Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — 9M FY2022 Earnings Presentation
70 slides from Hdfc Life Insurance's earnings presentation, 2022
Slide 1: Investor Presentation – 9M FY22
Investor Presentation – 9M FY22
Slide 2: Executive summary: 9M FY22
Executive summary: 9M FY22 Revenue & Scale Profitability & Cost Customer & Capital Growth 21% 9M FY22 26.5% 9M FY22 92% Individual New Business 13th month WRP Market Margin persistency2 9M FY21 25.6% 9M FY21 89% 15.2% Share Rs (Bn.) 144.7 Rs (Bn.) 17.8 Overall 99.4% Renewal VNB Claim Settlement Prem
Slide 3: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Exide Life Transaction Update 5 Our approach to ESG 6 Annexures 7 India Life Insurance Page 3
Slide 4: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Exide Life Transaction Update 5 Our approach to ESG 6 Annexures 7 India Life Insurance 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 Overall 7.2% 8.1% 9.2% 9.7% mkt share Pvt. mkt 12.5% 14.2% 15.5% 15.2% Growth HDFC Life Pvt sector Industry share Growth 5% 19% 17% 21% 9M FY22 21% 30% 20% 59.7 70.0 50.1 55.7 2 y
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 VNB growth of 4% 9% 7% 6% 13% 26% 26% on the back 14% 13% 14% 14% of higher 19% 19% 19% 22% volumes and balanced product _ 26.1% 26.5% mix 64% 25.6% 55% 61% 61%
Slide 7: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Exide Life Transaction Update 5 Our approach to ESG 6 Annexures 7 India Life Insurance 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 9M 9M Rs bn FY19 FY20 FY21 Profitable FY21 FY22 growth New business Margin 24.6% 25.9% 26.1% 25.6% 26.5% Economic Profit Value of new business 15.4 19.2 21.9 14.1 17.8 distribution mix Diversified Profit after tax (PAT) 12.8 13.0 13.6 10.4 8.5 Accounting Underwriting profi
Slide 10: Analysis of change in IEV
Analysis of change in IEV EVOP – 36.4 Rs bn EVOP1% - 18.6% Profitable growth 17.8 1.7 - 6.5 1.6 -2.3 295.4 16.9 Operating Covid impact Economic 266.2 Dividend VNB variances variances & ESOP distribution mix Unwind exercises Diversified Post-EMR 202.1 176.3 EVOP1%: 16.2% innovation Market- leading Ad
Slide 11: Diversified distribution mix enabled by multiple levers
Diversified distribution mix enabled by multiple levers Enhancing and expanding proprietary1 channels Profitable growth distribution Diversified mix Tapping new Expanding Focus on building a Leveraging generation of geographical skilled and analytics for customers reach via structurally solid upsell
Slide 12: Bancassurance powered by innovation, technology and people
Bancassurance powered by innovation, technology and people Profitable growth Product Partner experience Tech integration & Seamless Capability building & proposition & engagement analytics operations resourcing distribution Diversified Comprehensive Defined One stop Straight through Learning on the
Slide 13: Technology driving Agent Productivity in Agency Channel
Technology driving Agent Productivity in Agency Channel Profitable growth Onboarding Skilling & Engagement Enablement Support & Servicing distribution Diversified InstaPRL a simple, paperless and hassle free Digital learning & skilling HDFC Life Easy – platform benefitting mix FC1 onboarding platfor
Slide 14: Expanding market through consistent product innovation
Expanding market through consistent product innovation Click2Protect Life Saral Jeevan Bima Group Saral Pension Auto balance death and Standard term and Profitable Poorna growth Retirement critical illness cover or annuity plan with & pension Woman Suraksha receive income payouts uniform product fro
Slide 15: 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 16: Our approach to retiral solutions
Our approach to retiral solutions 1. NPS Profitable growth ▪ Largest Pension Fund Manager (PFM) in Retail ▪ Market share grew from 34% in Mar’21 to 37% in and Corporate NPS segment, with AUM of Rs Dec’21 amongst all PFMs 250 bn1 ▪ Company has over 0.9 mn customers - ~0.6 mn in retail ▪ Registered st
Slide 17: Our protection philosophy
Our protection philosophy Protection is a multi-decade opportunity that we plan to address prudently with continued innovation Profitable growth Supply side considerations Our Focus Areas Adverse mortality distribution Diversified experience Strengthening underwriting practices and mix Demand side
Slide 18: 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 19: Product mix across key channels
Product mix across key channels1 Segment FY19 FY20 FY21 9M FY22 Segment FY19 FY20 FY21 9M FY22 UL 26% 12% 10% 15% Profitable UL 64% 32% 27% 30% growth Par 40% 34% 37% 32% Agency Par 13% 18% 37% 33% Banca 2 Non par savings 17% 44% 30% 32% Non par savings 17% 40% 39% 39% Term 4% 4% 4% 4% Term 12% 12%
Slide 20: 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 21: AI/ML driven customer engagement
AI/ML driven customer engagement Enabling Sales Profitable growth Technical Capabilities built in-house distribution Diversified Cross-sell Models Sentiment Analyzer Engagement1 Tools mix • Predicts the propensity to • Text & voice based analytics • Agetymer, BMI & BP Machine Multi buy and provides
Slide 22: Enabling service simplification using AI/ML
Enabling service simplification using AI/ML Profitable growth Other Initiatives V Check SPOK Life Certificate distribution Diversified mix Simple & easy Rule based auto 24*7 service at video KYC response home Automated UW Engine predicts final innovation Market- UW decision for S&I products on non l
Slide 23: Futurance program – Start-up outreach for driving Innovation
Futurance program – Start-up outreach for driving Innovation Initiative started in June Collaboration with Profitable growth 2019 in collaboration 300+ applications with IvyCamp Ventures received 60+ startups Advisors distribution Diversified Sample highlights of POC conducted mix innovation Market-
Slide 24: 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 –6,50
Slide 25: Governance framework
Governance framework Board of Directors Profitable growth Independent and experienced Board Committees Risk Policyholder Nomination & Corporate Social Stakeholders’ Audit Investment With Profits Capital Raising Board Management Protection Remuneration Responsibility Relationship Committee Committee
Slide 26: 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 27: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Exide Life Transaction Update 5 Our approach to ESG 6 Annexures 7 India Life Insurance Page 27
Slide 28: Customer insights from HDFC Life’s Retirement study
Customer insights from HDFC Life’s Retirement1 study Triggers & Barriers for purchasing Ideal retirement product & Retirement – Low on Priority a retirement plan distribution Retirement does not feature in top Living independently, financial Consumers choice of retirement 3 priority for consumers se
Slide 29: Increasing awareness and encouraging timely retirement planning
Increasing awareness and encouraging timely retirement planning Opportunity: India is ageing rapidly and living longer. ~20% of Product Indian population will be above 60 in 20501 Systematic Retirement Plan Total Pop Over 60+ Easy payment of annuity premiums 271% Lock in future rates by invest
Slide 30: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Exide Life Transaction Update 5 Our approach to ESG 6 Annexures 7 India Life Insurance Page 30
Slide 31: The Exide Life journey
The Exide Life journey Challenging Consolidation & Foundation for value Set Up times Re-branding creation • Mainly South India focused • Global financial crisis impacts • ING Group exited from the JV • Invested in brand and Agency business ING in 2013 technology • Exide became a 50% JV • Product reg
Slide 32: Integration – Focus areas
Integration – Focus areas Value preservation Value accretion Pre – merger (9-12 months) Post merger (12-18 months) Continue Ensure top-line growth Deliver superior growth of key Augment Provide access to HDFC Wider suite of continuity by sustaining customer value through channels sales Life suite of
Slide 33: Exide Life transaction timeline
Exide Life transaction timeline Step 1: Step 3: Step 5: Step 7: Announcement of Application filed with IRDAI Integration Phase-1 (9- Final approval for transaction and CCI for acquisition, 12 months) merger (expected in (Sep 3, 2021) ongoing interactions H2 FY23) ₹ Step 2: Step 4: Step 6: Step 8
Slide 34: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Exide Life Transaction Update 5 Our approach to ESG 6 Annexures 7 India Life Insurance Page 34
Slide 35: Our ESG Strategy
Our ESG Strategy 5 pillars of ESG Strategy Actuarial Financial External Validation ESG • MSCI rating improved from ‘BB’ in October 2019 to ‘BBB’ in August 2020 Active engagement with external agencies including MSCI, S&P Integrated report and ESG • S&P Global (DJSI) percentile improved Report publis
Slide 36: Ethical Conduct & Governance
Ethical Conduct & Governance Governance structure & Compensation Risk management and BCM Information/Cyber Security Framework Actuarial Information/cyber Fraud risk management security Values program; ISO 27001:2013 and Corporate governance Board evaluation & Disciplinary Panel for ISMS assessment p
Slide 37: Responsible Investment
Responsible Investment Responsible Investment Policy Sustainable Equity Fund Objective What is Sustainable Why sustainable To generate optimal risk adjusted returns over the Equity fund? investing? long term Actuarial This fund shall seek to To create value for all RI framework generate returns from
Slide 38: Diversity, Equity and Inclusion & Employee Engagement
Diversity, Equity and Inclusion & Employee Engagement Special Recognition Employee diversity, equity & inclusion o Great Places to Work – Amongst top 100 Best Places o Promoting DEI ally ship: leadership development, communication, strengthening policies, aligning o Great Places to Work for Women– w
Slide 39: Holistic Living: Corporate Social Responsibility/Inclusive Growth
Holistic Living: Corporate Social Responsibility/Inclusive Growth Social Sector Lives 26% 29% 24% Actuarial FY 2019 FY 2020 FY 2021 Social lives as % of total group lives Required % or no. of lives as per the regulations: 5% Financial % lives covered in last 3 years: 27% No. of lives covered via mic
Slide 40: Holistic Living: Customer Centricity
Holistic Living: Customer Centricity Customer Centricity Simplifying buying journeys through platforms Online claim processing for eligible Journey simplification – like LifeEasy (online term purchase) customers via EasyClaims platform frictionless sales and Actuarial service Document simplification
Slide 41: Sustainable Operations
Sustainable Operations Energy and water Digitization - Reduction of Paper Usage Waste management o Online /e-forms for customers o Annual report FY21 digitally communicated Actuarial o Use of 3/5 star rated o Demat or dematerialized i.e. appliances digital policy accounts 43.9% of our new business o
Slide 42: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Exide Life Transaction Update 5 Our approach to ESG 6 Annexures 7 India Life Insurance Page 42
Slide 43: Improvement in overall persistency trends
Improvement in overall persistency trends1 Across key channels (%) CY (9M FY22) 96 92 90 92 86 87 88 82 84 80 77 76 76 72 72 68 65 68 Actuarial 57 52 Agency Banca Direct Company Financial 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (9M FY21) 94 92 89 86 89 84 81
Slide 44: Improvement in overall persistency trends
Improvement in overall persistency trends1 Across key channels (%) CY (9M FY22) 89 87 87 85 80 77 76 75 69 67 66 67 65 64 62 63 Actuarial 56 58 52 53 Agency Banca Direct Company Financial 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (9M FY21) 89 92 85 83 81 78 79
Slide 45: Improving VNB trajectory
Improving VNB trajectory Rs bn 26% 3.1 -0.5 0.4 0.7 17.8 Actuarial 14.1 Financial 1 9M FY21 Impact of higher APE Change in assumptions New Business Profile Fixed cost absorption 9M FY22 VNB Growth ESG NBM% 25.6% 0.0% -0.7% 0.6% 1.0% 26.5% 1. Reflects the impact of difference in mix of segment/distri
Slide 46: Sensitivity analysis – H1 FY22
Sensitivity analysis – H1 FY22 Change in VNB Analysis based on key metrics Scenario % Change in EV Margin 1 Change in Increase by 1% -1.4% -2.0% Actuarial Reference rate Decrease by 1% 1.1% 1.6% Equity Market Decrease by 10% -0.1% -1.7% movement Increase by 10% -0.3% -0.6% Persistency (Lapse rates)
Slide 47: Assets under management
Assets under management Rs bn Debt: Equity 62:38 71:29 64:36 64:36 UL:Traditional 50:50 43:57 43:57 42.58 Actuarial 37% 2,150 18% 1,650 18% 1% Financial 1,150 1,947 1,738 650 1,256 1,272 150 Mar 31, 2019 Mar 31, 2020 Mar 31, 2021 Dec 31, 2021 YoY Growth ESG Over 98% of debt investments in Governme
Slide 48: Stable capital position
Stable capital position Rs bn NB premium growth 32% 15% 17% 26% 140.0 201% 210% 188% 190% 184% 190% 120.0 Actuarial 100.8 94.3 170% 100.0 21.2 150% 80.0 70.8 24.0 62.7 130% 13.1 26.5 Financial 60.0 12.7 23.4 110% 19.2 40.0 16.7 90% 53.0 46.9 20.0 33.3 38.5 70% - 50% ESG Mar 31, 2019 Mar 31, 2020 Mar
Slide 49: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Customer Insights 4 Exide Life Transaction Update 5 Our approach to ESG 6 Annexures 7 India Life Insurance Page 49
Slide 50: 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 51: 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 52: 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 53: Government bond auctions
Government bond auctions Government Bonds – Tenorwise Issuance Rs cr 71% 65% 65% 72% 73% 79% 29% 35% 35% 28% 27% 21% FY17 FY18 FY19 FY20 FY21 FY22 (9M) <=15yrs 3,73,525 4,97,579 3,82,941 4,44,000 10,01,835 7,46,000 >15yrs 1,54,520 1,80,529 2,04,000 2,38,000 2,65,575 2,90,000 Total 5,28,045 6,78,109
Slide 54: 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 55: 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% 64% Market share Growth % Private 1% 7% -20% -24% 2% -3% 16% 14% 26% 24% 12% 5% 8% 30% LIC -22% 29% 4% 11% -4% -2% -27% 3% 15% 13% 5% 8% -3% 5% Overall -10% 17% -9% -5% -2
Slide 56: 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 61% 57% 9% 10% 10% 12% 14% 56% 3% 16% 16% 54% 5% 4% 52% 51% 51% 3% 3% 3% 3% 3% 48% 49% 49% 3% 3% 3% 46
Slide 57: Appendix
Appendix
Slide 58: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) 9M FY22 9M FY21 Growth FY21 FY20 FY19 CAGR Rs bn. New Business Premium (Indl. + Group) 170.7 135.5 26% 201.1 172.4 149.7 16% Renewal Premium (Indl. +Group) 144.7 121.3 19% 184.8 154.7 142.1 14% Total Premium 315.4 256.7 23% 385.8 327.1 291.9 15% Individual AP
Slide 59: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) 9M FY22 9M FY21 FY21 FY20 FY19 Overall New Business Margins (post overrun) 26.5% 25.6% 26.1% 25.9% 24.6% (1) Operating Return on EV 18.6% 18.3% 18.5% 18.1% 20.1% Operating Expenses / Total Premium 12.2% 12.1% 12.0% 13.1% 13.1% Total Expenses (OpEx + Commissio
Slide 60: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Rs bn Revenue A/c1 Profit and Loss A/c1 9M FY22 9M FY21 9M FY22 9M FY21 Premium earned 315.4 256.7 Income Reinsurance ceded (4.4) (4.2) Interest and dividend income 3.7 3.2 Income from Investments 178.2 266.6 Net profit/(loss) on sale 2.7 0.6 Other Income 0.9 1.0 Transf
Slide 61: Balance sheet
Balance sheet Dec 31, 20211 Dec 31, 2020 Mar 31, 2021 Rs bn Shareholders’ funds Share capital (including Share premium) 26.8 24.8 25.0 Accumulated profits 63.7 56.1 59.3 Fair value change 1.4 2.3 2.1 Sub total 91.9 83.2 86.4 Borrowings 6.0 6.0 6.0 Policyholders’ funds Fair value change 25.3 27.4 25.
Slide 62: 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 FY22: 23.1 (9M FY21: 25.1) 9M FY22: 36.3 (H1 FY21: 35.7) 12 36 UL UL 12 37 41 33 Par Par 42 33 23 32 Non-par Health Non-par Health 23 32 12 37 Non-par Savings Non-par Saving
Slide 63: 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 64: 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 65: 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 66: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Dec 31, 2020 As at Dec 31, 2021 As at Dec 31, 2020 As at Dec 31, 2021 1 3.54 4.04 3.48 3.96 2 4.63 5.42 4.00 4.62 3 5.55 6.29 4.47 5.11 4 6.26 6.94 4.87 5.51 5 6.79 7.41 5.21 5.84 10 7.80 8.26 6.25 6.80 15 7.65 8.03 6.65
Slide 67: 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 68: 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 69: 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 70: Thank You
Thank You me 21 YEARS
HDFC Life Insurance Company — 9M FY2022 Earnings Presentation on 6ix