Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — 9M FY20 Earnings Presentation
54 slides from Hdfc Life Insurance's earnings presentation, 2020
Slide 1: HDFC Life Insurance Investor Presentation – 9M FY20
HDFC Life Insurance Investor Presentation – 9M FY20
Slide 2: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Annexures 4 India Life Insurance Page 2
Slide 3: Performance Snapshot
Performance Snapshot Our Strategy Annexures India Life Insurance 1 Performance Snapshot
Slide 4: Executive summary: 9M FY20
Executive summary: 9M FY20 Scale Profitability Customer centricity Rs (Bn.) 53.0 New CY 26.6% CY 90%/87% Company 13th month Business APE Growth 31% PY 24.0% persistency1 PY 86%/82% Margin CY (%) 21.4 Rs (Bn.) 34.1 Overall NBP PY (%) 21.0 IEV Rs (Bn.) 208.4 Growth 22% CY (%) 14.3 EVOP Growth 19.0% Rs
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% 21.0% 21.4% 29% 22% 149.7 121.5 51.4 113.5 44.8 99.4 86.2 33.2 34.8 20.9 FY17 FY18 FY19 9M FY19 9M FY20 FY17 FY18 FY19 9M FY19 9M FY20 Private Market
Slide 6: Consistent performance across key metrics (2/2)
Consistent performance across key metrics (2/2) Strong growth in VNB, steady expansion in VNB margins (Rs Bn.) Healthy growth in Embedded Value (Rs Bn.) 22.0% 23.2% 24.6% 24.0% 26.6% 21.7% 21.5% 20.1% 19.7% 19.0% 45% 208.4 183.0 174.0 152.2 124.7 67% 68% 66% 15.4 14.1 68% 12.8 67% 9.2 9.7 32% 34% 33
Slide 7: Our Strategy
Performance Snapshot Our Strategy 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 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 9M 9M FY17 FY18 FY19 Rs Bn. Profitable FY19 FY20 growth New business Margin 22.0% 23.2% 24.6% 24.0% 26.6% Economic Profit Value of new business 9.2 12.8 15.4 9.7 14.1 distribution mix Profit after tax (PAT) Balanced 8.9 11.1 12.8 9.1 9.8 Accounting Profit Underwriting prof
Slide 10: Analysis of change in IEV
Analysis of change in IEV Rs Bn. EVOP – 25.5 Profitable EVOP1% - 19.0% growth 0.7 208.4 14.1 -0.3 0.3 distribution mix 183.0 10.7 Balanced Operating Economic ESOP Unwind Post over- variances variances exercises run VNB 140.1 124.3 innovation leading Market 2 Adjusted Net worth (ANW) Value of in-forc
Slide 11: Balanced distribution mix
Balanced distribution mix Increasing share of proprietary channels 1 Strong and diversified network of 230+ traditional partners Banks NBFCs and MFIs SFBs Profitable growth 11% 14% 19% 21% 12% 11% 5% 5% 13% 14% 4% 9% distribution Balanced 72% 71% mix 64% 55% FY17 FY18 FY19 9M FY20 Bancassurance Brok
Slide 12: Progress by proprietary channels
Progress by proprietary channels Agency Direct Online Profitable growth 57% - Increase in FC (Financial 31- Average age of customers; Consultant) productivity due to 77% - Adoption of i-earn, a hyper significantly younger compared to greater engagement and ease of personalization app distribution ot
Slide 13: Operating model moved from product centric to customer centric
Operating model moved from product centric to being customer centric Profitable From the Traditional Insurer... ... to the Insurer of the Future growth Traditional Channels (Top Line Marketing / Product Driven) Agency Banca Group distribution Balanced mix Customer (Segmented Marketing / Customer Dri
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 Risks mortgage Addressed distribution Balanced Medical care Mortality mix First Job Medical care Net Worth Need
Slide 15: Expanding market through consistent product innovation
Expanding market through consistent product innovation Profitable Guaranteed returns, with growth Retirement Woman option for life long income & pension FY15 FY17 FY18 FY19 FY20 distribution Balanced mix Lifelong regular income with payout flexibility and Youngstar innovation whole life cover leadin
Slide 16: Product mix across key channels
Product mix across key channels1 Segment FY17 FY18 FY19 9M FY20 Segment FY17 FY18 FY19 9M FY20 UL 26% 33% 26% 12% Profitable UL 61% 64% 67% 36% growth Agency Par 30% 26% 14% 11% Par 57% 48% 40% 26% Banca 2 Non par savings 8% 8% 15% 50% Non par savings 6% 5% 17% 50% Term 1% 1% 2% 2% Term 11% 11% 12%
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 mix 4 Agile / AI / ML Journey Data Sprints innovation Simplification Enrichment & l
Slide 18: 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 distribution Balanced mix Insurance beyond digital: Products and services built on Customer sales journe
Slide 19: Partner Integration: InstaInsure
Partner Integration: InstaInsure Intuitive user interface Relevant questions integrated in web and Quick customer journey Faster policy issuance asked Profitable mobile growth distribution Balanced mix innovation leading Market Reimagining insurance management Board and Quality of 19
Slide 20: Journey Simplification: Hello Selfie
Balanced Market Quality of Profitable Reimagining distribution leading Board and growth mix innovation insurance management Journey Simplification: Hello Selfie, Buy Insurance with a Selfie 20
Slide 21: Journey Simplification: Mobility Application Suite
Journey Simplification: Mobility Application Suite Profitable growth Upload doc | FR (Further Support Prospecting Lead Creation | Lead Fulfilment Form Filling | Online Payment E-Signature Verification Requirement) Fulfilment distribution Balanced mix innovation leading Market Reimagining insurance m
Slide 22: 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 23: 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 24: Risk Management for Non Par products
Risk Management for Non Par products Key risks Quantum of risk Mitigation Interest rate ROPP1: Low Duration 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 ROPP: Low Coupons used to meet annuity p
Slide 25: Performance of wholly-owned subsidiary companies
Performance of wholly-owned subsidiary 1 companies HDFC Pension AUM, Rs Bn. HDFC International Life and Re 76.8 51.7 11.6 0.5 Mar'15 Mar'17 Mar'19 Dec'19 Fastest growing PFM (Pension Fund Manager) under the Registered growth of 79% in revenue to USD 3.9 Mn in 9M NPS architecture (YoY growth of 9
Slide 26: Annexures
Performance Snapshot Our Strategy Annexures India Life Insurance 3 Annexures
Slide 27: Individual persistency for key channels and segments
Individual persistency for key channels and segments1 Across key channels (%) CY (9M FY20) 91 92 85 87 83 81 80 76 74 77 75 73 69 72 71 64 66 61 50 53 Agency Banca Direct Company 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (9M FY19) 91 88 84 82 76 76 79 76 76 77
Slide 28: VNB and NBM walkthrough
VNB and NBM walkthrough Rs Bn. 14.07 1.03 0.21 0.14 Growth of 45% 2.99 vs. 9M FY19 9.71 VNB 9M FY19 Impact of higher Change in New Business Expense impact 9M FY20 1 APE assumptions Profile NBM% 24.0% - 0.4% 0.3% 1.9% 26.6% 1. Reflects the impact of difference in mix of segment/distribution channel/t
Slide 29: Sensitivity analysis: H1 FY20
Sensitivity analysis: H1 FY20 % Change in Change in VNB % Change in Analysis based on key metrics Scenario VNB 1 Margin 1 EV Change in Increase by 1% -0.3% -0.1% -1.4% Reference rate Decrease by 1% 0.3% 0.1% 1.2% Equity Market Decrease by 10% -0.9% -0.3% -1.3% movement Increase by 10% -0.8% -0.3% -1
Slide 30: Stable capital position
Stable capital position Rs Bn. Dividend paid 2.6 3.3 4.0 New business premium growth 120.0 33% 32% 32% 22% 230% 210% 195% 100.0 192% 192% 188% 190% 73.6 80.0 170% 62.7 150% 52.1 16.9 60.0 12.7 42.1 130% 11.3 18.9 40.0 16.7 110% 9.1 13.6 11.0 90% 20.0 37.8 33.3 27.2 70% 22.0 - 50% 31st Mar 2017 31st
Slide 31: Assets under management
Assets under management Assets Under Management Change in AUM 1 Rs Bn. Debt 59% 61% 62% 63% Equity 41% 39% 38% 37% 111 109 24% 16% 18% 16% 62 1,550 30% 79 1,350 -20% 1,150 56 -70% 950 41 750 1,365 -120% 1,256 550 917 1,066 (7) (11) -170% 31st Dec 2018 31st Dec 2019 350 150 -220% Net Fund inflow Net
Slide 32: Environmental, Social, Governance (ESG): Committed to Sustainability
Environmental, Social, Governance (ESG): Committed to Sustainability Focus on building a sustainable business with a culture that fosters inclusive growth for all stakeholders, today and tomorrow Environmental Adoption of Initiatives across water conservation and energy efficiency Waste manageme
Slide 33: India Life Insurance
Performance Snapshot Our Strategy Annexures India Life Insurance 4 India Life Insurance
Slide 34: 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 35: 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 36: 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 37: Government Bond Auctions
Government Bond Auctions Government Bonds – Tenorwise Issuance Rs Bn. >15 yrs <=15 yrs 100% 6,300 6,200 34% 34% 29% 27% 34% 80% 38% 36% 6,100 6,000 5,900 60% 5,800 5,700 40% 66% 66% 71% 73% 66% 5,600 62% 64% 5,500 20% 5,400 5,300 0% 5,200 2019-20 (9M 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 F
Slide 38: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 23% 25% 22% 17% 3% 11% 11% 10% 12% 9% 13% 20% 18% 15% 51% 52% 26% 17% 67% 60% 65% 67% 50% 54% 49% 48% 33% 40% FY07 FY10 FY13 FY18 FY07 FY10 FY13 FY18 Financial savings Physical savings Currency & depos
Slide 39: 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% 57% Market share Growth % Private 86% 1% 7% -20% -24% 2% -3% 16% 14% 26% 24% 12% 16% 0% -22% 29% 4% 11% -4% -2% -27% 3% 15% 13% 5% 17% LIC 31% -10% 17% -9% -5% -2% -3% -11% 8%
Slide 40: 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 41: 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% 58% 7% 9% 10% 10% 12% 57% 14% 16% 54% 5% 4% 3% 52% 51% 51% 49% 5% 3% 3% 3% 3% 49% 4% 3% 3% 3% 4% 4
Slide 42: Appendix
Appendix
Slide 43: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) 9M FY20 9M FY19 Growth FY19 FY18 FY17 CAGR New Business Premium (Indl. + Group) 121.5 99.4 22% 149.7 113.5 86.2 32% Renewal Premium (Indl. +Group) 99.4 89.2 11% 142.1 122.1 108.2 15% Total Premium 220.9 188.6 17% 291.9 235.6 194.5 23% Individual APE 43.9 33.6
Slide 44: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) 9M FY20 9M FY19 FY19 FY18 FY17 Overall New Business Margins (post overrun) 26.6% 24.0% 24.6% 23.2% 22.0% (1) Operating Return on EV 19.0% 19.7% 20.1% 21.5% 21.7% Operating Expenses / Total Premium 13.8% 13.8% 13.2% 13.5% 12.6% Total Expenses (OpEx + Commissio
Slide 45: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Revenue A/c Profit and Loss A/c Rs Bn. 9M FY20 9M FY19 9M FY20 9M FY19 Premium earned 220.9 188.6 Income Reinsurance ceded (3.3) (1.8) - Interest and dividend income 2.7 2.1 Income from Investments 69.2 52.7 - Net profit/(loss) on sale 0.9 0.2 Other Income 1.1 0.6 Trans
Slide 46: Balance Sheet
Balance Sheet Dec 31, 2019 Dec 31, 2018 Mar 31, 2019 Rs Bn. Shareholders’ funds Share capital (including Share premium) 24.1 23.8 23.8 Accumulated profits 42.6 33.1 32.7 Fair value change (0.1) 0.0 (0.0) Sub total 66.6 56.9 56.6 Policyholders’ funds Fair value change 9.7 8.4 11.1 Policy Liabilities
Slide 47: Segment wise average term and age
Segment wise average term and age1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) 9M FY20: 17.0 (9M FY19 : 15.0) 9M FY20: 37.5 (9M FY19: 36.7) UL 37 UL 12 39 11 Par 36 18 37 Par 15 33 Non-par Health 35 Non-par Health 17 10 Non-par Savings 39 33 Non-par Savin
Slide 48: 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 49: 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 50: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Dec 31, 2019 As at Dec 31, 2018 As at Dec 31, 2019 As at Dec 31, 2018 1 5.55 7.00 5.40 6.77 2 6.30 7.39 5.75 6.95 3 6.87 7.65 6.05 7.09 4 7.23 7.82 6.28 7.20 5 7.43 7.93 6.46 7.28 10 7.52 8.02 6.86 7.50 15 7.47 7.95 6.98
Slide 51: 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 52: 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 53: 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 54: Thank you
Thank you
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