HDFC Life Insurance Company Limited (HDFCLIFE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the HDFC Life Insurance Company Limited H1 FY 2021 Earnings Conference Call. Joining us on this call today are Ms. Vibha Padalkar, Managing Director and Chief Executive Officer; Mr. Suresh Badami, Executive Director; Mr. Niraj Shah, Chief Financial Officer; and Mr. Srinivasan Parthasarathy, Chief Actuary and Appointed Actuary. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to MD and CEO, Ms. Vibha Padalkar. Thank you, and over to you, ma'am.

Thank you. Good evening, everyone. Thank you for joining us for the discussion on our results for the half year ended September 30, 2020. Our results, including the investor presentation, press release and regulatory disclosures, are already available on our website as well as that of the stock exchanges. I have with me Suresh Badami, Executive Director; Niraj Shah, CFO; Srinivasan Parthasarathy, our appointed Actuary; and Kunal Jain from Investor Relations. I will run through the key highlights of our H1 FY '21 results and would be happy to take questions post that. Starting with an update on business performance. While we remain sensitive about the health impact and loss of life due to the pandemic and continue to focus on employee, customer and partner safety norms, opening up of the economy has led to a pickup in activity levels on the ground. This has also resulted in a marginal uplift in household income and spend. Insurance as a category has emerged stronger as a vehicle to protect one family and realize their long-term financial goals. Customers are more active in decision making, resulting in traction in individual business. Our market share in terms of individual WRP has increased by 235 basis points from 15.2% in H1 FY '20 to 17.5% in H1 FY '21. We have neutralized the quarter 1 degrowth and have recorded a growth of 2% during H1 FY '21. This is on a base of 35% growth last year. Our performance compares well against the private industry, which degrew by 11% on a base of 16% growth in H1 last year. Our market share for the group and overall new business segments, amongst the private sector players, was at 27.4% and 23.3%, respectively. We sold over 4.4 lakh policies, registering a Y-o-Y growth of 6%. Inflows into conservative long-term savings products has picked up this quarter with customers willing to commit to higher ticket sizes compared to Q1. Our innovative and wide bouquet of products continues to address needs of our customers. Our product mix remains balanced with ULIPs at 23%, nonpar savings at 30% and par at 33%. We continue to see growth momentum in Individual Protection APE. The growth for H1 FY '21 stands at 38%, with a share of protection increasing from 6% last H1 to 9% for H1 FY '21. Our individual and group annuity business saw strong growth in H1 of 38% with annuities contributing over 5% of our individual APE. Renewal growth has remained strong at 22% with normalization being witnessed in our premium collection rates. However, we continue to monitor collections closely and remain watchful about emerging persistency trends. This quarter, new business margins have seen an improvement on sequential as well as year-on-year basis on the back of our return to growth, favorable product mix and costs being kept under control. The NBM for H1 FY '21 stands at 25.1% with the value of new business at INR 838 crores in H1 FY '21. Our operating return on EV is 17.6%. While the number of COVID claims is increasing month-on-month, the total number of claims is within our estimates. Non-COVID claims have been lower and we continue to monitor any delays in claims reporting. As of September 30, 2020, we have received 418 COVID-related claims on the individual business and 50 claims in group business. The COVID reserve of INR 41 crores created by us in April 2020 remains adequate. We are monitoring overall claims trends closely and will review adequacy of this reserve in H2. Our profit after tax grew by 6% to INR 777 crores. New business strain was offset by sustained profit emergence from our back book, which grew by 10%. Our solvency position remains healthy at 203% compared to 190% as on June 30, 2020. As indicated last quarter, we successfully raised the sub-debt of INR 600 crores, which has augmented our solvency position by 14%. Next, on channel performance. We continue to see strong growth in the bancassurance and online channels, which have grown at 11% and 14%, respectively, during H1 FY '21. Within bancassurance, growth at HDFC Bank continues to trend well. Agency channel saw a pickup this quarter, recording a growth of 6% for quarter 2. Our Agency Life program has seen higher engagement in the last 6 months with appreciable growth in attendance for the daily sessions, increase in number of qualifiers for the program as well as productivity of the qualifying agents. We continue to strengthen our distribution and expand the breadth of our relationships by adding newer partners. We are delighted to have entered into a bancassurance partnership with Yes Bank in quarter 2. Moving on to product performance. We remain focused on driving a balanced product mix, and our suite of innovative products is enabling us to effectively meet customer needs. Term protection grew by 38% over previous year to INR 241 crore. While Credit Protect business has degrown by 53% for H1 FY '21, quarter 2 has seen a sharp movement over quarter 1 with a degrowth of 36% in quarter 2 as compared to 74% in quarter 1. Some of our larger partners are approaching FY '20 disbursement volumes. Next, on technology. Being cognizant of the current environment and the increasing comfort of our customers to connect with virtually, we had launched WISE, our video-based sales enablement tool in June. This tool, which creates the closest impression of a face-to-face interaction at new business stage, has seen good traction in Tier 2 and 3 towns as well. Given the higher adoption of WISE, we have extended the hybrid model of digital plus human interaction to servicing via our tool called [ WeServe ]. [ WeServe ] is an industry's first video-based digital model of servicing. It allows our branch staff to service customers remotely and solve their queries and requests via a virtual interaction. [ WeServe ] also ties in with our branch virtualization journey. We have seen increasing trends in online payments by customers, whereby about 95% of the policies are being renewed digitally, accounting for 88% of renewal premium being done via digital modes. To conclude, our focus remains on our long-term strategy of building a sustainable and profitable business and adding value to all key stakeholders. On the back of the improved economic momentum, we are optimistic about being able to sustain our performance across key metrics for the year. The detailed disclosure on our results is available in our investor presentation. In the end, I would like to thank all of you for your continued support of our company. We are happy to take questions now.

[Operator Instructions] The first question is from the line of Suresh Ganapathy from Macquarie.

Vibha, at the start of the year, when you went to present to the Board, you said that I don't want to give any targets because it's obviously quite an uncertain year and the best case outcome could be a flat growth, and you guys have already delivered a 2% growth in the first half. So I mean you really think you can deliver a double-digit growth or any guidance that you can give? And how much of this is all pent-up demand because it is still not very clear whether all these things are sustainable heading into the second half, right? So that's my first question. Maybe I'll ask the second question later. Yes.

Yes, Suresh. Yes, I did say that we really don't know what the outlook is going to be like. And we are very happy that end of H1 we have wiped out all the degrowth. Yes, we feel a lot more positive now. But having said that, when you see what's happening in Europe, especially and the rebound, we still want to maintain a cautious outlook. Yes, we will beat the industry growth quite comfortably like we have been doing, and our market share should continue to inch upwards. But I don't want to remove this caution element. And so would still hesitate in terms of really saying, is it going to be double digits or is it going to be high single digits because of this unknown unknown. To your second point on the pent-up demand, not really anymore, Suresh. We are seeing new conversations. So it's not even that conversation that started pre-COVID that we are concluding now. These are completely new conversations that we are having with new customers, first-time customers as well as repeat customers. So it's a mix fixed bag of all sorts of customers and also younger customers, older customers in terms of annuity. I think what really does help is to have various conversations because we are really [ complementing ] various products, and that's really our key focus on having a balanced product mix, and that's really come in very, very handy during a lot of volatility that we are seeing.

Okay. The second question is what is the need to raise sub-debt and raise your solvency margin when you're already at 190% plus? I mean, what was the need to do that?

Because if you remember, we went down to 183% and -- so we did not want -- and that was largely driven by the market fall end of FY '20. And we didn't want to distract any kind of growth at that time, Suresh. So we ended 184% end of -- not 183%. And so we said at that time that you know what, we don't want to be distracted because growth is going to come back. And that time, we don't want to say, okay, doubling a little bit on capital. So we thought, let's get it out of the way. Fortunately, markets have done better since then. And so we are in a fairly comfortable position, but that was really the rationale rather than can we write more business, and it was just a volatility that we will see.

Sure. Just 2 quick more questions. Your view on the standard term products, which the IRDA is proposing, do you think it's really an addressable gap -- market that you can address? Point number one. And the second question is, how should I look at this INR 41 crore reserving? You have had some 500-odd claims. Does that mean that the per ticket claim is going to be less than INR 10 lakh so that the INR 41 crore reserving is sufficient?

Yes. So on the first one on standard term products, the way we see it is that anything new, it's not that regulators saying only have standard terms and don't sell others. We can continue to have other products. The standard term is very similar to our standard term product, except that it's slightly better that there is a 45-day waiting window period. So it allows us -- because this ticket size segment of below INR 25 lakhs, we have to be cautious. It's not that we haven't tried in this segment before, but the claims experience was not very favorable. Now with this exclusion, say 45-day exclusion period, we might be able to price it sensibly and also be able to cover lives in that category. So it will be kind of an add-on. Srini, you want to add anything on the standard term?

Yes. So this -- Suresh, this new product from IRDA also allows for a 45-day [ DN ]. So there's a waiting period, which doesn't -- which is not allowed in any of the standard life products. And since most of the earlier adverse claim experience that we saw when we were opened to less than INR 10 lakhs or INR 25 lakhs, there are a lot of anti-selection. There's a lot of fraudulent claims. So with this 45-day [ DN ] most of this anti-selective nature can be eliminated. So we are a little bit more positive about this product. And also, this will create a lot of visibility is what we personally feel that with the standard sort of being there, like how PMJJBY when it was introduced a few years ago that created visibility for the term space. Again, there will be this product being out in the market now and will create added visibility for the terms.

On your second question, about INR 41 crores reserving, actually, all the regular claims whether COVID or otherwise, we have a reserving in the normal course of business, and it is within our actuarial assumption, Suresh. So from time immemorial, we have been having a positive operating variance on mortality. So that is anyway covered. This INR 41 crores is over and above which we have not yet dipped into, just in case the COVID claims start galloping. But right now, at least up to end of H1 what we have seen is that while COVID claims have gone up versus quarter 1, other claims are lower than what we have -- what we would have expected. And that very well could have been because people are largely sitting at home. And other deaths that would have happened in the normal course are lower than what we have factored in. So there is a nullifying impact. We want to see the INR 41 crores because just from abundant caution point of view. And we'll see -- we really don't know how it's going to emerge down the line, but we are reasonably sure that it would be inadequate for us in case some spike starts happening.

[Operator Instructions] We take the next question from the line of Prayesh Jain from Yes Securities.

Congratulations on a very good set of number. Firstly, on the economic variance, if I look at the EV walk through, in Q1, we had an economic variance of INR 11.5 billion while for this -- for H1 it reduced by around INR 2 billion. Why would that happen?

Srini, you want to start off?

Sorry, I couldn't hear the question properly. There was some background noise.

Economic variance, quarter 1, INR 11.5 billion, H1 reduced.

Right. So that's mainly because of the change in the slope of the curve. So the -- from -- compared to March position, the yield curve actually fell as of 30th of June, but it rose slightly at different durations of the yield curve at different -- by a different extent. So that is the main reason for the slight fall in the investment variance compared to June.

Okay. Okay. And the second question was on the rising share of single premium writing. Do you think that -- how would that play out with regards to the future renewals in the next year -- next year onwards?

So that is on the back, largely in the individual space because of annuities. And this has been a stated objective of our belief that there's a huge potential for growth in the entire retiral space and very much in line with what we have been working on. And that's why you see the 38% growth in our annuities business, both individual and group. In terms of renewals, so we see it in 2 parts that our individual business, regular premium should anyway be doing well, which thankfully, it has grown by 21%. But if you were to look at annuities, very accretive to business and the very right product to be selling to senior citizens. So it's really both rather than one cannibalizing or having an impact on the other one.

Just one more question here. What would be your persistency on the ULIP book in particular as compared to what you would have assumed at the beginning of the year? And do you see any major assumption changes that would come across? That would be my last question.

So I'll start off and maybe Srini can add. So we look at persistency -- recalibrating persistency assumptions once a year, and we will do it sometime in March. We did in March of last year, and we did tighten a lot of our assumptions, especially, specifically unit-linked assumptions. There was some strain in the month of April due to COVID, which we said we are watching that space very closely. But a fair amount of recovery has happened to near pre-COVID levels as we exit in September.

The next question is from the line of Adarsh Parasrampuria from CLSA.

Vibha, the question was on the mix. Like the first quarter, we have continued to see strong momentum in par and share. So if you can explain what's keeping there in the product and the toggle between, say, a nonpar product versus a par product in terms of VNB margin profile?

So Adarsh, our Sanchay Par Advantage has done very well, and one of the reasons is some of the features in there, such as your cash back. So people start seeing their money faster than waiting much longer after 5, 10 years. And given COVID, that cash flow has also been one of the prime considerations. So it has done well. Also, there is an equity upside in par. They all -- there usually is as against with a product under the nonpar construct. So there are people who also like that part of nonpar part of par products. And that's why you see, even at, for example, our bancassurance partners have done reasonably well with this particular segment. So we have been lucky that just after this particular product was launched, Sanchay Par Advantage, with this volatility it was absolutely correct in terms of a risk-on approach that customers have been taking as against some of the other savings products like unit-linked product.

And Vibha, how does this toggle right between -- like while you don't intend it, but from a number perspective, nonpar would be down and par would have gone up, it would've normalized I would say. So how does that toggle in terms of VNB margin profile behave? Because eventually, at the end of the day par would still be 90-10 sharing, so just wanted to get a perspective there.

Still significantly better than unit linked. So it's not so much just that nonpar is being reduced and par is going up. Yes, some of that is happening, but also unit linked is being reduced and replaced by par. So there is a trade-off. And that's why what is important is that we take an overall holistic portfolio-based approach as against just one segment that is doing well on the margins. And so far -- at HDFC Life, it is not just protection that is a high margin product, but even a par can do well, even annuity can do well and be very accretive to overall margin.

Got it. And my last question is on protection pricing. If you can just talk about what's happening. I believe the last 1 or 2 months, there has been no change, and most players barring 1 still have to take a hike. And are viewing the margin in the context of large individually hike protection price is fairly very, very strong, I would say, right, 25.1%. So if you can talk about what's happening on the pricing side.

Yes. That's more or less settled down now, Adarsh, because right at the beginning, we said that we will take a nuanced and calibrated approach to not one extreme wherein like we saw some players who said I will pass on whatever I suffer from reinsurers and the other extreme was that, I will do nothing. I will just be status quo. We were somewhere in between, and we looked at a risk-based approach. And so without repeating all of that, suffice to say that, that approach worked well because people who took the view that I won't change, prices have now changed and so have others who have passed everything on now have launched protection, say, at a INR 1 crore cover level, which is cheaper. And so it's kind of converging towards the middle. So yes, it's no longer an issue. I think we need to stay true to what is the claims experience that we're getting and how do we balance both top line and bottom line as well as the fact that we have to stay competitive in a multi-tier environment. So it can't just be in isolation. So we -- in our own minds, we have moved on now. There are other products also which we have filed. And as we get them approved, that should give us even more flexibility on pricing.

So just to close the lid here. Are we saying that we've done all the hikes or there is product approvals to come through and the full hikes will come in the next few months?

So as of now, we are not hampered by the fact that our product approval is expected. We're not hampered by it. What I'm saying is that with the new product, it will give us even more flexibility to take a hike if we find that certain part of our claims experience are worse off than what has been factored in the actuaries. So it just gives more flexibility. But as of today, we are fine.

[Operator Instructions] The next question is from the line of Sanketh Godha from Spark Capital.

So maybe in FY '20, we had a little growth in annuity business, but it has revived very strongly. Just wanted to understand what's the strategy there, again, we are trying to push a little more deferred annuity and/or the focus is on immediate annuity. And if you can give a breakup into immediate, deferred and group annuity, that would be useful. And the second question which I have is if I look at the growth in the quarter 2, largely, the growth was driven by banca, that is banca channel it grew -- individual grew by 38 percentage, while others like agency and direct have been muted low single digits. So just wanted to understand that have we gained the significant market share in HDFC Bank which has led to this kind of a growth?

Yes. Maybe, Niraj, you can take the first part on annuities, and Suresh, you can follow.

Sure. So Sanketh, annuity portfolio has been, as you know, the sources of this business are fairly diverse and the mix is very similar to what it has been in the previous quarter in terms of immediate and deferred. Our deferral -- average deferral period is still sub-4 years, which has been in the range previously as well. So the average age is about 59, 60. And more than 95% of the business continues to be in return of premium annuities. So nothing structurally that has changed in this. It's just that sources of business are now kind of expanding. The NPS asset management that we have through our subsidiary, that is something which has now started to become a reasonable source. Also, what people are doing in terms of deploying the discretionary savings, not necessarily coming from the pension policies that are vesting. Just discretionary funds, they are thinking about how they can use that to actually lock into an interest rate when they are actually seeing interest rates only going down from here. So that's what has actually resulted in this demand. And like we mentioned previous quarter also when there were questions around, why is the growth not there? We're honestly not thinking about this, whether it's annuity or protection from a quarter-to-quarter basis. We believe both of these are multi-decade opportunities. So 1 quarter here, 1 quarter there won't really make a difference. People do see value in these kind of solutions. So we do see structural demand for both of them.

Got it. On the banca channel?

Yes. So look, I think we have been looking at growth across the channels. It's not that we've been focused on one particular channel, whether it's banca, agency, broking or online direct. The fact is that, look, we are supported by partners like HDFC Bank, which has shown tremendous growth. I think they've leveraged multi-tier. There has been channel nuances in terms of how the growth was in Q1 and Q2. So for instance, the banks remained open being most of the branches were back up and running being part of essential services. Asset business was probably a little lower, so they're focused on life insurance as one of these themes was good. They have been doing a lot of work in terms of looking at customers across all our partners and especially HDFC Bank. The agency business did take a little bit of a hit in Q1 because many of our agents are of the older profile. We had kind of communicated to our employees as well as partners that, look, we need to play safe. We don't want you going out, move to virtual. So while in Q1, the agency business was probably a little lower, they came back in Q2 because business as usual started to happen. But in the overall context of things, the banca partner with the branches open, with the kind of focus that they have brought, a lot of analytics related work which happened. And most importantly, the amount of digital that had got integrated with a lot of our banca partners that came into place. So while some of the channels like broking maybe are picking up now, a lot of tech integration, a lot of preapproved, that kind of work, which we had been working on for quite some time, gave us the continued momentum. There was, of course, this customer interest in protection, which gave us huge growth in Q1 and continued in Q2.

Yes. But just if you can put the market share number in HDFC Bank, it would be great.

Yes. So the overall -- you're talking about our market share in HDFC Bank? Yes, we continue to remain in the 65% to 70% kind of a range. So that has been consistent for us, right? And we have been actually focusing on increasing our protection business also at HDFC Bank. So that continues to be stable with a very, very good product mix.

Got it. Got it. Just if I can squeeze one more. On protection business, just wanted to understand that the 38% growth -- Individual Protection, 38% growth mostly have reported in the first half. If you can break down that waterfall 38 percentage into the price side, increasing the contribution of LP over RP and NOP, number of policies sold.

Over here, Sanketh, it is actually -- it is not such a simple math. It gets more evolved and each month is a different -- and through different channels is a different kind of a pattern that we see. Suffice to say that, yes, our LP is -- continues to grow. Our return of purchase prices remain more or less similar. And somewhere in between is RP.

The next question is from the line of Deepika Mundra from JPMorgan.

Just on the protection piece, wanted to follow up you mentioned about the calibrated approach to business side. But does that imply that what is marked here digital protection, your margins may be slightly lower. And if you could just -- while we understand the growth aspect on the margins and for the protection business, could you talk about the slightly more longer-term point of view or how do you see the margin panning out there?

Yes. So Deepika, margins actually is more than only the protection margins because, for example, our credit protect margins have -- are now better than what they were last year despite perhaps NBC being smaller because of degrowth overall in the level of disbursement and hence the coverage. So when you look at just the margins, there are many things that are going on in here. We also talked about some of our other strategies like our par replacing unit linked and so on. Our annuity is growing very well. All of that is contributing to our margins as against only what's happened on protection and pricing.

Okay. And just one more question from my side. On the back book surplus purpose, I mean, firstly, thanks for providing the disclosure consistently. On that front, I mean, you've seen a slowdown in the first half now. What will it take to return back to the earlier trajectory of the growth in back book surplus?

Well, our back book surplus has grown by 10%. And under these circumstances, I think we think that it is reasonably robust level of growth. What we are seeing is that the signature of our product has been slowly changing. So for example, last year, we did sell fair amount of Sanchay Plus. Instead of Sanchay Plus, if we had sold some other segment, say, like unit linked, maybe the unwind would have happened faster as against the nonpar savings that unwind. So while they're unwind, all things being equal, like persistency, et cetera, will happen, but the unwind will happen over a slightly longer number of years. And that's why you're seeing the 10% as against, like I said, had we sold something else, that would have been a higher number. But given the -- if you calibrate this with where persistency is and we are right up there and improving our 13-month persistency, no real reason in terms of -- apart from the change in underlying product construct of delayed unwind to P&L.

The next question is from Harshit Toshniwal from PremjiInvest.

Two questions. So one is on the participating product. So when we look at the tenure of the participating product, we are now -- it's around 40, 45 years versus around 10 to 15-year product, which we used to do earlier. Now typically, we would understand that with that longer duration and that longer float subsequently, we should -- these products should command much higher margins than a typical par. So again, quantification is difficult. But I just want to understand that does elongation of the tenure from 15 to 45 years, does that give the big kicker to the margin? That's the first question. And the second one is on the protection part. Now this -- for the industry in general, we are -- the limited pay product mix is increasing overall. Now what impact does this have on interest rate sensitivity for protection products? Because since the lapsation at the later parts of the linked product will be much lower intuitively compared to a regular plan. In that case, does interest rate -- this component keeps on increasing in limited pay versions?

On the first one, yes, you're right. We do get a margin kicker on that. And that's clearly what I -- the point I was making with the earlier question that there are lots of these levers that help us and some small, some big that help us get to the kind of margin ambition that we have. On the second part on interest rate sensitivity, Srini, you want to take that?

Yes. So Harshit, yes, in limited pay, there is a little bit more interest rate sensitivity than regular pay. But having said that, since the limited pay is usually, I mean, what gets sold is only 5 years, it is a little bit easier to manage. It's not like you are selling a 20-year of limited pay. So after 5 years, you -- whatever money you had the collect from the customers, already collected it's in your bag. So it's beyond that, it becomes like a single premium. And yes, with appropriate hedging and various other strategies that we follow, it is manageable. So yes, but technically, you're right, the LP has the higher interest rate sensitivity than RP.

Got it. But it is not -- so since it's 5 years, then it's not a material interest rate risk at the later end of the curve?

Absolutely. It's only 5 years.

Yes. Okay. Got it. And just one more thing on the -- Srini, maybe on the first question on the participating product. So with the increased float, the margins definitely improve. But is there any specific risk also which gets added on when we -- because in par, it's a pass-through. So is that margin improvement comes without any interest rate risk going up or any other supplementary risk going up?

No. Actually, if anything, since this is a cash bonus product where bonus is being paid out every year, unlike a reversion [ payments ] share that gets paid much later, the accrual to the shareholders happen a little bit faster also here. So especially relatively, in my view, slightly less risky. And since like you rightly mentioned in a participating structure, the -- both upside and downside is shared with the policyholders there is not so much of a risk to the company.

The next question is from the line of Arav Sangai from VT Capital.

Hello? Hello, am I audible?

Yes, please go ahead.

Firstly, I hope all is good at your end.

All good.

Secondly, I have a few questions. So ma'am, the first of them being that at the start of the year, again, we were very, very worried about the persistency ratio in the coming time. But now when we look at the persistency, like it is holding up or even there's some kind of improvement. So I remember, if I'm not wrong, that around 40% of our industry's premium come from self-employed people and the areas where we are concentrated, it is very much affected by the pandemic. So what is driving this sustenance in persistency? If you could throw some light on that.

Yes. So this has been -- because we have flagged it off internally as something to closely watch, we've been reaching out to our customers and explaining to them well in advance before the premium payment that they should be paying their premium and not lapsing it. So I think that has helped big time. Also reaching out in advance and ensuring that there is an SI, standing instruction, or ECS mandate so that collection becomes easier. Also, the combination is that in terms of having different channels and different, like you've mentioned, self-employed, that kind of diversification helps us because sometimes there is not all your eggs in one basket. It's not just a homogeneous set of customers and different customers having different compulsions also helps cushion some of these potential surrenders that could happen. So all of that means -- we have management call that is looking at this and perhaps that's the only metric that we look at every week, and senior management looks at this number. So that kind of a focus means that we are going after every customer, every rupee to also counsel them not to surrender. So all of that has helped, I think. So really, the April month that we struggled to collect, that we are still struggling to collect it. And I don't see how we will make up for that loss. But after that, like when we ended quarter 2, it is almost close to pre-COVID levels of collection.

Right. Ma'am, just one -- like 2 more questions on. Firstly, the business strain. So if I look at the disclosure that you have provided on your slide where you show the back book surplus and new business strain. If I calculate the new business strain as a percentage of back book surplus, it has gone up for this particular half year, whereas my understanding was that like if we are selling more of par compared to the nonpar that we sold last year, my strain should have been lesser. So am I understanding something wrong here?

Yes. I guess some nuances there. First of all, the strain and what the back book, there is no correlation there because you could be selling very different products. What you have is back book generation is what you sold last year and before that. So seeing the 2 in tandem as a percentage is just that it is a percentage and not really a -- that's point one. Second point is that we also sold a lot of protection, and that also has a fair amount of strain. So while you're right about par not having the strain, but the protection part does have a strain. And that has had the offset on that. Srini or Niraj, do you want to add anything on that?

So in addition to what Vibha just mentioned, while par might be low strain or no strain, all other product categories have some sort of strain or the other, either expense or reserving. So what you should actually compare is for period-to-period new business strain and that has, obviously, if you see is because of the change in product mix. So it's not really in terms of how much existing business is growing and how much your new business strain is growing. You should see it in light of the strain in the corresponding periods or in terms of the product mix of the new business that's been sold.

Right. Ma'am, just one last question, if I can squeeze in. Is that protection now -- the whole industry has been focusing a lot on protection and in the coming years, protection might become a very important component of the whole business. So are we seeing any change in the risk underwriting parameters as well? Because like whatever channel checks I did, my understanding is that there's a lot of demand for protection, but we have tightened our standards, underwriting standards because of the heightened risks. So are there any changing risk parameters which you'd like to throw up on like which will be important in the coming years when protection becomes a very significant portion of our book?

Yes. We always have dynamic underwriting parameters, and they keep changing depending on where and what kind of risk we are, our risk monitoring team is observing. So today, it could be in a particular geography, it could be a particular age group, it could be what kind of self-employed or a combination of a lot of these factors. And we might either put extra filters or we might actually have to stop doing business for some time and so on. So this is par for the course. And nothing unusual that we are seeing now just because there is more focus because HDFC Life has always been focused on protection. Others might have started focusing on it now, but -- and that's why perhaps it's not anything new that we have been doing in these 6 months that's different philosophically than what we were doing previously.

The next question is from the line of Mayank Bukrediwala from Franklin Templeton.

I have 2, 3 questions. I'll just put them. First is on persistency on the nonpar business. Can you give us some sense how it is stacking up versus what our expectations were? Second is on the OpEx growth. So compared to last quarter, this quarter OpEx growth seems to be flat. What is our view for the full year OpEx growth? Are we like -- given that we are beginning to see growth, are we likely to start investing back into the channels? And the last is just a data question. Is the overall growth level on our non-HDFC Bank channels similar or higher than the HDFC Bank channel?

Okay. On the first one on online. While as of now, it has been in the range of about 14%, but quarter 2 has been a little bit more muted than quarter 1. And some reasons there. One is that whoever in online and largely is unassisted, wanted to buy insurance policy when COVID was just rolling out bought the policy. And also younger population, clearly, the Google searches showed this that that there was an uptick in search for both terms as well as HDFC Life. Again, that culminated into policies being bought. So that happened in quarter 1. In quarter 2, there were a couple of things. One is that those who did not buy it in quarter 1 and wanted to buy it but still could not cover the hurdle of medicals, perhaps still remain in that bucket. And given that our telemedicals are now have been sub about 45%, so that, again, there was a large chunk that was stuck wherein medicals were not done. And clearly, they're not going to go to in person to get their medical done. So that got stuck as far as term is concerned. Another aspect that happened was savings started coming back, which was not so much the case in first quarter. So people started focusing on buying some assured through proxy of savings. So even the ticket sizes are going up and savings products saw an uptick. So all of that meant that there was some level of muted behavior on -- in the online space. But we would expect that to pick up. See, it's not going to be a rearing success story of when you're seeing, say, 40%, 50% growth. It is going to be robust growth. And that's how we would see it because wherever in any channel that we see growth that is unexplained, usually, the quality of business does suffer in hindsight. So there is underwriting to be looked at. We need to be calibrated. To the earlier question that I answered on underwriting in term, all of those new and emerging risks we have to be cognizant of. And right now, we are reasonably happy with the 14-odd percent growth on -- as far as online is concerned. As far as the OpEx growth is -- but yes, our percentage has eased off quite significantly, but I think that -- by about 400 basis points. But I think that will change as growth comes back. Yes, we will continue to trend downwards. But you will see that some investments that we have held back, not so much in technology, but in some other people-related investments and so on, training, some of that we'll have to start once again. So you will see that trending upwards in line with growth. Very much within cost of acquisition, very much within our margin trajectory. But nevertheless, as a percentage of premium, you'll see that going upwards. And the final one on non-HDFC Bank growth, yes, in the first of this year, HDFC Bank has grown well. But if you were to look at some of the green shoots even in our proprietary channel, like our agency channel, agency channel has grown 6% as against the degrowth in quarter 1. And also, the base impact that agency channel had, that also will start being nullified. So for example, agency channel almost grew by about 80-odd percent in H1 of last year. So it was a very, very tall ask even otherwise. And in terms of base effect, while I'm speaking on it, agency channel grew 80% in first half last year while HDFC Bank grew about 8%. So nullifying the base impact, the differential does start coming off. But we're proud of what we have done through HDFC Bank, and we are continuing to do also through the online channel that I just talked about as well as some of our other proprietary channels.

No. So Vibha, if I can add on the last part. I think, look, somewhere, we're not too worried if one particular distribution channel grows higher or more because over a period of time, we have found that there are nuances in each channel. So there are times when the bank has a focus and they grow and there are times when, for instance, in quarter 1, we had parceled, sent out advisory to our agents, not to move out and stay at home, take care of it. So do everything on remote, right? So we do understand we are fairly large in all the channels, whether it is broking, whether it's agency, whether it's online and direct, whether it's banca and whether it's alternate. We are happy to look at each of these channels in isolation and grow them. There will be a product strategy in some case, there will be a distribution growth strategy in some case and then there will be a productivity strategy in some cases. And quarter-to-quarter, it may vary. But over a period of time, we do find that all channels are growing at a certain rate. Yes, we got impacted in Q1 on nonbank. But I do believe like how Vibha was saying, in Q2, the green shoots are showing for some of the other channels to come back, and we will hopefully get the overall mix again.

And Suresh, if you could just give one comment on how our banca channel ex of HDFC Bank has been doing? Has that been growing very fast?

Yes. So yes, look, of course, HDFC Bank is a very, very large partner for us. So in some sense, out of the overall banca business that we do HDFC bank contributes. So a lot of our growth depends on how the bank does. But the rest of the channels have also shown good growth. They may not be as large. In some of...

To give you a number, Mayank, about 6% is ex-HDFC Bank, but growth.

Yes, but then it's growth. And we do find that over a period of time, some of these channels also go through a multi-di. Some of them will come through overall incremental growth. So for now, for instance, we got YES BANK as a partner. We do believe that next year that will be incremental growth for us coming in from an absolutely new banca partner. So somewhere, we see growth...

Bandhan is another one that's...

Bandhan is another partner which is doing very well for us. Some of our other partners like CSB and other partners are also opening up in terms of all branches for HDFC Life distribution. So we do see opportunity for growth across a lot of non-HDFC Bank partners.

Understood. And just this one question that I asked in the beginning, the 13-month persistency on the nonpar savings business, how is that stacking up versus what you would have expected a year back?

It is doing well. So persistency remains strong. In fact, we've given those disclosures in our investor presentation, segment wise.

Yes, I can see a slight increase in that persistency.

So it's in line with what we've expected, Mayank. What's happened is that -- I guess we've discussed this earlier as well in terms of -- we knew the product that we were launching will attract good persistency because it's something that customers will really value. So the way the product was priced was expecting good persistency and the actual experience is in line with that.

[Operator Instructions] The next question is from Nischint Chawathe from Kotak.

Just remaining on the -- sorry, continuing on the agency side, what seems to be the case is that this quarter agency seems to have pushed a lot of nonpar as compared to par, which is pushed at the banca side. So is this something which kind of built as a trend or is it something which would be just an aberration for the quarter?

Actually, when you look at Slide 15, I think that's where you've picked up from, right?

Yes.

Yes. So if you look, even our term and annuity continue to do well. So it's a combination of all 3 of them as against only -- nonpar savings is slightly higher, but still lower than where we were last year.

Yes. So as we really look at it, we see par growing on the agency side as much as what it has grown on the banca side?

Sorry, I didn't catch that. Versus -- you're comparing that with banca?

Yes, the kind of growth that par has seen on the banca side. Do you think...

It has been focusing for quite some time. Sorry, there's a little bit of an echo, but agency has been focusing on part of the shifting towards par towards the last -- end of last year was very high. So in terms of growth, it will come some time before -- but they've been managing a balance mix. And if you really look at it, agency has defocused from Unit Linked and moved away to par and nonpar. So that is where a lot of the growth there. And on the bank side, there's been a balance hit across, you will also include it.

The next question is from Geetika Gupta from First Voyager Advisors.

I just have one question on Credit Protect. So I think the business for the quarter was down about 36%. But when I look at some of the larger players like HDFC Limited, that I think the percentages are back to 95% of last year. So in that context, just wanted to check what is the kind of traction we are seeing in Credit Protect? And when do we expect the business to start growing?

Well, already, when you see -- and I mentioned this in my opening remarks, when you look at our Credit Protect business, quarter 2 -- so quarter 1 was over 70%; quarter 2, we degrew by 36%, ending at 53%. So sequentially speaking, we are doing much better. When you drill down into this number of our Q2 performance, some of our -- like you mentioned HDFC, some of our partners are close to pre-COVID levels. Some of them are not. Some of them are struggling. So it's a mixed bag. But I think towards the end of Q3, more or less, at least a big partnership should be close to normal.

Okay. So really, Q4 is where we expect positive growth in this segment?

Yes. So like Vibha mentioned, some of our partners are coming back to the same levels of disbursement, which were pre-COVID, they will hopefully catch up. We do monitor the disbursements which are happening at the large partner level. So some of the partners on the HDFC Bank Group as well as the large banca and NBFC partners are doing okay. We also monitor it by vertical. We look at how housing is growing, we look at how tractor and vehicle loans are growing as compared to some of the MFIs that are growing. And because we have such a wide distributed partner base, which is across segments and across large and small partners, it's -- somewhere, again, we are seeing some trends of growth coming in, which is how we focus and put our energies behind the disbursement in terms of increasing attachments. So one of the reasons why the degrowth came down from 74% in Q1 to 36% in Q2. We are hoping that this -- once Diwali comes in and a lot of these disbursements start happening towards Q3 and in Q4, hopefully, the loan disbursements will pick up again.

The next question is from the line of Abhishek Khanna from Jefferies?

Am I audible?

Abhishek, can you speak up a little bit, please?

Yes. Ma'am, am I audible now?

Yes. Go ahead.

Just one observation. Let me know if my observation is right or not. So I notice that for our operating variance in our EV EVOP, so for the first quarter, it was like around INR 60 crores and in this quarter means in the first half, which is around INR 70 crores. So for incrementally, it is just coming to around INR 10 crore. So basically wanted to understand, despite the pandemic the persistency has risen and seemingly operating equities are improving, so why are we not seeing a greater operating variance this time? And also, if I tie this up with the sensitivity tables that we have provided, so it appears that the sensitivities have actually come down on the operating parameters which is what it was there for FY '20. So if you -- would be -- just help me understand this, why is this changing -- why the sensitivities are changing now?

Srini, you want to take that?

Yes, 2 things. One is see, as you would know, in the first quarter of this year, IRDA gave some moratorium kind of a thing, where they extended the grace period and all. So we still don't know how much of those premiums we will get or not get. So we have continued our practice of setting up what we call as the revival reserve of those policies, which we -- which may or may not pay us. In normal circumstances, that would have gone through as a surplus. But since we wanted to be a little bit more cautious, we have -- we are kind of baking out for some more time to see whether those premiums will indeed come up or not come up. So we are a little bit conservative on that side. Also, like we have alluded to in the past and also today earlier in the call, the mortality also we have sort of -- we don't know whether we've seen the end of COVID or how the death claims are going to pan out. So in normal circumstances, some of those mortality surpluses would have been -- would have flown through as operating variance. And since -- like you said, we are a little bit more conservative on the mortality, so we're just holding it up for another quarter and see whether the claims will indeed come out or not. So we're just a little bit more conservative on that front. So therefore, the operating variance is slightly lower than what you saw in the first quarter.

The next question is from the line of Prakash Kapadia from Anived Portfolio Managers.

On the ULIP side, Vibha, we already have a low base. So risk aversion still seems continuing. So in the second half, assuming things come back, do we see some growth coming back? And VNB margin should normalize by FY '20, assuming equity markets remain positive?

I didn't actually understand your question, Prakash. So are you saying that are we going to sell more of Unit Linked or what was the question?

The base is lower and it's surprising that risk aversion seems to be continuing by investors despite markets doing pretty okay and pretty far end.

Yes, but there is a lot of volatility. And markets doing okay, I think, is -- it's a little bit relative. Insurance typically has almost a 9-month lag. Every time there is market -- reasonably significant market volatility, there is almost a 9-month lag. We saw this time and again, in 2008, '09, we saw it again in 2013. People don't flock to Unit Linked products unless there is a fair amount of stability for at least 6 months. And we're seeing that behavior once more.

Okay. And similarly, on the downside also, the persistency and the surrenders also come with a lag?

Persistency and surrenders -- rather surrender behavior comes in as a herd mentality. What we do see is that when markets tank sharply, surrenders don't happen immediately. But when volatility continues after the tanking, that's when people start exiting. Unfortunately, they exit at the lowest and enter at the highest. And that's what our job is to keep explaining to them why they should stay persistent. But yes, with time and again, we do see this behavior of people exiting with -- not -- with some lag, but lesser lag than what is required for them to enter again.

[Operator Instructions] The next question is from the line of Hasmukh Gala from Finvest Advisors.

Vibha, congratulations for really great set of numbers. Just broadly wanted to understand. Now when you move around, you have got more of digital products, et cetera, what type of customer expectations do you see in this COVID situation? And how are you going to develop the products to address that particular requirement? Can we have some star product like Sanchay Plus, which we had last year in any category?

So what your -- your question, Hasmukh, if I were to understand it right, so what...

Yes. My question is that under the current situation, which is not a normal situation, what are the customers looking for in an insurance product?

Yes. So a couple of things. Yes, sorry. Yes...

Yes, yes, yes. Yes, please go ahead.

So looking for 2, 3 things. One is that immediate here and now, they want to cover their health. Second, they want to cover their life, which is why the inflection point on protection that we saw and the 38% growth. They also are beginning to realize the need for annuities. Again, that is doing well. And then for them to have conservatively managed savings products, and that's when par or nonpar, there is almost a pull of the market. I think what people are saying is that there is so much uncertainty in their lives that they want to at least do away with one uncertainty in terms of their savings. And they want a reasonable certainty in terms of their returns as against putting money into Unit Linked products or some sort of hybrid Unit Linked products. And that's where -- all our products being flagship products and every category comes in very handy, whatever the customer wants. And it is also a combination of what we sell and how we sell it. So the digital that you mentioned and the platform that I had mentioned in my opening comments about us being able to sell-through wise, and it's as good as sitting next to a prospective customer. You can do everything whatever you do sitting face to face, and that has enabled us to give this kind of 21% growth that you see.

So Vibha, if I can add. I think, look, we have a fairly comprehensive product suite on ticket side as well as features across UL, par, nonpar and term. But having said that, we do see that there is a customer expectation on more innovative products, there is customer expectation on more -- flexibility in terms of benefits. There is also the whole work that we are doing on the digital to make it more transparent as well as ease of buying purchase journeys for the customer, which is what is going to make a difference for them to actually say, "Okay, I want to make sure I cover my term." And so something like a preapproved sum assured. Things like that is what we need to keep looking at with minimum documentation as -- and with the risk that we can take in terms of minimum medical. So a lot of these expectations are coming in. But at the other end, the customer is also getting more aware and the category as such is growing. So we don't really need to come out of a new product. But given that how we've been looking at it every year, there must be something which will continue to come out.

The next question is from the line of Ajox Frederick from B&K Securities.

My question is with respect to the ad spend and marketing spend, that has come bad, normally. So where are you focusing, on what products are you pushing?

So we've done -- we have done campaigns on term, we've done campaigns on annuity and so on. So -- and also we have done branding activities in terms of visibility. Given that we are in multi-tier situation, so we have to -- when a person walks into, say, a bank branch, and Suresh had given some examples of some of our partners, it could be an IDFC Bank, it could be a Bandhan, it could be. So there, unless we have this visibility, it's not going to be top of the mind recall. So it's a combination of both media spend and our branding.

The next question is from Swarna Mukherjee from Edelweiss.

Ma'am, my question is more on the par portfolio. So just wanted to understand your strategy. So the numbers this quarter are fabulous and, I think, reached a level where your par portfolio was there in -- at Q4. So I was just wondering what would be your strategy regarding this. Would you continue to grow, let this portfolio grow as the customer demand remains? Or is there any lever that you'd like to press to maybe maintain the balanced product mix that you generally have, like you have done for Sanchay Plus last time, although there was, of course, some amount of interest rate risk also involved in that. So I wanted to know your thoughts on how do we see going forward the sales of this par portfolio panning out?

We'll be very supportive. We do look at right sale and right fitment for the prospective customer because the last thing that we want is for us to have persistency issues and for the customer to lose money so that he never buys an insurance product again. So the fitment is important. And as long as the fitment is there and there is a pull from the customer, we are very happy to sell Sanchay Par Advantage to the customer. And if you look at our numbers back in time, say, 7, 8 years ago or a little bit before that, par used to be a very significant portion of what we sold. So about 1/3 of our business or thereabouts, between 1/3 to 40%, we are quite comfortable selling products such as Sanchay Par Advantage.

The next question is from the line of Yash Sidana from Genesis Investment Management.

Fantastic set of results. I have a slightly macro question. So despite income as an aggregate going down a bit for the country, we've seen savings shot up, largely because people are not spending right now. Possibly, the longer-term trend could be that people are now saving a bit more given the kind of a deep crisis that we have seen as an economy, possibly one of the only deep crises in the last 1 -- last 10 years or so. So in -- with that contrast, do you see savings products growth increasing a lot over a longer-term period, like let's say, a 5-, 7-year horizon. Because while this is happening, there is also a fair bit of advertisement sometimes by our community only that there is that if you want to invest in insurance invest in terms or invest in annuity. There's no point investing in your traditional ULIPs and pars of the world. So where do you see this going? And of course, there's no science to it. What's your gut saying given you've been there for so long?

No, I think it's not either/or. I see it as having a little bit of various things. It's like a asset allocation. And I see it actually helping an individual take care of varying needs. And that's why in terms of -- annuity serves a very different purpose to protection to some of the fixed benefit health care products, riders and also keep -- for an individual who has bought a policy to keep topping it up as his economic situation improves or his liabilities -- his or her liabilities increase and so on. So this is a dynamic risk management of his own set of assets and liabilities. That's how I see it. Rather than I think it's very erroneous to say, should I invest in Unit Linked or should I invest in something else? They are actually apples and oranges. It really depends on what is the purpose for buying insurance rather than is randomly buying something. So -- and that's what our people are trained, and we keep reemphasizing that the need-based analysis bottoms-up becomes very important. And all our -- each one of our products has been manufactured with a purpose. And if that fitment is there, then why would anyone really surrender -- unless the person has a cash crunch, why would anyone surrender their policy? And that's kind of the ultimate goal. So looking down to your question, looking ahead, I would say really all of the above.

The next question is from Bharat Shah from ASK Investment Managers.

One, when we think of our investment portfolio overall, for the entire industry, what it strikes somewhat not very clear to me. While I understand that in near term, equity return uncertainty would be a daunting compared to relative uncertainty of -- relative certainty of fixed income yield. But over the longer-term period, the roles reverse completely. For our insure -- and life insurance is ideally tailor-made for that kind of a long-term investing, yet we see the hesitation and reluctance to get into greater long-term quality equity investing. Any reason why especially for the longer-term portfolio of insurance products?

Yes. So clearly, here, we just discussed this a while back as well as in terms of rather than products, it's more about asset allocation. So yes, you're right that over a longer period, you would expect equity to outperform the fixed income instruments, though in the past the volatility has also put off some people because if you look at 5-year returns, 7-year returns, 3-year returns, they have been fairly -- not very clear in terms of equity as an outperformer in that time frame. So one thing which also has happened is that the definition of long term has changed. So people might buy a 20-year, 30-year product. But they want to commit for a period of maybe, say, 5 years, 7 years, 10 years. So that's why across product categories, you see an increase in limited pay products. And if I have INR 100 to invest, I might invest, let's say X -- INR X in equity depending on my risk appetite and INR Y in fixed income. And every customer has a different kind of risk appetite. So if you look at our product structures, even in Unit Linked, the percentage of debt has increased over the last few years, exactly for this reason. And that can change. Over the next couple of years when the environment changes, people will be able to reallocate their funds between these asset classes. Participating has, in some sense, best of both worlds. It has a good capital guarantee because of the debt investment and it also has potential for upside through equity investments. And then some part of your money you allocate, like you would put in a fixed deposit, you basically have a tax efficient, long-term income-generating product with an upfront guarantee. So across different ages, across different risk appetites, this can evolve. So our job is to ensure that we manage whatever funds that we get through whatever customer decides and their customer risk appetite, we manage it in a manner which is appropriate from a long-term horizon. So that's what we try and do.

The next question is from Nidhesh Jain from Investec Capital.

On the fixed cost absorption, we had a negative impact this -- in the first half. But if I look at our operating costs, we have declined in absolute amount on a Y-o-Y basis. So what is the reason for fixed -- and top line has grown on a Y-o-Y basis for H1. So what is the reason for a fixed absorption negative impact? And how do you see that impact for the full year?

You are talking about operating expenses as a percentage or in terms of absolute?

I'm talking about operating expenses in absolute amount that there has been a decline...

Yes, you're talking about Q2 versus Q1?

H1 versus H1 Y-o-Y.

Yes, H1 versus H1. Yes. See, that is all a mix in terms of -- while optically, it looks like your APE -- the composition of APE also matters because the cost of acquisition varies from channel to channel. And -- so for example, agency channel has much higher levels of fixed costs, some other channel might have intrinsically higher fixed -- higher costs, but -- because the product mix is able to give you the kind of margins. So it is not like a 1:1 equation in terms of rupee value will be the same. And also, second thing is that you have to see along with commission, so if you were to look at total expenses, along with commission, that -- the gap narrows. So the combination of these factors as against -- credit life also is lower. So it's a combination of all these factors rather than -- and also the factors, like I mentioned earlier, in one of the earlier questions where in, we have held back -- and a lot of austerity measures that we've had, including things like salaries being -- increments and promotions, et cetera, have completely been held back. So all of that is reflected here.

The next question is from the line of Arijit Singh, individual investor.

I have 2 questions. One is the operating return on EV has fallen from 21.5% in '18 to 17.6% in H1 2021. So how is this going to impact profitability now and going forward?

Srini, do you want to take that?

See, operating variance, a key component is the interest rates at which...

I think you're mentioning operating return on EV, right?

Yes. EVOP percentage.

Yes. Okay.

So EVOP percentage has come down.

Yes.

So an important component of this operating return on EV is the unwind and unwind is function of the prevailing interest rates. And I think you were comparing 2018 numbers or some -- I think of an old number, I think, when it was 21%, and that's because interest rates at the time was a little bit higher. So -- and that's why with interest rates falling in the last 1 or 2 years, the EVOP percentage has also accordingly come down.

The next question is from the line of Kishore Kausar, who is an individual investor.

My first question is, HDFC Life delivered robust agency growth in September '20. What was the special initiative that the company took?

Suresh, you want to take that? So while Suresh joins...

Hello. Yes. Sorry.

You're there. Maybe you were on mute. Yes. Go ahead, on agency.

So look, we -- on the overall agency growth over the last 2, 3 years, there has been a fair amount of structural interventions that we have made, right from how we have invested and actually looking at the distribution increase, looking at the quality of distribution in terms of who are the financial consultants of partnering. We initiated a very large training and capability program called Agency Life which was spread across all our agency partners with us. In the time of COVID, we migrated that from an offline branch training to an online where more than 6,000 financial consultant partners come online and get trained. There's been a fair amount of work in terms of digitization of that. So when you are looking at the entire agency channel, there is a product level intervention, there is a training intervention, there is a technology intervention that we have done. We have invested in -- even in our own team, there have been some design changes which have been made in terms of how our employees are closely linked to the kind of quality of business and the top line that our agents deliver. So the interests are very closely aligned. And we've been working on this over the last 3, 4 years, which has kind of resulted in a fairly good quality distribution with a very high level of quality in terms of persistency also coming in. So we do believe that we'll continue to stay invested. There are enough customers out there who like a financial consultant, who they can depend upon their financial investments, especially life insurance. So even if you go back and survey now, there are a lot of customers who treat financial consultants or agents as their primary source of sourcing I feel. So if you continue to invest in this, there are a large segment of customers who we will reach out through our financial consultants. And a lot of these financial consultants have been with HDFC Life for even 20 years. So even as we complete 20 years, there have been a lot of agents who have been with us. And all of this is slowly coming back into growth quarter-on-quarter. There was also a little bit of a hiccup in quarter 1, but that was more from our side when we advised all our partner agents to actually go slow and not step out, more for consideration for there about.

The next question is from the line of Vinayak Mohta from Augmenta Research.

I just had one small question. So it was mainly directed towards the change in actuarial liability. If you could please like elaborate a little upon what drives this number? Because as far as I remember, there are a lot of factors that come into play in driving like what kind of liabilities going to be created. So just some light on like what are the elements that drive this number?

Niraj, do you want to take that?

Actually, if you see the largest movement that you will see in the actual results is on account of market movement on the Unit Linked side. So if you look at our typical insurance balance sheet, you will basically find 2 kinds of liabilities. You'll find linked liabilities, you will find non-linked liabilities. And of course, you'll have the share capital. So if you were to just look at the linked liabilities, the reserves will move almost in tandem, very much in tandem with what's happening in the markets. So if the equity markets are doing well, for example, you'll see an increase in reserves, if you see -- and the other way around. On the non-linked side, it's a function of what kind of products you're writing, what kind of -- how much of your product mix is coming from non-linked. So if you have a balanced product mix like we do, you'll find an increase in liability on both the sides. It's just that the change in reserves on Unit Linked is going to be completely driven by what's happening in the market. Interest rates going down. You'll have greater liability because you'll have greater asset value. So that will get deducted from the reserve and same inverse will hold true for equity. The non-linked liabilities will depend on the kind of products you're writing, the nature, the long-term nature or the short-term nature, depending on the kind of products you're writing and the persistency that you expect. So that will be a lot more stable. On the linked side, you'll find a lot of volatility in the reserves.

The next question is from the line of Bharat Shah from ASK Investment Managers.

Yes. No, my earlier question when I was asking about taking a long-term view of the investment portfolio, where I was saying that insurance firms are ideally designed life insurance firms to create a long-term equity portfolio with near-term uncertainty of equity returns may look daunting and is compared with relative certainty of fixed income yield in the near term, but role reverse completely over long run. And therefore, why are insurance firms reluctant to increase their equity book. I was not speaking from the perspective of why customers are choosing what they are choosing. But as far the portfolio of insurance products, long-term protection [Technical Difficulty]

We seemed to have lost the line from Mr. Shah.

Is he on the line?

No, he has dropped off.

So we'll wait for him to come back. We can take the next question.

The next question is from the line of Kishore Kausar, an individual investor.

My question is, how has been the uptick of Group Poorna Suraksha that was launched in the last quarter? I mean how was the product acceptance among customers, how much approx business has done? And what are the challenges, if any?

So we've just had the foundations of it in terms of rollout. But given the number of group relationships that we have across corporate clients and others, we -- so a lot of serious discussions have begun. You will see traction more towards Q3, Q4.

Okay. So till now, how much business we have done for -- particularly, this product?

So we're not really giving product-wise kind of numbers out. But it has not been hugely material right now. Right now, it's been more in terms of sign-ups. So before we start selling, we need to have the sign-up for Group Suraksha, Group Poorna Suraksha. And for -- right now, we are focusing on signing up more and more of the corporate clients.

We have Mr. Bharat Shah from ASK Investment Management back on the line.

Sorry, line got disconnected. So my question is why insurance on the reluctant to extend their equity books, that was basically the question.

Right. So if you again break up our book into the 3 buckets, the first bucket is Unit Linked. Now Unit Linked is where the asset allocation is completely dictated by the customer. We just discussed that. So I guess we don't really have any role to play there except for managing the funds appropriately for the risk appetite and for the duration for which they are giving us the funds for. The non-linked portfolio, the customers are actually interesting the assets to us with a particular objective in mind. That objective is at the very least capital guarantee and at the most interest rate guarantees. So typically, these products do not lend themselves to a very high level of equity exposure because then we will not be in control of the risk management for these products. So participating, we do have significant equity, anywhere between 20% to 25%, depending on the years to maturity, depending on the term and so on and so forth. So that's where we do take equity exposure and manage it the way we need to. The third part of the assets we manage is again, shareholder funds. Now shareholder funds, again, as you're aware, basically does 2 things. One, it supports our solvency and the solvency needs to be reasonably within a band of the volatility that we can be comfortable with. So again, there asset allocation is predominantly debt. There will be equities there, again, about 20% to 25% depending on the calls that we would take. But again, there, given that a large part of the capital supports solvency, it needs to be fairly stay. For that, we need to kind of have that asset allocation. So equity clearly is dictated by the kind of funds that we manage, whether it is for the policyholders or for the shareholders and for the purpose for which these funds are being entrusted to us. So that's our submission on this. No hesitation really. No hesitation. It's just that it's completely driven by the nature of the funds that we manage.

Thank you very much. We'll take that as the last question. I would now like to hand the conference back to Ms. Vibha Padalkar for closing comments.

Thank you. As mentioned, the detailed disclosure on our results is available in our investor presentation. I would like to thank all of you for participating in the results call. Stay safe. Thank you, and good night.

Thank you very much. On behalf of HDFC Life Insurance Company Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.