Aditya Birla Capital Ltd Management Discussions.

Aditya Birla Sunlife Insurance Limited (Life Insurance)

Aditya Birla Sun Life Insurance Company Limited (ABSLI) is a 51:49 joint venture between the Aditya Birla Group and Sun Life Financial Inc., Canadas leading international financial services organisation. ABSLI has contributed to the growth and development of the Indian life insurance industry, and is currently one of Indias leading private life insurance companies.

Industry Overview

The life insurance industry in India has witnessed a sea change over the past two decades. These changes include opening up to the private sector, new product regulations, increase in Foreign Direct Investment (FDI) limits, besides initiation of open architecture for bancassurance and issuance of policies in electronic form. The life insurance industry has evolved considerably, catering to the changing macro-economic landscape, customer needs and technological developments.

The industry has grown at a CAGR of 16% in Individual APE during FY 16 to FY 19, registering a growth of 6% during FY 20 due to the impact of the COVID-19 lockdown in March 2020. The impact of the lockdown is however expected to be transient in nature, and the insurance industry is expected to be back on the growth path, given its criticality to both individuals and the economic development of the country.

During FY 20, the insurance industry grew 18% YTD. February 2020 ended with growth of 6% for FY 20 as the top line was impacted due to the lockdown. Private insurance players witnessed a growth of 5% and LIC registered a growth of 8%. The private players market share in individual new business premium stood at 57% in FY 20.

The industry continues to focus on the quality of business and improving financial performance to drive long-term shareholder value. This can be seen through improved persistency ratios across cohorts, reducing surrender to AUM ratios, better opex management and lower complaints.

The protection segment has emerged as an important category on the back of higher customer awareness, product innovation and emergence of digital modes of distribution. Awareness for protection products may get a tailwind out of the current prevailing situation and change in consumer attitude towards risk.

On the distribution mix, there has been a distinct shift with bancassurance, now emerging as the primary distribution channel with >50% share (21% in FY 10) among private sector insurers. This shift is primarily driven by the captive customer base and leveraging the wide-spread network of bank branches. Companies continue to focus on digital and direct channels, given the tremendous growth potential. There has been an increase in the number of web aggregators in recent years and many insurance companies have been showing increasing interest to get their products listed on aggregator portals and then on websites.

Performance Review

ABSLI recorded individual new business premium growth at 10% in YTD February 2020, while the year ended with a flat growth as sales were impacted in the month of March 2020 due to the COVID-19 shutdown. Given our focus on creating value and driving profitability, the Group business de-grew by 13%. Group business continued to be value accretive In FY 20. ABSLI maintained its market share in Individual new business at 4.0%.

Product mix is one of the important levers to drive customer penetration and profitability. During FY 20, ABSLI has reduced ULIP mix, while maintaining its protection mix. Expected maturity benefits of the guaranteed portfolio are entirely hedged.

ABSLI has continued its journey of balanced channel mix with a pan-India presence across 2,750+ cities through 9,500+ bank branches and 395+ own branches, with a base of 82,000+ agents. ABSLI has eight key bancassurance partners (including HDFC Bank, DCB, KVB, Indian Bank etc.) and 460+ direct selling employees. ABSLI continues to drive growth through partnerships and gain operating leverage in proprietary channels. The proprietary channel witnessed an 8% CAGR in productivity over the last two years.

The value of new business is one of the most important value metrics in the life insurance industry, and measures profitability over the long-term. In FY 20, ABSLI achieved a gross margin of 33.8% (PY: 34.6%), while the net VNB margin was at 6.9% (PY: 9.8%). The gross margins are highly sensitive to interest rates, yet ABSLI has been able to largely maintain the gross margin rates with its improved product mix, despite falling interest rates.

The embedded value increased year-on-year to touch 5,187 Crore from 4,900 Crore in FY 19. ABSLI has reported a healthy Return on operating Embedded Value (RoEV) at 13.2%.

ABSLI has one of the best gross margins in the industry, owing to a balanced product mix. The Company continues to focus on increasing the value of new business through growth in protection business, improving customer retention and enhancing cost efficiency.


( in Crore)

GSec(%) 7.4 7.3 6.1
Margin (%) 32.9 34.6 33.8

The quality of business remains a key focus area for ABSLI. There is continuous improvement in persistency across cohorts. The 13th month persistency ratio improved by 507 basis points to reach 83.4%, and 61st month persistency ratio improved by 336 basis point to touch 48.6%. The surrender ratio of policy shareholder AUM has reduced to 8.0% from 13.7% in FY 18, led by increasing in-force policies and renewal premiums. ABSLI has achieved the highest ever claim settlement ratio of 97.54%, driven by robust risk scoring models, data analytics and training to field force. The number of complaints has reduced by more than 50% over the last two years.

Assets under management (AUM) grew at 6% CAGR over the last 2 years from 36,867 Crore to 41,126 Crore led by a healthy in-force book, quality of business and new business growth. ABSLI has posted robust fund performance across categories against internal benchmarks, despite volatile market conditions. ABSLI maintained controlled opex by cost optimisation and productivity, with a stable FY 20 opex ratio at 15.9%, despite lower volumes in March 2020.

Total gross premium grew 7% year-on-year to 8,010 Crore against 7,511 Crore in FY 19. Net Profit After Tax at 103 Crore. No capital infusion has been required in the preceding ten years, as the business is generating adequate internal accruals to fund its requirements. ABSLI solvency margin is at 1.78 times as on 31st March, 2020, against the regulatory requirement of 1.5 times.


While the global pandemic, volatile nature of capital markets and an economic standstill are certain to result in revenue loss in the short to medium term, the industry will make a sharp recovery eventually as structural drivers for growth are in place.

A few factors, which reiterate the healthy growth positioning and recovery for the industry in the next 3-5 years are - resilience by the insurance industry during the pandemic, favourable demographics, increasing investment in the sector and digitisation.

ABSLI is well-positioned to tap into the opportunities of the life insurance industry. It is expected to emerge stronger on the back of its wide distribution franchise, a successful multichannel strategy, a long history of product innovations and operational efficiency. ABSLI will focus on growing faster than the industry and gaining market share with a balance of channel and product strategy.


Figures in Rs. Crore Full Year
Key Performance Parameters FY 18-19 (PY) FY 19-20 (CY)
Individual First year Premium 1,798 1,804
Group First year Premium 2,119 1,854
Renewal Premium 3,594 4,353
Total Gross Premium 7,511 8,010
Opex (Excl. Commission) 1,182 1,272
Opex to Premium (Excl. Commission) (%) 15.7 15.9
Opex to Premium (Incl. Commission) (%) 21.3 21.6
Profit Before Tax 131 137
Profit After Tax 107 103

Aditya Birla Health Insurance Co. Limited (Health Insurance)

Aditya Birla Health Insurance Co. Limited (ABHICL) was incorporated in 2015 by a joint collaboration between Aditya Birla Capital Limited (ABCL) and MMI Strategic Investments (Pty) Ltd. with each holding 51% and 49% shares, respectively. ABHICL commenced its operations in October 2016, and is engaged in the business of health insurance. Its current product portfolio includes unique offerings such as chronic care and incentivised wellness.

Industry Overview

The health insurance segment in India is one of the fastest growing segments in the financial services sector. The health insurance industry registered a premium of 56,792 Crore in FY 20, which translates into growth of 12% year-on-year. Standalone Health Insurers (SAHI) have outperformed the industry and grew at 27% in FY 20, with a gain in market share of 3.2% (CY market share 25.5% versus LY 22.3%). SAHI grew at a CAGR of 37% in last 5 years.

Health insurance companies can be broadly divided into three categories viz.

1) Four PSU Insurers with about 46% market share;

2) Private Multi-line Insurers with a market share of 29% and

3) Standalone Health Insurers (SAHI) players with a market share of 25%.

Health insurance has three broad customer segments:

1) Group segment for Corporates with ~41% market dominated by PSU insurers

2) Retail segment, with ~49% market, which has seen relatively higher growth

3) Government segment, which forms ~10% of the industry. Performance Review

Over the past three years of its business operations, it has created a differentiated ‘Health First business model by moving from the traditional ‘buy and forget to ‘buy and engage. Additionally, its differentiated health and wellness framework also emphasises on its holistic health management approach, focusing on disease prevention and wellness management

The strength of ABHIs business model, which is ‘Health first, was evident from its strong performance across financial and non-financial parameters this year. The Company continues to be the fastest growing Health Insurer, having registered Gross Written Premium (GWP) of 872 Crore in FY 20, growing by 76% year-on-year, covering 8.3 Million lives and translating to above 4x year-on-year in lives covered. The retail business grew by 94% and contributed to 72% in FY 20, against 65% in FY 19.

Since its inception, ABHI has followed a multi-channel distribution model across agency, broking, bancassurance, digital and direct marketing channels. It expanded its footprint from 800+ locations in FY 19 to 2,000+ locations in FY 20. The agency network consists of 24,900+ agents across 41 cities, with 76 branches. The bancassurance channel with nine bank partners, has delivered very strong growth in FY 20, contributing to 64% of retail GWP.

ABHI has broad-based its channel mix with a sizeable Gross written premium (GWP) contribution from all channels, and will continue to create sustainable distribution capacities. A key strategic priority for distribution is to execute a digital transformation of its business model. ABHICL continues to invest in digital technology that provides simple and effective support for agents and partners across sales, servicing, training and recruitment, besides through deeper systems integration with our bancassurance and digital partners.

ABHI aims to deliver a distinctive, personalised, and meaningful experience for our customers. As a health influencer, it actively engages with customers to help them understand the benefits of living well to prevent illness through its health management framework.

ABHI has enhanced its retail product suite with a focus on diversification, to capture market that is currently untapped by the industry. It has a comprehensive product suite, which includes Group Activ Health, Retail Activ Health, Retail Activ Assure, Retail Activ Secure, Group Activ Secure, Group Health Secure and Super Health-Plus Top-Up. It is constantly working towards segmentation and mapping of customers and distributors, with the right product segments.

In terms of its service delivery model, ABHI has built a robust platform and tech-enabled health and wellness ecosystem, for providing a seamless experience throughout the customer journey. It has empanelled 6,500+ hospitals to enable cashless services across 750+ cities.

ABHI continues to take a leadership stance on its ‘Health First business model, and has devised the industrys first incentivised wellness and chronic management programmes embedded in our products. Disease Risk Management is integral to its vision and differentiated health first business model. It conducts proactive health assessments and health check-ups, with 46% of its customers undergoing these check-ups. This is a significant achievement in terms of customer engagement, compared to the trend witnessed in the industry, consequently leading to increased retention and persistency.

The quality of the book remains healthy. This is demonstrated by the claim and combined loss ratio, which has significantly reduced year-on-year. The overall claim ratio has reduced to 59% in FY 20, against 72% in FY 19, while the combined ratio has reduced to 134% vis-a-vis 149%. ABHI has achieved a combined ratio of 117% in Q4 FY 20 vis-a-vis 129% in Q4 FY 19.

In FY 20, ABHI underwrote a gross premium of ?872 Crore compared to ?497 Crore in FY 19. The retail business contributed ~72% of the total GWP in FY 20, of which 93% was issued through the digitally enabled mode. ABHI posted a net ? 246 Crore loss in FY 20 in funding new business growth and creating a distribution network.


Despite global near-term uncertainty due to COVID-19, the structural demand drivers are expected to continue supporting the long-term and sustainable growth of the industry. Increasing health awareness and growing insurance needs, fuelled by high out-of-pocket expenses, coupled with steep retail healthcare inflation, rising income levels and increasing incidence of chronic diseases, remain the key growth drivers of health insurance.

SAHI players are expected to grow higher than the industry average in the next 3-4 years. ABHI, driven by its health first business model backed by a strong brand, unique Customer Value Proposition (CVP), diversified distribution network, digital ecosystem and capabilities is well ahead of the curve to exploit the growth opportunity. Going forward, the Company will focus on - 1) Customer acquisition and retention at scale; 2) Health Risk Management and 3) Health Management - as the key pillars to drive growth.


Figures in Rs. Crore Full Year
Key Performance Parameters FY 18-19 (PY) FY 19-20 (CY)
Retail Premium 325 630
Group Premium 172 242
Gross Written Premium 497 872
Revenue 500 803
Combined Ratio 149% 134%
Profit Before Tax (257) (246)

Aditya Birla Insurance Brokers Limited (General Insurance Advisory)

Aditya Birla Insurance Brokers Limited (ABIBL) is a leading composite general insurance intermediary, licensed by the Insurance Regulatory and Development Authority of India (IRDAI). It specialises in providing general insurance broking and risk-management solutions for corporate and individuals alike. ABIBL also offers reinsurance solutions to insurance companies; and has developed enduring relationships with Indian and global insurers operating in India and many others in South Asia, the Middle East and Southeast Asia.

Industry Overview

The total general insurance industry recorded a premium of ~?1.89 Lakh Crore in FY 20 - a notable ~12% growth over that of FY 19. This growth was largely led by a growth in Fire, Motor TP, Health Insurance (Retail & Group Insurance) and Crop Insurance. For the first time in several years, the Property segment (Fire & Engineering) witnessed hardening of rates in select industries, spurred by the IIB rates released by GIC Re due to sustained underwriting losses in that segment.

Performance Review

Aditya Birla Insurance Broker Ltd. (ABIBL) has been consistently outperforming the general insurance industry and gaining market share. Its non-life direct premium placement grew by 12% year-on-year from ?3,681 Crore in FY 19 to ?4,121 Crore in FY 20. Two main contributors for premium placement, the Health Insurance and Motor Insurance segments, grew by 22% and 9%, respectively. Its market share in direct non-life industry premium has shown marginal growth from 2.17% to 2.18%.

ABIBLs overall premium grew by 13%, from ?3,770 Crore to ?4,242 Crore, revenue rose by 15% from ?449 Crore to ?515 Crore and profitability increased by 54% from ?27.35 Crore to ?42.10 Crore in FY 19 and FY 20, respectively.


Insurance broking as a channel, represents customers and not insurers. This unique role of the broking channel is recognised by the regulator, insurers and customers. Despite the robust growth over the years, penetration and density have continued to remain low. Based on the industry and business performance mentioned, the broking channel is still evolving and needs to meet risk management requirements of customers comprehensively.

ABIBL will continue to focus on expanding its customer base in a cost-effective manner to grow its business. Various initiatives have been implemented for promotion and growth of the motor insurance business, with an increased focus on targeting renewal and rollover policies, and emphasis is being laid on enhancing corporate business, by targeting large corporate clients through its sector specific approach. Further, ABIBL aims to utilise the post-COVID scenario to capitalise and build on its digital assets, which are used across all the lines of business by several stakeholders.

Aditya Birla Money Limited (Stock & Securities)

Aditya Birla Money Limited (ABML) is a broking and distribution player, offering equity and derivative trading through the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), besides Currency Derivative on (MCX-SX ). It is registered as a Depository Participant with both NSDL and CDSL, and provides commodity trading on MCX and NCDEX through its subsidiary. ABML launched Indias first end-to-end Aadhar-based paperless e-KYC platform for account opening and onboarding.

Industry Overview

The broking industry had a decent FY 20 in terms of Average Daily Turnover (ADTO) although stock prices witnessed sharp correction across the board. On a structural basis, the shift from physical savings to financial savings continues, wherein the equity market participation, could increase significantly in forthcoming years considering its substantial under-penetration.

Performance Review

Aditya Birla Money Ltd. (ABML) continued to focus on the retail investor segment, cost reduction, technology and client acquisition.

ABML total revenues for FY20 stood at 171 Crore, led by higher broking income. Profit Before Tax improved from 14 Crore in FY 19 to 17 Crore in FY 20.


The outlook for the industry is dependent upon key factors such as domestic and global economic growth, buoyancy in primary markets, lack of alternative investment opportunities and technological up-gradation.

A broad-based macro-economic recovery will lead to improved corporate profits, thus supporting higher stock prices and positive equity market sentiments. While FIIs have sold lately, Indias structural long-term attractiveness will attract foreign investors.

ABML will continue to focus on technology, drive client acquisition, widen its business partner network, rationalise cost and provide efficient trading tools and value-added research advice to its clients. The overall strategic focus is to create product and service differentiators across all segments.


In a rapidly changing political, economic, regulatory and financial environment, ABCL continued to leverage on its strong risk management capabilities during FY 20. The approach to risk management is to proactively look at emerging risks in the context of the overall economic environment.

Due to varied nature of various businesses under its fold, there is no ‘one-size-fits-all approach towards risk management. Each material subsidiary carries out its own assessment of credit, market and operational risks, which seamlessly combines with the aggregate oversight, control and governance, exercised at a central level, to ensure that the financial conglomerate risk is managed effectively.

Against the backdrop of this credit environment and general macro factors playing out across sectors, we remain confident of our integrated risk and governance approach, which has demonstrated the capability to withstand economic and credit cycles, as well as dynamically adopt new scenarios and learnings into the risk and governance framework. We are well positioned to accelerate our growth across all lines of business, given our strong risk architecture, coupled with our strong management capability, robust capital and liquidity management and high governance standards.


The Company has in place an adequate internal audit framework to monitor the efficacy of internal controls with the objective of providing to the Audit Committee and the Board of Directors, an independent and reasonable assurance on the adequacy and effectiveness of the organisations risk management, internal control and governance processes. The framework is commensurate with the nature of the business, size, scale and complexity of its operations.

The internal audit plan is developed based on the risk profile of business activities of the organisation. The audit plan covers process audits of different functions. The audits are carried out by an independent external firm, The audit plan is approved by the Audit Committee, which regularly reviews the compliance to the plan.


Certain statements made in this Management Discussion and Analysis may not be based on historical information or facts and may be ‘forward-looking statements within the meaning of applicable securities laws and regulations, including, but not limited to, those relating to general business plans and strategy of Aditya Birla Capital Limited (‘ABCL, ‘The Company or ‘Your Company), future outlook and growth prospects, competition and regulatory environment, and the managements current views and assumptions which may not remain constant due to risks and uncertainties and hence, actual results may differ materially from these forward-looking statements.

This Management Discussion and Analysis does not constitute a prospectus, offering circular or offering memorandum, or an offer to acquire any of the Companys equity shares or any other security, and should not be considered as a recommendation that any investor should subscribe for or purchase any of the Companys shares. The Company, as such, makes no representation or warranty, express or implied, as to, and does not accept any responsibility or liability with respect to the fairness, accuracy, completeness or correctness of any information or opinions contained herein.

The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent developments, information or events or otherwise. Unless otherwise stated in this Management Discussion and Analysis, the information contained herein is based on the management information and estimates. The financial figures have been rounded off to the nearest Rupee One Crore. The events and developments up-to 31st March, 2020 have been covered in the Management Discussion and Analysis.