eIR 2007 Heinie Werth Shriram

8/2/2019 eIR 2007 Heinie Werth Shriram

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Life Insurance in India - The road ahead

by Akhila Srinivasan, Managing Director,Shriram Life Insurance Co Ltd,

April 25, 2007


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Agenda

1 Overview of the Indian economy

2 Life insurance market in India

3 Shriram Lifes key strategies

4 Performance expectation during 2007-2008


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The Indian Economy .

The economy is in a resilientmode in terms of GDP growth

Currently positioned as the fourth

largest economy in terms ofpurchasing power parity...

and has the benefit of lowinflation

along with rising forex rate andreserves

Indias economy has looked up since the early 1990s, due to implementation ofseveral reforms and liberalization measures

India today has a strong andvibrant economy

The reform process isirreversible

Industrial policy End oflicensing, Automatic FDI,Privatization initiatives

Financial sector - Rationalizationof tax rates, Current accountconvertibility and partial capitalaccount convertibility

Regulatory reforms SEBI, IRDA,TRAI etc

Other enablers Judiciaryreforms, trade arrangements


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The economy is riding on severalkey drivers for growth

Technology andinnovation

Infrastructureboom

Social enterprise

Manufacturingcompetitivenes

Financialmarkets

Consumer boom

Investmentreturns

Entrepreneurship

Drivers


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Advantage India The insurance linkages

There exists a strong urban and ruraldivide with regard to saving andinvestment pattern

The country is looking at an annual GDPgrowth of 9.2%

Insurance penetration of 3,1% followingentry of foreign players

High expected growth in personal income

and aspirations

Need for strong financial planning

Markets in most developed countrieshave saturated

This makes the Indian market moreattractive for global insurance majors

Huge opportunity to tap semi-urban andrural marketsThere exists a strong urban and ruraldivide with regard to saving andinvestment pattern

Over 1 Billion Indians Strong economicgrowth

Majority of the population does not haveadequate financial protection Opportunity of a Lifetime


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Comparative demographics

Population 1 billion

Projected annual GDP growth 9.2%

Life insurance penetration 2.53%

Population 45 million

Projected annual GDP growth 4.4%

Life insurance penetration -

10.8%


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Insurance premium in emerging markets

Country Premium volume Share of

(in USD million) emerging markets

South Korea 41,998 22.40%

China 32,442 17.30%

Taiwan 23,739 12.60%

South Africa 20,728 11.00%

India 13,590 7.20%

Hong Kong 10,117 5.40%

Brazil 6,306 3.40%

Singapore 5,561 3.00%Russia 4,887 2.60%

Mexico 4,230 2.30%

Top 10 163,598 87.10%

Source: Swiss Re Economic Research & Consulting


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Agenda






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Life insurance market in India

There are 16 life insurance players in India withaggregate foreign investment of $322m

Insurance penetration was less than 1% till 1990-91.It is now 2.53% following the entry of foreignplayers

Prior to competition, growth in life premium incomecollection did not exceed 20%. During 2005-06 thisgrowth was 28%

The life-insurance business, in terms of premiumcollection, has already doubled in the past 5 years.

The life insurance sector in India is poised to growby about 30% touching US $ 60 billion in five years

An evolving insurance sector is vital for economic

growth as it encourages saving and provides asafety net to enterprise and individuals


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Agenda






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Why Shriram is the right vehicle forentry into the business

Trusted name in financial services since 1974, with a turnover of morethan $3000m

Business includes consumer finance, personal finance, truck financeand now life insurance

3 million customers, 65,000 agents, 600 offices employing 15,000 people

Truck finance business poised to cover 15% of the trucker population(400 000)

Association with banks include ABN Amro,Standard Chartered Bank,HSBC, Deutsche Bank, Citibank, Bank of India, ICICI Bank, IDBI Bank,

Indian Overseas Bank,UTI Bank,Canara Bank, Bank of India, State Bankof India

Listed on the National Stock Exchange and the Bombay Stock Exchangewith a good dividend track record

Equity partners include Newbridge Capital, Chrysalis Capital, DSP MerrillLynch, Cambridge Investments,UK and FMO, Netherlands


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Shrirams unique advantage

Presence in chit fund business has established closerelationships with 1.5 million savers and investors

Chit funds operate on the mechanism of SHGs (self helpgroups) which establish a long term relationship between the

company and the customer creating strong loyalties

The chit members have been supporting various financial

products introduced by the group companies


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Key Strategies

Segment-specific strategies in place

Leveraging on the existing network of Shriram agents for theinsurance business

Resident representatives in rural areas and SHGs (self help groups)of rural women of Shrirams micro finance division

1.2 million depositor base of Shriram Making use of the broker/corporate agency channel

Bancassurance channel

Tap high networth individuals by developing a relationship withmutual fund distributors and brokers

Low cost strategy converting existing 3 million customers into lifeinsurance buyers requiring minimal brand building and promotionalexercise

Product strategy focus on medium to long term saving policies


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Private vs state-owned insurance companies

Following competition the market share of the state-ownedLife Insurance Corporation has dropped to 78% - it enjoyed

monopoly status earlier

Innovative products, smart marketing and aggressivedistribution have enabled fledgling life insurance companies

to establish themselves Recognizing the capital intensive nature of the life insurance

sector a resolution to increase the share of foreign equity from

26% to 49% is on the anvil With the entry of private players, the introduction of ULIPs has

considerably widened the range of products


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Shriram vs competition in the firstyear of operations

Amount in USD million

Insurer 1st year Single APE

premium premiumICICI Prulife 12.39 12.79 13.67

Max Newyork 7.92 0.70 7.99

HDFC Standard Life 4.94 2.34 5.18Birla Sunlife 4.02 2.23 4.24

Tata AIG 4.68 0.02 4.68

Shriram Life (1.1.2006 to 31.12.2006) 12.99 12.45 14.23


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Agenda






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Performance projections

Business operations commenced in February 2006 Approval for single premium policies obtained in June 2006

Amount in USD million

Budget Actuals Budget

2006 2006 2007

Single Premium (new business) 15.29 12.45 27.16

Non- single Premium (new business) 9.42 12.53 22.96

Renewal Premium Nil 0.46 8.00

Total Premium 24.71 25.44 58.12


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The road ahead.

Sanlam is the right partner for Shriram in India.

Following the joint venture in life insurance,Shriram and Sanlam are exploring thepossibility of setting up operations

in general insurance


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Thank You / Questions?

eIR 2007 Heinie Werth Shriram

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