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

Icici Prudential Life Insurance — 9M-FY2018 Earnings Presentation

54 slides from Icici Prudential Life Insurance's earnings presentation, Jan 19, 2018

  1. Slide 1: Performance update 9M-FY2018

    Performance update 9M-FY2018 January 19, 2018

  2. Slide 2: Agenda

    Agenda Key developments Company strategy and performance Opportunity Industry overview 2

  3. Slide 3: Agenda

    Agenda Key developments Company strategy and performance Opportunity Industry overview 3

  4. Slide 4: Key developments

    Key developments  Recommendation by IRDAI product committee  Level playing field for health products  More conducive environment for pension products  Flexibility in investment of policyholder funds  Review of surrender value in traditional saving products Year of Existing surrender charge for

  5. Slide 5: Agenda

    Agenda Key developments Company strategy and performance Opportunity Industry overview 5

  6. Slide 6: Strategy: Market share + profitable growth

    Strategy: Market share + profitable growth Objective Grow Value of New Business (VNB) Customer centric products Saving opportunity Protection opportunity Focus on retail through multi-channel distribution architecture backed by strong technology platform Superior business quality to deliver enhanced

  7. Slide 7: Customer centric products

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  8. Slide 8: Customer centric products

    Customer centric products ` bn FY2015 FY2016 FY2017 9M-FY2018 Savings 46.68 50.31 63.64 53.49 ULIP 39.40 41.79 55.69 46.25 Par 6.26 7.27 6.38 6.43 Non par 0.41 0.31 0.72 0.21 Group1 0.61 0.94 0.86 0.60 Protection2 0.76 1.39 2.60 2.30 Total APE 47.44 51.70 66.25 55.79  Strong customer value proposit

  9. Slide 9: Focus on Retail

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  10. Slide 10: Focus on Retail

    Focus on Retail ` bn FY2015 FY2016 FY2017 9M-FY2018 Retail APE 46.77 50.70 65.18 54.94 Group APE 0.66 1.00 1.07 0.85 Total APE 47.44 51.70 66.25 55.79 Retail as % Total APE 98.6% 98.1% 98.4% 98.5% Retail AUM 858.10 901.91 1,083.15 1,229.33 % Total AUM 85.7% 86.8% 88.1% 88.9% 10 Components may not ad

  11. Slide 11: Retail market share

    Retail market share1 ` bn FY2015 FY2016 FY2017 9M-FY2018 RWRP 45.96 49.68 64.08 54.01 YoY Growth 41.3% 8.1% 29.0% 26.3% 23.3% 23.0% 21.9% 22.3% Within total 13.1% industry 11.3% 11.3% 12.0% Within private sector FY2015 FY2016 FY2017 9MFY2018 1. Retail weighted received premium (RWRP) basis 11 Source

  12. Slide 12: Multi-channel distribution backed by strong technology platform

    Multi-channel distribution backed by strong technology platform ` bn FY2015 FY2016 FY2017 9M-FY2018 Bancassurance 27.70 29.64 37.72 29.07 Agency 11.58 12.31 15.41 14.70 Direct 4.18 5.14 7.98 8.08 Corporate agents 3.32 3.61 4.07 3.09 and brokers Group1 0.66 1.00 1.07 0.85 Total APE 47.44 51.70 66.25

  13. Slide 13: Superior business quality to deliver enhanced customer and shareholder value

    Superior business quality to deliver enhanced customer and shareholder value 13

  14. Slide 14: Persistency

    Persistency1 Month FY2015 FY2016 FY2017 8M-FY20182 13th month 79.0% 82.4% 85.7% 86.7% 25th month 65.9% 71.2% 73.9% 75.8% 37th month 64.3% 61.6% 66.8% 67.8% 49th month 54.4% 62.2% 59.3% 61.8% 61st month 14.5% 46.0% 56.2% 55.0% Retail renewal 95.71 119.95 142.19 114.89 premium (` bn) YOY growth 18.2%

  15. Slide 15: Cost efficiency

    Cost efficiency FY2015 FY2016 FY2017 9M-FY2018 Expense ratio (excl. 11.6% 11.0% 11.4% 8.5% commission)1 Commission ratio2 3.8% 3.5% 3.6% 5.6% Cost/TWRP3 15.4% 14.5% 15.1% 14.0% Cost / Average AUM4 2.5% 2.5% 2.8% 2.5% ` bn 31.60 24.11 25.45 22.50 7.59 Commission 6.20 9.57 5.53 24.01 16.97 19.25 14.55

  16. Slide 16: Fund performance

    Fund performance 31.5% 28.1% 17.0% 15.4% 13.5% 12.8% 13.0% 10.9% 10.5% 7.2% 8.2%8.9% 8.8% 6.7% 6.0% 4.7% 1Y 5Y 1Y 5Y 1Y 5Y 1Y 5Y Preserver Protector Balancer Maximiser (Liquid fund) (Debt fund) (Balanced fund) (Equity Fund) Benchmark Fund 88.4% of linked portfolio outperformed benchmark indices sinc

  17. Slide 17: Grow Value of New Business

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  18. Slide 18: Value of New Business

    Value of New Business 9M- 9M- ` bn FY2015 FY2016 FY2017 Growth FY2017 FY2018 APE1 47.44 51.70 66.25 44.58 55.79 25.1% Savings APE 46.68 50.31 63.64 42.84 53.49 24.9% Protection APE 0.76 1.39 2.60 1.74 2.30 32.2% Value of New 2.70 4.12 6.66 4.21 7.67 82.2% Business (VNB)2 VNB Margin2 5.7% 8.0% 10.1%

  19. Slide 19: Embedded Value (EV)

    Embedded Value (EV)1 ` bn 172.10 161.84 138.22 139.39 67.56 72.33 54.33 55.14 94.28 99.77 83.90 84.25 FY2015 FY2016 FY2017 H1FY2018 Value of inforce (VIF) Adjusted net worth (ANW) 1. As per Indian Embedded Value (IEV) method 19 Components may not add up to the totals due to rounding off

  20. Slide 20: Summary

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  21. Slide 21: Financial metrics

    Financial metrics ` bn FY2015 FY2016 FY2017 9M-FY2018 Retail new business premium 49.32 54.60 70.66 59.97 Retail renewal premium 95.71 119.95 142.19 114.89 Group premium 8.03 17.10 10.69 8.54 Total premium 153.07 191.64 223.54 183.40 Value of New Business (VNB)1 2.70 4.12 6.66 7.67 Embedded Value 13

  22. Slide 22: Summary

    Summary  Low penetration1 vs mature economies and even lower density 1 India: High growth potential  One of the fastest growing large economy in the world with strong growth drivers 2 Focus on growing  Market share gain on RWRP2 basis since FY2012 market share Customer Centric  Customer focused

  23. Slide 23: Agenda

    Agenda Key developments Company strategy and performance Opportunity Industry overview 23

  24. Slide 24: Favourable demography

    Favourable demography Large and Growing Population Base1 High Share of Working Population1 2016 Population (mn) Population of age 25-59 years (mn) 1,404 1,324 724 576 261 322 51 56 128 144 208 Russia China Brazil S Africa Japan USA India Indonesia S Korea 2015 2030 Rising Affluence2 Driving GDP Grow

  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 savings1 60 80% 69% 21.1% 61% 58% 22.4% 17.2% 23.4% 60% 52% 52% 52% 50% 26.2% 17.6% 40 48% 45% 14.4% 24.3% 45% 41% ` tn 36% 36% 40% 31% 20 9.19 10.82 6.43 8.32 20% 7.75

  26. Slide 26: Protection opportunity: Income replacement

    Protection opportunity: Income replacement Sum assured as % of GDP 1,2 Protection Gap 3,4 % 92 56 85 33 73 78 73 56 270% 260% 8.56 226% 6.58 166% USD tn 149% 5.30 106% 96% 70% 1.09 0.79 0.77 0.52 0.40 India Thailand S. Korea Malaysia Singapore Japan Indonesia Australia Singapore Germany US Japan Ind

  27. Slide 27: Protection opportunity: Liability cover

    Protection opportunity: Liability cover ₹ bn Retail Credit 16,200 13,922 11,663 7,599 10,097 6,454 8,976 7,828 5,378 4,711 4,409 3,858 7,468 8,601 5,386 6,285 3,971 4,567 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 Home Loans Others  Retail credit has been growing at a healthy pace  Credit life is v

  28. Slide 28: Protection opportunity

    Protection opportunity Gross direct FY2007 FY2017 CAGR premium (` bn) Health 33.19 307.65 24.9% Motor 106.97 502.45 16.7%  Protection premium was ~ ` 67 bn for Life insurance industry in FY2017 28 Source: IRDAI, General Insurance Council and company estimate

  29. Slide 29: Agenda

    Agenda Key developments Company strategy and performance Opportunity Industry overview 29

  30. Slide 30: Evolution of life insurance industry in India

    Evolution of life insurance industry in India FY2002 FY2010 FY2015 FY2017 New business 116 21.5% 550 -5.8% 408 14.3% 532 premium1 (` bn) Total premium (` bn) 501 23.2% 2,654 4.3% 3,281 12.9% 4,185 Penetration (as a % to 2.1% 4.1% 2.6% 2.8% GDP) Assets under 2,304 24.0% 12,899 12.6% 23,361 13.0% 29,8

  31. Slide 31: New business

    New business1 Growth FY2015 FY2016 FY2017 9M-FY2018 Private 15.9% 13.6% 26.4% 32.8% LIC -26.3% 2.9% 14.7% 16.0% Industry -10.3% 8.1% 20.7% 24.9% 400 56.4% 60% 53.9% 51.5% 49.0% 50% 300 40% ` bn 200 30% 20% 100 10% 0 0% FY2015 FY2016 FY2017 9MFY2018 LIC Private Private market share 1. Retail weighted

  32. Slide 32: Channel mix

    Channel mix1 Industry Private players 8% 8% 8% 9% 17% 16% 16% 18% 21% 24% 23% 24% 47% 52% 54% 53% 71% 68% 69% 67% 36% 32% 30% 29% FY2015 FY2016 FY2017 H1FY2018 FY2015 FY2016 FY2017 H1FY2018 Agency Bancassurance Others  Given a well developed banking sector, bancassurance has become largest channel

  33. Slide 33: Product mix

    Product mix1 Industry Private players 12% 13% 12% 12% 38% 43% 42% 44% 88% 87% 88% 88% 62% 57% 58% 56% FY2015 FY2016 FY2017 H1FY2018 FY2015 FY2016 FY2017 H1FY2018 Traditional ULIP  Strong customer value proposition of ULIPs  Transparent and low charges  Lower discontinuance charges compared to oth

  34. Slide 34: Annexures

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  35. Slide 35: Average APE by product categories

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

  36. Slide 36: Policy term and customer age

    Policy term and customer age1 Average policy term (years) Average customer age (years) 44 24 36 12 Savings Protection Savings Protection 36 1. For FY2017; protection excludes credit life

  37. Slide 37: Persistency (FY2017)

    Persistency (FY2017)1 Persistency across Product Categories 98.2% 85.6% 82.8% 89.5% 57.7% 63.0% 49.0% 54.1% ULIP Par Non-par Protection 13th month 49th month Persistency across Channel Categories 83.7% 87.9% 89.5% 87.5% 62.8% 55.6% 62.7% 54.3% Bancassurance Agency Direct Corporate Agents and Brokers

  38. Slide 38: Embedded Value

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  39. Slide 39: Analysis of movement in EV

    Analysis of movement in EV1 ` bn FY2016 FY2017 Opening EV 138.22 139.39 Unwind 12.58 12.21 Value of New Business (VNB) 4.12 6.66 Operating assumption changes 0.02 1.00 Persistency variance 2.01 0.99 Mortality and morbidity variance 0.79 0.98 Expense variance 0.59 0.35 Other variance 1.09 0.76 EVOP 2

  40. Slide 40: 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) 40

  41. Slide 41: 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;

  42. Slide 42: 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

  43. Slide 43: 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  Distributa

  44. Slide 44: 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 44

  45. Slide 45: 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

  46. Slide 46: 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

  47. Slide 47: 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 V

  48. Slide 48: 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, i

  49. Slide 49: 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

  50. Slide 50: 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  Allowance has been made for future taxation costs based on current tax rates 50

  51. Slide 51: Sensitivity analysis (FY2017)

    Sensitivity analysis (FY2017) % change % change Scenario in EV 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 mort

  52. Slide 52: Economic assumptions underlying EV

    Economic assumptions underlying EV Tenor (years) Reference Rates March 31, March 31, December 31, 2016 2017 2017 1 7.24% 6.35% 6.50% 5 8.22% 7.78% 8.02% 10 8.34% 8.02% 8.37% 15 8.40% 8.03% 8.33% 20 8.46% 8.03% 8.27% 25 8.50% 8.03% 8.25% 30 8.52% 8.03% 8.24% 52

  53. Slide 53: 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

  54. Slide 54: Thank you

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