Icici Prudential Life Insurance Co. Ltd. · NSE:ICICIPRULI

Icici Prudential Life Insurance — Q1 FY2019 Earnings Presentation

64 slides from Icici Prudential Life Insurance's earnings presentation, Jul 24, 2018

  1. Slide 1: Performance update: Q1-FY2019

    Performance update: Q1-FY2019 July 24, 2018

  2. Slide 2: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 2

  3. Slide 3: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 3

  4. Slide 4: Strategy: Market share + profitable growth

    Strategy: Market share + profitable growth Objective Grow Value of New Business (VNB) Focus on retail through multi-channel distribution Customer centric products Saving opportunity Protection opportunity Superior business quality to deliver enhanced customer and shareholder value Technology as busi

  5. Slide 5: Drivers of VNB growth

    Drivers of VNB growth ` billion 12.86 0.86 0.73 3.43 1.18 6.66 VNB (FY2017) Premium Product mix Productivity Experience VNB (FY2018) growth improvement 5

  6. Slide 6: Strategic elements

    Strategic elements Protection Premium VNB Persistency growth growth Productivity 6

  7. Slide 7: Strategic elements (1/4)

    Strategic elements (1/4)  Focus on retail for long term sustainability Premium  Diversification of distribution growth  Offer customer centric products  Unmatched on-boarding experience Q1-FY2019 update:  APE declined by 18%  Market share of 11.3% 7

  8. Slide 8: 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  Leverage technology for risk calibrated superior underwriting Q1-FY2019 update:  Protection APE growth of 48.1%  New micro insurance p

  9. Slide 9: Strategic elements (3/4)

    Strategic elements (3/4)  Drive renewal premium with the same rigour as new business  Offer convenience of multiple Persistency payment options  The single most important indicator of business quality Q1-FY2019 update:  Total premium growth of 13.0%  Retail renewal premium growth of 29.1%  13t

  10. Slide 10: 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 Q1-FY2019 update:  Cost/TWRP (savings LOB) at 13.7% compared to 12.5% in Q1-FY2018  Ratio expected to improve with growt

  11. Slide 11: VNB growth

    VNB growth ` billion FY2017 FY2018 Q1-FY2018 Q1-FY2019 Value of New 6.66 12.86 1.82 2.44 Business (VNB)1 VNB Margin 10.1% 16.5% 10.7% 17.5% VNB growth 61.7% 93.1% NA 34.1% 1. For full year, based on actual cost; Q1: based on management forecast of full year cost 11

  12. Slide 12: Outlook

    Outlook  Strong growth potential for industry Premium  Savings premium growth expected to growth be higher than nominal GDP growth  Protection business can grow at a Protection higher rate than savings  Continued improvement in Persistency persistency and quality parameters  Productivity improv

  13. Slide 13: Company performance

    Company performance @ICICI PRUDENTIAL? ; Raat ~~

  14. Slide 14: Categories of products

    Categories of products Savings  Transparent Linked  Choice of asset class  Low charges and minimal lapse risk for customers  Return upside through segment surplus 1 i.e. income net Par expense/reserve  High lapse risk for customers  Guaranteed returns Non-Par savings  High lapse risk for cust

  15. Slide 15: Saving products: persistency impact

    Saving products: persistency impact  Significant loss for traditional saving product (Par and Non par) customers in case of discontinuance before the maturity date Year of Total premiums Maximum surrender penalty surrender paid Unit linked Traditional Year 1 100,000 14,000 100,000 Year 2 200,000 20

  16. Slide 16: Strategy: Market share + profitable growth

    Strategy: Market share + profitable growth Objective Grow Value of New Business (VNB) Focus on retail through multi-channel distribution Customer centric products Saving opportunity Protection opportunity Superior business quality to deliver enhanced customer and shareholder value Technology as busi

  17. Slide 17: Focus on Retail market share

    Focus on Retail market share ` bn FY2017 FY2018 Q1-FY2018 Q1-FY2019 Growth Retail APE 65.18 75.78 16.79 13.35 (20.5%) Group APE 1.07 2.13 0.26 0.61 134.6% Total APE 66.25 77.92 17.04 13.96 (18.1%) Retail as % Total APE 98.4% 97.3% 98.5% 95.6% Retail AUM 1,083.15 1,235.21 1,118.25 1,275.15 14.0% Tota

  18. Slide 18: Multi-channel distribution

    Multi-channel distribution1 ` bn FY2017 FY2018 Q1-FY2018 Q1-FY2019 Bancassurance 37.72 40.75 8.28 7.76 Agency 15.41 19.79 5.20 3.04 Direct 7.98 10.54 2.42 1.64 Corporate agents and 4.07 4.70 0.88 0.91 brokers Group2 1.07 2.13 0.26 0.61 1.6% 2.7% 1.5% 4.4% 6.1% 6.0% 5.2% 6.5% 12.0% 13.5% 14.2% 11.8%

  19. Slide 19: Customer centric products

    Customer centric products ` bn FY2017 FY2018 Q1-FY2018 Q1-FY2019 Savings 63.64 73.45 16.27 12.82 ULIP 55.69 63.81 14.61 11.14 Par 6.38 8.46 1.42 1.36 Non par 0.72 0.40 0.09 0.13 Group 0.86 0.78 0.16 0.19 Protection1 2.60 4.46 0.77 1.14 Total APE 66.25 77.92 17.04 13.96  Protection APE grew by 48.1%

  20. Slide 20: Persistency (retail excluding single premium)

    Persistency1 (retail excluding single premium) Month FY2017 FY2018 Q1-FY2018 2m-FY2019 13th month 84.7% 85.8% 85.8% 85.8% 25th month 73.0% 77.0% 73.9% 77.8% 37th month 65.5% 67.6% 67.0% 68.2% 49th month 58.3% 62.8% 59.2% 63.7% 61st month 53.8% 53.7% 54.3% 54.0% ` bn FY2017 FY2018 Q1-FY2018 Q1-FY2019

  21. Slide 21: Productivity: Cost efficiency

    Productivity: Cost efficiency FY2017 FY2018 Q1-FY2018 Q1-FY2019 Expense ratio (excl. 11.4% 8.2% 9.4% 12.0% commission)1 Commission ratio2 3.6% 5.5% 4.8% 5.5% Cost/TWRP3 15.1% 13.7% 14.2% 17.5% Cost / Average AUM4 2.8% 2.6% 2.0% 2.5% Cost/TWRP (Savings LOB) 13.3% 11.8% 12.5% 13.7% 34.75 ` billion 31.

  22. Slide 22: Technology as business enabler

    Technology as business enabler 22

  23. Slide 23: Technology initiatives

    Technology initiatives  Facematch: Automated fraud detection tool for better underwriting Acquisition  API platform: Standardised data exchange platform across applications and partners (Implementation in progress)  Robotics Process Automation (RPA): Automation of regular manual activities to red

  24. Slide 24: Outcome

    Outcome  73% of new business policies issued within 2 days in Q1-FY2019 Productivity  91% of new business applications initiated via digital platform  More than 250,000 premium payment centres across India Persistency  61% of renewal premium receipted through electronic mediums1  72% service tr

  25. Slide 25: Financial update

    Financial update @ICICI PRUDENTIAL? 25 Purre «Ns U8 AN Cen

  26. Slide 26: Financial metrics

    Financial metrics ` bn FY2017 FY2018 Q1-FY2018 Q1-FY2019 Growth Retail new business 70.66 84.02 18.22 14.91 (18.2%) premium Retail renewal premium 142.19 174.97 28.08 36.25 29.1% Group premium 10.69 11.70 2.55 4.01 57.3% Total premium 223.54 270.69 48.85 55.18 13.0% Value of New Business 6.66 12.86

  27. Slide 27: VNB growth levers update (4P's)

    VNB growth levers update (4P’s) Q1- Q1- ` bn FY2016 FY2017 FY2018 Growth FY2018 FY2019 Premium 51.70 66.25 77.92 17.04 13.96 (18.1%) growth (APE)1 Protection APE 1.39 2.60 4.46 0.77 1.14 48.1% Persistency2 (13th month 81.8% 84.7% 85.8% 85.8% 85.8%3 excluding single premium) Productivity 14.5% 15.1%

  28. Slide 28: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 28

  29. Slide 29: Favourable demography

    Favourable demography Large and Growing Population Base1 High Share of Working Population1 2017 Population (mn) Population of age 25-59 years: India (mn) 1339 1410 724 576 209 264 324 51 57 127 144 China Brazil S Africa Russia USA Japan Indonesia India S Korea 2015 2030 Rising Affluence2 Driving GDP

  30. Slide 30: Financialisation of savings: Opportunity for insurance

    Share of Insurance in Savings Expected to Rise Financialisation of savings: Opportunity for insurance Household savings (excl. currency)1 Distribution of financial savings (excl. currency)2 90 66% 70% 62% 59% 58% 60% 70 51% 50% 48% 49% 48% 50% 45% 42% 23.8% 41% 25.1% 18.8% 26.1% 50 41% 40% 29.0% 20.

  31. Slide 31: Protection opportunity: Income replacement

    Protection opportunity: Income replacement Sum assured as % of GDP1,2 Protection Gap 3,4 270% % 92 56 85 33 73 78 73 56 260% 226% 166% 8.56 149% 6.58 USD tn 106% 5.30 96% 76% 1.09 0.79 0.77 0.52 0.40 India US Singapore Malaysia Japan Korea Germany Thailand India Thailand S. Korea Malaysia Singapore

  32. Slide 32: Protection opportunity: Liability cover

    Protection opportunity: Liability cover ₹ billion Retail credit 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

  33. Slide 33: Protection opportunity

    Protection opportunity Gross direct premium (` bn) 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: General Insu

  34. Slide 34: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 34

  35. Slide 35: Evolution of life insurance industry in India

    Evolution of life insurance industry in India FY2002 FY2010 FY2015 FY2018 New business 116 21.5% 550 -5.8% 408 15.9% 635 premium1 (` bn) Total premium (` bn) 501 23.2% 2,654 4.3% 3,281 11.8% 4,583 Penetration (as a % to 2.1% 4.1% 2.6% 2.7% GDP) Assets under 2,304 24.0% 12,899 12.6% 23,361 12.4% 33,1

  36. Slide 36: New business

    New business1 Growth FY2016 FY2017 FY2018 Q1-FY2019 Private 13.6% 26.4% 24.3% 4.5% LIC 2.9% 14.7% 13.2% 6.9% Industry 8.1% 20.7% 19.2% 5.6% 400 60% 58% 300 56.2% 56% ` bn 200 53.9% 53.9% 54% 100 51.5% 52% 0 50% FY2016 FY2017 FY2018 Q1FY2019 LIC Private Private market share 1. Retail weighted new bus

  37. Slide 37: Channel mix

    Channel mix1 Industry Private players 8% 8% 9% 16% 16% 18% 24% 23% 25% 52% 54% 54% 68% 69% 66% 32% 30% 28% FY2016 FY2017 FY2018 FY2016 FY2017 FY2018 Agency Bancassurance Others  Given a well developed banking sector, bancassurance has become largest channel for private players 1. Individual new bus

  38. Slide 38: Product mix

    Product mix1 Industry Private players 13% 12% 13% 43% 42% 44% 87% 88% 87% 57% 58% 56% FY2016 FY2017 FY2018 FY2016 FY2017 FY2018 Traditional ULIP  Strong customer value proposition of ULIPs  Transparent and low charges  Lower discontinuance charges compared to other savings products  Choice and f

  39. Slide 39: Annexures

    Annexures @ICICI PRUDENTIAL? = Purre «Ns U8 AN Cen

  40. Slide 40: Average APE by product categories

    Average APE by product categories Average retail FY2015 FY2016 FY2017 FY2018 APE per policy (`) ULIP 129,087 149,777 169,701 180,746 Par 38,430 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 40

  41. Slide 41: Policy term and customer age

    Policy term and customer age1 Average policy term (years) Average customer age (years) 26 44 36 12 Savings Protection Savings Protection 1. For FY2018; protection excludes credit life 41

  42. Slide 42: Channel wise product mix

    Channel wise product mix1 Channel Category Product Category FY2015 FY2016 FY2017 FY2018 ULIP 88.4% 88.9% 92.1% 89.8% Par 10.0% 9.1% 5.3% 7.3% Bancassurance 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% ULIP 78.5% 76.4% 79.5% 81.8% Par 19.2% 19.6% 14.2%

  43. Slide 43: 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 89.8% 87.6% 88.9% 85.2% 65.2% 62.7% 58.7% 58.2% Bancassurance Agency Direct Corpo

  44. Slide 44: Retail persistency (including single premium)

    Retail persistency (including single premium) Month FY2016 FY2017 FY2018 2M-FY2019 13th month 82.4% 85.7% 86.8% 86.9% 25th month 71.2% 73.9% 78.3% 79.2% 37th month 61.6% 66.8% 68.8% 69.3% 49th month 62.2% 59.3% 64.2% 65.1% 61st month 46.0% 56.2% 54.5% 54.8% As per IRDA circular dated January 23, 201

  45. Slide 45: Fund performance

    Fund performance Benchmark Fund 15.0% 13.6% 11.9% 11.5% 9.9% 9.1% 8.6% 9.7% 7.0% 8.0% 7.7% 7.0% 6.7% 3.6% 4.9% 1.3% 1Y 5Y 1Y 5Y 1Y 5Y 1Y 5Y Preserver Protector Balancer Maximiser (Liquid fund) (Debt fund) (Balanced fund) (Equity fund) 86.0% of linked portfolio out performed benchmark indices since i

  46. Slide 46: Embedded Value

    Embedded Value @ICICI PRUDENTIAL? 46 pLirFe «nS UR AN CRUE

  47. Slide 47: Embedded Value growth

    Embedded Value growth ` bn 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 15.4% 16.2% 16.5% 22.7% (ROEV)2 EV growth-pre dividend 24.8% 12.1% 20.6% 23.4% EV gr

  48. Slide 48: Analysis of movement in EV

    Analysis of movement in EV1 ` bn 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 variance

  49. Slide 49: EV methodology (1/2)

    EV methodology … (1/2)  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) 49

  50. Slide 50: EV methodology (2/2)

    EV methodology (2/2)  EV consists of Adjusted Net Worth (ANW) and Value of in-force covered business (VIF)  ANW is market value of assets attributable to shareholders, consisting of  Required Capital  Free Surplus  Value of in-force covered business (VIF) is  Present value of future profits; a

  51. Slide 51: 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 suppor

  52. Slide 52: Components of VIF (1/4)

    Components of VIF (1/4)  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

  53. Slide 53: Components of VIF (2/4)

    Components of VIF (2/4)  Frictional Cost of required capital (FC)  FCs represent investment management expenses and taxation costs associated with holding the Required capital  Investment costs reflected as an explicit reduction to the gross investment return 53

  54. Slide 54: Components of VIF (3/4)

    Components of VIF (3/4)  Time value of financial options and guarantees (TVFOG)  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

  55. Slide 55: Components of VIF (4/4)

    Components of VIF (4/4)  Cost of residual non-hedgeable risk (CRNHR)  CRNHR is an allowance for risks to shareholder value to the extent not already allowed for in the TVFOG or the PVFP  Allowance has been made for asymmetric risks of operational, catastrophe mortality / morbidity and mass lapsat

  56. Slide 56: Components of EV movement (1/2)

    Components of EV movement (1/2)  Operating assumption changes  Impact of the update of non-economic assumptions both on best estimate and statutory bases to those adopted in the closing EV  Expected return on existing business (unwind)  Expected investment income at opening reference rate on VIF

  57. Slide 57: 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, in

  58. Slide 58: 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

  59. Slide 59: 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

  60. Slide 60: Sensitivity analysis (FY2018)

    Sensitivity analysis (FY2018) % change % change Scenario in EV 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

  61. Slide 61: Economic assumptions underlying EV

    Economic assumptions underlying EV Tenor (years) Reference Rates March 31, March 31, June 30, 2017 2018 2018 1 6.35% 6.57% 7.13% 5 7.78% 8.21% 8.69% 10 8.02% 8.31% 8.46% 15 8.03% 8.11% 8.31% 20 8.03% 7.97% 8.27% 25 8.03% 7.91% 8.26% 30 8.03% 7.88% 8.26% 61

  62. Slide 62: Glossary

    Glossary  Annualized Premium Equivalent (APE) - Annualized Premium Equivalent (APE) is the sum of 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 val

  63. Slide 63: 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

  64. Slide 64: Thank you

    Thank you @ICICI PRUDENTIAL? pLirFe «NS UR AN CR

ICICI Prudential Life Insurance Company — Q1 FY2019 Earnings Presentation on 6ix