum assured2 11,8

  26. Slide 26: New business

    New business1 Growth FY2015 FY2016 FY2017 Q1FY2018 Private 15.9% 13.6% 26.4% 45.5% LIC -26.3% 2.9% 14.7% 12.8% Industry -10.3% 8.1% 20.7% 28.6% 400 60% 53.9% 54.5% 51.5% 49.0% 50% 300 40% ` bn 200 30% 20% 100 10% 0 0% FY2015 FY2016 FY2017 Q1FY2018 LIC Private Private market share 1. Retail weighted

  27. Slide 27: Channel mix

    Channel mix1 Industry Private players 8% 8% 8% 16% 16% 17% 21% 24% 23% 47% 52% 54% 71% 68% 69% 36% 32% 30% FY2015 FY2016 FY2017 FY2015 FY2016 FY2017 Agency Bancassurance Others  Given a well developed banking sector, bancassurance has become largest channel for private players 1. Individual new bus

  28. Slide 28: Product mix

    Product mix1 Industry Private players 12% 13% 12% 38% 43% 42% 88% 87% 88% 62% 57% 58% FY2015 FY2016 FY2017 FY2015 FY2016 FY2017 Traditional ULIP  Strong value proposition of ULIPs  Transparent and low charges  Lower discontinuance charges upto year 5 and zero surrender penalty after 5 years  Cho

  29. Slide 29: Annexures

    29 Annexures @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee

  30. Slide 30: Consistent leadership in private sector

    Consistent leadership in private sector1 Market Share FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 LIC 63.5% 62.0% 62.0% 51.0% 48.5% 46.1% ICICI Prudential 5.9% 7.0% 7.2% 11.3% 11.3% 12.0% SBI Life 4.4% 5.1% 6.2% 7.7% 9.7% 11.2% HDFC Life 5.7% 6.7% 5.2% 7.3% 7.6% 6.8% Max Life 3.1% 3.2% 3.9% 4.8% 4.8%

  31. Slide 31: Average APE by product categories

    Average APE by product categories Average retail APE per FY2015 FY2016 FY2017 policy (in `) ULIP 129,087 149,777 169,701 Par 38,430 44,533 56,325 Non par 25,233 23,656 39,153 Pure protection 4,408 10,284 9,815 Total 73,047 87,194 92,735 31

  32. Slide 32: Channel wise product mix

    Channel wise product mix1 Channel Product FY2015 FY2016 FY2017 ULIP 88.4% 88.9% 92.1% Par 10.0% 9.1% 5.3% Bancassurance Non par 0.0% 0.0% 0.4% Protection 1.5% 2.0% 2.2% Total 100.0% 100.0% 100.0% ULIP 78.5% 76.4% 79.5% Par 19.2% 19.6% 14.2% Agency Non par 1.0% 0.8% 2.0% Protection 1.3% 3.2% 4.3% Tot

  33. Slide 33: Persistency (FY2017)

    Persistency (FY2017)1 Persistency across Product Categories 98.2% 85.6% 82.8% 89.5% 57.7% 63.0% 49.0% 54.1% ULIP Par Non-par Protection 13th month 49th month Persistency across Channel Categories 83.7% 87.9% 89.5% 87.5% 62.8% 55.6% 62.7% 54.3% Bancassurance Agency Direct Corporate Agents and Brokers

  34. Slide 34: Indian Embedded Value

    34 Indian Embedded Value @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee

  35. Slide 35: Analysis of movement in IEV (FY2017)

    Analysis of movement in IEV (FY2017) ` bn 5.82 -6.32 0.99 0.98 0.35 0.76 161.84 6.66 12.21 1.00 EVOP1 = 22.95 VIF 139.39 ROEV2 = 16.5% 94.28 VIF 84.25 ANW ANW 67.56 55.14 IEV (March Unwind Operating VNB Persistency Mortality Expense Other Economic Net Capital IEV (March 31, 2016) Assumption variance

  36. Slide 36: IEV methodology (1/2)

    IEV methodology … (1/2)  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) 36

  37. Slide 37: IEV methodology (2/2)

    IEV methodology … (2/2)  IEV consists of Adjusted Net Worth (ANW) and Value of in-force covered business (VIF)  ANW is market value of assets attributable to shareholders, consisting of  Required Capital  Free Surplus  Value of in-force covered business (VIF) is  Present value of future profit

  38. Slide 38: 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

  39. Slide 39: Components of VIF (1/4)

    Components of VIF … (1/4)  Present value of future profits (PVFP)  Present value of projected distributable profits to shareholders arising from in-force covered business  Projectioncarried out using ‘best estimate’ non-economic assumptions and market consistent economic assumptions  Distributab

  40. Slide 40: Components of VIF (2/4)

    Components of VIF … (2/4)  Frictional Cost of required capital (FC)  FCs represent investment management expenses and taxation costs associated with holding the Required capital  Investment costs reflected as an explicit reduction to the gross investment return 40

  41. Slide 41: Components of VIF (3/4)

    Components of VIF … (3/4)  Time value of financial options and guarantees (TVFOG)  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 embedde

  42. Slide 42: Components of VIF (4/4)

    Components of VIF … (4/4)  Cost of residual non-hedgeable risk (CRNHR)  CRNHR is an allowance for risks to shareholder value to the extent not already allowed for in the TVFOG or the PVFP  Allowance has been made for asymmetric risks of operational, catastrophe mortality / morbidity and mass laps

  43. Slide 43: Components of IEV movement (1/2)

    Components of IEV movement … (1/2)  Operating assumption changes  Impact of the update of non-economic assumptions both on best estimate and statutory bases to those adopted in the closing IEV  Expected return on existing business (unwind)  Expected investment income at opening reference rate on

  44. Slide 44: Components of IEV movement (2/2)

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

  45. Slide 45: Key assumptions underlying IEV (1/2)

    Key assumptions underlying IEV … (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 o

  46. Slide 46: Key assumptions underlying IEV (2/2)

    Key assumptions underlying IEV … (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  Allowance has been made for future taxation costs based on current tax rates 4

  47. Slide 47: Sensitivity analysis (FY2017)

    Sensitivity analysis (FY2017) % change % change Scenario in IEV in VNB Increase in 100 bps in the reference rates (2.0) (5.2) Decrease in 100 bps in the reference rates 2.1 5.5 10% increase in the discontinuance rates (1.1) (10.6) 10% decrease in the discontinuance rates 1.2 10.9 10% increase in mor

  48. Slide 48: Economic assumptions underlying IEV

    Economic assumptions underlying IEV Tenor (years) Reference Rates March 31, 2016 March 31, 2017 1 7.24% 6.35% 5 8.22% 7.78% 10 8.34% 8.02% 15 8.40% 8.03% 20 8.46% 8.03% 25 8.50% 8.03% 30 8.52% 8.03% 48

  49. Slide 49: 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 forwa

  50. Slide 50: Thank you

    50 Thank you @ICICI PRUDENTIAL? pLirFe «NS UR AN CR

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