Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — Q1 FY20 Earnings Presentation
51 slides from Hdfc Life Insurance's earnings presentation, 2019
Slide 1: HDFC Life Insurance Investor presentation – Q1 FY20
HDFC Life Insurance Investor presentation – Q1 FY20
Slide 2: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Annexures 4 India Life Insurance 2
Slide 3: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Annexures 4 India Life Insurance 3
Slide 4: Executive summary: Q1 FY20
Executive summary: Q1 FY20 Scale Profitability Customer centricity 13th month CY 88% New Rs (Bn.) 39.3 Rs (Bn.) 4.2 Profit After persistency Business PY 87% Growth 47% Tax Growth 12% Premium Protection Rs (Bn.) 10.1 (Term) 1 Growth 20% NB Sum Rs (Tn.) 1.8 New CY 29.8% Business Protection Rs (Bn.) 6.
Slide 5: Consistent performance across key metrics (1/2)
Consistent performance across key metrics (1/2) Leadership in new business premium (Rs Bn.) Increasing number of lives insured (Mn.) 17.2% 19.1% 20.7% 22.3% 25.1% 51.4 149.7 26% 47% 113.5 33.2 86.2 20.9 39.3 10.3 13.0 26.8 FY17 FY18 FY19 Q1 FY19 Q1 FY20 FY17 FY18 FY19 Q1 FY19 Q1 FY20 Private Market
Slide 6: Consistent performance across key metrics (2/2)
Consistent performance across key metrics (2/2) Strong growth in VNB, industry leading VNB margins (Rs Bn.) Healthy growth in Embedded Value (Rs Bn.) 22.0% 23.2% 24.6% 24.2% 29.8% 21.7% 21.5% 20.1% 18.4% 19.9% 23% 183.0 192.3 152.2 156.9 124.7 32% 36% 32% 31% 104% 15.4 33% 12.8 9.2 68% 64% 68% 69% 5
Slide 7: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Annexures 4 India Life Insurance 7
Slide 8: Key elements of our strategy
Key elements of our strategy 1 2 3 4 5 Focus on profitable Balanced Market-leading Reimagining Quality of Board growth distribution mix innovation insurance and management Ensuring sustainable Developing multiple Identifying latent Market-leading digital Seasoned leadership and profitable growth cha
Slide 9: Focus on profitable growth
Focus on profitable growth Q1 Q1 FY17 FY18 FY19 Rs Bn. FY19 FY20 Profitable growth New business Margins 22.0% 23.2% 24.6% 24.2% 29.8% Value of new business 9.2 12.8 15.4 2.5 5.1 Profit after tax (PAT) 8.9 11.1 12.8 3.8 4.2 distribution mix Balanced Underwriting profits 7.5 8.5 9.0 3.1 3.5 Shareholde
Slide 10: Analysis of change in IEV
Analysis of change in IEV Rs Bn. EVOP - 8.5 Profitable growth EVOP1% - 19.9% 5.1 0.2 0.8 192.3 3.2 0.01 183.0 distribution mix Balanced Post over- Operating Economic ESOP Unwind run VNB variances variances exercises 122.7 124.3 Market leading innovation Adjusted Net worth (ANW) Value of in-force bus
Slide 11: Reimagining distribution: Balanced distribution mix
Balanced distribution mix Increasing share of proprietary channels 1 Strong and diversified network of 230+ partners Profitable Banks NBFCs and MFIs SFBs growth 11% 14% 19% 20% 12% 11% 5% 5% 13% 15% 4% 9% distribution Balanced 72% 71% 64% mix 56% FY17 FY18 FY19 Q1 FY20 Bancassurance Brokers and othe
Slide 12: Update on proprietary channels
Update on proprietary channels Profitable Agency Direct Online growth Ease of doing business and greater Multi-dimensional approach – Strong growth driven by higher ATS distribution agent engagement resulted in FLS branch walk-ins, tele-sales, digital Balanced and a multi-platform, multi- productivi
Slide 13: Operating model moved from product centric to customer centric
Operating model moved from product centric to being customer centric Profitable growth From the Traditional Insurer... ... to the Insurer of the Future Traditional Channels The Traditional Insurer (Top Line Marketing / Product Driven) Agency Banca Group distribution Balanced mix The Insurer of the F
Slide 14: Addressing customer needs at every stage of life
Addressing customer needs at every stage of life 20 – 30 years 30 – 40 years 40 – 50 years 50+ years Profitable Objective Simple Savings Borrowing Investments Asset Drawdown growth Pay off mortgage distribution Balanced Medical care mix First Job Medical care Needs Get married Plan for Net Worth inn
Slide 15: Expanding market through consistent product innovation
Expanding market through consistent product innovation Profitable growth Guaranteed returns, with Retirement option for life long income & pension distribution Balanced 2014 2015 2017 2018 2019 mix Youngstar Joint-life single-premium Woman’s ULIP with low cost structure innovation leading Market Div
Slide 16: Product mix across key channels
Product mix across key channels1 Segment FY17 FY18 FY19 Q1 FY20 Segment FY17 FY18 FY19 Q1 FY20 UL 61% 64% 67% 31% UL 26% 33% 26% 7% Profitable growth Agency Par 30% 26% 14% 5% Par 57% 48% 40% 9% Banca 2 Non par savings 8% 8% 15% 60% Non par savings 6% 5% 17% 73% Term 1% 1% 2% 2% Term 11% 11% 12% 8%
Slide 17: Created a new operating model to reimagine insurance
Created a new operating model to reimagine insurance Enablers Building Blocks Culture Profitable growth Cloud Computing Fail Early / Fail Fast Service Simplification Give me frictionless service distribution Balanced 4 mix Agile / AI / ML Journey Data Sprints Simplification Enrichment & Give me a si
Slide 18: Simplifying the customer journey using building blocks
Simplifying the customer journey using 5 building blocks 1 3 5 Profitable Platforms & Journey Data Enrichment growth Ecosystems Simplification & Analytics Partner Service Integration Simplification distribution Balanced 2 4 mix Insurance beyond digital: Continuous improvement in Products and service
Slide 19: Quality of Board and Management
Quality of Board and Management Active, well-informed and Profitable growth Seasoned senior management team independent Board oversees how with rich experience in financial the management serves and protects services interests of all stakeholders distribution Balanced mix Encouragement from Board to
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 ~59 years ▪ Quan
Slide 21: Risk Management for Non Par products
Risk Management for Non Par products Key risks Quantum of risk Mitigation ALM metric Interest rate ROPP1: Low Duration and cash flow matching risk Life: Low No supply side constraints on the long dated Govt bonds2 Dynamic re-pricing in line with change in market yield Annuity Net Sensitivity R
Slide 22: Performance of wholly-owned subsidiary companies
Performance of wholly-owned subsidiary1 companies HDFC Pension Rs Bn. HDFC International Life and Re 59.1 51.7 11.6 0.5 Mar'15 Mar'17 Mar'19 Jun'19 Fastest growing PFM (Pension Fund Manager) under the Registered growth of more than 100% in revenue worth USD NPS architecture (YoY growth of 96% in
Slide 23: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Annexures 4 India Life Insurance 23
Slide 24: Individual persistency for key channels and segments
Individual persistency for key channels and segments1 Across key channels (%) 91 89 83 83 82 85 80 78 74 75 76 72 70 70 69 67 65 50 52 53 Agency Banca Direct Company 13th month 25th month 37th month 49th month 61st month Across key segments (%) 96 88 88 84 84 85 78 78 82 80 76 73 77 76 70 71 70 67 6
Slide 25: Indian Embedded Value (IEV)
Indian Embedded Value (IEV)1 Rs Bn. Value of InForce business (VIF) 69.6 192.3 131.2 122.7 140 120 -0.2 -2.0 -6.3 100 80 60 40 20 - Present Value of Future Time Value of Financial Frictional Cost (FC) Cost of Residual Non VIF Adjusted Networth Embedded value (EV) Profits (PVFP) 2 Options and Guarant
Slide 26: VNB and NBM walkthrough
VNB and NBM walkthrough Rs Bn. 0.52 5.09 0.37 Growth of 104% 1.65 0.07 vs. Q1 FY19 2.49 VNB 1 Q1 FY19 Impact of higher APE Change in assumptions New Business Profile Operating leverage Q1 FY20 NBM% 24.2% - 0.4% 2.2% 3.0% 29.8% 1. Reflects the impact of difference in mix of segment/distribution chann
Slide 27: Sensitivity analysis: FY19
Sensitivity analysis: FY19 % Change in Change in VNB % Change in Analysis based on key metrics Scenario VNB 1 Margin 1 EV Change in Increase by 1% -0.4% -0.1% -1.7% Reference rate Decrease by 1% 0.2% 0.1% 1.6% Equity Market Decrease by 10% -1.4% -0.3% -1.7% movement Increase by 10% -2.9% -0.7% -1.4%
Slide 28: Stable capital position
Stable capital position Rs Bn. Dividend paid 2.6 3.3 4.0 - 120.0 230% New business growth 33% 32% 32% 47% 210% 100.0 192% 192% 193% 188% 190% 80.0 170% 67.0 62.7 150% 60.0 52.1 15.0 12.7 130% 42.1 11.3 16.7 17.3 40.0 110% 9.1 13.6 11.0 90% 20.0 33.3 34.7 27.2 70% 22.0 - 50% Mar 31, 2017 Mar 31, 2018
Slide 29: Assets under management
Assets under management Assets Under Management Change in AUM 1 Rs Bn. Debt 59% 61% 62% 62% Equity 41% 39% 38% 38% 40 24% 18% 1,550 16% 18% 30% 30 1,350 26 -20% 1,150 21 950 -70% 21 10 1,296 750 (1) (7) 1,256 -120% 550 917 1,066 -170% 350 30th Jun 2018 30th Jun 2019 150 -220% 31st Mar 2017 31st Mar
Slide 30: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Annexures 4 India Life Insurance 30
Slide 31: Growth opportunity: Under-penetration and favourable demographics
Growth opportunity: Under-penetration and favourable demographics Life Insurance penetration 1 Life Insurance density US$ 2 (2018) (2018) 17.5% 16.8% 6.756 India remains vastly under-insured, both in terms of penetration and density 6.7% 4,195 6.2% 3,835 Huge opportunity to penetrate the 3.6% 2,
Slide 32: Low levels of penetration – Life Protection
Low levels of penetration – Life Protection 172 mn 68 mn 1.7 mn Protection gap 2 (2014) 92.2% 88.3% 78.4% 73.3% 72.5% 70.2% India has the highest protection gap in 56.3% 56.0% the region, as growth in savings and life insurance coverage has lagged behind economic and wage growth 16.4% Protection
Slide 33: India has a rapidly increasing ageing population
India has a rapidly increasing ageing population with lack of awareness regarding systematic retirement planning By 2050, 1 in 6 people in India will be over the 41.5% of elderly male Unorganized workforce not 52% of elderly population age of 60, bringing the under any formal pension in both urban a
Slide 34: Government Bond Auctions
Government Bond Auctions Government Bonds- Tenor Rs Bn. <=15 yrs >15 yrs 29% 27% 34% 34% 38% 34% 36% 71% 73% 66% 66% 62% 66% 64% 2019-20 (July 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 7, '19) >15 yrs 1,880 2,030 2,250 1,710 1,580 1,930 840 <=15 yrs 3,690 3,890 3,600 4,110 4,300 3,780 1,522 To
Slide 35: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 23% 25% 22% 16% 3% 11% 11% 15% 12% 9% 13% 18% 16% 15% 51% 52% 26% 58% 25% 67% 65% 67% 50% 44% 49% 48% 42% 33% FY07 FY10 FY13 FY17 FY07 FY10 FY13 FY17 Financial savings Physical savings Currency & depos
Slide 36: Industry new business trends
Industry new business1 trends Individual WRP in Rs bn Sensex Private players 50% 57% 52% 46% 37% 38% 38% 49% 52% 54% 56% 58% 58% Market share Growth % Private 86% 1% 7% -20% -24% 2% -3% 16% 14% 26% 24% 12% 24% 0% -22% 29% 4% 11% -4% -2% -27% 3% 15% 13% 5% 3% LIC 31% -10% 17% -9% -5% -2% -3% -11% 8%
Slide 37: Private industry: Market share trends
Private industry: Market share trends Top 7 private players vs other players Amongst private insurers, insurers with a strong bancassurance platform continue to dominate with increasing market share of the total private individual new business Notes : Basis Individual Weighted Received Premium (WR
Slide 38: 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 67% 63% 6% 7% 9% 10% 10% 12% 57% 14% 54% 5% 5% 5% 4% 3% 3% 52% 51% 52% 3% 3% 48% 49% 48% 6% 4% 3% 3% 3
Slide 39: Appendix
Appendix
Slide 40: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) FY17 FY18 FY19 CAGR Q1 FY19 Q1 FY20 Growth Key Metrics (Rs Bn.) New Business Premium (Indl. + Group) 86.2 113.5 149.7 32% 26.8 39.3 47% Renewal Premium (Indl. +Group) 108.2 122.1 142.1 15% 23.8 26.1 10% Total Premium 194.5 235.6 291.9 23% 50.6 65.4 29% Indivi
Slide 41: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) FY17 FY18 FY19 Q1 FY19 Q1 FY20 Key Ratios Overall New Business Margins (post overrun) 22.0% 23.2% 24.6% 24.2% 29.8% (1) Operating Return on EV 21.7% 21.5% 20.1% 18.4% 19.9% Operating Expenses / Total Premium 12.6% 13.5% 13.2% 14.4% 13.5% Total Expenses (OpEx
Slide 42: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Revenue A/c Profit and Loss A/c Rs Bn. Q1 FY20 Q1 FY19 Q1 FY20 Q1 FY19 Premium earned 65.4 50.6 Income Reinsurance ceded (0.8) (0.6) - Interest and dividend income 0.8 0.6 Income from Investments 20.5 18.0 - Net profit/(loss) on sale 0.2 0.1 Other Income 0.2 0.4 Transfe
Slide 43: Balance Sheet
Balance Sheet Jun 30, 2019 Jun 30, 2018 Rs Bn. Shareholders’ funds Share capital (including Sh premium) 23.9 23.3 Accumulated profits 37.0 27.7 Fair value change (0.0) 0.1 Sub total 60.8 51.2 Policyholders’ funds Fair value change 10.3 8.3 Policy Liabilities 568.0 445.0 Provision for Linked Liabilit
Slide 44: Segment wise average term and age
Segment wise average term and age1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) Q1 FY20: 14.8 (Q1 FY19 : 14.2) Q1 FY20: 37.9 (Q1 FY19: 37.7) UL 36 12 39 UL 11 Par 36 Par 14 37 15 Non-par Health 33 14 35 Non-par Health 10 Non-par Savings 39 11 31 Non-par Sa
Slide 45: 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 46: Embedded Value: Methodology and Approach (2/2)
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 shareholde
Slide 47: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Jun 30, 2019 As at Jun 30, 2018 As at Jun 30, 2019 As at Jun 30, 2018 1 6.31 7.22 6.12 6.98 2 6.70 8.14 6.30 7.40 3 6.98 8.56 6.45 7.67 4 7.19 8.73 6.58 7.85 5 7.35 8.78 6.68 7.96 10 7.64 8.55 6.99 8.13 15 7.67 8.40 7.12
Slide 48: 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 49: 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 50: 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 51: Thank you
Thank you
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