Icici Prudential Life Insurance Co. Ltd. · NSE:ICICIPRULI
Icici Prudential Life Insurance — Investor Presentation (May 2020)
84 slides from Icici Prudential Life Insurance's investor presentation, May 9, 2020
Slide 1: Investor presentation cover letter to exchanges
May 9, 2020 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 400 051 Dear Sir/Madam, Subject: Investor presen
Slide 2: Performance update
Performance update May 09, 2020
Slide 3: April 2020 update
April 2020 update
Slide 4: Premium growth
Premium growth ` billion March 2020 FY2020 April 2020 APE1 5.29 73.81 1.90 YoY growth (46.7%) (5.4%) (54.0%) RWRP2 4.78 66.43 1.55 YoY growth (49.0%) (6.4%) (55.1%) 1. Annualized premium equivalent 2. Retail weighted received premium Components may not add up to the totals due to rounding off 3
Slide 5: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 6: Response to COVID-19 lockdown (1/2)
Response to COVID-19 lockdown (1/2) • Regular updates to the Board on the ongoing situation • Daily top management meetings to monitor emerging situation Governance • Central and regional COVID councils to track developments • BCP activated for all functions • Work from home enabled across the organ
Slide 7: Response to COVID-19 lockdown (2/2)
Response to COVID-19 lockdown (2/2) Email communication and press release on digital options available for: • Customer service transactions Customers • Premium payment • Claim registration and status Regulator & • Insurance classified as essential service Government • Regulatory relaxations provided
Slide 8: Risk management
Risk management Market risk Mortality risk Sharp fall in equity prices & lower bond yields Mortality experience and COVID-19 claims • Linked & Par (81% of liabilities) largely • Mortality experience continues to be better pass on the market performance to than assumptions customers • Proposed pricin
Slide 9: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 10: Key strategic elements
Key strategic elements Protection Customer Aspiration to centricity Premium double the VNB Growth Persistency continues to be Growth FY2019 VNB in at the core 3 - 4 years Productivity 9
Slide 11: Strong performance on customer metrics
Strong performance on customer metrics… 97.8% 1.6 days Claim settlement ratio1 Average claims settlement time2 83.2% 48 One of the best 13th month Number of grievances per 10,000 persistency3 ratio in the industry new business policies (retail) 1. Individual death claims 2. Average turnaround time f
Slide 12: …with strong growth in VNB
…with strong growth in VNB VNB Margin(%) 17.0% 21.7% VNB contribution* 25% FY2019 FY2020 VNB growth range to achieve our aspiration 19% VNB 13.28 16.05 ` billion 16.05 ` billion 4.20 13.28 4.17 (26.2%) (31.4%) 7.89 2.27 9.58 1.22 (59.4%) (14.1%) (59.7%) (9.2%) FY2019 FY2020 Protection Savings: Non-l
Slide 13: Premium growth
Premium growth NBP1 APE2 ` billion ` billion 77.99 73.81 123.48 0.99 2.47 102.52 62.10 47.72 12.46 7.68 7.22 11.16 FY2019 FY2020 FY2019 FY2020 Protection Savings: Non-linked Savings: Linked Savings: Group Strong growth in protection & non-linked savings; APE share increased from 19% to 32% 1. New bu
Slide 14: Continued growth in Protection and Annuity
Continued growth in Protection and Annuity Protection Annuity 8.5% 11.2% 20.6% 25.2% 2.6% 3.4% 6.6% 8.4% mix1 mix1 Protection new business received premium (` billion) Annuity new business received premium (` billion) 31.44 10.43 21.37 6.85 10.28 3.11 6.71 2.06 FY2017 FY2018 FY2019 FY2020 FY2017 FY2
Slide 15: Stable persistency
Stable persistency Retail persistency (excluding single premium) 83.1% 83.2% 74.4% 75.1% 68.3% 66.7% 64.3% 64.6% 56.3% 56.0% 13th Month 25th Month 37th Month 49th Month 61st Month 8M FY2020 11M FY2020 Persistency continued to be one of the best in the industry As per IRDAI circular dated January 23,
Slide 16: Productivity improvements
Productivity improvements ` billion FY2019 FY2020 Cost/TWRP1 15.0% 15.9% Cost/TWRP (savings LOB) 11.5% 10.4% Cost ratios improved further; continued to be one of the best in the industry 1. Cost/(Total premium- 90% of single premium) Total may not add up due to rounding off 15
Slide 17: Way forward: Our approach for Q1-FY2021 (1/2)
Way forward: Our approach for Q1-FY2021 (1/2) • Enablers for Q1 • Contactless conversations through video conferencing • Encourage higher levels of digital adoption across channels • Channel strategy • Agency: Traditional and protection • ICICI Bank: Protection sales through app and website Distribu
Slide 18: Way forward: Our approach for Q1-FY2021 (2/2)
Way forward: Our approach for Q1-FY2021 (2/2) • Customer service • Leverage new technologies to improve service offerings • Uniform policy information across all service touch points • Multiple digital avenues for renewal premium payment • Website, Netbanking, UPI, Bharat Bill Payment System, Wallet
Slide 19: Key strategic elements
Key strategic elements Protection Customer Aspiration to centricity Premium double the VNB Growth Persistency continues to be Growth FY2019 VNB in at the core 3 - 4 years Productivity 18
Slide 20: Premium: Product strategy and performance
Premium: Product strategy and performance
Slide 21: Products available across all categories
Products available across all categories Non-linked Savings Linked Participating with Savings with ULIP: Suite of funds ULIP: with capital equity guarantee; for Equity and Debt guarantee Annuity Retail Protection Group Pure term with Critical illness, Pure term, Micro insurance, Credit insurance, ac
Slide 22: Product segments
Product segments APE (` billion) Mix Segments FY2019 FY2020 Growth (%) FY2019 FY2020 Savings 70.77 62.65 (11.5%) 90.7% 84.9% Linked 62.10 47.72 (23.2%) 79.6% 64.7% Non-linked 7.68 12.46 62.2% 9.8% 16.9% Group 0.99 2.47 149.5% 1.3% 3.3% Protection1 7.22 11.16 54.6% 9.3% 15.1% Total APE 77.99 73.81 (5
Slide 23: Premium: Distribution strategy and performance
Premium: Distribution strategy and performance
Slide 24: Diversified distribution
Diversified distribution Strategy: Create depth and add width • > 500 partnerships Strategy: Build profitability Strategy: Digital focused upsell • Protection and non-linked savings: • 15 bank partnerships ~80% in FY2020 campaigns • Protection and Annuity mix • Analytics driven upsell channel increa
Slide 25: Distribution channels
Distribution channels APE (` billion) Mix Growth (%) Channels FY2019 FY2020 FY2019 FY2020 Linked Non-linked Bancassurance 43.53 37.48 55.8% 50.8% (20.0%) 72.5% Agency 16.89 15.62 21.7% 21.2% (38.8%) 87.8% Direct 9.34 9.31 12.0% 12.6% (16.6%) 59.0% Partnership distribution 4.59 5.46 5.9% 7.4% (7.0%)
Slide 26: Protection
Protection
Slide 27: Protection: Increasing share
Protection: Increasing share APE (` billion) FY2019 FY2020 Protection 7.22 11.16 YoY growth 61.9% 54.6% Protection mix 9.3% 15.1% Continued strong growth; mix increased from 9.3% to 15.1% 26
Slide 28: Protection: Components
Protection: Components Protection split based on APE* APE (` billion) (FY2020) 11.16 ` billion 2.35 1.74 Retail protection 7.22 1.13 (15.6%) 0.61 1.57 (5.5%) Group Term 1.28 1.13 (10.1%) 7.68 Credit life – ICICI 7.68 (68.8%) Bank 4.36 Credit life - Other FY2019 FY2020 Retail Protection Group Term Cr
Slide 29: Persistency
Persistency
Slide 30: Persistency
Persistency Retail excluding single premium Retail including single premium Month FY2019 8M-FY2020 11M-FY2020 Month FY2019 8M-FY2020 11M-FY2020 13th month 84.6% 83.1% 83.2% 13th month 86.2% 85.1% 85.3% 25th month 75.6% 74.4% 75.1% 25th month 77.4% 76.4% 77.4% 37th month 69.3% 68.3% 66.7% 37th month
Slide 31: Productivity
Productivity
Slide 32: Productivity: Cost efficiency
Productivity: Cost efficiency FY2019 FY2020 Expense ratio (excl. commission)1 9.3% 10.3% Commission ratio2 5.8% 5.7% Cost/TWRP3 15.0% 15.9% Cost/Average AUM4 2.8% 2.9% Cost/TWRP (Savings LOB) 11.5% 10.4% ` billion 44.71 41.94 Commission 25.90 28.85 Non Commission 16.04 15.86 FY2019 FY2020 • 66% of n
Slide 33: Expenses: improving efficiency on the savings business
Expenses: improving efficiency on the savings business • Improving savings cost ratio • Expense growth in line with APE growth Cost to TWRP Savings FY2020 Savings FY2019 11.5% APE growth (11.5%) FY2020 10.4% Operating expenses growth (10.4%) FY2020 savings business Growth Fixed cost (6.4%) Wage cost
Slide 34: Value of New Business (VNB)
Value of New Business (VNB) ` billion FY2019 FY2020 VNB 13.28 16.05 VNB margin 17.0% 21.7% 4.7% (1.1%) 1.0% 21.7% 0.1% 17.0% FY2019 Business mix Tax rate* Assumption Expense FY2020 changes * Change in effective tax rate 33
Slide 35: Analysis of movement in EV
Analysis of movement in EV ` billion 16.05 0.85 0.42 0.01 0.56 (14.76) 17.25 (2.25) (4.05) 230.30 216.23 EVOP1 = 32.88 ROEV2 = 15.2% ANW ANW ROEV3 = 17.7% 78.43 73.54 VIF VIF 142.69 151.87 EV (Mar 31, Unwind Operating VNB Persistency Mortality and Expense Other Economic Net Capital EV (Mar 31, 2019)
Slide 36: Analysis of movement in EV
Analysis of movement in EV1 ` billion FY2016 FY2017 FY2018 FY2019 FY2020 Opening EV 137.212 139.39 161.84 187.88 216.23 Unwind 12.58 12.21 13.72 15.84 17.25 Value of New Business (VNB) 4.12 6.66 12.86 13.28 16.05 Operating assumption changes 1.042 1.00 7.64 4.20 (2.25)3 Operating variance 4.48 3.08
Slide 37: Sensitivity analysis
Sensitivity analysis Scenario % change in VNB % change in EV FY2019 FY2020 FY2019 FY2020 Increase in 100 bps in the reference rates (4.3) (2.4) (2.0) (2.5) Decrease in 100 bps in the reference rates 4.4 2.2 2.0 2.6 10% increase in the discontinuance rates (8.5) (5.0) (1.3) (1.1) 10% decrease in the
Slide 38: Dividend
Dividend ` billion FY2019 FY2020 Profit after Tax 11.41 10.69 Solvency ratio1 215% 194.1% Dividend declared2 4.52 1.153 1. At March 31 of respective years 2. Excluding DDT 3. Interim dividend declared in October 2019 37
Slide 39: ESG
ESG Environmental Environmental Social Social Governance Governance
Slide 40: Environmental initiatives
Environmental initiatives Preserving ‘Mother Earth’ for future generations Replace Reduce Reuse & Recycle • End to end digital solutions for • 3/5 star rated ACs in all offices • Sewage treatment plant and our business activities • VRF AC systems (20% of usage) wet waste conversion into • 84% shareh
Slide 41: Social initiatives
Social initiatives Building communities and giving back to society Business itself is social in nature: Serving long term financial and protection needs of the society Customer centricity Commitment to employees Community service • Products across life stage needs; • Gender neutrality, equal • 3.9 m
Slide 42: Governance
Governance Transparency in functioning with separation of supervision from execution Awarded for Corporate Governance; scorecard by IFC, BSE limited and IiAS 01 Supervisory structure 02 Compliance, Risk & IA 03 Ethical practices • Diverse Board composition • Quarterly compliance • Framework for mana
Slide 43: Summary
Summary ` billion FY2019 FY2020 YoY growth Value of new business 13.28 16.05 20.9% VNB margin 17.0% 21.7% NA Embedded value 216.23 230.30 6.5% Return on Embedded value 20.2% 15.2% NA AUM1 1,604.10 1,529.68 (4.6%) …through the 4P approach Premium 77.99 73.81 (5.4%) Protection 7.22 11.16 54.6% Persist
Slide 44: Awards and accolades
Awards and accolades Excellence in One of the most Life insurance Ranked amongst Financial Reporting: valuable brands six company of the top 3 companies FY19 annual report times in a row year Indian corporate ‘BrandZ Top 75 Most 4th Annual Insurance ICAI Award India Summit & governance scorecard Val
Slide 45: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 46: Favorable demography
Favorable demography Large and growing population base1 High share of working population1 2019 Population (mn) Population of age 25-59 years (in mn) 1366 1434 727 578 271 329 127 146 211 51 59 China Brazil S Africa Russia USA Japan Indonesia India S Korea 2015 2030 Driving GDP growth 2 Rising afflue
Slide 47: 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% 61% 60% 23.8% ` tn 54% 55% 19.0% 52% 52% 50% 25.1% 18.8% 48% 26.7% 20.3% 50 45% 45% 29.0% 44% 20.5% 37% 38% 40% 16.0% 23.3% 30 36% 18.09 31% 15.59 1
Slide 48: Protection opportunity: Income replacement
Protection opportunity: Income replacement Sum Assured as a % of GDP1,2 Protection gap 3,4 273% 252% 92 251% 56 85 33 73 78 73 56 8.56 142% 6.58 131% 5.30 113% 93% 78% 1.09 0.79 0.77 0.52 0.40 • Sum assured as % of GDP low compared to other countries • Protection gap for India US $ 8.56 trillion 1.
Slide 49: Protection opportunity: Liability cover
Protection opportunity: Liability cover Retail Credit ` billion 22,207 19,085 16,200 13,922 10,606 11,663 9,339 8,976 10,097 7,599 6,454 4,711 5,378 4,409 11,601 7,468 8,601 9,746 4,567 5,386 6,285 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 Home Loans Others • Retail credit has been growing at
Slide 50: Protection opportunity
Protection opportunity Gross direct premium (` billion) FY2009 FY2019 CAGR Health 66.23 454.89 21.3% Motor 138.21 644.55 16.6% - Motor Own Damage (OD) 87.56 264.73 11.7% - Motor Third Party (TP) 50.65 379.82 22.3% • Protection premium ~ ` 200 billion for life insurance industry in FY2020 Source: Gen
Slide 51: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 52: Evolution of life insurance industry in India
Evolution of life insurance industry in India FY2002 FY2010 FY2015 FY2019 New business premium1 (` bn) 116 21.5% 550 -5.8% 408 14.1% 692 Total premium (` bn) 501 3.2% 2,654 4.3% 3,281 11.6% 5,089 Penetration (as a % to GDP) 2.1% 4.1% 2.6% 2.7% Assets under management (` bn) 2,304 24.0% 12,899 12.6%
Slide 53: Channel mix
Channel mix1 Industry Private players 9% 11% 12% 18% 21% 22% 25% 27% 27% 54% 54% 53% 66% 62% 61% 28% 25% 25% FY2018 FY2019 9M-FY2020 FY2018 FY2019 9M-FY2020 Agency Bancassurance Others • Given a well developed banking sector, bancassurance continues to be the largest channel for private players 1. I
Slide 54: Product mix
Product mix1 Industry Private players 17% 27% 26% 51% 44% 54% 83% 73% 74% 49% 56% 46% FY2018 FY2019 9M-FY2020 FY2018 FY2019 9M-FY2020 Non Linked Linked 1. New business weighted premium basis; Source: IRDAI, Life Insurance Council 53
Slide 55: Technology initiatives
Technology initiatives
Slide 56: Objectives
Objectives To be the most admired digitally enabled insurer • Empower customers and distributors with simplified journeys and choice of platforms • Decongest processes by leveraging ecosystems and emerging technologies • Enable servicing anytime, anywhere • Drive adoption through superior experience
Slide 57: Digital evolution path to maturity
Digital evolution path to maturity 2011-2013 2013-2015 2015-2018 2018-2020 1 2 3 4 Build digital foundation Digitize onboarding and service Leverage ecosystem Market leadership Optimize processes Build seamless presentation Collaborate with internal stakeholders IT as an enabler for and systems laye
Slide 58: Pre sales
Pre sales Suitability Lead Management Customer analysis System Profiler Product recommendation Enhanced with voice Know customer better based on customer’s life capability and geo through social platforms stage, goal, risk appetite tagging Nudge Cognitive My Learners Box engines BOTs Coach On-the-go
Slide 59: Onboarding and issuance
Onboarding and issuance Flexible/paperless Instant document PASA on-boarding verification (OCR) Platform agnostic and No medical or income Real time identification paperless journey document requirement and verification of available for all channels for smoother onboarding documents Robotic enabled
Slide 60: Customer servicing and claims (1/2)
Customer servicing and claims (1/2) Anytime.. Premium Intuitive/visual ..Anywhere premium payment IVR 87% transactions self Helps customers avoid 74% renewal premium serviced, omni channel IVR queues. Saves through electronic modes experience 50% navigation time Service bot AI based WhatsApp LiGo Cl
Slide 61: Customer servicing and claims (2/2)
Customer servicing and claims (2/2) Annuity Digilocker Customer service integration app Simplifying journey for View or download policy Customer service native Annuity customers with document from app with in-app digital life verification DigiLocker app nudges/notifications Bot orchestration WhatsAp
Slide 62: Marketing and lead generation
Marketing and lead generation Rank high on Segmented Hyper online searches targeting personalisation Machine learning used to Reaching the customer by Personalized messaging rank us higher when mapping their interests to engage customers customers search and affinities throughout journey Selfie True
Slide 63: Partner integration
Partner integration Process Flexible Web simplification integration portal Superior customer Modular integration as Self service module for experience per the choice of partners Group business Easy Customer UI service Pre-coded pages for Enabling customer quicker integration service on partner porta
Slide 64: Analytics
Analytics Actionable Data Smart insights modelling solutions Accelerate sales, enhance Customer interaction Pre approved life cover; customer experience & based segmentation, provide best offer to personalization propensity, nudges customer Google Big Query, Data lake Hadoop, Python solution Using b
Slide 65: Annexures
Annexures
Slide 66: Average APE by product categories
Average APE by product categories Average retail APE per policy (`) FY2018 FY2019 FY2020 ULIP 180,746 159,329 183,109 Par 62,379 60,308 64,285 Non Par 54,187 76,468 109,410 Protection 9,123 12,048 23,115 Total 90,620 83,309 88,648 65
Slide 67: Policy term and customer age
Policy term and customer age* Average policy term (years) Average customer age (years) 43 43 36 36 36 30 14 12 Savings Protection Savings Protection FY2019 FY2020 FY2019 FY2020 * For FY2020; protection excludes credit life 66
Slide 68: Channel wise product mix
Channel wise product mix1 Channel category Product category FY2018 FY2019 FY2020 ULIP 89.8% 93.4% 86.8% Par 7.3% 2.1% 2.2% Bancassurance Non par 0.1% 0.6% 1.8% Protection 2.7% 3.9% 9.3% Total 100.0% 100.0% 100.0% ULIP 81.8% 75.3% 49.9% Par 13.5% 18.1% 32.5% Agency Non par 0.4% 0.5% 7.3% Protection 4
Slide 69: Product wise channel mix
Product wise channel mix1 Product category Channel category FY2018 FY2019 FY2020 Bancassurance 57.4% 65.5% 68.2% Agency 25.4% 20.5% 16.3% ULIP Direct 14.5% 12.0% 13.0% Partnership distribution 2.7% 2.1% 2.5% Total 100.0% 100.0% 100.0% Bancassurance 35.4% 13.8% 9.0% Agency 31.5% 45.4% 56.0% Par Direc
Slide 70: Retail persistency excluding single premium
Retail persistency excluding single premium1 Persistency across product categories 82.6% 88.3% 82.6% 64.7% 65.8% 51.7% Linked Non linked Protection 13th month 49th month Persistency across channel categories 81.7% 86.4% 82.2% 86.9% 74.2% 62.7% 65.5% 66.2% Bancassurance Agency Direct Partnership dist
Slide 71: Embedded value
Embedded value
Slide 72: Embedded value
Embedded value ` billion FY2018 FY2019 FY2020 Value of In force (VIF) 117.64 142.69 151.87 Adjusted Net worth 70.24 73.54 78.43 Embedded value1 187.88 216.23 230.30 Return on Embedded Value (ROEV) 22.7% 20.2% 15.2% EV growth-pre dividend 23.4% 19.6% 8.4% EV growth-post dividend 16.1% 15.1% 6.5% VNB
Slide 73: 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 74: 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 75: 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 76: 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 77: 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 78: 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 79: 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 80: 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 81: Economic assumptions underlying VNB and EV
Economic assumptions underlying VNB and EV Tenor (years) References Rates March 31, 2019 March 31, 2020 1 6.66% 4.83% 5 7.83% 7.43% 10 8.35% 7.32% 15 8.35% 7.17% 20 8.22% 7.14% 25 8.11% 7.14% 30 8.05% 7.14% 80
Slide 82: 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 83: 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 84: Thank You
Thank You
ICICI Prudential Life Insurance Company — Investor Presentation (May 2020) on 6ix