Hdfc Life Insurance Co. Ltd. · NSE:HDFCLIFE
Hdfc Life Insurance — H1 FY2020 Earnings Presentation
54 slides from Hdfc Life Insurance's earnings presentation, 2019
Slide 1: HDFC Life Insurance Investor Presentation – H1 FY20
HDFC Life Insurance Investor Presentation – H1 FY20
Slide 2: Agenda
Agenda 1 Performance Snapshot 2 Our Strategy 3 Annexures 4 India Life Insurance Page 2
Slide 3: Performance Snapshot
Performance Snapshot Our Strategy Annexures India Life Insurance 1 Performance Snapshot
Slide 4: Executive summary: H1 FY20
Executive summary: H1 FY20 Scale Profitability Customer centricity Rs (Bn.) 34.7 New CY 27.5% CY 89% Company 13th month Business APE Growth 38% PY 24.3% persistency PY 87% Margin CY (%) 22.4 Rs (Bn.) 22.2 Overall NBP PY (%) 21.2 IEV Rs (Bn.) 201.2 Growth 23% CY (%) 15.2 EVOP Growth 19.6% Rs (Bn.) 5.
Slide 5: Consistent performance across key metrics (1/2)
Consistent performance across key metrics (1/2) Leadership in new business premium (Rs Bn.) Increasing number of lives insured (Mn.) 17.2% 19.1% 20.7% 21.2% 22.4% 33% 26% 51.4 149.7 113.5 33.2 28.7 86.2 79.1 20.9 21.6 62.9 FY17 FY18 FY19 H1 FY19 H1 FY20 FY17 FY18 FY19 H1 FY19 H1 FY20 Private Market
Slide 6: Consistent performance across key metrics (2/2)
Consistent performance across key metrics (2/2) Strong growth in VNB, steady expansion in VNB margins (Rs Bn.) Healthy growth in Embedded Value (Rs Bn.) 22.0% 23.2% 24.6% 24.3% 27.5% 21.7% 21.5% 20.1% 19.6% 19.6% 201.2 23% 183.0 163.8 152.2 57% 124.7 65% 68% 62% 15.4 68% 12.8 67% 9.2 9.6 6.1 32% 38%
Slide 7: Our Strategy
Performance Snapshot Our Strategy Annexures India Life Insurance 2 Our Strategy
Slide 8: Key elements of our strategy
Key elements of our strategy 1 2 3 4 5 Focus on profitable Balanced Market-leading Reimagining Quality of Board growth distribution mix innovation insurance and management Ensuring sustainable Developing multiple Identifying latent Market-leading digital Seasoned leadership and profitable growth cha
Slide 9: Focus on profitable growth
Focus on profitable growth H1 H1 FY17 FY18 FY19 Rs Bn. FY19 FY20 Profitable growth New business Margins 22.0% 23.2% 24.6% 24.3% 27.5% Value of new business 9.2 12.8 15.4 6.1 9.6 distribution mix Profit after tax (PAT) Balanced 8.9 11.1 12.8 6.7 7.3 Underwriting profits 7.5 8.5 9.0 5.4 5.5 Shareholde
Slide 10: Analysis of change in IEV
Analysis of change in IEV Rs Bn. EVOP – 17.1 Profitable EVOP1% - 19.6% growth 9.6 0.6 1.1 0.05 201.2 183.0 6.9 distribution mix Balanced Post over- Operating Economic ESOP Unwind run VNB variances variances exercises 130.1 124.3 innovation leading Market Adjusted Net worth (ANW) Value of in-force bu
Slide 11: Balanced distribution mix
Balanced distribution mix Increasing share of proprietary channels 1 Strong and diversified network of 230+ traditional partners Banks NBFCs and MFIs SFBs Profitable growth 11% 14% 19% 21% 12% 11% 5% 5% 13% 15% 4% 10% distribution Balanced 72% 71% mix 64% 54% FY17 FY18 FY19 H1 FY20 Bancassurance Bro
Slide 12: Progress by proprietary channels
Progress by proprietary channels Agency Direct Online Profitable growth 84% - Increase in FLS productivity due to ease of doing 19% - Improvement in FLS Younger customers (avg. age 31) business and greater agent productivity as compared to company average distribution Balanced engagement mix 91% - R
Slide 13: Operating model moved from product centric to customer centric
Operating model moved from product centric to being customer centric Profitable From the Traditional Insurer... ... to the Insurer of the Future growth Traditional Channels (Top Line Marketing / Product Driven) Agency Banca Group distribution Balanced mix Customer (Segmented Marketing / Customer Dri
Slide 14: Addressing customer needs at every stage of life
Addressing customer needs at every stage of life 20 – 30 years 30 – 40 years 40 – 50 years 50+ years Profitable Objective Simple Savings Borrowing Investments Asset Drawdown growth Pay off mortgage Risks Addressed distribution Balanced Medical care mix First Job Medical care Mortality Net Worth Need
Slide 15: Expanding market through consistent product innovation
Expanding market through consistent product innovation Profitable growth Guaranteed returns, with Retirement option for life long income & pension 2014 2015 2017 2018 2019 distribution Balanced mix Youngstar Joint-life single-premium Woman ULIP with low cost structure innovation leading Market Diver
Slide 16: Product mix across key channels
Product mix across key channels1 Segment FY17 FY18 FY19 H1 FY20 Segment FY17 FY18 FY19 H1 FY20 UL 26% 33% 26% 8% Profitable UL 61% 64% 67% 33% growth Agency Par 30% 26% 14% 8% Par 57% 48% 40% 17% Banca 2 Non par savings 8% 8% 15% 56% Non par savings 6% 5% 17% 63% Term 1% 1% 2% 2% Term 11% 11% 12% 9%
Slide 17: Created a new operating model to reimagine insurance
Created a new operating model to reimagine insurance Enablers Building Blocks Culture Profitable growth Cloud Computing Fail Early / Fail Fast Service Simplification Give me frictionless service distribution Balanced mix 4 Agile / AI / ML Journey Data Sprints innovation Simplification Enrichment & l
Slide 18: Simplifying the customer journey using building blocks
Simplifying the customer journey using 5 building blocks Profitable growth Platforms and Partner Journey Service Data Enrichment Ecosystems Integration Simplification Simplification and Analytics distribution Balanced mix Insurance beyond digital: Products and services built on Customer sales journe
Slide 19: Partner Integration – New Ecosystems
Partner Integration – New Ecosystems Profitable growth distribution Balanced mix innovation leading Market Reimagining insurance Get insured in 3 clicks Over 30 lakh lives insured since launch management Board and Quality of Around 7.7 lakh lives insured this year About 28k lives being insur
Slide 20: Service Simplification – RPA and InstA
Service Simplification – RPA and InstA Digitizing processes through 150+ BOTs instA – Virtual Assistant for Sales & Service Profitable 70% growth Improvement in TAT across processes 75% 138 Mn distribution Balanced Elimination of NVAs mix across processes Total transactions processed by BOTs in FY 1
Slide 21: Governance Framework
Governance Framework Board of Directors Profitable Independent and Experienced Board growth Committees Risk Corporate Board Policyholder Nomination & Stakeholders’ Audit Management Investment With Profits Social Protection Remuneration Relationship Committee Committee Committee Committee Responsibil
Slide 22: Financial risk management framework
Financial risk management framework Natural Hedges Product design & mix monitoring ▪ Protection and longevity businesses ▪ Prudent assumptions and pricing approach ▪ Unit linked and non par savings products ▪ Return of premium annuity products (>95% of annuity); Average age at entry ~59 years ▪ Quan
Slide 23: Risk Management for Non Par products
Risk Management for Non Par products Key risks Quantum of risk Mitigation ALM metric Interest rate ROPP1: Low Duration matching risk Life: Low No supply side constraints on the long dated Govt bonds2 Dynamic re-pricing in line with change in market yield Annuity Net Sensitivity ROPP: Low Cou
Slide 24: Performance of wholly-owned subsidiary companies
Performance of wholly-owned subsidiary1 companies HDFC Pension Rs Bn. HDFC International Life and Re 66.6 51.7 11.6 0.5 Mar'15 Mar'17 Mar'19 Sep'19 Fastest growing PFM (Pension Fund Manager) under the Registered growth of more than 100% in revenue to USD NPS architecture (YoY growth of 96% in AU
Slide 25: Annexures
Performance Snapshot Our Strategy Annexures India Life Insurance 3 Annexures
Slide 26: Individual persistency for key channels and segments
Individual persistency for key channels and segments1 Across key channels (%) CY (H1 FY20) 91 91 84 86 82 81 81 78 75 74 74 75 69 71 71 64 67 55 51 53 Agency Banca Direct Company 13th month 25th month 37th month 49th month 61st month Across key segments (%) PY (H1 FY19) 89 88 84 83 75 76 79 77 75 76
Slide 27: Indian Embedded Value (IEV)
Indian Embedded Value (IEV)1 Rs Bn. Value of InForce business (VIF) 71.1 201.2 139.5 140 130.1 120 -0.2 -2.4 -6.8 100 80 60 40 20 - 2 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) a
Slide 28: VNB and NBM walkthrough
VNB and NBM walkthrough Rs Bn. 0.76 9.57 0.14 0.23 2.32 Growth of 57% vs. H1 FY19 6.11 VNB 1 H1 FY19 Impact of higher APE Change in assumptions New Business Profile Operating leverage H1 FY20 NBM% 24.3% - 0.4% 0.7% 2.2% 27.5% 1. Reflects the impact of difference in mix of segment/distribution channe
Slide 29: Sensitivity analysis: H1 FY20
Sensitivity analysis: H1 FY20 % Change in Change in VNB % Change in Analysis based on key metrics Scenario VNB 1 Margin 1 EV Change in Increase by 1% -0.3% -0.1% -1.4% Reference rate Decrease by 1% 0.3% 0.1% 1.2% Equity Market Decrease by 10% -0.9% -0.3% -1.3% movement Increase by 10% -0.8% -0.3% -1
Slide 30: Stable capital position
Stable capital position Rs Bn. Dividend paid 2.6 3.3 4.0 - New business premium growth 33% 32% 32% 26% 120.0 230% 210% 100.0 192% 192% 192% 188% 190% 80.0 69.8 170% 62.7 150% 52.1 15.4 60.0 12.7 42.1 130% 11.3 18.1 40.0 16.7 110% 9.1 13.6 11.0 90% 20.0 33.3 36.3 27.2 70% 22.0 - 50% Mar 31, 2017 Mar
Slide 31: Assets under management
Assets under management Assets Under Management Change in AUM 1 Rs Bn. Debt 59% 61% 62% 63% Equity 41% 39% 38% 37% 66 55 24% 1,550 16% 18% 16% 30% 42 1,350 52 -20% 1,150 36 -70% 950 26 1,310 750 1,256 -120% 1,066 (11) 550 917 (23) -170% 30th Sep 2018 30th Sep 2019 350 150 -220% Net Fund inflow Net i
Slide 32: India Life Insurance
Performance Snapshot Our Strategy Annexures India Life Insurance 4 India Life Insurance
Slide 33: Growth opportunity: Under-penetration and favourable demographics
Growth opportunity: Under-penetration and favourable demographics Life Insurance penetration 1 Life Insurance density US$ 2 (2018) (2018) 17.5% 16.8% 6.756 India remains vastly under-insured, both in terms of penetration and density 6.7% 4,195 6.2% 3,835 Huge opportunity to penetrate the 3.6% 2,
Slide 34: Low levels of penetration – Life Protection
Low levels of penetration – Life Protection 172 mn 68 mn 1.7 mn Protection gap 2 (2014) 92.2% 88.3% 78.4% 73.3% 72.5% 70.2% India has the highest protection gap in 56.3% 56.0% the region, as growth in savings and life insurance coverage has lagged behind economic and wage growth 16.4% Protection
Slide 35: Ageing population and lack of retirement planning awareness
India has a rapidly increasing ageing population with lack of awareness regarding systematic retirement planning By 2050, 1 in 6 people in India will be over the 41.5% of elderly male Unorganized workforce not 52% of elderly population age of 60, bringing the under any formal pension in both urban a
Slide 36: Government Bond Auctions
Government Bond Auctions Government Bonds- Tenor Rs Bn. >15 yrs <=15 yrs 29% 27% 34% 34% 38% 34% 36% 71% 73% 66% 66% 62% 66% 64% 2019-20 (H1 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 FY 19-20) >15 yrs 1,880 2,030 2,250 1,710 1,580 1,930 1,560 <=15 yrs 3,690 3,890 3,600 4,110 4,300 3,780 2,860
Slide 37: Life Insurance: A preferred savings instrument
Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 23% 25% 22% 17% 3% 11% 11% 10% 12% 9% 13% 20% 18% 15% 51% 52% 26% 17% 67% 60% 65% 67% 50% 54% 49% 48% 33% 40% FY07 FY10 FY13 FY18 FY07 FY10 FY13 FY18 Financial savings Physical savings Currency & depos
Slide 38: Industry new business trends
Industry new business1 trends Individual WRP in Rs bn Sensex Private players 50% 57% 52% 46% 37% 38% 38% 49% 52% 54% 56% 58% 58% Market share Growth % Private 86% 1% 7% -20% -24% 2% -3% 16% 14% 26% 24% 12% 24% 0% -22% 29% 4% 11% -4% -2% -27% 3% 15% 13% 5% 3% LIC 31% -10% 17% -9% -5% -2% -3% -11% 8%
Slide 39: 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 : Basis Individual Weighted Received Premium (WR
Slide 40: Private industry: Product and distribution mix
Private industry: Product and distribution mix Product mix 1 Distribution mix 2 Unit Linked Conventional Individual Agents Corporate Agents - Banks Corporate Agents - Others Brokers Direct Business 67% 63% 6% 7% 9% 10% 10% 12% 57% 14% 54% 5% 5% 5% 4% 3% 3% 52% 51% 3% 3% 48% 49% 51% 49% 6% 4% 3% 3% 3
Slide 41: Appendix
Appendix
Slide 42: Financial and operational snapshot (1/2)
Financial and operational snapshot (1/2) FY17 FY18 FY19 CAGR H1 FY19 H1 FY20 Growth Key Metrics (Rs Bn.) New Business Premium (Indl. + Group) 86.2 113.5 149.7 32% 62.9 79.1 26% Renewal Premium (Indl. +Group) 108.2 122.1 142.1 15% 56.1 61.8 10% Total Premium 194.5 235.6 291.9 23% 119.0 140.9 18% Indi
Slide 43: Financial and operational snapshot (2/2)
Financial and operational snapshot (2/2) FY17 FY18 FY19 H1 FY19 H1 FY20 Key Ratios Overall New Business Margins (post overrun) 22.0% 23.2% 24.6% 24.3% 27.5% (1) Operating Return on EV 21.7% 21.5% 20.1% 19.6% 19.6% Operating Expenses / Total Premium 12.6% 13.5% 13.2% 14.1% 14.1% Total Expenses (OpEx
Slide 44: Revenue and Profit & Loss A/c
Revenue and Profit & Loss A/c Revenue A/c Profit and Loss A/c Rs Bn. H1 FY19 H1 FY20 H1 FY19 H1 FY20 Premium earned 119.0 140.9 Income Reinsurance ceded (1.2) (1.9) - Interest and dividend income 1.4 1.7 Income from Investments 28.9 31.9 - Net profit/(loss) on sale 0.2 0.7 Other Income 0.5 0.6 Trans
Slide 45: Balance Sheet
Balance Sheet Mar 31, 2019 Sep 30, 2018 Sep 30, 2019 Rs Bn. Shareholders’ funds Share capital (including Share premium) 23.8 23.5 23.9 Accumulated profits 32.7 30.6 40.1 Fair value change (0.0) (0.0) (0.4) Sub total 56.6 54.1 63.6 Policyholders’ funds Fair value change 11.1 8.2 8.0 Policy Liabilitie
Slide 46: Balance Sheet
Balance Sheet Mar 31, 2019 Sep 30, 2019 Sep 30, 2018 Rs Bn. Shareholders’ funds Share capital (including Share premium) 23.8 23.9 23.5 Accumulated profits 32.7 40.1 30.6 Fair value change (0.0) (0.4) (0.0) Sub total 56.6 63.6 54.1 Policyholders’ funds Fair value change 11.1 8.0 8.2 Policy Liabilitie
Slide 47: Segment wise average term and age
Segment wise average term and age1 Average Policy Term excluding annuity (Yrs) Average Customer Age excluding annuity (Yrs) H1 FY20: 15.7 (H1 FY19 : 14.9) H1 FY20: 37.6 (H1 FY19: 36.8) 12 UL 36 UL 39 11 14 Par 36 Par 37 15 Non-par Health 32 Non-par Health 16 35 10 Non-par Savings 39 11 31 Non-par Sa
Slide 48: 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
Slide 49: Indian Embedded value: Methodology and Approach (2/2)
Indian 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 sha
Slide 50: Embedded Value: Economic assumptions
Embedded Value: Economic assumptions1 Forward rates % Spot rates % Years As at Sep 30, 2019 As at Sep 30, 2018 As at Sep 30, 2019 As at Sep 30, 2018 1 5.67 7.69 5.51 7.41 2 6.14 8.33 5.74 7.70 3 6.58 8.57 5.95 7.88 4 6.94 8.67 6.14 7.99 5 7.25 8.72 6.31 8.06 10 7.90 8.73 6.88 8.22 15 7.85 8.62 7.12
Slide 51: Glossary (Part 1)
Glossary (Part 1) APE (Annualized Premium Equivalent) - The sum of annualized first year regular premiums and 10% weighted single premiums and single premium top-ups Backbook surplus – Surplus accumulated from historical business written Conservation ratio - Ratio of current year renewal premi
Slide 52: Glossary (Part 2)
Glossary (Part 2) Operating expense - It includes all expenses that are incurred for the purposes of sourcing new business and expenses incurred for policy servicing (which are known as maintenance costs) including shareholders’ expenses. It does not include commission. Operating expense ratio -
Slide 53: 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 (formerly HDFC Standard Life Insurance Company Limited)
Slide 54: Thank you
Thank you
HDFC Life Insurance Company — H1 FY2020 Earnings Presentation on 6ix