#1HDFC Life Insurance Investor Presentation - H1 FY21 ང་#2[ Agenda 1 Performance Snapshot 2 Our Strategy 3 Managing Covid-19 4 Customer Insights 5 Annexures 6 India Life Insurance#3Performance Snapshot 2016 Our Strategy Managing Covid-19 Customer Insights Annexures 2023 2024 2025 10000 1000 100 India Life Insurance 1 Performance Snapshot 2542 25314 2019 2020 2021 2022#4Executive summary: H1 FY21 Revenue growth and Market share Product mix Expansion in market share¹ by 235 bps from 15.2% to 17.5% Individual WRP growth of 22% in Q2 helped neutralize the Q1 de-growth. 2% growth in H1 FY21 v/s private industry de-growth of 11% Balanced product mix² (UL: 23%, Par: 33%, Non-par savings: 30%, Protection: 9%, Annuity: 5%) 38% growth in retail protection and annuity as well Renewal collection Cost management Renewal premium growth of 22% with stable 13th month persistency Opex ratio at 11.1% for H1 FY21 compared to 14.0% in H1 FY20 New business margins Improvement in sequential new business margins H1 NBM of 25.1%, on the back of higher growth and favourable product mix Profit after tax Capital position PAT of Rs 7.8 bn, with growth of 6% Solvency ratio healthy at 203% aided by a sub-debt raise of Rs 6 bn during the quarter HDFC 1. Based on Individual WRP; 2. Based on Indl APE The numbers throughout the presentation are based on standalone financial results of the Company 14 Life#5Demonstrating resilience in the current environment (1/2) Improving MoM business trends¹ Expanding market share¹ -19% 12% 14% 43% 22% 2% 63% 58% 35% -20% 17% 35% Rs Bn. Growth HDFC Life Pvt sector Industry H1 FY21 2% -11% -7% 27.5 28.1 17.5% H1 FY20 35% 16% 11% 17.4 15.2% 13.2 14.3 10.7 5.2 5.9 4.8 5.4 4.3 6.1 2 year CAGR 18% 1% 1% H1 FY20 H1 FY21 Q1 Jul Aug Sep Q2 H1 PY CY ■CY Growth PY Growth Balanced product mix 5 23% Improvement in CP volumes with pickup in disbursements Credit Protect² Individual APE 5% 9% 38% growth in retail protection -74% -36% -53% 33% 38% growth in annuity (incl. 30% group annuity) Par Non Par Savings ■ULIP Non Par Protection Annuity 1. Based on Individual WRP; 2. Based on NBP 9.4 7.0 2.4 Q1 FY21 Q2 FY21 H1 FY21 HDFC Life#6Demonstrating resilience in the current environment (2/2) Strong growth in renewal premium Stable profitable growth 22% Rs Bn. New Business Margins (NBM) Improving MoM collection 75.5 61.8 Remain cautious on persistency trends for 24.6% 25.9% 25.1% 24.3% 24.3% 25.6% next few quarters H1 FY20 H1 FY21 Healthy solvency position 6 Strong PAT accretion supplemented by sub- debt raise 203% 190% Jun 30, 2020 Sep 30, 2020 FY19 FY20 H1 FY21 Q4 FY20 Q1 FY21 Q2 FY21 6% Profit after tax(PAT) 7.8 7.3 H1 FY20 H1 FY21 Steady accretion of backbook surplus Continued focus on cost management HDFC Life#7Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 2 Our Strategy#8Key elements of our strategy 1 2 3 4 5 Focus on profitable growth Ensuring sustainable and profitable growth by identifying and tapping new profit pools Diversified distribution mix Developing multiple channels of growth to drive need-based selling Market-leading innovation Creating new product propositions to cater to the changing customer behaviour and needs Reimagining insurance Market-leading digital capabilities that put the customer first, shaping the insurance operating model of tomorrow Quality of Board and management Seasoned leadership guided by an independent and competent Board; No secondees from group companies 8 Our continuous focus on technology and customer-centricity has enabled us to maintain business continuity during the COVID-19 outbreak HDFC Life#919 Focus on profitable growth. Profit Accounting Economic Profit Profit after tax (PAT) FY18 FY19 FY20 H1 FY20 H1 FY21 Rs Bn. New business Margin 23.2% 24.6% 25.9% 27.5% 25.1% Value of new business 12.8 15.4 19.2 9.6 8.4 11.1 12.8 13.0 7.3 7.8 Underwriting profits 8.5 9.0 10.9 5.5 5.6 Shareholders' surplus 2.6 3.8 2.1 1.8 2.2 29.9 Underwriting profits breakup 25.5 19.1 10% 16.7 15.1 -10.6 -9.6 -11.1 -16.5 -19.1 Profitable growth distribution mix Balanced innovation leading Market Reimagining insurance management Board and Quality of HDFC FY18 FY19 FY20 ■New Business Strain H1 FY20 Backbook Surplus H1 FY21 Life#10Analysis of change in IEV1 EVOP 17.5 EVOP1% 17.6% - 0.2 233.3 9.2 8.4 8.4 206.5 0.7 VNB Unwind Operating variances Economic variances ESOP exercises 134.6 71.9 IEV at 31st Mar 20 Adjusted Net worth (ANW) Value of in-force business (VIF) 151.3 82.0 Rs Bn. IEV at 30th Sep 20 Operating experience continue to be positive and in line with our assumptions Covid reserve seems adequate considering mortality trends observed till date; to be reviewed from time to time 1. 10 EVOP% calculated as annualised EVOP (Embedded Value Operating Profit) to Opening EV growth Profitable Balanced leading Market distribution mix insurance Reimagining innovation management Board and Quality of HDFC Life#11Diversified distribution mix Focus on diversified mix ¹ 1 Strong and diversified network of 250+ traditional partners Banks HDFC BANK NBFCs and MFIS Chola TATA CAPITAL SFBs equitas Small Finance Bank 14% 19% 22% 21% 11% We understand your world 5% 13% 14% 4% 13% 6% BAJAJ FINANCE LIMITED Saraswat Bank 9% HDFC securities SBM GROUP The IDFC FIRST Bank Bandhan Bank >> HDFC SALES sbicap securities A Tradition of Trust 71% 64% 60% 55% MANAPPURAM FINANCE LIMITED Make life busy Edelweiss RBL BANK AXIS BANK pnb Housing Finance Limited YES BANK FY18 FY19 FY20 Bancassurance ■Brokers and others ■Agency H1 FY21 ■Direct BHARAT HDB FINANCIAL SERVICES Muthoot Financial Inclusion Ltd MICROFIN Prayaas se pragati 2 SURYODAY A BANK OF SMILES JUJJIVAN UIVAN SMALL FINANCE BANK Better Banking. Better Living Utkarsh Small Finance Bank Aapki Ummeed Ka Khaata Capital Small Finance Bank Developing alternative channels of distribution: 50+ partnerships in emerging eco-systems Strong growth in the bancassurance and online channels, pickup in agency channel in Q2 Expanding share of business from customers < 30 yrs indicating increasing awareness and early adoption of life insurance Maintained leadership position in Broker channel Health Apollo Health and Lifestyle Ltd 11 1. Basis Individual APE; 2. Direct includes online channel Tie-up in Q3 (Oct'20) Ecommerce Auto Telecom Mutual Fund Fintech Paytm MARUTI SUZUKI > airtel AXIS MUTUAL FUND Uber OMNIS Justdial HEALTH HOME CREDIT LENDINGKAT realme payसा Clix Capital Profitable distribution Balanced leading Market Reimagining Quality of growth Board and insurance mix innovation management HDFC Life#12Addressing customer needs at every stage of life <25 years Objective Simple Savings I I I 26-35 years Borrowing 36-50 years Investments Pay off mortgage 50+ years Asset Drawdown Risks Addressed Mortality Retire Medical care Needs First Job Medical care I Get married Plan for retirement Medical care Medical care Buy new car Child's education! Buy Home Product Offerings I Product mix across age categories¹ Morbidity Net Worth Longevity ¦ Interest Rate Profitable distribution Balanced growth mix innovation leading Market Quality of insurance Reimagining management Board and I UL 30% 26% 23% 19% Par 36% 29% 30% 39% Non par 26% 29% 35% 27% savings Protection 8% I 16% 10% 1% HDFC Annuity 0% 0% 2% 15% Life 12 1. Based on Individual WRP for H1 FY21#13Expanding market through consistent product innovation Click2 Invest Retirement & pension Woman Click2 Protect 3D Plus Sanchay Plus Guaranteed returns, with option for life long income Group Poorna Suraksha Comprehensive protection plan offering multiple choices of benefits under group platform Youngstar Group Credit Protect FY15 FY17 FY18 Cancer Care Balanced product suite helps in managing business cycles 1 2% 4% 4% 4% 5% Ind Protection: 7% 11% 17% 17% 17% 12% 5% Group Protection: 5% 6% 6% 6% 6% 9% 13% 25% 26% 34% 15% 45% 28% 16% 51% 8% 46% 23% 21% 20% FY18 13 FY19 FY20 Savings H1 FY20 Protection H1 FY21 ■UL ■Par ■Non Par Group ■Term ■ Annuity 1. As a % of Total APE FY19 FY20 FY21 Pension Guaranteed Classic One Plan Sanchay Par Advantage Lifelong regular income with payout flexibility and whole life cover Strong growth in individual protection 2 (Rs Bn.) 2.5 27.1 3.5 43.3 37.1 4.7 1.7 38% 20.7 2.4 9.5 FY18 FY19 FY20 H1 FY20 H1 FY21 Ind Protection ■Group Protection 2. Individual protection numbers are based on APE and group protection numbers based on NBP. Group protection includes Credit protect, GTI and Group Health -54% Profitable distribution Balanced growth mix innovation leading Market Quality of insurance Reimagining management Board and HDFC Life#14Our approach to retiral solutions Opportunity to grow the retiral corpus¹ by 3x between FY20-25 1. NPS Ranked #1 amongst private owned Pension Fund Managers in terms of AUM Registered strong AUM growth of 70% in H1 FY21 3. Immediate / deferred annuity ☐ Largest player in the private sector Servicing 100+ corporates and >16,000 lives covered in H1 FY21 2. Individual income plans 2 ☐ Providing long term retiral solutions Catering across age brackets & premium frequencies 4. Group superannuation fund Managing funds for about 150+ corporates under superannuation scheme Increasing retiral corpus¹ Rs Bn. Preferred long-term retiral service providers across corporates Bas- Strefact UGB ARYAVART BANK यूनियन बैंक SIEMENS Union Bank ऑफ इंडिया of India Ingenuity for life सेल SAIL इंडियन ऑयल बैंक ऑफ़ बड़ौदा Bank of Baroda OnGc punjab national bank IndianOil 434 357 287 ओएनजीसी 213 176 FY17 FY18 FY19 FY20 H1 FY21 1. 14 Includes NPS, Annuity, Group superannuation fund and long term variants of Sanchay Plus and Sanchay Par Advantage Profitable distribution Balanced growth mix innovation leading Market Quality of insurance Reimagining management Board and Bharat Petroleum energising lives gsk HDFC Life#15Protection Direct Banca 2 Product mix across key channels 1 Segment UL FY18 FY19 FY20 H1 FY21 64% 64% 32% 27% I ¦Par 25% 13% 18% 36% I Non par savings 8% 17% 44% 30% I Term 3% 4% 4% 5% Annuity 1% 3% 2% 2% ¡UL 58% 50% 33% 23% ¡Par 17% 8% 14% 15% I Non par savings 9% 12% 20% 13% 'Term 5% 6% 4% 4% Annuity 11% 24% 29% 44% 1. Basis Individual APE, Term includes health business Company Online³ Agency Segment FY18 FY19 FY20 H1 FY21 ¡UL 33% 26% 12% 9% I Par 48% 40% 34% 37% Non par savings 5% 17% 40% 35% Term 11% 12% 12% 15% I Annuity 3% 5% 3% 3% UL 57% 62% 44% 35% Par 1% 2% 1% 1% I Non par savings 0% 1% 18% 27% !Term 42% 35% 37% 36% Annuity 0% 1% 1% 1% Segment FY18 FY19 FY20 H1 FY21 ¦UL 57% 55% 28% 23% Par 28% 18% 19% 33% Non par savings 7% 15% 41% 30% Term 5% 7% 8% 9% Annuity 2% 5% 4% 5% Total APE FY18 FY19 FY20 H1 FY21 Total NBP FY18 FY19 FY20 ¡Term 11% 17% 17% 12% ¡Term 26% 27% 27% H1 FY21 14% I I I I Annuity !Total 2% 4% 4% 5% Annuity 9% 17% 16% 20% I 13% 21% 21% 17% !Total 35% 44% 43% 34% L 15 2. Includes banks, other corporate agents and online business sourced through banks / corporate agents. Nos for previous years have been restated in line with revised classification 3. Includes business sourced through own website and web aggregators. Nos for previous years have been restated in line with revised classification Profitable distribution Balanced growth mix innovation leading Market Quality of insurance Reimagining management Board and HDFC Life#16Simplifying the customer journey using 5 building blocks Profitable distribution Balanced leading Market growth insurance Reimagining Quality of Board and mix innovation management Platforms and Ecosystems Insurance beyond digital: allow multiple participants to connect, create & exchange value Lifegg Retire with pride One stop shop for retirement planning Partner Integration Products and services built on API for ease of partner integration Instalnsure O Pre-approved sum assured: Partner integrated KYC and income verification Quick easy to understand form filling: Seamless and customer friendly user interface 3-step buying journey: End-to-end digital journey enabling partner's customers to buy the policy Insta RL ■Mobile app for on-boarding of prospective agents A Journey Simplification Customer sales journeys simplified via mobility applications for sales force Insta Suite Bringing our technological capabilities on the mobile platform in order to empower sales force Insta Mix mSD Insta FR Insta Insta Verify Serv2.0 • Insta G2 InstaQuote! Hello Selfie Service Simplification Simplified solutions for customers across the value chain Online payments & services: ~88% of renewal via online/debit mode Chat bot ELLE WhatsApp bot ETTY ~90% of chats are self- serviced via chat-bot Robotic Process Automation: ~250+ bots deployed ÎnstA Virtual Assist for Sales & Service, current usage at ~1.6 million+ queries p.m. Life ai An omni-channel conversational AI engine " Data Enrichment and Analytics Continuous improvement in raw data by gaining deeper insight into our customers' lives Artificial Intelligence: Use of predictive analysis for persistency, underwriting and claims (fraud prevention) Big Data/Customer 360: Brings all customer data interactions, transactions & relationships in one place, in real time Cloud Storage: Data Lake (repository for entire enterprise data management) Lead Lake (For effective lead storage & enrichment) 16 HDFC Life#17- Journey simplification enabling digital journeys Customer journey Lead creation Prospecting & fulfillment Form filling & online payment e-signature End to end journey Suite of mobile apps Enables combos Insta Mix Uberized model Insta G2 - Gamification of buying journey Voice & Video based enabler For point of sales products For Group partners Hello Selfie WISENB POSP Life NEXT Pre approved offers Automated verification Electronic verification Agent onboarding 17 INSTAIN sure Insta FRL F Gi Digital Filling 7 MSD - 3 click journey Upload doc & FR fulfillment Automated underwriting & verification Quick upload Insta FR OOO noo eCCD - Chat/ video Insta Verify Chat PCVC ↑ I Profitable distribution Balanced growth mix innovation leading Market insurance Reimagining Quality of management Board and HDFC Life#18VServ: Industry first video based 'Phy-gital' mode of service 18 Zero setup for customer V-Serv VIRTUAL ENABLED SERVICE Storage on Cloud Chat functionality for chat enabled transactions VServ VIRTUAL ENABLED SERVICE Operations Device agnostic (Mobile/ Tablet Laptop) Secure Encrypted HDFC Life Customer Audit trail of Video & Audio Customer Journey ■ Customer connect Executive attends customer Service request Customer uploads documents ■ Acknowledgement given **** Document upload Encrypted recording OTP enabled customer authentication Enabler to our branch 'virtualisation' journey Profitable growth mix distribution Balanced leading Market Quality of insurance Reimagining innovation management Board and HDFC Life#1919 Governance framework Board Committees Management Committees/Councils Board of Directors Independent and experienced Board Audit Committee Risk Management Committee Investment Committee Policyholder Protection Committee With Profits Committee Corporate Social Responsibility Committee Nomination & Remuneration Committee Risk Council Compliance Council Investment Council Claims Review Committee ALCO Standalone councils Information & Cyber Security Credit Council Council Grievance Management Committee Disciplinary Panel for Product Council Malpractices Prevention of Sexual Harassment Stakeholders' Relationship Committee Business and Innovation Technology Council Persistency Council Profitable growth mix distribution Balanced innovation leading Market insurance Reimagining Quality of Management Board and Whistleblower Committee HDFC Additional governance through Internal, Concurrent and Statutory auditors Life The above list of committees is illustrative and not exhaustive#20Financial risk management framework Natural hedges ◉ Protection and longevity businesses ■ Unit linked and non par savings products Quantum of guaranteed return products: 14% of AUM ALM approach Target cash flow matching for non par savings plus group protection portfolio to manage non parallel shifts and convexity Immunise overall portfolio to manage parallel shifts in yield curve (duration matching) Managing Risk Product design & mix monitoring ■ Prudent assumptions and pricing approach Return of premium annuity products (>95% of annuity); Average age at entry ~60 years ■ Deferred as % of total annuity business < 30%, with limited deferment period (<4 yrs) Regular monitoring of interest rates and business mix Residual strategy External hedging instruments such as FRAS, IRFS, Swaps amongst others Reinsurance 20 20 HDFC Life FY20 H1 FY21 I Sensitivity Overall Scenario EV EV Non par 1 VNB Margin Overall EV VNB Margin EV Interest Rate +1% Interest Rate -1% Non par 1 VNB VNB Margin Margin (1.2%) (0.7%) (1.3%) (2.0%) (1.5%) (0.9%) (1.4%) (2.4%) 0.6% 0.2% 0.0% 1.7% 0.7% 0.2% 0.2% 1.3% Calibrated risk management has resulted in low EV and VNB sensitivity in the Non Par segment 1. Comprise of Non par savings (incl Annuity) plus Group protection#21Performance of wholly-owned subsidiary¹ companies 21 11.6 HDFC Pension AUM, Rs Bn. 51.6 82.7 113.2 Mar'17 Mar'19 Mar'20 Sep'20 HDFC International Life and Re Fastest growing PFM (Pension Fund Manager) under the NPS architecture (YoY growth of 70% in AUM) Market share grew from 29% in Sep'19 to 33% in Sep/20 amongst all PFMS Company has over 6 lakh customers - ~3.95 lakh in retail segment and ~ 2.19 lakh in corporate segment POP operations commenced in FY20 with enrolling of both retail and corporate subscribers; #2 POP in Corporate NPS business 1. Investment in subsidiaries not considered in Solvency Margin Registered growth of 63% in gross reinsurance premium in H1 FY21 Forayed into Kingdom of Saudi Arabia (KSA) and Qatar, both being strategically important (re)insurance markets Despite challenging external environment, momentum of growth trends and new opportunities remains positive S&P Global Ratings continues to reaffirm its long-term public insurer financial strength rating of "BBB" with "Stable" outlook HDFC Life#22Performance Snapshot Our Strategy 10101010 10101010 10101 101010101010101010101010 101010101010101010101010101 01010101010101010101010101 101 01010101010101010101010 101010101010101010101010101010 110101010101010101010101010101 10101010101010101010101010 1010101010101001010101010 bc010101010 Managing Covid-19 101010 1-104010 Customer Insights Annexures 010101 0101 010101010 0101010101 1010101010 10101 101010101 India Life Insurance 3 Managing Covid-19#23Dynamic approach to manage impact of the COVID-19 outbreak 23 HDFC Life Accelerated digital selling Focus on selling products with end to end digital customer journeys Digital servicing Communication to customers about digital touch-points for claims, renewal collection and customer queries Employee engagement/ facilitation Initiatives to keep employee morale high; infrastructure enablement and collaboration tools for WFH option Prioritizing areas of focus Dynamic review and assessment, strengthening operating assumptions, heightened focus on cost Responsive operating measures Regular branch operations in green and orange zones (>90% branches operational), daily tracking of employee and agent safety HDFC Life#24Emerging opportunities and risks. Reinvent operating model Enhanced focus on digital Work from home ▪ Fall in growth: End-to-end digital journey 88 ☐ Opportunities Higher demand for insurance Increasing awareness levels across mortality, morbidity, longevity and interest rate products Risks: Mitigants Adverse mortality experience: Stringent underwriting on the back of data analytics; increased pricing Consolidation of market share ■ Product innovation M&A ■ Credit risk: Conservative investment strategy; ongoing portfolio review 24 24 ▪ Volatility in equity markets impacting solvency: Sub-debt; balanced product mix; healthy backbook surplus ₹ ■ Fall in persistency: Improved customer engagement & communication around need to retain cover Fall in interest rates: Diversified product mix, discipline in repricing new business, appropriate hedging of back book HDFC Life#25Managing impact of COVID-19 on business New business / purchase Policy servicing 100 Customer interactions Employee / Partner engagement Digital sales journey - End-to-end digital sales, from prospecting till conversion, including customer interactions SVAR Renewal collections - ~88% of renewal payments (95% of policies) made digitally; SVAR (voice bot for renewal calling) and use of Cloud telephony InstA Seamless support experience - 1.6 mn+ monthly queries handled by InstA (virtual assistant) e-learning platform - 7,900+ agents attending training programs daily through mLearn / VC Platform Chat PCV No dependence on salesperson or call center. ~65% verifications completed post Covid Maturity payouts - Email, Whatsapp and customer portal 'My Account' enabled to upload necessary docs - Use of mobile app Over 10x increase in mobile app usage - Telemedicals 43% of the medicals done through tele- medicals, with number of cases increasing by over 2 times LifeEasy - Simple '3 click claim' process (~99% claims settled in 1 day). Claims initiation process also enabled through Whatsapp WORK Uninterrupted customer assistance - Work from home enabled across the organization, Microsoft Meet, Citrix RPA Robotic Process automation handled more than 250 processes remotely INSTAInsure 25 Insta Serv2.0 HI! Gamified contests - Launched to drive adoption of digital engagement initiatives InstaServe - OTP based policy servicing tool to handle customer queries Insta PRL Ägent on-boarding - Insta PRL enabling digital on-boarding of agents 35,000+ applicants since launch in mid March 24*7 self-service options - ~90% of chats are self-serve via chat-bot Employee engagement - VC based skill building sessions with digital partners (Twitter, Google, Facebook) InstaInsure - Simplified insurance buying through a 3-click journey Contact centres - Branch staff replacing Call centre agents servicing customers Branches - Daily tracking of employee and agent safety (>90% branches operational) Partner trainings - Conducted via digital collaboration tools New initiatives launched to manage volatile business environment due to the Covid-19 outbreak HDFC Life#26Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 4 Customer Insights#27Customer insights - Impact of Covid-19 Impact on LI category 1,2 Insurance sees a higher pickup post unlock with customers showing a higher disposition towards the category Evolved expectation due to Covid-192 23% More innovative product features 28% Flexible cover increase based on life stages Majority of customers were more positive about the industry, 1 driven by: 8&E 35% Realization of the importance of life and health insurance 34% Insurers' response to COVID-19 crisis 28% Increased awareness of personal needs and protection gaps Digital modes of payment also continue with their increasing trend and are slated to grow further Source: 1. BCG report, Aug 20, across Indian markets 2. 27 RGare knowledge centre, Aug 20, across Asian markets 23% Flexible benefit checks 8% Flexible premium payment terms 9% Other 3% More customer 6% Additional interaction health services Innovative and flexible product features remain the most important factors in prompting a purchase HDFC Life#28Customer Insights - Customer Behaviour/Preferences Top reasons to buy Life insurance 2019 rank 2013 rank Protect family in case of death 1 1 To secure child's education/marriage 2 2 Old age security/retirement For disciplined saving Good returns Safe investment option Additional investment option 3 3 4 8 5 4 7 7 4 Dual benefit of investment and insurance 8 9 I Tax Saving 9 4 To meet additional life cover 28 10 10 Customer behaviour / trend The future intent to buy Life Insurance is the highest amongst financial products driven primarily by 21-40 year olds Within LI, the intent to buy traditional policies was highest, particularly by people in the ages of 41-50 The intent to buy term insurance was driven primarily by people in the age group of 22-30 The key differentiating factors for consumers were safety of investment and maturity value Major reasons to buy Life Insurance continue to be protection for family, securing child's needs and retirement planning over last 6 years Tax saving is the 9th reason to buy Life Insurance, compared to 4th in 2013 There has been significant pickup in intention to buy term products in metros Online mode for premium collection shows an increasing trend across geographies Source: Nielsen Syndicated U&A HDFC Life#29Performance Snapshot Our Strategy Managing Covid-19 Customer Insights Annexures India Life Insurance 5 Annexures TAGAX IM ES:ST T#30Individual persistency for key channels and segments¹ Across key channels (%) 91 85 85 77 75 72 69 67 64 पु Agency Across key segments (%) 47 93 87 40 77 78 69 Banca Direct 13th month 25th month ■37th month 49th month 61st month 92 85 82 74 71 69 71 69 68 30 30 Savings (Traditional) 44 89 22 82 74 73 Savings (UL) Protection ■13th month ■25th month ■37th month ■49th month ■61st month 1. Calculated as per IRDAI circular (based on original premium) for individual business CY (H1 FY21) 88 79 69 66 53 98 86 22 75 72 Company PY (H1 FY20) 71 Company 67 40 53 Actuarial Financial ESG HDFC Life#31VNB and NBM walkthrough 9.57 0.38 0.20 0.05 0.56 8.38 H1 FY20 APE impact Change in assumptions New Business Profile¹ Fixed cost absorption H1 FY21 NBM% 27.5% 0.0% -0.6% -0.2% -1.7% 25.1% 31 1. Reflects the impact of difference in mix of segment/distribution channel/tenure/age/sum assured multiple etc VNB - Value of New Business; NBM - New Business Margin Rs Bn. Actuarial Financial ESG HDFC Life#32Sensitivity analysis Analysis based on key metrics Scenario Change in Change in VNB Margin 1 % Change in EV Increase by 1% -0.9% -1.5% Reference rate Decrease by 1% 0.2% 0.7% Equity Market movement Decrease by 10% -0.1% -1.3% Increase by 10% -0.3% -0.7% Persistency (Lapse rates) Decrease by 10% 0.2% 0.7% Increase by 10% -0.6% -0.8% Maintenance expenses Decrease by 10% 0.6% 0.8% Acquisition Increase by 10% -2.9% ΝΑ Expenses Decrease by 10% 2.9% ΝΑ Increase by 5% -0.7% -0.8% Mortality / Morbidity Decrease by 5% 0.7% 0.8% Tax rate² Increased to 25% -5.0% -7.9% Actuarial Financial ESG 32 1. Post overrun total VNB for Individual and Group business 2. The tax rate is assumed to increase from 14.56% to 25% and hence all the currently taxed profits in policyholder/shareholder segments are taxed at a higher rate. It does not allow for the benefit of policyholder surplus being tax-exempt as was envisaged in the DTC Bill. HDFC Life#33Assets under management Assets Under Management 62:38 71:29 67:33 UL:Traditional 54:46 50:50 43:57 43:57 55 55 Debt:Equity 61:39 ☐ 16% 18% 15% 1% 1,506 1,272 1,066 1,256 31st Mar 2018 31st Mar 2019 31st Mar 2020 30th Sep 2020 ■AUM in Rsbn ◆ Growth in AUM vs LY Change in AUM 1 Rs Bn. 234 111 54 52 68 26 (23) 30th Sept 2019 30th Sept 2020 Net Fund inflow Net investment income Market movements ☐ Net change in AUM¹ 2 Continue to rank amongst top 3 private players, in terms of assets under management Over 97% of debt investments in Government bonds and AAA rated securities as on Sep 30, 2020 33 1. Calculated as difference from April to September 2. Based on Assets under Management as on Jun 30, 2020 Actuarial Financial ESG HDFC Life#34Stable capital position. Dividend paid 3.3 4.0 NB premium growth 32% 32% 15% 7% 203% 192% 188% 184% 84.8 70.8 22.1 62.7 13.1 52.1 12.7 20.9 11.3 19.2 16.7 13.6 27.2 33.3 Mar 31, 2018 Mar 31, 2019 ASM1 RSM @100% Incremental RSM @ 150% 38.5 41.8 Mar 31, 2020 Surplus Capital² Sep 30, 2020 Solvency margin Rs Bn. Actuarial Financial ESG Sub-debt of Rs 6 bn has helped strengthen the solvency ratio, augmented by steady accretion to backbook HDFC 1. ASM represents Available solvency margin and RSM represents Required solvency margin 2. Investment in subsidiaries not considered in solvency margin 34 Life#35Governance - Promoting responsible behavior Actuarial Financial ESG Governance structure Corporate governance policy Board diversity policy 。 30% women occupancy in the Board o Multiple nationalities and varied ethnicities Board evaluation and independence 。 Self-assessment of Board performance o 50% independent directors o Regulatory norm as per 'Fit and Proper' o Average Board experience is >30 yrs Board members are elected independently Compensation Framework Remuneration policy recommended by Nomination and Remuneration Committee Performance Management System based on the principles of balanced scorecard Detailed disclosure of managerial remuneration in the annual report ■ Information / Cyber Security ISO 27001:2013 and ISMS assessment program; o Independent auditors and IRDAI auditors validated and certified the controls implemented Data Privacy Policy o Applicable to customers, employees and service providers o Any disciplinary action is in line with the malpractice matrix Compliances/ Policies Code of Conduct Policy Vigil Mechanism/ Whistle Blower Policy Prevention of sexual harassment to women at workplace policy Business Responsibility Reporting (BRR) Stewardship Code Risk Management and BCM Risk management policy Risk oversight by Senior Management & Board of Directors, via Risk Management Council and Risk Management Committee respectively Enterprise risk management (ERM) framework o 'Three Lines of Defense approach' o Designed and approved by the Board Modes of Risk awareness o Trainings, Workshops, E- mailers, Seminars, Conferences, Quizz es and Special awareness Drives Sensitivity analysis and stress testing Business Continuity Management(BCM) o Creation of a recovery plan for critical business activities of a function or process 35 HDFC Life#36Social initiatives - Culture of care and giving Actuarial Inclusive growth Swabhimaan, the Corporate Social Responsibility wing is aligned with the UN Sustainable Development Goals (SDGs) with focus on Education, Health, Environment, Livelihood & Disaster Relief FY 2020-21: 20+ CSR projects FY 2019-20: 22 CSR projects across 25 states and 3 UTS impacting >280K beneficiaries in India Financial Inclusion: Insured >40 million lives through microfinance institutions in FY20 ■ COVID-19 Response: о Contribution to PM Cares Fund Medical supplies, nutritional meals for frontline healthcare workers Distribution of Happiness Box consisting of immunity boosting supplements, hygiene support material and educational workbooks for underprivileged school children Customer centricity Improve lives with products designed to suit the different life stage needs Focus on leveraging technology to simplify life insurance for customers through their journey across issuance, claims, servicing, or any other engagement Artificial Intelligence (AI) for text and speech recognition; о Machine Learning (ML) to improve persistency; Cognitive bots (software robots) for 24x7 customer service; and О Alternate data to enhance underwriting Grievance Redressal Policy Overachieved on Voice of Customers (VOC) study in FY20 36 Financial ESG HDFC Life#37Social initiatives - Human Capital Development Actuarial Financial ESG Attracting talent Virtual hiring and on-boarding process without compromising on quality Robust employee referral schemes (>50% of the hiring through referrals) Flexi job program and flexi hours to promote WFH, attract gig workers Hire-train-deploy model through tie-up with reputed learning institutions Focus on training and development Mandatory and optional learning programs for employees, contractors, channel partners Mobile learning app for self-paced learning Virtual training of employees during Covid Access to curated online training programs from reputed universities Career coaching and development interventions for high potential talent Employee engagement Online yoga, mindfulness / meditation sessions, fitness challenges (Walkathon, Fit by Bit) Emotional and mental well being assistance program for employees Engagement programs for employees and their families Carpool app as a green initiative to provide safe transport for employees dependent on public transport Strong Reward and Recognition framework Employee diversity Actively promoting diversity and inclusion 24% women employees (creche facility, maternity transition program) Promoting diverse talent pool (work profiles designed for second career women, freelancers, specially-abled) LGBTQ-friendly organisation Talent management/retention Fast track growth path for special categories of employees - Management Trainees & Graduate Trainees, etc. Potential review and talent development interventions for leadership Robust, transparent and objective performance management system Career microsite, job portal to educate employees on career opportunities within the company Higher increments, bonuses for those exceeding expectations Long term incentive plans in the form of ESOPs and Cash to attract, retain and motivate good talent Elaborate succession planning for Key Managerial Personnel, critical senior roles 37 HDFC Life#38Environmental initiatives - Creating a better environment Actuarial Financial ESG Energy and Water Energy efficiency and water conservation initiatives Use of 3/5 star rated appliances with regular maintenance Use of LED based lighting system Use of sensor based urinals and water taps CSR initiatives Reducing operational footprint through CSR activities О о 12 water ATMs installed in villages to provide clean drinking water 10 city forest consisting of 13,574 trees across 22,900 sq.ft. created using Miyawaki method Digitization Reduction of Paper Usage О О Online /e-forms for customers Annual report FY'20 was digitally communicated to all stakeholders Printers configured with default double side printing О Business Travel 40+ video conferencing rooms setup to reduce travel Waste Management Segregation and proper disposal of waste dry and wet - No single-use plastics О Use of bio-degradable garbage bags Cafeteria with reusable plates, cutlery, wooden stirrers etc Conference / meetings rooms with glass bottles and cups Employees encouraged to bring their own mugs/glass Compliant under the Hazardous and Other Wastes (Management and Tran- boundary Movement) Rules, 2016 and E-waste (Management), Rules, 2016 38 HDFC Life#39Performance Snapshot Our Strategy Managing Covid-19 - Backspace Scree Page Home Up Customer Insights Annexures India Life Insurance Life Insurance 6 India Life Insurance Page F Down Shi Insert#4040 40 2015 67.6 2035 Taiwan Hong Kong 16.5% Singapore 6.0% 6.7% 3.3% Japan Thailand 3.4% 2.8% 1 2.3% 8,979 Growth opportunity: Under-penetration and favourable demographics 1 Life Insurance penetration ¹ 18.3% (2019) Life Insurance density US$ (2019) 2 Life expectancy (Years) Malaysia India China Hong Kong Taiwan 4,129 3,244 2,691 380 256 230 58 Singapore Japan Malaysia 1.3 1.6 1.7 6% 9% 75.0 15% 71.9 56% 61% 60% 2055 2015 Thailand Population composition (Bn.) 38% 30% 25% 1. Penetration as measured by premiums as % of GDP, 2. Density defined as the ratio of premium underwritten in a given year to the total population Source: Swiss Re (Based on respective financial year of the countries), MOSPI, United Nations World Populations Prospects Report (2017) 2035 Less than 20 years 20-64 years ■65 years and above 2055 China India India remains vastly under-insured, both in terms of penetration and density Huge opportunity to penetrate the underserviced segments, with evolution of the life insurance distribution model India's insurable population is expected to touch 750 million by 2020 India's elderly population is expected to double by 2035 (as compared to 2015) Emergence of nuclear families and advancement in healthcare facilities lead to increase in life expectancy thus facilitating need for pension and protection based products HDFC Life#41Low levels of penetration - Life protection 172 mn 68 mn 1.7 mn 83.0% Protection gap 2 (2019) Urban Working Population Addressable Market Annual Policy Sales (excl blue collared) India Indonesia Malaysia 24 Only 1 out of 40 people (2.5%) who can afford it is buying a policy every year 1 17 12 8 Even within the current set, Sum Assured as a multiple of Income is <1x 41 3. Kotak institutional equities 1. Goldman Sachs Report, March 2019 2. Swiss Re (Based on respective financial year of the countries) Thailand 76.0% 74.0% China 71.0% 70.0% 61.0% Japan Singapore South Korea Trend of retail loans 3 (Rs Tn.) FY10 FY12 FY14 FY16 FY18 FY20 34 Australia 55.0% 55.0% 54.0% 41.0% India has the highest protection gap in the region, as growth in savings and life insurance coverage has lagged behind economic and wage growth Protection gap growth rate is predicted to grow at 4% per annum 42 Hong Kong Retail credit has grown at a CAGR of 18% over last 10 years Increasing retail indebtedness to spur need for credit life products Immense opportunity given: ☐ Increasing adoption of credit Enhancement of attachment rates Improvement in value penetration Widening lines of businesses HDFC Life#42Macro opportunity - Retiral solutions 222 42 4.8 India's pension market is under-penetrated at 4.8% of GDP Pension Assets / GDP Ratio 60.8 56.4 43.2 India Hong Kong South Africa ■India Japan 130.7 120.5 USA Australia I Hong Kong South Africa ■Japan ■USA Australia 60+ population is expected to almost triple by 2050 Ageing population 9% 19% 62% 62% 29% 19% 2015 2050 Age <15 years ■Age 15-59 years Age 60+ years Improvements in life expectancy will lead to an average post retirement period of 20 years Life expectancy at age 60 16 61 22 19 18 18 17 22 20 1995-2000 2000-05 2011-12 2030E Males Females Average household size has decreased from 4.6 in 2001 to 3.9 in 2018 Total Pension AUM is expected to grow to Rs 47 Tn by 2025 (more than 1/3rd accounted for by NPS) Mandatory schemes to increase coverage for both unorganized and organized sectors HDFC Source: Milliman Asia Retirement Report 2017; Survey by NSSO, Ministry of statistics and Programme implementation Crisil PFRDA, Census of India, UN Population Estimates Life#43Government bond auctions Government Bonds - Tenorwise Issuance 21% 29% 27% 35% 35% 79% 71% 63% 65% 65% FY17 FY18 FY19 FY20 H1FY21 >15yrs 1,54,520 1,80,529 2,04,000 2,38,000 1,38,000 ■ <=15yrs 3,73,525 4,97,579 3,82,941 4,44,000 5,26,000 Total 5,28,045 6,78,109 5,86,941 6,82,000 6,64,000 Auction of >15 year maturity bonds has been ~25-30% on an average facilitates writing annuity business at scale Budget estimate plan for government borrowing for FY21 at Rs. 12 trillion on gross basis The actual borrowing till H1 is 55% of the budget 43 Source: CCIL & National Statistics Office, Union Budget, RBI Rs Cr HDFC Life#44Life Insurance: A preferred savings instrument Household savings composition Financial savings mix 25% 22% 18% 18% 3% 11% 8% 12% 16% 13% 19% 18% 21% 52% 26% 17% 68% 65% 65% 16% 48% 32% 35% 67% 56% 50% 47% 35% FY10 FY13 ■Financial savings FY16 ■Physical savings FY19 Household savings as % of GDP FY10 FY13 FY16 FY20 ■Currency & deposits Life insurance ■Provident/Pension fund ■Others Increasing preference towards financial savings with increasing financial literacy within the population Various government initiatives to promote financial inclusion: Implementation of JAM trinity Launch of affordable PMJJBY and PMSBY social insurance schemes Atal Pension Yojana promoting pension in unorganized sector 44 Source: DBIE-RBI Statistics, RBI Annual Report, Economic Survey, CSO, www.pmjdy.gov.in HDFC Life#45Industry new business¹ trends Private players Market share 45 Growth % Individual WRP in Rs bn Sensex Private Players ■LIC 304 292 288 285 269 273 262 230 203 227 214 208 200 175 178 172 287 357 420 401 315 291 278 245 160 124 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 H1 FY21 57% 52% 46% 37% 38% 38% 49% 52% 54% 56% 58% 57% 56% Private 1% 7% -20% -24% 2% -3% 16% 14% 26% 24% 12% 5% -11% LIC -22% 29% 4% 11% -4% -2% -27% 3% 15% 13% 5% 8% -2% Overall -10% 17% -9% -5% -2% -3% -11% 8% 21% 19% 9% 6% -7% Private sector gained higher Market share than LIC for the first time in FY16, post FY11 regulatory changes Amongst private insurers, insurers with a strong bancassurance platform continue to gain market share 1.Basis Individual Weighted Received Premium (WRP) Source: IRDAI and Life Insurance Council Sensex HDFC Life#46Private industry: Product and distribution mix 43% Product mix ¹ Unit Linked ■Conventional Distribution mix 2 Individual Agents Corporate Agents Banks Corporate Agents Others Brokers Direct Business 57% 54% 52% 51% 51% 48% 49% 49% 46% 66% 9% 10% 10% 12% 14% 16% 20% 56% 3% 70- 201 3% 20% 3% 3% 3% 3% 3% 3% 3% 3% 44% 47% 34% 52% 54% 54% 55% 53% 49% FY15 FY16 FY17 FY18 FY19 FY20 Q1 FY21 40 46 36% 32% 30% 28% 25% 25% 25% FY15 FY16 FY17 FY18 FY19 FY20 Q1 FY21 Product mix has recently moved towards conventional business for the private players due to volatile markets Increasing thrust on protection business by top players has helped improve the new business margins Banca sourced business continues to dominate the channel mix on the back of increasing reach of banks along with increase in share of direct channel, while share of Agency has been constant in the last few years 1. Basis Overall WRP (Individual and Group); 2. Basis Individual New business premia for all private players Source: IRDAI and Life Insurance Council ㅁ HDFC Life#47Appendix HDFC Life#4848 88 Financial and operational snapshot (1/2) New Business Premium (Indl. + Group) Renewal Premium (Indl. +Group) Total Premium Individual APE Overall APE Group Premium (NB) Profit after Tax - Policyholder Surplus - Shareholder Surplus Dividend Paid Assets Under Management Indian Embedded Value Net Worth NB (Individual and Group segment) lives insured (Mn.) No. of Individual Policies (NB) sold (In 000s) 1. Including dividend distribution tax (DDT) 2. Comprises share capital, share premium and accumulated profits/(losses) H1 FY21 H1 FY20 Growth FY20 FY19 FY18 CAGR Rs Bn. 85.0 79.1 7% 172.4 149.7 113.5 23% 75.5 61.8 22% 154.7 142.1 122.1 13% 160.5 140.9 14% 327.1 291.9 235.6 18% 28.3 28.7 -1% 61.4 52.0 48.9 12% 33.3 34.7 -4% 74.1 62.6 55.3 16% 42.9 40.2 7% 87.8 73.3 54.1 27% 7.8 7.3 6% 13.0 12.8 11.1 8% 5.6 5.5 1% 10.9 9.0 8.5 13% 2.2 1.8 20% 2.1 3.8 2.6 -11% (1) NA 4.0 3.3 NA 1,506.2 1,310.1 15% 1,272.3 1,255.5 1,066.0 9% 233.3 201.2 16% 206.5 183.0 152.2 16% (2) 77.9 64.0 22% 69.9 56.6 47.2 22% 10.2 28.7 -64% 61.3 51.4 33.2 36% 444.2 420.4 6% 896.3 995.0 1,049.6 -7% HDFC Life#49Financial and operational snapshot (2/2) H1 FY21 H1 FY20 FY20 FY19 FY18 Overall New Business Margins (post overrun) Operating Return on EV 25.1% 27.5% 25.9% 24.6% 23.2% (1) 17.6% 19.6% 18.1% 20.1% 21.5% Operating Expenses / Total Premium 11.1% 14.0% 13.1% 13.1% 13.5% Total Expenses (OpEx + Commission) / Total Premium 15.2% 19.0% 17.7% 17.0% 18.0% Return on Equity (2) 21.0% 24.3% 20.5% 24.6% 26.0% Solvency Ratio Persistency (13M / 61M) (3) 203% 88%/53% 192% 86%/53% 184% 88%/54% 188% 84%/51% 192% 83%/50% Market Share (%) 49 49 - Individual WRP - Group New Business - Total New Business Business Mix (%) 17.5% 15.2% 14.2% 12.5% 13.3% 27.4% 28.9% 29.0% 28.4% 28.5% 23.3% 22.4% 21.5% 20.7% 19.1% - Product (UL/Non par savings/Non par protection/Par) (4) - Indl Distribution (CA/Agency/Broker/Direct) (4) - Total Distribution (CA/Agency/Broker/Direct/Group) (5) - Share of protection business (Basis Indl APE) - Share of protection business (Basis Overall APE) - Share of protection business (Basis NBP) 27.9% 23/35/9/33 26/58/6/9 28/45/8/19 60/13/6/21 54/15/10/21 55/14/9/22 64/13/4/19 71/11/5/14 23/6/2/18/51 23/7/3/16/51 23/7/3/17/51 26/7/2/16/49 33/7/2/10/48 8.5% 6.1% 7.6% 6.7% 5.1% 12.1% 16.7% 17.2% 16.7% 14.1% 55/20/7/18 57/9/5/28 11.3% 27.6% 27.0% 25.9% 1. During FY18, there was a one time positive operating assumption change of Rs 1.4 bn based on review by an external actuary as part of the IPO process. Excluding this one time adjustment, Operating return on EV would have been 20.4% for FY18 2. Calculated using net profit and average net worth for the period (Net worth comprises of Share capital, Share premium and Accumulated profits) 3. Persistency ratios (based on original premium). Group business, where persistency is measurable, has been included in the calculations. 4. Based on individual APE. UL: Unit Linked, Trad: Traditional, Par: Participating & CA: Corporate Agents. Percentages are rounded off 5. Based on total new business premium including group. Percentages are rounded off HDFC Life#50Revenue and Profit & Loss A/c Revenue A/c I H1 FY21 H1 FY20 Profit and Loss A/c H1 FY21 H1 FY20 Premium earned 160.5 140.9 I Income I I Reinsurance ceded (2.8) (1.9) Interest and dividend income 2.0 1.7 I Income from Investments 150.7 31.9 I I Net profit/(loss) on sale 0.3 0.7 I Other Income 0.7 0.6 I Transfer from Policyholders' Account 5.6 5.7 Transfer from Shareholders' Account 0.1 0.2 I I Other Income 0.0 0.0 Total Income 309.1 171.7 Commissions 6.7 7.0 Total 8.0 8.1 I Expenses GST on UL charges 17.7 19.6 Outgoings I I 1.7 1.7 Transfer to Policyholders' Account 0.1 0.2 I I Provision for taxation 0.5 (0.2¦ Expenses 0.1 0.1 I | Provision for diminution in value of investments (0.5) 1.4 I I Interest on Non-convertible debenture 0.1 Benefits paid 72.5 75.0 I I Change in valuation reserve 203.8 57.6 I Provision for diminution in value of investments (0.1) 0.2 I I Bonuses Paid Total Outgoings 2.9 3.6 Provision for Taxation 0.0 0.3 305.2 165.9 Total 0.2 0.8 Surplus 3.9 5.9 Profit for the year Transfer to Shareholders' Account 5.7 5.7! I Funds for future appropriation - Par (1.7) 0.2 Total Appropriations 3.9 5.9 50 50 7.8 7.3 Rs Bn. HDFC Life#51Balance sheet 51 Shareholders' funds | Share capital (including Share premium) I Accumulated profits I Fair value change ! Sub total I I Borrowings Policyholders' funds Fair value change Sep 30, 2020 Sep 30, 2019 Mar 31, 2020 Rs Bn. 24.4 23.9 24.2 53.5 40.1 45.7 0.4 (0.4) (1.9) 78.2 63.6 68.0 6.0 11.2 8.0 0.5 I Policy Liabilities 745.8 597.1 652.7 I Provision for Linked Liabilities ! Funds for discontinued policies 615.6 597.5 508.4 36.9 33.2 33.4 I ¡ Sub total 1,409.5 1,235.8 1,195.0 I Funds for future appropriation (Par) 7.1 11.2 Total Source of funds 1500.9 1,310.5 8.8 1,271.9 I I Shareholders' investment 74.4 53.0 58.6 | Policyholders' investments: Non-linked 779.3 626.4 671.9 Policyholders' investments: Linked 652.5 630.6 541.8 I Loans 3.2 1.9 3.0 I Fixed assets 3.3 3.4 3.3 Net current assets (11.9) (4.9) (6.7) Total Application of funds 1500.9 1,310.5 1,271.9 HDFC Life#52Segment wise average term and age¹ Average Policy Term excluding annuity (Yrs) H1 FY21: 25.2 (H1 FY20: 15.7) 12 UL 12 22 42 Par 14 Non-par Health 23 23 16 12 Non-par Savings 11 Non-par Protection 40 38 Non-par Pension 10 10 H1 FY21 H1 FY20 Average Customer Age excluding annuity (Yrs) H1 FY21: 35.7 (H1 FY20: 37.6) 37 UL 36 33 Par 36 Non-par Health 32 32 36 Non-par Savings 39 Non-par Protection 34 35 Non-par Pension 57 57 59 Annuity 59 H1 FY21 H1 FY20 Focus on long term insurance solutions, reflected in longer policy tenure Extensive product solutions catering customer needs across life cycles from young age to relatively older population 62 52 1. Basis individual new business policies (excluding annuity) HDFC Life#53Summary of Milliman report on our ALM approach¹ • Scope of review Assess appropriateness of ALM strategy to manage interest rate risk in non-par savings business Review sensitivity of value of assets and liabilities to changes in assumptions Portfolios reviewed ■ Portfolio 1: Savings and Protection All non-single premium non-par savings contracts and group protection products ■ Portfolio 2: All immediate and deferred annuities Description Interest rate scenarios Interest rate + Demographic scenarios 100% persistency and low interest rates Stress scenarios tested Parallel shifts/ shape changes in yield curve within +- 150 bps of March 31st 2020 Gsec yield curve Interest rate variation + changes in future persistency/ mortality experience Net asset liability position Changes by < 4.5% Changes by 7% 100% persistency with interest rates falling to 4% p.a. for next 5 years, 2% p.a for years 6 -10 and 0% thereafter Still remains positive Opinion and conclusion ALM strategy adopted for Portfolios 1 and 2 is appropriate to: ■ meet policyholder liability cash flows protect net asset-liability position thereby limiting impact on shareholder value HDFC 1. Opinion issued by Milliman Advisors LLP on ALM strategy (for non par business) basis FY20 disclosures 153 Life#54Indian Embedded value: Methodology and Approach (1/2) Overview Indian Embedded Value (IEV) consists of: ☐ ☐ Adjusted Net Worth (ANW), consisting of: - - Free surplus (FS); - Required capital (RC); and Value of in-force covered business (VIF): Present value of the shareholders' interest in the earnings distributable from assets allocated to the covered business, after making sufficient allowance for the aggregate risks in the covered business. Components of Adjusted Net Worth (ANW) ☐ Free surplus (FS): FS is the Market value of any assets allocated to, but not required to support, the in-force covered business as at the valuation date. The FS has been determined as the adjusted net worth of the Company (being the net shareholders' funds adjusted to revalue assets to Market value), less the RC as defined below. Required capital (RC): RC is the amount of assets attributed to the covered business over and above that required to back liabilities for the covered business. The distribution of this to shareholders is restricted. RC is set equal to the internal target level of capital equal to 170% of the factor-based regulatory solvency requirements, less the funds for future appropriations ("FFA") in the participating funds. 54 54 HDFC Life#55Indian Embedded value: Methodology and Approach (2/2) Components of Value in-force covered business (VIF) Present value of future profits (PVFP): PVFP is the present value of projected distributable profits to shareholders arising from the in-force covered business determined by projecting the shareholder cash flows from the in-force covered business and the assets backing the associated liabilities. Time Value of Financial Options and Guarantees (TVFOG): TVFOG reflects the value of the additional cost to shareholders that may arise from the embedded financial options and guarantees attaching to the covered business in the event of future adverse market movements. Intrinsic value of such options and guarantees is reflected in PVFP. Frictional costs of required capital (FC): FC represents the investment management expenses and taxation costs associated with holding the RC. VIF includes an allowance for FC of holding RC for the covered business. VIF also includes an allowance for FC in respect of the encumbered capital in the Company's holdings in its subsidiaries. Cost of residual non-hedgeable risks (CRNHR): CRNHR is an allowance for risks to shareholder value to the extent that these are not already allowed for in the TVFOG or the PVFP. In particular, the CRNHR makes allowance for: - asymmetries in the impact of the risks on shareholder value; and - risks that are not allowed for in the TVFOG or the PVFP. CRNHR has been determined using a cost of capital approach. CRNHR is the present value of the cost of capital charge levied on the projected capital in respect of the material risks identified. HDFC 55 Life#56Embedded Value: Economic assumptions¹ Forward rates % Spot rates % Years As at Sep 30, 2020 As at Sep 30, 2019 As at Sep 30, 2020 As at Sep 30, 2019 12345 3.90 5.67 3.83 5.51 5.12 6.14 4.41 5.74 6.01 6.58 4.89 5.95 6.65 6.94 5.28 6.14 7.09 7.25 5.59 6.31 10 7.67 7.90 6.45 6.88 15 7.37 7.85 6.71 7.12 20 7.05 7.68 6.77 7.21 25 6.84 7.55 6.75 7.23 30+ 6.72 7.48 6.72 7.23 56 1. Forward rates are annualised and Spot rates are continuous HDFC Life#57◉ ■ Glossary (Part 1) APE (Annualized Premium Equivalent) - The sum of annualized first year regular premiums and 10% weighted single premiums and single premium top-ups ◉ Backbook surplus - Surplus accumulated from historical business written ☐ Conservation ratio - Ratio of current year renewal premiums to previous year's renewal premium and first year premium Embedded Value Operating Profit ("EVOP") - Measure of the increase in the EV during any given period, excluding the impact on EV due to external factors like changes in economic variables and shareholder-related actions like capital injection or dividend pay-outs. First year premiums - Regular premiums received during the year for all modes of payments chosen by the customer which are still in the first year. For example, for a monthly mode policy sold in March 2021, the first instalment would fall into first year premiums for 2020-21 and the remaining 11 instalments in the first year would be first year premiums in 2021-22 ◉ New business received premium - The sum of first year premium and single premium. ◉ New business strain - Strain on the business created due to revenues received in the first policy year not being able to cover for expenses incurred HDFC 57 44 Life#58☐ ◉ ◉ ◉ ■ Glossary (Part 2) Operating expense - It includes all expenses that are incurred for the purposes of sourcing new business and expenses incurred for policy servicing (which are known as maintenance costs) including shareholders' expenses. It does not include commission. Operating expense ratio - Ratio of operating expense (including shareholders' expenses) to total premium Proprietary channels - Proprietary channels include agency and direct Protection Share - Share of protection includes annuity and health Persistency - The proportion of business retained from the business underwritten. The ratio is measured in terms of number of policies and premiums underwritten. ■ Renewal premiums - Regular recurring premiums received after the first year Solvency ratio - Ratio of available solvency Margin to required solvency Margins ◉ Total premiums - Total received premiums during the year including first year, single and renewal premiums for individual and group business Weighted received premium (WRP) - The sum of first year premium and 10% weighted single premiums and single premium top-ups HDFC 58 Life#59Disclaimer This presentation is for information purposes only and does not constitute an offer or invitation to sell or the solicitation of an offer or invitation to purchase any securities ("Securities") of HDFC Life Insurance Company Limited (formerly HDFC Standard Life Insurance Company Limited) ("HDFC Life" or the "Company") in India, the United States, Canada, the People's Republic of China, Japan or any other jurisdiction. This presentation is not for publication or distribution, directly or indirectly, in or into the United States (including its territories and possessions, any state of the United States and the District of Columbia). The securities of the Company may not be offered or sold in the United States in the absence of registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. The Company does not intend to register any securities in the United States. You confirm that you are either: (i) a "qualified institutional buyer" as defined in Rule 144A under the U.S. Securities Act of 1933, as amended, or (ii) outside the United States. By receiving this presentation, you are agreeing to be bound by the foregoing and below restrictions. Any failure to comply with these restrictions will constitute a violation of applicable securities laws. This presentation should not, nor should anything contained in it, form the basis of, or be relied upon in any connection with any contract or commitment whatsoever. The information contained in this presentation is strictly confidential and is intended solely for your reference and shall not be reproduced (in whole or in part), retransmitted, summarized or distributed to any other persons without Company's prior written consent. The Company may alter, modify or otherwise change in any manner the contents of this presentation, without obligation to notify you or any person of such revision or changes. This presentation may contain forward-looking statements that involve risks and uncertainties. Forward-looking statements are based on certain assumptions and expectations of future events. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. Although Company believes that such forward-looking statements are based on reasonable assumptions, it can give no assurance that your expectations will be met. Representative examples of factors that could affect the accuracy of forward-looking statements include (without limitation) the condition of and changes in India's political and economic status, government policies, applicable laws, the insurance sector in India, international and domestic events having a bearing on Company's business, particularly in regard to the regulatory changes that are applicable to the life insurance sector in India, and such other factors beyond our control. You are cautioned not to place undue reliance on these forward-looking statements, which are based on knowledge, experience and current view of Company's management based on relevant facts and circumstances. The data herein with respect to HDFC Life is based on a number of assumptions, and is subject to a number of known and unknown risks, which may cause HDFC Life's actual results or performance to differ materially from any projected future results or performance expressed or implied by such statements. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside Company's control. Past performance is not a reliable indication of future performance. This presentation has been prepared by the Company. No representation, warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information and opinions in this presentation. None of Company or any of its directors, officers, employees, agents or advisers, or any of their respective affiliates, advisers or representatives, undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise and none of them shall have any liability (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. Further, nothing in this presentation should be construed as constituting legal, business, tax or financial advice or a recommendation regarding the securities. Before acting on any information you should consider the appropriateness of the information having regard to these matters, and in particular, you should seek independent financial advice. 59 HDFC Life#60Thank you SELECTED Superbrand Consumer Validated 2019 HDFC Life