Icici Prudential Life Insurance Co. Ltd. · NSE:ICICIPRULI
Icici Prudential Life Insurance — Q1 FY2020 Earnings Presentation
69 slides from Icici Prudential Life Insurance's earnings presentation, Jul 24, 2019
Slide 1: Performance update: Q1-FY2020
Performance update: Q1-FY2020 July 24, 2019
Slide 2: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 3: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 4: Key strategic elements
Key strategic elements Protection Premium Growth VNB Growth VNB Growth Persistency Customer centricity VNB Growth continues to be at the core Productivity Aspiration to double FY2019 VNB in 3 - 4 years 4
Slide 5: VNB growth
VNB growth ` billion Q1-FY2019 FY2019 Q1-FY2020 Value of New Business (VNB)1 2.44 13.28 3.09 VNB margin 17.5% 17.0% 21.0% 1. For full year, based on actual cost; Q1: based on management forecast of full year cost 5
Slide 6: Strategic elements (1/4)
Strategic elements (1/4) • Deepen penetration in under-served customer segments Premium • Enhance current distribution growth • Create new distribution • Augment capability in Health and Protection • Increase focus on Pension and Annuity ` billion FY2019 Q1-FY2020 APE1 77.99 14.70 YoY growth 0.1% 5.
Slide 7: Strategic elements (2/4)
Strategic elements (2/4) Protection Continue to grow both retail and group lines of business focus ` billion FY2019 Q1-FY2020 Protection APE 7.22 2.14 YoY growth 61.9% 87.7% Protection mix 9.3% 14.6% 7
Slide 8: Strategic elements (3/4)
Strategic elements (3/4) Persistency Improve persistency across all cohorts Persistency1 FY2019 2M-FY2020 13th month 84.6% 84.4% 25th month 75.6% 75.7% 37th month 69.3% 69.8% 49th month 63.8% 64.2% 61st month 56.8% 57.3% 1. Retail excluding SP computed as per IRDAI circular dated January 23, 2014 8
Slide 9: Strategic elements (4/4)
Strategic elements (4/4) Continue to leverage technology for process re- Productivity engineering and to drive productivity ` billion Q1-FY2019 FY2019 Q1-FY2020 Cost/TWRP1 17.5% 15.0% 17.0% Cost/TWRP (savings 13.7% 11.5% 11.3% LOB) 1. Total cost including commission/(Total premium- 90% of single pre
Slide 10: Key strategic elements
Key strategic elements Protection Premium Customer centricity VNB Growth Persistency Growth continues to be at the core Productivity 10
Slide 11: 4P: Premium
4P: Premium
Slide 12: Premium growth
Premium growth • Deepen penetration in under-served customer segments Premium • Enhance current distribution growth • Create new distribution • Augment capability in Health and Protection • Increase focus on Pension and Annuity APE (` billion) 77.92 77.99 13.96 14.70 FY2018 FY2019 Q1-FY2019 Q1-FY202
Slide 13: Product segments
Product segments • Deepen penetration in under-served customer segments Premium • Enhance current distribution growth • Create new distribution • Augment capability in Health and Protection • Increase focus on Pension and Annuity APE (` billion) Mix Segments Q1-FY2019 FY2019 Q1-FY2020 FY2019 Q1-FY20
Slide 14: Distribution channels
Distribution channels • Deepen penetration in under-served customer segments Premium • Enhance current distribution growth • Create new distribution • Augment capability in Health and Protection • Increase focus on Pension and Annuity APE (` billion) Mix Channels Q1-FY2019 FY2019 Q1-FY2020 FY2019 Q1
Slide 15: 4P: Protection
4P: Protection
Slide 16: Protection growth
Protection growth Protection growth • Continue to grow both retail and group lines of business APE (` billion) 7.22 4.46 2.14 1.14 FY2018 FY2019 Q1-FY2019 Q1-FY2020 Protection growth continues to be robust 16
Slide 17: 4P: Persistency
4P: Persistency
Slide 18: Persistency (retail excluding single premium)
Persistency (retail excluding single premium) Month FY2019 2M-FY2020 13th month 84.6% 84.4% 25th month 75.6% 75.7% 37th month 69.3% 69.8% 49th month 63.8% 64.2% 61st month 56.8% 57.3% As per IRDAI circular dated January 23, 2014; 18
Slide 19: Persistency (retail including single premium)
Persistency (retail including single premium) Month FY2019 2M-FY2020 13th month 86.2% 86.1% 25th month 77.4% 77.4% 37th month 71.0% 71.7% 49th month 65.0% 65.4% 61st month 58.1% 58.7% As per IRDA circular dated January 23, 2014 19
Slide 20: 4P: Productivity
4P: Productivity
Slide 21: Productivity: Cost efficiency
Productivity: Cost efficiency Q1-FY2019 FY2019 Q1-FY2020 Expense ratio (excl. commission)1 12.0% 9.5% 12.1% Commission ratio2 5.5% 5.6% 4.9% Cost/TWRP3 17.5% 15.0% 17.0% Cost/Average AUM4 2.5% 2.8% 2.3% Cost/TWRP (Savings LOB) 13.7% 11.5% 11.3% ` billion 41.94 15.51 Commission Non-Commission 8.85 26
Slide 22: VNB growth levers update (4P's)
VNB growth levers update (4P’s) ` billion Q1-FY2019 FY2019 Q1-FY2020 Value of New Business (VNB)1 2.44 13.28 3.09 VNB margin 17.5% 17.0% 21.0% ` billion FY2019 Q1-FY2020 Growth Premium growth (APE) 77.99 14.70 5.3% Protection growth (APE) 7.22 2.14 87.7% Persistency (13th month)2 84.6% 84.4% Persist
Slide 23: Financial update
Financial update
Slide 24: Financial metrics
Financial metrics ` billion Q1-FY2019 FY2019 Q1-FY2020 Growth Retail new business premium 14.91 81.40 15.33 2.8% Retail renewal premium 36.25 202.25 39.76 9.7% Group premium 4.01 25.65 8.20 104.5% Total premium 55.18 309.30 63.29 14.7% Value of New Business (VNB)1 2.44 13.28 3.09 Profit after Tax 2.
Slide 25: Technology
Technology
Slide 26: Objectives
Objectives Strengthening the Support new Be future ready core growth engines 26
Slide 27: Digital evolution path to maturity
Digital evolution path to maturity 2011-2013 2013-2015 2015-2018 2018-2019 1 2 3 4 Build digital foundation Digitize onboarding and service Leverage ecosystem Market leadership Optimize processes Build seamless presentation Collaborate with internal stakeholders IT as an enabler for and systems laye
Slide 28: Pre sales
Pre sales Lead Management Need Analysis Customer Profiler System Product recommendation Enhanced with voice Know customer better based on customer’s life capability and geo through social platforms stage, goal, risk appetite tagging Nudge Engines Cognitive BOTs Learners Box On-the-go e-learning Prom
Slide 29: Onboarding and issuance
Onboarding and issuance Flexible Paperless Instant document on-boarding on-boarding verification (OCR) Real time identification Platform agnostic and End to end digital and and verification of available for all channels seamless onboarding documents Robotic enabled AI assisted Tele underwriting issu
Slide 30: Customer servicing and claims
Customer servicing and claims Anytime.. Premium payment Intuitive IVR ..Anywhere 76% transactions self Over 60% renewal 50% navigation time serviced, omni channel premium through saved experience electronic modes Automated Service bots (LiGo) WhatsApp Claims Processing 92% good understanding AI base
Slide 31: Marketing and lead generation
Marketing and lead generation Rank high on Segmented Hyper online searches targeting personalisation Machine learning used to Reaching the customer by Personalized messaging rank us higher when mapping their interests to engage customers customers search and affinities throughout journey Truecaller
Slide 32: Partner integration
Partner integration Process Flexible integration Web portal simplification Superior customer Modular integration as Self service module for experience per the choice of partners Group business Easy UI Customer service Pre-coded pages for Enabling customer quicker integration service on partner porta
Slide 33: Analytics
Analytics Actionable insights Data modelling Smart solutions Accelerate sales, enhance Customer interaction Pre approved life cover; customer experience & based segmentation, provide best offer to personalization propensity, nudges customer Google Big Query, Data lake Hadoop, Python solution Using b
Slide 34: Embedded Value
Embedded Value
Slide 35: Embedded Value (EV)
Embedded Value (EV)1 216.23 ` billion 187.88 73.54 70.24 142.69 117.64 Mar-2018 Mar-2019 Value of inforce (VIF) Adjusted net worth (ANW) Pre dividend EV growth of 19.6% 1. As per Indian Embedded value (IEV) method Components may not add up to the totals due to rounding off 35
Slide 36: Analysis of movement in EV
Analysis of movement in EV ` billion 1.97 0.04 0.02 (1.22) (8.43) 13.28 2.66 216.23 15.84 4.20 187.88 EVOP1 = 38.01 ANW ROEV2 = 20.2% 73.54 ANW 70.24 VIF VIF 117.64 142.69 IEV (Mar 31, Unwind Operating VNB Persistency Mortality and Expense Other variance Economic Net Capital IEV (Mar 31, 2018) Assum
Slide 37: Analysis of movement in EV
Analysis of movement in EV1 ` billion FY2017 FY2018 FY2019 Opening EV 139.39 161.84 187.88 Unwind 12.21 13.72 15.84 Value of New Business (VNB) 6.66 12.86 13.28 Operating assumption changes 1.00 7.64 4.20 Persistency variance 0.99 1.53 2.66 Mortality and morbidity variance 0.98 0.78 1.97 Expense var
Slide 38: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 39: Favorable demography
Favorable demography Large and growing population base1 High share of working population1 Population of age 25-59 years (in mn) 2018 Population (mn) 1353 1428 727 578 268 327 127 146 209 51 58 Brazil China S Africa Russia USA Japan Indonesia S Korea India 2015 2030 Driving GDP growth 2 Rising afflue
Slide 40: Financialisation of savings: Opportunity for insurance
Financialisation of savings: Opportunity for insurance Household savings1 Distribution of financial savings(excluding currency)2 90 69% 70% 64% 70 60% 60% 60% 23.8% 55% 25.1% 26.7% 20.3% 54% 52% 52% 50% 29.0% 20.5% 50 48% 16.0% 44% 45% 45% 23.3% 37% 38% 40% 30 36% 18.09 31% 15.59 13.64 16.53 30% 8.5
Slide 41: Protection opportunity: Income replacement
Protection opportunity: Income replacement Protection gap 3,4 273% Sum Assured as a % of GDP1,2 270% 252% 92 56 85 33 73 78 73 56 8.56 144% 142% 6.58 113% 5.30 106% USD tn 76% 1.09 0.79 0.77 0.52 0.40 India Singapore US Malaysia Japan Korea Germany Thailand India Japan Australia Indonesia S. Korea T
Slide 42: Protection opportunity: Liability cover
Protection opportunity: Liability cover Retail credit ` billion 22,207 19,085 16,200 10,606 13,922 11,663 9,339 10,097 7,599 8,976 6,454 5,378 4,409 4,711 9,746 11,601 7,468 8,601 4,567 5,386 6,285 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 Home Loans Others • Retail credit has been growing at
Slide 43: Protection opportunity
Protection opportunity Gross direct premium (` billion) FY2009 FY2019 CAGR Health 66.23 346.95 18.0% Motor 138.21 644.55 16.6% - Motor Own Damage (OD) 87.56 264.73 11.7% - Motor Third Party (TP) 50.65 379.82 22.3% • Protection premium ~ ` 125 billion for life insurance industry in FY2019 Source: Gen
Slide 44: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 45: Evolution of life insurance industry in India
Evolution of life insurance industry in India FY2002 FY2010 FY2015 FY2018 116 408 15.9% New business premium1 (` bn) 21.5% 550 -5.8% 635 Total premium (` bn) 501 23.2% 2,654 4.3% 3,281 11.8% 4,583 Penetration (as a % to GDP) 2.1% 4.1% 2.6% 2.8% Assets under management (` bn) 2,304 24.0% 12,899 12.6%
Slide 46: Channel mix
Channel mix1 Industry Private players 8% 9% 11% 16% 18% 21% 23% 25% 27% 54% 54% 54% 69% 66% 63% 30% 28% 25% FY2017 FY2018 9MFY2019 FY2017 FY2018 9MFY2019 Agency Bancassurance Others Given a well developed banking sector, bancassurance continues to be the largest channel for private players 1. Indivi
Slide 47: Product mix
Product mix1 Industry Private players 25% 27% 27% 51% 54% 52% 75% 73% 73% 49% 46% 48% FY2017 FY2018 9MFY2019 FY2017 FY2018 9MFY2019 Non Linked Linked • Strong customer value proposition of ULIPs • Transparent and low charges • Lower discontinuance charges compared to other savings products • Choice
Slide 48: Annexures
Annexures
Slide 49: Average APE by product categories
Average APE by product categories Average retail APE per policy (`) FY2017 FY2018 FY2019 ULIP 169,701 180,746 159,329 Par 56,325 62,379 60,308 Non Par 39,153 54,187 76,468 Protection 9,815 9,123 12,048 Total 92,735 90,620 83,309 49
Slide 50: Policy term and customer age
Policy term and customer age1 Average policy term (years) Average customer age (years) 30 43 36 12 Savings Protection Savings Protection 1. For FY2019; protection excludes credit life 50
Slide 51: Channel wise product mix
Channel wise product mix1 Channel category Product category FY2017 FY2018 FY2019 ULIP 92.1% 89.8% 93.4% Par 5.3% 7.3% 2.1% Bancassurance Non par 0.4% 0.1% 0.6% Protection 2.2% 2.7% 3.9% Total 100.0% 100.0% 100.0% ULIP 79.5% 81.8% 75.3% Par 14.2% 13.5% 18.1% Agency Non par 2.0% 0.4% 0.5% Protection 4
Slide 52: Product wise channel mix
Product wise channel mix1 Channel category Product category FY2017 FY2018 FY2019 Bancassurance 62.4% 57.4% 65.5% Agency 22.0% 25.4% 20.5% ULIP Direct 12.2% 14.5% 12.0% Corporate agents and brokers 3.4% 2.7% 2.1% Total 100.0% 100.0% 100.0% Bancassurance 31.3% 35.4% 13.8% Agency 34.3% 31.5% 45.4% Par
Slide 53: Retail persistency excluding single premium
Retail persistency excluding single premium1 Persistency across product categories 86.0% 89.4% 84.8% 74.1% 79.4% 64.3% 62.7% 49.8% ULIP Par Non- Par Protection 13th month 49th month Persistency across channel categories 84.8% 88.6% 85.6% 88.5% 62.7% 64.9% 66.5% 67.9% Bancassurance Agency Direct Corp
Slide 54: Embedded value
Embedded value
Slide 55: Analysis of movement in EV
Analysis of movement in EV1 ` billion FY2015 FY2016 FY2017 FY2018 FY2019 Opening EV 117.75 137.212 139.39 161.84 187.88 Unwind 11.70 12.58 12.21 13.72 15.84 Value of New Business (VNB) 2.70 4.12 6.66 12.86 13.28 Operating assumption changes 1.60 1.042 1.00 7.64 4.20 Persistency variance 2.01 0.99 1.
Slide 56: Embedded value
Embedded value ` billion FY2017 FY2018 FY2019 Value of In force (VIF) 94.28 117.64 142.69 Adjusted Net worth 67.56 70.24 73.54 Embedded value1 161.84 187.88 216.23 Return on Embedded Value (ROEV) 16.5% 22.7% 20.2% EV growth-pre dividend 20.6% 23.4% 19.6% EV growth-post dividend 16.1% 16.1% 15.1% VNB
Slide 57: EV methodology
EV methodology • 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) • EV consists of Adjusted Net Worth (ANW) and Value of in-force covered business (VIF) • A
Slide 58: 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 suppo
Slide 59: Components of VIF (1/2)
Components of VIF (1/2) • 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 • Distributab
Slide 60: Components of VIF (2/2)
Components of VIF (2/2) • Time value of financial options and guarantees (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 embedded value
Slide 61: Components of EV movement (1/2)
Components of EV movement (1/2) • Expected return on existing business (unwind) • Expected investment income at opening reference rate on VIF and ANW • Expected excess ‘real world’ investment return over the opening reference rate on VIF and ANW • Operating assumption changes • Impact of the update
Slide 62: 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, inf
Slide 63: 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 t
Slide 64: 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 ex
Slide 65: Economic assumptions underlying VNB and EV
Economic assumptions underlying VNB and EV Tenor (years) References Rates March 31, 2018 March 31, 2019 June 30, 2019 1 6.57% 6.66% 6.28% 5 8.21% 7.83% 7.31% 10 8.31% 8.35% 7.61% 15 8.11% 8.35% 7.63% 20 7.97% 8.22% 7.62% 25 7.91% 8.11% 7.60% 30 7.88% 8.05% 7.60% 65
Slide 66: Sensitivity analysis (FY2019)
Sensitivity analysis (FY2019) Scenario % change in VNB % change in EV Increase in 100 bps in the reference rates (4.3) (2.0) Decrease in 100 bps in the reference rates 4.4 2.0 10% increase in the discontinuance rates (8.5) (1.3) 10% decrease in the discontinuance rates 8.9 1.4 10% increase in mortal
Slide 67: Glossary
Glossary • Annualized Premium Equivalent (APE) – Annualized Premium Equivalent (APE) is the sum of the 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
Slide 68: 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 69: Thank you
Thank you
ICICI Prudential Life Insurance Company — Q1 FY2020 Earnings Presentation on 6ix