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Standard Life in India
19 November 2012
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Standard Life in India | November 2012 2
This presentation may contain certain forward-looking statements with respect to certain of Standard Life's
plans and its current goals and expectations relating to its future financial condition, performance, results,
strategy and objectives. Statements containing the words believes, intends, expects, plans, seeks
and anticipates, and words of similar meaning, are forward-looking. By their nature, all forward-looking
statements involve risk and uncertainty because they relate to future events and circumstances which are
beyond Standard Life's control including among other things, UK domestic and global economic and
business conditions, market related risks such as fluctuations in interest rates and exchange rates, and the
performance of financial markets generally; the policies and actions of regulatory authorities, the impact of
competition, inflation, and deflation; experience in particular with regard to mortality and morbidity trends,
lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or
combinations within relevant industries; and the impact of changes in capital, solvency or accounting
standards, and tax and other legislation and regulations in the jurisdictions in which Standard Life and its
affiliates operate. This may for example result in changes to assumptions used for determining results of
operations or re-estimations of reserves for future policy benefits. As a result, Standard Lifes actual future
financial condition, performance and results may differ materially from the plans, goals, and expectations set
forth in the forward-looking statements. Standard Life undertakes no obligation to update the forward-
looking statements contained in this presentation or any other forward-looking statements it may make.
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Welcome
Jackie Hunt
Chief Financial Officer
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Standard Life in India | November 2012 4
Welcome and agenda
Welcome
Jackie Hunt (CFO, Standard Life)
Asia and Emerging Markets overview
Nathan Parnaby (CEO, Asia and Emerging Markets, Standard Life)
HDFC Life
Amitabh Chaudhry (MD and CEO, HDFC Life)
HDFC Asset Management Company
James Aird (Director, HDFC AMC and Head of Strategic Development, Standard Life Investments)
Questions and Answers
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Asia and Emerging Markets
Nathan Parnaby
CEO, Asia and Emerging Markets
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Standard Life in India | November 2012 6
Asia and Emerging Markets
International operations
Hong Kong - Standard Life Asia Limited
Standard Life International Limited
Based in Dublin, primarily servicing UK offshore market
Singapore branch now open for business
Joint ventures
HDFC Life
Joint venture with Housing Development Finance Corporation (HDFC)
26% stake, maximum allowed by FDI rules
Heng An Standard Life
Joint venture with Tianjin Economic Technological Development Area (TEDA)
50% stake, maximum allowed by FDI rules
Asset management
HDFC AMC
Joint venture with HDFC
40% stake, held and managed by Standard Life Investments
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Standard Life in India | November 2012 7
Maximising the value of our JV relationships
Number 2 position in Indian individual private market with 17% share and more than 2m customers
India now profitable and capital self-sufficient
Growing distribution capability in China
Growing our business
Taking advantage of our offshore savings
capability
Operations base in Dublin primarily servicing UK offshore
16% market share and growing
Increasing efficiency and building an internationally scalable business with c.3bn assets
Leveraging the value of Standard Life and HDFC
brands in Asia
Strong brands with both European ex-pats and non-resident Indian market
Attractive affluent target customer base
Existing experience in Hong Kong
Opening of Singapore branch with further potential for growth in similar markets
Leveraging the asset management expertise
of Standard Life Investments and HDFC AMC
Increased scope for distribution of Standard Life Investments and HDFC AMC investment products
Expanding share of the value chain
Number one mutual fund company in India by assets and 5m customers
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HDFC Standard Life Insurance Company Limited
Amitabh Chaudhry
MD & CEO, HDFC Life
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Standard Life in India | November 2012 9
Background & Parentage
Growth Opportunities for HDFC Life
Overview of Indian life insurance industry
HDFC Life performance
About HDFC Life
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Standard Life in India | November 2012 10
HDFC Life : Strong parentage
Leading financial services corporation
known for its industry leading business performance and high governance standards
Leading long term savings and investments company operating internationally
1st private life insurer to start
operations in India
HDFC: Housing Development Finance CorporationShareholding Pattern as at 30th Sept 2012 : HDFC 72.4%; Standard Life 26.0%; Individuals / ESOP Trust 1.6%
72.4% 26.0%
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Standard Life in India | November 2012 11
HDFC Limited was incorporated in 1977 as the first specialized mortgage company in India
HDFC has financed 4.2 million housing units, has Rs 1551.3 Bn loans outstanding
Mortgage loan growth at 22% CAGR, PAT at 21% CAGR
Stable, experienced management average tenure of senior management is 25+ years
Today it is a financial conglomerate with interests beyond mortgages
HDFC Group : Indias leading financial services conglomerate
^ on a fully diluted basis
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Standard Life in India | November 2012 12
Background & Parentage
Growth Opportunities for HDFC Life
Overview of Indian life insurance industry
HDFC Life performance
About HDFC Life
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Standard Life in India | November 2012 13
Indian consumers are positively disposed towards insurance purchase
Average Household Size
1981 1991 2001 2011
5.5 5.1 4.6 4.2
Indian consumers are risk-averse and consider insurance to be a low risk, high return product
Insurance penetration (premiums as a % of GDP) is higher than most emerging markets. With expected increase in per capita income, life insurance premiums should increase given the positive disposition of customers.
Increase in average life expectancy would fuel need for pension and health products. Emergence of nuclear families has resulted in reduction in average household size and would increase need for protection products.
4444
3333
2222
2222 55553333 4444
Risk
Return
Mutual Funds
Bonds
Life Insurance
Bank Savings Account
Source: McKinsey PFS Survey, 2011
Indian consumer perceives life insurance as a low risk, high return
product
4444
3333
2222
2222 55553333 4444
Risk
Return
Mutual Funds
Bonds
Life Insurance
Bank Savings Account
Source: McKinsey PFS Survey, 2011
Indian consumer perceives life insurance as a low risk, high return
product
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Standard Life in India | November 2012 14
Product suite has significant headroom to expand and increase penetration and profitability
Current product mix is largely oriented around investment & savings products. HDFC Life has developed multiple vehicles of protection.
Click2Protect - term insurance plan on individual platform
Credit Protect - loan cover plan on group platform
The increased emphasis on risk protection would help to diversify the product mix
Increasing opportunities for bundling insurance with banking products as financial inclusion increases across the country
Risk Protection
LIFEEARNING ABILITY
LIFESTYLE ADJUSTMENT
FUTURE NEEDS
Premium Protection
Future CoverIllnessFunctional Impairment
Combination Retrenchment
Physical Impairment
Occupational Disability
Death
Accidental Death Benefit
Final Expense Benefit
Health
and
Wellbeing
Death
and
Bereavement
Emergencies
Work
Counselling
Legal
Savings
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Standard Life in India | November 2012 15
Share of agency channel (2.4 million agents) continues to shrink
Bancassurance contributes nearly 1/3rd of NB premiums for private life insurers
Top 3 private life insurers have banking partners within the financial group
LIC continues to be agency driven
Source : Public Disclosures of 20 Private Insurers in India, IRDA Annual Report & HDFC Life Analysis
Banks continue to gain share of distribution as they expand and penetrate new markets
Distribution Mix of Private Life Insurers
64%
45%
18%
37%
10% 8%
1% 5%8% 5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY06 FY12
Individual agents Corporate AgentsBanks Corporate Agents Others
Brokers Direct Business
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Standard Life in India | November 2012 16
We are well positioned to leverage this trend due to our strong partnership with HDFC Bank
HDFC Bank HDFC Life operate the single largest bancassurance partnership in terms of new business premiums garnered
The banks share of saving deposits across Indian banks is estimated at nearly 5%
Fees and remuneration earned through bancassurancewas 11% of the banks net profits in FY12
In FY12 the bank contributed 68% of new business premiums to HDFC Life in
FY12 20-22% of all new business premiums collected
by banks
The Best Bancassurance Award at the 11th International Excellence in Retail Financial Services Awards Program
As of March 31, 2012 HDFC Bank had 2,544 branches across 1,399 cities with 75%
branches outside the top 9 cities Customer base of 26 million
The branch network has grown at a CAGR of 22% from March 2009 to March 2012
Source : HDFC Life estimates, Public Disclosures, HDFC Bank Annual Report, RBI Data
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Standard Life in India | November 2012 17
Background & Parentage
Growth Opportunities for HDFC Life
Overview of Indian life insurance industry
HDFC Life performance
About HDFC Life
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Standard Life in India | November 2012 18
Entry of Private Life Insurers
Start of Equity Bull Market
Post-Lehman World
Riding the wave (ULIPs1)1st wave of private
insurers 2nd wave of entrants
Increase in Regulatory
change, 3rd wave
BSE SENSEX
Source : BSE Sensex Performance Jan 1, 2000 Nov.5,2012, Google Finance, HDFC Life Analysis.
Graph not as per scale
Life Insurance in India has seen 3 distinct phases post the year 2000 the market has 24 life insurers present today
The development of life insurance industry in India
1 Unit Linked Insurance Plans are products where the investor bears the investment risk
13
Number of private life insurance entrants
7 3
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Standard Life in India | November 2012 19
Industry new business premium movement in last decade since entry of private players
The Life Insurance journey (20012012): New Business Premia
Source: IRDA data, HDFC Life Analysis
1 GBP = 87.0706 INR (as per Reuters 13 Nov 2012)
Private sector grew at a CAGR of 192% between 00-01 and 08-09 (8 times the pace of LIC)
LIC grew at a 15% CAGR between 08-09 and 11-12 while the private sector remained flat in this period resulting in a slide in the private sectors market share in the last 3 years
Private sector growth slowdown post increase in regulatory change(3rd phase of industry development). Primary reason for the flat growth was the charge cap regulations introduced by the regulator on ULIP products.
Note: New Business Premium numbers are based on first year premium including single premium
97
196160 173
207
285
562600
532
715
864815
353
0 3 1024
56103
194
337 342384 394
327
1161%6%
12%
21%
26%
26%
36%
39%
35%
31%29%
25%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0
100
200
300
400
500
600
700
800
900
1000
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 H1 2012-13
Pri
va
te M
ark
et
Sh
are
%
Ne
w B
usi
ne
ss P
rem
ium
in R
s. B
n
LIC Private Players Private Market Share
State Owned Life Insurance Corporation (LIC) of India vs. Private Players
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Standard Life in India | November 2012 20
The industry had to reinvent to stay relevant to customers and distributors due to the pace & magnitude of change
Unprecedented shift in regulation post Sept. 2010
Households allocated less to financial assets
Source : Nomura
Source : Mckinsey
Lower margins for insurers and distributors post the shift in regulation on ULIP products
High inflation resulted in a reduction in household savings rates impact on financial savings (insurance, mutual funds, deposits,etc.) higher than that on physical savings (gold, real estate, etc.)
Central bank policy sustained high interest rates on bank deposits making life insurance and equity linked investments unattractive in the short term.
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Standard Life in India | November 2012 21
The transition is near completion and we expect the industry to revert to growth in the next 3-4 quarters
Government looking at reforms to stimulate the life insurance industry
Short term pain but customer friendly in the long term transition in its last leg
Distributors aligned to the new normal; large distributors commanding a premium
Improvement in operating efficiencies and expense management
Increased focus on customer service and brand building
Industry leaders selling a balanced product mix
Norms for traditional products near finalization
Increasing demand for protection products
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Standard Life in India | November 2012 22
Background & Parentage
Growth Opportunities for HDFC Life
Overview of Indian life insurance industry
HDFC Life performance
About HDFC Life
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Standard Life in India | November 2012 23
Revenue
Total Premium FY 09-10 FY 11-12 CAGR
HDFC Life 70 102 21%
Top 7 620 626 0.5%
Costs
FY 09-10 FY 11-12 CAGR
HDFC Life 208 323 25%
Top 7 1,801 2,462 17%
AUM
Capital Efficiency
FY 09-10 FY 11-12 CAGR
HDFC Life 3.6 4.7 15%
Top 7 3.8 3.7 -2%
Others
13th month persistency FY 09-10 FY 11-12
HDFC Life 57% 82%
Top 7* 63% 71%
Conservation ratio FY 09-10 FY 11-12
HDFC Life 72% 77%
Top 7* 67% 69%
Surrenders & Withdrawals
/ Renewal Premia
FY 09-10 FY 11-12
HDFC Life 34% 43%
Top 7 39% 63%
Note: Top 7 comprise of I-Pru, HDFC Life, SBI Life, Bajaj Allianz Life insurance, Birla Life Insurance, Max Life and Reliance Life
* Numbers are simple average of the respective companys ratio
Source: IRDA, Public disclosure of respective companies
Individual WRP FY 09-10 FY 11-12 CAGR
HDFC Life 25 27 4%
Top 7 218 127 -23%
Total Private 288 175 -22%
Mkt share -
Individual WRP
FY 09-10 FY 11-12 Change
HDFC Life 8.7% 15.5% 680 bps
Top 7 75.6% 72.7% -290 bps
Ranking - HDFC Life 5 2
Opex / Total
premium Ratio
FY 09-10 FY 11-12 (Inc)/
Dec
HDFC Life 19.6% 11.5% 8.2%
Top 7 17.1% 14.0% 3.2%
Opex / Individual
WRP
FY 09-10 FY 11-12 (Inc)/
Dec
HDFC Life 55% 43% 11.6%
Top 7 49% 69% -19.8%
Capital Efficiency = Total Premium / Capital
Conservation ratio = Ratio of current year renewal premiums to previous years renewal
premium and first year premium.
In the last two years HDFC Life has outperformed its competitorsacross many metrics
Bn Rupees
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Standard Life in India | November 2012 24
8.7%
12.9%
15.5%
17.0%
4.6%
5.9% 5.7% 5.5%
FY10 FY11 FY12 H1 FY13
Private Sector Market Share Total Industry Market Share
Consistent growth in market share
Ranked #2 in H1 FY13 amongst private insurance companies (Individual & Overall business)
During the last 2 years, private industry has ceded 19% market share to LIC(LIC market share increased from 49% in H1 FY11 to 68% in H1 FY13)
Source: IRDA
Steady in
crease in
private se
ctor mark
et share
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Standard Life in India | November 2012 25
31%19% 17%
1%
4% 7%
65%73% 71%
3% 4% 5%
FY11 FY12 H1 FY13
Tied Agency Broker Bancassurance Direct
86%
56% 56%
14%
44% 44%
FY11 FY12 H1 FY13
ULIP Conventional
Efforts to diversifying distribution mix have started to yield results with new channels i.e. Broker & Direct increasing their share of APE
Tied Agency continues to struggle in line with industry
Operates out of 461 offices across the country serving over 945 cities in India & a liaison office in Dubai
Share of Conventional business has increased after regulatory changes of Sep 2010
Distribution Mix Product Mix
The percentages are with reference to APE for individual business. ULIP stands for Unit Linked Insurance Plan.
Developing broker distribution while maintaining highly profitable bancassurance focus
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Standard Life in India | November 2012 26
Organization agenda continues to be driven through five strategic themes
Leader in providing long term insurance solutions
Fortify & Diversify distribution channel mix
Own select customer segments and product categories
Deliver unique customer experience
Cost leadership across the delivery chain
Set the industry standards by driving changes that encourage long term behaviour by all stakeholders & yield sustainable benefits
Set the industry standards by driving changes that encourage long term behaviour by all stakeholders & yield sustainable benefits
Retain and grow existing distribution partners and win new relationships to de-risk business in the face of increasing competitive intensity
Retain and grow existing distribution partners and win new relationships to de-risk business in the face of increasing competitive intensity
Select attractive customer segments, develop products based on needs of the segments and drive efforts & investments to these segments
Select attractive customer segments, develop products based on needs of the segments and drive efforts & investments to these segments
Improve customer experience & loyalty through offering best-in-class service standards across touch points
Improve customer experience & loyalty through offering best-in-class service standards across touch points
Run a profitable business through driving cost & productivity efficiencies across the value chain
Run a profitable business through driving cost & productivity efficiencies across the value chain
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Standard Life in India | November 2012 27
Leader in providing long term insurance solutions
Acquire new customers
Enhance policy termBalanced product
mixRetain customers for the long term
Number of policies grew by 26% in H113 vs. H112
Number of policies grew by 26% in H113 vs. H112
Policy term enhanced to 13.2 years in H113 vs. 11.5 years in H112
Policy term enhanced to 13.2 years in H113 vs. 11.5 years in H112
Conventional products contributed 44% in H113 vs. 35% in H112 to individual premium
Conventional products contributed 44% in H113 vs. 35% in H112 to individual premium
Maintained high quality business amidst tough regulatory conditions, Conservation ratio at 77% in H113
Maintained high quality business amidst tough regulatory conditions, Conservation ratio at 77% in H113
Improvement in key indicators on the journey to becoming a leader in providing long term insurance solutions
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Standard Life in India | November 2012 28
Fortify & Diversify Channel Mix
Fortify existing channels
Diversify Channel Mix
Segregated management structures
Win new relationships
Growth in bancassurance channel in H113
Agency stays flat in difficult business conditions
Better than industry performance
Growth in bancassurance channel in H113
Agency stays flat in difficult business conditions
Better than industry performance
Direct sales & broker contribution in individual business increased to 11.5% in H113 vs. 6.5% in H112
Direct sales & broker contribution in individual business increased to 11.5% in H113 vs. 6.5% in H112
Dedicated sales team structures for channels & verticals under channels
Interventions to improve knowledge, skills and relationships
Dedicated sales team structures for channels & verticals under channels
Interventions to improve knowledge, skills and relationships
Plug-and-Play toolkit for new partner acquisitions
Ongoing program to attract new financial consultants
Plug-and-Play toolkit for new partner acquisitions
Ongoing program to attract new financial consultants
Efforts to fortify and diversify channel mix that started in FY11 beginning to yield results
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Standard Life in India | November 2012 29
Own select customer segments and product categories
Product development aligned to customer segments
Sales of online term product Click2Protect continue to grow
Smart woman campaign launched to attract more women customers
Invest wise plan launched for the wisdom investor
Sales of online term product Click2Protect continue to grow
Smart woman campaign launched to attract more women customers
Invest wise plan launched for the wisdom investor
Integrated & faster NPD process
New Product Development driven through an integrated Research, Product & Marketing structure to improve speed-to-market from concept to launch has been deployed
Positioned to manage any product changes that may be rolled out in H213 by regulator
New Product Development driven through an integrated Research, Product & Marketing structure to improve speed-to-market from concept to launch has been deployed
Positioned to manage any product changes that may be rolled out in H213 by regulator
Products launched in identified customer segments and steps taken to improve speed to market
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Standard Life in India | November 2012 30
Deliver unique customer experience
Faster Policy Issuance
Right Advice & Need based selling
Improve Customer Loyalty
Continuous Improvement
Point-of-Sale underwriting engine -Click2Buy extended across channels
Emphasis on straight-through-processing based on LEAN principles
Point-of-Sale underwriting engine -Click2Buy extended across channels
Emphasis on straight-through-processing based on LEAN principles
Mobility devices tested
Aim to ensure standardization of communication
Need based analysis financial planning tool
Mobility devices tested
Aim to ensure standardization of communication
Need based analysis financial planning tool
Dedicated loyalty channel Tele-salesFeet-on-streetBranch Sales
Growth surpassing traditional sales channels
Dedicated loyalty channel Tele-salesFeet-on-streetBranch Sales
Growth surpassing traditional sales channels
Servesresht program based on Lean Six Sigma methodology
Governance driven through Service Excellence Council
Servesresht program based on Lean Six Sigma methodology
Governance driven through Service Excellence Council
Processes & teams aligned to offer a unique customer experience
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Standard Life in India | November 2012 31
Cost leadership across the delivery chain
Higher profitability Optimize CapitalTechnology enabled
business transformation
NBM 17.5% (H113) vs 15.6% (H112)
Opex/Total Premium 13.3% (H113) vs. 12.1% (H112)
NBM 17.5% (H113) vs 15.6% (H112)
Opex/Total Premium 13.3% (H113) vs. 12.1% (H112)
No capital draw-down needed in the last 6 quarters
Company can now declare dividend
No capital draw-down needed in the last 6 quarters
Company can now declare dividend
System Integrator selected for end-to-end technology transformation
Customer impacting projects prioritized
System Integrator selected for end-to-end technology transformation
Customer impacting projects prioritized
Improvement in cost ratios in a difficult business environment
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Standard Life in India | November 2012 32
HDFC Life is well positioned to align and take advantage of the potential changes expected in the near future
Market
Customer
Channel
Product
Process & Technology
People
Polarization of market share in favour of large players with access to existing distribution
Polarization of market share in favour of large players with access to existing distribution
Higher alignment to brands that evoke trustHigher alignment to brands that evoke trust
Bancassurance guidelines expected in Q313Bancassurance guidelines expected in Q313
Revised product guidelines are expected in Q313 and speed to market would be critical in the short term
Revised product guidelines are expected in Q313 and speed to market would be critical in the short term
Key differentiator to improve productivity & reduce cost across the value chain given anticipated business environment challenges
Key differentiator to improve productivity & reduce cost across the value chain given anticipated business environment challenges
Ability to attract talent likely to be restricted to select few insurers who deliver profitable, sustainable growth
Ability to attract talent likely to be restricted to select few insurers who deliver profitable, sustainable growth
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Standard Life in India | November 2012 33
Summary
HDFC Life has a strong parentage and enjoys the trust of all stakeholders
Established market outperformance consistently over the past 2 years
The Indian life insurance industry in poised for long term growth
HDFC Life is best positioned to take advantage of the market opportunity
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Standard Life in India | November 2012 34
Thank You
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HDFC Asset Management Company
James Aird
Director, HDFC AMC
Head of Strategic Development, Standard Life Investments
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Standard Life in India | November 2012 36
The largest mutual fund company in India
Context
Joint venture established in 2000 between SLI (40%) and Housing Development Finance Corporation (HDFC) 60%
Major driver in reaching current position has been organic growth
Bolt-on acquisition of Zurich AM in India in 2003 added equity team and increased retail presence
Has licenses for Mutual Funds and Portfolio Management Services
Number one in mutual funds market by assets both overall and in equities with over 5m customer accounts
Strategic priorities
Further strengthen position in retail segment
Focus on investment performance
Widening distribution
Maintaining market leadership
Build business from overseas markets
Standard Life Investments distribution
HDFC brand strengthConsistent and quality
investment performance
Broad based distribution
franchise
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Standard Life in India | November 2012 37
Market leading position and growing market share
September 2008 September 2012
Equity 10.4% 19.8%
Debt 10.7% 13.0%
Liquidity 7.0% 8.6%
Other 0% 4.8%
Total 9.9% 13.9%
Over 5m customer accounts - market leader in Indian mutual funds, growth through global financial crisis
Overall market share has grown from under 10% to nearly 14% by AUM over the past four years
Significant growth in higher margin equity class with assets more than doubling to 406bn rupees vs. industry
growth of around 25%
HDFC AMC market share by AUM
0
200
400
600
800
1000
1200
2004 2008 2012
0
1
2
3
4
5
6
Assets Accounts
HDFC AMC assets and accounts
Accounts (million)
Assets (billion Rupees)
Number one in equity market and overall mutual funds market by assets1
1. As at 30 September 2012
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Standard Life in India | November 2012 38
Retail equity propositions driving growth
Strong growth in higher margin equity segment outpacing market shift
Retail (7.2bn1)
Main investors in equity funds
Growing use of pound cost averaging with Systematic Investment Plan (SIP) / Systematic Transfer Plan (STP) products
Average holding period has extended to almost 3 years
Product focus still very much on domestic funds
Market leader in SIP, with over 1.5m customers investing on a monthly basis
Institutional (4.2bn1)
Primarily institutions parking surplus liquidity in short term debt funds (yield pick up c/w overnight rates)
Flows can be volatile around quarter ends
Portfolio Management Services (0.6bn1)
Main segment is Indian HNWI
Growing international sales efforts, but small at present
SLI promote India strategy through their distribution channels
SLI provides product wrappers e.g. SICAV, Mauritian OEIC
1. R87/1 used
HDFC AMC channel mix
Retail 60%Institutional
35%
Portfolio
Management
Services 5%
HDFC AMC product mix
Equity 40%
Debt 46%
Liquidity 12%
Other 2%
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Standard Life in India | November 2012 39
Diversified distribution network
India is an open architecture distribution environment
HDFC AMC has 115 branches / investor service centres and has 37,000 certified distributors
HDFC AMC has well diversified distribution through banks, nationals (non-bank financial services providers), IFAs and Direct
Largest Distributor is HDFC Bank with 9% of total sales
Five largest distributors just 24.2% and no other distributor accounts for more than 5% of sales
Direct at 11% of AUM, continues to grow steadily (Walk ins and online)
Top 15 cities account for 82% of AUM - ongoing initiatives to grow distribution in second and third tier cities
HDFC AMC distribution
Banks 23%
Nationals 33%
IFAs 33%
Direct 11%
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Standard Life in India | November 2012 40
Demand driven by brand and fund performance
Past performance is not indicative of future results. Past performance may not necessarily provide a basis for comparison with other investments. Source: Bloomberg as of Jun 29, 2012 (1) Fund performance is for the Growth Option in USD. Performance is reported net of management fees and other standard operating fees (excluding any sales and commissions) . Reporting currency is in INR. Returns are absolute annualized returns unless otherwise stated. Inception date is January 1, 1995. Since inception returns are based on CompoundedAnnualized Returns. (2) S&P CNX 500 index is the Funds benchmark index. Benchmarks are used solely for the purposes of comparison and the comparison does not mean that there will necessarily be a correlation between the returns described herein and the benchmarks. There are limitations in using financial indices for comparison purposes because, among other reasons, such indices may have different volatility, diversification, credit and other material characteristics (such as number or type of instrument or security).
Delivering outperformance
Team members have an average of 14 years experience in the Indian markets
HDFC Equity Fund Growth Option has outperformed its benchmark in 15 out of 17 years since 1995, delivering significant alpha
HDFC CMF Treasury Advantage Plan and HDFC Liquid Fund our two largest Fixed Income funds, representing over 4bn assets outperformed benchmark net of fees over 1, 3 and 5 years
12.2%
10.1%8.6%
29.9%
13.0%
3.7%
1.5%
20.4%
1 year 3 year 5 year 10 year
HDFC Equity Fund - Growth Option S&P CNX 500(2)(1)
HDFC Equity Fund Historical Performance (in USD %)
HDFC brand recognition continuing to drive retail flows
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Standard Life in India | November 2012 41
Delivering growth in profitability
Growth in profitability CAGR from 2008 to 2011 of 32%
Growing strength in higher margin equities driving increasing profitability
EBIT margin of over 50%
6.2
13.0
9.3
14.1
7.0
2008 2009 2010 2011 H1 2012
HDFC AMC normalised underlying profit contribution to Standard Life Investments1 (m)
1. Underlying profit contribution defined as profit to Standard Life Investments less any material movement in provisions and accounting policy changes
Continuing contribution to the profitability of Standard Life Investments
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Standard Life in India | November 2012 42
Attractive opportunities for future growth
Market
Strong economic growth, leading to increased financial prosperity
Demographic profile supports asset accumulation
Cash savings growing strongly
Mutual funds penetration remains low (8% of GDP)
Increased investor education, should underpin greater take up of mutual funds, and the introduction of more sophisticated products over time
Opportunity to leverage Standard Life Investments
Sale of HDFC AMC funds via SL wrappers (IOSI)
Ability to use SLI and its global reach to secure mandates for the JV
Opportunity to sell SLI global products into India as the market becomes more sophisticated.
HDFC brand strengthConsistent and quality
investment performance
Broad based distribution
franchise
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Appendix
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Standard Life in India | November 2012 44
10.3 11.4
3.4 3.8
26.9 28.1
1.1
0.5
H1 FY12 H1 FY13
41.743.8
16%
88%
38%
70%
-26%
5%
-53%
4%
12%
11%
Premium Income
Growth of 13% in total premium at 102.0 billion rupees led by renewal premium & group premium in FY12
Positive growth in first year regular (11%), group (12%) & renewal (8%) premium leading to overall growth of 7% in H1 FY13
Continue to grow in new business since Q3 of FY12 beating the private market(Q3 FY12: 3%, Q4 FY12: 15%, Q1 FY13: 17%, Q2 FY13: 7%)
First Year Regular Premium (Individual)
Total Premium Single Premium (Individual) Reported Renewal Premium (Individual)
Group Premium
H1 Performance
{7%}
{8%}
Note: 1) Since Q1 FY13, we stopped making an accrual for premium due but not received on unit-linked policies, based on directive from the regulator. Figures in bracket represent growth numbers had this change been done for previous years. 2) After adjusting for change in accounting policy for unit-linked business, total reported premium growth would be 13% (PY FY12), 29% (PY FY 11), 7% (H1 FY13) and 17% (H1 FY12).
29.0 26.9
5.9 9.5
49.2
63.4
5.9
2.1
FY11 FY12
90.0
102.0
29%
120%
36%
-5%
17%
13%
-65%
29%
61%
-7%
PY (12 M) Performance
-
Standard Life in India | November 2012 45
14.4
11.7
16.0%
11.5%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
(3.0)
2.0
7.0
12.0
17.0
22.0
FY11 FY12
4.9 5.8
11.9% 13.3%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
H1 FY12 H1 FY13
Operating Expenses
- After adjusting for change in accounting policy for unit-linked business, operating expenses/total reported premium ratio for previous years would be 11.7% (PY FY12), 16.3% (PY FY 11) and
12.1% (H1 FY12)- Operating expenses exclude service tax
In H1 FY13, Operating expenses ratio has increased vs. last year due to higher incentive support for
new channels & conscious decision to invest in new channels, technology, branch refurbishments and
international business
H1 PerformancePY (12 M) Performance
{12.1%}
Bn Rupees
-
Standard Life in India | November 2012 46
(0.0)
0.6
1.1
1.9
0.2
0.2
(1.0)
(0.5)
-
0.5
1.0
1.5
2.0
2.5
3.0
H1 FY12 H1 FY13
1.2
2.8
(1.7)
1.1
0.4
2.5
(1.4)
0.2
(4.0)
(3.0)
(2.0)
(1.0)
-
1.0
2.0
3.0
4.0
FY11 FY12
(2.7)
3.8
Indian GAAP Results
Policyholder A/C Surplus amounting to 1.9 bn rupees transferred to Shareholder Account in H1 FY13
Deficit as of 31st March 2012 of 0.6 bn rupees has been completely off-set by the surplus generated in the Policyholder A/C in the current year
H1 PerformancePY (12 M) Performance
Shareholder A/C surplus Policyholder A/C surplus Deficit (created)/reversed in Rev A/c
Bn Rupees
-
Standard Life in India | November 2012 47
24 26
-16
19
H1 FY 12 H1 FY 13
Fund flow Market Movements
265 273
323
367
31st March 2011
30th Sept 2011
31st March 2012
30th Sept 2012
Robust growth in Assets Under Management
45Inflows vs. Market
8
AUM Movements
248
273
367 20,069
16,454
18,763
14,000
16,000
18,000
20,000
22,000
24,000
26,000
150
200
250
300
350
400
30th Sept 2010 30th Sept 2011 30th Sept 2012
AUM in Rs bn Sensex
34.5%50.6%
10.1%
Growth in AUM vs LY
42% 46%50%
58% 54%50%
30th Sept 2010 30th Sept 2011 30th Sept 2012
Debt Equity
Bn Rupees
-
Standard Life in India | November 2012 48
* FY11 had first 5 months of margins under product portfolio that existed in the pre charge cap regime
H1 FY12 H1 FY13 FY11 FY12
New business profits1,2 1.7 2.1 5.4 4.8
New business APE2 10.6 11.8 28.6 27.9
New business margin1,2 15.6% 17.5% 18.8%* 17.2%
1 Based on loaded acquisition expenses2 Margins and APE are shown for individual business only
New business margin (after impact of
acquisition expenses overrun) 210.5%14.2%
New Business Profits
Bn Rupees
-
Standard Life in India | November 2012 49
CIO 100 Award for Enterprise Excellence
Underwriting initiative of the year award by Asian Leadership Awards
For more details about our Awards & Accolades, kindly refer our website at www.hdfclife.com
FAME Fabulous Achievement in Marketing Excellence
BestPrax Benchmark Award for Leadership Governance
Brand Slam Leadership Awardby CMO Asia
Best Private Life Insurer at CNBC TV18 Best Bank and Financial
Institution Awards 2012
Awards and Accolades
-
Standard Life in India | November 2012 50
Best Product Innovation Award 2012 for second consecutive year
Best Companies to Work for 3rd consecutive year.
CISO Best Information Security practices
World HRD Congress Thought Leader Award 2012
Porter Prize for Strategy & Product Innovation
Award for CEO with HR orientation & Talent Management
For more details about our Awards & Accolades, kindly refer our website at www.hdfclife.com
Awards and Accolades
-
Standard Life in India | November 2012 51
Mutual fund industry AUM and growth rate
0000
1,0001,0001,0001,000
2,0002,0002,0002,000
3,0003,0003,0003,000
4,0004,0004,0004,000
5,0005,0005,0005,000
6,0006,0006,0006,000
7,0007,0007,0007,000
'03'03'03'03 '04'04'04'04 '05'05'05'05 '06'06'06'06 '07'07'07'07 '08'08'08'08 '09'09'09'09 '10'10'10'10 '11'11'11'11 '12'12'12'12
Source: AMFI, AUM amounts in Rupees billions as at end March (end of FY)
JV grew initially in 00-03 period when falling bond yields attracted strong growth in core fixed income product
03, acquired Zurichs Indian AMC, which strengthened JV equity proposition
03-08, major equity bull market, JV becomes leading equity franchise in India
Since financial crisis, become leader in SIP
-
Standard Life in India | November 2012 52
2012
AUM Market Share %
HDFC 978 13.1
Reliance 863 11.6
ICICI Prudential 764 10.2
Birla 729 9.8
UTI 708 9.5
SBI 510 6.8
Franklin Templeton 390 5.2
DSP 302 4.0
IDFC 280 3.8
Kotak 303 4.0
Total Market 6,928 78.0
Source: AMFI, Based on Average AUM for July Sept Periods in Rupee Bns
New Entrants
Invesco (Bought 49% of Religare)
Schroders (Bought 25% of Axis)
Nippon Life (Bought 26% of Reliance)
Exit
Fidelity (Sold to L&T AMC (Indian AMC))
Other Foreign Participants (Market Share)
AIG (0.1%)
BP Paribas (0.7%),
Daiwa (0.1%),
Goldman Sachs (0.6%),
Mirae (0.1%),
Pramerica (0.3%)
Top ten mutual fund houses in India
-
Standard Life in India | November 2012 53
Simplified structure chart
Standard Life plc
Standard Life
Employee Services
Limited
Heng-An Standard
Life Insurance
Company Limited
Standard Life
(Mauritius Holdings)
2006 Limited
Standard Life
Overseas Holdings
Limited
Standard Life
Investments
(Holdings) Limited
Standard Life
Assurance Limited
Standard Life
Savings Limited
Standard Life
Investment Funds
Limited
The Standard Life
Assurance Company
of Canada
Standard Life
Financial Inc
HDFC Standard Life
Insurance Company
Limited
Standard Life
Investments Limited
HDFC Asset
Management
Company Limited
The Standard Life
Assurance Company
2006
Standard Life
Savings Nominees
Limited
Standard Life
Trustee Company
Limited
Standard Life
International Limited
Standard Life
Pension Funds
Limited
Standard Life Client
Management
Limited
Standard Life Asia
Limited
-
Standard Life in India | November 2012 54
Heng An Standard Life
GUANDONG
HENAN
JIANGSU
SHANDONG
BEIJINGTIANJIN
LIAONING
SICHUAN
Joint venture with TEDA (TianjinEconomic Technological Development Area )
Standard Life holding: 50%
Based in Tianjin: one of 4 Chinese direct-controlled municipalities
Ranked 8 (2011: 9) of 25 foreign JVs
Presence in 36 (2011: 32) cities across 8 provinces
New general manager and management team driving business growth
Working closely with TEDA on developing the business
Opportunities for growth particularly in individual and bancassurance
-
Standard Life in India | November 2012 55
Standard Life Asia (Hong Kong)
Relationship with 315 brokers firms and No. 2 position in IFA channel
Broad range of propositions:
Aspire, Wealth Amplifier, Harvest 101, Harvest Supreme, LifeMaster, Pro-Investor (exclusive product), Peaceful Life and Perpetual Protector
New propositions recently launched including Harvest Wealth to cater to the needs of internationally mobile clients and Smart Wealth, our first Renminbi denominated product
leveraging existing Standard Life technology
Use of mobile technology to attract and engage target customers
Wholly owned operation based in Hong Kong
Fast growing business with significant future potential
No. 6 position in market (H1 2008: 18)
Market position stable despite overall market being down year-on-year
Scalable operation and contributing to Group IFRS profit
SL Asia assets under administration, HK$ m
528
1,053
1,604
2,407
0
500
1,000
1,500
2,000
2,500
FY 2009 FY 2010 FY 2011 Q3 2012
-
Standard Life in India | November 2012 56
Standard Life International Limited
Open to business in 2006 grown quickly vs. very established competitors
Around 3bn in UK assets of which over 1bn on Wrap
Branch of SLIL recently launched in Singapore targeting high net worth clients
Singapore offers exposure to high growth, high value Asian markets and presents a growth opportunity reusing existing infrastructure
Wholly owned offshore business based in Ireland
In the UK Offshore Bond market:
Top 3 player over last 18 months
Around 15% market share
Leader in core IFA segment and developing newer bank and wealth manager channels
Fully RDR compliant ahead of deadlines
See strong growth in this market as product becomes mainstream
SLIL assets under administration, GBP m
1,159
1,769
2,360
2,876
0
500
1,000
1,500
2,000
2,500
3,000
FY 2009 FY 2010 FY 2011 Q3 2012
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