Icici Prudential Life Insurance Co. Ltd. · NSE:ICICIPRULI
Icici Prudential Life Insurance — FY2018 Earnings Presentation
72 slides from Icici Prudential Life Insurance's earnings presentation, Apr 24, 2018
Slide 1: Performance update FY2018
Performance update FY2018 April 24, 2018
Slide 2: Agenda
Agenda Indian life insurance Company strategy and performance Opportunity Industry overview 2
Slide 3: Agenda
Agenda Indian life insurance Company strategy and performance Opportunity Industry overview 3
Slide 4: Categories of products
Categories of products Savings Transparent Linked Choice of asset class Low charges and minimal lapse risk for customers Return upside through segment surplus1 i.e. income net Par expense/reserve High lapse risk for customers Guaranteed returns Non-Par savings High lapse risk for custo
Slide 5: Saving products: persistency impact
Saving products: persistency impact Significant loss for traditional saving product (Par and Non par) customers in case of discontinuance before the maturity date Year of Total Premiums Maximum surrender penalty surrender paid Unit Linked Traditional Year 1 100,000 14,000 100,000 Year 2 200,000 20
Slide 6: Agenda
Agenda Indian life insurance Company strategy and performance Opportunity Industry overview 6
Slide 7: Strategy: Market share + profitable growth
Strategy: Market share + profitable growth Objective Grow Value of New Business (VNB) Focus on retail through multi-channel distribution Customer centric products Saving opportunity Protection opportunity Superior business quality to deliver enhanced customer and shareholder value Technology as busi
Slide 8: FY2018: Key highlights
FY2018: Key highlights YOY 3 year ` bn FY2015 FY2016 FY2017 FY2018 growth CAGR Value of New Business 2.70 4.12 6.66 12.86 93.1% 68.3% (VNB)1 VNB Margin1 5.7% 8.0% 10.1% 16.5% - - APE2 47.44 51.70 66.25 77.92 17.6% 18.0% Savings APE 46.68 50.31 63.64 73.45 15.4% 16.3% Protection APE 0.76 1.39 2.60 4.
Slide 9: Analysis of movement in IEV (FY2018)
Analysis of movement in IEV (FY2018) ` bn 12.86 1.53 0.78 0.27 0.00 1.13 -11.88 187.88 13.72 7.64 161.84 EVOP1 = 36.80 ROEV2 = 22.7% VIF VIF 117.64 94.28 ANW ANW 67.56 70.24 IEV (Mar 31, Unwind Operating VNB Persistency Mortality Expense Other Economic Net Capital IEV (Mar 31, 2017) Assumption varia
Slide 10: Embedded Value growth
Embedded Value growth ` bn FY2015 FY2016 FY2017 FY2018 Value of In force (VIF) 82.88 84.25 94.28 117.64 Adjusted Net worth 54.33 55.14 67.56 70.24 Embedded Value1 137.21 139.39 161.84 187.88 Return on Embedded Value 15.4% 16.2% 16.5% 22.7% (ROEV)2 EV growth-pre dividend 24.8% 12.1% 20.6% 23.4% EV gr
Slide 11: Focus on Retail
11 Focus on Retail @ICICI PRUDENTIAL? pLiFe tNS UR AN CR
Slide 12: Focus on Retail
Focus on Retail CAGR ` bn FY2017 FY2018 1 year 3 year 5 year Retail APE 65.18 75.78 16.3% 17.5% 17.4% Group APE1 1.07 2.13 99.1% 47.8% 10.9% Total APE 66.25 77.92 17.6% 18.0% 17.1% Retail as % Total APE 98.4% 97.3% - - - Retail AUM 1,083.15 1,235.21 14.0% 12.9% 15.1% % Total AUM 88.1% 88.5% - - -
Slide 13: Retail market share
Retail market share1 23.0% 21.9% 22.3% 20.9% 18.9% 11.3% 11.3% 12.0% 11.8% 7.2% FY2014 FY2015 FY2016 FY2017 FY2018 Within total industry Within private sector CAGR RWRP (` bn) FY2017 FY2018 1 year 3 year 5 year ICICI Pru 64.08 74.61 16.4% 17.5% 17.6% Private Sector 287.00 356.68 24.3% 21.3% 14.9% In
Slide 14: Multi-channel distribution
Multi-channel distribution CAGR ` bn FY2017 FY2018 1 year 3 year 5 year Bancassurance 37.72 40.75 8.0% 13.7% 21.5% Agency 15.41 19.79 28.4% 19.6% 11.0% Direct 7.98 10.54 32.1% 36.1% 31.6% Corporate agents 4.07 4.70 15.5% 12.3% 2.0% and brokers Group1 1.07 2.13 99.1% 47.8% 10.9% Total APE 66.25 77.92
Slide 15: Customer centric products
Customer centric products 15
Slide 16: Customer centric products
Customer centric products CAGR ` bn FY2017 FY2018 1 year 3 year 5 year Savings 63.64 73.45 15.4% 16.3% 16.3% ULIP 55.69 63.81 14.6% 17.4% 28.4% Par 6.38 8.46 32.6% 10.6% 35.5% Non par 0.72 0.40 -44.4% -0.8% -50.5% Group 0.86 0.78 -9.3% 8.5% -4.5% Protection1 2.60 4.46 71.5% 80.4% 42.1% Total APE 66.
Slide 17: Savings: persistency
Savings: persistency FY2014 FY2015 FY2016 FY2017 FY2018 13th month ULIP 70.3% 79.4% 82.6% 85.2% 86.8%2 persistency (excluding single premium)1 Par 62.5% 74.4% 77.2% 82.8% 88.4%2 Sensex returns 19% 25% -9% 17% 11% Consistent improvement in persistency in last five years Improvement in both ULIP a
Slide 18: Savings: cost efficiency
Savings: cost efficiency Savings LOB FY2014 FY2015 FY2016 FY2017 FY2018 Cost/TWRP 18.4% 14.8% 13.8% 13.3% 11.8% Cost / Average AUM 3.1% 2.5% 2.5% 2.6% 2.4% 64% of new business policies issued within 2 days in FY2018 Technology Technology and analytics for customer screening and as business pitch
Slide 19: Protection
Protection Comprehensive suite of products to cover income protection, credit life and critical illness Term product with 34 critical illness riders Liability cover available on retail as well as group platform Use of analytics and real time connectivity with different Technology eco- system
Slide 20: Superior business quality to deliver enhanced customer and shareholder value
Superior business quality to deliver enhanced customer and shareholder value 20
Slide 21: Retail persistency (excluding single premium)
Retail persistency (excluding single premium)1 Month FY2014 FY2015 FY2016 FY2017 11M-FY2018 13th month 70.9% 78.2% 81.8% 84.7% 86.9% 25th month 65.9% 65.1% 70.1% 73.0% 77.6% 37th month 34.5% 61.6% 60.7% 65.5% 67.7% 49th month 19.4% 30.0% 59.3% 58.3% 62.3% 61st month 11.0% 13.9% 24.1% 53.8% 54.0% 21
Slide 22: Renewal premium
Renewal premium CAGR ` bn FY2017 FY2018 1 year 3 year 5 year Retail renewal 142.19 174.97 23.1% 22.3% 16.8% premium More than 250,000 premium payment centres across India First in the industry to implement eNACH: paperless method Technology for authorizing recurring payments as business Premiu
Slide 23: Superior customer service
Superior customer service FY2014 FY2015 FY2016 FY2017 FY2018 13th month persistency1 70.9% 78.2% 81.8% 84.7% 86.9%2 (excluding single premium) Claim Settlement Ratio3 94.1% 93.8% 96.2% 96.9% 97.9% Grievance Ratio4 253 185 153 95 92 Omni channel customer view across all service channels including d
Slide 24: Cost efficiency
Cost efficiency FY2014 FY2015 FY2016 FY2017 FY2018 Expense ratio (excl. comm)1 13.6% 11.6% 11.0% 11.4% 8.2% Commission ratio2 5.2% 3.8% 3.5% 3.6% 5.5% Cost/TWRP 18.8% 15.4% 14.5% 15.1% 13.7% ` bn 34.75 31.60 22.59 22.50 25.45 Commission 7.59 14.03 5.53 6.20 6.27 Non-Commission 19.25 24.01 20.72 16.3
Slide 25: Grow Value of New Business
25 Grow Value of New Business @ICICI PRUDENTIAL? pLiFe tNS UR AN CR
Slide 26: Value of New Business (VNB)
Value of New Business (VNB) CAGR ` bn FY2015 FY2016 FY2017 FY2018 1 year 3 year VNB1 2.70 4.12 6.66 12.86 93.1% 68.3% VNB Margin1 5.7% 8.0% 10.1% 16.5% - - 6.4% increase in VNB margin 16.5% 1.3% 1.1% 4.0% 10.1% FY2017 Product Mix Expense Experience Assumption Changes FY2018 (excluding expense) 1. Ba
Slide 27: Financial summary
27 Financial summary @ICICI PRUDENTIAL? pLiFe tNS UR AN CR
Slide 28: Profit breakup
Profit breakup ` bn FY2015 FY2016 FY2017 FY2018 Non participating surplus 10.58 11.70 10.87 9.62 Participating surplus 0.39 0.38 0.43 0.52 (Shareholders’ share) Shareholders’ income (net of 4.88 5.64 6.55 7.06 expenses) Profit before tax 15.85 17.72 17.85 17.20 Tax 0.49 (1.21) (1.03) (1.00) Profit a
Slide 29: Financial summary
Financial summary CAGR ` bn FY2017 FY2018 1 year 3 year 5 year Retail new business 70.66 84.02 18.9% 19.4% 18.2% premium Retail renewal premium 142.19 174.97 23.1% 22.3% 16.8% Group premium 10.69 11.70 9.4% 13.4% -8.7% Total premium 223.54 270.69 21.1% 20.9% 14.9% Assets under 1,229.19 1,395.32 13.5
Slide 30: Summary
Summary Strong growth potential for both saving as well protection Focus on growing Value of New Business through Customer centric products Strong technology platform Multi channel architecture Superior business quality Low interest rate risk and credit risk Strong capital position 3
Slide 31: Agenda
Agenda Indian life insurance Company strategy and performance Opportunity Industry overview 31
Slide 32: Favourable demography
Favourable demography Large and Growing Population Base1 High Share of Working Population1 2017 Population (mn) Population of age 25-59 years: India (mn) 1339 1410 724 576 209 264 324 51 57 127 144 India Japan Brazil USA China S Korea S Africa Russia Indonesia 2015 2030 Rising Affluence2 Driving GDP
Slide 33: Financialisation of savings: opportunity for insurance
Share of Insurance in Savings Expected to Rise Financialisation of savings: opportunity for insurance Household savings (excl. currency)1 Distribution of financial savings (excl. currency)2 90 66% 70% 62% 59% 58% 60% 70 51% 50% 48% 49% 48% 50% 23.8% 45% 42% 41% 25.1% 18.8% 41% 26.1% 50 40% 29.0% 20.
Slide 34: Protection opportunity: Income replacement
Protection opportunity: Income replacement Sum assured as % of GDP 1,2 Protection Gap 3,4 270% 92 56 85 33 73 78 73 56 260% % 226% 166% 8.56 149% 6.58 USD tn 106% 5.30 96% 70% 1.09 0.79 0.77 0.52 0.40 Thailand Australia Indonesia Malaysia Japan India Singapore S. Korea Malaysia Japan Thailand German
Slide 35: Protection opportunity: Liability cover
Protection opportunity: Liability cover ₹ bn Retail Credit 16,200 13,922 11,663 7,599 10,097 6,454 8,976 7,828 5,378 4,711 4,409 3,858 7,468 8,601 5,386 6,285 3,971 4,567 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 Home Loans Others Retail credit has been growing at a healthy pace Credit life is v
Slide 36: Protection opportunity
Protection opportunity Gross direct premium (` bn) FY2007 FY2017 CAGR Health 33.31 310.68 25.0% Motor 110.80 517.13 16.7% Motor Own Damage (OD) 77.39 251.40 12.5% Motor Third Party (TP) 33.41 265.73 23.0% Protection premium ~ ` 100 bn for life insurance industry in FY2018 36 Source: General Insura
Slide 37: Agenda
Agenda Indian life insurance Company strategy and performance Opportunity Industry overview 37
Slide 38: Evolution of life insurance industry in India
Evolution of life insurance industry in India FY2002 FY2010 FY2015 FY2017 New business 116 21.5% 550 -5.8% 408 14.3% 532 premium1 (` bn) Total premium (` bn) 501 23.2% 2,654 4.3% 3,281 12.9% 4,185 Penetration (as a % to 2.1% 4.1% 2.6% 2.7% GDP) Assets under 2,304 24.0% 12,899 12.6% 23,361 13.0% 29,8
Slide 39: New business
New business1 Growth FY2015 FY2016 FY2017 FY2018 Private 15.9% 13.6% 26.4% 24.3% LIC -26.3% 2.9% 14.7% 13.2% Industry -10.3% 8.1% 20.7% 19.2% 400 56.2% 60% 51.5% 53.9% 49.0% 50% 300 40% ` bn 200 30% 20% 100 10% 0 0% FY2015 FY2016 FY2017 FY2018 LIC Private Private market share 1. Retail weighted new
Slide 40: Channel mix
Channel mix1 Industry Private players 8% 8% 8% 9% 17% 16% 16% 18% 21% 24% 23% 24% 47% 52% 54% 54% 71% 68% 69% 67% 36% 32% 30% 28% FY2015 FY2016 FY2017 9MFY2018 FY2015 FY2016 FY2017 9MFY2018 Agency Bancassurance Others Given a well developed banking sector, bancassurance has become largest channel
Slide 41: Product mix
Product mix1 Industry Private players 12% 13% 12% 13% 38% 43% 42% 45% 88% 87% 88% 87% 62% 57% 58% 55% FY2015 FY2016 FY2017 9MFY2018 FY2015 FY2016 FY2017 9MFY2018 Traditional ULIP Strong customer value proposition of ULIPs Transparent and low charges Lower discontinuance charges compared to oth
Slide 42: Annexures
42 Annexures @ICICI PRUDENTIAL? pLiFe tNS UR AN CR
Slide 43: Revenue and P&L a/c
Revenue and P&L a/c ` bn FY2015 FY2016 FY2017 FY2018 Premium earned 153.07 191.64 223.54 270.69 Premium on reinsurance ceded (1.46) (1.65) (1.99) (2.58) Net premium earned 151.61 189.99 221.55 268.11 Investment income 192.51 17.91 156.35 119.96 Other income 0.18 0.21 0.88 0.75 Total income 344.30 20
Slide 44: Balance sheet
Balance sheet ` bn Mar 31, 2015 Mar 31, 2016 Mar 31, 2017 Mar 31, 2018 Investments - Shareholders’ 58.57 62.16 66.40 77.49 - Policyholders’ 188.58 215.16 270.67 332.89 - Linked 747.78 752.96 878.78 975.02 Fixed assets 2.15 2.20 2.14 4.22 Cash & bank balances 2.55 2.00 2.14 2.04 Advances and other as
Slide 45: Average APE by product categories
Average APE by product categories Average retail FY2015 FY2016 FY2017 FY2018 APE per policy (`) ULIP 129,087 149,777 169,701 180,746 Par 38,430 44,533 56,325 62,379 Non par 25,233 23,656 39,153 54,187 Protection 4,408 10,284 9,815 9,123 Total 73,047 87,194 92,735 90,620 45
Slide 46: Policy term and customer age
Policy term and customer age1 Average policy term (years) Average customer age (years) 26 44 36 12 Savings Protection Savings Protection 46 1. For FY2018; protection excludes credit life
Slide 47: Channel wise product mix
Channel wise product mix1 Channel Category Product Category FY2015 FY2016 FY2017 FY2018 ULIP 88.4% 88.9% 92.1% 89.8% Par 10.0% 9.1% 5.3% 7.3% Bancassurance Non par 0.0% 0.0% 0.4% 0.1% Protection 1.5% 2.0% 2.2% 2.7% Total 100.0% 100.0% 100.0% 100.0% ULIP 78.5% 76.4% 79.5% 81.8% Par 19.2% 19.6% 14.2%
Slide 48: Persistency excluding single premium
Persistency excluding single premium1 Persistency across Product Categories 86.8% 88.4% 88.9% 82.3% 62.1% 61.4% 63.9% 62.9% ULIP Par Non-par Protection 13th month 49th month Persistency across Channel Categories 89.8% 87.6% 88.9% 85.2% 65.2% 62.7% 58.7% 58.2% Bancassurance Agency Direct Corporate Ag
Slide 49: Retail persistency (including single premium)
Retail persistency (including single premium) Month FY2014 FY2015 FY2016 FY2017 11M-FY2018 13th month 71.5% 79.0% 82.4% 85.7% 87.8% 25th month 68.4% 65.9% 71.2% 73.9% 78.8% 37th month 57.3% 64.3% 61.6% 66.8% 68.9% 49th month 20.3% 54.4% 62.2% 59.3% 63.6% 61st month 12.7% 14.5% 46.0% 56.2% 54.8% 49 A
Slide 50: Fund performance
Fund performance 15.2% 12.6% 13.1% 10.7% 10.4% 10.6% 9.8% 9.3% 8.7% 8.6% 7.0% 8.1% 7.1% 7.1% 6.8% 5.1% 1Y 5Y 1Y 5Y 1Y 5Y 1Y 5Y Benchmark Fund Preserver Protector Balancer Maximiser (Liquid fund) (Debt fund) (Balanced fund) (Equity Fund) 87.4% of linked portfolio outperformed benchmark indices since
Slide 51: Embedded Value
51 Embedded Value @ICICI PRUDENTIAL? pLiFe tNS UR AN CR
Slide 52: Analysis of movement in EV
Analysis of movement in EV1 ` bn FY2015 FY2016 FY2017 FY2018 Opening EV 117.75 137.212 139.39 161.84 Unwind 11.70 12.58 12.21 13.72 Value of New Business (VNB) 2.70 4.12 6.66 12.86 Operating assumption changes 1.60 1.042 1.00 7.64 Persistency variance 2.01 0.99 1.53 Mortality and morbidity variance
Slide 53: EV methodology (1/2)
EV methodology … (1/2) 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) 53
Slide 54: EV methodology (2/2)
EV methodology … (2/2) EV consists of Adjusted Net Worth (ANW) and Value of in-force covered business (VIF) ANW is market value of assets attributable to shareholders, consisting of Required Capital Free Surplus Value of in-force covered business (VIF) is Present value of future profits;
Slide 55: 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 suppor
Slide 56: Components of VIF (1/4)
Components of VIF … (1/4) 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 Distributa
Slide 57: Components of VIF (2/4)
Components of VIF … (2/4) Frictional Cost of required capital (FC) FCs represent investment management expenses and taxation costs associated with holding the Required capital Investment costs reflected as an explicit reduction to the gross investment return 57
Slide 58: Components of VIF (3/4)
Components of VIF … (3/4) Time value of financial options and guarantees (TVFOG) 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 embedde
Slide 59: Components of VIF (4/4)
Components of VIF … (4/4) Cost of residual non-hedgeable risk (CRNHR) CRNHR is an allowance for risks to shareholder value to the extent not already allowed for in the TVFOG or the PVFP Allowance has been made for asymmetric risks of operational, catastrophe mortality / morbidity and mass laps
Slide 60: Components of EV movement (1/2)
Components of EV movement … (1/2) Operating assumption changes Impact of the update of non-economic assumptions both on best estimate and statutory bases to those adopted in the closing EV Expected return on existing business (unwind) Expected investment income at opening reference rate on V
Slide 61: 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, i
Slide 62: 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
Slide 63: 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
Slide 64: Sensitivity analysis (FY2018)
Sensitivity analysis (FY2018) % change % change Scenario in EV in VNB Increase in 100 bps in the reference rates (2.1) (4.9) Decrease in 100 bps in the reference rates 2.2 5.2 10% increase in the discontinuance rates (1.3) (8.6) 10% decrease in the discontinuance rates 1.4 9.1 10% increase in mortal
Slide 65: Economic assumptions underlying EV
Economic assumptions underlying EV Tenor (years) Reference Rates March 31, March 31, March 31, 2016 2017 2018 1 7.24% 6.35% 6.57% 5 8.22% 7.78% 8.21% 10 8.34% 8.02% 8.31% 15 8.40% 8.03% 8.11% 20 8.46% 8.03% 7.97% 25 8.50% 8.03% 7.91% 30 8.52% 8.03% 7.88% 65
Slide 66: CSR: making an impact
CSR: making an impact 66
Slide 67: CSR: ICICI Foundation
CSR: ICICI Foundation ICICI academy of skills ICICI digital villages Network of 24 fully operational Complete digitization of financial centres to provide sustainable transactions and commercial livelihood opportunities to activities underprivileged youth Providing vocational training Indust
Slide 68: CSR: Focus areas
CSR: Focus areas Consumer awareness Education Consumer awareness and Catalysts for Social Action (Program education campaign Asha) & SOS Children’s Villages of 98,390 eIA accounts opened India to support underprivileged children with the objective of 6755 registrations for health enhancing t
Slide 69: Awards and accolades 2017 & 2018
Awards and accolades 2017 & 2018 Silver Shield for Excellence in Financial Winner of the Money Today Financial award Reporting by Institute of Chartered Accounts 2017-18 for Best Term Insurance provider of India (ICAI) for FY17 Annual Report Ranked as the no. 1 brand in the “Top Winner of the D&B –
Slide 70: Glossary
Glossary Annualized Premium Equivalent (APE) - Annualized Premium Equivalent (APE) is the sum of 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 val
Slide 71: 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 72: Thank you
72 Thank you @ICICI PRUDENTIAL? pLirFe «NS UR AN Cee
ICICI Prudential Life Insurance Company — FY2018 Earnings Presentation on 6ix