Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — H1 FY2023 Earnings Presentation
63 slides from Hdfc Life Insurance's earnings presentation, 2022
Slide 1: Investor Presentation – H1 FY23
Investor Presentation – H1 FY23
Slide 2: Executive summary: H1 FY23
Executive summary: H1 FY23 Revenue & Scale Profitability & Cost Customer & Capital New CY 27.6% 26.2% Rs. bn 37.8 41.1 CY 88% 87% Individual Business 13th month WRP Market Margin persistency1 14.8% 16.1% (NBM) PY 26.4% PY 86% Share Rs (Bn.) 108.0 120.1 Rs (Bn.) 12.6 12.9 Overall 99.6% Renewal VNB Cl
Slide 3: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Exide Life Transaction Update 4 Our approach to ESG 5 Annexures 6 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: Healthy performance across all key metrics (1/2)
Healthy performance across all key metrics (1/2)* Rs bn Strong, sustainable growth Strong CP volumes on the back of higher disbursements1 Overall 8.1% 9.2% 9.3% 9.4% 10.2% mkt share Pvt. mkt 14.2% 15.5% 14.8% 14.8% 16.1% share 17% -19% 55% 66% YoY 19% 17% 16% 11% NM# growth _ 81.5 53.0 70.0 42.4 59.
Slide 6: Healthy performance across all key metrics (2/2)
Healthy performance across all key metrics (2/2) Rs bn Improving Persistency1 Steady expansion in New Business Margins 88% 87% 16% 86% Improving Margins 52% 54% 51% persistency continue to trends across improve for 27.6% channel _ and 26.4% 26.2% both existing product cohorts and acquired busine
Slide 7: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Exide Life Transaction Update 4 Our approach to ESG 5 Annexures 6 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 Rs bn H1 H1 FY23 H1 FY23 FY20 FY21 FY22 Profitable FY22 (Pre-Merger) (Post-Merger) growth Economic New business Margin 25.9% 26.1% 27.4% 26.4% 27.6% 26.2% Profit Value of new business 19.2 21.9 26.8 10.9 12.6 12.9 distribution Diversified Profit after tax (PAT) 13.0 13.6 1
Slide 10: Analysis of change in IEV
Analysis of change in IEV Rs bn Profitable growth EVOP – 25.5 EVOP1% - 17.7% 30.0 360.2 1.0 12.4 16.6 330.2 12.6 11.9 distribution mix Exide Life Diversified 300.5 Operating VNB variances Economic Dividend & EV Unwind variances Capital infusion 239.4 220.4 innovation Market- leading 211.9 Adjusted N
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 ~450 Branches 48 Digital Branches2 www.hdfclife.com innovation HDFC Life App Market- leading Group, Pension & Int
Slide 12: Product innovation across segments
Product innovation across segments Credit Protection with ULIP Offline Online Add ons Protect Profitable growth Plain vanilla term Cheaper compared Term insurance New features such as Provides higher plans where to offline term plan attached spouse cover, smart coverage with customer gets life with
Slide 13: 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 14: 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% in Sep’21 to 39% in Sep’22 and Corporate NPS segment, with AUM of Rs amongst all PFMs 351 bn1 ▪ Company has over 1.25 mn customers ▪ Registered strong YoY growth in
Slide 15: Product mix across key channels – Post-Merger basis
Product mix across key channels1 – Post-Merger basis Segment FY20 FY21 FY22 H1 FY23 Segment FY20 FY21 FY22 H1 FY23 UL 12% 10% 16% 11% Profitable UL 32% 27% 29% 26% growth Par 34% 37% 33% 39% Agency Par 18% 37% 33% 29% Banca 2 Non par savings 44% 30% 33% 37% Non par savings 40% 39% 39% 39% Term 4% 4%
Slide 16: 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 my independent from purchase SIMPLIFICATION for connect and world / buying service personaliza
Slide 17: New in-house automated underwriting rule engine
New in-house automated underwriting rule engine Profitable Developed inhouse automated rule engine to replace existing externally sourced rule engine growth Benefits distribution Diversified mix Complete control- No dependencies on external rule engine service provider innovation Market- leading Hig
Slide 18: Journey Simplification
Journey Simplification Credit Bureau, ITR & EPFO Integration aiding better throughput Empowering a seamless customer onboarding journey Success metrics Benefits Profitable growth Bureau score is Hassle free customer 85% received for 85% onboarding experience distribution Diversified of cases mix ITR
Slide 19: Strengthening underwriting and simplifying customer journey
Strengthening underwriting and simplifying customer journey Cardiac risk assessment at home for medical underwriting Profitable Cardiac risk assessment service at home promises convenience to individuals who have to undergo medicals while growth applying for an HDFC Life insurance policy distributio
Slide 20: Home medicals for NRI customers
Home medicals for NRI customers In an industry first initiative, we have now launched home medicals for our Profitable customers overseas in 21 countries growth distribution Diversified mix innovation Market- leading Reimagining insurance management Board and Quality of 20
Slide 21: 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 22: 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 23: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Exide Life Transaction Update 4 Our approach to ESG 5 Annexures 6 Life insurance in India Page 23
Slide 24: Exide Life Performance Snapshot: H1 FY23
Exide Life Performance Snapshot: H1 FY23 Scale Profitability & Cost Customer & Capital Others Individual APE Margins 13M Persistency1 Channel Mix2 Rs bn: 3.2 VNB (Rs bn): 0.3 H1 FY23: 76% Agency: 56% Growth: 15% NBM: 8.2% H1 FY22: 73% Banca: 7% Broker: 25% Direct: 12% Opex ratio Claim Settlement Rat
Slide 25: Integration – Focus areas
Integration – Focus areas Accelerating revenues … Realizing cost savings … Optimizing nation-wide geographic presence Augmenting proprietary growth channels • Adoption of best practices and re-aligning key result (offices, branches, hubs) • 80+ branches to be merged across geographies areas across t
Slide 26: Exide Life transaction timelines
Exide Life transaction timelines Milestones Date Completed Milestone 1: Sep 3, 2021 Announcement of transaction Milestone 2: Sep 29, 2021 Shareholders’ approval for issuance of shares Milestone 3: Receipt of approvals from IRDAI and CCI for acquisition, ongoing Jan 1, 2022 interactions. Exide Life b
Slide 27: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Exide Life Transaction Update 4 Our approach to ESG 5 Annexures 6 Life insurance in India Page 27
Slide 28: ESG at a Glance
ESG at a Glance ESG Focus Areas 28
Slide 29: Ethical Conduct & Governance
Ethical Conduct & Governance Governance structure & Compensation Risk management and BCM Information/Cyber Security Framework Information/cyber security Fraud risk management ISO 27001:2013 and Values program; Corporate governance Board evaluation & Disciplinary Panel for ISMS assessment policy inde
Slide 30: 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 companies with high ESG standards and com
Slide 31: Employee Engagement & Diversity, Equity and Inclusion (DEI)
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 32: 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 33: 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 service Document simp
Slide 34: 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 o 94% of branches use LED o Annual report FY20 & FY21 digitally
Slide 35: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Exide Life Transaction Update 4 Our approach to ESG 5 Annexures 6 Life insurance in India Page 35
Slide 36: Improvement in overall persistency trends – Pre-Merger basis
Improvement in overall persistency trends – Pre-Merger basis1 Across key channels (%) CY (H1 FY23) 91 90 88 86 83 82 79 76 76 72 67 71 70 64 63 64 60 53 56 54 Agency Banca Direct Company 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (H1 FY22) 90 94 88 86 82 81 82
Slide 37: Persistency trends for HDFC Life – Post-Merger basis
Persistency trends for HDFC Life – Post-Merger basis1 Across key channels (%) CY (H1 FY23) 88 86 89 87 82 77 76 77 70 71 69 70 61 64 62 63 51 53 53 51 Agency Banca Direct Company 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (H1 FY22) 89 93 85 86 80 80 79 76 76 71
Slide 38: Improving VNB trajectory
Improving VNB trajectory Rs bn 16% 1.4 0.5 0.3 12.9 12.6 1.2 0.4 10.9 H1 FY22 Impact of Change in New Business Fixed cost H1 FY23 Exide H1 FY23 higher APE assumptions Profile 1 absorption (Pre-Merger) (Post-Merger) NBM% 26.4% - -0.8% 3.1% -1.1% 27.6% 26.2% VNB Growth 1. Reflects the impact of differ
Slide 39: 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 40: Capital position
Capital position Rs bn 160.0 210% 201% 210% 139.8 140.0 184% 190% 176% 120.0 40.1 170% 97.7 100.0 94.3 150% 14.3 80.0 24.0 33.2 70.8 130% 27.8 13.1 60.0 23.4 110% 19.2 40.0 90% 66.4 55.6 20.0 46.9 38.5 70% - 50% Mar 31, 2020 Mar 31, 2021 Mar 31, 2022 Sep 30, 2022 (Post-Merger) ASM1 RSM @100% Increme
Slide 41: 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 36:64 Actuarial NM* 2,150 17% 37% 1,650 1% 2,249 Financial 2,042 1,150 1,738 650 1,272 150 Mar 31, 2020 Mar 31, 2021 Mar 31, 2022 30th Sep 2022 (Post-Merger Basis) ESG YoY Growth Over 99% of debt in
Slide 42: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Exide Life Transaction Update 4 Our approach to ESG 5 Annexures 6 Life insurance in India Page 42
Slide 43: Growth opportunity: Under-penetration and favorable demographics
Growth opportunity: Under-penetration and favorable demographics Life Insurance penetration 1 Life Insurance density US$ 2 19.2% (FY 2021) (FY 2021) India remains vastly under-insured, both in 8,983 terms of penetration and density 14.0% Huge opportunity to penetrate the 7.6% 4,528 underserviced
Slide 44: 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 45: 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 9.3% of GDP retirement period of 20 years 131.7 Life expectancy at age 60 96.8 20 19 18 17 18 17 16 15 50.6 54.3 21.2 9.3 India Japan South Hong Kong USA A
Slide 46: Government bond auctions
Government bond auctions Government Bonds – Tenorwise Issuance Rs cr 100% 90% 80% 70% 65% 62% 65% 65% 71% 73% 72% 73% 60% 79% 50% 40% 30% 20% 35% 38% 35% 35% 29% 27% 28% 27% 10% 21% 0% FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 H1FY23 <=15yrs 3,86,000 3,66,500 3,73,525 4,97,579 3,82,941 4,44,000 10,01,
Slide 47: 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 48: Industry new business trends
Industry new business trends1 Individual WRP in Rs bn Sensex Private players 52% 46% 37% 38% 38% 49% 52% 54% 56% 58% 57% 60% 63% 63% Market share 7% -20% -24% 2% -3% 16% 14% 26% 24% 12% 5% 8% 22% 21% Growth % Private LIC 29% 4% 11% -4% -2% -27% 3% 15% 13% 5% 8% -3% 7% 15% 17% -9% -5% -2% -3% -11% 8%
Slide 49: 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 50: Appendix
Appendix 50
Slide 51: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) H1 FY23 H1 FY23 Rs bn. H1 FY22 Growth FY22 FY21 (Pre-Merger) (Post-Merger) New Business Premium (Indl. + Group) 109.2 103.6 5% 241.5 201.1 113.2 Renewal Premium (Indl. +Group) 108.0 89.2 21% 218.1 184.8 120.1 Total Premium 217.2 192.9 13% 459.6 385.8 231.9 In
Slide 52: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) H1 FY23 H1 FY23 H1 FY22 FY22 FY21 (Pre-Merger) (Post-Merger) Overall New Business Margins (post overrun) 27.6% 26.4% 27.4% 26.1% 26.2% Operating Return on EV 17.7% 16.1% 16.6% 18.5% NA Operating Expenses / Total Premium 14.3% 12.0% 12.3% 12.0% 14.7% Total Exp
Slide 53: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Rs bn Revenue A/c1 Profit and Loss A/c1 H1 FY23 H1 FY23 H1 FY22 H1 FY22 (Post-Merger) (Post-Merger) Premium earned 233.3 192.9 Income Reinsurance ceded (3.7) (3.0) Interest and dividend income 2.9 2.5 Income from Investments 64.8 158.4 Net profit/(loss) on sale (0.1) 2.
Slide 54: Balance sheet
Balance sheet Sep 30, 2022 Rs bn Sep 30, 2021 March 31, 2022 (Post-Merger) Shareholders’ funds Share capital (including Share premium) 58.6 25.9 86.7 Accumulated profits 64.2 61.0 67.3 Fair value change 0.6 2.3 0.8 Sub total 123.5 89.2 154.8 Borrowings 9.5 6.0 6.0 Policyholders’ funds Fair value cha
Slide 55: Segment wise average term and age – Pre-Merger basis
Segment wise average term and age – Pre-Merger basis1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) H1 FY23: 23 (H1 FY22: 23) H1 FY23: 35 (H1 FY22: 36) UL 12 UL 37 12 36 Par 39 Par 33 41 33 Non-par Health 17 Non-par Health 32 22 32 Non-par Savings 12 Non-pa
Slide 56: 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 57: 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 58: 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 59: Embedded Value: Economic assumptions (Post-Merger Basis)
Embedded Value: Economic assumptions (Post-Merger Basis)1 Forward rates % Spot rates % Years As at Sep 30, 2021 As at Sep 30, 2022 As at Sep 30, 2021 As at Sep 30, 2022 1 3.95 6.66 3.87 6.45 2 5.17 7.49 4.45 6.84 3 6.02 7.74 4.92 7.04 4 6.68 7.78 5.31 7.15 5 7.17 7.75 5.63 7.22 10 8.19 7.61 6.63 7.3
Slide 60: 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 61: 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 62: 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 63: Thank You
Thank You me 21 YEARS
HDFC Life Insurance Company — H1 FY2023 Earnings Presentation on 6ix