Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — H1 FY22 Earnings Presentation
67 slides from Hdfc Life Insurance's earnings presentation, 2021
Slide 1: Investor Presentation – H1 FY22
Investor Presentation – H1 FY22
Slide 2: Executive summary: H1 FY22
Executive summary: H1 FY22 Revenue trends Profitability Claims Settled around 2 lakh claims in H1. Gross New H1 FY22 26.4% and net claims provided for amounted to growth 22% Business Individual Margin (%) H1 FY21 25.1% Rs 36.4 bn and Rs 24.7 bn respectively WRP market 16.2% share Rs bn 10.9 Indi
Slide 3: Agenda
Agenda Performance Snapshot 1 Our Strategy 2 Customer Insights 3 Exide Life Transaction Update 4 Managing Covid-19 5 Annexure 6 India Life Insurance 7 Page 3
Slide 4: Agenda
Agenda Performance Snapshot 1 Our Strategy 2 Customer Insights 3 Exide Life Transaction Update 4 Managing Covid-19 5 Annexure 6 India Life Insurance 7 Page 4
Slide 5: Demonstrating resilience in the current environment (1/2)
Demonstrating resilience in the current environment (1/2) Rs bn Steady Individual WRP trends Strong, sustainable growth1 Mkt share 15.5% 17.8% 15.3% 16.2% Growth 17% 22% 22% 22% Growth HDFC Life Pvt sector Industry H1 FY22 22% 32% 20% 70.0 59.7 2 yr CAGR 12% 8% 5% 28.1 34.2 13.1 17.4 21.1 10.7 FY 21
Slide 6: Demonstrating resilience in the current environment (2/2)
Demonstrating resilience in the current environment (2/2) Rs bn Focus on diversified channel mix1 Profitable growth New business margin VNB growth of 4% 9% 7% 6% 13% 30% 30% on the back 14% 13% 13% 14% -12% of higher 19% 19% 21% 22% volumes and balanced product _ 26.1% 26.4% mix 64% 61% 60% 25.1%
Slide 7: Agenda
Agenda Performance Snapshot 1 Our Strategy 2 Customer Insights 3 Exide Life Transaction Update 4 Managing Covid-19 5 Annexure 6 India Life Insurance 7 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 H1 H1 Rs bn FY19 FY20 FY21 Profitable FY21 FY22 growth New business Margin 24.6% 25.9% 26.1% 25.1% 26.4% Economic Profit Value of new business 15.4 19.2 21.9 8.4 10.9 distribution mix Diversified Profit after tax (PAT) 12.8 13.0 13.6 7.8 5.82 Accounting Underwriting profit
Slide 10: Analysis of change in IEV
Analysis of change in IEV EVOP – 23.5 Rs bn EVOP1% - 18.4% Profitable growth 1.4 - 6.0 6.6 -3.2 287.0 10.9 11.2 266.2 VNB Economic Dividend & Unwind Operating Covid Wave variances ESOP variances3 distribution mix 2 impact exercises Diversified 194.4 176.3 Post-EMR2 EVOP1%: 16.1% innovation Market- l
Slide 11: Diversified distribution mix enabled by multiple levers
Diversified distribution mix enabled by multiple levers Enhancing and expanding proprietary1 channels Profitable growth distribution Diversified mix Tapping new Expanding Focus on building a Leveraging generation of geographical skilled and analytics for customers reach via structurally solid upsell
Slide 12: Bancassurance powered by innovation, technology and people
Bancassurance powered by innovation, technology and people Profitable growth Product Partner experience Tech integration & Seamless Capability building & proposition & engagement analytics operations resourcing distribution Diversified Comprehensive Defined One stop Straight through Learning on the
Slide 13: Technology driving productivity in Agency channel
Technology driving productivity in Agency channel Profitable growth Onboarding Skilling & Engagement Enablement Support & Servicing distribution Diversified InstaPRL a simple, Digital learning & skilling HDFC Life Easy – mix paperless and hassle free platform benefitting End 2 End Term Journey Partn
Slide 14: Expanding market through consistent product innovation
Expanding market through consistent product innovation Click2Protect Life Saral Jeevan Bima Group Saral Pension Auto balance death and Standard term and Poorna Profitable growth Retirement critical illness cover or annuity plan with & pension Woman Suraksha receive income payouts uniform product fro
Slide 15: 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 16: 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 34.4% in Mar’21 to 36% in and Corporate NPS segment, with AUM of Rs Sep’21 amongst all PFMs 223.3 bn ▪ Company has around 9 lakh customers - ~5.8 lakh in ▪ Registered st
Slide 17: Our protection philosophy
Our protection philosophy Protection is a multi-decade opportunity that we plan to address prudently with continued innovation Profitable growth Supply side considerations Our Focus Areas Adverse mortality distribution Diversified experience Strengthening underwriting practices and mix Demand side
Slide 18: Multi-pronged risk management approach for protection
Multi-pronged risk management approach for protection 1 2 3 4 Profitable growth Reducing incidence of Limiting impact on Balancing pricing & Strong governance & fraud & early claims profitability & solvency underwriting audits @Partners distribution Analytics and Data Enrichment Diversified Reinsura
Slide 19: Product mix across key channels
Product mix across key channels1 Segment FY19 FY20 FY21 H1 FY22 Segment FY19 FY20 FY21 H1 FY22 UL 26% 12% 10% 14% Profitable UL 64% 32% 27% 30% growth Par 40% 34% 37% 31% Agency Par 13% 18% 37% 33% Banca 2 Non par savings 17% 44% 30% 31% Non par savings 17% 40% 39% 40% Term 4% 4% 4% 4% Term 12% 12%
Slide 20: Aligned to make life simpler for the customers
Aligned to make life simpler for the customers in a turbulent environment 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 wor
Slide 21: Service Simplification – Conversational bots
Service Simplification – Conversational bots Technical Capabilities built in-house Highlights Profitable growth Hi Deep distribution Chat in 8 languages Cognitive Multi Diversified 650+ queries 9 lakh+ unique Claims and loan Hindi, Gujarati, Marathi, learning mix available on chat and automation pla
Slide 22: Service Simplification - Branch automation
Service Simplification - Branch automation Profitable growth distribution Diversified mix Simple and Eliminating physical easy forms Device agnostic innovation Market- leading No data connectivity OCR1 capability to Chat, audio, video, required capture cheque/DD document exchange details for NEFT fu
Slide 23: Service Simplification – Other digital interventions
Service Simplification – Other digital interventions Profitable growth SimplyQlik distribution Diversified mix Supports 11 key On-the-fly, real-time Real time update on policy servicing service transaction document transactions status update requirement innovation Market- leading Device agnostic; En
Slide 24: Experimenting with emerging tech through Futurance
Experimenting with emerging tech through Futurance Profitable Initiative started in June 80+ startups have growth 2019 in collaboration with collaborated with us IvyCamp Ventures Advisors distribution Diversified mix Benefits – solves for futuristic innovation customer and stakeholder Market- leadin
Slide 25: 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 26: 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 27: Agenda
Agenda Performance Snapshot 1 Our Strategy 2 Customer Insights 3 Exide Life Transaction Update 4 Managing Covid-19 5 Annexure 6 India Life Insurance 7 Page 27
Slide 28: Customer Insights from HDFC Life's LFI study
Customer Insights from HDFC Life’s LFI1 study Survey Results Higher need for financial planning given impact of pandemic Financial Sufficiency and Adequacy Index • Measures comprehensiveness of 1. Consumer looking for a more holistic financial plan financial planning • Down by 8.7 pts compared to 20
Slide 29: Agenda
Agenda Performance Snapshot 1 Our Strategy 2 Customer Insights 3 Exide Life Transaction Update 4 Managing Covid-19 5 Annexure 6 India Life Insurance 7 Page 29
Slide 30: Exide Life transaction timeline
Exide Life transaction timeline Step 1: Step 3: Step 5: Announcement of Application filed with IRDAI Application to IRDAI and Transaction and CCI for acquisition, NCLT for merging the two (Sep 3, 2021) ongoing interactions companies ₹ Step 2: Step 4: Step 6: Shareholders’ approval Receipt of app
Slide 31: Agenda
Agenda Performance Snapshot 1 Our Strategy 2 Customer Insights 3 Exide Life Transaction Update 4 Managing Covid-19 5 Annexure 6 India Life Insurance 7 Page 31
Slide 32: Dynamic approach to manage impact of the COVID-19 outbreak
Dynamic approach to manage impact of the COVID-19 outbreak Employee Engagement/ Facilitation Accelerated digital Digital Servicing selling • Communication to customers • Focus on selling products about digital touch-points for with end to end digital claims, renewal collection customer journeys Vacc
Slide 33: Emphasis on digital across customer touch-points
Emphasis on digital across customer touch-points New business / Customer Employee / Partner Policy servicing purchase interactions engagement ▪ Digital sales journey - End-to-end ▪ Digital Renewal collections – 87% based on renewal premiums ▪ Seamless support experience – ▪ e-learning platform –7,00
Slide 34: Agenda
Agenda Performance Snapshot 1 Our Strategy 2 Customer Insights 3 Exide Life Transaction Update 4 Managing Covid-19 5 Annexure 6 India Life Insurance 7 Page 34
Slide 35: Improvement in overall persistency trends
Improvement in overall persistency trends1 Across key channels (%) CY (H1 FY22) 96 92 90 91 86 87 85 84 82 79 75 76 76 71 72 67 65 67 Actuarial 56 51 Agency Banca Direct Company Financial 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (H1 FY21) 94 92 89 88 81 81 84
Slide 36: Improvement in overall persistency trends
Improvement in overall persistency trends1 Across key channels (%) CY (H1 FY22) 89 87 86 84 80 75 73 76 69 66 66 65 64 65 62 63 Actuarial 59 55 52 51 Agency Banca Direct Company Financial 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (H1 FY21) 89 92 84 82 79 78 78
Slide 37: Improving VNB trajectory
Improving VNB trajectory Rs bn 30% 0.7 0.1 10.9 Actuarial 2.0 0.3 8.4 Financial 1 H1 FY21 Impact of higher APE Change in New Business Profile Fixed cost absorption H1 FY22 assumptions VNB Growth ESG NBM% 25.1% 0.0% -0.7% 1.7% 0.3% 26.4% 1. Reflects the impact of difference in mix of segment/distribu
Slide 38: Sensitivity analysis
Sensitivity analysis Change in VNB Analysis based on key metrics Scenario % Change in EV Margin 1 Change in Increase by 1% -1.4% -2.0% Actuarial Reference rate Decrease by 1% 1.1% 1.6% Equity Market Decrease by 10% -0.1% -1.7% movement Increase by 10% -0.3% -0.6% Persistency (Lapse rates) Decrease b
Slide 39: Assets under management
Assets under management Rs bn Debt: Equity 62:38 71:29 64:36 62:38 UL:Traditional 50:50 43:57 43:57 43.57 Actuarial 37% 2,150 27% 18% 1,650 1% Financial 1,150 1,912 1,738 650 1,256 1,272 150 Mar 31, 2019 Mar 31, 2020 Mar 31, 2021 Sep 30, 2021 YoY Growth ESG Over 98% of debt investments in Governme
Slide 40: Stable capital position
Stable capital position Rs bn NB premium growth 32% 15% 17% 22% 201% 210% 120.0 188% 190% 184% 190% Actuarial 97.0 100.0 94.3 170% 20.5 80.0 70.8 24.0 150% 62.7 13.1 25.5 130% 60.0 23.4 Financial 12.7 19.2 110% 40.0 16.7 90% 46.9 51.0 20.0 33.3 38.5 70% - 50% ESG Mar 31, 2019 Mar 31, 2020 Mar 31, 20
Slide 41: Focus on sustainability
Focus on sustainability Our ESG strategy focusses on five pillars, each of which aims to address ESG related risks and create long term value for • Active engagement with external agencies all stakeholders including MSCI, S&P Global (DJSI) Actuarial • MSCI rating improved from ‘BB’ in October 20
Slide 42: Environment Social Governance pillars of ESG Framework
Environment Social Governance 5 pillars Governance structure & Compensation Risk management and BCM Information/Cyber Security of ESG Framework o ISO 27001:2013 and ISMS assessment program o Data Privacy Policy Ethical Responsible Investment (RI) Conduct o Generate optimal risk adjusted returns over
Slide 43: Environment Social Governance pillars
Environment Social Governance 5 pillars of ESG Ethical Conduct Employee engagement o Emotional and well being assistance program for employees and their families Responsible Attracting talent o Doctor on Call: Unlimited free consultation Investment o Hybrid work model and flexi hours to o E-Sparsh:
Slide 44: Environment Social Governance pillars
Environment Social Governance 5 pillars Inclusive growth Financial Inclusion Customer centricity of ESG Ethical Conduct Leveraging technology Responsible o In line with the Government’s social o To simplify life insurance for customers through Investment scheme ‘Pradhan Mantri Jeevan Jyoti their jou
Slide 45: Environment Social Governance pillars
Environment Social Governance 5 pillars Energy and water Digitization Waste management of ESG Reduction of Paper Usage o Online /e-forms for customers o Annual report FY21 digitally Ethical communicated to all Conduct stakeholders o Printers configured with default double side printing Responsible C
Slide 46: Agenda
Agenda Performance Snapshot 1 Our Strategy 2 Customer Insights 3 Exide Life Transaction Update 4 Managing Covid-19 5 Annexure 6 India Life Insurance 7 Page 46
Slide 47: Growth opportunity: Under-penetration and favorable demographics
Growth opportunity: Under-penetration and favorable demographics Life Insurance penetration 1 Life Insurance density US$ 2 (2019) (2019) 18.3% India remains vastly under-insured, both in 16.5% 8,979 terms of penetration and density Huge opportunity to penetrate the underserviced segments, with e
Slide 48: 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 49: 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 4.8% of GDP retirement period of 20 years Pension Assets / GDP Ratio Life expectancy at age 60 130.7 22 22 120.5 20 19 18 18 17 16 56.4 60.8 43.2 4.8 India
Slide 50: Government bond auctions
Government bond auctions Government Bonds – Tenorwise Issuance Rs cr 27% 21% 27% 29% 35% 35% 73% 79% 73% 71% 65% 65% FY17 FY18 FY19 FY20 FY21 H1FY22 >15yrs 1,54,520 1,80,529 2,04,000 2,38,000 2,65,575 1,99,000 <=15yrs 3,73,525 4,97,579 3,82,941 4,44,000 10,01,835 5,25,000 Total 5,28,045 6,78,109 5,8
Slide 51: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 25% 22% 18% 19% 3% 8% 11% 15% 12% 13% 19% 18% 20% 26% 17% 52% 60% 14% 68% 65% 67% 50% 56% 51% 48% 40% 32% 35% FY10 FY13 FY16 FY20 FY10 FY13 FY16 FY20 Financial savings Physical savings Currency & depos
Slide 52: Industry new business trends
Industry new business1 trends Individual WRP in Rs bn Sensex Private players 57% 52% 46% 37% 38% 38% 49% 52% 54% 56% 58% 57% 60% 62% Market share 1% 7% -20% -24% 2% -3% 16% 14% 26% 24% 12% 5% 8% 32% Growth % Private LIC -22% 29% 4% 11% -4% -2% -27% 3% 15% 13% 5% 8% -3% 4% Overall -10% 17% -9% -5% -2
Slide 53: 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% 57% 9% 10% 10% 12% 14% 56% 3% 16% 16% 54% 5% 4% 52% 51% 51% 3% 3% 3% 3% 3% 48% 49% 49% 3% 3% 3% 46
Slide 54: Appendix
Appendix
Slide 55: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) H1 FY22 H1 FY21 Growth FY21 FY20 FY19 CAGR Rs bn. New Business Premium (Indl. + Group) 103.6 85.0 22% 201.1 172.4 149.7 16% Renewal Premium (Indl. +Group) 89.2 75.5 18% 184.8 154.7 142.1 14% Total Premium 192.9 160.5 20% 385.8 327.1 291.9 15% Individual APE 3
Slide 56: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) H1 FY22 H1 FY21 FY21 FY20 FY19 Overall New Business Margins (post overrun) 26.4% 25.1% 26.1% 25.9% 24.6% (1) Operating Return on EV 18.4% 17.6% 18.5% 18.1% 20.1% Operating Expenses / Total Premium 12.0% 11.1% 12.0% 13.1% 13.1% Total Expenses (OpEx + Commissio
Slide 57: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Rs bn Revenue A/c1 Profit and Loss A/c1 H1 FY22 H1 FY21 H1 FY22 H1 FY21 Premium earned 192.9 160.5 Income Reinsurance ceded (3.0) (2.8) Interest and dividend income 2.5 2.0 Income from Investments 158.4 150.7 Net profit/(loss) on sale 2.1 0.3 Other Income 0.5 0.7 Transf
Slide 58: Balance sheet
Balance sheet Sep 30, 20211 Sep 30, 2020 Mar 31, 2021 Rs bn Shareholders’ funds Share capital (including Share premium) 25.9 24.4 25.0 Accumulated profits 61.0 53.5 59.3 Fair value change 2.3 0.4 2.1 Sub total 89.1 78.2 86.4 Borrowings 6.0 6.0 6.0 Policyholders’ funds Fair value change 30.0 11.2 25.
Slide 59: Segment wise average term and age
Segment wise average term and age1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) H1 FY22: 23.3 (H1 FY21: 25.2) H1 FY22: 36.2 (H1 FY21: 35.7) 12 UL 36 UL 37 12 41 Par 33 Par 33 42 22 Non-par Health 32 Non-par Health 32 23 12 Non-par Savings 37 Non-par Saving
Slide 60: 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 61: 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 62: 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 63: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Sep 30, 2020 As at Sep 30, 2021 As at Sep 30, 2020 As at Sep 30, 2021 1 3.90 3.95 3.83 3.87 2 5.12 5.17 4.41 4.45 3 6.01 6.02 4.89 4.92 4 6.65 6.68 5.28 5.31 5 7.09 7.17 5.59 5.63 10 7.67 8.19 6.45 6.63 15 7.37 8.10 6.71
Slide 64: 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 65: 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 66: 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 67: Thank you
Thank you atats ite
HDFC Life Insurance Company — H1 FY22 Earnings Presentation on 6ix