Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE

Hdfc Life Insurance — Motilal Oswal CEO track 2020

15 slides from Hdfc Life Insurance's conference presentation, Aug 24, 2020

1. Slide 1: Life Insurance: A Business of Risk Management

   Life Insurance: A Business of Risk Management Motilal Oswal CEO track | Aug 24, 2020 Vibha Padalkar, MD & CEO, HDFC Life This is the sole and exclusive property of HDFC Life. August 25, 2020

2. Slide 2: Competition reduces as we approach the core

   What are life insurance companies supposed to do for their customers? Competition reduces as we approach the core …..and Risk of inflation & interest rate movements Banks AMCs Life many (>2100) (>45) Insurers (24) Gold more! Risk of falling ill Health / General Insurers (34) Life Insurers (24) Risk

3. Slide 3: And how are they expected to generate value?

   And how are they expected to generate value? Spread Risk charge Savings Annuity Protection Market-linked Traditional Term Health 3

4. Slide 4: What we've seen in India till the early 2000s was mainly focused on mobilising savings

   However, what we’ve seen in India till the early 2000s was mainly focused on mobilising savings LIC of India is formed Opening up of private sector Absorbing many Indian & Non- New licenses issued and a Indian insurers competitive environment ushered in 1956 2000 1960-99 The monoline industry era On

5. Slide 5: Private insurers decided to find their own path... with ULIP

   After trying to emulate LIC for a while, private insurers decided to find their own path... with ULIP Private industry product mix 1 5% 50% 71% 82% 89% 86% 83% 92% 95% 50% ............ 29% 18% 11% 14% 17% 8% 2001 2004 2005 2006 2007 2008 2009 2010 Traditional ULIP The new product category mobilised

6. Slide 6: At HDFC Life, we charted our independent, unique path introducing innovative products

   At HDFC Life, we charted our independent, unique path introducing innovative products that helped address customer concerns Retirement  Early commitment to the category   Online sale of protection Credit Life Popularized with our flagship Click2Protect Leveraged a prominent white space Low charge

7. Slide 7: These propositions were directed at real customer needs across their lifespans

   These propositions were directed at real customer needs across their lifespans 20 – 30 years 30 – 40 years 40 – 50 years 50+ years Objective Simple Savings Borrowing Investments Asset Drawdown Gold / real estate less attractive Pay off Retired folks wanting Youngsters buying to pursue interests hous

8. Slide 8: Our propositions were all centered around the core of risk management

   Our propositions over the years were all centered around the core of risk management Mortality Longevity (Risk of dying early) (Risk of living too long) Morbidity Interest rate (Related to illness / disease) (Related to investments, managing guarantees) 8

9. Slide 9: But risk management can be tricky…

   But risk management can be tricky… Being a first mover, Frauds, lack of might get it wrong hedging options Capital strain, Not enough losing street credible data credibility 9

10. Slide 10: The science behind our risk management

    So, what is the science behind our risk management that helps HDFC Life stay balanced on the rope? 1 2 Operational risks Mortality Longevity (Persistency, Mortality, (Risk of dying early) (Risk of living too long) Expense) Risks we cover for Risks intrinsic to our our customers business Morbidity In

11. Slide 11: Risk management measures: Mortality & Morbidity

    Risk management measures: Mortality & Morbidity 1 2 3 4 Reducing incidence of Limiting impact on Balancing price and Strong governance fraud & early claims profitability & solvency risk & audits @Partners Analytics and Data Enrichment Reinsurance Active re-pricing TPAs & medical centers AI-ML based

12. Slide 12: Risk management measures: Longevity & Interest rate

    Risk management measures: Longevity & Interest rate 1 2 3 4 Validation Natural hedges & Product design & mix monitoring Prudent ALM approach Residual strategy Naturally hedged product lines Prudent pricing assumptions Target cash flow matching Stress test scenarios For Non-par savings + Group protec

13. Slide 13: Risk management measures: Operational and Economic

    Risk management measures: Operational and Economic 1 Operational risks 2 Economic risks Balanced product mix Mortality assumptions Conservative investment strategy To manage risk emerging from market Regular, granular review of experience vs GSecs or AAA rated securities (~97%); volatility assumptio

14. Slide 14: In conclusion

    In conclusion Sensitivity of key Change in % Change risk factors (FY20) Scenario Non par VNB Margin in EV 1% -0.7% -1.2% VNB Margin EV Reference rate -2.0% -1.3% 1% 0.2% 0.6% 1.7% 0.0% Equity Market 10% -0.1% -1.1% movement Key takeaways: 10% -0.5% -0.7%  We are in the business of risk transfer, wh

15. Slide 15: Thank You

    Thank You

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