Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — Investor Presentation (2023)
63 slides from Hdfc Life Insurance's investor presentation, 2023
Slide 1: Investor Presentation – FY23
Investor Presentation – FY23
Slide 2: Executive summary: FY23
Executive summary: FY23 Revenue & Scale Profitability & Cost Customer & Capital Rs.Bn 112.6 CY 27.6% CY 87% Individual New Business 13th month WRP Market Margin (NBM) persistency PY 27.4% PY 87% 16.5% Share Renewal CY 284.5 CY 36.7 Overall 99.7% VNB (Rs Bn.) Claim settlement Premium (Rs PY 26.8 rati
Slide 3: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 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 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: 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 Overall 8.1% 9.2% 9.3% 10.8% mkt share Pvt. mkt 14.2% 15.5% 14.8% 16.5% share 17% -19% 55% 46% YoY 19% 17% 16% 27%* growth _ 112.6 77.4 81.5 53.0 59.7 70.0 42.4 34.2 FY20 FY21
Slide 7: Robust delivery across key metrics (2/2)
Robust delivery across key metrics (2/2) Rs bn Stable Persistency1 NBM neutrality achieved ahead of expectations2 27.4% 27.6% 87% 87% ▪ Multiple pools of ▪ Focus on quality of profitability contributing business and providing 54% 52% to VNB accretion superior customer experience_ 36.7 ▪ VNB growth o
Slide 8: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Our approach to ESG 5 Annexures 6 Life insurance in India Page 8
Slide 9: 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 10: Focus on profitable growth
Focus on profitable growth FY20 FY21 FY22 FY231 Rs bn Profitable New business Margin 25.9% 26.1% 27.4% 27.6% growth Economic Profit Value of new business 19.2 21.9 26.8 36.7 Profit after tax (PAT) 13.0 13.6 12.1 13.6 distribution Accounting Diversified mix Underwriting profits Profit 10.9 7.3 4.42 5
Slide 11: Analysis of change in IEV
Analysis of change in IEV Rs bn EVOP – 64.9 EVOP%1 - 19.7% Profitable growth 1.5 15.9 16.7 395.3 36.7 26.2 0.4 Operating distribution Economic Diversified 329.6 variances3 Dividend & Change in VNB variances mix capital Unwind operating infusion assumptions 267.4 Customer 228.3 first Adjusted Net wor
Slide 12: Diversified distribution enabled by multiple levers
Diversified distribution enabled by multiple levers Proprietary1 Brokers, Aggregators & Banks, NBFCs, SFBs and Other CAs New Ecosystems Profitable growth ~1.8L Agents distribution Diversified ~500 Branches mix 48 Digital Branches2 www.hdfclife.com HDFC Life App Customer First Group, Pension & Intern
Slide 13: 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 • New tie-ups with partners like distribution Diversified strategy In
Slide 14: 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 Objective Simple Savings Borrowing Investments Asset Drawdown Profitable growth Pay off mortgage Mortality Medical care distribution Diversified mix Morbidity First Job Medical care Net Wor
Slide 15: Focus on protection
Focus on protection Protection (Individual + Group) trends FY23 Retail protection growth trend Rs Bn. Profitable growth 22% -16%* 24% ~20% 26% 13% 51% 17.8 1.7 12.7 13.2 distribution 1.1 Diversified 10.7 1.0 mix 0.8 Customer FY20 FY21 FY22 FY23 Q1 Q2 Q3 Q4 First Sequential Growth 18% -17%* 47% >40%
Slide 16: Product mix across key channels
Product mix across key channels1 Segment FY21 FY22 FY23 Segment FY21 FY22 FY23 UL 27% 29% 24% UL 10% 16% 10% Profitable growth Par 37% 33% 33% Agency Par 37% 33% 27% Banca 2 Non par savings 30% 33% 42% Non par savings 39% 39% 49% Term 4% 4% 3% Term 11% 10% 6% Annuity 2% 2% 4% Annuity 3% 3% 3% distri
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 ▪ Prudent assumptions and pricing approach Profitable ▪ Protection and longevity businesses growth ▪ 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
Journey Simplification Enhancing customer journeys across touchpoints Enhanced customer onboarding Enabling seamless payout journey Profitable growth distribution Diversified mix Quote Engine Pre-underwriting Financial & CKYC Simplified Paperless Authentication doc collection journey journey for ris
Slide 21: Partner integration
Partner integration Integration Integration Business journeys areas Impact Profitable growth SSO 70+ partners distribution Diversified mix New API Portal business STP • Scalable, cheaper and 400+ API more efficient API portal Customer integrations first Quote • Faster new partner Customers Customer
Slide 22: Service simplification
Service simplification Profitable growth distribution Diversified mix Smart Voice based Automated Robot ✓ Whatsapp Payment ✓ OLA and CRED and ✓ Customer many more via BBPS Customer Authentication first ✓ NPCI’s upi123pay ✓ Appointment Booking ✓ SI on Amex card ✓ Reminder/ Follow Up ✓ Cardless EMI ✓
Slide 23: Data Labs
Data Labs CP to Retail propensity model Withdrawal aversion model Pension CRM Profitable growth Model that provides Cross-sell Model to predict customer Computer Vision based solution propensity for CP customers withdrawal at New Business to record customer details & to buy retail policy stage & ave
Slide 24: Emerging Technology: CX & Inspire
Emerging Technology: CX & Inspire Customer Experience Transformation & Technology Transformation Profitable growth CX Transformation Technology Transformation distribution Diversified mix 1 2 3 4 Customer first Customer Satisfaction Business Benefits Agility Agility Deeper Insights Deeper Insights m
Slide 25: Performance of wholly-owned subsidiary companies
Performance of wholly-owned subsidiary1 companies HDFC Pension HDFC International NPS AUM Revenue Rs Bn. Ranked #1 76% 33% $ Mn. based on AUM 454 17 83 7 FY20 FY23 FY20 FY23 3 Year CAGR 3 Year CAGR ▪ HDFC Pension continues to be the largest PFM (Pension Fund ▪ Registered 10% YoY growth in GWP in FY
Slide 26: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Our approach to ESG 5 Annexures 6 Life insurance in India Page 26
Slide 27: 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 28: Customer insights – Women policyholders & distributors
Customer insights – Women policyholders & distributors Customers Distribution ▪ 3-year APE CAGR for women customers vs men: ▪ 3-year CAGR for APE sourced by women vs men 27% vs 19% agents: 30% vs 10% ▪ Women constitute ~30% of policyholders, an ▪ Women constitute ~30% of total agents of HDFC increas
Slide 29: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Our approach to ESG 5 Annexures 6 Life insurance in India Page 29
Slide 30: ESG at a Glance
ESG at a Glance ESG Focus Areas ESG Score Highlight: Highest rated Indian insurance company in the ESG assessment by a leading ratings agency (Continuous improvement in score for five consecutive years) 30 30
Slide 31: Ethical Conduct & Governance
Ethical Conduct & Governance Leadership Oversight on ESG • Board CSR Committee renamed as CSR and ESG Committee and Terms of Reference enhanced to include oversight of ESG issues • ESG Management Committee, led by the Chief Financial Officer oversees the policy implementation and operational control
Slide 32: Ethical Conduct & Governance (contd.)
Ethical Conduct & Governance (contd.) Information / Cybersecurity Policies and Frameworks • Anti-bribery & Anti-corruption Policy • Risk oversight by Board Risk Management Committee and risks reporting done on a quarterly basis • Anti Money Laundering (AML) Policy • Board Diversity Policy • Modes of
Slide 33: 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 This fund shall seek to generate returns from investing in long term companies with high ESG standards and com
Slide 34: 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 35: Holistic Living: Delivering superior customer experience
Holistic Living: Delivering superior customer experience Customer Centricity Enhancing Customer Experience through our CX Program, based on 5 focus areas: Journey Simplifying buying journeys through platforms Online claim processing for eligible simplification – like LifeEasy (online term purchase)
Slide 36: Sustainable Operations
Sustainable Operations Energy and water Digitization - Reduction of Paper Usage Waste management o Since 2014 only 3 or 5 o Introduction of E-business cards & star rating air – ID cards conditioners used o Online /e-forms for customers o > 95% of branches use total LED lightings o Annual report FY20
Slide 37: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Our approach to ESG 5 Annexures 6 Life insurance in India Page 37
Slide 38: Persistency trends for HDFC Life
Persistency trends for HDFC Life1 Across key channels (%) CY (FY23) 89 86 90 87 83 78 77 76 79 72 71 72 62 66 64 64 55 56 52 52 Agency Banca Direct Company 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (FY22) 93 89 87 87 81 82 81 79 74 76 73 70 66 67 66 63 61 55 5
Slide 39: Improving VNB trajectory for both existing and acquired businesses
Improving VNB trajectory for both existing and acquired businesses Rs bn 9.8 0.9 0.3 0.5 36.7 0.1 26.8 FY22 Impact of higher Change in New Business Fixed 1 cost Project Inspire FY23* APE assumptions Profile 1 absorption NBM% 27.4% 0.0% 0.1% 0.7% -0.2% -0.4% 27.6% 1. Reflects the impact of difference
Slide 40: 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 41: Capital position
Capital position Rs bn 230% 200.0 201% 203% 210% 184% 190% 176% 146.6 150.0 170% 97.7 38.4 94.3 150% 100.0 130% 70.8 14.3 36.1 24.0 110% 27.8 13.1 23.4 50.0 19.2 90% 72.1 55.6 70% 46.9 38.5 - 50% Mar 31, 2020 Mar 31, 2021 Mar 31, 2022 Mar 31, 2023 ASM1 RSM @100% Incremental RSM @150% Surplus Capital
Slide 42: Assets under management
Assets under management* Rs bn Debt: Equity 71:29 64:36 63:37 70:30 UL:Traditional 43:57 43:57 39:61 33:67 2,650 17% 2,150 37% 1% 1,650 2,388 2,042 1,150 1,738 650 1,272 150 Mar 31, 2020 Mar 31, 2021 March 31, 2022 March 31, 2023 YoY Growth ▪ ~99% of debt investments in Government bonds and AAA rate
Slide 43: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Our approach to ESG 5 Annexures 6 Life insurance in India Page 43
Slide 44: 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 45: 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 Kong Singapore Japa
Slide 46: 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 47: Government bond auctions
Government bond auctions Government Bonds – Tenorwise Issuance Rs cr 65% 62% 65% 65% 71% 73% 72% 71% 79% 35% 38% 35% 35% 29% 27% 28% 29% 21% FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 <=15yrs 3,86,000 3,66,500 3,73,525 4,97,579 3,82,941 4,44,000 10,01,835 8,48,000 10,04,000 >15yrs 2,06,000 2,25,00
Slide 48: 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 49: Industry new business trends
Industry new business trends1 Sensex Private Players LIC 800 70,000 684 700 60,000 Individual WRP in Rs bn 600 551 50,000 500 452 401 420 40,000 400 357 356 Sensex 315 305 325 285 287 291 30,000 300 278 227214 245 200208 20,000 200 172 100 10,000 0 - FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
Slide 50: Appendix
Appendix tL 22 YEARS
Slide 51: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) FY23* FY22 FY21 FY20 Rs bn. New Business Premium (Indl. + Group) 290.9 241.5 201.1 172.4 Renewal Premium (Indl. +Group) 284.5 218.1 184.8 154.7 Total Premium 575.3 459.6 385.8 327.1 Individual APE 114.0 81.7 71.2 61.4 Overall APE 133.4 97.6 83.7 74.1 Group Pr
Slide 52: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) FY23* FY22 FY21 FY20 Overall New Business Margins (post overrun) 27.6% 27.4% 26.1% 25.9% Operating Return on EV 19.7% 16.6% 18.5% 18.1% Operating Expenses / Total Premium 14.8% 12.3% 12.0% 13.1% Total Expenses (OpEx + Commission) / Total Premium 19.8% 16.5% 1
Slide 53: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Rs bn Revenue A/c1 Profit and Loss A/c1 FY23* FY22 FY23* FY22 Premium earned 575.3 459.6 Income Reinsurance ceded (7.7) (5.7) Interest and dividend income 6.7 4.8 Income from Investments 126.0 192.2 Net profit/(loss) on sale 0.5 3.1 Other Income 4.3 1.5 Transfer from Po
Slide 54: Balance sheet
Balance sheet March 31, 20231 March 31, 20221 Rs bn Shareholders’ funds Share capital (including Share premium) 58.7 86.7 Accumulated profits 71.0 67.3 Fair value change 0.2 0.8 Sub total 129.9 154.8 Borrowings 9.5 6.0 Policyholders’ funds Fair value change 19.8 21.7 Policy Liabilities 1,432.7 1,043
Slide 55: Segment wise average term and age
Segment wise average term and age1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) FY23: 22.7 (FY22: 22.6) FY23: 35.6 (FY22: 36.4) UL 12 UL 37 12 37 Par 36 Par 33 41 33 Non-par Health 16 Non-par Health 32 21 32 Non-par Savings 13 Non-par Savings 38 12 37 Non-
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 sh
Slide 59: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Mar 31, 2023 As at Mar 31, 2022 As at Mar 31, 2023 As at Mar 31, 2022 1 7.19 4.34 6.94 4.25 2 7.47 5.65 7.07 4.87 3 7.47 6.70 7.11 5.41 4 7.45 7.43 7.13 5.85 5 7.44 7.90 7.14 6.20 10 7.51 8.36 7.17 7.10 15 7.60 7.97 7.22
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
HDFC Life Insurance Company — Investor Presentation (2023) on 6ix