Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — Q1 FY22 Earnings Presentation
61 slides from Hdfc Life Insurance's earnings presentation, 2021
Slide 1: Investor Presentation – Q1 FY22
Investor Presentation – Q1 FY22
Slide 2: Executive summary: Q1 FY22
Executive summary: Q1 FY22 Revenue trends Profitability Claims HDFC Q1 FY22 26.2% Settled over 70,000 claims in Q1. Gross Individual 22% Life New WRP growth% Business Q1 FY21 24.3% and net claims provided for amounted to Industry 16% Margin (%) Rs 16 bn and Rs 10 bn respectively FY21 26.1% Rank 2
Slide 3: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Managing Covid-19 4 Customer Centricity 5 Annexures 6 India Life Insurance Page 3
Slide 4: Performance Snapshot
Performance Snapshot Our Strategy Managing Covid-19 Customer Centricity Annexures India Life Insurance 1 Performance Snapshot Page 4
Slide 5: Demonstrating resilience in the current environment (1/2)
Demonstrating resilience in the current environment (1/2) Rs bn Steady Individual WRP trends Strong, sustainable growth1 Mkt share 17.5% 18.5% 17.8% Growth HDFC Life Pvt sector Industry Growth 63% -19% 22% Q1 FY22 22% 26% 16% 2 yr CAGR -1% -1% -2% 13.2 13.1 10.7 3 yr CAGR 17% 6% 3% Q1 FY20 Q1 FY21 Q
Slide 6: Demonstrating resilience in the current environment (2/2)
Demonstrating resilience in the current environment (2/2) Rs bn Focus on diversified channel mix1 Profitable growth New business margin 40% 4% 9% 7% 6% 13% 14% 13% 15% VNB growth of 19% 19% 40% on the back 22% 23% of higher volumes and _ 26.1% 26.2% 64% 55% 61% 56% balanced product 24.3% mix FY19
Slide 7: Our Strategy
Performance Snapshot Our Strategy Managing Covid-19 Customer Centricity Annexures India Life Insurance 2 Our Strategy Page 7
Slide 8: Key elements of our strategy
Key elements of our strategy 1 2 3 4 5 Focus on profitable Diversified Market-leading Reimagining Quality of Board growth distribution mix innovation insurance and management Ensuring Developing multiple Creating new Market-leading Seasoned sustainable and channels of growth product digital capabili
Slide 9: Focus on profitable growth
Focus on profitable growth Q1 Q1 Rs bn FY19 FY20 FY21 Profitable FY21 FY22 growth New business Margin 24.6% 25.9% 26.1% 24.3% 26.2% Economic Profit Value of new business 15.4 19.2 21.9 2.9 4.1 distribution mix Diversified Profit after tax (PAT) 12.8 13.0 13.6 4.5 3.0 Accounting Underwriting profits
Slide 10: Analysis of change in IEV
Analysis of change in IEV1 Pre-EMR1 Rs bn EVOP: 10.3 Profitable EVOP2%: 16.5% growth 5.5 0.7 1.8 273.3 266.2 4.1 - 5.5 0.5 Economic ESOP Unwind VNB Operating Excess mortality variances exercises distribution mix variances3 reserve Diversified Post-EMR 176.3 EVOP1%: 14.4% 183.4 innovation Market- lea
Slide 11: Diversified distribution mix enabled by multiple levers
Diversified distribution mix enabled by multiple levers Enhancing and expanding proprietary1 channels Strong partnerships share increased from 32% in FY21 to 38% in Q1 FY22 Profitable growth Tapping new generation of customers Expanding geographical reach distribution Diversified through Online chan
Slide 12: Bancassurance powered by technology, partner engagement and people
Bancassurance powered by technology, partner engagement and people Tech enablement Partner engagement Upskilling workforce Profitable growth Insta mobility enabling Learning on the go: mobile Platform to engage across front-line to generate leads nuggets for skill bank’s hierarchy and close sa
Slide 13: Expanding market through consistent product innovation
Expanding market through consistent product innovation Click2Protect Life Group Flexibility to auto balance Profitable Poorna growth Retirement death and critical illness & pension Woman Suraksha cover or receive income payouts from age 60 FY15 FY17 FY18 FY19 FY20 FY21 FY22 distribution Diversified
Slide 14: Addressing customer needs at every stage of life
Addressing customer needs at every stage of life <25 years 25-35 years 36 – 50 years 50+ years Risks Addressed Profitable Objective Simple Savings Borrowing Investments Asset Drawdown growth Pay off mortgage Mortality distribution Diversified Medical care mix Morbidity First Job Medical care Net Wor
Slide 15: Our approach to retiral solutions
Our approach to retiral solutions Opportunity to grow the retiral corpus1 by 3x between FY21-25 Retiral corpus as a % of total AUM2 has increased from 19% in FY17 to 30% in Q1 FY22 Profitable growth 1. NPS 2. Individual income plans 3 ▪ Ranked #1 in Retail and Corporate NPS segment, with AUM of Rs 1
Slide 16: Our protection philosophy
Our protection philosophy Protection is a multi-decade opportunity that we plan to address prudently with continued innovation Profitable growth Our Focus Areas Supply side considerations distribution Diversified Strengthening underwriting practices mix Demand side and use of deep learning underwrit
Slide 17: Multi-pronged risk management approach for protection
Multi-pronged risk management approach for protection 1 2 3 4 Profitable growth Reducing incidence of Limiting impact on Balancing pricing & Strong governance & fraud & early claims profitability & solvency underwriting audits @Partners distribution Diversified Analytics and Data Enrichment Reinsura
Slide 18: Product mix across key channels
Product mix across key channels1 Segment FY19 FY20 FY21 Q1 FY22 Segment FY19 FY20 FY21 Q1 FY22 UL 26% 12% 10% 13% Profitable UL 64% 32% 27% 30% growth Par 40% 34% 37% 29% Agency Par 13% 18% 37% 34% Banca 2 Non par savings 17% 44% 30% 29% Non par savings 17% 40% 39% 41% Term 4% 4% 4% 5% Term 12% 12%
Slide 19: Aligned to make life simpler for the customers
Aligned to make life simpler for the customers in a turbulent environment Profitable growth 1 3 5 distribution Diversified mix Give me a Accelerate SERVICE Give me PLATFORMS simple journey JOURNEY SIMPLIFICATION frictionless Nudge me in my independent from purchase SIMPLIFICATION for connect and wor
Slide 20: Journey Simplification – Enabling pre and post sales efficiency
Journey Simplification – Enabling pre and post sales efficiency Profitable growth distribution Diversified mix innovation Market- leading Reimagining insurance management Board and Quality of InstaMix InstaQuote InstaPlan Integrated seamless journey Offline quote calculator for sales Digital tool fo
Slide 21: Creating a scalable and efficient digital architecture
Creating a scalable and efficient digital architecture Profitable growth distribution Diversified mix innovation Market- leading InteGreat Payment Middleware CloudLife Reimagining insurance Publish and test APIs for partner Unified API middleware for payment Flexible & agile infrastructure integrati
Slide 22: Governance framework
Governance framework Board of Directors Profitable growth Independent and experienced Board Committees Corporate Risk Policyholder Nomination & Stakeholders’ Board Audit Investment Social With Profits Capital Raising Management Protection Remuneration Relationship Committee Committee Responsibility
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 ▪ Defe
Slide 24: Managing Covid
Performance Snapshot Our Strategy Managing Covid-19 Customer Centricity Annexures India Life Insurance 3 Managing Covid Page 24
Slide 25: Dynamic approach to manage impact of the COVID-19 outbreak
Dynamic approach to manage impact of the COVID-19 outbreak Employee Engagement/ Facilitation Accelerated digital Digital Servicing selling • Communication to customers • Focus on selling products about digital touch-points for with end to end digital claims, renewal collection customer journeys Vacc
Slide 26: Emphasis on digital across customer touch-points
Emphasis on digital across customer touch-points New business / Customer Employee / Partner Policy servicing purchase interactions engagement ▪ Digital sales journey - End-to-end ▪ Digital Renewal collections - 87% based on renewal premiums ▪ Seamless support experience - ▪ e-learning platform – 7,0
Slide 27: Customer Centricity
Performance Snapshot Our Strategy Managing Covid-19 Customer Centricity Annexures India Life Insurance 4 Customer Centricity Page 27
Slide 28: Delivering significant customer benefits at scale
Delivering significant customer benefits at scale Rs bn Death claims payout Par bonus Key metrics 176 278 291 1,469 1,445 1,549 22 Covering ~75 mn lives and managing ~5 mn 31 inforce policies as on March 31, 2021 23 15 15 15 Settled death claims amounting to ~ Rs 69 bn over last 3 years FY19 FY20 FY
Slide 29: Annexures
Performance Snapshot Our Strategy Managing Covid-19 Customer Centricity Annexures India Life Insurance 5 Annexures Page 29
Slide 30: Individual persistency for key channels and segments
Individual persistency for key channels and segments1 Across key channels (%) CY (Q1 FY22) 92 95 90 90 85 86 81 82 82 75 77 76 73 70 67 64 65 66 Actuarial 50 53 Agency Banca Direct Company Financial 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (Q1 FY21) 93 92 88
Slide 31: Improving VNB trajectory
Improving VNB trajectory Rs bn 40% 0.31 0.10 4.08 Actuarial 0.11 0.88 2.91 Financial Q1 FY21 Impact of higher Change in New Business Profile1 Fixed cost Q1 FY22 APE assumptions absorption VNB Growth ESG NBM% 24.3% 0.0% -0.7% 2.0% 0.6% 26.2% 1. Reflects the impact of difference in mix of segment/dist
Slide 32: Sensitivity analysis – FY21
Sensitivity analysis – FY21 Change in VNB Analysis based on key metrics Scenario % Change in EV Margin 1 Change in Increase by 1% -1.5% -2.2% Actuarial Reference rate Decrease by 1% 0.9% 1.6% Equity Market Decrease by 10% -0.1% -1.5% movement Increase by 10% -0.3% -0.6% Persistency (Lapse rates) Dec
Slide 33: Assets under management
Assets under management Assets Under Management Change in AUM 1 Rs bn Debt: Equity 62:38 71:29 64:36 63:37 127 74 UL:Traditional 50:50 43:57 43:57 43.57 Actuarial 1,950 37% 30% 77 1,750 1,550 18% 1% 1,350 36 1,150 Financial 20 950 1,738 1,813 39 1,256 1,272 30 750 550 350 -1 30th June 2020 30th June
Slide 34: Stable capital position
Stable capital position Rs bn NB premium growth 32% 15% 17% 44% 201% 203% 210% 120.0 188% 184% 190% Actuarial 98.6 94.3 100.0 170% 25.9 24.0 150% 80.0 70.8 62.7 13.1 130% Financial 60.0 23.4 24.2 12.7 19.2 110% 40.0 16.7 90% 46.9 48.5 20.0 38.5 33.3 70% ESG - 50% Mar 31, 2019 Mar 31, 2020 Mar 31, 20
Slide 35: Focus on sustainability
Focus on sustainability Our ESG strategy focusses on five pillars, each of which aims to address ESG related risks and create long term value for all stakeholders • Active engagement with external agencies including MSCI, S&P Global (DJSI) Actuarial • MSCI rating improved from ‘BB’ in October 20
Slide 36: Environment Social Governance
Environment Social Governance Governance structure Risk management and BCM 5 pillars of ESG Corporate governance Risk management policy policy Board evaluation & o Enterprise risk management o Risk oversight by Board Ethical o Commitment to ethical independence (ERM) framework of Directors Conduct B
Slide 37: Environment Social Governance
Environment Social Governance Attracting talent Employee engagement Talent management/retention 5 pillars of ESG Ethical o Online yoga, meditation sessions, fitness Conduct challenges (Walkathon, Fit by Bit), o Virtual hiring and on-boarding process o Fast track growth path for special categories of
Slide 38: Environment Social Governance
Environment Social Governance 5 pillars Inclusive growth Customer centricity of ESG Financial Inclusion Ethical Conduct o In line with the Government’s social Leveraging technology scheme ‘Pradhan Mantri Jeevan Jyoti Bima Yojana’, HDFC Life offers HDFC Life o To simplify life insurance for customers
Slide 39: Environment Social Governance
Environment Social Governance 5 pillars Energy and water Digitization Waste management of ESG Ethical o 310 Kgs of e-waste was recycled/ refurbished/disposed Conduct Energy efficiency and water conservation in an environmentally controlled manner, conforming initiatives to the guidelines of E-Waste
Slide 40: India Life Insurance
Performance Snapshot Our Strategy Managing Covid-19 Customer Centricity Annexures India Life Insurance 6 India Life Insurance Page 40
Slide 41: Growth opportunity: Under-penetration and favorable demographics
Growth opportunity: Under-penetration and favorable demographics Life Insurance penetration 1 Life Insurance density US$ 2 (2019) (2019) 18.3% India remains vastly under-insured, both in 16.5% 8,979 terms of penetration and density Huge opportunity to penetrate the underserviced segments, with e
Slide 42: Low levels of penetration – Life protection
Low levels of penetration – Life protection 172 mn 68 mn 1.7 mn Protection gap 2 (2019) 83.0% 76.0% 74.0% 71.0% 70.0% India has the highest protection gap in 61.0% the region, as growth in savings and life 55.0% 55.0% 54.0% insurance coverage has lagged behind 41.0% economic and wage growth Prot
Slide 43: Macro opportunity – Retiral solutions
Macro opportunity – Retiral solutions India’s pension market is under-penetrated at Improvements in life expectancy will lead to an average post 4.8% of GDP retirement period of 20 years Pension Assets / GDP Ratio Life expectancy at age 60 130.7 22 22 120.5 20 19 18 18 17 16 56.4 60.8 43.2 4.8 India
Slide 44: Government bond auctions
Government bond auctions Government Bonds – Tenorwise Issuance Rs cr 27% 21% 29% 28% 35% 35% 73% 79% 71% 72% 65% 65% FY17 FY18 FY19 FY20 FY21 Q1FY22 >15yrs 1,54,520 1,80,529 2,04,000 2,38,000 2,65,575 96,000 <=15yrs 3,73,525 4,97,579 3,82,941 4,44,000 10,01,835 2,52,000 Total 5,28,045 6,78,109 5,86,
Slide 45: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 25% 22% 18% 19% 3% 8% 11% 15% 12% 13% 19% 18% 20% 26% 17% 52% 60% 14% 68% 65% 67% 50% 56% 51% 48% 40% 32% 35% FY10 FY13 FY16 FY20 FY10 FY13 FY16 FY20 Financial savings Physical savings Currency & depos
Slide 46: Industry new business trends
Industry new business1 trends Individual WRP in Rs bn Sensex Private players 57% 52% 46% 37% 38% 38% 49% 52% 54% 56% 58% 57% 60% 59% Market share Growth % Private 1% 7% -20% -24% 2% -3% 16% 14% 26% 24% 12% 5% 8% 26% LIC -22% 29% 4% 11% -4% -2% -27% 3% 15% 13% 5% 8% -3% 4% Overall -10% 17% -9% -5% -2
Slide 47: Private industry: Product and distribution mix
Private industry: Product and distribution mix Product mix 1 Distribution mix 2 Individual Agents Corporate Agents - Banks Corporate Agents - Others Brokers Direct Business Unit Linked Conventional 63% 57% 9% 10% 10% 12% 14% 56% 3% 16% 17% 54% 5% 4% 52% 51% 51% 3% 3% 3% 3% 48% 49% 49% 3% 3% 3% 3% 46
Slide 48: Appendix
Appendix
Slide 49: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) Q1 FY22 Q1 FY21 Growth FY21 FY20 FY19 CAGR Rs bn. New Business Premium (Indl. + Group) 37.7 26.2 44% 201.1 172.4 149.7 16% Renewal Premium (Indl. +Group) 38.9 32.4 20% 184.8 154.7 142.1 14% Total Premium 76.6 58.6 31% 385.8 327.1 291.9 15% Individual APE 13.1
Slide 50: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) Q1 FY22 Q1 FY21 FY21 FY20 FY19 Overall New Business Margins (post overrun) 26.2% 24.3% 26.1% 25.9% 24.6% (1) Operating Return on EV 16.5% 15.8% 18.5% 18.1% 20.1% Operating Expenses / Total Premium 12.5% 11.5% 12.0% 13.1% 13.1% Total Expenses (OpEx + Commissio
Slide 51: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Rs bn Revenue A/c1 Profit and Loss A/c1 Q1 FY22 Q1 FY21 Q1 FY22 Q1 FY21 Premium earned 76.6 58.6 Income Reinsurance ceded (1.2) (1.4) Interest and dividend income 1.2 0.9 Income from Investments 69.6 87.5 Net profit/(loss) on sale 1.3 0.0 Other Income 0.2 0.3 Transfer f
Slide 52: Balance sheet
Balance sheet Jun 30, 20211 Jun 30, 2020 Mar 31, 2021 Rs bn Shareholders’ funds Share capital (including Share premium) 25.4 24.3 25.0 Accumulated profits 62.3 50.2 59.3 Fair value change 1.8 (0.6) 2.1 Sub total 89.7 73.9 86.4 Borrowings 6.0 - 6.0 Policyholders’ funds Fair value change 23.4 8.1 25.6
Slide 53: 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 FY22: 24.0 (Q1 FY21: 25.7) Q1 FY22: 36.0 (Q1 FY21: 34.2) UL 13 36 14 UL 33 Par 41 33 39 Par 33 26 Non-par Health 33 Non-par Health 32 24 12 Non-par Savings 37 Non-par Saving
Slide 54: Summary of Milliman report on our ALM approach – FY20
Summary of Milliman report on our ALM approach – FY20 Scope of review Portfolios reviewed • Assess appropriateness of ALM strategy to manage Portfolio 1: Savings and Protection – All non-single premium interest rate risk in non-par savings business non-par savings contracts and group protection pr
Slide 55: 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 56: 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 57: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Jun 30, 2020 As at Jun 30, 2021 As at Jun 30, 2020 As at Jun 30, 2021 1 3.57 3.87 3.51 3.80 2 4.74 5.40 4.07 4.53 3 5.78 6.39 4.59 5.08 4 6.50 7.01 5.01 5.51 5 6.98 7.43 5.36 5.84 10 7.60 7.99 6.30 6.72 15 7.33 7.72 6.59
Slide 58: 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 59: 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 60: 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 (“HDFC Life” or the “Company”) in India, the United Stat
Slide 61: Thank you
Thank you atats iitc
HDFC Life Insurance Company — Q1 FY22 Earnings Presentation on 6ix