Icici Prudential Life Insurance Co. Ltd. · NSE:ICICIPRULI
Icici Prudential Life Insurance — Investor Presentation (June 2019)
71 slides from Icici Prudential Life Insurance's investor presentation, Jun 5, 2019
Slide 1: Investor presentation cover letter to stock exchanges
flICICI PRLDENTIAL1~J L I F E I N S U • 1( i A June 5, 2019 General Manager Vice President Listing Department Listing Department BSE Limited, National Stock Exchange of India Limited Phiroze Jeejeebhoy Tower, 'Exchange Plaza' , Dalal Street, Bandra-Kurla Complex, Mumbai 400 001 Bandra (East), Mumbai
Slide 2: Performance update
Performance update June 05, 2019
Slide 3: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 4: May 2019 update
May 2019 update
Slide 5: Premium growth
Premium growth ` billion FY2019 April 2019 May 2019 2M-FY2019 APE1 77.99 4.13 4.57 8.70 YoY growth 0.1% 9.0% 5.1% 6.9% RWRP2 70.95 3.46 4.03 7.49 YoY growth (4.9%) 2.0% 0.8% 1.4% 1. Annualized premium equivalent 2. Retail weighted received premium 4
Slide 6: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 7: Immediate priorities we had set for ourselves (1/2)
Immediate priorities we had set for ourselves (1/2) Premium Growth ` billion 9MFY-2019 Q4-FY2019 FY2019 APE1 53.43 24.57 77.99 YoY growth (4.2%)2 11.0%2 0.1% Beginning of journey to broaden customer base - Retail savings new business policies grew by 18.6% YoY for Q4-FY2019 1. Annualized premium equ
Slide 8: Immediate priorities we had set for ourselves (2/2)
Immediate priorities we had set for ourselves (2/2) Persistency improvement Persistency1 8M-FY2019 11M-FY2019 13th month 84.1% 86.1% 49th month 63.2% 63.9% Improvement over 8M-FY2019 1. Retail excluding SP computed as per IRDA circular dated January 23, 2014 7
Slide 9: Continued focus on protection
Continued focus on protection Protection mix1 4.6% 8.5% 11.2% 20.6% Protection new business received premium (In ` bn) 21.37 10.28 6.71 3.13 FY2016 FY2017 FY2018 FY2019 Protection >20% of new business received premium - Leading to… 1. As a % of total new business received premium 8
Slide 10: Value of new business
Value of new business ` billion 7.89 5.40 Savings (APE mix-9.3%) (APE mix-90.7%) Protection …protection business contributing ~60% of VNB 9
Slide 11: Delivering value…
Delivering value… ` billion FY2018 FY2019 YoY growth Value of new business 12.86 13.28 3.3% VNB margin 16.5% 17.0% NA Embedded value 187.88 216.23 15.1% Return on Embedded value 22.7% 20.2% NA …through the 4P approach Premium 77.92 77.99 0.1% Protection 4.46 7.22 61.9% Persistency1 (13th month) 85.8
Slide 12: Way forward
Way forward • Deepen penetration in under-served customer segments • Enhance current distribution Premium • Create new distribution Growth • Augment capability in Health and Protection • Increase focus on Pension and Annuity Protection • Continue to grow both retail and group lines of business Persi
Slide 13: Strategy
Strategy
Slide 14: To create value for all key stakeholders
To create value for all key stakeholders Customers Shareholders Employees
Slide 15: Customers
Customers Metrics FY2018 FY2019 Claims settlement ratio1 97.9% 98.6% Average no. of days for settlement2 2.99 2.34 Grievance count 7,698 6,387 Grievance ratio3 (volume) 92 72 1. Individual death claims 2. Average turn around time for non-investigated claims from receipt of last requirement 3. Grieva
Slide 16: Employees
Employees • 91% of senior management have served for more than 10 years Leadership • 86% senior management vacancies filled internally depth & in the last 5 years breadth • 70% of senior management team have done at least 3 job rotations Productive & • Amongst best in industry on employee cost to en
Slide 17: Shareholders: Performance snapshot
Shareholders: Performance snapshot ` billion FY2018 FY2019 Growth Value of New Business (VNB) 12.86 13.28 3.3% Embedded Value 187.88 216.23 15.1% APE 77.92 77.99 0.1% -Savings 73.45 70.77 (3.6%) -Protection 4.46 7.22 61.9% Persistency (13th month)1 85.8% 86.1% Persistency (49th month)1 62.8% 63.9% P
Slide 18: Shareholders: 4P strategy
Shareholders: 4P strategy Protection Premium Customer centricity VNB Growth Persistency Growth continues to be at the core Productivity 17
Slide 19: 4P: Premium
4P: Premium
Slide 20: Premium growth
Premium growth APE (` billion) 77.92 77.99 55.79 53.43 22.13 24.57 9MFY2018 9MFY2019 Q4FY2018 Q4FY2019 FY2018 FY2019 Retail continues to constitute more than 95% of new business 19
Slide 21: Premium growth: Product segments
Premium growth: Product segments APE (` billion) Segments Q4-FY2018 Q4-FY2019 FY2018 FY2019 Q4-FY2019 FY2019 mix Mix Savings 19.96 21.96 73.45 70.77 89.4% 90.7% ULIP 17.56 18.85 63.81 62.10 76.7% 79.6% Par 2.03 2.29 8.46 6.72 9.3% 8.6% Annuity 0.17 0.31 0.31 0.69 1.3% 0.9% Others 0.20 0.50 0.87 1.27
Slide 22: Premium growth: Channels
Premium growth: Channels APE (` billion) Q4-FY2019 FY2019 Channels Q4-FY2018 Q4-FY2019 FY2018 FY2019 mix mix Bancassurance 11.68 13.33 40.75 43.53 54.3% 55.8% Agency 5.09 5.41 19.79 16.89 22.0% 21.7% Direct 2.46 3.14 10.54 9.34 12.8% 12.0% Corporate agents and 1.61 1.58 4.70 4.59 6.4% 5.9% brokers G
Slide 23: 4P: Protection
4P: Protection
Slide 24: Protection: Components
Protection: Components 7.22 APE (` billion) 1.28 4.46 1.57 1.15 0.61 4.36 2.71 FY2018 FY2019 Retail protection Credit life Group term Retail protection is more than 60% of protection APE Components may not add up to the totals due to rounding off 23
Slide 25: Protection: Increasing share
Protection: Increasing share APE (` billion) Segment H1-FY2019 Q3-FY2019 Q4-FY2019 FY2019 Savings 31.14 17.68 21.96 70.77 Protection 2.66 1.95 2.61 7.22 Total 33.81 19.62 24.57 77.99 Protection mix 7.9% 9.9% 10.6% 9.3% Protection mix ~10% for two quarters in a row Components may not add up to the to
Slide 26: Protection: Credit life
Protection: Credit life ` billion New business received premium Protection split based on APE1 15.14 1.04 (13.7%) Retail protection 0.52 (8.1%) Group term 5.81 4.36 Credit life-ICICI group 1.28 (60.5%) 3.40 (17.8%) Credit life-other 1.65 FY2016 FY2017 FY2018 FY2019 Credit life through third party Pr
Slide 27: 4P: Persistency
4P: Persistency
Slide 28: Persistency (retail excluding single premium)
Persistency1 (retail excluding single premium) Month FY2018 11M-FY2019 13th month 85.8% 86.1% 25th month 77.0% 76.3% 37th month 67.6% 69.8% 49th month 62.8% 63.9% 61st month 53.7% 56.4% ` billion FY2018 FY2019 Retail renewal premium 174.97 202.25 Retail surrender (linked) 116.86 91.91 Assets under m
Slide 29: 4P: Productivity
4P: Productivity
Slide 30: Productivity: Cost efficiency
Productivity: Cost efficiency FY2018 FY2019 Expense ratio (excl. commission)1 8.2% 9.5% Commission ratio2 5.5% 5.6% Cost/TWRP3 13.7% 15.0% Cost/Average AUM4 2.6% 2.8% Cost/TWRP (Savings LOB) 11.8% 11.5% ` billion 41.94 34.75 15.51 14.03 Commission 20.72 26.43 Non-Commission FY2018 FY2019 • 67% of ne
Slide 31: Technology driving the industry leading benchmark
Technology driving the industry leading benchmark 1st in industry 1st in industry Customer profiler Nudge Instant reader Personalized info., Real time analytics upfront requirements, providing appropriate Instant feedback on Video streaming and trigger to customers KYC documents best suited options
Slide 32: Value of New Business (VNB)
Value of New Business (VNB) ` billion FY2018 FY2019 VNB 12.86 13.28 VNB margin 16.5% 17.0% 0.9% 2.2% (2.6%) 16.5% 17.0% FY2018 Business mix Assumption changes Acquisition expenses FY2019 31
Slide 33: Embedded Value (EV)
Embedded Value (EV)1 216.23 ` billion 187.88 73.54 70.24 142.69 117.64 Mar-2018 Mar-2019 Value of inforce (VIF) Adjusted net worth (ANW) Pre dividend EV growth of 19.6% 1. As per Indian Embedded value (IEV) method Components may not add up to the totals due to rounding off 32
Slide 34: Analysis of movement in EV
Analysis of movement in EV ` billion 1.97 0.04 0.02 (1.22) (8.43) 13.28 2.66 216.23 15.84 4.20 187.88 EVOP1 = 38.01 ANW ROEV2 = 20.2% 73.54 ANW 70.24 VIF VIF 117.64 142.69 IEV (Mar 31, Unwind Operating VNB Persistency Mortality and Expense Other variance Economic Net Capital IEV (Mar 31, 2018) Assum
Slide 35: Analysis of movement in EV
Analysis of movement in EV1 ` billion FY2017 FY2018 FY2019 Opening EV 139.39 161.84 187.88 Unwind 12.21 13.72 15.84 Value of New Business (VNB) 6.66 12.86 13.28 Operating assumption changes 1.00 7.64 4.20 Persistency variance 0.99 1.53 2.66 Mortality and morbidity variance 0.98 0.78 1.97 Expense var
Slide 36: Sensitivity analysis
Sensitivity analysis Scenario % change in VNB % change in EV FY2018 FY2019 FY2018 FY2019 Increase in 100 bps in the reference rates (4.9) (4.3) (2.1) (2.0) Decrease in 100 bps in the reference rates 5.2 4.4 2.2 2.0 10% increase in the discontinuance rates (8.6) (8.5) (1.3) (1.3) 10% decrease in the
Slide 37: Dividend
Dividend
Slide 38: Dividend
Dividend ` billion FY2018 FY2019 Profit after Tax 16.20 11.41 Solvency ratio1 252% 215% Dividend declared2 9.62 4.52 Dividend payout ratio 59.4% 39.6% Dividend payout ratio of ~40% for FY2019 1. At March 31 of respective years 2. Excluding DDT 37
Slide 39: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 40: Favorable demography
Favorable demography Large and growing population base1 High share of working population1 Population of age 25-59 years: India (mn) 2017 Population (mn) 1,339 1,410 724 576 209 264 324 51 57 127 144 China Russia Brazil S Africa Japan Indonesia USA India S Korea 2015 2030 Driving GDP growth 2 Rising
Slide 41: Financialisation of savings: Opportunity for insurance
Financialisation of savings: Opportunity for insurance Household savings1 Distribution of financial savings(excluding currency)2 90 69% 70% 64% 70 60% 60% 60% 23.8% 55% 25.1% 26.7% 20.3% 54% 52% 52% 50% 29.0% 20.5% 50 48% 16.0% 44% 45% 45% 23.3% 37% 38% 40% 30 36% 18.09 31% 15.59 13.64 16.53 30% 8.5
Slide 42: Protection opportunity: Income replacement
Protection opportunity: Income replacement Protection gap 3,4 273% Sum Assured as a % of GDP1,2 270% 252% 92 56 85 33 73 78 73 56 8.56 144% 142% 6.58 113% 5.30 106% USD tn 76% 1.09 0.79 0.77 0.52 0.40 India Singapore US Malaysia Japan Korea Germany Thailand India Japan Australia Indonesia S. Korea T
Slide 43: Protection opportunity: Liability cover
Protection opportunity: Liability cover Retail credit ` billion 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
Slide 44: Protection opportunity
Protection opportunity Gross direct premium (` billion) 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 ~ ` 125 billion for life insurance industry in FY2019 Source: Gen
Slide 45: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 46: Evolution of life insurance industry in India
Evolution of life insurance industry in India FY2002 FY2010 FY2015 FY2018 116 408 15.9% New business premium1 (` bn) 21.5% 550 -5.8% 635 Total premium (` bn) 501 23.2% 2,654 4.3% 3,281 11.8% 4,583 Penetration (as a % to GDP) 2.1% 4.1% 2.6% 2.8% Assets under management (` bn) 2,304 24.0% 12,899 12.6%
Slide 47: Channel mix
Channel mix1 Industry Private players 8% 9% 11% 16% 18% 21% 23% 25% 27% 54% 54% 54% 69% 66% 63% 30% 28% 25% FY2017 FY2018 9MFY2019 FY2017 FY2018 9MFY2019 Agency Bancassurance Others Given a well developed banking sector, bancassurance continues to be the largest channel for private players 1. Indivi
Slide 48: Product mix
Product mix1 Industry Private players 25% 27% 27% 51% 54% 52% 75% 73% 73% 49% 46% 48% FY2017 FY2018 9MFY2019 FY2017 FY2018 9MFY2019 Non Linked Linked • Strong customer value proposition of ULIPs • Transparent and low charges • Lower discontinuance charges compared to other savings products • Choice
Slide 49: Annexures
Annexures
Slide 50: Average APE by product categories
Average APE by product categories Average retail APE per policy (`) FY2017 FY2018 FY2019 ULIP 169,701 180,746 159,329 Par 56,325 62,379 60,308 Non Par 39,153 54,187 76,468 Protection 9,815 9,123 12,048 Total 92,735 90,620 83,309 Average retail APE per policy (`) Q1FY2019 Q2FY2019 Q3FY2019 Q4FY2019 U
Slide 51: Policy term and customer age
Policy term and customer age1 Average policy term (years) Average customer age (years) 30 43 36 12 Savings Protection Savings Protection 1. For FY2019; protection excludes credit life 50
Slide 52: Channel wise product mix
Channel wise product mix1 Channel category Product category FY2017 FY2018 FY2019 ULIP 92.1% 89.8% 93.4% Par 5.3% 7.3% 2.1% Bancassurance Non par 0.4% 0.1% 0.6% Protection 2.2% 2.7% 3.9% Total 100.0% 100.0% 100.0% ULIP 79.5% 81.8% 75.3% Par 14.2% 13.5% 18.1% Agency Non par 2.0% 0.4% 0.5% Protection 4
Slide 53: Product wise channel mix
Product wise channel mix1 Channel category Product category FY2017 FY2018 FY2019 Bancassurance 62.4% 57.4% 65.5% Agency 22.0% 25.4% 20.5% ULIP Direct 12.2% 14.5% 12.0% Corporate agents and brokers 3.4% 2.7% 2.1% Total 100.0% 100.0% 100.0% Bancassurance 31.3% 35.4% 13.8% Agency 34.3% 31.5% 45.4% Par
Slide 54: Retail persistency excluding single premium
Retail persistency excluding single premium1 Persistency across product categories 86.0% 89.4% 84.8% 74.1% 79.4% 64.3% 62.7% 49.8% ULIP Par Non- Par Protection 13th month 49th month Persistency across channel categories 84.8% 88.6% 85.6% 88.5% 62.7% 64.9% 66.5% 67.9% Bancassurance Agency Direct Corp
Slide 55: Retail persistency
Retail persistency Including single premium Month FY2017 FY2018 11M-FY2019 13th month 85.7% 86.8% 87.4% 25th month 73.9% 78.3% 78.0% 37th month 66.8% 68.8% 71.3% 49th month 59.3% 64.2% 65.2% 61st month 56.2% 54.5% 57.6% Excluding single premium Month FY2017 FY2018 11M-FY2019 13th month 84.7% 85.8% 8
Slide 56: Fund performance
Fund performance Benchmark Fund 12.4% 12.0% 11.7% 11.0% 10.3%10.9% 7.7% 9.8% 8.9% 9.1% 7.6% 7.7% 8.3% 6.7% 7.4% 4.9% 1Y 5Y 1Y 5Y 1Y 5Y 1Y 5Y Preserver Protector Balancer Maximiser (Liquid fund) (Debt fund) (Balanced fund) (Equity fund) 82.7% of linked portfolio out performed benchmark indices since
Slide 57: Embedded value
Embedded value
Slide 58: Analysis of movement in EV
Analysis of movement in EV1 ` billion FY2015 FY2016 FY2017 FY2018 FY2019 Opening EV 117.75 137.212 139.39 161.84 187.88 Unwind 11.70 12.58 12.21 13.72 15.84 Value of New Business (VNB) 2.70 4.12 6.66 12.86 13.28 Operating assumption changes 1.60 1.042 1.00 7.64 4.20 Persistency variance 2.01 0.99 1.
Slide 59: Embedded value
Embedded value ` billion FY2017 FY2018 FY2019 Value of In force (VIF) 94.28 117.64 142.69 Adjusted Net worth 67.56 70.24 73.54 Embedded value1 161.84 187.88 216.23 Return on Embedded Value (ROEV) 16.5% 22.7% 20.2% EV growth-pre dividend 20.6% 23.4% 19.6% EV growth-post dividend 16.1% 16.1% 15.1% VNB
Slide 60: EV methodology
EV methodology • 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) • EV consists of Adjusted Net Worth (ANW) and Value of in-force covered business (VIF) • A
Slide 61: 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 suppo
Slide 62: Components of VIF (1/2)
Components of VIF (1/2) • 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
Slide 63: Components of VIF (2/2)
Components of VIF (2/2) • Time value of financial options and guarantees (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 value
Slide 64: Components of EV movement (1/2)
Components of EV movement (1/2) • Expected return on existing business (unwind) • Expected investment income at opening reference rate on VIF and ANW • Expected excess ‘real world’ investment return over the opening reference rate on VIF and ANW • Operating assumption changes • Impact of the update
Slide 65: 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, inf
Slide 66: 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
Slide 67: 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
Slide 68: Economic assumptions underlying EV
Economic assumptions underlying EV Tenor (years) References Rates March 31, 2018 March 31, 2019 1 6.57% 6.66% 5 8.21% 7.83% 10 8.31% 8.35% 15 8.11% 8.35% 20 7.97% 8.22% 25 7.91% 8.11% 30 7.88% 8.05% 67
Slide 69: Glossary
Glossary • Annualized Premium Equivalent (APE) – Annualized Premium Equivalent (APE) is the sum of the 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
Slide 70: 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
Slide 71: Thank you
Thank you
ICICI Prudential Life Insurance Company — Investor Presentation (June 2019) on 6ix