Icici Prudential Life Insurance Co. Ltd. · NSE:ICICIPRULI
Icici Prudential Life Insurance — 9M-FY2019 Earnings Presentation
57 slides from Icici Prudential Life Insurance's earnings presentation, Jan 22, 2019
Slide 1: Performance update: 9M-FY2019
Performance update: 9M-FY2019 January 22, 2019
Slide 2: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview Image to be pasted
Slide 3: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview Image to be pasted
Slide 4: Strategic elements
Strategic elements Protection Premium Customer centricity VNB Growth Persistency Growth continues to be at the core Productivity 4
Slide 5: Strategic elements (1/4)
Strategic elements (1/4) • Focus on retail for long term sustainability Premium • Diversification of distribution growth • Customer centric products • Unmatched on-boarding experience • APE1 declined by 4.2% in 9M-FY2019 • Q3-FY2019 APE declined by 2.1% • Market share of 10.8%2 for 9M-FY2019 1. Annu
Slide 6: Premium growth
Premium growth H1- H1- Oct- Nov- Dec- 9M- 9M- ` billion FY2018 FY2019 FY2019 FY2019 FY2019 FY2018 FY2019 APE 35.74 33.81 5.09 6.87 7.66 55.79 53.43 YoY growth 36.8% (5.4%) (11.8%) 0.3% 3.0% 25.1% (4.2%) RWRP 34.42 31.48 4.69 5.11 6.88 54.01 48.15 YoY growth 38.8% (8.5%) (17.2%) (23.9%) (4.7%) 26.3%
Slide 7: Strategic elements (2/4)
Strategic elements (2/4) • Meeting the needs of both income replacement and liability cover Protection • Comprehensive suite of products focus • New partnerships • Leveraging technology for risk calibrated superior underwriting 9M-FY2019 update: • Protection APE growth of 100.4% • Growth across all
Slide 8: Strategic elements (3/4)
Strategic elements (3/4) • Drive renewal premium with the same rigor as new business Persistency • Offer convenience of multiple payment options • The single most important indicator of business quality 9M-FY2019 update: • Total premium growth of 13.2% • Retail renewal premium growth of 18.5% • Decl
Slide 9: 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 9M-FY2019 update: • Cost/TWRP (savings LOB) at 12.0% • Technology initiative • First life insurance company to have verifie
Slide 10: VNB growth
VNB growth ` billion FY2017 FY2018 9M-FY2018 9M-FY2019 Value of New Business (VNB)1 6.66 12.86 7.67 9.10 VNB margin 10.1% 16.5% 13.7% 17.0% VNB growth 61.7% 93.1% 82.2% 18.6% 1. For full year, based on actual cost; 9M: based on management forecast of full year cost 10
Slide 11: 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 Producti
Slide 12: Strategic elements
Strategic elements Protection Premium Customer centricity VNB Growth Persistency Growth continues to be at the core Productivity 12
Slide 13: Premium growth
Premium growth1 Retail mix 98.4% 97.3% 98.5% 95.2% 77.92 55.79 ` billion 66.25 53.43 FY2017 FY2018 9M-FY2018 9M-FY2019 Market share FY2018 9M-FY2019 • APE declined by 2.1% for Q3- (RWRP) FY2019 Total industry 11.8% 10.8% • Retail AUM at 89.3% of total Private sector 20.9% 18.7% AUM2 1. Based on APE
Slide 14: Premium growth
Premium growth H1- H1- Oct- Nov- Dec- 9M- 9M- ` billion FY2018 FY2019 FY2019 FY2019 FY2019 FY2018 FY2019 APE 35.74 33.81 5.09 6.87 7.66 55.79 53.43 YoY growth 36.8% (5.4%) (11.8%) 0.3% 3.0% 25.1% (4.2%) RWRP 34.42 31.48 4.69 5.11 6.88 54.01 48.15 YoY growth 38.8% (8.5%) (17.2%) (23.9%) (4.7%) 26.3%
Slide 15: Customer centric products
Customer centric products ` billion FY2017 FY2018 9M-FY2018 9M-FY2019 Savings 63.64 73.45 53.49 48.82 ULIP 55.69 63.81 46.25 43.25 Par 6.38 8.46 6.43 4.43 Non Par 0.72 0.40 0.21 0.41 Group 0.86 0.78 0.60 0.73 Protection1 2.60 4.46 2.30 4.61 Total APE 66.25 77.92 55.79 53.43 Protection mix at 8.6% 1.
Slide 16: Multi-channel distribution
Multi-channel distribution1 ` billion FY2017 FY2018 9M-FY2018 9M-FY2019 Bancassurance 37.72 40.75 29.07 30.20 Agency 15.41 19.79 14.70 11.48 Direct 7.98 10.54 8.08 6.20 Corporate agents and brokers 4.07 4.70 3.09 3.01 Group2 1.07 2.13 0.85 2.54 Channel mix (%) 1.6% 2.7% 1.5% 4.7% 6.1% 6.0% 5.5% 5.6%
Slide 17: Protection
Protection1 ` billion 4.46 4.61 2.60 2.30 FY2017 FY2018 9M-FY2018 9M-FY2019 • 42.9% of retail new business policies are protection • New business sum assured grew by 38.7% to ` 3,009.89 billion 1. Based on APE 17
Slide 18: Persistency (retail excluding single premium)
Persistency1 (retail excluding single premium) Month FY2017 FY2018 9M-FY2018 8M-FY2019 13th month 84.7% 85.8% 85.5% 84.1% 25th month 73.0% 77.0% 75.4% 76.7% 37th month 65.5% 67.6% 66.6% 68.7% 49th month 58.3% 62.8% 61.1% 63.2% 61st month 53.8% 53.7% 53.6% 55.6% ` billion FY2017 FY2018 9M-FY2018 9M-F
Slide 19: Productivity: Cost efficiency
Productivity: Cost efficiency ` billion FY2017 FY2018 9M-FY2018 9M-FY2019 Expense ratio (excl. commission)1 11.4% 8.2% 8.5% 9.9% Commission ratio2 3.6% 5.5% 5.6% 5.5% Cost/TWRP3 15.1% 13.7% 14.0% 15.4% Cost/Average AUM4 2.8% 2.6% 2.5% 2.7% Cost/TWRP (Savings LOB) 13.3% 11.8% 12.3% 12.0% 34.75 ` bill
Slide 20: Financial update
Financial update
Slide 21: Financial metrics
Financial metrics ` billion FY2017 FY2018 9M-FY2018 9M-FY2019 Growth Retail new business premium 70.66 84.02 59.97 54.77 (8.7%) Retail renewal premium 142.19 174.97 114.89 136.09 18.5% Group premium 10.69 11.70 8.54 16.80 96.7% Total premium 223.54 270.69 183.40 207.66 13.2% Value of New Business (V
Slide 22: VNB growth levers update (4P's)
VNB growth levers update (4P’s) ` billion FY2017 FY2018 9M-FY2018 9M-FY2019 Growth Premium growth (APE)1 66.25 77.92 55.79 53.43 (4.2%) Protection APE 2.60 4.46 2.30 4.61 100.4% Persistency2 (13th month excluding single premium) 84.7% 85.8% 85.5% 84.1% NA Productivity (Cost/TWRP – Savings LOB) 13.3%
Slide 23: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview Image to be pasted
Slide 24: Favorable demography
Favorable demography Large and growing population base1 High share of working population1 Population of age 25-59 years: India (mn) 2017 Population (mn) 1,339 1,410 724 576 209 264 324 51 57 127 144 China S Africa Russia Brazil USA S Korea Japan Indonesia India 2015 2030 Driving GDP growth 2 Rising
Slide 25: 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% 59% 62% 58% 60% 70 51% 50% 23.8% 48% 49% 48% 25.1% 19.0% 18.8% 50% 26.7% 20.3% 45% 42% 41% 41% 29.0% 20.5% 50 40% 34% 32% 16.0% ` tn 23.3% 27% 30
Slide 26: Protection opportunity: Income replacement
Protection opportunity: Income replacement Sum assured as % of GDP1,2 Protection gap 3,4 270% 260% 92 56 85 33 73 78 73 56 226% 8.56 166% 149% 6.58 106% 5.30 96% USD tn 76% 1.09 0.79 0.77 0.52 0.40 Germany India US Japan Korea Malaysia Thailand Singapore India Japan Australia Indonesia S. Korea Thai
Slide 27: Protection opportunity: Liability cover
Protection opportunity: Liability cover Retail credit ` billion 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
Slide 28: Protection opportunity
Protection opportunity Gross direct premium (` billion) 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: Gen
Slide 29: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview Image to be pasted
Slide 30: Evolution of life insurance industry in India
Evolution of life insurance industry in India FY2002 FY2010 FY2015 FY2018 116 408 15.9% New business premium1 (` bn) 21.5% 550 -5.8% 635 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 (` bn) 2,304 24.0% 12,899 12.6%
Slide 31: Channel mix
Channel mix1 Industry Private players 8% 9% 11% 16% 18% 21% 23% 25% 26% 54% 54% 53% 69% 66% 63% 30% 28% 26% FY2017 FY2018 H1FY2019 FY2017 FY2018 H1FY2019 Agency Bancassurance Others Given a well developed banking sector, bancassurance continues to be the largest channel for private players 1. Indivi
Slide 32: Product mix
Product mix1 Industry Private players 25% 27% 26% 51% 54% 52% 75% 73% 74% 49% 46% 48% FY2017 FY2018 H1FY2019 FY2017 FY2018 H1FY2019 Traditional ULIP • Strong customer value proposition of ULIPs • Transparent and low charges • Lower discontinuance charges compared to other savings products • Choice a
Slide 33: Annexures
Annexures
Slide 34: Categories of products
Categories of products Savings Linked • Transparent • Choice of asset class • Low charges and minimum lapse risk for customers Par • Return upside through segment surplus1 i.e. income net expense/ reserve • High lapse risk for customers Non-Par Savings • Guaranteed returns • High lapse risk for cust
Slide 35: Average APE by product categories
Average APE by product categories Average retail APE per policy (`) FY2015 FY2016 FY2017 FY2018 ULIP 129,087 149,777 169,701 180,746 Par 38,480 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 35
Slide 36: 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 36
Slide 37: Channel wise product mix
Channel wise product mix1 Channel category Product category FY2015 FY2016 FY2017 FY2018 Bancassurance ULIP 88.4% 88.9% 92.1% 89.8% Par 10.0% 9.1% 5.3% 7.3% 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% Agency ULIP 78.5% 76.4% 79.5% 81.8% Par 19.2% 19.6%
Slide 38: 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 85.2% 89.8% 87.6% 88.9% 65.2% 62.7% 58.7% 58.2% Bancassurance Agency Direct Corpo
Slide 39: Retail persistency (including single premium)
Retail persistency (including single premium) Month FY2016 FY2017 FY2018 8M-FY2019 13th month 82.4% 85.7% 86.8% 85.4% 25th month 71.2% 73.9% 78.3% 78.4% 37th month 61.6% 66.8% 68.8% 69.9% 49th month 62.2% 59.3% 64.2% 64.6% 61st month 46.0% 56.2% 54.5% 56.6% As per IRDA circular dated January 23, 201
Slide 40: Fund performance
Fund performance 12.0% 11.8% 11.0% 10.4% 11.1% 7.4% 8.4% 8.7% 9.2% 7.6% 7.8% 5.9% 4.4% 0.8% 1.2% 1Y 5Y 1Y 5Y 1Y 5Y 1Y 5Y -4.0% Benchmark Fund Preserver Protector Balancer Maximiser (Liquid fund) (Debt fund) (Balanced fund) (Equity fund) 83.9% of linked portfolio out performed benchmark indices since
Slide 41: Embedded value
Embedded value
Slide 42: Embedded Value (EV)
Embedded Value (EV)1 ` billion 187.88 192.48 161.84 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 off
Slide 43: Embedded value growth
Embedded value growth ` billion 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 (ROEV)2 15.4% 16.2% 16.5% 22.7% EV growth-pre dividend 24.8% 12.1% 20.6% 23.4%
Slide 44: Analysis of movement in EV
Analysis of movement in EV1 ` billion 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 vari
Slide 45: 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
Slide 46: 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 suppo
Slide 47: 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 • Distributab
Slide 48: 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
Slide 49: 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
Slide 50: 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
Slide 51: 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
Slide 52: 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
Slide 53: 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
Slide 54: Economic assumptions underlying EV
Economic assumptions underlying EV Tenor (years) References Rates March 31, 2017 March 31, 2018 December 31, 2018 1 6.35% 6.57% 6.94% 5 7.78% 8.21% 7.87% 10 8.02% 8.31% 7.97% 15 8.03% 8.11% 7.90% 20 8.03% 7.97% 7.89% 25 8.03% 7.91% 7.92% 30 8.03% 7.88% 7.98% 54
Slide 55: Glossary
Glossary • Annualized Premium Equivalent (APE) – Annualized Premium Equivalent (APE) is the sum of the 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
Slide 56: 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 57: Thank you
Thank you
ICICI Prudential Life Insurance Company — 9M-FY2019 Earnings Presentation on 6ix