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

Icici Prudential Life Insurance — FY2017 Earnings Presentation

53 slides from Icici Prudential Life Insurance's earnings presentation, Apr 25, 2017

  1. Slide 1: FY2017 performance review

    FY2017 performance review April 25, 2017

  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 leadership + Profitable growth

    Strategy: Market leadership + Profitable growth  Leverage market opportunity for saving products through Segmented  Delivery of superior customer value through better products, approach to tap market customer service, fund performance and claims management opportunity-  Focus on key local markets

  5. Slide 5: Key Highlights

    Key Highlights Rs bn FY2015 FY2016 Growth FY2017 Growth APE1 47.44 51.70 9.0% 66.25 28.1% Savings APE 46.68 50.31 7.8% 63.64 26.5% Protection APE 0.76 1.39 82.9% 2.60 87.1% Value of New Business (VNB) 2 2.70 4.12 52.6% 6.66 61.7% VNB Margin2 5.7% 8.0% 10.1% Indian Embedded Value 138.22 139.39 0.8% 1

  6. Slide 6: New business

    New business @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee

  7. Slide 7: Market share

    Market share1 Rs bn FY2015 Growth FY2016 Growth FY2017 Growth RWRP 45.96 41.3% 49.68 8.1% 64.08 29.0% 30% 23.0% 21.9% 22.3% 20% 11.3% 11.3% 12.0% 10% 0% FY2015 FY2016 FY2017 Within total industry Within private sector Market leaders in private sector since FY2002 1. Retail weighted received premium

  8. Slide 8: Premium summary

    Premium summary 250 223.54 10.69 200 191.64 18.13 70.66 153.07 150 9.14 53.57 Rs bn 48.21 100 142.19 119.95 50 95.71 0 FY2015 FY2016 FY2017 Retail renewal premium Retail new business premium Group premium 8 Components may not add up to the totals due to rounding off

  9. Slide 9: Product mix

    Product mix1 Product mix1 FY2015 FY2016 FY2017 Savings 98.4% 97.3% 96.1% ULIP 83.1% 80.8% 84.1% Participating 13.2% 14.1% 9.6% Non-Participating 0.6% 0.4% 1.1% Group2 1.5% 2.0% 1.3% Protection3 1.6% 2.7% 3.9% 70 2.60 60 1.58 6.38 50 1.39 0.76 1.02 1.25 6.26 7.27 40 Rs bn 30 55.69 20 39.40 41.79 10 0

  10. Slide 10: Protection

    Protection Rs bn FY2015 FY2016 FY2017 Retail Protection 0.36 0.94 2.09 Group Term 0.06 0.06 0.13 Mortgage based 0.33 0.39 0.38 Total APE 0.76 1.39 2.60 4,000 New Business Sum Assured 2,940.40 3,000 Rs bn 1,315.96 2,000 1,546.25 1,195.35 566.85 1,000 528.68 1,624.44 666.67 979.40 0 FY2015 FY2016 FY20

  11. Slide 11: Channel mix

    Channel mix Channel Mix1 FY2015 FY2016 FY2017 Bancassurance 58.4% 57.3% 56.9% Agency 24.4% 23.8% 23.3% Direct 8.6% 9.8% 11.9% Corporate Agents and Brokers 7.0% 7.0% 6.1% Group 1.6% 2.1% 1.7% 70 60 4.07 7.89 50 3.61 3.32 15.41 4.06 5.04 40 Rs bn 11.58 12.31 30 20 37.72 27.70 29.64 10 0 FY2015 FY2016

  12. Slide 12: Quality parameters

    12 Quality parameters @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee

  13. Slide 13: Persistency

    Persistency1 Month FY2015 FY2016 11MFY2017 13th month 79.0% 82.4% 86.0% 25th month 65.9% 71.2% 74.2% 37th month 64.3% 61.6% 67.3% 49th month 54.4% 62.2% 61.1% 61st month 14.5% 46.0% 57.9% 13 1. As per IRDA circular dated January 23, 2014

  14. Slide 14: Customer Service

    Customer Service Claim Settlement ratio1 100% 93.8% 96.2% 96.9% 50% 0% FY2015 FY2016 FY2017 Grievance Ratio2 200 185 153 150 95 100 50 0 FY2015 FY2016 FY2017 1. Individual Death Claims 14 2. Number of grievances per 10,000 new business policies issued in the same period

  15. Slide 15: Digitization impact

    Digitization impact E-Login1 and online renewal payment2 100% 89% 93% 93% 52% 57% 50% 44% 0% FY2015 FY2016 FY2017 E-Login Online renewal payment Employee productivity3 6 5.55 4.61 4.26 4 Rs mn 2 0 FY2015 FY2016 FY2017 1. New business applications generated through digital medium 15 2. Transactions p

  16. Slide 16: Cost efficiency

    Cost efficiency FY2015 FY2016 FY2017 Expense ratio (excl. commission)1 11.6% 11.0% 11.4% Commission ratio2 3.8% 3.5% 3.6% Cost/TWRP3 15.4% 14.5% 15.1% Cost / Average AUM4 2.5% 2.5% 2.8% 40 31.60 30 25.45 22.50 7.59 Rs bn 20 6.20 5.53 24.01 10 16.97 19.25 0 FY2015 FY2016 FY2017 Non-Commission Commiss

  17. Slide 17: Superior fund performance across cycles

    Superior fund performance across cycles 21.2% 18.7% 15.5% 14.5% 12.8% 14.7% 11.9% 12.3% 11.1% 11.0% 8.5% 10.7% 8.4% 9.5% 7.4% 7.1% Preserver Protector Balancer Maximiser (Liquid fund) (Debt fund) (Balanced fund) (Equity Fund) 1Y 5Y 1Y 5Y 1Y 5Y 1Y 5Y Fund Benchmark More than 90% of linked portfolio h

  18. Slide 18: Assets under management

    Assets under management Linked Mix (%) Equity Mix (%) 74.6 72.4 71.5 48.0 46.3 46.8 Rs bn Rs bn 1,500 1,500 1,229.19 1,229.19 1,001.83 1,039.39 1,039.39 1,001.83 1,000 350.41 1,000 254.06 286.44 575.20 480.86 481.04 500 878.78 500 747.78 752.96 520.97 558.35 653.99 0 0 FY2015 FY2016 FY2017 FY2015 FY

  19. Slide 19: Profitability

    19 Profitability @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee

  20. Slide 20: Analysis of movement in IEV (FY2017)

    Analysis of movement in IEV (FY2017) ` bn 5.82 -6.32 0.99 0.98 0.35 0.76 161.84 6.66 12.21 1.00 EVOP1 = 22.95 VIF 139.39 ROEV2 = 16.5% 94.28 VIF 84.25 ANW ANW 67.56 55.14 IEV (March Unwind Operating VNB Persistency Mortality Expense Other Economic Net Capital IEV (March 31, 2016) Assumption variance

  21. Slide 21: Profit after tax

    Profit after tax Solvency Ratio 337 320 281 (%) Profit after tax (Rs bn) 20 16.34 16.50 16.82 16 12 Rs bn 8 4 0 FY2015 FY2016 FY2017  Well capitalized for growth opportunities  Dividend proposed for FY2017 is Rs 10.55 billion 21

  22. Slide 22: Summary

    Summary India: High growth  Low penetration1 vs mature economies and even lower density 1 potential  One of the fastest growing large economy in the world with strong growth drivers Consistent  #1 in India on RWRP2 basis for every year since FY2002 2 Leadership Across Cycles  Significant market

  23. Slide 23: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 23

  24. Slide 24: Favourable demography to drive macro growth

    Favourable demography to drive macro growth High Share of Working Population1 Large and Growing Population Base1  Indian economy 2015 Population (mn) 1311 1376 Population of age 25-59 years poised to head (in mn) towards sustained 726 576 growth fuelled by favourable 208 258 322 demographics, 127 1

  25. Slide 25: Share of insurance in household savings

    Share of Insurance in Savings Expected to Rise Share of insurance in household savings Household Savings1 Distribution of financial assets1 60 60% 48% 45% 21.1% 41% 17.0% 40 40% 15.4% 19.6% 36% 36% 18.3% 33% 26.2% Rs trillion 31% 14.4% 20 9.19 10.82 20% 6.43 7.34 8.32 7.75 2.47 14.23 14.99 14.49 16.

  26. Slide 26: Protection opportunity

    Protection opportunity Protection Margin2,3 (%) Sum assured as % of GDP1 400% 92 56 85 33 73 78 73 56 300% 270% 260% Protection Gap3 226% 10 8.56 200% 8 166% 6.58 USD tn 149% 6 5.30 106% 96% 100% 4 60% 2 1.09 0.79 0.77 0.52 0.40 0% India 0 Singapore Malaysia US Japan Korea Germany Thailand Indonesia

  27. Slide 27: Protection opportunity

    Protection opportunity Gross direct FY2007 FY2017 CAGR premium (Rs bn) Health 33.19 307.65 24.9% Motor 106.97 502.45 16.7%  Protection premium was ~Rs 67 bn for Life insurance industry in FY2017 27 Source: IRDAI, General Insurance Council and company estimates

  28. Slide 28: Agenda

    Agenda Company strategy and performance Opportunity Industry overview 28

  29. Slide 29: Evolution of life insurance industry in India

    Evolution of life insurance industry in India FY2002 FY2010 FY2016 New business premium1 116 21.5% 550 -3.6% 441 (Rs bn) Total premium (Rs bn) 501 23.2% 2,655 5.5% 3,669 Penetration (as a % to 2.1% 4.1% 2.8% 2.7% GDP) Assets under 2,304 24.0% 12,899 11.9% 25,294 management (Rs bn) In-force sum assur

  30. Slide 30: New business

    New business1 Growth FY2015 FY2016 FY2017 Private 15.9% 13.6% 26.4% LIC -26.3% 2.9% 14.7% Industry -10.3% 8.1% 20.7% 400 60% 53.9% 51.5% 49.0% 300 40% Rs bn 200 20% 100 0 0% FY2015 FY2016 FY2017 LIC Private Private market share 1. Retail weighted new business premium 30 Source : IRDAI, Life insuranc

  31. Slide 31: Channel mix

    Channel mix1 Industry Private players 8% 8% 7% 17% 16% 17% 21% 24% 21% 47% 52% 52% 71% 68% 72% 36% 32% 31% FY2015 FY2016 9MFY2017 FY2015 FY2016 9MFY2017 Agency Bancassurance Others  Given a well developed banking sector, bancassurance has become largest channel for private players 1. Individual new

  32. Slide 32: Product mix

    Product mix1 Industry Private players 12% 13% 11% 38% 43% 39% 88% 87% 89% 62% 57% 61% FY2015 FY2016 9MFY2017 FY2015 FY2016 9MFY2017 Traditional ULIP  Strong value proposition of ULIPs  Transparent and low charges  Lower discontinuance charges upto year 5 and zero surrender penalty after 5 years 

  33. Slide 33: Annexures

    33 Annexures @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee

  34. Slide 34: Consistent leadership in private sector

    Consistent leadership in private sector1 Market Share FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 LIC 63.5% 62.0% 62.0% 51.0% 48.5% 46.1% ICICI Prudential 5.9% 7.0% 7.2% 11.3% 11.3% 12.0% SBI Life 4.4% 5.1% 6.2% 7.7% 9.7% 11.2% HDFC Life 5.7% 6.7% 5.2% 7.3% 7.6% 6.8% Max Life 3.1% 3.2% 3.9% 4.8% 4.8%

  35. Slide 35: Average APE by product categories

    Average APE by product categories Average retail APE per policy (in Rs) FY2015 FY2016 FY2017 ULIP 129,087 149,777 169,701 Par 38,430 44,533 56,325 Non par 25,233 23,656 39,153 Pure protection 4,408 10,284 9,815 Total 73,047 87,194 92,735 35

  36. Slide 36: Channel wise product mix

    Channel wise product mix1 Channel Category Product Category FY2015 FY2016 FY2017 ULIP 88.4% 88.9% 92.1% Par 10.0% 9.1% 5.3% Bancassurance Non par 0.0% 0.0% 0.4% Protection 1.5% 2.0% 2.2% Total 100.0% 100.0% 100.0% ULIP 78.5% 76.4% 79.5% Par 19.2% 19.6% 14.2% Agency Non par 1.0% 0.8% 2.0% Protection

  37. Slide 37: Persistency (11MFY2017)

    Persistency (11MFY2017)1 Persistency across Product Categories 150% 98.2% 100% 86.0% 83.6% 88.5% 58.9% 63.8% 57.4% 49.8% 50% 0% ULIP Par Non-par Protection 13th month 49th month Persistency across Channel Categories 150% 100% 84.1% 88.7% 89.6% 87.1% 63.0% 57.3% 63.1% 56.7% 50% 0% Bancassurance Agenc

  38. Slide 38: Indian Embedded Value methodology

    Indian Embedded Value methodology 38

  39. Slide 39: IEV methodology (1/2)

    IEV 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) 39

  40. Slide 40: IEV methodology (2/2)

    IEV methodology … (2/2)  IEV 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 profit

  41. Slide 41: 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

  42. Slide 42: 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  Projectioncarried out using ‘best estimate’ non-economic assumptions and market consistent economic assumptions  Distributab

  43. Slide 43: 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 43

  44. Slide 44: 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 embedde

  45. Slide 45: 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 laps

  46. Slide 46: Components of IEV movement (1/2)

    Components of IEV 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 IEV  Expected return on existing business (unwind)  Expected investment income at opening reference rate on

  47. Slide 47: Components of IEV movement (2/2)

    Components of IEV movement … (2/2)  Operating experience variance  Captures impact of any deviation of actual experience from assumed in the opening IEV during the inter-valuation period  Economic assumption changes and Investment variance  Impact of the update of the reference rate yield curve,

  48. Slide 48: Key assumptions underlying IEV (1/2)

    Key assumptions underlying IEV … (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 o

  49. Slide 49: Key assumptions underlying IEV (2/2)

    Key assumptions underlying IEV … (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  Allowance has been made for future taxation costs expected to be incurred by t

  50. Slide 50: Sensitivity analysis (FY2017)

    Sensitivity analysis (FY2017) % change % change Scenario in IEV in VNB Increase in 100 bps in the reference rates (2.0) (5.2) Decrease in 100 bps in the reference rates 2.1 5.5 10% increase in the discontinuance rates (1.1) (10.6) 10% decrease in the discontinuance rates 1.2 10.9 10% increase in mor

  51. Slide 51: Economic assumptions underlying IEV

    Economic assumptions underlying IEV Tenor (years) Reference Rates March 31, 2016 March 31, 2017 1 7.24% 6.35% 5 8.22% 7.78% 10 8.34% 8.02% 15 8.40% 8.03% 20 8.46% 8.03% 25 8.50% 8.03% 30 8.52% 8.03% 51

  52. Slide 52: 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

  53. Slide 53: Thank you

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

ICICI Prudential Life Insurance Company — FY2017 Earnings Presentation on 6ix