Icici Prudential Life Insurance Co. Ltd. · NSE:ICICIPRULI
Icici Prudential Life Insurance — H1 FY2018 Earnings Presentation
55 slides from Icici Prudential Life Insurance's earnings presentation, Oct 24, 2017
Slide 1: Performance review H1-FY2018
Performance review H1-FY2018 October 24, 2017
Slide 2: Agenda
Agenda Company strategy and performance Opportunity Industry overview 2
Slide 3: Agenda
Agenda Company strategy and performance Opportunity Industry overview 3
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
Slide 5: Key highlights
Key highlights ` bn FY2015 FY2016 FY2017 H1-FY2017 H1-FY2018 Growth APE1 47.44 51.70 66.25 26.13 35.74 36.8% Savings APE 46.68 50.31 63.64 24.99 34.23 37.0% Protection APE 0.76 1.39 2.60 1.14 1.50 31.6% Value of New 2.70 4.12 6.66 2.44 4.17 70.9% Business (VNB)2 VNB Margin2 5.7% 8.0% 10.1% 9.4% 11.7
Slide 6: New business
New business @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee
Slide 7: Retail market share
Retail market share1 ` bn FY2015 FY2016 FY2017 H1-FY2018 RWRP 45.96 49.68 64.08 34.42 YoY Growth 41.3% 8.1% 29.0% 38.8% 24.6% 23.0% 21.9% 22.3% Within total industry 13.7% 11.3% 11.3% 12.0% Within private sector FY2015 FY2016 FY2017 H1FY2018 Market leaders in private sector since FY2002 1. Retail we
Slide 8: Premium summary
Premium summary ` bn 223.54 114.84 191.64 10.69 6.36 17.10 90.29 153.07 70.66 38.16 5.46 8.03 54.60 27.84 49.32 142.19 119.95 70.32 95.71 56.99 FY2015 FY2016 FY2017 H1FY2017 H1FY2018 Retail renewal premium Retail new business premium Group premium 8 Components may not add up to the totals due to rou
Slide 9: Product mix
Product mix Product mix1 FY2015 FY2016 FY2017 H1-FY2018 Savings 98.4% 97.3% 96.1% 95.8% ULIP 83.1% 80.8% 84.1% 81.8% Par 13.2% 14.1% 9.6% 12.3% Non par 0.9% 0.6% 1.1% 0.4% Group2 1.3% 1.8% 1.3% 1.3% Protection3 1.6% 2.7% 3.9% 4.2% ` bn Total APE 47.44 51.70 66.25 35.74 2.60 6.38 1.58 1.50 Protection
Slide 10: New business sum assured
New business sum assured ` bn 1,939.77 2,940.40 1,485.49 1,315.96 1,045.98 1,546.25 811.98 1,195.35 566.85 528.68 1,624.44 893.79 979.40 673.51 666.67 FY2015 FY2016 FY2017 H1FY2017 H1FY2018 Retail Group 10
Slide 11: Channel mix
Channel mix Channel mix1 FY2015 FY2016 FY2017 H1-FY2018 Bancassurance 58.4% 57.3% 56.9% 51.3% Agency 24.4% 23.8% 23.3% 27.1% Direct 8.8% 9.9% 12.0% 14.4% Corporate agents 7.0% 7.0% 6.1% 5.5% and brokers Group 1.4% 1.9% 1.6% 1.8% ` bn 4.07 1.96 Corporate Agents 7.98 5.14 and Brokers 3.61 3.32 15.41 4
Slide 12: Quality parameters
12 Quality parameters @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee
Slide 13: Persistency
Persistency1 Month FY2015 FY2016 FY2017 5M-FY2018 13th month 79.0% 82.4% 85.7% 87.0% 25th month 65.9% 71.2% 73.9% 74.3% 37th month 64.3% 61.6% 66.8% 68.2% 49th month 54.4% 62.2% 59.3% 60.6% 61st month 14.5% 46.0% 56.2% 55.6% 13 1. As per IRDA circular dated January 23, 2014
Slide 14: Cost efficiency
Cost efficiency FY2015 FY2016 FY2017 H1-FY2018 Expense ratio (excl. 11.6% 11.0% 11.4% 8.7% commission)1 Commission ratio2 3.8% 3.5% 3.6% 5.4% Cost/TWRP3 15.4% 14.5% 15.1% 14.1% Cost / Average AUM4 2.5% 2.5% 2.8% 2.4% ` bn 31.60 15.03 25.45 22.50 7.59 5.79 Commission 6.20 5.53 24.01 9.24 16.97 19.25
Slide 15: Fund performance
Fund performance 14.4% 12.3% 12.8% 14.8% 12.3% 9.0% 11.5% 9.5% 10.7% 11.3% 10.5% 7.6% 8.3% 9.3% 7.9% 6.7% 1Y 5Y 1Y 5Y 1Y 5Y 1Y 5Y Preserver Protector Balancer Maximiser (Liquid fund) (Debt fund) (Balanced fund) (Equity Fund) Benchmark Fund 87% of funds have outperformed benchmark indices since incep
Slide 16: Assets under management
Assets under management Linked Mix (%) Equity Mix (%) 74.6 72.4 71.5 70.7 48.0 46.3 46.8 46.0 ` bn ` bn 1,305.91 1,305.91 1,229.19 1,229.19 1,039.39 1,001.83 1,039.39 1,001.83 382.49 350.41 575.20 601.05 286.44 254.06 480.86 481.04 923.42 878.78 747.78 752.96 653.99 704.86 520.97 558.35 FY2015 FY201
Slide 17: Profitability
17 Profitability @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee
Slide 18: Embedded Value (EV)
Embedded Value (EV)1 ` bn 172.10 161.84 138.22 139.39 67.56 72.33 54.33 55.14 94.28 99.77 83.90 84.25 FY2015 FY2016 FY2017 H1FY2018 Value of inforce (VIF) Adjusted net worth (ANW) 1. As per Indian Embedded Value (IEV) method 18 Components may not add up to the totals due to rounding off
Slide 19: Profit after tax
Profit after tax Solvency Ratio (%) 337 320 281 276 Profit after tax (` bn) 16.34 16.50 16.82 8.27 FY2015 FY2016 FY2017 H1FY2018 Well capitalized for growth opportunities Dividend declared for H1-FY2018 is ` 4.88 billion (excluding Dividend Distribution Tax) 19
Slide 20: 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
Slide 21: Agenda
Agenda Company strategy and performance Opportunity Industry overview 21
Slide 22: Favourable demography
Favourable demography Large and Growing Population Base1 High Share of Working Population1 2016 Population (mn) Population of age 25-59 years (mn) 1,404 1,324 724 576 261 322 51 56 128 144 208 Russia China Brazil S Africa Japan USA India Indonesia S Korea 2015 2030 Rising Affluence2 Driving GDP Grow
Slide 23: Share of insurance in household savings
Share of Insurance in Savings Expected to Rise Share of insurance in household savings Household savings1 Distribution of financial savings1 60 80% 69% 21.1% 61% 58% 22.4% 17.2% 23.4% 60% 52% 52% 52% 50% 26.2% 17.6% 40 48% 45% 14.4% 24.3% 45% 41% ` tn 36% 36% 40% 31% 20 9.19 10.82 6.43 8.32 20% 7.75
Slide 24: Protection opportunity: Income replacement
Protection opportunity: Income replacement Sum assured as % of GDP 1,2 Protection Gap 3,4 % 92 56 85 33 73 78 73 56 270% 260% 8.56 226% 6.58 166% USD tn 149% 5.30 106% 96% 70% 1.09 0.79 0.77 0.52 0.40 India Thailand S. Korea Malaysia Singapore Japan Indonesia Australia Singapore Germany US Japan Ind
Slide 25: Protection opportunity: Liability cover
Protection opportunity: Liability cover ₹ bn Retail Credit 16,200 13,922 11,663 7,599 10,097 6,454 8,976 7,828 5,378 4,711 4,409 3,858 7,468 8,601 5,386 6,285 3,971 4,567 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 Home Loans Others Retail credit has been growing at a healthy pace Credit life is v
Slide 26: 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 26 Source: IRDAI, General Insurance Council and company estimate
Slide 27: Agenda
Agenda Company strategy and performance Opportunity Industry overview 27
Slide 28: Evolution of life insurance industry in India
Evolution of life insurance industry in India FY2002 FY2010 FY2015 FY2017 New business 116 21.5% 550 -5.8% 408 14.3% 532 premium1 (` bn) Total premium (` bn) 501 23.2% 2,654 4.3% 3,281 12.9% 4,181 Penetration (as a % to 2.1% 4.1% 2.6% 2.8% GDP) Assets under 2,304 24.0% 12,899 12.6% 23,361 13.0% 29,8
Slide 29: New business
New business1 Growth FY2015 FY2016 FY2017 H1-FY2018 Private 15.9% 13.6% 26.4% 36.5% LIC -26.3% 2.9% 14.7% 13.3% Industry -10.3% 8.1% 20.7% 25.2% 400 55.7% 60% 51.5% 53.9% 49.0% 50% 300 40% ` bn 200 30% 20% 100 10% 0 0% FY2015 FY2016 FY2017 H1FY2018 LIC Private Private market share 1. Retail weighted
Slide 30: Channel mix
Channel mix1 Industry Private players 8% 8% 8% 10% 17% 16% 16% 19% 21% 24% 23% 23% 47% 52% 54% 49% 71% 68% 69% 67% 36% 32% 30% 32% FY2015 FY2016 FY2017 Q1FY2018 FY2015 FY2016 FY2017 Q1FY2018 Agency Bancassurance Others Given a well developed banking sector, bancassurance has become largest channel
Slide 31: Product mix
Product mix1 Industry Private players 12% 13% 12% 13% 38% 43% 42% 44% 88% 87% 88% 87% 62% 57% 58% 56% FY2015 FY2016 FY2017 Q1FY2018 FY2015 FY2016 FY2017 Q1FY2018 Traditional ULIP Strong value proposition of ULIPs Transparent and low charges Lower discontinuance charges upto year 5 and zero sur
Slide 32: Annexures
32 Annexures @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee
Slide 33: 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%
Slide 34: Protection
Protection ` bn FY2015 FY2016 FY2017 Retail Protection 0.36 0.94 2.09 Group Term 0.06 0.06 0.13 Mortgage based 0.33 0.39 0.38 Total APE 0.76 1.39 2.60 34
Slide 35: Average APE by product categories
Average APE by product categories Average retail APE per FY2015 FY2016 FY2017 policy (`) ULIP 129,087 149,777 169,701 Par 38,430 44,533 56,325 Non par 25,233 23,656 39,153 Protection 4,408 10,284 9,815 Total 73,047 87,194 92,735 35
Slide 36: Policy term and customer age
Policy term and customer age1 Average policy term (years) Average customer age (years) 44 24 36 12 Savings Protection Savings Protection 36 1. For FY2017; protection excludes credit life
Slide 37: 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
Slide 38: 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
Slide 39: Embedded Value
39 Embedded Value @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee
Slide 40: Analysis of movement in EV
Analysis of movement in EV1 ` bn FY2016 FY2017 Opening EV 138.22 139.39 Unwind 12.58 12.21 Value of New Business (VNB) 4.12 6.66 Operating assumption changes 0.02 1.00 Operating experience variance 4.49 3.08 EVOP 21.22 22.95 Return on embedded value (ROEV) 15.3% 16.5% Economic assumption change and
Slide 41: EV methodology (1/2)
EV 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) 41
Slide 42: EV methodology (2/2)
EV methodology … (2/2) EV 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 profits;
Slide 43: 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
Slide 44: 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 Projection carried out using ‘best estimate’ non-economic assumptions and market consistent economic assumptions Distributa
Slide 45: 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 45
Slide 46: 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
Slide 47: 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
Slide 48: Components of EV movement (1/2)
Components of EV 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 EV Expected return on existing business (unwind) Expected investment income at opening reference rate on V
Slide 49: 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, i
Slide 50: 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
Slide 51: 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 Allowance has been made for future taxation costs based on current tax rates 51
Slide 52: Sensitivity analysis (FY2017)
Sensitivity analysis (FY2017) % change % change Scenario in EV 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 mort
Slide 53: Economic assumptions underlying EV
Economic assumptions underlying EV Tenor (years) Reference Rates March 31, March 31, September 30, 2016 2017 2017 1 7.24% 6.35% 6.35% 5 8.22% 7.78% 7.51% 10 8.34% 8.02% 7.84% 15 8.40% 8.03% 7.86% 20 8.46% 8.03% 7.86% 25 8.50% 8.03% 7.86% 30 8.52% 8.03% 7.86% 53
Slide 54: 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
Slide 55: Thank you
55 Thank you @ICICI PRUDENTIAL? pLirFe «NS UR AN CR
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