Icici Prudential Life Insurance Co. Ltd. · NSE:ICICIPRULI
Icici Prudential Life Insurance — Investor Presentation (November 2019)
75 slides from Icici Prudential Life Insurance's investor presentation, Nov 7, 2019
Slide 1: Investor presentation cover letter
flICICI PRLDENTIAL1~/ LIFE INSU November 7, 2019 General Manager Vice President Listing Department Listing Department BSE Limited, National Stock Exchange of India Limited Phiroze Jeejeebhoy Tower, , 'Exchange Plaza', Dalal Street, Bandra-Kurla Complex, Mumbai 400 001 Sandra (East), Mumbai 400 051 D
Slide 2: Performance update
ICICI PRLDENT1AL1~l L I F E I N S U R A ·N Performance update November 07, 2019
Slide 3: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview ICICI PRLDEN11AL-n1 LIFE N SUIA
Slide 4: October 2019 update
October 2019 update :· . . -._ . . - . r . . I . . ~ RlllENTLAL , JJ ICICI P1 I I.I. FE INSU,R
Slide 5: Premium growth
Premium growth ` billion FY2019 H1-FY2020 October 2019 7M-FY2020 APE1 77.99 33.69 5.90 39.59 YoY growth 0.1% (0.4%) 15.9% 1.8% RWRP2 70.95 30.49 5.53 36.02 YoY growth (4.9%) (3.2%) 17.9% (0.4%) 1. Annualized premium equivalent (~l 1VLLN3CTR:lcl 1::,1::,1. :il:111 ,n S N ! N\fH 2. Retail weighted rec
Slide 6: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview ICICI PRLDEN11AL-n1 LIFE N SUIA
Slide 7: 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 the FY2019 VNB in 3 - 4 years :· . . -._ . . - . r . . I . . ~ ICICI PiRlllENTLAL , jJJ I I.I. FE INSU,RA 6
Slide 8: VNB growth
VNB growth ` billion H1-FY2019 FY2019 H1-FY2020 Value of New 5.90 13.28 7.09 Business (VNB)1 VNB margin 17.5% 17.0% 21.0% 1. For full year, based on actual cost; H1: based on management forecast of full year cost (~l 1VLLN3CTR:lcl 1::,1::,1. :il:111 ,n S N ! N\fH 7
Slide 9: Strategic elements (1/4)
Strategic elements (1/4) • Deepen penetration in under-served customer segments • Enhance current distribution Premium • Create new distribution growth • Augment capability in Health and Protection • Increase focus on Pension and Annuity ` billion FY2019 H1-FY2020 APE1 77.99 33.69 YoY growth 0.1% (0
Slide 10: Strategic elements (2/4)
Strategic elements (2/4) Protection Continue to grow both retail and group lines of business focus ` billion FY2019 H1-FY2020 Protection APE 7.22 4.97 YoY growth 61.9% 86.8% Protection mix 9.3% 14.8% (~l l\fl..LN3Cftld 1::,1::,1. 1 :il:111 ,n S N ! N\fH 9
Slide 11: Strategic elements (3/4)
Strategic elements (3/4) Persistency Improve persistency across all cohorts Persistency1 FY2019 5M-FY2020 13th month 84.6% 83.6% 49th month 63.8% 63.7% 1. Retail excluding SP computed as per IRDAI circular dated January 23, 2014 (~l l\fl..LN3Cftld 1::,1::,1. 1 :il:111 ,n S N ! N\fH 10
Slide 12: Strategic elements (4/4)
Strategic elements (4/4) Continue to leverage technology for process re- Productivity engineering and to drive productivity ` billion H1-FY2019 FY2019 H1-FY2020 Cost/TWRP1 16.1% 15.0% 16.6% Cost/TWRP 12.7% 11.5% 11.0% (savings LOB) 1. Total cost including commission/(Total premium- 90% of single pre
Slide 13: Key strategic elements
Key strategic elements Protection Premium Customer centricity VNB Growth Persistency Growth continues to be at the core Productivity 12
Slide 14: 4P: Premium
4P: Premium
Slide 15: 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 H1-FY2019 FY2019 H1-FY2020 FY2019 H1-FY20
Slide 16: 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 H1-FY2019 FY2019 H1-FY2020 FY2019 H1
Slide 17: 4P: Protection
4P: Protection
Slide 18: Protection growth
Protection growth Protection growth • Continue to grow both retail and group lines of business APE (` billion) 7.22 4.97 4.46 2.66 FY2018 FY2019 H1-FY2019 H1-FY2020 Protection growth continues to be robust 17
Slide 19: 4P: Persistency
4P: Persistency
Slide 20: Persistency (retail excluding single premium)
Persistency (retail excluding single premium) Month FY2019 5M-FY2020 13th month 84.6% 83.6% 25th month 75.6% 75.0% 37th month 69.3% 69.1% 49th month 63.8% 63.7% 61st month 56.8% 57.2% As per IRDAI circular dated January 23, 2014 19
Slide 21: Persistency (retail including single premium)
Persistency (retail including single premium) Month FY2019 5M-FY2020 13th month 86.2% 85.5% 25th month 77.4% 76.8% 37th month 71.0% 71.3% 49th month 65.0% 64.9% 61st month 58.1% 58.6% As per IRDAI circular dated January 23, 2014 20
Slide 22: 4P: Productivity
4P: Productivity
Slide 23: Productivity: Cost efficiency
Productivity: Cost efficiency H1-FY2019 FY2019 H1-FY2020 Expense ratio (excl. commission)1 10.5% 9.5% 11.3% Commission ratio2 5.6% 5.6% 5.3% Cost/TWRP3 16.1% 15.0% 16.6% Cost/Average AUM4 2.7% 2.8% 2.5% Cost/TWRP (Savings LOB) 12.7% 11.5% 11.0% ` billion 41.94 Commission 19.47 26.43 20.77 Non Commis
Slide 24: VNB growth levers update (4P's)
VNB growth levers update (4P’s) ` billion H1-FY2019 FY2019 H1-FY2020 Value of New Business (VNB)1 5.90 13.28 7.09 VNB margin 17.5% 17.0% 21.0% ` billion FY2019 H1-FY2020 Growth Premium growth (APE) 77.99 33.69 (0.4%) Protection growth (APE) 7.22 4.97 86.8% Persistency (13th month)2 84.6% 83.6% Persi
Slide 25: Financial update
Financial update
Slide 26: Embedded Value (EV)
Embedded Value (EV)1 226.80 ` billion 216.23 192.48 77.31 73.54 66.45 142.69 149.49 126.03 Sep-18 Mar-19 Sep-19 Value of Inforce (VIF) Adjusted net worth (ANW) VIF grew by 18.6% over September 2018 1. As per Indian Embedded value (IEV) method 25
Slide 27: 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 28: Financial metrics
Financial metrics ` billion H1-FY2019 FY2019 H1-FY2020 Growth Retail new business premium 36.03 81.40 36.04 0.0% Retail renewal premium 86.59 202.25 91.26 5.4% Group premium 9.38 25.65 17.89 90.8% Total premium 132.00 309.30 145.20 10.0% Value of New Business (VNB)1 5.90 13.28 7.09 20.2% Profit afte
Slide 29: Technology initiatives
Technology initiatives
Slide 30: Objectives
Objectives Strengthening the Support new Be future ready core growth engines 29
Slide 31: Insta-insure
Insta-insure Data analytics based real time offers for customers Applying data Endeavour towards customer delight by ensuring the following analytics on customers’ occupation, health, Reduced clicks for faster No financial documents onboarding journey required financial and social scores available w
Slide 32: AI in servicing
AI in servicing • To help customer service executive to understand customer better For customer • Next best action prediction, churn prediction, payment bounce service prediction, pitch product to customer etc. For due • To identify cases which should go for risk verification diligence • To identify
Slide 33: Nudge
Nudge Appropriate, short, crisp message for positive influence & appropriate actions Design We have the • Place holder in all frontline facing applications capability to send customized Notification feed messages to • Configurable nudge engine design frontline personnel to help them in Approach achi
Slide 34: Claim for sure
Claim for sure With this service, 1 Day Death Claim Settlement is available for the following we promise to settle death claims in 1 day* All mandatory Total claim Policies that claim Interest will be paid amount of all Claim does have been documents on claim amount the policies is not require activ
Slide 35: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 36: Favorable demography
Favorable demography Large and growing population base1 High share of working population1 2018 Population (mn) Population of age 25-59 years (in mn) 1353 1428 727 578 268 327 127 146 209 51 58 China Japan Brazil S Africa Russia USA Indonesia India S Korea 2015 2030 Driving GDP growth 2 Rising afflue
Slide 37: 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% 61% 60% 23.8% ` tn 54% 55% 52% 52% 50% 25.1% 48% 26.7% 20.3% 50 45% 45% 29.0% 44% 20.5% 37% 38% 40% 16.0% 23.3% 30 36% 18.09 31% 15.59 13.64 16.53 3
Slide 38: Protection opportunity: Income replacement
Protection opportunity: Income replacement Sum Assured as a % of GDP1,2 Protection gap 3,4 273% 270% 92 56 85 33 73 78 73 56 252% 8.56 6.58 144% 142% 5.30 113% 106% 78% 1.09 0.79 0.77 0.52 0.40 • Sum assured as % of GDP low compared to other countries • Protection gap for India US $ 8.56 trillion 1.
Slide 39: Protection opportunity: Liability cover
Protection opportunity: Liability cover Retail Credit ` billion 22,207 19,085 16,200 13,922 10,606 11,663 9,339 8,976 10,097 7,599 6,454 4,711 5,378 4,409 11,601 7,468 8,601 9,746 4,567 5,386 6,285 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 Home Loans Others • Retail credit has been growing at
Slide 40: 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 41: Agenda
Agenda • Company strategy and performance • Opportunity • Industry overview
Slide 42: Evolution of life insurance industry in India
Evolution of life insurance industry in India FY2002 FY2010 FY2015 FY2019 116 408 14.1% New business premium1 (` bn) 21.5% 550 -5.8% 692 Total premium (` bn) 501 23.2% 2,654 4.3% 3,281 11.6% 5,089 Penetration (as a % to GDP) 2.1% 4.1% 2.6% 2.7% Assets under management (` bn) 2,304 24.0% 12,899 12.6%
Slide 43: Channel mix
Channel mix1 Industry Private players 8% 9% 11% 16% 18% 21% 23% 25% 27% 54% 54% 54% 69% 66% 62% 30% 28% 25% FY2017 FY2018 FY2019 FY2017 FY2018 FY2019 Agency Bancassurance Others Given a well developed banking sector, bancassurance continues to be the largest channel for private players 1. Individual
Slide 44: Product mix
Product mix1 Industry Private players 25% 27% 26% 51% 54% 51% 75% 73% 74% 49% 46% 49% FY2017 FY2018 FY2019 FY2017 FY2018 FY2019 Non Linked Linked 1. New business weighted premium basis; Source: IRDAI, Life Insurance Council 43
Slide 45: Annexures
Annexures
Slide 46: 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 45
Slide 47: 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 46
Slide 48: 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 49: Product wise channel mix
Product wise channel mix1 Product category Channel 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 50: 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 51: Technology
Technology
Slide 52: Objectives
Objectives Strengthening the Support new Be future ready core growth engines 51
Slide 53: 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 54: 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 55: 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 56: 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 57: 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 58: 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 59: 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 60: Embedded value
Embedded value
Slide 61: 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 62: 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 63: 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 64: 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 65: 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 66: 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 67: 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 68: 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 69: 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 70: 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 71: 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 72: Economic assumptions underlying VNB and EV
Economic assumptions underlying VNB and EV Tenor (years) References Rates March 31, 2018 March 31, 2019 September 30, 2019 1 6.57% 6.66% 5.77% 5 8.21% 7.83% 7.35% 10 8.31% 8.35% 8.00% 15 8.11% 8.35% 7.95% 20 7.97% 8.22% 7.78% 25 7.91% 8.11% 7.65% 30 7.88% 8.05% 7.58% 71
Slide 73: 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 74: 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 75: Thank you
Thank you
ICICI Prudential Life Insurance Company — Investor Presentation (November 2019) on 6ix