HDFC Life Insurance

Investor presentation – H1 FY19

Agenda

A Performance Snapshot

Key Differentiators

Additional Business Information

India Life Insurance

Annexures

2
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%

Operational snapshot

21.6 mn Rs 2,618 bn 18,500+ 170 31 413 15,000+

NB (Individual and New business Employee Bancassurance Non-traditional Offices6 Partner
Group segment) lives sum assured headcount partners distribution partners branches7
insured

Notes: 1 VNB: Value of New business; 2 IEV: Indian Embedded value; 3 Operating return on EV – Annualised EVOP (Embedded value operating profit)/Opening EV; 4 Calculated
using net profit and average net worth for the period (Net worth comprises of Share capital, Share premium and Accumulated profits/(losses)); 5 Calculated as per IRDAI circular
(based on original premium). Group business, where persistency is measurable, has been included in the calculations; 6 Including corporate office in Mumbai and 2 hub
operations; 7 For top 15 bancassurance partners
3 PS: The numbers throughout the presentation are based on standalone financial results of the Company
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 FY18 H1 FY19

Total APE 37.1 41.9 55.3 21.3 25.1

Total Premium Single Premium Renewal Premium First Year Regular Premium

Private Market share / Ranking FY16 FY17 FY18 H1 FY18 H1 FY19

Individual WRP 14.7% / 3 12.7% / 3 13.3% / 3 12.7% / 3 13.0%/ 3

Group premium 18.3% / 1 24.3% / 1 28.5% / 1 28.6% / 1 28.0%/ 1

Total new business received premium 15.8% / 3 17.2% / 2 19.1% / 1 18.5% / 1 21.2%/ 1

4
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 Mar 31, 2017 Mar 31, 2018 Sep 30, 2018

1 2,3
ASM RSM @100% Incremental RSM @150% Surplus Capital Solvency margin

 Internal accrual of surplus from backbook has supported the capital requirement for robust new business growth

 Track record of healthy dividend payouts

 No capital infused in last seven years (except through issuance of ESOPs)

Notes:
1. RSM represents Required solvency margin
2. Investment in subsidiaries not considered in solvency margin.
5 3. No capital infusion required even if NB APE grows at CAGR of 50% in the next 3 years
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 APE 34.3 37.4 48.9 19% 18.5 21.0 13%
Group Premium (NB) 28.3 44.2 54.1 38% 23.4 32.0 36%
Profit after Tax 8.2 8.9 11.1 16% 5.5 6.7 20%
- Policyholder Surplus 6.8 7.5 8.5 11% 4.5 5.4 20%
- Shareholder Surplus 1.4 1.4 2.6 38% 1.1 1.3 23%
(1 )
Dividend Paid 2.2 2.6 3.3 23% NA NA NA
Assets Under Management 742.5 917.4 1,066.0 20% 995.3 1,132.3 14%
(2 )
Indian Embedded Value 102.3 124.7 152.2 22% 140.1 163.8 17%
(3 )
Net Worth 31.5 38.1 47.2 22% 44.3 54.1 22%
(4 )
New Business Sum Assured 2,714.9 3,887.6 4,734.5 32% 1,965.5 2,618.2 33%
(5 )
No. of Individual Policies (NB) sold (In 000s) 1,150.3 1,082.3 1,049.6 -4% 430.1 439.3 2%

Notes:
1. Including dividend distribution tax (DDT)
2. Based on internal company analysis. IEV excluding investment variance has grown at a CAGR of 19% between FY16-18 and by 20% during H1 FY19 (on an annualised basis)
3. Comprises share capital, share premium and accumulated profits/(losses)
4. Comprises individual and group business
5. Including rural policies
6. Previous year group numbers have not been reclassified based on current year numbers for FY16 and FY17
6
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 + Commission) / Total Premium 15.9% 16.7% 18.0% 18.6% 18.0%
(2 )
Return on Invested Capital 37.9% 41.0% 49.1% 49.9% 57.2%
(3 )
Return on Equity 28.7% 25.7% 26.0% 27.0% 26.4%
Solvency Ratio 198% 192% 192% 201% 193%
(4 )
Persistency (13M / 61M) 81%/50% 84%/59% 87%/51% 86%/55% 87%/50%
Indl Conservation Ratio 80% 82% 85% 85% 86%
Business Mix (%)
(5 )
- Product (UL/Non par savings/Non par protection/Par) 56/9/5/30 52/9/4/35 57/9/5/28 58/8/5/29 59/11/7/23
(5 )
- Indl Distribution (CA/Agency/Broker/Direct) 75/12/4/9 72/12/5/11 71/11/5/14 69/10/6/14 67/11/4/17
(6 )
- Total Distribution (CA/Agency/Broker/Direct/Group) 40/8/2/7/43 32/7/2/7/52 33/7/2/10/48 30/6/2/8/53 27/7/2/14/51
- Share of protection business (Basis APE) 7.3% 7.8% 11.3% 11.8% 16.2%
- Share of protection business (Basis NBP) 17.2% 21.8% 25.9% 26.4% 28.7%

Notes:
1. During H1 FY18, there was a one time operating assumption change of positive Rs 1.4 bn based on review by Milliman as part of the IPO process. Excluding this one time
adjustment, Operating return on EV would have been 18.7% for H1 FY18
2. Calculated using net profit and average share capital including share premium
3. Calculated using net profit and average net worth for the period (Net worth comprises of Share capital, Share premium and Accumulated profits/(losses))
4. Persistency ratios (based on original premium). Group business, where persistency is measurable, has been included in the calculations.
5. Based on individual APE. UL: Unit Linked, Trad: Traditional, Par: Participating & CA: Corporate Agents. Percentages are rounded off
6. Based on total new business premium including group. Percentages are rounded off
7 7. Previous year group numbers have not been reclassified based on current year numbers for FY16 and FY17
Agenda

Performance Snapshot

B Key Differentiators

Additional Business Information

India Life Insurance

Annexures

8
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 and latent
customer needs, setting
3 pools to achieve the fine
balance between sales growth
and profitability
benchmarks in the life
insurance industry

Reimagining Quality of
insurance Board and
Market-leading digital management

4 capabilities to shape the

insurance operating model of
tomorrow
5 Seasoned leadership
guided by an
independent and
competent Board

9
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 with non-  Enhanced focus on proprietary
partnerships by providing focus on recruiting quality traditional partners across channels has resulted in 35%
superior value propositions agents is underway; 75% of various eco-system verticals CAGR growth (FY14-18) in direct
branches covered under the including fintech, education, channel business over the last five
 Focused on forging new e-commerce, transportation years
program
partnerships with PSU banks and health verticals
like Vijaya bank to gain access  The channel registered a  Online and digital sub-channel
to incremental customer base growth of 26% YoY  Ability to customize contributed 7% of the individual
insurance buying journeys APE
 HDFC group entities sourced  Agent activation increased that can embed seamlessly
13% of total group business by 17% in H1 FY19 with in partner journeys
and 32% of total new business 37% increase in the number
in H1 FY19 of agents as on 30th Sep  Tie-ups with most of the
marquee insurance brokers
 7 bancassurance partners
added in Q2 FY19

Balanced Product Reimagining Quality of Board

Profitable growth
distribution mix innovation insurance and management
10 Note: All growth numbers are basis Individual APE
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 Brokers and others

Stable distribution mix (based on total NBP)

31
Ecosystems

34% 35% 32%

29%
Optimizing cross-sell opportunities1
42%

8.5%
14% 21%
14%
17%
15%
6.2%
5.5%
20% 24%
14% 24% 26%
3.5%
1.6%
30% 32% 29%
24% 25%

FY 16 FY 17 FY 18 H1 FY18 H1 FY19 FY15 FY16 FY17 FY18 H1 FY19

2 2
Group Others Group Protection Proprietary channels Third Party Distributors

Balanced Product Reimagining Quality of Board

Profitable growth
distribution mix innovation insurance and management
11 Note: 1. Calculated as Number of policies from existing group customers / Total number of individual new business policies
2. Third party distributors include bancassurance and broker; Proprietary channels include agency and direct
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%
8% 0%
12%
 Diversified portfolio across loan segments 40% 15%
7%
18% -10%
14% 12%
7%
 201 distribution partners are testament to our strong reputation as preferred business partner 20%
30% 25% 26%
-20%
22%
0% -30%
 Extensive manpower and support, with dedicated niche technology platforms offered to the FY16 FY17 FY18 H1 FY19

partners UL Par Non par savings Group savings Non par protection

Morbidity Longevity

 High medical inflation coupled with increase in  Proportion of India’s elderly population Retirement Funds as a % of GDP1
the incidence of lifestyle diseases leaves (> 65 yrs of age) will increase by ~50% Netherlands 161%
families with big financial exposures in case of to 120 Mn by 2030 Iceland 146%
Switzerland (E) 125%
illnesses  With competitive annuity rates, deferred
Australia 113%
 Our health suite comprises defined benefit annuity guaranteeing payouts for a life United Kingdom 96%
products across individual and group platforms time, we are positioned well to attend to United States 85%
life-health combination product propositions the retirement opportunity India 12%

0% 50% 100% 150% 200%

Balanced Product Reimagining Quality of Board

Profitable growth
distribution mix innovation insurance and management
12 Note: 1. OECD Study 2015
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 that
of protection and fund management covers death, disease and disability

Balanced product mix1

9% 9% 9% 8% 11%
5% 4% 5% 5% 7%
Joint-life single-premium ULIP 30% 35% 28% 29% 23%
New Launch
with low cost structure

56% 53% 57% 58% 59%

FY16 FY17 FY18 H1 FY18 H1 FY19

ULIP Par Npar Protection Npar Savings

Balanced Product Reimagining Quality of Board

Profitable growth
distribution mix innovation insurance and management
13 Note: 1. As a % of individual APE
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
11.7
9.3

0.0

-4.8
-7.7 -7.1 -6.3
-5.0 -10.6

-10.0
FY16 FY17 FY18 H1 FY18 H1 FY19

New business strain Back book surplus

 Steady unwind of profits from the back book significantly higher than the new business strain caused by growth
in business, resulting in healthy underwriting profits

Balanced Product Reimagining Quality of Board

Profitable growth
distribution mix innovation insurance and management
Note:
14 1. Based on internal Company analysis, numbers may not add up due to rounding off
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 business (VIF)

48.5 49.6

IEV at 31st IEV at 30th

Mar 18 Sep 18

 Continue to deliver healthy operating returns on EV

 Positive persistency, mortality and expense variances, reflecting favourable experience compared to assumptions

Balanced Product Reimagining Quality of Board

Profitable growth
distribution mix innovation insurance and management
15 Note: 1. Operating Return on Embedded Value calculated as annualised EVOP (Embedded Value Operating Profit) to Opening EV
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 significant
reduction in man-hours

 Video-enabled confirmation of customer  ~ 56% of verification done

Ensuring understanding (pre-issuance) through the video-based app
suitability
 Automated suitability matrix to mitigate  Customer complaints reduced by
mis-selling 24% in H1 FY19

 Pre-approved sum assured on partner  99.9% applications submitted via

Capability to website/ mobile apps digital medium
customize
 Customized new business and renewal  ~78% of renewal payments via
collection process online modes

Balanced Product Reimagining Quality of Board

Profitable growth
distribution mix innovation insurance and management
16
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 interests of
transition all stakeholders

Track record of delivering consistent results across Encouragement from Board to calibrate business
business cycles strategies to harness new pools of profitability

Key Governance forums

Disciplinary
Risk Whistle-blower
Panel for POSH
management Committee
More than 25 Malpractices
governance forums run Compliance
within the company Council
Information and
Policyholder
Claims Review Cyber Security Product Council
protection
Council

Balanced Product Reimagining Quality of Board

Profitable growth
distribution mix innovation insurance and management
17
Agenda

Performance Snapshot

Key Differentiators

C Additional Business Information

India Life Insurance

Annexures

18
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 2018

31st Mar 2016 31st Mar 2017 31st Mar 2018 30th Sep 2017 30th Sep 2018
Net Fund inflow Net investment income
AUM in Rs bn Growth in AUM vs LY Market movements Net change in AUM1

 Continue to rank amongst top 3 private players, in terms of assets under management2

 Over 96% of debt investments in AAA rated and Government bonds as on Sep 30, 2018

 Accretion to the AUM has been marginally impacted by the decline in the value of the investments due to volatile
debt and equity markets

Notes:
1. Calculated as difference from April to September
19 2. Based on Asset under Management as on Jun 30, 2018
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%
Non par others 6% 7% 8% 8% 12%
Direct UL 45% 48% 54% 56% 47%
Par 24% 22% 12% 12% 8%
Non par protection 23% 18% 21% 22% 23%
Non par others 8% 13% 13% 9% 22%
Company UL 56% 52% 57% 58% 59%
Par 30% 35% 28% 29% 23%
Non par protection 5% 4% 5% 5% 7%
Non par others 9% 9% 9% 8% 11%
Protection mix (Basis Indl + Group APE) 7% 8% 11% 12% 16%
Protection mix (Basis Indl + Group NBP)3 17% 22% 26% 26% 29%

Notes:
1. Basis Individual APE
2. Includes banks and other corporate agents
20 3. Previous year group numbers have not been reclassified based on current year numbers
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%
76% 76%
70% 70%
65% 65% 70%
61% 63%
60%
56%
53%
49%
45%

Par Non par (Term) Non par savings UL Company

13th month 25th Month 37th Month 49th Month 61st Month

21 Note: 1. Calculated as per IRDAI circular (based on original premium) for period ended Sep 30, 2018 for individual business
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 Guarantees Risk (CRNHR)
(TVFOG)

 Significant proportion of VIF at 70% of the total Embedded value

 TVFOG includes cost of guarantees for conventional participating and unit linked products

Notes:
1. Based on internal analysis, detailed explanation of components provided in the Appendix to the presentation
22 2. PVFP pertains to Overall (Individual + Group) business
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. Based on internal Company analysis
2. Impact of change in mainly persistency and mortality assumptions revised during annual review in March’18
23 3. Reflects the impact of difference in mix of segment/distribution channel/tenure/age/sum assured multiple etc
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% -0.84% -1.60%

Persistency (Lapse rates)
Decrease by 10% 3.67% 0.89% 1.70%

Increase by 10% -2.19% -0.53% -0.60%

Maintenance expenses
Decrease by 10% 2.19% 0.53% 0.60%

Increase by 10% -15.27% -3.71% NA

Acquisition
Expenses
Decrease by 10% 15.27% 3.71% NA

Increase by 5% -5.99% -1.46% -0.90%

Mortality / Morbidity
Decrease by 5% 5.99% 1.46% 0.90%

Tax rate2 Increased to 25% -13.96% -3.39% -6.40%

Notes:
1. Post overrun total VNB for Individual and Group business
2. The tax rate is assumed to increase from 14.56% to 25% and hence all the currently taxed profits in policyholder/shareholder segments are taxed at a higher rate. It does
not allow for the benefit of policyholder surplus being tax-exempt as was envisaged in the DTC Bill.
24
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 negotiations and branch cost rationalisation

o Process improvements through implementation of AI and robotics

o Leveraging technology and automation to improve efficiency

Notes:
1. One-off reversals comprise of reversal of previous year provisions in H1 FY18 with regards to IPO / Merger costs
2. Fixed costs include employee, infrastructure, information technology costs and any other costs which are fixed in nature
25 3. Variable costs include stamp duty, medical fees, sales incentives, brand awareness, operations support and any other costs which are linked to business
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
 Total subscriber base is slightly over 272,000 as on 30th Sept 2018

 HDFC International Life and Re Company, our Dubai based

subsidiary continues to work with reputable cedants

 Revenue lines consist of reinsurance of individual life products and

HDFC International
group life & credit schemes from GCC and MENA based ceding
Life and Re insurers

 HDFC International also recorded its second consecutive profitable

quarter in Q2 FY19

26 Note: 1. Investment in subsidiaries not considered in solvency margin

Agenda

Performance Snapshot

Key Differentiators

Additional Business Information

D India Life Insurance

Annexures

27
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
Malaysia

Malaysia
Hong Kong

Singapore

Japan

Thailand

China

China

Thailand

Indonesia

Hong Kong

Japan

Singapore
Taiwan

Taiwan
India
Malaysia
Hong Kong

Japan

Thailand

China
Singapore
Taiwan
India life insurance India life insurance density
penetration (FY09-18) US$ (FY09-18)  India has the highest protection gap in
the region, as growth in savings and
life insurance coverage has lagged
56 55

4.0%
4.6% 4.4% 41
48 49
43 41 44 43 47 behind economic and wage growth
3.4% 3.2% 3.1% 2.8%
Protection gap has increased over 4x in
2.7% 2.7%
2.6%

last 15 years with significantly low
insurance penetration and density
FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18
Note: Penetration as measured by premiums as % of GDP, Density defined as the ratio of premium underwritten in a given year to
the total population
28 Source: Swiss Re (Based on respective financial year of the countries), MOSPI
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 million by 2020

 India is currently one of the world’s youngest nation, offering great opportunity for long term savings and investment plans
 Demand for retirement policies to rise with increasing life expectancy, declining birth-rates and proportion of India’s elderly
population expected to increase by almost 100% by 2035 (as compared to 2015)
 Emergence of nuclear families and increasing life expectancy to facilitate need for pension and protection based products

Source:
29 1. United Nations World Populations Prospects Report (2017)
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 & deposts Life insurance Provident/Pension fund Others
Household savings as % of GDP

 Increasing preference towards financial savings with buoyant equity market returns, along with impact of demonetisation on
physical assets return profile
 Increasing share of life insurance within financial assets, as it caters to long-term saving and protection needs
 Various government initiatives to promote financial inclusion:
− Implementation of JAM trinity – around 329 mn new savings bank accounts opened till date
− Launch of affordable PMJJBY and PMSBY social insurance schemes
− Atal Pension Yojana promoting pension in unorganized sector
− Set up of Small Finance Banks and Payment Banks to increase financial inclusion

30 Source: DBIE-RBI Statistics, RBI Annual Report, Economic Survey, CSO, www.pmjdy.gov.in
 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% 8% 21% 19% 10%
Overall

 Private sector gained higher market share than LIC for the first time in FY16, post FY11 regulatory changes

 Based on individual WRP private sector has outpaced LIC in last 3 years (FY16-18)

Note: 1.Basis Individual Weighted Received Premium (WRP)

31
Source: IRDAI and Life Insurance Council
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 (WRP) as disclosed by IRDAI, Life Insurance Council
32 2. Top 7 players based on H1 FY19 business numbers, comprising of ICICI Pru, SBI Life, HDFC Life, Max Life, Birla Sun Life, Bajaj Allianz and Tata AIA
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%
46%
43%
40%
37% 39% 43% 44%
33% 47% 52% 54% 54%

44% 40% 41% 36% 32% 30% 28%

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY12 FY13 FY14 FY15 FY16 FY17 FY18

 Reduced distributors’ payout and high expense structure led many players to move to traditional products over last few years,
however the focus is changing towards linked products with improved equity market performance and increase in share of
Banca
 Increasing thrust on protection business to help improve the new business margins
 Banca sourced business has consistently increased on the back of increasing reach of banks while share of Agency has
declined post regulatory changes in FY11

Notes:
1. Basis Overall WRP (Individual and Group);
2. Basis Individual New business premia
33 Source: IRDAI and Life Insurance Council
Annexures
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 Income from Investments (B) 113.7 88.8 54.0 30.4
Other Income (C) 1.0 1.2 0.9 0.8
Total Income (D=A+B+C) 307.4 323.7 145.4 149.0
Expenses and Outflow
Commission 7.9 10.8 4.0 4.6
Operating expenses 24.5 31.7 12.9 16.8
GST / Service tax on UL charges 2.2 3.0 1.3 1.6
Benefits Paid1 100.0 131.1 55.8 63.0
Provision for diminution in value of investments 0.0 (0.0) (0.1) 0.8
Change in Valuation Reserves (net) 160.5 133.2 64.8 55.3
Change in funds for future appropriations 1.6 0.9 0.6 (0.2)
Provision for tax 1.7 1.9 0.4 0.4
Total Expenses and Outflow (E) 298.5 312.6 139.9 142.3

Profit after tax (D-E) 8.9 11.1 5.5 6.7

35 Note: 1. Benefits paid comprises of benefits paid (net), interim bonus and terminal bonuses paid
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 323.8 423.2 472.9
Provision for Linked Liabilities 508.1 546.0 548.6
Funds for discontinued policies 29.9 25.9 28.8
Funds for Future Appropriations 8.7 9.6 9.4
Change in fair value account 4.0 6.2 8.2
Current Liabilities & Provisions 38.2 46.4 47.6
Total Liabilities 951.1 1,104.8 1,169.6

APPLICATION OF FUNDS
Investments
Shareholders 32.5 40.7 44.4
Policyholders' assets 346.9 453.5 510.5
Assets held to cover linked liabilities 538.0 571.8 577.4
Loans 0.5 0.2 0.3
Fixed Assets 3.5 3.4 3.4
Cash & Bank Balances 8.0 11.1 5.2
Advances & Other Assets 21.7 24.1 28.4
Total Assets 951.1 1,104.8 1,169.6

36
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 Non-par Protection
34

Non-par Pension 11 54
11 Non-par Pension
54

 Focus on long term insurance solutions, reflected in longer policy tenure

 Extensive product solutions catering customer needs across life cycles from young age to relatively
older population

37 Note: 1. Basis individual new business policies (excluding annuity) sold in H1 FY19
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 distributable
from assets allocated to the covered business, after making sufficient allowance for the aggregate risks in the covered
business.

Components of Adjusted Net Worth (ANW)

 Free surplus (FS): FS is the market value of any assets allocated to, but not required to support, the in-force covered
business as at the valuation date. The FS has been determined as the adjusted net worth of the Company (being the net
shareholders’ funds adjusted to revalue assets to market value), less the RC as defined below.
 Required capital (RC): RC is the amount of assets attributed to the covered business over and above that required to
back liabilities for the covered business. The distribution of this to shareholders is restricted. RC is set equal to the
internal target level of capital equal to 170% of the factor-based regulatory solvency requirements, less the funds for
future appropriations (“FFA”) in the participating funds.

38
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 shareholder cash flows from the in-force
covered business and the assets backing the associated liabilities.

 Time Value of Financial Options and Guarantees (TVFOG): TVFOG reflects the value of the additional cost to
shareholders that may arise from the embedded financial options and guarantees attaching to the covered business in
the event of future adverse market movements. The intrinsic value of such options and guarantees is reflected in the
PVFP.

 Frictional costs of required capital (FC): FC represents the investment management expenses and taxation costs
associated with holding the RC. VIF includes an allowance for FC of holding RC for the covered business. VIF also
includes an allowance for FC in respect of the encumbered capital in the Company’s holdings in its subsidiaries.

 Cost of residual non-hedgeable risks (CRNHR): CRNHR is an allowance for risks to shareholder value to the
extent that these are not already allowed for in the TVFOG or the PVFP. In particular, the CRNHR makes allowance for:
– asymmetries in the impact of the risks on shareholder value; and
– risks that are not allowed for in the TVFOG or the PVFP.

CRNHR has been determined using a cost of capital approach. CRNHR is the present value of the cost of capital charge
levied on the projected capital in respect of the material risks identified.
39
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 7.19

20 8.52 7.80 8.24 7.27

25 8.45 7.80 8.22 7.32

30+ 8.41 7.80 8.20 7.35

40 Note: 1. Forward rates are annualised and Spot rates are continuous
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 - 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 2018, the first instalment would fall into first
year premiums for 2017-18 and the remaining 11 instalments in the first year would be first year premiums in 2018-19
 New business received premium - The sum of first year premium and single premium.
 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 - Ratio of operating expense (including shareholders’ expenses) to total premium
 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, based on reducing balance approach

41
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 United States, Canada, the People’s Republic
of China, Japan or any other jurisdiction. This presentation is not for publication or distribution, directly or indirectly, in or into the United States (including its
territories and possessions, any state of the United States and the District of Columbia). The securities of the Company may not be offered or sold in the United States
in the absence of registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. The Company does not intend to register any
securities in the United States. You confirm that you are either: (i) a “qualified institutional buyer” as defined in Rule 144A under the U.S. Securities Act of 1933, as
amended, or (ii) outside the United States. By receiving this presentation, you are agreeing to be bound by the foregoing and below restrictions. Any failure to comply
with these restrictions will constitute a violation of applicable securities laws.

This presentation should not, nor should anything contained in it, form the basis of, or be relied upon in any connection with any contract or commitment whatsoever.
The information contained in this presentation is strictly confidential and is intended solely for your reference and shall not be reproduced (in whole or in part),
retransmitted, summarized or distributed to any other persons without Company’s prior written consent.

The Company may alter, modify or otherwise change in any manner the contents of this presentation, without obligation to notify you or any person of such revision
or changes. This presentation may contain forward‐looking statements that involve risks and uncertainties. Forward‐looking statements are based on certain
assumptions and expectations of future events. Actual future performance, outcomes and results may differ materially from those expressed in forward‐looking
statements as a result of a number of risks, uncertainties and assumptions. Although Company believes that such forward‐looking statements are based on reasonable
assumptions, it can give no assurance that your expectations will be met. Representative examples of factors that could affect the accuracy of forward-looking
statements include (without limitation) the condition of and changes in India’s political and economic status, government policies, applicable laws, the insurance sector
in India, international and domestic events having a bearing on Company’s business, particularly in regard to the regulatory changes that are applicable to the life
insurance sector in India, and such other factors beyond our control. You are cautioned not to place undue reliance on these forward-looking statements, which are
based on knowledge, experience and current view of Company’s management based on relevant facts and circumstances.

The data herein with respect to HDFC Life is based on a number of assumptions, and is subject to a number of known and unknown risks, which may cause HDFC
Life’s actual results or performance to differ materially from any projected future results or performance expressed or implied by such statements. Forecasts and
hypothetical examples are subject to uncertainty and contingencies outside Company’s control. Past performance is not a reliable indication of future performance.

This presentation has been prepared by the Company. No representation, warranty, express or implied, is made as to, and no reliance should be placed on, the
fairness, accuracy , completeness or correctness of the information and opinions in this presentation. None of Company or any of its directors, officers, employees,
agents or advisers, or any of their respective affiliates, advisers or representatives, undertake to update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise and none of them shall have any liability (in negligence or otherwise) for any loss howsoever arising from any use of
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legal, business, tax or financial advice or a recommendation regarding the securities. Before acting on any information you should consider the appropriateness of the
information having regard to these matters, and in particular, you should seek independent financial advice.

42
Thank you