Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — Q1 FY24 Earnings Presentation
46 slides from Hdfc Life Insurance's earnings presentation, Jul 21, 2023
Slide 1: Exchange cover letter
July 21, 2023 Ref. No: HDFC Life/CA/2023-24/39 Listing Department Listing Department National Stock Exchange of India Limited BSE Limited Exchange Plaza, Plot No C/1, Block G, Sir PJ Towers, Bandra-Kurla Complex, Dalal Street, Bandra (East), Fort, Mumbai- 400 051 Mumbai – 400 001 NSE Symbol: HDFCLIF
Slide 2: Press release - performance for quarter ended June 30, 2023
PRESS RELEASE - PERFORMANCE FOR THE QUARTER ENDED JUNE 30, 2023 BSE Code: 540777 NSE Code: HDFCLIFE Value of new business grew by 18% aided by robust premium (APE) growth of 13%; Overall market share (Individual WRP) expansion to 10.6% • Private market share of 16.4% compared to 15.8% last year • Re
Slide 3: Key Financial Summary
We are proud to be recognized as one of India's top 10 best companies to work for by Great Place to Work. We are the only insurance company to receive this recognition, which is a testament to our unwavering commitment to creating a people-centric workplace. While we remain optimistic about growth o
Slide 4: Definitions and abbreviations
Distribution mix by Indl APE (Corp Agents/ 61/20/8/12 52/19/8/21 56/20/11/13 60/14/6/19 Agency/ Broker/ Direct) Notes: Percentages may not add up due to rounding off effect 1. VNB and NBM for the pre-merger entity (excl. Exide Life) in Q1 FY23 was Rs 510 Cr and 26.8% respectively *Numbers are on a m
Slide 5: About HDFC Life
• Total premium - Total received premiums during the year including first year, single and renewal premiums for individual and group business • Weighted received premium (WRP) - The sum of first year premium received during the year and 10% of single premiums including top-up premiums About HDFC Lif
Slide 6: Disclaimer
Disclaimer 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 forward
Slide 7: Investor Presentation – Q1 FY24
Investor Presentation – Q1 FY24
Slide 8: Executive summary: Q1 FY24
Executive summary: Q1 FY24 Revenue & Scale Profitability & Cost Customer & Capital Growth 12% CY 26.2% CY 87% Individual New Business 13th month WRP Market Margin (NBM)1 persistency PY 25.1% PY 87% 16.4% Share Rs (Bn.) 58.0 Rs (Bn.) 6.1 Overall 99.6% Renewal VNB1 Claim settlement premium Growth 18%
Slide 9: Agenda
Agenda 1 Performance Snapshot 2 Business Overview 3 Other Business Highlights 4 Life insurance in India Page 3
Slide 10: Consistent, predictable, sustained performance
Consistent, predictable, sustained performance Rs bn Holistic growth Consistent track record over multiple periods New business premium Renewal premium VNB 291 284 150 142 55 93 36.7 26.8 FY15 FY19 FY23 FY15 FY19 FY23 21.9 15.4 12.8 9.2 Protection new business1 Annuity new business 84.4 FY17 FY18 FY
Slide 11: Consistent performance across business cycles
Consistent performance across business cycles Change in ULIP tax Change in traditional exemption limit savings tax exemption limit Open architecture Covid-19 pandemic ▪ Tax exemption removed ▪ Tax exemption removed for for policies > Rs 2.5 lakh policies > Rs 5 lakh ▪ Banks allowed to tie up ▪ Lockd
Slide 12: Consistently outpacing industry and gaining market share
Consistently outpacing industry and gaining market share1 HDFC Life market share trend HDFC Life 19% 17% 27% 27% Growth ▪ Delivered strong performance across all Pvt. mkt 5% 8% 22% 24% growth metrics while increasing market share between Overall 6% 3% 16% 19% FY19 and FY23 Industry growth ✓ Overall
Slide 13: Robust delivery across key metrics (1/2)
Robust delivery across key metrics (1/2) Sustained performance Strong CP volumes on the back of higher disbursements1 Rs bn Individual NOP Individual WRP (in ‘000s) Pvt. mkt 15.8% 16.4% share -19% 55% 46% 37% YoY 9% 12% growth 19.0 77.4 206.9 53.0 16.9 190.6 34.2 19.6 Q1 FY23 Q1 FY24 Q1 FY23 Q1 FY24
Slide 14: Robust delivery across key metrics (2/2)
Robust delivery across key metrics (2/2) Rs bn Stable Persistency Strong VNB growth along with steady margin expansion 25.1% 26.2% 87% 87% ▪ Multiple pools of ▪ Focus on quality of profitability contributing business and providing 52% 53% to VNB accretion superior customer experience_ ▪ VNB growth o
Slide 15: Agenda
Agenda 1 Performance Snapshot 2 Business Overview 3 Other Business Highlights 4 Life insurance in India Page 9
Slide 16: Key elements of our strategy
Key elements of our strategy 1 2 3 4 Profitable growth Diversified Customer first Risk management distribution mix & board Ensuring Creating superior governance sustainable and Developing multiple product propositions profitable growth channels of growth and customer Maintaining focus on by identify
Slide 17: Focus on profitable growth
Focus on profitable growth Q1 Q1 Rs bn FY21 FY22 FY23 FY23 FY24 Profitable growth 26.2% Economic New business Margin 26.1% 27.4% 27.6% 25.1% Profit Value of new business 21.9 26.8 36.7 5.2 6.1 Profit after tax (PAT) 13.6 3.6 4.2 distribution 12.1 13.6 Diversified Accounting mix Profit Underwriting p
Slide 18: Profit emergence
Emergence of Existing Business (EB) Surplus Profit Emergence 80 EB Surplus emergence as a % of VIF 30% Profitable 25% 24% 24% growth 70 25% Traditional Savings Protection ULIP 20% 19% (Longer Tenure) (Ind+Grp) 60 20% 50 15% distribution Diversified 0%-1% mix 20%-25% 40 10% 30%-35% 20%-25% 55% - 60%
Slide 19: Analysis of change in IEV
Analysis of change in IEV Rs bn EVOP – 15.0 EVOP%1 - 16.0% Profitable growth 1.0 8.1 0.1 418.4 7.9 6.1 395.3 Economic ESOPs VNB Operating Unwind variances variances distribution Diversified mix 283.8 267.4 Customer first Adjusted Net worth (ANW) Value of in-force business (VIF) & governance manageme
Slide 20: Diversified distribution enabled by multiple levers
Diversified distribution enabled by multiple levers Proprietary1 Banks, NBFCs, SFBs and Other CAs 12% YoY increase in Proprietary1 Profitable growth new agent licenses 1.9L+ Agents Highest agent additions distribution in last FY Diversified 483 Branches mix 48 Digital Branches2 ~900 new HDFC Bank Ba
Slide 21: Diversified distribution mix growth strategy
Diversified distribution mix growth strategy Agency Other Key Alliances Profitable growth • Segregating Growth (tier 1) and • Gained significant experience of Focus (tier 2/3) markets working in multi-tie • Developing micro market • Tie-ups with partners with distribution Diversified strategy strong
Slide 22: Product mix across key channels
Product mix across key channels1 Q1 Q1 Q1 Q1 Segment FY21 FY23 Segment FY21 FY23 FY23 FY24 FY23 FY24 UL 27% 24% 30% 32% UL 10% 10% 12% 12% Profitable Banca 2 Agency growth Par 37% 27% 30% 26% Par 37% 33% 41% 32% Non par savings 30% 42% 33% 30% Non par savings 39% 49% 36% 44% Term 4% 3% 4% 5% Term 11
Slide 23: 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 24: Financial risk management framework
Financial risk management framework Natural hedges Product design & mix monitoring ▪ Profitable Prudent assumptions and pricing approach ▪ growth Protection and longevity businesses ▪ Unit linked and non par savings products ▪ Return of premium annuity products (>95% of annuity); Average age at entr
Slide 25: Aligned to make life simpler for customers
Aligned to make life simpler for customers Profitable growth 1 3 5 distribution Diversified mix Give me a Accelerate SERVICE Give me PLATFORMS simple journey JOURNEY SIMPLIFICATION frictionless Nudge me in independent from purchase SIMPLIFICATION for connect and my world buying / service personaliza
Slide 26: Journey Simplification: Easier customer journey via digital integrations
Journey Simplification: Easier customer journey via digital integrations Instacheck: Easing customer journey by document collection and eligibility Profitable check at quote level itself growth distribution Diversified Improve customer experience and reduce the TATs by minimizing the mix requirement
Slide 27: Project Inspire: 'Future Proofing' HDFC Life
Project Inspire: ‘Future Proofing’ HDFC Life 01 02 03 04 Profitable growth ‘Digitally-enabled’ Improved customer- Operational efficiency Organizational agility Distribution centricity distribution Diversified mix Seamless onboarding of Evolution from customer Cross-sell, up-sell and Future-of-work r
Slide 28: Agenda
Agenda 1 Performance Snapshot 2 Business Overview 3 Other Business Highlights 4 Life insurance in India Page 22
Slide 29: Persistency trends for HDFC Life
Persistency trends for HDFC Life Across key channels (%) CY (Q1 FY24) 88 86 90 87 83 79 78 78 78 72 71 73 64 67 65 65 54 53 57 53 Agency Banca Direct Company 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (Q1 FY23) 92 88 87 87 81 82 82 75 76 78 71 74 64 65 65 67 63
Slide 30: VNB and NBM walkthrough
VNB and NBM walkthrough Including Exide Life in Q1 FY23 base Rs bn 6.1 0.7 0.0 0.1 0.1 5.2 Q1 FY23 Impact of higher APE Change in assumptions New Business Profile1 Fixed cost absorption Q1 FY24 NBM% 25.1% 0.0% 0.1% 0.5% 0.5% 26.2% Excluding Exide Life in Q1 FY23 base 1.1 0.0 0.1 0.3 6.1 5.1 Q1 FY23
Slide 31: Sensitivity analysis – FY23
Sensitivity analysis – FY23 Change in VNB Analysis based on key metrics Scenario % Change in EV Margin 1 Change in Increase by 1% -1.5% -2.4% Reference rate Decrease by 1% 0.7% 2.1% Equity Market Decrease by 10% -0.1% -1.3% movement Increase by 10% -0.3% -0.3% Persistency (Lapse rates) Decrease by 1
Slide 32: Summary of Milliman report on our ALM approach – FY23
Summary of Milliman report on our ALM approach – FY23 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 33: ESG at a glance
ESG at a glance The 5 Pillars Environment Social Governance of ESG • Launched Employee Resource Groups • ESG governed by the Board CSR & ESG • Board approved Environment and 1. Ethical Conduct & (ERGs) - Women in insurance, Life of Pride Committee and driven by the ESG Climate Change Policy Governan
Slide 34: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) Rs bn. Q1 FY24 Q1 FY23 Growth FY23* FY22 FY21 CAGR New Business Premium (Indl. + Group) 58.7 49.5 19% 290.9 241.5 201.1 19% Renewal Premium (Indl. +Group) 58.0 51.0 14% 284.5 218.1 184.8 23% Total Premium 116.7 100.5 16% 575.3 459.6 385.8 21% Individual APE 1
Slide 35: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) Q1 FY24 Q1 FY23 FY23* FY22 FY21 Overall New Business Margins (post overrun) 26.2% 25.1% 27.6% 27.4% 26.1% Operating Return on EV 16.0% 15.7% 19.7% 16.6% 18.5% Total Expenses (OpEx + Commission) / Total Premium 19.8% 19.6% 19.8% 16.5% 16.4% (1) Return on Equit
Slide 36: Segment wise average term and age
Segment wise average term and age1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) Q1FY24: 22.8 (Q1FY23: 23.2) Q1FY24: 36.0 (Q1FY23: 35.5) UL 13 UL 37 12 37 Par 35 Par 34 37 33 Non-par Health 19 Non-par Health 32 25 34 Non-par Savings 13 Non-par Savings 38 13
Slide 37: Agenda
Agenda 1 Performance Snapshot 2 Business Overview 3 Other Business Highlights 4 Life insurance in India Page 31
Slide 38: Growth opportunity: Under-penetration and favorable demographics
Growth opportunity: Under-penetration and favorable demographics Life Insurance penetration 1 Life Insurance density US$ 2 (FY 2022) (FY 2022) 19.2% ▪ India remains vastly under-insured, both in 8,433 terms of penetration and density 14.0% 5,414 ▪ Huge opportunity to penetrate the 7.6% 3,772 underse
Slide 39: Low levels of penetration: Life protection
Low levels of penetration: Life protection 1 3 Protection gap (2019) Sum Assured as a % of GDP 2 Trend of retail loans (Rs Tn.) 332% 83.0% 74.0% 53 71.0% 70.0% 252% 251% 61.0% 44 55.0% 34 41.0% 153% 143% 127% 24 17 85% 12 62% 23% India Malaysia Thailand China Japan Singapore Hong Singapore Japan USA
Slide 40: 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 3%* of GDP retirement period of 20 years Life expectancy at age 60 146.2 20 19 18 17 18 17 98.3 16 15 90.1 54.0 31.3 3.0 India Japan Hong Kong Canada USA Au
Slide 41: Government bond auctions
Government bond auctions Government Bonds – Tenorwise Issuance Rs cr 27% 21% 29% 35% 35% 28% 29% 34% 38% 73% 79% 71% 65% 65% 72% 71% 66% 62% FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24 <=15 yrs >15 yrs FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24 <=15 yrs 3,66,500 3,73,525 4,97,579 3,82,941 4,4
Slide 42: Industry new business trends
Industry new business trends 1 Product mix 61% 60% 57% 51% 51% 684 49% 49% 43% 39% 40% Individual WRP in Rs bn 452 401 356 287 291 305 FY15 FY17 FY19 FY21 FY22 245 200 208 Unit Linked Conventional 2 116 Distribution mix 63 9% 10% 14% 16% 15% 5% 3% 3% 3% 5% FY15 FY17 FY19 FY21 FY23 Q1 FY24 50% 57% Pr
Slide 43: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 22% 18% 22% 20% 0% 8% 15% 15% 22% 19% 18% 21% 17% 23% 55% 59% 52% 68% 16% 17% 67% 56% 48% 45% 41% 48% 38% 32% FY13 FY16 FY20 FY22 FY13 FY16 FY20 FY22 Financial savings Physical savings Currency & depos
Slide 44: Reasons for buying insurance – Tax as a reason has declined
Reasons for buying insurance – Tax as a reason has declined Top reasons to buy life insurance 1 Customer behaviour / trend 2 2019 rank 2013 rank Protect family in case of death 1 1 To secure child’s education/marriage 2 2 Macro-level • State of the economy Economy • Stock market Old age security/ret
Slide 45: 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 46: Thank You
Thank You
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