Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — H1 FY2021 Earnings Presentation
60 slides from Hdfc Life Insurance's earnings presentation, 2020
Slide 1: HDFC Life Insurance Investor Presentation – H1 FY21
HDFC Life Insurance Investor Presentation – H1 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: H1 FY21
Executive summary: H1 FY21 Expansion in market share1 by 235 bps from 15.2% to 17.5% Revenue growth and Individual WRP growth of 22% in Q2 helped neutralize the Q1 de-growth. 2% growth in H1 FY21 v/s Market share private industry de-growth of 11% Balanced product mix2 (UL: 23%, Par: 33%, Non-p
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. -19% 12% 14% 43% 22% 2% 63% 58% 35% -20% 17% 35% Growth HDFC Pvt Industry Life sector H1 FY21 2% -11% -7% 27.5 28.1 17.5% H1 FY20 35% 16% 11% 17.4 15.2% 13.2 14.3 2 year 10.7 18% 1
Slide 6: Demonstrating resilience in the current environment (2/2)
Demonstrating resilience in the current environment (2/2) Strong growth in renewal premium Stable profitable growth Rs Bn. New Business Margins (NBM) 22% Improving MoM collection Remain cautious on 25.9% 75.5 _ 24.6% 25.1% 24.3% 24.3% 25.6% 61.8 persistency trends for next few quarters FY19 FY20
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 H1 H1 FY18 FY19 FY20 Rs Bn. Profitable FY20 FY21 growth New business Margin 23.2% 24.6% 25.9% 27.5% 25.1% Economic Profit Value of new business 12.8 15.4 19.2 9.6 8.4 distribution mix Balanced Profit after tax (PAT) 11.1 12.8 13.0 7.3 7.8 Accounting Profit Underwriting pro
Slide 10: Analysis of change in IEV
Analysis of change in IEV1 Rs Bn. EVOP – 17.5 Profitable EVOP1% - 17.6% growth 9.2 0.2 233.3 8.4 0.7 8.4 206.5 ESOP Operating Economic distribution mix VNB exercises variances Balanced Unwind variances 151.3 134.6 innovation leading Market Adjusted Net worth (ANW) Value of in-force business (VIF) Re
Slide 11: Diversified distribution mix
Diversified distribution mix Focus on diversified mix 1 Strong and diversified network of 250+ traditional partners Banks NBFCs and MFIs SFBs Profitable growth 14% 19% 22% 21% 11% 5% 13% 13% 14% 4% 6% 9% distribution Balanced mix 71% 64% 55% 60% innovation FY18 FY19 FY20 H1 FY21 leading Market 2 Ban
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 Comprehensive protection plan Profitable growth Retirement offering multiple choices of returns, with option for & pension benefits under group platform Woman life long income FY15 FY17 FY18 FY19 FY20 FY21 distri
Slide 14: Our approach to retiral solutions
Our approach to retiral solutions Opportunity to grow the retiral corpus1 by 3x between FY20-25 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 strong AUM growth of 70%
Slide 15: Product mix across key channels
Product mix across key channels1 Segment FY18 FY19 FY20 H1 FY21 Segment FY18 FY19 FY20 H1 FY21 UL 33% 26% 12% 9% Profitable UL 64% 64% 32% 27% growth Par 48% 40% 34% 37% Agency Par 25% 13% 18% 36% Banca 2 Non par savings 8% 17% 44% 30% Non par savings 5% 17% 40% 35% Term 3% 4% 4% 5% 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: Journey simplification - enabling digital journeys
Journey simplification - enabling digital journeys Upload Automated Lead creation Form filling & Customer journey Prospecting & fulfillment online payment e-signature doc underwriting & FR fulfillment & verification Profitable growth End to end journey distribution Enables Uberized Digital Quick Cha
Slide 18: VServ: Industry first video based Phy-gital mode of service
VServ: Industry first video based „Phy-gital‟ mode of service Profitable growth Zero setup for customer Storage on Cloud distribution Balanced Secure mix Chat functionality for chat Operations Document upload enabled transactions innovation leading Market Encrypted Device agnostic (Mobile / Customer
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 ~60 years ▪ Quan
Slide 21: Performance of wholly-owned subsidiary companies
Performance of wholly-owned subsidiary1 companies HDFC Pension AUM, Rs Bn. HDFC International Life and Re 113.2 82.7 51.6 11.6 Mar'17 Mar'19 Mar'20 Sep'20 Fastest growing PFM (Pension Fund Manager) under the Registered growth of 63% in gross reinsurance premium in NPS architecture (YoY growth of
Slide 22: Managing Covid-19
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 3 Managing Covid-19
Slide 23: 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 24: 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 25: 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 - ~88% of renewal payments (95% of policies) ▪ Seamless support experience - ▪ e-learning platform - 7,900+
Slide 26: Customer Insights
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 4 Customer Insights
Slide 27: Customer insights – Impact of Covid-19
Customer insights – Impact of Covid-19 Impact on LI category1,2 Evolved expectation due to Covid-192 Insurance sees a higher pickup post unlock with customers showing a higher disposition towards the category Majority of customers were more positive about the industry, driven by: 35% Realization of
Slide 28: 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 29: Annexures
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 5 Annexures
Slide 30: Individual persistency for key channels and segments
Individual persistency for key channels and segments1 Across key channels (%) CY (H1 FY21) 91 93 85 85 87 88 77 77 78 79 72 75 69 67 69 69 66 64 Actuarial 53 47 Agency Banca Direct Company Financial 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (H1 FY20) 92 89 85
Slide 31: VNB and NBM walkthrough
VNB and NBM walkthrough Rs Bn. 9.57 0.38 0.20 0.05 0.56 Actuarial 8.38 Financial H1 FY20 APE impact Change in New Business Fixed cost H1 FY21 assumptions Profile 1 absorption NBM% 27.5% 0.0% -0.6% -0.2% -1.7% 25.1% ESG 1. Reflects the impact of difference in mix of segment/distribution channel/tenur
Slide 32: Sensitivity analysis
Sensitivity analysis Change in VNB Analysis based on key metrics Scenario % Change in EV Margin 1 Change in Increase by 1% -0.9% -1.5% Actuarial Reference rate Decrease by 1% 0.2% 0.7% Equity Market Decrease by 10% -0.1% -1.3% movement Increase by 10% -0.3% -0.7% Persistency (Lapse rates) Decrease b
Slide 33: Assets under management
Assets under management Assets Under Management Change in AUM 1 Rs Bn. Debt:Equity 61:39 62:38 71:29 67:33 UL:Traditional 54:46 50:50 43:57 43:57 55 234 Actuarial 1,750 16% 18% 15% 1% 30% 1, 750 16% 18% 18% 111 1,550 1% 30% 1, 550 -20% 1,350 -20% 1, 350 1,150 54 -70% Financial 1, 150 -70% 950 1,506
Slide 34: Stable capital position
Stable capital position Rs Bn. Dividend paid 3.3 4.0 - - NB premium growth 32% 32% 15% 7% 230% 120.0 203% 210% 192% Actuarial 188% 184% 190% 100.0 84.8 170% 80.0 70.8 22.1 150% 62.7 13.1 60.0 52.1 Financial 130% 12.7 20.9 11.3 19.2 110% 40.0 16.7 13.6 90% 20.0 38.5 41.8 33.3 70% 27.2 - 50% ESG Mar 3
Slide 35: Governance - Promoting responsible behavior
Governance - Promoting responsible behavior Governance structure Information / Cyber Security Risk Management and BCM Corporate governance policy ISO 27001:2013 and ISMS Risk management policy assessment program; Risk oversight by Senior Management & Board diversity policy o Independent au
Slide 36: Social initiatives - Culture of care and giving
Social initiatives - Culture of care and giving Inclusive growth Customer centricity Swabhimaan, the Corporate Social Responsibility wing is Improve lives with products designed to suit the different aligned with the UN Sustainable Development Goals (SDGs) life stage needs with focus on Educatio
Slide 37: Social initiatives – Human Capital Development
Social initiatives – Human Capital Development Attracting talent Employee engagement Talent management/retention Virtual hiring and on-boarding process Online yoga, mindfulness / meditation Fast track growth path for special without compromising on quality sessions, fitness challenges categori
Slide 38: Environmental initiatives - Creating a better environment
Environmental initiatives - Creating a better environment Energy and Water Digitization Waste Management Energy efficiency and water Reduction of Paper Usage Segregation and proper disposal of conservation initiatives waste - dry and wet o Use of 3/5 star rated appliances Online /e-forms for c
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 (2019) (2019) 18.3% 16.5% 8,979 India remains vastly under-insured, both in terms of penetration and density Huge opportunity to penetrate the 6.7% 4,129 6.0% 3,244 2,691 u
Slide 41: 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% 55.0% 55.0% 54.0% the region, as growth in savings and 41.0% life insurance coverage has lagged behind economic and wage growth Prot
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 27% 21% 29% 35% 35% 63% 79% 71% 65% 65% FY17 FY18 FY19 FY20 H1FY21 >15yrs 1,54,520 1,80,529 2,04,000 2,38,000 1,38,000 <=15yrs 3,73,525 4,97,579 3,82,941 4,44,000 5,26,000 Total 5,28,045 6,78,109 5,86,941 6,82,000 6,64,000 Auctio
Slide 44: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 25% 22% 18% 18% 3% 8% 11% 16% 12% 13% 19% 18% 21% 26% 17% 52% 68% 65% 65% 16% 67% 50% 56% 47% 48% 32% 35% 35% FY10 FY13 FY16 FY19 FY10 FY13 FY16 FY20 Financial savings Physical savings Currency & depos
Slide 45: Industry new business trends
Industry new business1 trends 450 Sensex Private Players LIC 420 45 401 400 40 357 Individual WRP in Rs. Bn 350 35 315 Individual WRP in Rs bn 304 292 291 300 288 285 287 30 273 278 269 262 250 230 245 25 227 214 203 208 200 Sensex 200 175 178 20 172 160 150 124 15 100 10 50 5,0 0 - FY09 FY10 FY11 F
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 66% 57% 9% 10% 10% 12% 14% 56% 16% 20% 54% 3% 52% 51% 51% 5% 4% 3% 3% 3% 49% 49% 3% 3% 3% 3% 48% 46% 3
Slide 47: Appendix
Appendix
Slide 48: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) H1 FY21 H1 FY20 Growth FY20 FY19 FY18 CAGR Rs Bn. New Business Premium (Indl. + Group) 85.0 79.1 7% 172.4 149.7 113.5 23% Renewal Premium (Indl. +Group) 75.5 61.8 22% 154.7 142.1 122.1 13% Total Premium 160.5 140.9 14% 327.1 291.9 235.6 18% Individual APE 28.
Slide 49: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) H1 FY21 H1 FY20 FY20 FY19 FY18 Overall New Business Margins (post overrun) 25.1% 27.5% 25.9% 24.6% 23.2% (1) Operating Return on EV 17.6% 19.6% 18.1% 20.1% 21.5% Operating Expenses / Total Premium 11.1% 14.0% 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. H1 FY21 H1 FY20 H1 FY21 H1 FY20 Premium earned 160.5 140.9 Income Reinsurance ceded (2.8) (1.9) Interest and dividend income 2.0 1.7 Income from Investments 150.7 31.9 Net profit/(loss) on sale 0.3 0.7 Other Income 0.7 0.6 Transfer
Slide 51: Balance sheet
Balance sheet Sep 30, 2020 Sep 30, 2019 Mar 31, 2020 Rs Bn. Shareholders’ funds Share capital (including Share premium) 24.4 23.9 24.2 Accumulated profits 53.5 40.1 45.7 Fair value change 0.4 (0.4) (1.9) Sub total 78.2 63.6 68.0 Borrowings 6.0 - - Policyholders’ funds Fair value change 11.2 8.0 0.5
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) H1 FY21: 25.2 (H1 FY20: 15.7) H1 FY21: 35.7 (H1 FY20: 37.6) UL 37 UL 12 36 12 Par 33 42 36 Par 14 32 Non-par Health 32 Non-par Health 23 16 Non-par Savings 36 39 Non-par Saving
Slide 53: 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 54: 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 55: 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 56: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Sep 30, 2020 As at Sep 30, 2019 As at Sep 30, 2020 As at Sep 30, 2019 1 3.90 5.67 3.83 5.51 2 5.12 6.14 4.41 5.74 3 6.01 6.58 4.89 5.95 4 6.65 6.94 5.28 6.14 5 7.09 7.25 5.59 6.31 10 7.67 7.90 6.45 6.88 15 7.37 7.85 6.71
Slide 57: 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 58: 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 59: 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 60: Thank you
Thank you
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