Leadership in life insurance - ICICI Bank & Deposits Life Insurance Fund ... Distribution...
Transcript of Leadership in life insurance - ICICI Bank & Deposits Life Insurance Fund ... Distribution...
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Leadership in life insurance
November 2015
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Industry overview
Outlook
Agenda
Company strategy and performance
2
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Industry overview
Outlook
Agenda
Company strategy and performance
3
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Total premium (Rs bn)
Penetration (as a % to
GDP)
New business premium1
(Rs bn)
FY2015
408
3,277
FY2002
116
501
2.1%
21.5%
23.2%
Source: IRDAI, CSO, Life insurance council
* Company estimate
Evolution of life insurance industry in India
Assets under
management (Rs bn)23,4422,304
24.0%
1. Retail weighted premium
2. Individual and Group in-force sum assured
FY2010
550
2,655
12,899
-5.8%
4.3%
12.7%
2.8%
In-force sum assured2
(Rs bn)
11,812* 37,505 78,78615.5% 16.0%
2.1% 4.1% 2.6%
In-force sum assured (as
% to GDP)
50.1% 57.9% 62.8%
4
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1. Retail weighted new business premium
Source : IRDAI, Life insurance council
Rs
bn
Growth FY2012 FY2013 FY2014 FY2015 H1FY2016
Private -23.9% 1.9% -3.4% 15.9% 15.2%
LIC 11.2% -4.1% -3.4% -26.3% -11.1%
Industry -4.8% -1.9% -3.4% -10.3% 0.4%
New business1: Private players showing strong growth
45.7%
36.5% 38.0%38.0%
49.0%50.2%
0%
10%
20%
30%
40%
50%
60%
0
50
100
150
200
250
300
350
FY2011 FY2012 FY2013 FY2014 FY2015 H1FY2016
LIC Private Private market share
5
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Bancassurance dominant channel for private players1
Industry
1. Individual new business premium basis
Source: IRDAI, Public disclosures
Components may not add up to the totals due to rounding off
Private players
6
44% 40% 40% 36% 33%
39% 43% 44%47% 48%
17% 17% 16% 17% 19%
FY2012 FY2013 FY2014 FY2015 Q1FY2016
Agency Bancassurance Others
Given a well developed banking sector, bancassurance has
become largest channel for private players
LIC- 95% of Individual new business sales contributed by agency
79% 78% 78%71% 71%
15% 16% 16%21% 20%
6% 6% 6% 8% 8%
FY2012 FY2013 FY2014 FY2015 Q1FY2016
Agency Bancassurance Others
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Share of ULIPs on the rise1
Industry
1. New business premium basis
Source: IRDAI, Life insurance council 7
Strong value proposition of ULIPs
Transparent and low charges
Lower discontinuous charges upto year 5 and zero surrender penalty
after 5 years
Choice of asset allocation to match risk appetite of different customer
59%65%
71%62% 60%
41%35%
29%38% 40%
FY2012 FY2013 FY2014 FY2015 Q1FY2016
Traditional ULIP
Private players
85%
90%
93%
88% 88%
15%
10%
7%
12% 12%
FY2012 FY2013 FY2014 FY2015 Q1FY2016
Traditional ULIP
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Industry overview
Outlook
Agenda
Company strategy and performance
8
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Large and Growing Population Base1
50 53
127 143
201
251
316
1,238
1,350
So
uth
Ko
rea
So
uth
Afric
a
Jap
an
Ru
ssia
Brazil
In
do
nesia
US
A
In
dia
Ch
ina
2013 Population (mn)
Driving GDP Growth 3
High Share of Working Population2
Rising Affluence1
2.1%2.5%
3.4% 3.6%
5.4%
7.5%
9.8%10.1%
14.4%
Jap
an
US
A
So
uth
Ko
rea
So
uth
Afric
a
Brazil
Ru
ssia
In
dia
In
do
nesia
Ch
ina
GDP per
Capita
CAGR (2007-
2017)
Indian economy
poised to head
towards sustained
growth fuelled by
favourable
demographics,
rising affluence
Growth rate of
total premium
written by the
insurance industry
has outpaced the
GDP growth rate
over the period of
FY2002-FY2015
1. Source: Economist Intelligence Unit
2. Source: UN population division 2013 release
3. Source: World bank database
4.9%
9.8%
8.5%
6.6%
5.1%
6.9%7.3% 7.5%
7.9% 8.0%
1.9%
4.3%
-1.7%
3.1%2.4% 2.5% 2.6% 2.8%
3.3% 3.2%
FY02 FY08 FY10 FY12 FY13 FY14 FY15 FY16 FY17 FY18
India World
Favourable demography to drive macro growth
585 639
691 739
2015 2020 2025 2030
Population of age 25-60 years (in mn)
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Share of Insurance in Savings Expected to Rise
India has a high household savings rate
Part of physical savings shifting to financial savings
Financial savings headed toward a rebound
Financial year 2002 2008 2010 2011 2012 2013 2014 2015
Financial savings /
GDP10.5% 11.6% 12.0% 9.9% 7.3% 7.0% 7.2% 7.6%
Household savings /
GDP23.2% 22.4% 25.2% 23.1% 22.8% 20.2% 18.2% 18.1%*
2.98 3.44 4.31 5.38 7.60 8.56
10.26
13.71 13.22 12.46 13.08
2.47 3.13
4.38
5.80
5.71
7.75
7.74
6.43 6.94 8.19 9.59
0
5
10
15
20
25
Rs
trillio
n
Physical savings Financial savings
*Company estimate
10
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11
.4%
8.4
%
7.2
%
3.6
%
3.0
%
2.6
%
1.7
%
1.1
%
0%
3%
6%
9%
12%
S.A
fric
a
Jap
an
Ko
rea
Th
ailan
d
US
In
dia
Ch
ina
In
do
nesia
Penetration (Premium / GDP)2
270% 260%
226%
166%149%
106% 96%
60%
0%
50%
100%
150%
200%
250%
300%
US
Jap
an
Sin
gap
ore
Ko
rea
Mala
ysia
Germ
an
y
Th
ailan
d
In
dia
Sum Assured as % of GDP 3
Share of insurance in financial savings expected to rise
1. Source: Reserve Bank of India
2. Source: Swiss Re - World insurance in 2014
3. Source: McKinsey analysis 2013
11
14.4%22.0%
26.2%19.5% 21.0% 17.8% 16.0%
19.0%
0%
20%
40%
60%
80%
100%
FY2002 FY2008 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015
Distribution of financial assets1
Currency & Deposits Life Insurance Fund
Shares / Debentures / MFS Provident / Pension Fund / Claims on Govt
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Industry overview
Outlook
Agenda
Company strategy and performance
12
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Sustainability
Improve cost
efficiency
Better persistency
and surrender
control
Robust risk
management and
control process
Customer centricity
Superior value to
customers
through better
products
Superior risk
adjusted fund
performance
Smooth on-
boarding and
service
experience
Distribution
Multi-channel
approach
Micro market
strategies leading
to Geographic
leadership
Digital platform to
expand
distribution
capacity and
improve
productivity
Strategy: Market leadership + Profitable growth
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Premium summary
83.19
153.07
124.29
14
61.34
135.38
34.20 34.32
48.21
80.55 81.00
95.71
20.63
8.97
9.14
0
20
40
60
80
100
120
140
160
FY2013 FY2014 FY2015
Rs b
n
18.45 22.38
37.34
47.53
5.55
13.28
0
20
40
60
80
100
120
140
160
H1FY2015 H1FY2016R
s b
n
Retail new business premium Retail renewal premium Group premium
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Consistently outperforming industry growth1
1. Retail weighted received premium (RWRP) basis
Source: IRDAI, Life insurance council 15
17.5%
-1.7%
41.3%
1.9%
-3.4%
15.9%
-1.9%-3.4%
-10.3%
-20%
-10%
0%
10%
20%
30%
40%
50%
FY2013 FY2014 FY2015
ICICI Prudential Private players Industry
28.9%
21.2%
8.8%
15.2%
-10.5%
0.4%
-20%
-10%
0%
10%
20%
30%
40%
50%
H1FY2015 H1FY2016
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Gaining market share1
1. Retail weighted received premium (RWRP) basis
Source: IRDAI, Life insurance council 16
7.0% 7.2%
11.3%
18.5% 18.9%
23.0%
0%
5%
10%
15%
20%
25%
30%
FY2013 FY2014 FY2015
10.3%
12.4%
23.6%
24.8%
0%
5%
10%
15%
20%
25%
30%
H1FY2015 H1FY2016
Within total industry Within private sector
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Consistent leadership1
1
3
4
5
2
FY2006 FY2013
6
FY2014
1. Retail weighted received premium (RWRP) basis
FY2002 FY2010 FY2015 H1FY2016
17
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Product strategy
Customer centric product design
Offer superior IRRs to customer, IRR increases with tenure
Products for every life stage & income segment
Increased focus on protection
Credit life
Attachment with our savings products and partner
products
Health
From products to iSolutions
Combining products to create customized solutions
18
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Product strategy
Savings Characteristics Strategy
Linked
Transparent; low
charges; choice of asset
class; no lapse risk for
customers
Core product offering; funds across
asset classes and option for capital
protection to cater customers with
different risk appetite
Par
Upside based on fund
performance; 90% of
surplus shared with
customers as bonus
Allow product mix to float between
par and linked based on customer
preference
Non-Par
savings
Guaranteed returns; high
lapse risk for customersNot an area of focus currently
Protection Business environment Strategy
Term Low penetrationGrow at 2x-3x of company’s overall
growth
Health
Regulatory changes likely
to create level playing
field vis-a-vis P&C
players
Emerging focus area; growth
dependent on evolving
environment
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Product mix
1. Retail weighted received premium (RWRP) basis
20
18.04 21.62
38.95
15.07 10.91
7.01
0
10
20
30
40
50
FY2013 FY2014 FY2015
Rs b
n
Product mix1
FY2013 FY2014 FY2015 H1FY2015 H1FY2016
Linked 54.5% 66.5% 84.8% 81.8% 85.6%
Non Linked 45.5% 33.5% 15.2% 18.2% 14.4%
14.29
18.12
3.17
3.06
0
10
20
30
40
H1FY2015 H1FY2016
Rs b
n
Linked Non Linked
Protection APE increased from Rs 0.29 bn in H1FY2015 to
Rs 0.49 bn in H1FY2016
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Channel mix
1. Retail weighted received premium (RWRP) basis21
11.73 9.43
11.51
14.87 17.77
27.19
4.34 3.12
3.16
2.16 2.21
4.09
0
10
20
30
40
50
FY2013 FY2014 FY2015
Rs b
n
Channel Mix1
FY2013 FY2014 FY2015 H1FY2015 H1FY2016
Agency 35.4% 29.0% 25.0% 22.5% 21.1%
Bancassurance 44.9% 54.6% 59.2% 61.8% 62.8%
Corporate agents and brokers 13.1% 9.6% 6.9% 6.9% 6.7%
Direct 6.5% 6.8% 8.9% 8.8% 9.4%
3.93 4.47
10.80
13.30
1.21
1.43 1.54
1.99
0
10
20
30
40
H1FY2015 H1FY2016
Rs b
n
Agency Bancassurance Corporate agents and brokers Direct
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Post sales
Enable anytime,
anywhere servicing
View and update
policy details and
execute payments
Ease of upsell
through pre-
approved additional
cover
Ease of self-
servicing for
employee / agent
Pre sales
Structured sales
approach and need
analysis
Product literature in
12 languages to aid
sales
Standardized
content including
videos to enable
consistent
messaging
Integrated with lead
management
system
Fulfilment
Intuitive, easy to use
app form with data
pre population
eKYC – no doc
required for existing
ICICI Bank, ICICI Life
customers and
Aadhar card holders
Ease of scanning
and uploading doc
Instant underwriting
Support multiple
Online payment
options
Leveraging technology across value chain
Issuance and delivery of e-policy within 2 hours
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Digitization impact
Employee productivity3
E-Login1
and online renewal payment2
1. New business applications generated through digital medium
2. Transactions processed through website, SMS and IVRS
3. RWRP / Average no. of employees during the period
23
52%
80%
93%
20%
42%
50%
0%
20%
40%
60%
80%
100%
FY2013 FY2014 FY2015
E-Login Online renewal payment
92% 95%
45%
59%
0%
20%
40%
60%
80%
100%
H1FY2015 H1FY2016
2.55 2.77
4.26
0.00
1.00
2.00
3.00
4.00
5.00
FY2013 FY2014 FY2015
Rs m
illio
n
1.58 1.82
0.00
1.00
2.00
3.00
4.00
5.00
H1FY2015 H1FY2016
Rs m
illio
n
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Cost efficiency
1. All insurance expenses including commission / Retail weighted received premium
2. Expense ratio: All insurance expenses (excl. commission)
/ (Total premium – 90% of single premium)
3. Commission ratio: Commission / (Total premium –
90% of single premium)
4. Total Expense ratio: Cost / (Total premium – 90% of single premium)
5. Annualized cost / Average assets under management held during the
period
Rs bn FY2013 FY2014 FY2015 H1FY2015 H1FY2016
Cost to RWRP1
75.4% 69.3% 49.1% 57.9% 56.6%
Expense ratio (excl. commission)2
13.3% 13.6% 11.7% 13.8% 13.2%
Commission ratio3
5.9% 5.2% 3.8% 4.0% 3.5%
Total expense ratio4
19.2% 18.8% 15.4% 17.8% 16.7%
Cost / Average AUM5
3.4% 2.9% 2.5% 2.4% 2.4%
24
17.31 16.28 17.05
7.65
6.27 5.53
0
5
10
15
20
25
30
FY2013 FY2014 FY2015
Rs b
n
Non-Commission Commission
24.96
22.5522.58
10.12
11.99
7.87 9.45
2.25
2.54
0
5
10
15
20
25
30
H1FY2015 H1FY2016R
s b
n
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Persistency1
1.As per IRDA circular IRDA/ACT/CIR/035/01/2014 dated January 23,
2014
25
71.5%
79.0%
20.3%
54.4%
0%
20%
40%
60%
80%
100%
FY2014 FY2015
13th month 49th month
74.4%
80.4%
20.7%
62.2%
0%
20%
40%
60%
80%
100%
H1FY2015 H1FY2016
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Surrender
1. Average monthly retail surrenders
Surrenders1 as % of average AUM
26
1.3%
1.1%
0.9%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
FY2013 FY2014 FY2015
1.0%
0.6%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
H1FY2015 H1FY2016
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364.10 423.71
520.97
377.54
382.26
480.86
0
200
400
600
800
1,000
1,200
FY2013 FY2014 FY2015
27
Assets under management
Among the largest fund managers in India
805.97
1,001.83
741.64
575.21 603.10
747.78
166.43
202.86
254.06
0
200
400
600
800
1,000
1,200
FY2013 FY2014 FY2015
805.97
1,001.83
741.64
907.26
991.27
Linked Mix (%)
75.1 73.877.6 74.8 74.6
Equity Mix (%)
48.9 46.550.9 47.4 48.0
Rs bn Rs bn Rs bn Rs bn
27
681.39 731.07
225.87
260.21
0
200
400
600
800
1,000
1,200
H1FY2015 H1FY2016
Linked Other than linked
907.26
991.27
463.40 530.74
443.86
460.53
0
200
400
600
800
1,000
1,200
H1FY2015 H1FY2016
Debt Equity
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Maximiser (Equity Fund)Balancer (Balanced fund)Protector (Debt fund)Preserver (Short term debt fund)
Superior fund performance across cycles
Multi-tiered investment management structure with clearly defined
roles and responsibilities
96% of funds have outperformed benchmark since inception*
Over 90% of debt investments in AAA rated and government bonds
Inception Dates:
Preserver Fund: June 28, 2004; Protector Fund: April 2, 2002
Balancer Fund : April 2, 2002; Maximiser Fund: Nov 19, 2001
* As on September 30, 2015
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1.3%
8.6%
18.6%
8.6%9.2%
11.9%
14.3%
10.2%
7.7%8.5%8.9%
8.2%
0.8%
5.6%
16.0%
8.6%7.8%
10.5%
12.6%
8.5%
6.8%
8.6%8.6%7.1%
L1YL5YSinceInception
L1YL5YSinceInception
L1YL5YSinceInception
L1YL5YSinceInception
Fund Benchmark
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Profitable growth
14.9615.67
16.34
0
3
6
9
12
15
18
FY2013 FY2014 FY2015
4.84
10.93
8.37
0
2
4
6
8
10
12
FY2013 FY2014 FY2015
396
Solvency Ratio (%)
Profit after tax (Rs bn)
357 328372 33731.2 32.6 33.732.7 33.9
1.Based on invested capital
Dividend (Rs bn)
RoE1
(%)
Sustained and strong profitability Best positioned to capitalize on
growth opportunity
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7.81 8.12
0
3
6
9
12
15
18
H1FY2015 H1FY2016
5.366.01
0
2
4
6
8
10
12
H1FY2015 H1FY2016
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New Business Profit1
1. Indian Embedded Value basis
2. Based on long term assumptions
Rs billion FY2015 H1FY2016
APE 47.44 22.34
New Business Profit on target acquisition cost2
6.43 3.08
New Business Margin on target acquisition cost 13.6% 13.8%
New Business Profit on actual acquisition cost2
2.70 1.47
New Business Margin on actual acquisition cost 5.7% 6.6%
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Summary
1. Sum assured as a % of GDP
2. Premium per capita
3. IRDAI Retail Weighted Received Premium (RWRP)
4. RWRP ratio of ICICI Prudential to nearest competitor
5. Based on invested capital
Low penetration1 and even lower density
2
One of the last emerging markets with significant scale and favourable growth drivers
India: High growth
potential1
#1 in India on RWRP3
basis for every year since FY2002
Distance increased from 1.04x in FY2012 to 1.47x 4
in FY2015
Consistent
Leadership Across
Cycles
2
Revolutionizing customer experience across value chain through digitization
Customer focused product suite; Delivering superior value through product design and
fund performance
Low grievance ratio and best in class claims settlement ratio
Customer Centric
Approach Across
Value Chain
3
Access to network of ICICI bank (#1 Indian private bank ) and Standard Chartered Bank
Continue to invest in agency channel, adding quality agents and improving productivity
Strong focus on technology and digitization to reduce dependence on physical presence
Multi Channel
Distribution backed
by advanced digital
processes
4
Very low regulatory or interest rate risk with over 80% of RWRP contribution from ULIP
products; Over 90% of debt investments in AAA rated and government bonds
Focus on reducing costs - Cost/RWRP declined from 84.8% in FY2012 to 49.1% in FY2015
Strong focus on renewals (high persistency ratios)
Robust &
Sustainable
Business Model
RoE5
of more than 30% since FY2012; Self funded business – no capital calls since FY
2009; cumulative dividend pay-out of Rs 34.29 bn till H1FY2016
With strong solvency of 328% and less capital requirement due to product mix, well
positioned to take advantage of growth
Delivering
Consistent Returns
to Shareholders
5
6
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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 forward-looking statements involve a number
of risks, uncertainties and other factors that could cause actual results to differ
materially from those suggested by the forward-looking statements. These risks
and uncertainties include, but are not limited to our ability to successfully
implement our strategy, our growth and expansion in business, the impact of any
acquisitions, technological implementation and changes, the actual growth in
demand for insurance products and services, investment income, cash flow
projections, our exposure to market risks, policies and actions of regulatory
authorities; impact of competition; experience with regard to mortality and
morbidity trends, lapse rates and policy renewal rates; the impact of changes in
capital , solvency or accounting standards , tax and other legislations and
regulations in the jurisdictions as well as other risks detailed in the reports filed by
ICICI Bank Limited, our holding company, with the United States Securities and
Exchange Commission. ICICI Bank and we undertake no obligation to update
forward-looking statements to reflect events or circumstances after the date
thereof.
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Thank you
33