Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — FY2021 Earnings Presentation
66 slides from Hdfc Life Insurance's earnings presentation, 2021
Slide 1: Investor Presentation – 12M FY21
Investor Presentation – 12M FY21
Slide 2: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Managing Covid-19 4 Customer Insights 5 Annexures 6 India Life Insurance Page 2
Slide 3: Performance Snapshot
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 1 Performance Snapshot Page 3
Slide 4: Executive summary: 12M FY21
Executive summary: 12M FY21 Scale Profitability & Cost Customer & Capital Rs (Bn.) 71.2 New CY 26.1% CY 90% Individual Business 13th month APE Margin PY 25.9% persistency Growth 16% PY 88% CY (%) 15.5 Rs (Bn.) 21.9 Overall 99.4% Market Claim Settlement VNB Ratio Share1 Individual 98.0% Growth 130 bp
Slide 5: Demonstrating resilience in the current environment (1/2)
Demonstrating resilience in the current environment (1/2) Rs Bn. Improving QoQ business trends1 Faster than industry growth1 -19% 22% 19% 40% 17% Growth HDFC Life Pvt sector Industry 63% 17% 24% -3% 19% FY21 17% 8% 3% FY20 19% 5% 6% 70.0 59.7 2 years 18% 6% 5% 13.2 10.7 14.3 17.4 15.1 18.0 17.1 23.9
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 Steady expansion in VNB margin 19% 22% 19% 20% 13% 14% 13% 15% 4% 7% 9% 7% 24.6% 25.9% 26.1% 25.6% 26.4% 27.0% 64% 24.3% 55% 61% 58% _ FY19 FY20 FY21 Q4 FY21 FY19 FY20 FY21 Q1 FY21 Q2 FY21 Q3 FY21 Q4 F
Slide 7: Our Strategy
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights 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 FY18 FY19 FY20 FY21 Rs Bn. Profitable growth New business Margin 23.2% 24.6% 25.9% 26.1% Economic Profit Value of new business 12.8 15.4 19.2 21.9 distribution mix Diversified Profit after tax (PAT) 11.1 12.8 13.0 13.6 Accounting Underwriting profits Profit 8.5 9.0 10.9 7.
Slide 10: Analysis of change in IEV
Analysis of change in IEV1 EVOP – 38.3 Rs Bn. EVOP1% - 18.5% Profitable growth 20.6 0.8 266.2 21.9 0.8 ESOP exercises 17.4 -1.8 Economic Operating variances 206.5 variances3 distribution mix VNB Diversified Change in Unwind Operating assumptions2 176.3 31% 134.6 Adjusted Net worth (ANW) Value of in-
Slide 11: Diversified distribution mix enabled by multiple levers
Diversified distribution mix enabled by multiple levers Enhancing and expanding proprietary channels Strong partnerships Profitable growth Tapping new generation of customers Expanding geographical reach distribution Diversified through Online channel via Online channel mix Agency Life innovation Fo
Slide 12: Tech-led Agency
Tech-led Agency Profitable growth Onboarding Skilling & Engagement Enablement Support & Servicing distribution Diversified InstaPRL a simple, mix paperless and hassle- Digital platform for free FC onboarding sales hierarchy for platform effective engagement and partner Pre approved sales opportunity
Slide 13: Digital flywheel – powering the Online channel
Digital flywheel – powering the Online channel Continue to find new niches Profitable growth Product Innovation distribution Diversified mix Customer Brand innovation Value Market- leading Stand Up & Salience Management Analytics backed digital Learning Be a ‘top-of-the-mind’ hourenablement solution
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: Expanding market through consistent product innovation
Expanding market through consistent product innovation Group Poorna Suraksha Guaranteed returns, with Comprehensive protection plan Profitable growth Retirement option for life long income offering multiple choices of & pension benefits under group platform Woman FY15 FY17 FY18 FY19 FY20 FY21 distri
Slide 16: Our approach to retiral solutions
Our approach to retiral solutions Opportunity to grow the retiral corpus1 by 3x between FY21-25 Profitable growth 1. NPS 2. Individual income plans 2 ▪ Ranked #1 with AUM of Rs 163.8 bn amongst ▪ Providing long term retiral solutions private owned Pension Fund Managers ▪ Catering across age brackets
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 Our Focus Areas Supply side considerations distribution Strengthening underwriting practices Diversified mix Demand side and use of deep learning underwrit
Slide 18: Product mix across key channels
Product mix across key channels1 Segment FY18 FY19 FY20 FY21 Segment FY18 FY19 FY20 FY21 UL 33% 26% 12% 10% Profitable UL 64% 64% 32% 27% growth Par 48% 40% 34% 37% Agency Par 25% 13% 18% 37% Banca 2 Non par savings 8% 17% 44% 30% Non par savings 5% 17% 40% 39% Term 3% 4% 4% 4% Term 11% 12% 12% 11%
Slide 19: Aligned to make life simple for the customers
Aligned to make life simple for the customers in a turbulent environment Solving for the customer’s needs.. 1 3 5 Profitable growth Give me a Accelerate SERVICE Give me PLATFORMS simple journey JOURNEY SIMPLIFICATION frictionless Nudge me in my independent distribution Diversified from purchase SIMP
Slide 20: Journey Simplification – Short journeys for specific requirements
1. Journey Simplification – Short journeys for specific requirements Profitable growth distribution Diversified mix innovation Market- leading InstaSIP – POSP LifeEasy1– Voice WIP Reimagining insurance ULIP Journey Journey Protection Journey Journey >99% policy <4 hrs. Faster ~7 mn offers 51% overal
Slide 21: Partner Integration – Different partners, different solutions
2. Partner Integration– Different partners, different solutions Profitable growth distribution Diversified Life Next1 Insta PRL2 mix HDFC Bank Paytm innovation Market- leading Reimagining insurance Airtel Partner Portal3 Multiple End-to-end Straight ~98K <1sec partners servicing of through digital p
Slide 22: Service Simplification – Through 24*7 digital offerings
3. Service Simplification– Through 24*7 digital offerings 24*7 accessibility Instant branch experience Frictionless journey Profitable growth ETTY- ELLE 2.0- ELSA- Alexa distribution Diversified Whatsapp Chatbot bot Insta Serv1– Life Certificate – mix Assisted Policy Insta Receipt2 Customer App Vide
Slide 23: Data Labs – Creating a data led ecosystem and scaling AI
4. Data Labs– Creating a data led ecosystem and scaling AI Deep learning model Vision AI Voice AI Profitable growth AgeTymer UW engine (Face (Face ageing) (automated recognition) underwriting) distribution Diversified (INDUSTRY FIRST; mix HealthProfiler Bodmeter Manages end-to- (BP and Heart (Face B
Slide 24: Platforms and Ecosystem
5. Platforms and Ecosystem Life 991: Ecosystem for retirement and pension segment Profitable growth distribution Diversified National Gratuity and Employee Public Provident Annuity Consolidated mix Pension System Superannuation Provident Fund Fund Portfolio View innovation Market- leading Simulation
Slide 25: Leveraging technology to build resilience
Leveraging technology to build resilience Architecture Resilience – Scalability and Efficiency Profitable growth Modular Low Code distribution Diversified architecture Custom APIs Data Lake Platforms Cloud mix Workforce Resilience – Hybrid Working Environment innovation Market- leading Virtual Work
Slide 26: Governance framework
Governance framework Board of Directors Profitable Independent and experienced Board growth Committees Corporate Board Risk Policyholder Nomination & Stakeholders’ Audit Investment Social With Profits Management Protection Remuneration Relationship Committee Committee Responsibility Committee Commit
Slide 27: 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 ~60 years ▪ Defe
Slide 28: Performance of wholly-owned subsidiary companies
Performance of wholly-owned subsidiary1 companies HDFC Pension AUM, Rs Bn. HDFC International Life and Re 163.8 82.7 51.6 11.6 Mar'17 Mar'19 Mar'20 Mar'21 HDFC Pension continues to be the largest PFM (Pension Fund Manager) Registered growth of 81% in gross reinsurance premium in FY21 in Retail a
Slide 29: Managing Covid
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 3 Managing Covid Page 29
Slide 30: Dynamic approach to manage impact of the COVID-19 outbreak
Dynamic approach to manage impact of the COVID-19 outbreak Accelerated digital Digital Servicing Employee Engagement/ selling Facilitation • Focus on selling products • Communication to customers • Initiatives to keep employee with end to end digital about digital touch-points for morale high; infra
Slide 31: 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
Slide 32: Customer Insights
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 4 Customer Insights Page 32
Slide 33: Customer Insights – Customer Behaviour/Preferences
Customer Insights – Customer Behaviour/Preferences Personalization takes Human+Machine model Catering to changing centre stage – Maintaining right customer demands balance is the key Consumers are looking for Different generational customized experiences 34% Customers are willing to segments look fo
Slide 34: Customer Insights – Customer Behaviour/Preferences
Customer Insights – Customer Behaviour/Preferences Top reasons to buy Life insurance Customer behaviour / trend 2019 rank 2013 rank The future intent to buy Life Insurance is the highest Protect family in case of death 1 1 amongst financial products driven primarily by 21-40 To secure child’s educ
Slide 35: Annexures
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 5 Annexures Page 35
Slide 36: Individual persistency for key channels and segments
Individual persistency for key channels and segments1 Across key channels (%) CY (FY21) 91 94 86 89 90 86 79 80 81 75 77 77 68 69 71 65 67 64 Actuarial 53 48 Agency Banca Direct Company Financial 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (FY20) 93 90 87 88 80
Slide 37: VNB and NBM walkthrough
VNB and NBM walkthrough Rs Bn. -0.59 1.22 -0.47 21.85 2.50 19.19 Actuarial Financial FY20 Impact of higher Change in New Business Fixed cost FY21 APE assumptions Profile 1 absorption ESG NBM% 25.9% 0.0% -0.7% 1.5% -0.6% 26.1% 1. Reflects the impact of difference in mix of segment/distribution channe
Slide 38: 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 39: Assets under management
Assets under management Assets Under Management Change in AUM 1 Rs Bn. Debt: Equity 61:39 62:38 71:29 64:36 17 466 UL:Traditional 54:46 50:50 43:57 43.57 Actuarial 37% 232 18% 1,750 1,550 16% 1% 131 1,350 95 1,150 67 104 Financial 950 1,738 (145) 1,272 1,256 750 1,066 550 FY20 FY21 350 Net Fund infl
Slide 40: Stable capital position
Stable capital position Rs Bn. Dividend paid 3.3 4.0 - - NB premium growth 32% 32% 15% 17% 201% 210% 192% Actuarial 120.0 188% 184% 190% 94.3 100.0 170% 70.8 80.0 62.7 24.0 150% 52.1 13.1 130% Financial 60.0 12.7 23.4 11.3 19.2 110% 40.0 16.7 13.6 90% 46.9 20.0 33.3 38.5 70% 27.2 - 50% Mar 31, 2018
Slide 41: Governance - Promoting responsible behavior
Governance - Promoting responsible behavior Governance structure Information / Cyber Security Risk Management and BCM Actuarial Corporate governance Board Board Risk management Mitigating & Managing ISO 27001:2013 and Data Privacy Policy policy Diversity evaluation & policy Risk ISMS assessment o Ap
Slide 42: Social initiatives - Culture of care and giving
Social initiatives - Culture of care and giving Inclusive growth Customer centricity Actuarial CSR Financial COVID-19 Leveraging technology Customer Satisfaction Inclusion Response o The Corporate Social o To simplify life insurance for o Grievance Redressal Policy Responsibility wing is Insured 21
Slide 43: Social initiatives – Human Capital Development
Social initiatives – Human Capital Development Attracting talent Employee engagement Talent management/retention Actuarial o Online yoga, meditation sessions, fitness challenges o Virtual hiring and on-boarding process without (Walkathon, Fit by Bit), Click2Wellness app compromising on quality o Fas
Slide 44: Environmental initiatives - Creating a better environment
Environmental initiatives - Creating a better environment Energy and Water Digitization Waste Management Actuarial Energy efficiency and water conservation Reduction of Paper Usage o Segregation and proper disposal of waste - initiatives dry and wet o Online /e-forms for customers o Use of 3/5 star
Slide 45: India Life Insurance
Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 6 India Life Insurance Page 45
Slide 46: 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 47: 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 48: 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 49: Government bond auctions
Government bond auctions Government Bonds – Tenorwise Issuance Rs Cr 27% 22% 29% 35% 35% 73% 78% 71% 65% 65% FY17 FY18 FY19 FY20 FY21 >15yrs 1,54,520 1,80,529 2,04,000 2,38,000 2,65,575 <=15yrs 3,73,525 4,97,579 3,82,941 4,44,000 10,01,835 Total 5,28,045 6,78,109 5,86,941 6,82,000 12,67,410 Auctio
Slide 50: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 25% 22% 18% 18% 3% 8% 11% 16% 12% 13% 19% 18% 21% 26% 17% 52% 68% 65% 65% 16% 67% 50% 56% 47% 48% 32% 35% 35% FY10 FY13 FY16 FY19 FY10 FY13 FY16 FY20 Financial savings Physical savings Currency & depos
Slide 51: 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% Market share 1% 7% -20% -24% 2% -3% 16% 14% 26% 24% 12% 5% 8% Growth % Private LIC -22% 29% 4% 11% -4% -2% -27% 3% 15% 13% 5% 8% -3% Overall -10% 17% -9% -5% -2% -3% -11%
Slide 52: 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 53: Appendix
Appendix
Slide 54: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) CAGR Rs Bn. FY21 FY20 YoY Growth FY19 FY18 (3 yrs.) New Business Premium (Indl. + Group) 201.1 172.4 17% 149.7 113.5 21% Renewal Premium (Indl. +Group) 184.8 154.7 19% 142.1 122.1 15% Total Premium 385.8 327.1 18% 291.9 235.6 18% Individual APE 71.2 61.4 16%
Slide 55: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) FY21 FY20 FY19 FY18 Overall New Business Margins (post overrun) 26.1% 25.9% 24.6% 23.2% (1) Operating Return on EV 18.5% 18.1% 20.1% 21.5% Operating Expenses / Total Premium 12.0% 13.1% 13.1% 13.5% Total Expenses (OpEx + Commission) / Total Premium 16.4% 17.7
Slide 56: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Revenue A/c Profit and Loss A/c Rs Bn. FY21 FY20 FY21 FY20 Premium earned 385.8 327.1 Income Reinsurance ceded (4.6) (4.8) Interest and dividend income 4.4 3.6 Income from Investments 326.8 (33.1) Net profit/(loss) on sale 2.1 0.8 Other Income 1.6 2.1 Transfer from Poli
Slide 57: Balance sheet
Balance sheet Mar 31, 2021 Mar 31, 2020 Rs Bn. Shareholders’ funds Share capital (including Share premium) 25.0 24.2 Accumulated profits 59.3 45.7 Fair value change 2.1 (1.9) Sub total 86.4 68.0 Borrowings 6.0 - Policyholders’ funds Fair value change 25.6 0.5 Policy Liabilities 855.2 652.7 Provision
Slide 58: Segment wise average term and age
Segment wise average term and age1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) FY21: 24.7 (FY20: 19.6) FY21: 35.8 (FY20: 37.2) UL 12 UL 37 12 37 Par 42 33 27 Par 35 Non-par Health 24 Non-par Health 33 18 33 12 Non-par Savings 36 Non-par Savings 38 11 40 N
Slide 59: Summary of Milliman report on our ALM approach
Summary of Milliman report on our ALM approach 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 products
Slide 60: 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 61: 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 62: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Mar 31, 2021 As at Mar 31, 2020 As at Mar 31, 2021 As at Mar 31, 2020 1 3.95 4.69 3.87 4.58 2 5.31 5.69 4.52 5.06 3 6.27 6.52 5.04 5.48 4 6.95 7.04 5.46 5.81 5 7.42 7.29 5.80 6.06 10 7.97 7.18 6.71 6.55 15 7.52 7.03 6.95
Slide 63: 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 64: 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 65: 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 66: Thank you
Thank you atats ite
HDFC Life Insurance Company — FY2021 Earnings Presentation on 6ix