Life Insurance Thematic - Challenges Galore - December 2020 - SPARK

LIFE INSURANCE SECTOR
December 28, 2020
▪ SANKETH GODHA, sanketh@sparkcapital.in, +91 22 6176 6821

▪ ARJUN N, arjun@sparkcapital.in, +91 44 4344 0081
 Analyst Certification and Required Disclosures begin on last two pages – Click
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This file was downloaded from Spark Research website by eq.researchportal1@gmail.com|December 28, 2020 09:20:25
LIFE INSURANCE SECTOR
Challenges Galore
Despite COVID-related challenges, Life Insurance Industry in FY21 has managed to do better than expected in APE growth, product diversification,
profitability, and EV growth. Strong demand for protection due to COVID scare in 1H, price hike in individual protection (due to reinsurance rate hardening)
SECTOR UPDATE
and favorable forward rate agreement market (FRA) aiding insurers to offer higher IRRs on guarantee products (thus competing directly with deposits which
were underutilized by banks due to weak credit demand) arrested the sharp APE decline. While tactical cost savings measures (esp. employee & admin cost)
28 December 2020
provided support to VNB margins, strong rebound in capital markets (both bonds & equity) aided in EV growth driven by economic variance.
Company CMP Reco TP
However, we believe, with the reversal of most of these macro/tactical benefits & regulatory challenges, growth/profitability shall be under pressure due to
following factors. 1) New Labour Law shall impact discretionary individual savings, thus leading to potential cut in insurance ticket size (which was a key
IPRU 496 REDUCE 430
growth driver in FY16-20, volume growth was muted), 2) Double whammy of Yield curve flattening & improvement in bank CD ratio shall impact Non-Par
savings growth, 3) Elevated life segment combined ratio for reinsurers can trigger another round of price hike, thus impacting protection growth (COVID scare
demand is also dissipating), 4) Lower incremental policies sold in protection business (growth was led by higher share of limited pay policies), 5) Strong BS SBILIFE 874 BUY 950
agency reach/higher profit sharing of LIC shall make it hard for private peers to gain market share in Par segment & 6) Sustained weakness in ULIP demand.
Coupled with these growth challenges, the VNB margin shall also be under pressure due to 1) Sharp increase in lapse rate in ULIP business (discontinued HDFCLIFE 657 REDUCE 515
funds or slippage to discontinued funds is 2x of Mar’20 level), 2) Normalization of cost ratios with salary hike & higher admin cost & 3) Another potential
round of reinsurance rate hardening. Hence, with lower operating variance (with persistency & opex under pressure), unwind rate (decline in interest rate) MAXF 682 ADD 630
and VNB gearing (due to lower APE growth), we believe operating ROEVs shall be structurally lower vs. ROEVs experienced by insurers in FY17-20E.
#1. New Labor Laws to impact ticket size: Higher Provident Fund (PF) deduction under new labor laws shall impact the discretionary savings. This could BJFIIN 8,993 BUY 11,000
potentially reduce the insurance ticket size (ATS) which was the key growth driver in FY16-20. As per our estimates, 80C-related life insurance ATS could correct
by 30-50%. Further, EEE tax treatment & interest rate on PF (5 years of employment) vs. insurance shall give tough fight to the life insurance savings business.
Stock performance (%)
#2. Product diversification benefit is limited: Most insurers have managed to optimize their product mix over the last 2-3 years by increasing the contribution of
traditional savings products. Hence, any growth/margin levers from product diversification (esp. savings business) shall be limited going ahead. 1m 6m 12m
#3. Slope normalization of yield curve and banking system CD ratio: FRA market, which is still favorable for life insurance (to improve margin in FY21 as IRRs
have been stable but FRA rates improved) could potentially reverse. RBI efforts to lower the slope of the yield curve and increase credit growth shall improve CD IPRU 9.2% 17.2% 0.5%
ratio. This should impact growth of non-par products/ par products in banca channel. However, loan growth shall be positive for credit protect for life insurers. SBILIFE 2.6% 11.4% -11.8%
#4. LIC’s market leadership in Par business is impregnable: With strong balance sheet, operating efficiency and higher surplus sharing, LIC’s revisionary &
HDFCLIFE -0.5% 21.3% 3.4%
terminal bonus rate for long-term Par policies remain unmatched by private peers, thus making hard for them to gain market share in Par segment.
#5. Reinsurance rate hardening risk remains for protection business: Combined ratio of reinsurers in the life segment remains elevated. Further, the slowdown MAXF 7.1% 32.3% 29.3%
of one of the largest reinsurers in the life reinsurance market can lead to supply-side pressure. Hence, we believe, another round of reinsurance price hike in BJFIN 2.1% 51.2% -3.8%
protection can happen and shall impact the growth & profitability of this segment.
#6. Value-led growth in protection business suggests peaking of demand: Like savings business, incremental individual protection growth is driven by ticket size
largely due to higher share of limited pay policies. However, a few insurers (such as IPRU) have seen a decline in the number of policies. Hence, we expect RESEARCH ANALYST
moderation in protection growth going ahead, thus indicating limited scope in margin expansion due to an increase in the contribution of protection business.
SANKETH GODHA
#7. Sharp deterioration in ULIP persistency: Slippage to discontinued fund and contribution of discontinued funds to ULIP AUM have doubled from FY19/FY20. sanketh@sparkcapital.in
Given the fund management fees on discontinued fund capped at 0.5% vs. 1.35% for standard ULIP, this shall have a bearing on operating variance/VNB margins.
+91 22 6176 6821
#8. Cost ratio savings measures are unsustainable: Tactical cost savings measures especially employee & admin cost, which aided in reporting better-than-
ARJUN N
expected margin in 1HFY21, shall reverse in the normal environment. Given the growth pressures, we believe a higher opex ratio shall impact future profitability.
arjun@sparkcapital.in
#9. Banca productivity at risk; agency channel remains suboptimal: With improvement in CD ratio, bank branch productivity shall come down. To overcome
+91 44 4344 0081
ICICI Bank productivity challenges, IPRU has diversified its banca relationship with new tie-ups such as IIB & RBL. Private life insurers’ agency remains sub-optimal.
find SPARK RESEARCH on Bloomberg [RESP SPAK <go>] | FACTSET | REFINITIV EIKON Page 2
Life Insurance Sector
Sharp increase of
discontinuation &
surrender ratio in ULIP,
does not bodes well for
VNB margins and
operating variance New labour laws to impact
Banca productivity at risk
discretionary individual
and agency continue to savings into life insurance
remain sub-optimal
Product mix is
Opex ratio almost diversified,
improvement led by
Lower Operating variance limited scope for
lower employee & + VNB gearing + Unwind margin expansion
admin cost not Rate = Structurally Lower due to mix change
sustainable for long ROEVs vs. FY17-20
term
Normalization of the yield

Higher combined ratio of curve slope and banking
reinsurers in life segment system CD ratio to impact
could trigger another Non-Par Savings growth
reinsurance rate hike
With better bonus rate,
hard for private insurers to
gain market share from LIC
in Par Segment
Implied Avg Op VNB Avg VNB

Rating Market Cap CMP Target price Upside Implied P/EV Implied NBx APE CAGR(x)
P/EVE ROEV (%) CAGR (%) Margins (%)
Rs bn Rs Rs (%) Sep’22 Sep’22 Sep’22 FY20-23E FY20-23E FY20-23E FY20-23E
IPRU REDUCE 713 496 430 -13% 1.9 13.9 14.4 15% 4.1% 6.9% 24%
SBILIFE BUY 874 874 950 9% 2.5 19.6 18 15.8% 9.5% 10.1% 20.2%
HDFCLIFE REDUCE 1,327 657 515 -22% 3.3 27.7 22.5 17.5% 10.5% 8.5% 24.7%
MAXF ADD 183 682 630 -8% 2.3 14.3 15.9 18.7% 11.7% 11% 21.8%
BJFIN/BALIC BUY 1430 8992 11,000 22% NA NA NA 9% 13% 30.8% 13%
Page 3
Brokerage Industry
Table of Contents
5 New Labour Laws and It’s Impact
7 Industry Trend
10 Non-Participating Savings
16 Participating Savings
19 Protection & Reinsurance
28 ULIP
32 Distribution & Operating Efficiency
38 Key Financials & Valuation
Page 4
#1 (a). New ‘Labour Laws’: Potentially could lead to lower allocation to Insurance savings, thus impacting growth
▪ In new proposed ‘Labour Laws’ there shall be only one definition of wages vs. 12 different definitions which are applicable now.
▪ As per the new definition of wages, if the aggregate of the excluded components exceeds 50% of the total remuneration, the amount that exceeds the one-half will be deemed
to be 'wages’ (Basic Salary). This new definition would be used to calculate gratuity, retrenchment compensation and provident fund (PF) deductions, which could potentially net
lower net cash monthly salary per employee and increase the employee cost of the employer.
Head Earlier Changes as per the new labour codes Impact
▪ PF contribution was mandatory for every ▪ Mandatory PF contribution would reduce the
establishment with >20 employees and ▪ Mandatory for every establishment with monthly take home salary, which would lower
for employees drawing <Rs. >20 employees (Salary condition discretionary financial savings (outside PF)
15,000/month salary). withdrawn). and consumption.
Provident Fund ▪ Optional if employees drawing > Rs. ▪ The contributions paid by the employer ▪ A large portion of life insurance customers
(PF) 15,000/month salary. shall be 10% of the wages (Basic) (it may would buy policies to avail 80C benefit on
▪ The contribution paid by the employee be increased to 12% by the Central Govt.). income tax. If the share of PF contribution
was 12% of basic salary and an equal ▪ Existing PF scheme will continue for one under 80c increases, then this would
contribution was payable by the more year for smooth transition. indirectly reduce the allocation towards life
employer also. insurance savings.
▪ No changes for permanent employees

▪ Gratuity would be calculated based on the
▪ Only permanent employees were eligible ▪ Fixed-term employees would also be
for gratuity after completion of 5 years total wages, which means firms are under-
eligible for gratuity. There is no condition provided for gratuity. And it would be
of service for minimum service period for this applicable on a retrospective basis.
Gratuity ▪ No gratuity for fixed-term employees category. It would be paid on a pro rata
▪ Gratuity of organisation is usually managed
▪ Was calculated based on the basic basis.
by life insurers, hence could potentially see a
salary (15 days of basic salary for each ▪ Will be calculated based on the new huge inflow of funds in group fund based
completed year) definition of wages (15 days of wages for business .
each completed year).
Source: Spark Capital Research
Page 5
#1 (b). New ‘Labour Laws’: Higher PF deduction could potentially lower 80C related life insurance allocation by 30-50%
Tax Status
▪ Exempt/ Exempt/ Exempt tax treatment for
Attractiveness
of Products
Public Provident Fund 8.5% Non-Par Products 4.5% to 6.2% PF (after 5 year of continuous employment)
and Life Insurance (which usually have min. 5-
year Premium Paying Term)
If the share of PF contribution in the Rs.150K exemption available under 80c increases, then this could potentially impact life insurance savings products significantly
Current Pay Slip Break-up Post Wage Code Implementation

100% 100%
56.6% 38%
1.0 1.0
0.8 0.8 12%
0.6 8.4% 0.6
0.4 0.4
0.2 0.2
35.0% 50%
0.0 0.0
Basic (35% of CTC) PF (12% of Basic) Other Allowances CTC Basic (50% of CTC) PF (12% of Basic) Other Allowances CTC
CTC (Rs. Per month) Rs. 1,00,000 40-60% of Life policies have ticket less than Rs 125K (could be potentially bought
Pre-Regulation for 80C), which should be impacted by higher PF deductions
Basic as % of 80c Min (15,000) 30% 35% 40% FY20 - Composition of Individual Regular premium Ticket size (Rs.mn)
EPFO 21,600 43,200 50,400 57,600
10%
Other investments (ELSS/ Housing loan) 50,000 50.000 50,000 50,000 10%
45% 45% 42% 44%
Amount available for insurance Investment 78,400 56,800 49,600 42,400 63% 29%
Total 80C Investments 1,50,000 1,50,000 1,50,000 1,50,000
18% 21% 24% 19%
Post-Regulation
15% 27% 51%
Contribution to 80C(Rs.0.1mn*50%*12%*12) 72,000 72,000 72,000 72,000 29% 26% 28%
17%
Other investments (ELSS/ Housing loan) 50,000 50,000 50,000 50,000 4% 8% 7% 6% 11%
Amount available for insurance Investment 28,000 28,000 28,000 28,000 IPRU SBILIFE HDFCLIFE MAXF BALIC LIC
Drop in eligible amount for 80C exemption <25,000 25,000-75,000 75,000-1,25,000 >1,25,000
-64% -51% -44% -34%
post PF
Source: Spark Capital Research
Page 6
#2 (a). Value vs. Volume (Individual APE): Entire life insurance industry growth during FY16-20 was driven by ticket size increase
Both for Pvt life insurers and LIC, the growth in APE over FY16-20 was driven by increase in the ticket size, as no of policies grew just ~2% during FY16-20
Pvt Insurers FY16-20 CAGR LIC FY16-20 CAGR Industry FY16-20 CAGR
APE per policy 13.3% 8.4% 11.5%
Ind. policies 3.0% 1.6% 2.0%
Ind APE 16.6% 10.1% 13.6%
0% 5% 10% 15% 20% 0% 2% 4% 6% 8% 10% 12% 0% 5% 10% 15%
Source: Company, Spark Capital Research
Coverage universe growth is also ticket size led but better than industry Number of individual policies remained flat for industry
FY16-20 CAGR Pvt LIC Industry

30% 28% 21.9
7.5 7.2 28.8
23% 23% 22% 21.3 21.4 28.2 28.7
6.9 7.0
17% 18% 7.0 20.5 26.7 26.4
20% 16%
6.3 20.1
6.5 6.2
11%
10% 8% 7% 7% 6.0
5% 5%
0% 5.5
0%
5.0
-10% -6% 4.5

HDFCLIFE SBILIFE IPRU MAX BALIC 4.0
FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20
Ind APE Ind. policies APE per policy
Page 7
#2 (b). Value vs. Volume (Individual APE): Ticket size led growth for HDFCLIFE / Max while growth in policies is supporting SBILIFE / BALIC in FY21
Ind. APE Per Policy (Ticket Size)

No. of Policies (Growth % yoy) Ind. APE (Growth % yoy)
(Growth % yoy)
-35.7% 0.4% -35.5% SBILIFE’s growth in 2Q/3Q is

SBILIFE
supported by increase in no
1.1% -11.8% -10.9% policies vs. ticket size, potentially
indicating higher share of
12.3% -8.4% 2.8% protection business
-4.3% -15.2% -18.9% Among the peers, HDFCLIFE has a

HDFC LIFE
more balanced growth in 2Q/ 3Q

15.0% 6.1% 22.0% on ticket size and policies,
However, larger ticket size is
10.0% 19.6% 31.6% driving growth in 3Q
-25.9% -31.6% -49.4%

IPRU
IPRU has struggled to grow both

-19.5% -12.9% -29.9%
ticket size and policies,
-14.5% -14.0% -26.5%
7.9% -10.7% -3.6% After protection led growth in 1H,

MAXF
1.8%
MAX’s 3Q growth is driven by high
6.6% 8.6%
ticket size policies (newly launched
-0.8% 26.1% 25.1% non-par savings product)
53.9% -35.3% -0.5% BALIC’s increased focused on

protection (with launch of new
BALIC
38.1% -13.9% 18.9% plan) led to strong growth in no of

policies and sharp reduction in
17.4% -16.0% -1.4% ticket size
-60.0%-40.0%-20.0% 0.0% 20.0% 40.0% 60.0% -40.0% -20.0% 0.0% 20.0% 40.0% -60.0% -40.0% -20.0% 0.0% 20.0% 40.0%
1QFY21 2QFY21 3QFY21*
Source: Company, Spark Capital Research Page 8

#3 (a). Product Mix: Product diversification in the savings business achieved for most of the insurers, hence see limited mix change going ahead
IPRU HDFC Life SBI Life MAXF BALIC
1%4% 5% 1%
1% 4% 4% 0%
11% 7% 8%
26% 24%
43%
FY18
29%
59%
72% 45% 72%

85%
ULIP
Par
14% 9% 8% 13% 10%

23%
35% 14%
54% 34%
36%
12%
1HFY21
11% 35%
34%
67%
21%
33%
19% 19%
ULIP
Par
We see limited, change in individual product mix (esp. savings business ) going ahead for most of the insurers and hence expect limited expansion in margin due to change in the product mix

#3 (b). Product Mix: Non- Par Savings is supporting growth; moderation in protection business (after strong demand in 1Q)
Par Non-Par ULIP Individual Protection Individual APE

1750 517%
87% 32%
% 19% 21%
SBILIFE
68% 27% 9% 38% 13% 15% 9%
-13% -35% -39% -51% -25%

-28% -22%
263% 45% 29%

HDFC LIFE
212% 166% 69% 18%

7% 25% 2% 0% 8%
43% 38%
28%
-33% -40% -12% -1%
-40%
33% 32% 188% 213% 59% 76% -37%

14% 92% 15% 31% 16%
IPRU
-45% -3% -19% -1% -9%

-21% -23%
-54%
57% 78%
21% 66%
13% 110%
MAXF
43% 49% 22% 21%

64%
37%
-4% 9% -2% -6% 4% 4%
-21%
-42%
57% 180% 38%

34% 132% 127% 41%
BALIC
3% 4% 25%
11% 11%
20% -6%
-27% -26%
FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21
1. Individual APE growth for last ~2 years have been driven by Non-Par Savings. Further, favourable macros with respect to the yield curve supported this growth in FY21E
2. Par growth improved for HDFCLIFE and IPRU. Product diversification / conscious decision to lower contribution of non-par savings (HDFCLIFE) led to PAR segment growth
3. After strong demand for protection in 1Q, growth moderated for life insurers. IPRU market leader witnessed decline in 1H (due to price competition & lower share of Limited Pay Plans)

Non-Participating Savings
Page 11
#1. Non- Par Savings: Further steepening of yield curve is Forward Rate Agreement (FRA) conductive, thus supporting near term growth
With no significant change in IRRs on Non- Par Savings, VNB margins shall
Yield curve slope increased further – better FRA rates for life insurers
improve in near term with better FRA rates
8.0 Current FD Highest IRR
G-Sec Bond Yield Curve < 1yr < 3yr < 5yr 5-10yr Life cos.
7.5 Rates offered
7.0
6.5 HDFC Life 6.2%
6.0
HDFC Bank 4.4% 5.15% 5.50% 5.50%
5.90 TATA AIA 5.8%
%
5.5
5.0 ICICI Bank 4.9% 5.15% 5.35% 5.5% IPRU 5.3%
4.5
4.0 MAXF 5.7%
3.5
3.35 Axis Bank 5.15% 5.25% 5.4% 5.5%
BALIC 6.5%
3.0
ON 3M 6M 1Y 2Y 3Y 4Y 5Y 10Y 15Y 20Y 30Y
SBI 4.4% 5.10% 5.30% 5.40% SBI Life 5.3%
Current 3M back 1yr back 2yrs back
Source: Bloomberg, Spark Capital Research Source: Company, Spark Capital Research
Difference in overnight rate and 10yr/30yr G-Sec yield is highest since global Spread between 10yr G-Sec and 1yr OIS + Bank Margin (assuming 100bps) is at all
financial crisis time high, leading to better FRA rates for life insurers
6
Spread between Overnight rate and G-Sec rate Spread between 10yr G-Sec and 1yr OIS + Bank Margin*
3.00
4 2.00
1.53
1.00
2
1.00
0.00
0 -1.00
-2.00
-2
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
-3.00
Jun-17
Jun-18
Jun-19
Jun-20
Dec-17
Dec-18
Dec-19
Dec-20
Oct-17
Oct-18
Oct-19
Oct-20
Apr-17
Feb-18
Apr-18
Feb-19
Apr-19
Feb-20
Apr-20
Aug-17
Aug-18
Aug-19
Aug-20
Difference Between overnight rate and 10yr Gsec rate
Difference Between 3M rate and 10yr Gsec
Source: Bloomberg, Spark Capital Research
Source: Bloomberg, Spark Capital Research
Page 12
#2. Non-Par Savings: Future growth in this segment is function of favourable FRA rate environment and supply of partly paid debentures (PPD)
Except for HDFCLIFE (which is a conscious decision), Non- Par Savings contribution sharply increased for most of the life insurers
Non-Par Savings APE (ex- Annuity) % of total APE
60% 59%
53%
43% 45%
34% 32% 31% 34%
29%
26%
19% 18%
12% 11%
7% 8% 9% 8%
4% 6% 3% 3% NA
1% 0% 0% 0%
HDFCLIFE SBILIFE IPRU MAXF BALIC TATA ABSLI
FY18 FY19 FY20 1HFY21
Partly Paid debenture (PPD) supported Non-Par growth for SBILIFE, IPRU and BALIC While HDFCLIFE and Max relied on FRA market to underwrite guarantee business
Partly Paid Up Bonds (Rs bn) Forward Rate Agreement + Interest Rate Swap (Notional), Rs bn
31 31 With FRA being attractive
119
and cheaper, Max
incrementally hedged
21 20 90 87 through FRAs and closed IRS
14 14 14
12
7 9 46 45
6 7 6
4 5 26 26
1 2 2
0 0 15
0 0 4 4
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1HFY21
1HFY21
1HFY21
1HFY21
1HFY21
FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20
HDFCLIFE Max TATA ABSLI
HDFCLIFE SBILIFE IPRU BALIC ABSLI
Source: Company, Spark Capital Research Source: Bloomberg, Spark Capital Research
Page 13
#3. Non-Par Savings: HDFCLIFE relied on back book (credit protect) to under write Non- Par Savings in FY20, PPD + FRAs exposure lower than peers
BALIC has highest capacity of PPD to underwrite non-par savings business. SBILIFE & IPRU capacity is lower while Max relied on interest rate derivative market to underwrite
non-par. Lower coverage of PPD & FRA for HDFCLIFE (in FY20) could be also to be due to lower persistency assumptions
PPD + FRAs % of last 3 yrs cummulative Non-Par Savings APE
600%
490%
500%
400% 313%
300% 235%
190% 490%
200% 154%
114% 115%
313%
100% 132% 235%
114% 154% 79%
58% 36%
0% 0%
HDFCLIFE SBILIFE IPRU MAX BALIC TATA ABSLI
PPD FRAs
Non-Par contribution to life fund (largely individual traditional business) increased sharply for HDFCLIFE and steadily for MAX and BALIC. Any significant increase from the current level shall
remain a concern, as it could potentially increase balance sheet volatility.
Non-Par AUM % of Life Fund

45% 44% IPRU higher Non-par contribution is due
50%
39% 41% to strong growth of index liked non par 37% 38%
40% 34% 34% 34% 34%
sales during FY11-14. Index Linked like
30%
26% 24% 26% 25% ULIP don’t carry BS risk 23%
19% 21%
14% 15% 16%
20% 12% 12% 12%
9% 8% 10%
7% 7%
10%
0%
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1H21
1H21
1H21
1H21
1H21
1H21
1H21
HDFCLIFE SBILIFE IPRU MAX BALIC TATA ABSLI
Page 14
#4. Non- Par Savings: Larger banks have lower credit growth vs. deposit growth – an environment highly favourable for high IRR non-par products
Credit growth lower than deposit growth shall lead to better growth in individual
Historically, APE growth rate is negatively correlated with CD ratios
APE, esp. guarantee business
80
17
78 15
76 13 11.3
11
%, yoy
74
72.0 9
72 7
70 5
5.7
3
68
1
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Jun-18
Nov-18
Dec-18
Jun-19
Nov-19
Dec-19
Jun-20
Nov-20
Jul-18
Oct-18
Jul-19
Oct-19
Jul-20
Oct-20
Apr-18
Sep-18
Feb-19
Apr-19
Sep-19
Feb-20
Apr-20
Sep-20
May-18
Aug-18
May-19
Aug-19
May-20
Aug-20
Jan-19
Mar-19
Jan-20
Mar-20
Credit Deposit Ratio (%)
Deposit growth Credit growth
Source: RBI, Spark Capital Source: RBI, Spark Capital
Larger banks which distribute life insurance product of coverage universe are witnessing lower credit growth vs. deposit growth
ICICI Bank Credit and Deposit State Bank Credit and Deposit HDFC Bank Credit and Deposit
HDFC Bank Credit and Deposit Growth 30% 50% Growth Growth
Growth
28% 25% 40% 28%
23% 20.3% 20% 30% 23%

15% 14.4%
18% 20% 18%
10%
13% 15.8% 10%
5% 13%
8% 0%
0% 8%
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-17
Mar-18
Mar-19
Mar-20
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-17
Mar-18
Mar-19
Mar-20
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-17
Mar-18
Mar-19
Mar-20
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-17
Mar-18
Mar-19
Mar-20
Credit Growth Yoy Deposit Growth YoY
Source: Company, Spark Capital
Page 15
#5. Non- Par Savings: Cash flow hedging is reflected in the manageable interest rate sensitivity for most of the covered insurers.
SBILIFE’s EV sensitivity is higher due to group fund based business (where interest rate are re-set every quarter).
EV Sensitivity + 1% change in Risk Free Rate (%) EV Sensitivty: - 1% change in Risk Free Rate (%)
5.0%
-1.2%
-1.5%
-1.8% -1.7%
-2.1% -2.0% -1.9% -1.7% -1.8% 4.0%
3.6% 3.4%
-2.5% -2.5%
-2.9% 2.6%
-3.4% 2.2% 2.0%
1.9%
-4.0% 1.6% 1.6% 1.6% 1.8%
-5.0% 0.6% 0.7% 0.5%
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1H21
1H21
1H21
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1H21
1H21
1H21
HDFC LIFE SBILIFE IPRU MAX
Source: Company, Spark Capital Source: Company, Spark Capital l
IPRU’s VNB sensitivity to interest rates is higher due to ULIP business, were AUM growth (hence the fee income) is linked to interest rate (negative correlation). Max
Sensitivity is higher due to Par- business exposure. Non-Par sensitivity is function of unhedged cash flows
VNB Sensitivity + 1% change in Risk Free Rate (%) VNB Sensitivity - 1% change in Risk Free Rate (%)
6.8% 5.2%
4.4%
4.9% 2.2%
3.4%
3.0% 0.2% 0.9% 0.8% 0.0%
1.7% 1.6%
1.0% -1.7% -2.0% -1.8%
0.3% -0.2% -3.0%
-0.4%
-2.8% -2.4% -5.6% -6.2%
-3.6% -6.7%
-4.9% -4.3% -9.0%
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1H21
1H21
1H21
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1H21
1H21
1H21
HDFC LIFE SBILIFE IPRU MAX HDFC LIFE SBILIFE IPRU MAX

Page 16
Participating Products
Page 17
#1. Participating products: After normalization of yield curve, focus would be on Par segment to grow APE (if ULIP demand remains muted)
Reducing heavy reliance on Non- Par for HFCLIFE and ULIP for IPRU is driving Par growth; while others have defocused on this segment in last 2 years
Par as % of total APE (%)

43%
40%
28% 30%
26% 24% 23% 24%
19% 18% 17% 19%
15% 16% 16%
11% 11% 12%
9% 9%
HDFCLIFE SBILIFE IPRU MAX BALIC
Source: Company, Spark Capital.
LIC’s lucrative revisionary bonus rates and terminal bonus rates (for long term plans) shall limit scope for most of the private life insurers to gain market share in Par business
over medium to long terms LIC’s huge balance sheet, higher surplus sharing and lower cost ratios gives them ability to give better bonus rates
Premium Paying Terminal Bonus
Insurer Par - Product Policy Term Revisionary Bonus Insurers Par - Product Policy Term
Term Rate*
(Yrs) (Yrs) % of GMB Yrs % of GMB
LIC All Particating plans 15 2%
LIC Jeevan Anand 20 20 4.0%
All Particating plans 20 7%
Jeevan Labh 16 10 4.4%
All Particating plans 25 45%
IPRU Savings Surksha (LP) 20 10 3.0% All Particating plans 30 110%
Savings Surksha (RP) 20 10 1.8% All Particating plans 35 230%
Lakshya LT Wealth 20 10 3.2% All Particating plans 40 & above 355%
Future Perfect 20 10 2.3% IPRU Cash Back 15 25%
Save 'n' Product 15 30%
Sachay Par Advantage - Immediate
HDFCLIFE NA 10 3.6%** Forever Life RP 15 40%
income
HDFCLIFE Assurance Plan 15 67.3%
Classic Assure Plus 20 10 4.5%
Endowment Assurance 15 36.3%
Super Income Plan 20 10 4.5%
Money Back 15 44.0%
SBILIFE Smart Money Back 20 20 3.0% SBILIFE Money Back 15 40.0%
Smart Bachat 20 10 3.0% Sanjeevan Supreme 15 40.0%
BALIC Invest Assure 20 10 3.0% BALIC Invest Assure 20 0.50%
Young Assure 20 12 3.0% Young Assure 20 0.5%
Source: Company, Spark Capital. * GMB is Guaranteed Maturity Benefit, **Cash Bonus. ** Terminal bonus for most the pvt. insurers not available as these popular products have not
Page 18
completed one maturity cycle yet
Few product offer guranteed value addition which are rewarded to policyholder irrespective of surplus created.
#2. Participating Products : PAR AUM has failed to grow for most the Pvt insurers, which could be a hindrance to improve bonus rates
PAR contribution to Life funds (largely individual traditional AUM) remined broadly stable for life insurers.
PAR AUM % of total life fund

97% 94%
88% 88%
76% 77% 80% 78%
74% 71%
66% 63%
58% 56% 60% 58% 58% 56%
53% 54%
34% 37% 36%

31%
HDFCLIFE SBILIFE IPRU MAX BALIC LIC
LIC has huge PAR AUM (equity exposure) gives

Lower PAR APE growth is muted and is function of APE growth in this segment
then ability to pay better bonus rates
Par AUM (Rs bn) LIC - Par AUM (Rs tn)

28%
25% 24% 24% 10%
23%
18% 8%
10% 11% 11% 12%
8% 9% 7%
6%
3%
248 274 281 297 193 247 303 325 118 147 182 201 261 323 382 415 133 148 166 178
3%
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1HFY21
1HFY21
1HFY21
1HFY21
1HFY21
18.3 19.9 22.0 22.6
HDFCLIFE SBILIFE IPRU MAX BALIC FY18 FY19 FY20 1HFY21
Par AUM % change LIC- PAR AUM (Rs tln) % change
Source: Company, Spark Capital Source: Company, Spark Capital
Page 19
Protection & Reinsurance
Page 20
#1. Protection: Sharp growth in reinsurance premium ceded vs. sum assured (SA) growth, reflect significant hardening of reinsurance rates
Despite sharp decline in new business sum assured in 1HFY21, the life reinsurance market grew by 34% YoY, clearly indicating sharp hardening of reinsurance rates
Total new business sum assured (Rs tn) Life reinsurance market (Rs bn)
60 12% 15% 40 50%
48 11% 34.0
50 43 42%
39 10% 3.0 34% 40%
8 30 24.0
40 11 28% 21.3
5% 17.9 20.8 30%
30 12 3.2 15.5
22 20 20 3.7 1.1
0% 11.8 15.0
10.9 2.9 12% 1.0 20%
20 40 3 3 2.2
33 10 1.4 1.8 19% 19%
27 -8% -5% 10%
10 19 17
9.4 8% 9.9 12.8 15.0 17.6 20.8 31.0 14.5 19.8
0 -10% 0 0%
FY18 FY19 FY20 1HFY20 1HFY21 FY14 FY15 FY16 FY17 FY18 FY19 FY20 1HFY20 1HFY21
Pvt LIC YoY (%, RHS) Private LIC YoY growth (%, RHS)
Source: Company, IRDA, Spark Capital Source: Company, IRDA, Spark Capital
Slowdown in sum assured for the industry was more acute for group business, which we believe is due to lower off take of credit protect
Individual new business sum assured (Rs tn) Group new business sum assured (Rs tn)
28
25 25% 30 26 15%
20 24 2
22% 10%
20 17 20% 25 10%
5 6% 19
14 6 14% 15% 7 5%
20 16
15 6 12 11 14 1 0%
8 10% 15 12 1
5 8 26 1 -5%
10 6% 4 3 1
2 5% 10 21
13 2 18 18 -10%
5 12 13 15
9 8 9 0% 5 10 -15% -13%-15%
6 7
-3%
0 -5% 0 -20%
FY18 FY19 FY20 1HFY20 1HFY21 8MFY20 8MFY21 FY18 FY19 FY20 1HFY20 1HFY21 8MFY20 8MFY21
Pvt LIC YoY (%, RHS) Pvt LIC YoY (%, RHS)
Source: Company, IRDA, Spark Capital Source: Company, IRDA, Spark Capital
Page 21
#2. Protection: Reinsurance rate hardening is witnessed across the covered life insurers
Higher growth for reinsurance premium vs. sum assured reflect significant rate hardening for HDFCLFE, SBILIFE and IPRU. BALIC increase is due to higher share of protection
214%
6 250%
5 200%
4 84% 68% 64% 79% 66% 150%
35% 49% 36% 57% 44% 29% 31% 41% 39% 40% 24% 12% 20% 100%
3 -13% 50%
2 -49% 0%
1 1.9 2.6 4.8 1.9 2.8 1.9 1.0 3.1 1.7 2.9 2.6 3.5 5.5 2.5 3.6 1.2 1.6 2.0 1.0 1.5 0.6 0.5 0.7 0.2 0.3 0.7 1.1 2.0 0.9 1.5 1.8 2.3 2.5 1.2 1.5 -50%
0 -100%
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
HDFCLIFE SBILIFE IPRU MAX BALIC TATA ABSL
Premium ceded (Rs bn) YoY (%, RHS)
125% 110%
10 150%
8 50% 47% 100%
28% 21% 35% 33% 29% 19% 33% 26% 12% 23% 9%
6 4% -8% -10% 3% -7% 50%
4 -50% 0%
2 4.7 6.1 9.1 4.4 2.2 2.8 3.4 4.6 2.1 2.1 3.3 4.4 5.7 2.7 2.5 1.7 2.6 3.0 1.3 1.8 2.0 2.5 2.8 1.2 1.1 0.6 1.4 2.9 1.2 1.2 1.9 2.3 2.2 1.0 1.1 -50%
0 -100%
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
New business SA (Rs tn) YoY (%,RHS)
265%
3 300%
250%
2 112% 200%
73% 71% 62% 150%
33% 40% 40% 25% 100%
1 16% 22% 12% 6% -19% 18% 11% 7% 11% -3%
-14% -11% 50%
1.6 1.9 2.3 1.0 1.1 0.9 1.3 1.3 0.6 0.5 2.0 2.4 2.7 1.2 1.1 1.2 1.7 1.8 0.8 1.1 0.2 0.3 0.3 0.1 0.4 0.6 1.3 2.2 0.8 1.0 0.3 0.5 0.5 0.2 0.2 0%
0 -50%
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
1H20
1H21
Individual - New business SA (Rs bn) YoY (%,RHS)

Page 22
#3. Protection: HDFLCIFE, IPRU and MAX heavily dependent on reinsurers to underwrite high Sum Assured Individual protection
SBILIFE largely immune to reinsurance hardening as it had significantly lower ceding of sum assured. This was largely due to their focus on Return of Premium Plans (ROP)
where sum assured are lower than pure term insurance policies
Sum Assured ceded to reinsuers (%)
67%
63%
62%
62%
59%
57%
70%
48%
48%
46%
60%
43%
47%
39%
39%
43% 43%
36%
50% 38% 41%
30%
36%
30%
27%
26%
40%
24%
23%
23%
22%
21%
19%
19%
18%
18%
16%
30%
14%
14%
12%
20%
10%
0%
FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20
Individual - Sum assured ceded Group - Sum assured ceded Total - Sum assured ceded
HDFCLIFE SBILIFE IPRU MAXF BALIC
IPRU and Max has higher sum assured per individual policies (due to higher contribution of individual protection) while sum assured per group is higher for SBILIFE due to
higher mortgage-based credit protect exposure
Individual sum assured per policy (Rs mn) Group Sum Assured per Life (Rs '000)
1,396
1,392
1,236
6.0 1,500
5.0
4.8
4.5
5.0
973
3.9
949
3.8
3.7
3.7
3.6
3.5
4.0
3.1
1,000
2.7
2.7
2.7
2.6
2.5
2.4
593
2.4
581
570
558
2.3
547
2.2
3.0
2.0
1.9
1.9
445
440
1.8
1.8
1.8
424
416
413
404
1.6
377
1.3
2.0
260
500
1.1
1.0
205
204
0.9
198
0.8
0.8
0.8
163
0.7
0.6
114
113
112
103
102
100
96
1.0
91
82
72
62
56
47
0.0 0
TATA MAX IPRU HDFCLIFE BAGIC ABSL SBILIFE ABSLI TATA SBILIFE MAX IPRU HDFCLIFE BAGIC
FY18 FY19 FY20 1H21 8M21 FY18 FY19 FY20 1H21 8M21
Page 23
#4. Protection: Further deterioration of combined ratios for reinsurers in life segments does not bodes well for life insurance companies
Foreign reinsurers provided maximum support to life reinsurance market; RGA conscious decision to slowdown life reinsurance in India, could potentially lead to lower supply
and increase in life reinsurance rates
FY18 - Life Reinsurance market FY19 - Life Reinsurance market FY20 - Life Reinsurance market
GICRE
GICRE
GICRE 20% Cross
24%
18% Border
Cross
Munich 31%
Border
8%
38%
Swiss Munich
Cross 4% 10%
Munich
Border
Hannover Swiss 10%
62% GenRE
1% 8%
Scor… 4%AXA Swiss
RGA Hannover 1% 9%
GenRE Scor
GenREAXA 3%
7% AXA RGA 3%
1% RGA ScorHannover
3% 0% 2% 11% 17% 3% 1%
Source: IRDAI, Spark Capital
Combined ratio of reinsurers in the life segment further deteriorated in FY20 and 1HFY21.
Life reinsurance - Combined Ratio (%)
203%
240%
153%
200%
133%
127%
125%
124%
123%
123%
121%
121%
118%
118%
117%
115%
116%
113%
160%
110%
106%
106%
104%
103%
103%
102%
98%
84%
120%
79%
80%
1425%
40%
NA
0%
GICRE Munich Swiss Hannover Scor RGA AXA GenRE Total (ex- GICRE) Total
Source: IRDAI, Spark Capital.
Page 24
#5. Protection: IPRU life lost market share in individual sum assured which is reflected in decline the individual protection business in 1HFY21
IPRU lost market share in individual SA and HDFCLIFE in group SA (slowdown in credit protect); Group Term Life (GTL) led to group SA growth for SBILIFE and IPRU
Market Share : Individual new business sum assured (%)
14.1%
13.7%
13.4%
13.0%
13.0%
12.6%
12.5%
12.5%
12.1%
11.7%
11.6%
11.4%
11.0%
10.9%
10.9%
15%
9.8%
9.2%
8.5%
7.2%
7.2%
6.7%
6.6%
10%
6.3%
5.8%
5.0%
4.5%
4.2%
2.9%
2.5%
2.4%
2.4%
2.2%
1.7%
1.7%
5%
1.2%
0%
HDFCLIFE IPRU MAX TATA SBILIFE BAGIC ABSL
FY18 FY19 FY20 1H21 8M21
Market Share : Group new business sum assured (%)

24.0%
30%
16.1%
14.9%
14.3%
12.8%
12.7%
12.5%
11.5%
20%
10.9%
10.7%
9.6%
8.7%
8.4%
8.3%
7.9%
7.7%
7.7%
7.3%
7.0%
6.8%
6.5%
6.4%
5.9%
5.7%
5.6%
5.4%
5.1%
4.3%
3.3%
10%
2.4%
2.2%
2.1%
1.9%
0.3%
0.0%
0%
FY18 FY19 FY20 1H21 8M21
18.9%
Market Share : Total new business sum assured (%)

20%
14.0%
12.6%
12.5%
12.2%
11.8%
11.6%
11.3%
11.1%
10.7%
10.2%
15%
9.5%
8.8%
8.6%
8.0%
7.9%
7.3%
6.3%
6.2%
5.9%
5.9%
5.8%
5.7%
5.7%
5.6%
5.4%
5.4%
5.3%
10%
5.1%
5.0%
4.9%
4.5%
4.5%
3.1%
1.6%
5%
0%
FY18 FY19 FY20 1H21 8M21
Source: Company, IRDA, Spark Capital Page 25

#6. Protection: With slowdown in number of person insured in individual protection, we believe, growth for this segment to peak out
Though individual protection contribution has higher for IPRU, it witnessed decline in APE . Higher contribution is optical due to sharper decline in savings business
Indivdiual protection % of total APE Individual Protection APE growth
12.1%
12.0%
10 517% 600%
14.0%
10.4%
500%
12.0% 8
400%
7.9%
7.8%
7.2%
10.0% 6 300%
6.5%
6.3%
5.8%
5.6%
5.5%
8.0% 200%
4.7%
4.7%
4 69% 43% 76% 78%
31% 59% 43% 66% 49%
4.1% 28% 38% 38% 13%
3.8%
3.5%
6.0% -28% -19% 100%

2
4.0% 2.5 3.6 4.7 2.4 0.6 3.7 5.1 2.6 2.7 4.4 7.7 2.8 1.4 2.3 3.4 2.4 0.8 0%
0.7%
0.0%
0.0%
0.0%
2.0% 0 -100%
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1HFY21
1HFY21
1HFY21
1HFY21
1HFY21
0.0%
SBI life IPRU Max HDFC Life BALIC
FY18 FY19 FY20 1HFY21 HDFC Life SBI life IPRU Max BALIC
Ind Protection APE (Rs bn) YoY
Individual protection APE growth driven by higher contribution of limited pay polices, coverage universe insuring less people, indicating plateauing of growth in this segment.
COVID scare demand (witnessed in 1Q) is also moderating for most of the life insurers.
No of new indivdual protection policies ('000) Indivdual protection APE per policy (Rs' 000 )
176% 127%
400 200% 25 150%
92%
150% 20 100%
300
100% 15 32% 43%
41% 46% 54% 51%
200 28% 16% 7% 8% 18% 50%
20% 50% 10 -2%
5% -7%
-8%
100 -38% 5 0%
0%
91 250 321 300 362 332 114 175 183 121 7 15 16 9 12 23 12 13 19 19
0 -50% 0 -50%
FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20 1HFY21
SBILIFE IPRU MAX SBILIFE IPRU MAX
No of individual protection policies ('000) YoY Protection Ticket size (Rs '000) YoY
Page 26
#7. Protection: Any reinsurance rate hardening shall increase premium rates which could potentially impact growth further
Companies increase pure protection rates reflecting the increase in reinsurance rates Premium comparison between pure protection policies and return of
Mar'20 Apr'20 Jul'20 Nov'20 Increase in premium protection policies
Insurers Premium per policy Aug vs. Mar
Premium per policy Return of premium policies
ICICI Prudential Life 9,739 11,616 13,391 12,173 25%
Tata AIA 9,440 12,744 12,744 12,744 35% Insurers Nov'20 Nov'20 Difference
SBI Life 11,092 11,092 11,092 11,092 0%
ICICI Prudential Life 12,173 24,713 103%
LIC 11,007 11,007 11,007 11,007 0%
HDFC Life 9,718 10,648 10,648 10,648 10% Tata AIA 12,744 16,824 32%
ABSL 8,469 10,372 10,372 10,372 22% HDFC Life 10,648 24,968 134%
Max Life 8,378 8,378 9,912 9,912 18%
Max Life 9,912 17,472 76%
Bajaj Allianz 7,033 7,033 9,626 9,626 37%
Kotak Life 8,968 8,968 8,968 8,968 0% Bajaj Allianz 9,626 17,793 85%
PNB MetLife 8,732 8,732 8,732 10,384 19% PNB MetLife 10,384 22,050 112%
Edelweiss Tokio 7,228 7,228 7,950 7,950 10%
Future Generali 7,682 7,682 7,682 NA NA Source: Policy bazaar, Spark Capital * Premium per policy is for Sum
assured of Rs 10mn for a non-smoker at an entry age of 30 yrs and with a
Aegon Life 7,087 7,087 7,087 7,087 0% premium paying term of 30yrs. #Above prices include GST
Lower credit protect growth in 1HFY21 supported VNB margin for HDFCLIFE in 1H, Strong growth in home loan disbursals and growth in GTL led to higher share of
which could be under pressure if MFI/ ST loan related credit growth improves group protection for SBILIFE
Proteciton APE Mix (%) Group protection % of total APE
10.9%
10.9%
100% 12%
7.8%
31% 38% 10%
7.4%
80% 40% 44% 47% 48% 39% 40% 41% 39%
53% 44%
6.8%
59% 65% 63%
6.0%
8%
5.3%
60%
4.9%
87%
4.7%
4.7%
4.5%
4.3%
4.2%
3.7%
40% 6%
3.0%
69% 62%
56% 53% 52% 61% 60%
2.3%
60% 59% 61%
20% 41% 35% 37% 47% 56% 4%
13% 2%
0%
FY18 FY19 FY20 1H21 FY18 FY19 FY20 1H21 FY18 FY19 FY20 1H21 FY18 FY19 FY20 1H21 0%
HDFCLIFE SBILIFE IPRU Max SBI life IPRU Max HDFC Life
Individual Group FY18 FY19 FY20 1HFY21
Source: Company, Spark Capital Research Source: Company, Spark Capital Research
Page 27
#8. Protection: Increase in protection led to higher mortality sensitivity
SBILIFE sensitivity to mortality could be higher due to higher retention and IPRU due to higher sum assured per policy
VNB Sensitivity + 10% change mortality

-4.8%
-5.6%
-8.0%
-7.0%
-8.9%
-9.2%
-5.4%
-9.4%
-9.5%
-3.7%
-3.5%
-5.0%
-4.3%
-10%
-10%
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1H21
1H21
1H21
EV sensitivity broadly similar for most of the life insurers
EV Sensitivty + 10% change mortality

0%
-1.6%
-1.8%
-1.2%
-1.6%
-1.0%
-2.0%
-2.3%
-1.9%
-1.0%
-1.4%
-1.6%
-1.3%
-1.4%
-1.8%
-1.7%
-1%
-1%
-2%
-2%
-3%
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
FY18
FY19
FY20
1H21
1H21
1H21
Page 28
ULIPs
Page 29
#1. ULIP: Most of the insurers have reduced reliance on linked business; even weak demand for ULIP also impacted contribution
SBILIFE now has the highest contribution of ULIP to total APE in IHFY21; followed by IPRU
ULIP as % of total APE (%)

82% 80%
71% 70%
66% 65%
56% 56%
53%
46% 46% 47%
41% 42% 43%
38%
31% 30%
23%
20%

Increase in ULIP AUM (due to MTM gains) shall be EV positive, driven by economic variance. IPRU to be the biggest beneficiary
ULIP AUM growth (%)

26% 24%
21% 19% 20% 20%
14% 14% 16%
11% 9%
-4%
-12% -15% -15%
975 1,109 971 1,174 549 691 786 935 572 634 542 653 171 199 192 208 226 193 239
230
FY18 FY19 FY20 1H21 FY18 FY19 FY20 1H21 FY18 FY19 FY20 1H21 FY18 FY19 FY20 1H21 FY18 FY19 FY20 1H21
IPRU SBILIFE HDFCLIFE MAXF BALIC
ULIP AUM (Rs bn) % change
Page 30
#2. ULIP: Persistency key for ULIP profitability has been clearly under pressure for all insurers
IPRU, BALIC and MAXF has seen highest dent in their persistency ratio Lower impact in policy persistency, indicate higher lapses in larger ticket size ULIPs
13 Month (incl single premium) - Premium Persistency (%) 13Month - Policy Persistency (%)
82.0%
81.9%
80.7%
80.0%
79.8%
79.6%
79.5%
79.0%
78.8%
90.5%
90.1%
77.0%
77.0%
89.1%
75.3%
74.3%
87.2%
87.1%
73.9%
73.8%
87.0%
86.8%
86.8%
73.5%
72.8%
86.2%
86.1%
85.9%
72.2%
85.8%
85.1%
85.1%
71.0%
84.6%
84.0%
68.7%
68.3%
83.0%
83.0%
68.2%
82.0%
65.7%
81.0%
80.4%
64.5%
80.0%
79.2%
62.6%
77.2%
77.2%
IPRU SBILIFE HDFCLIFE MAXF BALIC IPRU SBILIFE HDFCLIFE MAXF BALIC
FY18 FY19 FY20 1HFY20 1HFY21 FY18 FY19 FY20 1HFY20 1HFY21
Fund management fees of discontinued funds is 0.5% vs. 1.25-12.35% for standard
Slippage into discontinued fund sharply increased which shall impact EV and VNB.
ULIP funds hence significant on VNB margins & ROEVs
ULIPs fund slipped in discontinued funds as % of opening linked AUM Discontinued funds % of total ULIP AUM (%)
9.9%
9.6%
9.3%
9.3%
9.1%
8.8%
7.2%
7.1%
6.7%
6.5%
6.5%
6.3%
6.2%
6.2%
6.0%
5.9%
5.7%
5.3%
5.3%
5.2%
5.0%
4.8%
4.6%
4.5%
4.5%
4.3%
4.3%
4.1%
4.1%
3.9%
3.7%
3.3%
3.3%
3.2%
3.0%
2.8%
2.4%
2.3%
2.2%
1.8%
FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21
Page 31
#3. ULIP: Surrender ratio at elevated level and hence weak net addition to ULIP AUM
Except for SBILIFE, all insurers have witnessed sharp increase in ULIP surrender ration and out flow from ULIP AUMs
Surrender ratio as % of avg ULIP AUM Net addition to opening ULIP AUM (%)
18.8%
17.8%
17.7%
17.5%
17.1%
12% 13% 12%

16.1%
16.1%
15.2%
14.6%
14.0%
13.2%
13.1%
6.3%
11.3%
4%
10.7%
10.0%
0% 0.3% 1%
0% 0% -0.1%
-3% -2% -2.0%
-5% -4%
-5% -5.8% -7%
-13%
FY18 FY19 FY20 FY18 FY19 FY20 1HFY21
With increase in contribution of non-ULIP business, EV and VNB sensitivity to persistency has declined
VNB Sensitivity to 10% increase in lapse rate VNB Sensitivity to 10% increase in lapse rate
-0.9%
-0.9%
-1.2%
-1.2%
-2.1%
-2.1%
-2.9%
-2.9%
-3.7%
-3.7%
-3.9%
-3.9%
-4.1%
-4.1%
-5.0%
-5.0%
-5.5%
-5.5%
-5.6%
-5.6%
-5.8%
-5.8%
-6.0%
-6.0%
-7.0%
-7.0%
-8.5%
-8.5%
-8.6%
-8.6%
IPRU SBILIFE HDFCLIFE MAXF IPRU SBILIFE HDFCLIFE MAXF
FY18 FY19 FY20 1H21 FY18 FY19 FY20 1H21
Page 32
Distribution & Operating efficiency
Page 33
#1. Distribution: Bancassurance supported the growth, which could be at risk if CD ratio and yield curve normalizes
Banca Agency Others Individual APE

37% 185% 32%
18% 20% 146% 15%
11% 11% 9%
SBILIFE
7%
31%
15%
-25% -26% -22%
26% 29% 29%

27% 59%
HDFC LIFE
17% 50% 18%

10% 33%
8%
2%
-2% -14% -1%

-14%
28% 27%
8% 7% 16% -37%
6%
IPRU
-14% -15% -8% -1%

-22% -9% -9%
-46% -29%
30%
24% 22% 22%
MAXF
18% 18% 4% 21%

10%
6%
1% 3% -17% 4% 4%
-71%
87% 82%
76% 38%
29%
57% 20%
BALIC
9% 25%
0% 11% 11%
-10% -13% -35%
FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21
1. Lower credit growth vs. deposit and better IRR on non-par business led to significantly better growth in bancassurance channel for HDFCLIFE (HDFC Bank) and Max Life ( Axis bank)
2. Lock-down impact 1Q bancassurance growth for SBILIFE
3. ICICI Bank reluctance to sell traditional products and lower demand for ULIPs impacted bancassurance growth for IPRU

#2. Distribution: Agency channel remains sub-optimal for most of the insurers
Despite increase in agency additions, agency channel contribution has not improved for most of the insurers
No. of Agents (000s)

Contribution of Agency to Individual APE
191
79% 171 176
69% 152 154
56% 124 130
45%
108 117 108
91
77 81 77
31% 30% 30% 28% 29%31% 32%
71 73
26% 27% 27% 57 51
23% 23% 46 52
11% 13% 14% 13%
IPRU HDFC Life SBI Life MAXF BALIC IPRU HDFC Life SBI Life MAXF BALIC
Source: Spark Capital Research Source: IRDA, Spark Capital Research
Agency productivity remains sub-optimal for HDFCLIFE & IPRU, lockdown impacted SBILIFE’s productivity in 1HFY21
Agent Productivity Premium (000s) Avg. No. of Policies per Agent (000s)
265 108.8
249 238
234 238
216 88.5 89.4 89.2
76.1 80.2 83.3
75.4
160 168 67.2 70.4 69.2
150 141 58.6 54.7 61.7
138 134 52.3 50.7 52.3
105 47.0
100 40.9
86 80 80 87
58 66
21.2
IPRU HDFC Life SBI Life MAXF BALIC IPRU HDFC Life SBI Life MAXF BALIC
Source: IRDA, Company, Spark Capital Research Source: IRDA, Company, Spark Capital Research
Page 35
#3. Distribution: Bank branch productivity was also under pressure for HDFCLFE (due to market share loss) and IPRU
Banca contribution has been under pressure in HDFCLIFE, IPRU and Max Life (due to Yes Bank), while it increased for BALIC
Contribution of Banca to Individual APE Major Bank Branch Productivity (Rs mn)
70.6% 69.3%
68.0% 71.6%
69.9%
66.0% 67.4%
58.5%
64.0%
60.0% 7.7 7.5 8.0
53.8% 6.6 6.4
48.9%
45.0% 5.3 5.7 5.3 5.5 5.9 5.7
5.0
67.8% 68.4% 2.8 3.0

55.2% 55.0% 20.4% 2.3
13.7% 1.6
32.5%
IPRU HDFC Life SBI Life MAXF BALIC IPRU (ICICI Bank) HDFCLIFE (HDFC Bank) SBILIFE (SBI) Max (Axis)
FY18 FY19 FY20 1HFY21 FY17 FY18 FY19 FY20
Source: Company, Spark Capital Research Source: Company, Spark Capital Research
▪ With challenges witnessed in

Life insurers Key Bancassurance Partners New Bancassurance Partners
ICICI Bank, IPRU has been
diversifying their bancassurance
ICICI, Standard Chartered, Capital SFB, Utkarsh SFB, CSB, tie-up which could be growth
IPRU IndusInd Bank, RBL, IDFC First Bank
Equitas SFB
positive
SBILIFE SBI, PSB, South Indian Bank, UCO Bank, Indian Bank, Yes Bank
▪ SBILFIE has been also aggressive
with banca among the other
HDFC Bank , RBL, Equitas SFB, Captial SFB, IDFC Bank, CSB,
HDFC LIFE Bandhan Bank, Yes bank PSU banks
Ujjivan, Utkarsh, DCB
▪ Axis Bank added to BALIC

Max Life Axis , Yes , LVB No New Banca Relationships
growth, could be at risk with
Axis bank strategic tieup with
Bajaj Allianz Dhanlaxmi, Ujjivan Axis Bank, Bandhan Bank Max Life
Source: IRDA, Spark Capital Research
Page 36
#4. Operating expenses: Cost control measured improved opex ratio and VNB margin; which we believe is unsustainable
HDFCLIFE’s segmental opex allocation towards Par segment is significantly higher than the company average
Par Opex (ex-commission) Ratio Non-Par Opex (ex-commission) Ratio Linked Opex (ex-commission) Ratio Total Opex (ex-commission) Ratio
18%
26%
18%
18%
21%
24%
24%
20%
22%
15%
18%
18%
21%
14%
17%
17%
20%
20%
20%
16%
16%
16%
13%
13%
13%
15%
16%
13%
11%
15%
15%
12%
12%
9%
8%
10%
8%
8%
8%
8%
7%
8%
8%
8%
7%
7%
6%
7%
6%
6%
7%
5%
6%
6%
5%
6%
6%
5%
5%
3%
HDFCLIFE SBILIFE IPRU MAX BALIC HDFCLIFE SBILIFE IPRU MAX BALIC HDFCLIFE SBILIFE IPRU MAX BALIC HDFCLIFE SBILIFE IPRU MAX BALIC
FY19 FY20 1HFY21 FY19 FY20 1HFY21 FY19 FY20 1HFY21 FY19 FY20 1HFY21
Profit dynamic of HDFC Bank channel for HDFCLIFE under pressure with higher opex towards the channel
HDFC Bank related Opex (ex-Commissions) HDFC Bank Related opex % of total Opex HDFC Life - Banca APE growth (%) Banca % of individual APE
7 6.3 100% 19% 18% 30% 26% 75%
78% 71%
6 18% 25%
4.9 80% 70%
5 17% 64%
4.1 20%
60% 16% 65%
4 3.2 15% 60%
3 15% 15% 10% 60%
28% 40% 55%
22% 23%
2 14% 13% 13% 10% 55%
20% 13%
1 5% 2% 50%
0 0% 12% -2%
11% 0% 45%
10% -5% 40%
HDFC Bank (Rs bn) YoY (%, RHS) FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21
Page 37
#5. Operating expenses: Cost control measures seen in employee & other admin cost; which shall normalize thus putting pressure on margin
Lower holding company expenses, narrowed VNB margin gap between
Admin cost contribution to total cost declined in 1HFY21
reported and net of hold expense margins
FY20 - Operating expense (ex-commission) 1HFY21 - Operating expense (ex- MAXF - Holding Company Expense (Rs mn) MAX - VNB margin
Mix (%) commission) Mix (%) 31%
1,200 40%
24.1%23.0%
18% 27% 24% 17% 22% 1,000 20% 20.8% 21.6%
32% 36% 29% 31% 23% 5% 20.2% 19.7%
800 17.6% 18.0%
18% 12% 1% 16% 10% 0%
39% 4% 39%
29% 29% 600
-29%
-20%
60% 400 -45%
56% 53% 64% 58% 63%
39% 36% 40% 38% 200 -40%
851 1,113 786 210
0 -60%
HDFCLIFE IPRU SBILIFE MAX BALIC HDFCLIFE IPRU SBILIFE MAX BALIC FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21
Employee Adv & Prom IT Others MAXF -Holding company expenses (Rs
Employee Adv & Prom IT Others VNB margin VNB margin - Adj for Holdco exp
mn)
Cost control measures seen in employee & other admin cost; which shall normalize thus putting pressure on future VNB margin
Total Opex (% YoY) Employee cost (% YoY) Advertisement & Promotion cost (%, YoY) Other Opex (% YoY)
46%
29%
28%
24%
23%
22%
21%
34%
20%
19%
19%
19%
18%
21%
29%
16%
16%
14%
13%
14%
12%
11%
10%
19%
167%
9%
16%
15%
34%
34%
57%
61%
8%
4%
12%
12%
1%
4%
5%
10%
3%
9%
6%
1%
-61%
-27%
-1%
-5%
-2%
-9%
-10%
-12%
-12%
-17%
-13%
-19%
-14%
-17%
-22%
-24%
HDFCLIFE SBILIFE IPRU MAX BALIC HDFCLIFE SBILIFE IPRU MAX BALIC HDFCLIFE SBILIFE IPRU MAX BALIC
FY19 FY20 1HFY20 FY19 FY20 1HFY20 FY19 FY20 1HFY20

FY19 FY20 1HFY20
Page 38
Key Financials & Valuation
Page 39
#1 Profitability: Negligible operating variance + Decline in Unwind + Weak VNB Gearing = Structurally lower ROEVs
Key contributors to operatingg ROEVs – Unwind rate (due to lower interest rates), VNB gearing (lower APE growth) and Operating Variance ( pressure on persistency & Opex)
shall structurally have bearing operating ROEVs of life insurers
Operating variance % of opening EV VNB Gearing (%) Unwind % of opening EV (%)
6.3%
11.0%
10.5%
9.7%
10.3%
10.1%
10.0%
7% 14% 11%
10.0%
9.3%
4.7%
9.1%
9.0%
6%
9.0%
8.8%
12% 10%
8.4%
8.5%
8.5%
8.5%
8.5%
8.5%
8.1%
8.4%
8.4%
7.9%
8.1%
7.4%
8.1%
8.0%
5%
8.0%
7.1%
3.0%
10%
2.9%
9%
7.6%
7.5%
5.7%
4%
5.2%
8%
1.7%
6.9%
1.5%
1.4%
1.4%
3% 8%
1.2%
1.0%
0.9%
0.7%
6%
2%
0.2%
1.7%
7%
1.3%
1.2%
1% 4%
2% 6%
0%
-1% 0% 5%
-0.1%
-0.2%
-0.2%
-0.9%
-0.2%
-2% -2% 4%
HDFCLIFE SBILIFE IPRU MAXF BALIC HDFCLIFE SBILIFE IPRU MAXF BALIC HDFCLIFE SBILIFE IPRU MAXF BALIC
FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21 FY18 FY19 FY20 1HFY21
HDFCLIFE, IPRULife have shown immense pressure on operating ROEVs
VNB Margins (%) Operating ROEVs (%)

26.3%
25.9%
22.7%
25.2%
24.6%
21.9%
23.6%
21.5%
22.4%
21.7%
20.6%
20.4%
30%
20.3%
20.2%
20.1%
20.6%
25%
20.1%
19.5%
18.9%
18.7%
17.7%
18.1%
17.0%
17.9%
16.5%
16.2%
25%
17.4%
16.9%
16.6%
15.2%
20% 20%
9.9%
15%
6.9%
10.7%
5.8%
15%
10%
8.4%
8.2%
5%
10%
0%
-1.0%
-5% 5%
HDFCLIFE SBILIFE IPRU MAX BALIC HDFCLIFE SBILIFE IPRU MAXF BALIC
Source:Company, Spark Capital Research
Page 40
#2. Profitability: Muted EVOP growth; EV growth driven by economic variance in FY21E
VNB growth is not translating into EVOP growth due to lower operating variance and decline in unwind rate
VNB Growth (%)
107%
93%
150%
47%
100%
39%
34%
31%
25%
25%
24%
21%
20%
20%
17%
N.M
9%
50%
3%
0%
-12%
-13%
-50%
-15%
EVOP Growth (%)
60%
100%
55%
38%
37%
24%
21%
14%
12%
50%
8%
6%
3%
3%
2%
2%
0%
-13%
-14%
-50%
-26%
EV Growth (%)
22%
30%
21%
20%
19%
19%
17%
17%
16%
15%
14%
13%
13%
13%
12%
12%
20%
10%
5%
4%
3%
10%
0%

#3. EV Walk: EV growth in FY21 to driven by economic variance; operating ROEVs to be lower than historical average
SBILIFE IPRU HDFCLIFE MAXLIFE BALIC
EV
FY20 FY21E F22E F23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E
Opening EV 2,24,020 2,62,720 3,14,347 3,60,344 2,16,240 2,30,310 2,75,344 3,12,069 1,83,000 2,06,590 2,50,115 2,89,185 89,380 99,780 1,16,551 1,34,940 1,29,890 1,34,381 1,52,610 1,65,152
Assumption changes 0 0 0 0 -2,250 0 0 0 0 0 0 0 0 0 0 0 -251 0 0 0
Adjusted opening EV 2,24,020 2,62,720 3,14,347 3,60,344 2,13,990 2,30,310 2,75,344 3,12,069 1,83,000 2,06,590 2,50,115 2,89,185 89,380 99,780 1,16,551 1,34,940 1,29,639 1,34,381 1,52,610 1,65,152
VNB 20,100 19,915 23,153 26,807 16,050 15,765 17,734 19,599 19,190 18,908 21,428 24,519 8,970 9,562 10,946 12,553 2,266 2,720 3,703 5,075
Unwind 19,000 22,590 25,926 29,913 17,250 19,648 22,545 25,984 13,700 17,599 20,516 23,971 8,526 9,925 11,404 13,207 9,838 8,881 10,378 11,448
Operating variance 6,700 -525 -314 0 1,830 -576 -275 312 300 826 1,000 1,157 1,030 -998 -583 -337 -938 -672 -382 -413
Operating EV earnings 45,800 41,980 48,765 56,720 32,880 34,837 40,004 45,896 33,190 37,334 42,945 49,647 18,526 18,489 21,767 25,422 11,166 10,930 13,699 16,110
Economic variance -7,100 12,085 0 0 -14,760 11,285 0 0 -10,000 9,785 0 0 -3,170 2,095 0 0 -5,149 7,299 0 0
EV Earnings 38,700 54,066 48,765 56,720 18,120 46,122 40,004 45,896 23,190 47,119 42,945 49,647 14,960 19,781 21,087 24,653 6,017 18,229 13,699 16,110
EV before capital
2,62,720 3,16,786 3,63,112 4,17,064 2,34,360 2,76,432 3,15,348 3,57,964 2,06,190 2,53,709 2,93,059 3,38,833 1,04,340 1,19,561 1,37,638 1,59,593 1,35,656 1,52,610 1,66,309 1,81,262
changes
Dividends 0 -2,438 -2,768 -3,164 -4,050 -1,088 -3,280 -3,356 0 -3,594 -3,874 -4,309 -4,560 -3,010 -2,698 -2,355 -1,275 0 -1,158 -1,149
Capital infusion 0 0 0 0 0 0 0 0 400 0 0 0 0 0 0 0 0 0 0 0
Closing EV 2,62,720 3,14,347 3,60,344 4,13,900 2,30,310 2,75,344 3,12,069 3,54,608 2,06,590 2,50,115 2,89,185 3,34,524 99,780 1,16,551 1,34,940 1,57,237 1,34,381 1,52,610 1,65,152 1,80,112
Operating EV earnings 45,800 41,980 48,765 56,720 32,880 34,837 40,004 45,896 33,190 37,334 42,945 49,647 18,526 18,489 21,767 25,422 11,166 10,930 13,699 16,110
EV earnings 38,700 54,066 48,765 56,720 18,120 46,122 40,004 45,896 23,190 47,119 42,945 49,647 14,960 19,781 21,087 24,653 6,017 18,229 13,699 16,110
Operaing ROEV 20.4% 16.0% 15.5% 15.7% 15.2% 15.1% 14.5% 14.7% 18.1% 18.07% 17.2% 17.2% 20.7% 18.5% 18.7% 18.8% 8.6% 8.1% 9.0% 9.8%
ROEV 17.3% 20.6% 15.5% 15.7% 8.4% 20.0% 14.5% 14.7% 12.7% 22.8% 17.2% 17.2% 16.7% 19.8% 18.1% 18.3% 4.6% 13.6% 9.0% 9.8%
ROEV Tree FY20 FY21E F22E F23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E
Assumption changes 0.0% 0.0% 0.0% 0.0% -1.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -0.2% 0.0% 0.0% 0.0%
VNB Gearing 9.0% 7.6% 7.4% 7.4% 7.4% 6.8% 6.4% 6.3% 10.5% 9.2% 8.6% 8.5% 10.0% 9.6% 9.4% 9.3% 1.7% 2.0% 2.4% 3.1%
Unwind 8.5% 8.6% 8.2% 8.3% 8.0% 8.5% 8.2% 8.3% 7.5% 8.5% 8.2% 8.3% 9.5% 9.9% 9.8% 9.8% 7.6% 6.6% 6.8% 6.9%
Operating variance 2.5% 0.0% 0.0% 0.0% 0.8% -0.3% -0.1% 0.1% 0.8% 0.4% 0.4% 0.4% 1.2% -1.0% -0.5% -0.3% 0.3% 0.2% 0.1% 0.1%
Operating ROEV 19.9% 16.2% 15.6% 15.7% 15.2% 15.1% 14.5% 14.7% 18.8% 18.1% 17.2% 17.2% 20.7% 18.5% 18.7% 18.8% 9.4% 8.8% 9.3% 10.1%
Economic variance -3.2% 4.6% 0.0% 0.0% -6.8% 4.9% 0.0% 0.0% -5.5% 4.7% 0.0% 0.0% -3.5% 2.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
ROEV 16.7% 20.8% 15.6% 15.7% 8.4% 20.0% 14.5% 14.7% 13.3% 22.8% 17.2% 17.2% 17.2% 20.6% 18.7% 18.8% 9.4% 8.8% 9.3% 10.1%
VIF % of EV 65.6% 62.6% 63.0% 63.5% 73.7% 69.5% 70.6% 71.9% 70.7% 67.3% 67.5% 67.9% 77.4% 76.7% 76.9% 76.7% 24.2% 29.2% 30.4% 36.2%
Key Assumptions FY20 FY21E F22E F23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E
APE 1,07,500 1,05,116 1,22,598 1,41,272 73,810 64,340 73,563 83,385 74,070 75,421 86,924 99,987 41,490 43,479 50,563 57,824 22,945 24,868 28,775 33,120
APE growth 10.8% -2.2% 16.6% 15.2% -5.4% -12.8% 14.3% 13.4% 18.3% 1.8% 15.3% 15.0% 5.0% 4.8% 16.3% 14.4% 3.1% 8.4% 15.7% 15.1%
VNB Margins 18.7% 18.9% 18.9% 19.0% 21.7% 24.5% 24.1% 23.5% 25.9% 25.1% 24.7% 24.5% 21.6% 22.0% 21.6% 21.7% 9.9% 10.9% 12.9% 15.3%
VNB 20,100 19,915 23,153 26,807 16,027 15,765 17,734 19,599 19,190 18,908 21,428 24,519 8,970 9,562 10,946 12,553 2,266 2,720 3,703 5,075
Source Company, Spark Capital Page 42

#4. SBILIFE assumptions conservative for VNB and EV calculations

Key assumption in EV & VNB
SBILIFE IPRU HDFCLIFE MAXF Comments
calculation
Not reviewed (Reviewed

External Consultant Actuary Willis Towers Watson Milliman EY in 2015 by Milliman Max Life is not reviewed by external actuary
same principal followed)
Zero coupon
Reference rates derived Reference rates is the
government bond yield
from zero coupon yield curve derived from G-sec spot rate yield
Reference rate –March 2019 curve published by
the prices of G-sec using curve taken from FBIL
yield curve as published
FIMMDA data supplied CCIL
on CCIL
Tenor 1 6.66% 6.66% 6.63% 6.43% Discount and investment rates assumed for all the
Tenor 5 7.83% 7.83% 7.80% 6.99% company broadly similar
Tenor 10 8.35% 8.35% 8.32% 7.40%
Tenor 15 8.35% 8.35% 8.31% 7.83%
Tenor 20 8.22% 8.22% 8.19% 7.78%
Tenor 25 8.11% 8.11% 8.08% 7.73%
Tenor 30 8.05% 8.05% 8.01% 7.72%
SBILIFE capital charge on CRNHR is higher than peers

Capital charge for Cost of residual which has led to higher impact of the same on VIF/
5.00% 4.00% 3.50% 4.00%
non-hedgeable risks (CRNHR) EV. While HDFC Life has lowest capital charge of
3.5% in FY18
HDFC Life has highest expense inflation assumption
Expense inflation 5.50%* 5.7%* 6.50% 6.00% while calculating distributable profits from future
years
Based on last one-year
Based on three-year Based on last one-year Based on last one-year All follow their past experience while calculating EV
experience (13m
experience and experience and experience and and VNB; any improvement and deterioration from
Persistency / Mortality persistency is 82%) and
expectations of future expectations of future expectations of future past experience will be reflected in positive /
expectations of future
experience experience experience negative operating variance.
experience
SBI Life and Max Life is conservative on tax rate. Tax
Tax Rate 14.56% Effective tax rate Effective tax rate Effective tax rate deduction available on dividend income on equity is
not considered
SBI LIFE is most conservative on solvency margin
Solvency Margin 180% 150% 170% 170%
while calculation EV and VNB
Source: Company, Spark Capital,
Page 43
#5. Latest reported EV and VNB sensitivity to key operating parameters

EV Sensitivity SBILIFE –Sep’20 IPRU – Mar’20 HDFCLIFE –Sep’20 MAXF – Sep’20
Interest rates
+ 100bps interest rate / discount rate -2.90% -2.50% -1.50% -2.00%
- 100bps interest rate / discount rate 3.40% 2.60% 0.70% 1.00%
- 10% Equity value -1.50% -1.8% -1.30% -1.00%
Expenses
+ 10% maintainance expenses -0.60% -0.80% -0.80% -1.00%
- 10% maintainance expenses 0.60% 0.80% 0.80% 1.00%
Policy/ Premium discontinuance
+10% multiplicative increase in discountinuance rate -0.80% -1.10% -0.70% -1.00%
-10% multiplicative decrease in discountinuance rate 1.20% 1.10% 0.70% 1.00%
Insurance risk
+5% mortality & morbidity rates -0.95% -0.80% -0.80% -1.00%
-5% mortality & morbidity rates 0.95% 0.75% 0.80% 1.00%
Taxation
Assumed corporate tax increased to 25% -8.10% -5.80% -7.90% -12.00%
VNB sensitivity SBILIFE –Sep’20 IPRU – Mar’20 HDFCLIFE –Sep’ 20 MAXF – Sep’20
Interest rates
+ 100bps interest rate / discount rate -0.20% -2.40% -3.6% 3.00%
- 100bps interest rate / discount rate 0.00% 2.20% 0.8% -6.00%
- 10% Equity value -0.40% -0.7% -0.4% 0.00%
Expenses
+ 10% maintainance expenses -2.60% -3.00% -2.4% -8.00%
- 10% maintainance expenses 2.60% 3.00% 2.5% 8.00%
+ 10% acquisition expenses N.A. -11.6% -11.6%. N.A.
- 10% acquisition expenses N.A. 11.6% 11.6%. N.A.
Policy/ Premium discontinuance
+10% multiplicative increase in discountinuance rate -3.90% -5.0% -1.2% -1.00%
-10% multiplicative decrease in discountinuance rate 5.00% 5.1% 0.8% 1.00%
Insurance risk
+5% mortality & morbidity rates -4.60% -4.75% -2.8% -2.00%
-5% mortality & morbidity rates -4.60% 4.80% 2.8% 2.00%
Taxation
Assumed corporate tax increased to 25% -16.30% -11.40% -19.9% -22.00%
Source: Company, Spark Capital, Note: * as on Mar’16, ** based on Mar’17
Page 44
#6. Valuation Summary - Target Price derivation
Valuation Summary IPRU SBILIFE HDFCLIFE MAXF BALIC
Life Franchise Value (Rs. Bn) 284 563 728 190 60
Embedded Value - Sep'22 (Rs. bn) 333 387 312 146 173
Appraisal Value (Rs. bn) 618 950 1,040 336 233
Distribution discount 0% 0% 0% 0% 0%
Adj. Appraisal Value (Rs. Bn) 618 950 1,040 336 233
Stake in Operating Business 100% 100% 100% 80% 74%
Value of Holding in Business (Rs. bn) 618 950 1,040 269 172
Discount for Holdco Structure 0% 0% 0% 20% 0%
NOSH (mn) 1,436 1,000 2,019 345 159
Target Price (Rs.) 430 950 515 630 1,082
CMP (Rs.) 496 835 657 489 NA
Upside -13% 14% -22% 27% NA
VNB - Sep'23 (Rs. bn) 20.5 28.8 26.3 13.2 5.9
Average Op. EV Earnings - Sep'22 (Rs. bn) 42.9 52.7 46.3 21.1 14.9
Implied NB Multiple (x) 13.9x 19.6x 27.7x 14.3x 10.1
Implied P/EV (x) 1.85x 2.46x 3.34x 2.3x 1.3
Implied P/EVE (x) 14.4x 18.0x 22.5x 15.9x 15.6
Page 45
#7. BJFIN SOTP
SOTP valuation for BJFIN % holding Basis of Valuation on Sep'22E Rs per share % of total SOTP
BALIC 74.0% 1.3x P/EV 1,082 10%
BAGIC 74.0% 25x EPS 1,566 14%
BAF 52.7% Current Market Cap 10,354 75%
Cash & Investments 1x FY20 reported value 71
Total 13,073
Holdco discount 20% 2,071
Total SOTP 11,000
CMP 5,873
Upside (%) 87%
Page 46
#8. Key valuation assumptions

Valuation assumptions IPRU SBILIFE HDFCLIFE MAXF BALIC
APE growth (%)
APE CAGR FY17-20 (%) 3.7% 16.9% 20.9% 16.0% 21.2%
APE CAGR FY20-23E (%) 4.1% 9.5% 10.5% 11.7% 13.0%
APE CAGR FY23-28E (%) 11.3% 14.1% 14.4% 13.0% 12.1%
APE CAGR FY28-38E (%) 6.4% 9.8% 13.1% 7.5% 4.7%
VNB Growth (%)
VNB CAGR FY17-20 (%) 34.0% 24.7% 27.7% 21.6% na
VNB CAGR FY20-23E (%) 6.9% 10.1% 8.5% 11.9% 30.8%
VNB CAGR FY23-28E (%) 9.4% 13.8% 14.1% 11.0% 11.3%
VNB margins (%)
VNB Margin - FY20 24.5% 18.7% 25.9% 21.6% 9.9%
VNB Margin - FY21E 24.1% 18.9% 25.1% 22.0% 10.9%
VNB Margin - FY22E 23.5% 18.9% 24.7% 21.6% 12.9%
VNB Margin - FY23E 24.0% 19.0% 24.5% 21.7% 15.3%
Average VNB Margins -FY20-23E 24.0% 18.9% 24.7% 21.8% 13.0%
ROEV
Operating ROEV - FY20 15.2% 20.4% 18.1% 16.7% 8.4%
Operating ROEV - FY21E 15.2% 16.2% 18.1% 19.8% 8.1%
Average Op ROEV -FY20-23E 15.0% 15.8% 17.5% 18.7% 9.0%
Terminal growth (%) 3.0% 3.0% 5.0% 3.0% 3.0%

RDR (%) 13.0% 13.0% 12.5% 13.5% 13.0%
Source: Spark Capital
Page 47
#9. Valuation summary

Company Market Cap CMP Target price Rating P/EV (x) New business multiple (x) P/ Op EVE (x)
Rs bn Rs Rs FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E
IPRU 713 496 430 REDUCE 3.1 2.6 2.3 2.0 30.6 24.6 20.4 16.8 21.7 20.4 17.8 15.5
SBILIFE 874 874 950 BUY 3.3 2.8 2.4 2.1 30.7 24.2 19.2 14.9 19.1 20.8 17.9 15.4
HDFCLIFE 1,327 657 515 REDUCE 6.4 5.3 4.6 4.0 59.2 50.2 42.3 35.4 39.9 35.5 30.9 26.7
MAXF 183 682 630 ADD 2.9 2.5 2.2 1.9 20.3 16.2 12.7 9.8 16.2 16.6 13.9 11.9
Total 3,097 4.6 3.8 3.3 2.9 42.3 35.0 29.0 23.8 28.4 26.8 23.2 20.1
Company EV p/s (Rs) EVE P/s (Rs) Operating EVE P/s (Rs) NBV p/S
FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E
IPRU 160.4 191.8 217.3 247.0 12.6 32.1 27.9 32.0 22.9 24.3 27.9 32.0 11.2 11.0 12.4 13.6
SBILIFE 262.7 314.3 360.3 413.9 38.7 54.1 48.8 56.7 45.8 42.0 48.8 56.7 20.1 19.9 23.2 26.8
HDFCLIFE 102.3 123.8 143.2 165.6 11.5 23.3 21.3 24.6 16.4 18.5 21.3 24.6 9.5 9.4 10.6 12.1
MAXF 231.3 270.2 312.8 364.5 34.7 45.9 48.9 57.2 42.0 41.0 48.9 57.2 20.8 22.2 25.4 29.1
Company EV p/s growth (%) EVE P/s growth (%) Operating EVE P/s growth (%) NB p/s growth (%)
IPRU 6.5% 19.6% 13.3% 13.6% -50.7% 154.5% -13.3% 14.7% -13.5% 5.9% 14.8% 14.7% 20.7% -1.6% 12.5% 10.5%
SBILIFE 17.3% 19.6% 14.6% 14.9% 8.3% 39.7% -9.8% 16.3% 37.8% -8.3% 16.2% 16.3% 16.9% -0.9% 16.3% 15.8%
HDFCLIFE 12.8% 21.0% 15.6% 15.7% -32.3% 103.1% -8.9% 15.6% 8.2% 12.4% 15.0% 15.6% 24.6% -1.5% 13.3% 14.4%
MAXF 11.6% 16.8% 15.8% 16.5% -26.3% 32.2% 6.6% 16.9% -4.5% -2.5% 19.2% 16.9% 9.0% 6.6% 14.5% 14.7%
Company VNB Margins Operating ROEV ROEV ROE

IPRU 21.7% 24.5% 24.1% 23.5% 15.2% 15.1% 14.5% 14.7% 8.4% 20.0% 14.5% 14.7% 13.9% 12.5% 12.0% 11.6%
SBILIFE 18.7% 18.9% 18.9% 19.0% 20.4% 16.0% 15.5% 15.7% 17.3% 20.6% 15.5% 15.7% 17.1% 16.7% 16.6% 16.3%
HDFCLIFE 25.9% 25.1% 24.7% 24.5% 18.1% 18.1% 17.2% 17.2% 12.7% 22.8% 17.2% 17.2% 19.6% 18.2% 17.6% 17.3%
MAXF 21.6% 22.0% 21.6% 21.7% 20.3% 17.7% 18.1% 18.3% 16.7% 19.8% 18.1% 18.3% 22.7% 22.4% 22.5% 22.2%
Company EPS BVPS DPS Dividend yield

IPRU 7.4 7.6 7.7 8.0 50.2 58.6 64.1 69.7 2.3 0.8 2.3 2.3 0.5% 0.2% 0.5% 0.5%
SBILIFE 14.2 16.3 18.5 21.1 87.4 102.6 118.3 136.2 0.0 2.4 2.8 3.2 0.0% 0.3% 0.3% 0.4%
HDFCLIFE 6.4 7.1 7.7 8.5 33.5 39.3 45.2 51.8 0.0 1.8 1.9 2.1 0.0% 0.3% 0.3% 0.3%
MAXF 12.5 14.0 15.7 18.3 58.1 65.3 74.8 87.6 0.0 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0%
Source: Spark Capital. Note: Per share number for MAXF are adjusted to % holding of MAXF in Max Life: Note: MAXF is for 80% economic interest in Max Life
Page 48
#10. SBILIFE: At CMP, it is trading at ~2 std dev below average 1-yr fwd P/EV and ~1std dev below 1-yr fwd P/EVOP and NBx
SBILIFE is at bottom on most the different valuation parameters
1 yr – fwd P/EV 1 yr – fwd P/EVOP 1 yr – fwd NBx range No. of days traded % of of no. of days
No. of days traded % of of no. of days No. of days traded % of of no. of days
range range
< 15x 29 2%
< 2x 10 1% < 14x 162 14% 15 - 17x 148 13%
2 - 2.2x 35 3% 14 - 15.5x 119 10% 17 - 19x 187 16%
2.2 - 2.4x 293 25% 15.5 - 17x 19 - 21x 166 14%
SBILIFE
79 7%
2.4 - 2.6x 194 16% 21 - 23x 222 19%
17 - 18.5x 262 22%
23 - 25x 197 17%
2.6 - 2.8x 121 10% 18.5 - 20x 187 16% 25 - 27x 112 9%
2.8 - 3x 184 16%
20 - 21.5x 181 15% 27 - 29x 16 1%
3 - 3.2x 166 14% 29 - 31x 74 6%
21.5 - 23x 155 13%
3.2 - 3.4x 173 15% 31 - 34x 30 3%
23 - 24.5x 37 3%
3.4 - 3.6x 6 1% 33 - 35x 1 0%
Total Days 1182 Total Days 1182
Total Days 1182
Source Bloomberg, Spark Capital
SBILIFE is trading at 2 std dev below avg 1-yr fwd P/EV and ~1std dev below 1-yr fwd P/EVOP and NBx
4.0 27.0 38.0 SBILIFE – 1-yr fwd NBx

SBILIFE – 1-yr fwd P/EV Chart SBILIFE - P/EVOP
3.5 33.0
22.0 28.0
3.0
23.0
2.5
17.0 18.0
2.0 13.0
1.5 12.0 8.0
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Sep-18
Sep-19
Sep-20
Mar-18
Mar-19
Mar-20
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Sep-18
Sep-19
Sep-20
Mar-18
Mar-19
Mar-20
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Sep-18
Sep-19
Sep-20
Mar-18
Mar-19
Mar-20
P/EV Mean +1 SD P/EVOP Mean +1 SD P/NBx Mean +1 SD
Page 49
#11. IPRU: At CMP, it is trading at ~2 std dev below average 1-yr fwd P/EV, P/EVOP and NBx
IPRU is trading at is lowest valuation multiples since listing
1yr fwd NBx

1 yr – fwd P/EV 1 yr – fwd P/EVOP No. of days traded % of of no. of days
No. of days traded % of of no. of days No. of days traded % of of no. of days range
range range
< 13x 186 13%
<1.9x 32 3% < 12x 3 0% 13 - 16x 109 8%
1.9 - 2.1x 129 9% 12 - 14x 16 - 19x 251 18%
162 12%
2.1 - 2.3x 221 16% 19 - 22x
IPRU
14 - 16x 315 23%

2.3 - 2.5x 546 40%
252 18% 22 - 25x 199 15%
2.5 - 2.7x 307 23% 16 - 18x 428 31%
25 - 28x 130 10%
2.7 - 2.9x 222 16% 18 - 20x 108 8% 28 - 31x
122 9%
2.9 - 3.1x 118 9% 20 - 22x 112 8% 31 - 34x 29 2%
3.1 - 3.5x 69 5%
22 - 44x 4 0% 34 - 58x 21 2%
3.5 – 6.5x 13 1%
Total Days 1363 Total Days 1363 Total Days 1362
IPRU is trading at 2 std dev below avg 1-yr fwd P/EV, P/EVOP and NBx
4.0 IPRU - 1yr Fwd. P/EV Chart 25.0 IPRU - P/EVOP Chart IPRU – 1-yr fwd NBx
36.0
3.5
20.0
3.0 26.0
2.5
15.0 16.0
2.0
1.5 10.0 6.0
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Feb-18
Oct-18
Feb-19
Oct-19
Feb-20
Oct-20
Apr-18
Aug-18
Apr-19
Aug-19
Apr-20
Aug-20
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Oct-17
Oct-18
Oct-19
Oct-20
Feb-18
Apr-18
Feb-19
Apr-19
Feb-20
Apr-20
Sep-18
Sep-19
Sep-20
Aug-18
Aug-19
Aug-20
Mar-18
Mar-19
Mar-20
Page 50
#12. HDFCLIFE: At CMP. it is still expensive on 1yr fwd P/EVOP and NBx multiples for its ROEV profile
HDFCLIFE is the only insurer still trading above the listing multiples
1 yr – fwd P/EV 1 yr – fwd P/EVOP 1 yr – fwd NBx

No. of days traded % of of no. of days No. of days traded % of of no. of days No. of days traded % of of no. of days
range range range
3 - 3.6x 54 5% < 20x 2 0% < 23x 1 0%

3.6 - 3.8x 74 7% 23 - 27x 9 1%
20 - 22x 15 1%
3.8 - 4x 156 14% 27 - 31x 155 14%
HDFCLIFE
22 - 24x 143 13% 31 - 35x 180 16%

4 - 4.2x 116 10%
4.2 - 4.4x 96 8% 24 - 26x 172 15% 35 - 39x 181 16%
4.4 - 4.6x 106 9% 26 - 28x 129 11% 39 - 43x 220 19%
4.6 - 4.8x 129 11% 28 - 30x 215 19% 43 - 47x 179 16%
4.8 - 5x 145 13% 47 - 51x 143 13%
30 - 32x 229 20%
5 - 5.2x 124 11% 51 - 55x 45 4%
5.2 - 7.4x 134 12% 32 - 34x 175 15%
55 - 59x 21 2%
HDFCLIFE is still trading above +1 std dev on 1-yr fwd P/EVOP
HDFC Life– 1-yr fwd P/EV HDFC Life – P/EVOP 70.0

HDFC Life – 1-yr fwd NBx
7.00 60.0
33.0
6.00
50.0
5.00 28.0
40.0
4.00
23.0 30.0
3.00
Jun-18
Jun-19
Jun-20
Dec-17
Dec-18
Dec-19
Dec-20
Sep-18
Sep-19
Sep-20
Mar-18
Mar-19
Mar-20
18.0 20.0
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Oct-18
Oct-19
Oct-20
Feb-18
Apr-18
Feb-19
Apr-19
Feb-20
Apr-20
Aug-18
Aug-19
Aug-20
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Sep-18
Sep-19
Sep-20
Mar-18
Mar-19
Mar-20
P/EV Mean +1 SD
P/EVOP Mean +1 SD
-1 SD +2 SD -2 SD
-1 SD +2 SD -2 SD P/NBx Mean +1 SD
Page 51
#13. MAXF is trading at lowest multiple among peers due to promoter pledge share issue
MAXF is not trading significantly below mean 1yr fwd P/EVOP at CMP
1 yr – fwd P/EV 1 yr – fwd P/EVOP 1 yr – fwd NBx

No. of days traded % of of no. of days No. of days traded % of of no. of days No. of days traded % of of no. of days
range range range
<1.5x 6 0%
8x 14 1% 5x 57 4%
1.5 - 1.7x 46 3%
8 - 9.5x 5 - 7x 224 16%
1.7 - 1.9x 187 14% 261 19%
9.5 - 11x 7 - 9x 251 18%
1.9 - 2.1x 293 21% 409 30%
MAXF
2.1 - 2.3x 9 - 11x 247 18%

258 19% 11 - 12.5x 203 15%
2.3 - 2.5x 11 - 13x 234 17%
231 17% 12.5 - 14x 190 14% 13 - 15x 86 6%
2.5 - 2.7x 46 3%
14 - 15.5x 106 8% 15 - 17x 74 5%
2.7 - 2.9x 53 4%
2.9 - 3.1x 59 4%
15.5 - 17x 95 7% 17 - 19x 7 1%
3.1 - 5.1x 184 13% 17 - 18.5x 85 6% 19 - 35x 183 13%
MAXF is trading below ~1 std dev of average 1yr fwd P/EV and NBx
4.8 24.0 MAXF – 1-yr fwd NBx

MAXF - P/EV Chart MAXF - P/EVOP Chart
20.0
3.8 19.0
15.0
2.8 14.0
10.0
1.8 9.0 5.0
0.0
0.8 4.0
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Sep-18
Sep-19
Sep-20
Mar-18
Mar-19
Mar-20
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Oct-18
Oct-19
Oct-20
Feb-18
Apr-18
Feb-19
Apr-19
Feb-20
Apr-20
Sep-18
Sep-19
Sep-20
Aug-18
Aug-19
Aug-20
Mar-18
Mar-19
Mar-20
Page 52
Spark Disclaimer
Absolute Rating BUY Stock expected to provide positive returns of >15% over a 1-year horizon REDUCE Stock expected to provide returns of <5% – -10% over a 1-year horizon
Interpretation ADD Stock expected to provide positive returns of >5% – <15% over a 1-year horizon SELL Stock expected to fall >10% over a 1-year horizon
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Life Insurance Thematic - Challenges Galore - December 2020 - SPARK

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LIFE INSURANCE SECTOR

December 28, 2020

▪ SANKETH GODHA, sanketh@sparkcapital.in, +91 22 6176 6821

Normalization of the yield

Implied Avg Op VNB Avg VNB

5 New Labour Laws and It’s Impact

19 Protection & Reinsurance

32 Distribution & Operating Efficiency

38 Key Financials & Valuation

Head Earlier Changes as per the new labour codes Impact

▪ No changes for permanent employees

Source: Spark Capital Research

Current Pay Slip Break-up Post Wage Code Implementation

APE per policy 13.3% 8.4% 11.5%

Ind. policies 3.0% 1.6% 2.0%

Ind APE 16.6% 10.1% 13.6%

0% 5% 10% 15% 20% 0% 2% 4% 6% 8% 10% 12% 0% 5% 10% 15%

Source: Company, Spark Capital Research

FY16-20 CAGR Pvt LIC Industry

-10% -6% 4.5

Source: Company, Spark Capital Research

Ind. APE Per Policy (Ticket Size)

-35.7% 0.4% -35.5% SBILIFE’s growth in 2Q/3Q is

-4.3% -15.2% -18.9% Among the peers, HDFCLIFE has a

more balanced growth in 2Q/ 3Q

-25.9% -31.6% -49.4%

IPRU has struggled to grow both

7.9% -10.7% -3.6% After protection led growth in 1H,

53.9% -35.3% -0.5% BALIC’s increased focused on

38.1% -13.9% 18.9% plan) led to strong growth in no of

Source: Company, Spark Capital Research Page 8

72% 45% 72%

14% 9% 8% 13% 10%

Source: Company, Spark Capital Research Page 9

Par Non-Par ULIP Individual Protection Individual APE

68% 27% 9% 38% 13% 15% 9%

-13% -35% -39% -51% -25%

263% 45% 29%

212% 166% 69% 18%

33% 32% 188% 213% 59% 76% -37%

-45% -3% -19% -1% -9%

43% 49% 22% 21%

57% 180% 38%

Source: Company, Spark Capital Research Page 10

Non-Par Savings APE (ex- Annuity) % of total APE

HDFCLIFE SBILIFE IPRU MAXF BALIC TATA ABSLI

FY18 FY19 FY20 1HFY21

Source: Company, Spark Capital Research

Source: Company, Spark Capital Research

Non-Par AUM % of Life Fund

Source: Company, Spark Capital Research

Source: RBI, Spark Capital Source: RBI, Spark Capital

23% 20.3% 20% 30% 23%

Source: Company, Spark Capital

Source: Company, Spark Capital Source: Company, Spark Capital l

Source: Company, Spark Capital

Par as % of total APE (%)

HDFCLIFE SBILIFE IPRU MAX BALIC

FY18 FY19 FY20 1HFY21

Source: Company, Spark Capital.

PAR AUM % of total life fund

34% 37% 36%

HDFCLIFE SBILIFE IPRU MAX BALIC LIC