eir 2007 heinie werth shriram
TRANSCRIPT
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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
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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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
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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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
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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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?