Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE

Hdfc Life Insurance — H1 FY2019 Earnings Presentation

43 slides from Hdfc Life Insurance's earnings presentation, 2018

  1. Slide 1: HDFC Life Insurance Investor presentation – H1 FY19

    HDFC Life Insurance Investor presentation – H1 FY19

  2. Slide 2: Agenda

    Agenda A Performance Snapshot Key Differentiators Additional Business Information India Life Insurance Annexures 2

  3. Slide 3: Company overview

    Company overview Financial and Actuarial snapshot VNB1 13M Persistency5 Total premium Total NB IEV2 AUM PAT NB margin (Post 61M Persistency5 Growth % Growth % EVOP3 % Growth % ROE4 overrun)1 Rs 119.0 bn Rs 62.9 bn Rs 6.1 bn Rs 163.8 bn Rs 1,132.3 bn Rs 6.7 bn 87% 30% 43% 24.3% 19.6% 14% 26.4% 50% Op

  4. Slide 4: Strong premium growth and market positioning

    Strong premium growth and market positioning Consistent growth across premium categories 235.6 Rs bn 21% 119.0 30% 194.5 19% 66.1 33% 163.1 10% 91.4 19% 49.6 56% 42.7 64% 31.9 24% 26.0 28% 122.1 13% 108.2 10% 98.3 5% 47.4 10% 56.1 18% 47.4 30% 40% 12% 33.0 13% 36.6 11% 18.0 20.2 FY16 FY17 FY18 H1 FY

  5. Slide 5: Stable capital position

    Stable capital position Rs bn Dividend paid 2.2 2.6 3.3 - New business growth 18% 33% 32% 43% 90.0 230% 80.0 210% 198% 192% 192% 193% 70.0 190% 57.4 60.0 170% 52.1 50.0 12.8 150% 42.1 11.3 40.0 130% 34.3 9.1 14.9 13.6 30.0 8.4 110% 11.0 20.0 8.6 90% 27.2 29.8 10.0 22.0 70% 17.3 - 50% Mar 31, 2016 Ma

  6. Slide 6: Financial and operational snapshot (1/2)

    Financial and operational snapshot (1/2) FY16 FY17 FY18 CAGR H1 FY18 H1 FY19 Growth Key Metrics (Rs bn) New Business Premium (Indl+Group) 64.9 86.2 113.5 32% 44.0 62.9 43% Renewal Premium (Indl+Group) 98.3 108.2 122.1 11% 47.4 56.1 18% Total Premium 163.1 194.5 235.6 20% 91.4 119.0 30% Individual AP

  7. Slide 7: Financial and operational snapshot (2/2)

    Financial and operational snapshot (2/2) FY16 FY17 FY18 H1 FY18 H1 FY19 Key Ratios Overall New Business Margins (post overrun) 19.9% 22.0% 23.2% 22.4% 24.3% (1 ) Operating Return on EV 20.7% 21.7% 21.5% 21.2% 19.6% Operating Expenses / Total Premium 11.6% 12.6% 13.5% 14.2% 14.1% Total Expenses (Opex

  8. Slide 8: Agenda

    Agenda Performance Snapshot B Key Differentiators Additional Business Information India Life Insurance Annexures 8

  9. Slide 9: Key Differentiators

    Key Differentiators Balanced Market-leading Focus on distribution mix product innovation profitable growth Developing multiple channels of Effective risk management Leveraging emerging profit 1 growth to drive contextual, need-based product distribution 2 driving product designs that cater to innate

  10. Slide 10: Balanced distribution mix

    Balanced distribution mix Wide access through our 170 bancassurance and 31 non-traditional ecosystem partnerships provides us with well diversified distribution Bancassurance Agency Alliance & Ecosystems Direct (incl. Online)  Continue to ring-fence  “Agency LIFE” program with  High engagement wi

  11. Slide 11: Constant endeavour to diversify distribution mix

    Constant endeavour to diversify distribution mix Stable distribution mix (based on Individual APE) Select distribution partners 23 4% 5% 5% 4% 9% 6% Banks 11% 14% 17% 14% 11% 12% 11% 10% 11% 119 NBFCs 75% 72% 71% 69% 19 67% MFIs FY16 FY17 FY18 H1 FY18 H1 FY19 9 SFBs Bancassurance Agency Direct Broke

  12. Slide 12: Our continued protection focus

    Our continued protection focus Mortality Individual protection: Increasing share of protection (Basis NBP) 120% 40% 29%  Industry-first products meeting latent needs of customers 26% 30% 100% 22% 17%  Comprehensive protection at competitive prices 80% 20% 29% 10% Group protection: 60% 32% 24% 24%

  13. Slide 13: Expanding market through constant product innovation

    Expanding market through constant product innovation Protection term insurance coverage Tiered-benefit product focused on Assured annuity rates from a pre- for loans cancer; cover from early stage determined date 2014 2017 2011 2015 2018 ULIP with minimal charges; only cost Online protection product

  14. Slide 14: Focus on profitable growth

    Focus on profitable growth FY16 FY17 FY18 H1 FY18 H1 FY19 Rs bn New business margins 19.9% 22.0% 23.2% 22.4% 24.3% Profit after tax (PAT) 8.2 8.9 11.1 5.5 6.7 Shareholder’s surplus 1.4 1.4 2.6 1.1 1.3 Underwriting profits 6.8 7.5 8.5 4.5 5.4 15.0 10.0 19.1 Underwriting profits 14.5 14.6 breakup1 5.0

  15. Slide 15: Analysis of change in IEV

    Analysis of change in IEV Analysis of change in EV (Rs bn) Operating Return on 14.2 Embedded Value1: 19.6% 0.2 6.1 1.1 163.8 7.0 152.2 -2.8 ESOP Operating Post over- Economic exercises variances / Unwind run VNB variances Model Refinem ents 114.2 103.6 Adjusted Net worth (ANW) Value of in-force busi

  16. Slide 16: Reimagining insurance

    Reimagining insurance  Faster processing through instant data  97% policy servicing requests Real-time flow, e-KYC integration fulfilled in less than 8 hours fulfillment  Robotics-led optimization has led to  127 processes till date automated efficient processes using Robotics leading to signifi

  17. Slide 17: Quality of Board and Management

    Quality of Board and Management Experienced senior management Independent and illustrious Board Seasoned senior management team with rich experience Active, well-informed and independent Board oversees in financial services enabled a seamless leadership how the management serves and protects the int

  18. Slide 18: Agenda

    Agenda Performance Snapshot Key Differentiators C Additional Business Information India Life Insurance Annexures 18

  19. Slide 19: Assets under management

    Assets under management Assets Under Management Change in AUM for half year ended Rs bn Debt 61% 59% 61% 59% 62% Equity 39% 41% 39% 41% 38% 24% 78 66 22% 1,350 11% 16% 14% 30% 12 1,150 42 -20% 43 950 -70% 750 1,066 1,132 -120% 36 995 23 917 550 742 350 -170% (11) 150 -220% 30th Sep 2017 30th Sep 201

  20. Slide 20: Product mix across key channels

    Product mix across key channels Channel summary1 Segment FY16 FY17 FY18 H1 FY18 H1 FY19 Banca2 UL 66% 61% 64% 66% 72% Par 24% 30% 26% 25% 18% Non par protection 2% 1% 1% 1% 2% Non par others 9% 8% 9% 8% 8% Agency UL 25% 26% 33% 26% 23% Par 56% 57% 48% 54% 52% Non par protection 13% 11% 11% 13% 12% N

  21. Slide 21: Individual persistency for key channels and segments

    Individual persistency for key channels and segments Across key channels 88% 86% 82% 85% 83% 81% 77% 81% 76% 76% 75% 70% 68% 64% 63% 59% 62% 51% 47% 49% Agency Banca Direct Company 13th month 25th Month 37th Month 49th Month 61st Month Across key segments 95% 92% 86% 83% 87% 84% 85% 83% 79% 80% 78%

  22. Slide 22: Indian Embedded Value (IEV)

    Indian Embedded Value (IEV)1 Rs bn Value of InForce business (VIF) 49.6 163.8 140 121.5 120 114.2 100 -0.2 -1.3 -5.8 80 60 40 20 - Present Value of Time Value of Frictional Cost Cost of Residual VIF Adjusted Networth Embedded value Future Profits Financial Options (FC) Non Hedgeable (EV) (PVFP)2 and

  23. Slide 23: Value of new business (VNB) and NBM walkthrough

    Value of new business (VNB) and NBM walkthrough1 Rs bn NBM 22.4% - 1.2% 0.4% 0.3% 24.3% 0.10 0.08 6.10 0.30 0.86 4.78 H1 FY18 Impact of higher Change in New Business Expense impact H1 FY19 APE assumptions 2 Profile 3  Higher VNB driven by growth in new business and favourable product mix Note: 1. B

  24. Slide 24: Sensitivity analysis – H1 FY19

    Sensitivity analysis – H1 FY19 Change in VNB Analysis based on key metrics Scenario % Change in VNB1 % Change in EV Margin1 Change in Increase by 1% 0.85% 0.21% -2.00% Reference rate Decrease by 1% -2.30% -0.56% 2.10% Equity market Decrease by 10% -1.03% -0.25% -1.60% movement Increase by 10% -3.47%

  25. Slide 25: Operating expense trend

    Operating expense trend 0.3% -1.0% 0.6% 14.2% 14.5% 13.5% 14.1% 14.1% H1 FY18 One-off H1 FY18 excl Fixed expenses Variable H1 FY19 reversals one-off expenses reversals  Continue to focus our efforts in improving efficiency and rationalising costs through our various internal initiatives o Vendor ne

  26. Slide 26: Performance of wholly-owned subsidiary companies

    Performance of wholly-owned subsidiary1 companies  HDFC Pension market share grew from 21.4% in Mar’18 to 24.0% in Sep’18 amongst all Pension Fund Managers (PFM) HDFC Pension  HDFC Pension ranks #1 in Corporate subscribers base, #2 amongst all PFMs in Net Fund Flow, Retail subscriber base and AUM

  27. Slide 27: Agenda

    Agenda Performance Snapshot Key Differentiators Additional Business Information D India Life Insurance Annexures 27

  28. Slide 28: Growth opportunity – Under-penetration vs global benchmarks

    Growth opportunity – Under-penetration vs global benchmarks Life insurance penetration Life insurance density US$ Protection gap (2014) (2017) (2017) 17.9% 6.756 92.2% 88.3% 14.6% 78.4% 73.3% 72.5% 70.2% 4,195 56.3% 56.0% 3,835 6.6% 6.3% 2,411 3.6% 3.3% 339 2.8% 2.7% 237 16.4% 225 55 India India Mal

  29. Slide 29: Growth opportunity – Favourable demographics

    Growth opportunity – Favourable demographics Life expectancy (Years)1 Population composition (bn)1 75.0 1.3 1.6 1.7 6% 9% 15% 71.9 56% 61% 67.6 60% 38% 30% 25% 2015 2035 2055 2015 2035 2055 Less than 20 years 20-64 years 65 years and above  India's insurable population is anticipated to touch 750 m

  30. Slide 30: Life insurance – A preferred savings instrument

    Life insurance – A preferred savings instrument Household savings composition Financial savings mix 23% 25% 22% 16% 3% 11% 11% 12% 15% 9% 13% 18% 16% 15% 51% 52% 26% 67% 58% 25% 65% 67% 50% 44% 49% 48% 42% 33% FY07 FY10 FY13 FY17 FY07 FY10 FY13 FY17 Financial savings Physical savings Currency & depo

  31. Slide 31: Industry new business trends

    Industry new business1 trends Individual WRP in Rs bn Sensex Private players 35% 50% 57% 52% 46% 37% 38% 38% 49% 52% 54% 56% 56% market share Growth % Private 99% 86% 1% 7% -20% -24% 2% -3% 16% 14% 26% 24% 11% 88% 0% -22% 29% 4% 11% -4% -2% -27% 3% 15% 13% 8% LIC 92% 31% -10% 17% -9% -5% -2% -3% -11

  32. Slide 32: Private industry – Market share trends

    Private industry – Market share trends Top 7 private players vs other players  Amongst private insurers, insurers with a strong bancassurance platform continue to dominate with increasing market share of the total private individual new business Notes: 1. Basis Individual Weighted Received Premium

  33. Slide 33: Private industry – Product and distribution mix

    Private industry – Product and distribution mix Product mix1 Distribution mix2 Unit Linked Conventional Individual Agents Corporate Agents - Banks Corporate Agents - Others Brokers Direct Business 67% 60% 63% 4% 6% 7% 9% 10% 10% 57% 5% 12% 5% 5% 3% 52% 51% 49% 54% 4% 5% 4% 3% 3% 48% 8% 6% 3% 3% 3% 4

  34. Slide 34: Annexures

    Annexures

  35. Slide 35: Revenue and Profit & Loss A/c

    Revenue and Profit & Loss A/c Rs bn Particulars FY17 FY18 H1 FY18 H1 FY19 Gross Premium Income 194.4 235.6 91.4 119.0 Reinsurance (net) (1.7) (1.9) (0.9) (1.2) Net Premium Income (A) 192.7 233.7 90.5 117.8 Income from Investments Policyholders 111.4 86.0 52.8 28.9 Shareholders 2.3 2.8 1.2 1.5 Total

  36. Slide 36: Balance Sheet

    Balance Sheet Rs bn 31st Mar 31st Mar 30th Sep Particulars 2017 2018 2018 SOURCES OF FUNDS Capital invested (Share capital + Premium) 21.9 23.3 23.5 Reserves and Surplus 16.2 23.9 30.6 Credit / (Debit) Fair Value Change Account 0.3 0.3 (0.0) Sub-Total 38.4 47.5 54.1 Policy Liabilities 323.8 423.2 47

  37. Slide 37: Segment wise average term and age

    Segment wise average term and age1 Average Policy Term (Yrs) Average Customer Age (Yrs) H1 FY19: 14.9 (H1 FY18: 14.5) H1 FY19: 36.8 (H1 FY18: 37.2) UL 11 UL 39 11 40 Par 15 37 15 Par 37 Non-par Health 10 35 11 Non-par Health 34 Non-par Savings 14 31 15 Non-par Savings 30 Non-par Protection 33 35 33

  38. Slide 38: 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

  39. Slide 39: Embedded Value: Methodology and Approach (2/2)

    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 shareholde

  40. Slide 40: Embedded Value: Economic assumptions

    Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Sep 30, 2018 As at Sep 30, 2017 As at Sep 30, 2018 As at Sep 30, 2017 1 7.69 6.29 7.41 6.10 2 8.33 6.57 7.70 6.23 3 8.57 6.93 7.88 6.39 4 8.67 7.23 7.99 6.53 5 8.72 7.44 8.06 6.66 10 8.73 7.77 8.22 7.04 15 8.62 7.80 8.25

  41. Slide 41: Glossary

    Glossary  APE (Annualized Premium Equivalent) - The sum of annualized first year regular premiums and 10% weighted single premiums and single premium top-ups  Conservation ratio - Ratio of current year renewal premiums to previous year's renewal premium and first year premium  First year premiums

  42. Slide 42: 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 Standard Life Insurance Company Limited (“HDFC Life” or the “Company”) in India, the Un

  43. Slide 43: Thank you

    Thank you Superbrand

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