Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — Q1 FY2021 Earnings Presentation
59 slides from Hdfc Life Insurance's earnings presentation, 2020
Slide 1: HDFC Life Insurance Investor Presentation – Q1 FY21
HDFC Life Insurance Investor Presentation – Q1 FY21
Slide 2: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Managing Covid-19 4 Customer Insights 5 Annexures 6 India Life Insurance Page 2
Slide 3: Performance Snapshot
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 1 Performance Snapshot
Slide 4: Executive summary: Q1 FY21
Executive summary: Q1 FY21 Expansion in market share1 by 100 bps from 17.5% to 18.5% Revenue growth and Market share Individual WRP de-growth of 19% v/s private industry de-growth of 23%, despite our base effect of 63% growth in Q1 FY20 Balanced product mix2 (UL: 27%, Par: 30%, Non-par savings
Slide 5: Demonstrating resilience in the current environment (1/2)
Demonstrating resilience in the current environment (1/2) Improving MoM business trends1 Expanding market share1 Rs Bn. CY -29% -33% -3% -19% Growth Market share Growth vs Industry PY 31% 59% 87% 63% Growth Growth HDFC Pvt Industry Life sector Q1 FY21 -19% -23% -18% 13.2 10.7 Q1 FY20 63% 24% 14% 18.
Slide 6: Demonstrating resilience in the current environment (2/2)
Demonstrating resilience in the current environment (2/2) Strong growth in renewal premium Robust profitability Rs Bn. New Business Margins (NBM) Profit after tax (PAT) 24% APE1 1x 1.67x 1.17x 6% Continue to witness delay in collections 32.4 Improving MOM_ 29.8% 4.5 26.1 4.2 collection trends 24
Slide 7: Our Strategy
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 2 Our Strategy
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 sustainable Developing multiple Creating new product Market-leading digital Seasoned leadership and profitable growt
Slide 9: Focus on profitable growth
Focus on profitable growth Q1 Q1 FY18 FY19 FY20 Rs Bn. Profitable FY20 FY21 growth New business Margin 23.2% 24.6% 25.9% 29.8% 24.3% Economic Profit Value of new business 12.8 15.4 19.2 5.1 2.9 distribution mix Profit after tax (PAT) Balanced 11.1 12.8 13.0 4.2 4.5 Accounting Profit Underwriting pro
Slide 10: Analysis of change in IEV
Analysis of change in IEV1 Rs Bn. EVOP – 7.7 Profitable EVOP1% - 15.8% growth 225.8 206.5 distribution mix Balanced innovation leading Market Adjusted Net worth (ANW) Value of in-force business (VIF) Reimagining insurance management Board and Quality of Operating variances continue to be in line w
Slide 11: Diversified distribution mix
Diversified distribution mix Focus on diversified mix 1 Strong and diversified network of 230+ traditional partners Banks NBFCs and MFIs SFBs Profitable growth 14% 19% 22% 24% 11% 5% 13% 14% 12% 4% 9% 5% distribution Balanced mix 71% 64% 55% 59% FY18 FY19 FY20 Q1 FY21 innovation leading Market Banca
Slide 12: Addressing customer needs at every stage of life
Addressing customer needs at every stage of life <25 years 26-35 years 36 – 50 years 50+ years Risks Addressed Profitable Objective Simple Savings Borrowing Investments Asset Drawdown growth Pay off mortgage Mortality distribution Balanced Medical care mix Morbidity First Job Medical care Net Worth
Slide 13: Expanding market through consistent product innovation
Expanding market through consistent product innovation Group Poorna Suraksha Guaranteed returns, Comprehensive protection plan Profitable growth Retirement offering multiple choices of with option for life long & pension benefits under group platform Woman income FY15 FY17 FY18 FY19 FY20 FY21 distri
Slide 14: Our approach to retiral solutions
Our approach to retiral solutions Opportunity to grow the current retiral corpus1 of ~Rs 360 bn to 3x in the next 5 years Profitable growth 1. NPS 2. Individual income plans 2 ▪ Ranked #1 amongst private owned Pension ▪ Providing long term retiral solutions Fund Managers in terms of AUM ▪ Registered
Slide 15: Product mix across key channels
Product mix across key channels1 Segment FY18 FY19 FY20 Q1 FY21 Segment FY18 FY19 FY20 Q1 FY21 UL 33% 26% 12% 13% Profitable UL 64% 64% 32% 31% growth Par 48% 40% 34% 43% Agency Par 25% 13% 18% 32% Banca 2 Non par savings 8% 17% 44% 30% Non par savings 5% 17% 40% 23% Term 3% 4% 4% 6% Term 11% 12% 12
Slide 16: Simplifying the customer journey using building blocks
Simplifying the customer journey using 5 building blocks Profitable growth Platforms and Partner Journey Service Data Enrichment Ecosystems Integration Simplification Simplification and Analytics Insurance beyond digital: Products and services built on Customer sales journeys Simplified solutions fo
Slide 17: VVISE: Industry first video based sales enablement tool
VVISE: Industry first video based sales enablement tool Profitable growth Lead tracking and Zero setup for customer functional dashboard Encrypted and Secure distribution Balanced mix Voice & Video with multiple Storage on Cloud modes innovation leading Market Screen share to display Options for mas
Slide 18: Service simplification – Enabling digital servicing
Service simplification – Enabling digital servicing1 Alexa bot Profitable growth Equipped to resolve 200+ types of generic & policy related queries Customer 360 Whatsapp bot Etty Offers ‘one-stop solution’ for viewing About 1.2 million queries resolved distribution Balanced all details of customer f
Slide 19: Governance framework
Governance framework Board of Directors Profitable Independent and experienced Board growth Committees Corporate Board Risk Policyholder Nomination & Stakeholders’ Audit Investment With Profits Social Management Protection Remuneration Relationship Committee Committee Committee Responsibility Commit
Slide 20: 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 ▪ Quan
Slide 21: Summary of Milliman report on our ALM approach
Summary of Milliman report on our ALM approach1 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 products
Slide 22: Performance of wholly-owned subsidiary companies
Performance of wholly-owned subsidiary1 companies HDFC Pension AUM, Rs Bn. HDFC International Life and Re 99.7 82.7 51.7 11.6 Mar'17 Mar'19 Mar'20 Jun'20 Fastest growing PFM (Pension Fund Manager) under the Registered growth of 35% in gross reinsurance premium in NPS architecture (YoY growth of
Slide 23: Managing Covid-19
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 3 Managing Covid-19
Slide 24: Dynamic approach to manage impact of the COVID-19 outbreak
Dynamic approach to manage impact of the COVID-19 outbreak Accelerated Digital selling Focus on selling products with end to end digital customer journeys Digital servicing Communication to customers about digital touch-points for claims, renewal collection and customer queries Employee engagement/
Slide 25: Emerging opportunities and risks
Emerging opportunities and risks Opportunities Reinvent operating model Higher demand for Consolidation of market Enhanced focus on digital insurance share Work from home Increasing awareness Product innovation levels across mortality, M&A morbidity, longevity and interest rate produ
Slide 26: Managing impact of COVID-19 on business
Managing impact of COVID-19 on business New business / Customer Employee / Partner Policy servicing purchase interactions engagement ▪ Digital sales journey - End-to-end ▪ Renewal collections - ~89% of ▪ Seamless support experience - ▪ e-learning platform - 7,500+ digital sales, from prospecting til
Slide 27: Customer Insights
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 4 Customer Insights
Slide 28: Customer insights – health and financial concerns
Customer insights – Customer behaviour/preferences Savings and Insurance preferred by Indian consumer1 More concerned about health & finances2 I am concerned about my physical wellbeing I am concerned about making upcoming payments concerns concerns Financial Global: 30% India: 46% Health Global: 54
Slide 29: Customer Insights – Customer Behaviour/Preferences
Customer Insights – Customer Behaviour/Preferences Top reasons to buy Life insurance Customer behaviour / trend 2019 rank 2013 rank The future intent to buy Life Insurance is the Protect family in case of death 1 1 highest amongst financial products driven To secure child’s education/marriage 2 2
Slide 30: Annexures
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 5 Annexures
Slide 31: Individual persistency for key channels and segments
Individual persistency for key channels and segments1 Across key channels (%) CY (Q1 FY21) 90 93 84 84 87 84 77 78 77 77 74 71 67 69 67 69 63 65 Actuarial 53 47 Agency Banca Direct Company Financial 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (Q1 FY20) 91 88 82
Slide 32: VNB and NBM walkthrough
VNB and NBM walkthrough Rs Bn. 5.09 -1.53 Actuarial -0.07 -0.12 -0.47 2.91 Financial Q1 FY20 VNB Impact of lower Change in New Business Fixed cost Q1 FY21 VNB APE assumptions Profile 1 absorption NBM% 29.8% 0.0% -0.6% -1.0% -3.9% 24.3% ESG 1. Reflects the impact of difference in mix of segment/distr
Slide 33: Sensitivity analysis: FY20
Sensitivity analysis: FY20 % Change in Change in VNB % Change in Analysis based on key metrics Scenario VNB 1 Margin 1 EV Change in Increase by 1% -2.8% -0.7% -1.2% Actuarial Reference rate Decrease by 1% 0.9% 0.2% 0.6% Equity Market Decrease by 10% -0.3% -0.1% -1.1% movement Increase by 10% -2.1% -
Slide 34: Assets under management
Assets under management Assets Under Management Change in AUM 1 Rs Bn. Debt:Equity 61:39 62:38 71:29 68:32 UL:Traditional 54:46 50:50 43:57 44:56 40 127 Actuarial 16% 18% 1,750 8% 1% 30% 1,550 -20% 1,350 1,150 77 Financial -70% 950 1,272 1,400 -120% 20 750 1,066 1,256 26 550 -170% 21 30 350 (7) 30th
Slide 35: Stable capital position
Stable capital position Rs Bn. Dividend paid 3.3 4.0 - - 230% NB premium growth 32% 32% 15% -33% 120.0 210% 192% 190% 188% Actuarial 184% 190% 100.0 70.8 75.7 170% 80.0 62.7 150% 52.1 15.9 13.1 60.0 130% 12.7 Financial 19.2 19.9 11.3 110% 40.0 16.7 13.6 90% 20.0 38.5 39.8 33.3 70% 27.2 - 50% Mar 31,
Slide 36: Governance: Promoting responsible behavior
Governance Promoting responsible behavior Actuarial Governance Structure Information / Cyber Security Risk Management and BCM Corporate Governance Policy ISO 27001:2013 and ISMS assessment Risk management policy program; Board diversity policy o Independent auditors and IRDAI nterprise ris
Slide 37: Social initiatives
Social initiatives Culture of care and giving/reimagining insurance Actuarial Inclusive Growth Customer Centricity Employee Diversity and Engagement CSR Programs – Swabhimaan are Improve Lives with products designed to Focus on Diversity and Inclusion; 24% of aligned with the UN SDGs suit the
Slide 38: Environmental initiatives
Environmental initiatives Creating a better environment Actuarial Energy and Water Digitization Waste Management Energy efficiency and water Paper reduction Segregation and proper disposal of conservation initiatives in HO & waste- dry and wet branches o Online /e-forms for customers o Use of
Slide 39: India Life Insurance
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 6 India Life Insurance
Slide 40: Growth opportunity: Under-penetration and favourable demographics
Growth opportunity: Under-penetration and favourable demographics Life Insurance penetration 1 Life Insurance density US$ 2 (2018) (2018) 17.5% 16.8% 6.756 India remains vastly under-insured, both in terms of penetration and density 6.7% 4,195 6.2% 3,835 Huge opportunity to penetrate the 3.6% 2,
Slide 41: Low levels of penetration – Life protection
Low levels of penetration – Life protection 172 mn 68 mn 1.7 mn Protection gap 2 (2014) 92.2% 88.3% 78.4% 73.3% 72.5% 70.2% India has the highest protection gap in 56.3% 56.0% the region, as growth in savings and life insurance coverage has lagged behind economic and wage growth 16.4% Protection
Slide 42: 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 43: Government bond auctions
Government bond auctions Government Bonds – Tenorwise Issuance Rs Cr 100% 90% 27% 34% 34% 80% 38% 29% 70% 60% 50% 40% 73% 66% 65% 30% 62% 71% 20% 10% 0% FY17 FY18 FY19 FY20 Q1FY21 >15yrs 1,54,520 1,80,529 2,04,000 2,38,000 68,000 <=15yrs 3,73,525 4,97,579 3,82,941 4,44,000 2,36,000 Total 5,28,045 6,
Slide 44: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 23% 25% 22% 17% 3% 11% 11% 10% 12% 9% 13% 20% 18% 15% 51% 52% 26% 17% 67% 60% 65% 67% 50% 54% 49% 48% 33% 40% FY07 FY10 FY13 FY18 FY07 FY10 FY13 FY18 Financial savings Physical savings Currency & depos
Slide 45: 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% 55% Market share Growth % Private 1% 7% -20% -24% 2% -3% 16% 14% 26% 24% 12% 5% -23% LIC -22% 29% 4% 11% -4% -2% -27% 3% 15% 13% 5% 8% -11% Overall -10% 17% -9% -5% -2% -3% -1
Slide 46: Private industry: Product and distribution mix
Private industry: Product and distribution mix Product mix 1 Distribution mix 2 Unit Linked Conventional Individual Agents Corporate Agents - Banks Corporate Agents - Others Brokers Direct Business 67% 7% 9% 10% 10% 12% 57% 56% 14% 16% 54% 5% 4% 3% 52% 51% 51% 49% 5% 3% 3% 3% 3% 3% 49% 4% 3% 3% 3% 4
Slide 47: Appendix
Appendix
Slide 48: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) Q1 FY21 Q1 FY20 Growth FY20 FY19 FY18 CAGR Rs Bn. New Business Premium (Indl. + Group) 26.2 39.3 -33% 172.4 149.7 113.5 23% Renewal Premium (Indl. +Group) 32.4 26.1 24% 154.7 142.1 122.1 13% Total Premium 58.6 65.4 -10% 327.1 291.9 235.6 18% Individual APE 10
Slide 49: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) Q1 FY21 Q1 FY20 FY20 FY19 FY18 Overall New Business Margins (post overrun) 24.3% 29.8% 25.9% 24.6% 23.2% (1) Operating Return on EV 15.8% 19.9% 18.1% 20.1% 21.5% Operating Expenses / Total Premium 11.5% 13.4% 13.1% 13.1% 13.5% Total Expenses (OpEx + Commissio
Slide 50: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Revenue A/c Profit and Loss A/c Rs Bn. Q1 FY21 Q1 FY20 Q1 FY21 Q1 FY20 Premium earned 58.6 65.4 Income Reinsurance ceded (1.4) (0.8) Interest and dividend income 0.9 0.8 Income from Investments (87.5) 20.5 Net profit/(loss) on sale 0.0 0.2 Other Income 0.3 0.2 Transfer
Slide 51: Balance sheet
Balance sheet June 30, 2020 June 30, 2019 Mar 31, 2020 Rs Bn. Shareholders’ funds Share capital (including Share premium) 24.3 23.9 24.2 Accumulated profits 50.2 37.0 45.7 Fair value change (0.6) (0.0) (1.9) Sub total 74.0 60.8 68.0 Policyholders’ funds - Fair value change 8.1 10.3 0.5 Policy Liabil
Slide 52: Segment wise average term and age
Segment wise average term and age1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) Q1 FY21: 25.7 (Q1 FY20: 14.8) Q1 FY21: 34.2 (Q1 FY20: 37.9) 14 UL 33 UL 36 12 Par 33 39 36 Par 14 Non-par Health 32 24 33 Non-par Health 14 Non-par Savings 35 12 39 Non-par Sav
Slide 53: 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 54: 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 55: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Jun 30, 2020 As at Jun 30, 2019 As at Jun 30, 2020 As at Jun 30, 2019 1 3.57 6.31 3.51 6.12 2 4.74 6.70 4.07 6.30 3 5.78 6.98 4.59 6.45 4 6.50 7.19 5.01 6.58 5 6.98 7.35 5.36 6.68 10 7.60 7.64 6.30 6.99 15 7.33 7.67 6.59
Slide 56: 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 57: 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 58: 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 (formerly HDFC Standard Life Insurance Company Limited)
Slide 59: Thank you
Thank you
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