HDFC Standard Life Insurance Company Limited - Nine months ended December 2014
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HDFC Standard Life Insurance
Company Limited
Nine months ended December 2014
This is the sole and exclusive property of HDFC Life
Performance Snapshot – 9M FY15
Financial Highlights
Other Highlights
Revenue Growth
• Ranked 1st in Group • Registered net profit • Conservation ratio* at
Received Premium of ` 5.7 Bn 92%
and 3rd in Individual
WRP in private • Solvency Ratio of
• ` 1.4 Bn (7%)#
sector 187% against a
interim dividend
paid during the year regulatory
• 36% growth vs PY in requirement of 150%
New business
premium$ • Accumulated losses
wiped off in Q1 FY15 • NBM at 21.2% for
individual business
• Renewal premium
higher by 17% vs PY • Expense ratio at
10.7% vs 11.2% PY • MCEV of ` 77.8 Bn as
at September 30,
2014
• Assets under
management at
` 635 Bn, up 37%
$ New Business Premium includes Group business
* Conservation ratio is for individual business
# Dividend @ 7% on face value of shares of ` 10 each excluding Dividend Distribution Tax
2
Performance Summary – 9M FY15
9M FY14 9M FY15 Change FY13 FY14 Change
Revenue Growth
Market Share# 12.8% 14.9% - 17.5% 13.8% -
New Business Premium$ (` Bn) 25.2 34.4 +36% 44.3 40.4 -9%
Renewal Premium (` Bn) 51.6 60.5 +17% 68.9 80.2 +17%
Total Premium (` Bn) 76.8 94.9 +23% 113.2 120.6 +7%
Financial Highlights
IGAAP Surplus (` Bn) 5.3 5.7 +8% 5.1 7.3 +42%
Expense Ratio 11.2% 10.7% - 10.8% 10.7% -
Premium less Policyholder
44.9 36.5 -19% 74.0 73.6 -1%
Payouts (` Bn)
AUM (` Bn) 462 635 +37% 401 503 +25%
Other Highlights
Conservation Ratio* 79% 92% - 79% 79% -
Solvency 202% 187% - 217% 194% -
NBM (Pre OR) 24.1% 21.2% - 17.8% 26.2% -
MCEV^ (` Bn) 60.9 77.8 +28% 58.7 69.9 +19%
#Market Share is computed on Individual Weighted Received Premium (WRP) basis
$New Business Premium includes Group business
* Conservation ratio is for individual business
^ MCEV is disclosed on a half-yearly basis
3
New Business Private Market Share & Ranking
9M Performance PY (12M) Performance
17.5%
Individual WRP
13.8%
17.2%
14.9%
12.8%
Rank 2 3 3 2 3
9M FY13 9M FY14 9M FY15 FY13 FY14
14.4%
Group Received Premium
17.4% 10.9%
15.3%
8.9%
Rank 4 1 1 4 3
9M FY13 9M FY14 9M FY15 FY13 FY14
Total Received Premium 14.4%
15.6%
13.6% 13.7%
13.3%
Rank 3 3 2 3 2
9M FY13 9M FY14 9M FY15 FY13 FY14
Continued to consolidate market share for Individual business and has been ranked amongst Top 3
for over 4½ years
Ranked 1st amongst private players in Group business in 9M FY15 with 30% higher collection than
closest peer
Note: Market Share is computed on WRP basis for Individual business and on received premium for Group and Total business
4
Premium Income
` Bn
9M Performance PY (12M) Performance
94.9 23%
2.2 117% 120.6 7%
113.2 11%
13.7 40% 2.0 10%
76.8 9%
1.8 -13%
7% 14.8 30%
70.3 1.0 6% 11.4 20%
-39%
0.9 9.8 77%
5.5 -4%
60.5 17% 68.9 9% 80.2 17%
44.6 6% 51.6 16%
31.1
19.2 15% 18.5 28% 16% 23.6 -24%
14.4 -25%
9M FY13 9M FY14 9M FY15 FY13 FY14
Total Premium Single Premium (Individual) Group Premium
Renewal Premium (Individual) First Year Regular Premium (Individual)
Total premium grew by 23% vs PY, aided by robust growth across new business, renewal and group
premium
Effective customer education initiatives and ongoing customer engagement aiding growth in renewal
premium
5
Distribution Mix
9M Performance PY (12M) Performance
5% 9% 8%
5% 8% 8% 5% 7%
68% 56%
72% 65% 70% 72%
74% 70%
12%
7%
8% 6%
7% 7% 7%
5%
20% 22%
16% 19% 13%
16% 16% 16%
9M FY13 9M FY14 Q1 FY13 9M FY15 Q1 FY14 Q1 FY15 FY13 FY14
Agency Broker AgencyDirect
Bancassurance Broker Bancassurance Direct
Agency Broker Bancassurance Direct
The Company is investing in new tie ups with other banks and NBFCs while strengthening its existing
Bancassurance relationships
Investments in focussed distribution channels such as Defence, Develop-Nurture-Achieve (DNA)
model for Agency, Online and other Direct channels continue to be made as a part of the Company‟s
diversification efforts
The Company maintained its leading position in Online segment with 92% growth vs PY
Note: The percentages are with reference to APE for individual business
6
Segment Mix
9M Performance PY (12M) Performance
2% 3% 7% 3%
10%
19% 22% 15%
39% 45% 36%
43%
40% 23%
30% 36%
59% 52% 58% 50% 61%
50% 48% 49%
Q1 FY13 Q1 FY14 Q1 FY15
9M FY13 9M FY14 9M FY15 FY13 FY14
Unit Linked Participating Non Participating
Unit Linked Participating Non Participating
Unit Linked Participating
The Company continues to cater to emerging segments such as online term, health and annuity
while maintaining a balanced product mix to cater to the needs of diverse segments
Promising sales of first-of-its-kind Online ULIP product “Click2Invest” along with buoyant equity
markets have aided in the sales of ULIP products
Note: The percentages are with reference to APE for individual business
7
Conservation Ratio
9M Performance PY (12M) Performance
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
92%
40% 79% 79% 40% 79% 79%
30% 30%
20% 20%
10% 10%
0% 0%
9M FY13 9M FY14 9M FY15 FY13 FY14
Improvement in Conservation ratio aided by:
Heightened focus on need-based selling
Increased interaction with lapsed policyholders aiding revival collection
Note: Conservation ratio is for individual business
8
Persistency Ratio
100%
90%
80%
70%
60%
50%
90% 88% 91% 91%
40%
86%
72% 71% 72% 67% 68%
30%
20%
10%
0%
13th month 25th month 37th month 49th month 61st month
Dec-13 Dec-14
Improvement in 37th and 49th month persistency due to
Continued focus on need-based selling approach and increased customer interaction initiatives
Higher proportion of post Sept 10 policies (with higher lock-in period) in CY vs PY
Note: Persistency ratios are calculated with a 1 month lag for the period of December-November for respective years on reducing balance
basis
9
Operating Expenses
` Bn
9M Performance PY (12M) Performance
30.0%
14.0 20.0 30.0%
20.0%
12.2% 11.2% 10.7% 18.0
20.0%
12.0
10.8% 10.7%
10.0% 16.0
10.0%
10.0
14.0
0.0%
0.0%
12.0
8.0
-10.0%
10.0 -10.0%
6.0
-20.0% 8.0
10.1 -20.0%
8.6 8.6 6.0 12.2 12.9
4.0
-30.0%
-30.0%
4.0
2.0 -40.0% -40.0%
2.0
- -50.0% - -50.0%
9M FY13 9M FY14 9M FY15 FY13 FY14
Operating Expenses Operating Expense/Total premium Ratio
20.0 30.0%
Opex / Total Premium
18.0 Ratio continues to decline and is one of the lowest in the private industry
20.0%
11.5% 10.8% 10.7%
Investments continue to be made in new distribution channels, technology and products
16.0
10.0%
14.0
0.0%
12.0
10.0 -10.0%
8.0
-20.0%
12.2 12.9
6.0
11.7
-30.0%
4.0
-40.0%
2.0
- -50.0%
FY12
Note: Operating expenses exclude service tax FY13 FY14 10Premium less Policyholder Payouts
` Bn
9M Performance PY (12M) Performance
40.0 47.211.9 44.9 74.0 73.6
36.5 180.0 80.0
120.0 40.0
35.0 8.9 160.0
10.0
70.0
7.3
30.0 100.0 94.9 20.0
140.0 60.0
120.6
24.2
113.2
25.0 76.8 - 120.0 5.0 50.0
80.0
70.3 19.3
20.0 17.7 (20.0)
100.0 40.0
60.0
50.2 80.0
15.1 - 30.0
15.0 (40.0)
40.0 9.3 60.0 20.0
10.0 28.2 (60.0) 35.7 40.6
20.85.2
(5.0)
40.0 10.0
5.0 20.0
8.2 1.1 (80.0) 1.8
0.6 3.7
20.0
3.6 6.4 -
2.3
- (10.0)
- (100.0) - (10.0)
Q1 FY13 Q1 FY14 Q1 FY15
9M FY13 9M FY14 9M FY15 FY13 FY14
Total Total Premium
TotalPremium
Premium Surrenders & Withdrawals
Surrenders & Withdrawals Claims by Death, Maturity & Others Premium less policyholder payouts
Surrenders & Withdrawals
Claims by Death, Maturity & Others Net Cash flow Claims by Death, Maturity & Others
The Company continues to maintain a healthy positive premium less policyholder payouts despite
higher surrenders & withdrawals aided by need-based selling and strengthening of KYC processes
Surrenders & withdrawals grew by 78% vs PY in value terms (driven by well-performing equity markets)
though number of policies increased by 20% (21% lower vs PY for Q3 FY15)
Notes: 1. Total Premium and Benefits Paid are gross of reinsurance
2. KYC – Know Your Customer
11Indian GAAP Profits
` Bn
9M Performance PY (12M) Performance
7.3
5.7 7.3
5.8 5.3 5.5 5.1
7.5
0.9
0.6
4.8 4.5 6.5
4.0 5.1
5.5 7.7
3.8 0.4 3.5
0.6
4.5
2.8 2.5 3.9 7.7
5.4 3.5
4.8
3.0
1.8 1.5 2.5 3.9
1.5
0.8 0.5
0.6
0.6 0.5 0.6 -
(0.4)
(0.1) (0.5) -
(0.4)
(0.2) (0.5)
FY13 FY14
9M FY13 9M FY14 9M FY15 FY13 FY14
Shareholders' surplus Policyholders' surplus Deficit reversed in policyholders' A/c
Paid interim dividend of ` 1.4 Bn (7%)# in Q3 FY15, 40% higher vs FY14
550 Declared a net profit of ` 5.7 Bn due to a strong back book, despite new business strain on 34%
higher individual new business
450 The Company wiped off its accumulated losses in Q1 FY15
350
250 # Dividend @ 7% on face value of shares of ` 10 each excluding Dividend Distribution Tax
12Assets Under Management
9M Performance PY (12M) Performance
42% 37% 25.3%
40%
50
18% 500
20% 24.4%
50 450
0%
400
-20%
50
635 -40%
350
503
50 300
-60%
401
462 250
-80%
50 392
-100% 200
50 -120% 150
31st Dec 2012 31st Dec 2013 31st Dec 2014 31st Mar 2013 31st Mar 2014
AUM in Rs bn Growth in AUM vs LY AUM in Rs bn Growth in AUM vs LY
50% 45% 48%
52%
45% 46% 52% 45% 45% 46% 46%
50% 55%
55% 52%
54% 55% 55% 54% 54%
48% 48%
31stDec
31st Mar2012
2012 31st
31st Mar
Dec2013
2013 31st Mar
31st 2014
Dec 2014 31st Mar31st
2012Mar 2013
31st Mar 2013
31st Mar 31st
2014Mar 2014
Debt Equity Debt Equity
Debt Equity Debt Equity
Continued to rank amongst Top 3 in terms of total AUM in private sector with a 3 year CAGR of 32%
The debt-equity mix has stabilized over the recent years with the Company maintaining a
balanced portfolio
13Fund Performance
Since Inception Last 1 Year
17.1%
64.0%
14.6%
55.9%
13.1% 13.1%
10.8% 44.5%
9.9%
30.6% 32.3%
7.3%
6.0% 22.4%
14.3% 14.9%
Opportunities Secured Balanced Growth Opportunities Secured Balanced Growth
Benchmark Returns HDFC Life Returns
64.0% benchmarks in all the major fund categories over both, medium and
The company has outperformed
long term horizon 55.9%
The company continues to strengthen its research capabilities to ensure a more diverse investment
44.5%
portfolio
& Opportunities Fund: 32.3%
Inception Dates: Growth Fund, Balanced Fund, Secured Fund: January 2,200430.6% January 4,2010.
Benchmarks: Growth Fund: BSE 100, Balanced Fund: 45% BSE-100 & 55% Crisil Composite Bond Index, Secured Fund: CRISIL Composite
Bond Index, Opportunities Fund: CNX MIDCAP Index 22.4%
Fund performance represented in Compounded Annual Growth Rate (CAGR)
14New Business Profits
` Bn
9M FY13 9M FY14 9M FY15 FY13 FY14
1
New business APE 20.1 14.9 18.3 32.8 25.4
New business profits1,2 3.6 3.6 3.9 5.8 6.7
New business margin1,2 17.9% 24.1% 21.2% 17.8% 26.2%
New business profits (after impact of
4.3 4.1
acquisition expenses overrun) 1
New business margin (after impact of
13.2% 16.1%
acquisition expenses overrun) 1
1
Margins and APE are shown for individual business only
2
Based on loaded acquisition expenses
Higher new business profits due to 23% growth in new business APE vs PY
New business margin for 9M FY15 lower vs PY due to revised expense assumptions based on review
of cost structure
15Progress on Strategic Themes
Long Term Positioning
• Average policy term has improved to 14.5 years (PY 13.6 years)
• Balanced product mix with Traditional (42%) and Unit Linked (58%)
Fortification & Diversification
• Widened reach through new tie ups with NBFCs, MFIs and other partnerships
• „Plug and Play‟ integration model for partner tie-ups put in place
• Readiness for bancassurance open architecture model
Owning Customer Segments
• Launched 5 new products in 9M FY15 :
• Sampoorn Samriddhi Plus - Limited premium endowment plan
• Click2Invest – Low-cost Unit Linked Plan with only Mortality & Fund
Management charges
• Youngstar Udaan – Traditional Children plan with multiple benefit options
• Click2Protect Plus – Comprehensive protection plan
• Health Assure – Revamped Health Plan
16Progress on Strategic Themes Contd...
Unique Customer Experience
• Revamped website - Simple, user friendly interface with 73% of the total service
transactions processed through website
• 53% of renewal payments received through online and direct debit modes
• 89% of new business applications initiated using POS platform
• Best in class claim repudiation ratio at 4.5%* for 9M FY15
Cost Leadership
• Steadily improving cost ratios since FY09
• No capital infusion in last 3 years
• Accumulated shareholder losses have been wiped off in Q1 FY15
* In NOP terms 17Awards and Accolades
32nd in „Top 50 Best Places to National Quality Excellence
Work for‟ Awards 2014 for Best Business
Process Excellence Program
National Gold Award for
Excellence in Cost Management
organized by ICAI
„Most Admired Life Insurance
TDWI Best Practices Award 2014 Companies in Private Sector‟ at
for BI on a Limited Budget the BFS&I Awards, 2014
For more details about our Awards & Accolades, kindly refer our website at www.hdfclife.com 18Awards and Accolades Contd…
Ranked amongst Top 100 CISOs Best Product Innovation (Life Loyalty Award for Financials –
at Infosec Maestros Awards, Insurance), Best Technology Non Banking Financial Sector at
2014 Innovation (Life Insurance) and the 7th Loyalty Awards and
Most Socially Responsible Summit, 2014
Insurer (Overall), 2014
My FM Stars of the Industry - Amongst „50 Most Talented Innovative Leadership in Quality
Youth Icon Award at the My FM Quality Professionals of India‟ at Award at the World Quality
Stars of the Industry Awards, World Quality Congress and Congress and Awards, 2014
2014 Awards, 2014
For more details about our Awards & Accolades, kindly refer our website at www.hdfclife.com 19Appendix & Glossary
Analysis of Change in MCEV
EV profit
` Bn
7.9
77.8
-0.7
3.5
69.9 0.4 -0.8 3.1
2.4 Operating Investment
Acquisition Expected variances and
Methodology New Variances
expense return on change in
and business overrun inforce economic
assumption profits
changes (before assumptions
expense 53.0
49.8 over-run)*
4.4
Embedded value operating profit (EVOP) 24.8
20.1
Value of in-force business Shareholder’s Adjusted Networth
MCEV at MCEV at
31st Mar 14 30th Sep 14
11% growth in MCEV vs FY14
Operating variance is mainly due to adverse persistency experience on UL
Investment variance is mainly due to strong performance of capital markets in H1 FY15
* New business profits pertain to Overall (Individual + Group) business
21Appendix 1 : MCEV methodology and approach
MCEV methodology
The calculations of embedded value and new business profits have been performed using a market consistent
embedded value (“MCEV”) approach. This approach differs from a traditional EV approach primarily in respect of the
way in which allowance for risk is made.
Within the traditional EV approach allowance is made for risk through an increase in the risk discount rate used to
value future shareholder cash flows, whilst within the MCEV calculation explicit separate allowances are made for
risk.
Components of MCEV
There are two components to the MCEV:
1. Shareholders’ adjusted net worth –this component represents the market value of assets attributable to
shareholders. This amount is derived from the Indian GAAP balance sheet adjusted to allow for assets on a market
value basis, elimination of intangible assets and to allow for shareholder attributable assets or liabilities residing
within the unit-linked and non Par policyholder funds.
2. Value of in-force –this component represents the discounted value of after tax shareholder attributable
cashflows expected on the business as at the valuation date. No allowance is made for future new business. This
amount has been adjusted to deduct allowances for non hedgeable risk, frictional costs of required capital and the
time value of financial options and guarantees.
22Appendix 2 : Components of value of in force (“VIF”)
Present value of future profits (“PVFP”) Cost of non hedgeable risk (“CNHR”)
This component has been calculated by discounting the The VIF incorporates an explicit deduction to allow for non
projected future after tax shareholder attributable cash- hedgeable and non economic risks. The CNHR has been
flows expected to arise on in-force business at the valuation derived using a cost of capital approach and is calculated as
date. The cash-flows have been projected on a the discounted value of an annual charge applied to
deterministic basis using the Company‟s best estimate view projected risk bearing capital.
of future persistency, mortality and expenses. Future
The initial risk bearing capital has been calculated based
investment returns and the risk discount rate have been set
on 99.5th percentile stress events for non economic
equal to the returns from the risk free (government bond)
assumptions over a 1-year time horizon. This initial risk
yield curve at the closing balance sheet date.
bearing capital has been updated based on the portfolio
Time Value of Financial Options and Guarantees of business as at 31st March 2013.
("TVFOG") Projected risk bearing capital has been determined by
The Company has regularly carried out analysis of the running-off the initial risk bearing capital in line with the
profile of guarantees in its Par funds to identify the level of expected movement in the regulatory solvency margin
guaranteed benefits occurring at future time periods. The requirement.
investment strategy of the Par funds is re-set to enable, 99.5th Percentile stress events have been taken from
where possible, hedging of these guaranteed benefits the EU Solvency II, QIS 5 framework (previously QIS 4
through cashflow matching of the guarantees with fixed framework). In order to allow for the greater risks
interest assets. As a result, the Company is of the view that associated with emerging markets, the risk bearing
there is no residual TVFOG associated with the Par funds. capital has been uplifted by 50%.
The cost associated with the investment guarantees in the The annual charge applied to the projected risk bearing
unit linked funds has been allowed for in the PVFP capital is 4% p.a.
calculation.
The stress events, uplifts to NHR, run-off pattern for
Frictional Costs of Required Capital (“FCRC”) projected risk bearing capital and annual charge, are
The VIF allows for a deduction in respect of the frictional reviewed and modified if necessary on an annual basis.
costs of holding required capital (“FCRC”). Required capital
has been set equal to the amount of shareholder
attributable assets required to back local regulatory
solvency requirements. The FCRC has been calculated as
the discounted value of investment costs and taxes on
shareholder attributable assets backing the required capital
over the lifetime of the in-force business.
23Appendix 3 : Key assumptions underlying MCEV
Expenses Mortality and morbidity
Maintenance expenses have been based on the latest Mortality and morbidity assumptions are set by product
expense analysis done in FY13 and are inflated at 7.5% line and are based on past experience.
per annum. These assumptions do not incorporate any
allowance for future productivity improvements.
Persistency
The Company has recently reviewed its cost structure
based on the expense analysis and has derived the Persistency assumptions are set by product line, payment
projected long-term acquisition expense assumptions mode and duration in-force, based on past experience
based on this review. These assumptions are higher than and expectations of future experience. Separate
those used earlier and have been incorporated into the decrements are modeled for lapses, surrenders, paid-ups
calculation of pre-overrun margins for 9M FY15 and partial withdrawals.
Economic assumptions Tax assumptions
The closing MCEV is calculated assuming projected Tax assumptions are based on interpretation of existing
earned and risk discount rates are both set equal to the tax legislation, where appropriate supported by legal
risk free (government bond) yield curve at the closing opinion.
balance sheet date.
Profits attributable to shareholders are assumed to be
The new business profitability is calculated with similar taxed at 14.16% for Life business and 0% for Pensions
assumptions, except that the yield curve at the opening business.
balance sheet date is used.
Allowance is made within the tax computation for
No allowance for any illiquidity premia is made within the dividend offsets permitted under Section 2A of the
earned rates, except for group credit spread products. Income Tax Act and for losses incurred within the
Shareholder Fund.
No allowance is made for future changes to taxation such
as the Direct Tax Code. These changes will be
incorporated only once materially enacted. It is expected
that implementation of DTC in its current form will result
in a material negative impact to the MCEV and new
business profitability.
24Appendix 4 : Key components underlying MCEV movements
Analysis of change in MCEV
Opening modeling, assumptions and methodology Operating Variances: The Operating Variances capture
changes: The models, assumptions and methodology are the impact of the deviations of the actual claims,
continuously refined and improved and the impact of persistency and maintenance expense experience during
these refinements is reflected in the opening changes. the period from that assumed in the opening MCEV
calculation.
Investment variances and change in economic
Expected return on inforce: This item reflects expected
assumptions: This reflects the impact due to the actual
investment income on shareholder assets during the
investment return being different from the expected
period, and reflects that future shareholder profits are
returns and the impact from the change in the yield curve
closer than at the start of the period. This positive item
at the end of the period compared to the yield curve at
will occur in each MCEV period.
the start of the period.
25Glossary
Commission ratio – Ratio of total commissions paid out on first year, single and renewal premiums to total
premiums.
Conservation ratio – Ratio of current year renewal premiums to previous year‟s renewal premium and first year
premium.
APE (Annualized Premium Equivalent) – The sum of annualized first year regular premiums and 10%
weighted single premiums and single premium top-ups.
First year premiums – Regular premiums received during the year for all modes of payments chosen by the
customer which are still in the first year. For example, for a monthly mode policy sold in March 2014, the first
installment would fall into first year premiums for 2013-14 and the remaining 11 installments in the first year
would be first year premiums in 2014-15.
New business received premium – The sum of first year premium and single premium.
Operating expense – All expenses of management excluding service tax. It does not include commission.
Operating expense ratio – Ratio of operating expenses (excluding service tax) to total premiums.
Renewal premiums – Regular recurring premiums received after the first year.
Solvency ratio – Ratio of available solvency margin to required solvency margins.
Total premiums – 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 and 10% weighted single premiums and
single premium top-ups.
13th month persistency – Percentage of contracts, measured by premium, still in force 13 months after they
have been issued.
26Disclaimer
This release is a compilation of published financial results, other information and is not a statutory
release. This may also contain statements that are forward looking. These statements are based on
current expectations and assumptions that are subject to risks and uncertainties. Actual results could
differ from our expectations and assumptions. We do not undertake any responsibility to update any
forward looking statements nor should this be constituted as a guidance of future performance. This
release is a privilege copy intended for reference of selected group.
These disclosures are subject to the prevailing regulatory and policy framework as on December 31,
2014 and do not reflect any subsequent changes.
27Thank You
In partnership with Standard Life
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