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

Ladies and gentlemen, good day, and welcome to the HDFC Life Insurance Company Limited Q4 FY'21 Earnings Conference Call. [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, Raymond. Good evening, everyone. Thank you for joining us for the discussion on our results for the 12 months ended March 31, 2021. 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 FY'21 results and would be happy to take questions post that. In terms of the current situation, the second wave does appear to be steeper than the first one. We are hopeful that its impact on public health and the economy would be curtailed by a speedy vaccination drive and discipline observed by our fellow citizens. Once the second wave subsides and significant parts of our country are vaccinated, we believe that pent-up demand would lift economic and commercial activity. We are working closely with our partners and reinsurers to ensure prompt service and claims resolution. Over the course of the year, we have settled over 2.9 lakh death claims, resulting in payouts in excess of INR 3,000 crores. Despite logistical challenges through the year, we insured close to 40 million lives in FY'21. Moving on to our business performance. FY'21 was a year in which we were able to showcase progressively stronger business performance each quarter, clocking an individual business growth of 40% in quarter 4. This has been delivered on the back of our proven strategy of adhering to a balanced product mix and diversified distribution, whilst leveraging our digital capabilities. We continued on our trajectory of delivering consistent and predictable performance in FY'21, while outpacing industry growth. We have recorded a growth of 17% in terms of individual WRP during FY'21 on a base of 19% growth in FY'20. The private industry grew by 8% on a base of 5% growth in FY'20. We issued 9.8 lakh new individual policies, registering a Y-o-Y growth of 10%. Our market share in terms of individual WRP increased by 130 basis points from 14.2% in FY'20 to 15.5% in FY'21. Our product mix remains balanced with non-par savings at 31%, participating products at 34% and ULIPs at 24%. In FY'21, we have once again exhibited our ability to run a calibrated product mix strategy without any single product segment dominating the product portfolio. Our individual and group annuity business saw strong growth of 46% with annuities contributing about 5% to our individual APE. With a calibrated approach in addressing the long-term opportunity for protection, our individual protection business grew by 4% during the year. While the heightened customer demand in H1 normalized in H2, we saw customer inquiries improve towards the end of the year. We witnessed customers valuing brand comfort, onboarding experience and claims payment track record as much as if not more than price. Supply side considerations, such as difficulty in conducting physical medical, lack of a centralized medical database, underwriting challenges in Tier 2, 3 locations become more important as we deepen our reach beyond the top few cities and the salaried customer base. However, we remain confident about the medium to long-term prospects of protection in India on the back of under penetration, higher awareness, rising affluence and increasing access to consumer credit. We are seeing encouraging trends in the Credit Protect business on the back of improvement in disbursements, registering growth of 26% in quarter 4. Our renewal premiums grew by 19% on the back of robust collections in our recently launched long-term savings products with our 13-month persistency improving from 88% to 90%. While we saw improvement in persistency across various time cohorts in FY'21, we remain focused on this metric in light of the evolving situation. Next, on COVID claims. While we have had an overall positive operating variance during the year, we experienced a negative mortality variance, primarily on the back of higher-than-expected COVID claims. This was largely absorbed by the COVID reserve created by us at the start of FY'21. Based on our actual experience in FY'21 and after factoring in aspects such as latest mortality trends across business and customer segments as well as geographical spread of COVID 2.0, we have provided for a COVID reserve of INR 165 crores for FY'22. We will continue to review the adequacy of this reserve through the course of FY'22. With this approach, we remain confident of our ability to absorb the impact of shocks from one-off events and deliver steady returns with minimal variances through a realistic and disciplined assumption setting approach. At the start of this year and against the backdrop of a pandemic, we had aspire to maintain our new business margins between FY'19 and FY'20 levels. We are very pleased to report that we have been able to surpass that goal on the back of growth across channels, calibrated product mix and extracting cost efficiency. Our full year new business margin was 26.1% against 25.9% last year, with the value of new business at INR 2,185 crores, implying a growth of 14%. Our operating return on embedded value stands at 18.5% as against 18.1% in the previous year. Our profit after tax, post the additional COVID reserve of INR 165 crores, grew by 5% to INR 1,360 crores. Our solvency position remains healthy at 201%. We are pleased to announce that the Board has approved a dividend of INR 2.02 per share in today's meeting. The payout of the dividend is subject to shareholder approval. Next, on channel and product performance. Almost all our channels witnessed each quarter of FY'21 getting better, with our bancassurance channel leading the fact with a growth of 29%. We saw a resurgence of growth in our proprietary channels in the latter half of the year, with agency channel growing 49% and 6% in quarter 4 and full year, respectively. Towards the end of quarter 4, we started clocking business with our new bancassurance partners and are confident of gaining traction in the year ahead. We remain focused on tapping a new generation of customers through our online channel whilst expanding our geographical presence across the country, especially in non-metro. We have seen contribution of business from Tier 2 and 3 locations increased to over 15% of our online business. Our focus on driving a balanced product mix, backed by our suite of innovative products, is enabling us to effectively meet customer demand. There has been a concerted effort to enhance customer experience, refine pricing appropriately, while continuing to responsibly underwrite new business. Coming to our pension subsidiary. HDFC pension continues to be the largest pension fund manager in retail and corporate NPS segment, with an asset under management of INR 16,384 crores, thereby clocking a growth of 98% over the previous year. With the base of over 7 lakh customers, HDFC pension's market share stands at 34.4% as of March '21. We see pension as the next big opportunity and envisage the business to grow further. Next on digital. Digital is the backbone of our growth story, and we continue to invest in technology with a view to simplifying the buying journey, enhancing service experience for customers while creating new product proposition. We have included a fairly detailed view on our digital approach in our investor deck for your reference. To conclude, given the resurgence of COVID and uncertainty looming around economic and market momentum, we will continue to maintain a cautiously optimistic stance for FY'22 and evaluate our approach on a dynamic basis. We will strive to achieve sustainable new business growth and maintain an upward trajectory on new business margins, while adhering to a robust risk management approach. We remain sensitive about the health impact and loss of lives due to the current pandemic and continue to prioritize employee, customer and partner safety. The current pandemic has led to higher awareness around the need for protection and the inadequacy of current insurance coverage. Life insurance has surely emerged as a prominent theme to protect one family while securing long-term financial goals. To this effect, we take cognizance of our responsibility as an insurer, and we extend our sincere gratitude to all our employees, partners, shareholders and all of you who have stood with us in these tough times and helped us achieve our objective of being one of the most trusted insurers of choice. We also thank our regulator, IRDAI, for issuing several enabling notifications, without which our business might have struggled. The detailed disclosure on our results is available in our investor presentation. We wish you and your family a safe and healthy time ahead. We're happy to take questions now.

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

3 questions, I have got. The third one is an accounting question on COVID reserve. First is on the -- is it possible from a disclosure perspective for you guys to share the split of VNB into protection and savings? Because, look, your peers disclose it. So for better transparency, it would be good that you guys also disclose it?

Suresh, I thought you had 3 questions. Should -- you want me to answer this one, and then you...

Yes, yes, I think we can go one at a time, that would be great.

Yes. Yes. So Suresh, a lot of these expenses are allocated expenses as well as there are nuances in terms of a particular channel. So it's not only the segment, but there is a very overwhelming overlay of which channel is selling what. So a particular channel that sell unit-linked could have a very different outcome to some other channel selling unit-linked. So it does get fairly complicated, but certainly, we'll take that into account.

Okay. The second thing is on the reinsurance part. I mean, are the reinsurance guys flexing muscles? Do you think there is another round of hike which can happen this year with respect to reinsurance rates?

So as of now, there is no exclusive conversation or no communication from them rather, that they intend to do that. But if I were to look at rates in India, they are on the lower side. And they -- even before the recent hike that happened towards the start of FY'21. We were on the lower end compared to -- and given that we are an emerging economy. So they will, I think, look at a risk profile, emerging risk, new long COVID risk of people who have recovered from COVID and is mortality signature different and so on. So it isn't entirely inconceivable that they might do that, but nothing concrete as of now.

And finally, on this COVID reserving, you guys had some 3 billion reserving before this 1.65 billion, right?

We had 40 -- well, we had an incremental COVID reserve of 41. Do you want to take that, Niraj?

Yes. So Suresh, if you want to simplify this into, let's say, what happened in the P&L and what will happen and what will appear on the balance sheet with that, and then we can -- if you have any further questions, so in that case we'll do that. So FY'20 to the P&L was INR 41 crores. FY '21, the hit to the P&L that we've taken is INR 120-plus crores. And the balance sheet number, equivalent of that for FY'20 would be 41. And for FY'21, 165. After adjusting for -- you'll have to take into account taxes and all of that, but very simply put, if you want to just look at what the statements capture at these points in time, this is what it is.

Okay. So okay. So the balance sheet number is INR 165 crores. And this is what is being reflected in the EV box, right?

That's right.

Yes. Okay. So there has been some kind of an underestimation, let me put it this way because at that time, you guys thought INR 40 crores was enough. I, of course, understand that this is an extremely challenging situation for everyone. Are you really confident that this INR 165 crores balance sheet number is fine? Or there can be some higher number and you're reasonably be conservative with respect to this estimate?

So Surech, again, we can never be 100% sure of anything, especially in times like this. But what we can do is we can draw on what we've seen in the past and what level of prudence we want to keep here. So now COVID is as such, it's not necessarily only to do with COVID there. It's basically a phenomenon. That phenomenon will result in mortality experience, right? And that like Vibha mentioned, it will be the pan out now and it will pan out over a period of time as well. So if you were to just put things in perspective, we settled around INR 3,000 crores of claims, as Vibha mentioned earlier in our speech through the year, right? And if you were to look at what was at an overall level? There was some -- on an overall basis, the claims that we would have settled in excess of what we had anticipated is a very, very small number of about INR 50-odd crores. And the reason for that is that while COVID claims would have been marginally higher than what we had anticipated. But at an overall level, the claims were lower. So what we have reflected in our operating variance is what you will see here, that overall adverse claim experiences to the extent that we've mentioned in our operating variances. What we've done to comfort ourselves and to all of setting you -- sitting outside the business is that we have scooped up this COVID reserve and we've also, in anticipation of any sort of adverse mortality that could happen. We've also taken a strengthened operating assumptions as well. So that's also reflected in the EV walk. After that, of course, we will review it every quarter because we can't be 100% sure of anything, right?

So Suresh, can I just comment? Actually, the expected claims, like of the year was INR 2,350 crores INR or so. I think that the total claims -- I'm not splitting into COVID and non-COVID because there is a little bit of a one is up and one is down. But if you look at the overall payout of the claims were around INR 2,412 crores against our expected of INR 2,350-odd crores, there was a gap of INR 50 crores -- INR 50-odd crores, which was based on by the how the digital credit goes. So by and large, our estimate is not too far out of line with what actually panned out in practice. So we were not very off, maybe by a single -- single-digit crores, maybe INR 4 crores, INR 5 crores is what the difference was between what we provided for and what actually happened. But in terms of future, like Niraj outlined, we have various provisions that are set up for COVID of about INR 165 crores, thus we strengthened the mortality assumption also to the tune of INR 180 crores.

The next question is from the line of Udit Kariwala from AMBIT Capital.

I had 2 questions. First is on Slide number 37, if you could explain the point around fixed cost absorption? So that was my first question. And the second question is, that the solvency today looks fine at 201%. But then we saw last year when the markets go down very fast, the solvency could decline. Considering the kind of growth HDFC Life has demonstrated. And I think this is also reflecting the bond which you had issued earlier. What is your expectation around a capital raise? So these are my 2 questions.

Niraj, you want to go ahead?

Yes. So Udit what you see on the VNB walk on Slide 37 is basically the impact of each of these elements, both on the VNB as well as on the margin. The negative number that you see here of INR 47 crores and negative 0.6 is primarily on account of lower volumes on CP. We've had 16%, 17% growth on the individual business, but we had a 20% degrowth on CP. So there is some sort of investment that continues in the business, which we're not fully been able to recuperate in this year. As we see the trends through the year, we got about 25%, 26% growth in quarter 4 in CP. So we are fairly hopeful that as the year pans out, we will be able to change this phenomenon, but this is what happened in this period.

So Niraj, just one point. I mean maybe just to understand it a little better. CP product predominantly would be -- I mean, it's sold by the banks or the NBFCs, right? So it's like a variable cost, right? So what -- I mean if you could give more color around this, that will be helpful. It is not like an agency business where you need to maintain the agency force where there will be a high amount of fixed cost.

So it may not be as high as agency, you're right, but it's not that there is no fixed cost at all because we have, as you're aware, in excess of 300-odd partnerships across banks, MFIs, small finance banks as well as NBFCs. So across each of these, we need to obviously have a setup, which will ensure that there is smooth processes that happen at the end of the partner. For that, there are investments that need to be made, investments in people, investments in technology, all of those things get defrayed over a period of time because it's not something that can get completely recovered in a particular point of time. So it's an ongoing exercise. And because we had a volume impact this year, you're seeing this number in this period. Through this period prior to this, we've had growth in this segment. So you would not have seen this prior to this.

Okay. And on the solvency?

On solvency, okay. Now there are a couple of elements there. You're aware that solvency, as of now, is 201%. We had this market impact in March of last year, which resulted in our solvency dipping by about 12-odd percent, we saw that last time. Keeping that in mind, we did raise some debt earlier in the year, as you're aware, which helped us create that further cushion of 15-odd percent. So we've got -- Vibha also mentioned, we've declared -- the Board has approved dividend, which will get approved by the shareholders. Recommended dividend which will get approved by the shareholders in the upcoming AGM. We've taken account of that as well, while looking at the dividend bit. So the solvency would still be upwards of 190%. And any sort of equity impact is something that we can look at in that context. So it bakes in all the elements that we've seen in the past and the sub-debt raise was actually on account of that.

And what -- sorry, just one last thing. What is the quantum of incremental sub-debt that you can issue? I'm not talking from the approval point of view, but from the regulatory point of view.

It's actually the same thing really. Now we've -- like we mentioned last time, we maxed out based on the formula that's available in terms of net worth and capital. So we've raised 25% of that now only when the equity capital starts or the network starts growing in a meaningful manner, can we get to a size, which makes sense to raise, which will probably happen only a few years down the line.

[Operator Instructions] We take the next question from the line of Arav Sangai from VT Capital.

So I had 2 questions. My first question is on Slide 27, there's a slight increase in sensitivity of VNB margin in non-par products. So is that -- is there any kind of pressure in selling non-par business? Or is there any kind of margin impact in this business, given a lot of peers have gotten aggressive in this area? That's the first question. And second question is a broader question on protection. So we have been hearing that India is very underpenetrated from a protection point of view, and this year was kind of an inflection point, from a protection point of view again. So first, have we did see robust growth in protection? And second have it kind of developed a lot. Obviously, there was some pent-up demand. But the broader question remains that even after pandemic year, if we see across peer on the individual protection basis, ignoring the CP, there's not much of a change in the -- like component of protection from 1 year or 2 years. So do you think like the kind of fast protection penetration we anticipated in India that might not happen because after 6 months only, the kind of slowdown is witnessed in individual protection, that was a lot. So any clarification or any guidance on the protection front how should we think about it going forward.

So I'll answer your second question, first and then leave to Niraj and hand it over to him. So on the protection bit, even when we grew by 50% in first quarter, you will recall us saying that this is unusual. For us, anything growing by suddenly 50% and very, very sharp rates, apart from something like annuity, which we understand the overall opportunity and why it is growing. And so we do believe that the opportunity is significant with all the data points put together. However, it will be calibrated. And reason here is it's a little bit more complex than something like annuity. Because there are also supply-side constraints. There are also constraints in terms of very heavy underwriting, both medical and financial. And as we move to different age groups, different geographical customer base and so on, the underwriting requirements are level of a good sense as to what does it mean when a certain document is given and so on, is evolving and -- largely and nascent. That doesn't take away the overall opportunity, but it does slow down growth because as insurers, we also need to understand the risk that we take on our balance sheet and also what risk that reinsurers take on their balance sheet. And so it will be a more calibrated growth, but I do believe that in the medium term, it will be faster than overall company growth. Niraj, do you want to address the first part?

Yes. On your first question, if you look at the VNB sensitivity, which has increased marginally. That's nothing much to do really with the pricing. It's -- we have -- we continue to be fairly calibrated in the way we price the products. It's just to do with the excess assets that are sitting in the book at the beginning of the period, where the first premium -- the first few premiums have come in are not really matched by the liabilities in that set. So to do a full cash flow match, there is excess sensitivity that is happening at the beginning of the period because of the excess assets. That is what is being reflected here. As such, from any sort of interest rate movements which are beyond just the parallel shifts, whether it is convexity or slope change, any of those? For that, cash flow matching is something that continues to be done. And that's the reason what's causing this success sensitivity. And to give you comfort, typically, in any guaranteed non-par product, you would worry about what happens when interest rates are going down. And if you look at the table here, you will find that the value only enhances when states go down. That just basically tells you that the book is fairly well hedged. And there is no risk really coming from a downward movement in interstate. And also the excess sensitivity is something that we can easily take care of by putting the excess cash just in overnight paper rather than investing it in bonds. But the yield, we do not believe there is any reason to grow up that yield that we can get by actually investing in those assets in bonds rather than putting it in treasury. So that's basically the reason for this. Nothing much to do with pricing at all.

And just a follow-up question on the protection. So last quarter, we had introduced a kind of ROP product in the protection. So do you think that insurance becomes a little expensive in India because, obviously, we have led data compared to a lot of other nations. So this share of ROP products will like naturally increase in India across Taiwan, like, you might see going ahead, this becoming a more dominant portion of the protection portfolio of all our companies?

So we believe in really selling policies that customers want, what is pull of the market and whether we are able to satisfy that pull. I don't think we want to take a purist approach to say that I will only sell what we -- I think you should be buying. Because any kind of insurance is better than no insurance. So if it is ROP, so be it, but at least that individual will get a fairly significant amount, anything up to 200x cover. So that's our philosophy. And this year, it's still relatively lesser. Which is sub about 1/4 of our business. But could we see this increasing? Perhaps we could. It's again, that classic argument about one should unbundle an insurance savings products and buy term separately and put your savings into fixed deposits or mutual funds and so on. And that's where our philosophy comes in to say that if someone is looking for a bundled solution or someone will not buy anything unless you gave his money back, then at least he has this. So yes, I think -- hopefully, I've answered your question.

The next question is from the line of Sanketh Godha from Spark Capital.

Sir, my question is on the margins. So in 9-month FY'21 and the reported margin of 25.6%. When we look at the VNB walk, the product mix change contributed 10 bps to the expansion. But now if I look at FY '21, the product exchange contributed almost 150 basis points to the margin expansion. I know the opening numbers are a little different, but still still if I factor in that it is about 80, 90 bps improvement in the VNB margin because of the product mix change. But if I look at the overall product mix, it has significantly not changed compared to 9 months FY'21 -- and FY'21, maybe except for the fact that group protection has gone up and individual protection has come down. So just wanted to understand what led to product mix change, there will be almost like a 50 basis point sequential improvement in the VNB margin. Is it safe to assume right now that individual protection because of reinsurance where have been group protection business has become much more profitable than individual protection and therefore, deferred the margin funds moving positively.

Sirni, you want to take that?

Yes, sure. So Sanketh, you're right, there is shift towards group protection last quarter because primarily on account disbursements, the NBFCs and other financial institutes are coming back. So that relate to growth in the group protection in the last quarter. In fact, it grew by 26% on the stand-alone Q4 quarter. So that is certainly sort of a profitable business that has added to the increase in the March in the last quarter.

So maybe if I look at from fourth quarter perspective, then the group protection margins maybe seems to be better than the individual protection. Because the overall protection remain broadly same still margins expanded. So does that maybe a normal conclusion to make?

Actually, the fourth quarter, individual protection margin also is slightly higher because, as you would know, that the reinsurance transition took place in the first quarter of the fiscal. So the first quarter business is a little bit a blend of the old regime and the new regime. So it's a little bit transitionary phase. So therefore, the 9 months -- when you compare with the 9-months figure of individual protection stand-alone versus stand-alone Q4. I think individual protection also has a slightly higher-margin than what we saw in the 9-month individual protection.

Okay. Got it. Sir, so I have one more question really 2 rather. One is on the EV walk. So you -- I assume you think this, you said that it's INR 180 crores. So out of which INR 124 crore incremental what you provided towards COVID, how -- explain that the partially response that was ready say it was INR 60 crores or INR 55 crores, INR 50-odd crores, is due to what reason? That's the one question I had. And second question is with respect to COVID death claims, you said that around -- I was looking at the data in FY'20, we believe we paid almost INR 258 lakh to death claims last year, which was INR 2,300 crores of payout. In the current year, we made INR 2.9 lakh quickly and then the payout is around INR 3,000 crores and the difference is around INR 700-odd crores. So given probably we did more group last year compared to what we are now. The maturity experience in the group business will be significantly different from individual business, maybe below the target in both. I just wanted to understand that this INR 700 crores growth in the -- despite number of claims remaining broadly constant, the growth in INR 700 crores of debt claim is largely due to COVID and probably, you can see in the second wave, when the numbers reported will be higher, we can see a significant negative number coming, around INR 165 crores in asking -- prohibiting matter INR 165 crores of incremental and could be good enough to observe it.

So I think I didn't quite catch your first question on the EV walk. You're talking about the operating variance here or you talking about the assumptions change.

Assumptions change which is INR 180 crores, minus INR 180 crores in the EV walk. So out of which assumption change of the incremental INR 124 crores is explained by additional COVID provisioning. So just wanted to understand, minus INR 56 crores is due to what? That's the first question I had. In the page to Page #10 or Slide #10. If I see INR 180 crores, INR 1.8 billion negative operating assumptions change, and incremental, last year, we provided INR 41 crores. Now we provided INR 165 crores. So the balance INR 56 crores -- sorry -- so INR 124 crores is because of COVID, what is the rest amount of around INR 56 crores coming from?

So this is the positive variance due to expenses and persistency.

No, no. I'm not speaking about operating variance here. I was speaking about change in operating assumptions, which is red color minus INR 180 crores.

So Srini that is more in terms of -- you have the COVID reserve sitting there. We also have strengthening of assumptions, mortality assumptions as well. So there is a positive operating assumption change for expenses and persistency based on the favorable experience. On the mortality, in addition to the COVID reserves Sanketh, there is also strengthening of assumptions on mortality at an overall level as well.

Okay. So basically, you can simply say that specific to COVID, you provided incrementally INR 124 crores. But additionally, you have even strengthened your mortality experience. So it is INR 180-odd crores.

Yes. That's right. So last year, if you recollect, we had strengthened the persistency assumptions and in expectation of mortality adverse -- becoming adverse, we had made some assumption change on centering on the mortality as well. But overall, the assumption change was positive because of the expense variance. This time around, we have a positive in persistency and expense on mortality, in addition to the COVID reserve, there is additional strengthening of mortality assumption as well, which we had done last year as well.

Okay. So just Niraj one small detail, mortality experience is also of INR 50 crores that 0.8 operating variance number. So should we believe that protection margins, which we were anticipating in historical years, have got a little bit impacted because your experience is coming a little different from what our initial bid came while calculating EV or VNB of previous years?

To the extent of the negative operating variance that we have just disclosed, yes. To the extent of that, yes. And that's the reason why we have actually strengthened our assumptions further so that we factored that into a prospective VNB as we write new business.

So 26.1 considers that additional mortality negative...

Of course.

Okay. And finally, if you can clarify on the death claims because I was just looking into public disclosure, I realized that we paid almost 3.8 lakh claims last year. And we paid death claims of INR 2,300 crores. Today -- this year, we have paid 2.9 lakh claims, and we have paid around INR 3,000 crores. And actually, product mix saw more in favor of individual rather than growth from incremental business point of view. So I just wanted to understand the additional INR 700 crores seems to be a little higher. Is it -- are we experiencing relatively higher debt -- or mortality experience could be higher than what we are actually anticipating.

So Sanketh, the INR 700 crores, you're comparing with what last year numbers is it?

Last year, probably disclose your numbers, if I see, we give a statement of debt claim. So I can see that in FY'20, you paid the claim of around INR 2,300 crores for 2.9 lakh claim. Now that number is INR 3,000 crores for 2.9 lakh claims. So average has already gone up. And also the number, absolute number seems to be very high...

Yes. So the book has also grown, right? So it's not like it's same book since we keep writing business every year, the overall book size also keeps growing. As a result, the number of claims that we expect and that cohort also keeps growing. But if we really look at the expected claim, we we need to look at this how much do we provide for, for our processing claims versus how much actually turned out in factors? So if you look at the expected claims in rupees crores, all claims put together, it's COVID or non-COVID net of reinsurance, our numbers is INR 2,350-odd crores is what the total expected, including in all claims, including COVID as well. Now compare to that INR 2,350 odd crores of expected claims. The actual claims into cores -- are 2,412 crore INR. There is a gap of about INR 50 crores. And within this INR 50 crores, I mean, this is -- this INR 50 crores is also funded by the INR 41 crores of COVID reserves that we set up at the start of the year. So there was hardly like the single-digit figure of crores extra claims is what actually occurred in the last fiscal.

[Operator Instructions] The next question is from the line of Prakash Kapadia from Anived Portfolio Managers.

I have 2 questions. If I look at UL, why is it that despite the federal markets doing well, actually not growing on a low base, If I look at the absolute value of UTI expenses trending down. If it's like -- if I compare that to a few years ago it seems lower, that's the first question. And second, as we step into FY'22, obviously, the second wave has taken most of us as a shock. So what are we seeing, in last year, we had a very low pace. So what kind of momentum are we expecting in non-metro cities. If you could give some color that would be great.

Suresh, you want to...

Yes. So the first one, I'll take on the UL. Like we have always mentioned that we've always believed in a very balanced product mix strategy. I think the idea is not to skew our overall product mix either to a non-par or to a par or to even. Term an annuity will remain focused as long in term we write good quality business. So it's actually been a fairly conscious strategy for us to be able to drive the product mix the way we want to. We want -- like we had mentioned earlier, the idea was to ensure that every channel of ours is profitable. We fully understand what you are saying that the markets are large. There is a huge opportunity on UL on term, on-par. But what we are trying to make sure is to say that, look, first, we look at what the customer is wanting. If, let's say, it -- we also look at the quality of the business and what is it that we are looking at well because in some of the products it is important that we drive high persistency, like in all other products. So we have been selective in terms of what kind of product mix should we be driving through each of the channels because it won't, at the channel level of certain profitability, ensuring the customer meets and requirement and we sell our right self, so that overall, over a period of time, it's persistency is also very good. So I don't think it is the fact that we are not driving this. And like I said, as compared to some of the other products, UL profitability is slightly lower. So to ensure that we maintain a good mix between margins, top line growth, quality of business. All of that is what we have been kind of trading, and that gets renewed across our product committees, across our channel efficiencies across customer level, feedback, all of that. So I don't see really too much of a concern to say UL is coming down. Yes, if we want, we can grow UL higher. But then again, we want to make sure that our overall ambiance remain the way we want it. We want our channels to remain profitable and as well as persistency. So that's broadly our strategy on the...

I was not trying to understand, there are some [indiscernible]. So is there some channel resistance or banker partners or some other channels.

Not really. Actually, it's what we have been looking at from a customer perspective, it's also looking at why we will open up. Frankly, it's also a question of how we train our people, which product we want them to go into the market with? Again, it depends like our strategy from partner to partner. There are certain banker partners who are more comfortable doing a product strategy, which is more skewed towards traditional products. There are some customers who are okay with the UL because they believe they don't want to run the customer issues tomorrow if the market becomes a little volatile. So we work very closely with HDFC Bank, all the other banker partners to ensure that, look, we fix our strategy on will, accordingly. In agency also, I think there's a very select set of agency work through on UL where we say that, okay, fine, we are willing to work with you because we have seen good quality business. And when the customer also understands it is better. Because we just don't want to sell UL to customers who can't take the risk down the line. So that's broadly the UL strategy. So it's not that you build the resistance. We can grow. Frankly, at our end, annuity is the largest market like Vibha has mentioned, simple product, no mid-sell, everybody understands you can grow it. Term also, it's been a very calibrated approach. Frankly, you don't want to go into terms in a manner where tomorrow, either you're leading to higher mortality or you're getting into segments that are taking higher risk. So that is something that we have been working on. So I don't see a concern. I think it's up to us to decide how the overall mix should remain. And frankly, right now, we are operating at a very comfort level of 25 to 30 and UL 30 to 35 on par 30 to 35 on non-par and term. Term, yes, if it can increase without us taking high risks, we will be up here.

Second part, if you can comment on as we are stepping in to grow...

Sorry, I could not hear you very well.

As we are stepping in FY'20 to last, you're at a very low pace. So what are the ground reality, especially in non-metro cities and what challenges are we facing because of the pandemic today?

I'll go ahead. See, frankly, it's not that it's a lower base. I think we've done fairly well even in terms of our year-on-year. I know the industry has had a low risk. But if you look at our 2 year CAGR we have done fairly well on -- and our market share has increased. So last year saw a good days. And even by the time we've entered this year on the leave, we're fairly well, right? So I do think that as compared to the rest of the industry, we don't really -- we have more of a base effect where we are higher on the base. Having said that, we believe our opportunity is higher will continue to grow. On the specific questions on how do we go back and expand into some of the other markets? Look, we are watching the situation very closely, both across metro as well as some of the smaller locations. We are looking at what is happening in terms of trends in certain states and certain geographies. And we will take a call in terms of how aggressive or how conservative we want to be in each of these markets. Our approach to actually reaching out to the smaller geographies has been multiple. One, primarily, we are looking at banker partners who are reaching out to different geographies. So while some large partners like HDFC Bank are anyway doing a rural expansion in our Tier 3, Tier 4 strategy, we are happy to ride with them. Similarly, what we have done is we have gone back and partnered with a lot of other partners like Jeevan, Equitas, Utkarsh, Bandhan, who are respectively very strong in some of the Tier 2, tier 3 markets. Our agency and direct are limited to certain larger cities. But there, again, we are looking at how do we go into these markets. So the way we look at it, look, these markets are also growing decently fast. There's a lot of under penetration, which is there in terms of insurance, both on protection as well as savings. So as long as we have a good partner to work with, we are able to write the right quality of business. We'll be happy to grow even in these markets.

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

So I just had a couple of questions. Firstly, on the VNB walk. In the fourth quarter, expense transition also seems to be negative despite the bounce back in CP as well as in overall APE. So anything related to commissions or anything on the distribution side where expenses are essentially going up? My second question is on the savings business. I mean last couple of years have been great for the company. So just wanted to understand if this lockdown or partial lockdown in states is impacting the momentum to a certain extent? And between the traditional businesses between par and non-par, do you see any particular tailwinds again in either of those two lines -- between any of these two lines going into next year?

Deepika, on your first question, I'm not sure if I got it right. But for the full year, yes, there is an expense impact negative, which we did mention a little while back as well. That's because of lower CP volumes for the year. So -- and also, I think Srini covered earlier as well in terms of Q4 versus Q4? Largely, it was on account of product mix, while it was covered in terms of overall protection remaining the same, retail group being higher. So that was more in terms of Q4 to Q4. But on a year-on-year basis, the expense negative impact was only on account of lower CV volumes. I don't know if I missed any part of...

So yes, just to clarify, specifically for fourth quarter, for instance, if I take it by difference of FY'21 versus 9 months? For the fourth quarter, also, the expenses impact is as negative. And which has basically turned around in 3Q because of the pickup in the business. So I just want to understand that why is expense again negative?

Yes. So last year, we had -- last year was definitely the partial lockdown situation that we had, and that was basically the result of that. This year, like we said, it is on account of CP for the full year. For Q4 this year, there is no negative expense impact on NBM, if that's what you're saying. And for Q4, the margins have expanded from 24.3% to 27%, right?

Yes. So Deepika, I'm not sure where you're picking up the expense negative in quarter 4. The rupee value, obviously, will be higher because of this -- the growth, but actually, there has been a better expense deferring in quarter 4. And thereby resulting in much higher margins of 27% for the stand-alone quarter 4.

Okay. So maybe just some rounding also from my end. Just want to...

On the second question in terms of the partial lockdown and what kind of tailwinds you're seeing in savings, Deepike, our point is that look, it's too early in the year to look at the April, but we get a sense from the ground in terms of what's happening, frankly, in some states and some markets like you can read across, there is a fair amount of concern in terms of the number of cases which are there. So again, from our side, frankly, the advisory is very clearly in terms of employee safety, in terms of partner safety and our financial consult and safety. So we have again gone back to say that, look, totally on remote. Our sense is on technology, our strength is in terms of being able to manage the entire sales forces end-to-end. You saw that in Q1, Q2, Q3 of last year where we were able to grow much faster than the industry, while we also grew in Q1, but our ability to come back in terms of growth was fairly fast. We do sense a little bit of an apprehension on the frontline sales, given what is happening in the market, and rightly so. So you will really get the full impact on the partial lockdown in terms of the business over the next. We are watching it quarter-on-quarter. Frankly, we would like to do the same as what we did last year. While there is clearly an aspiration to grow, we'll watch it quarter-on-quarter and we all have to see market growth. There are a few of our branches we've had to shut down because of being in geographies where there are a high number of cases or some of our ops guys have got affected. And we monitor that on a daily basis through our task force, and those are operational calls where we can clearly see some business impacted. There is a little bit of a slowdown in the last few days, and we are okay with that because, look, it's a long-term business anyway. In terms of tailwinds on certain products, yes, look, frankly, all said and done, it also depends on the customer on one -- on the term as well on the savings. Last year, when we went into this, people were really not sure whether they had the jobs intact or their businesses will get affected. There is still a little bit of a worry, but probably not the same level of concern now that the vaccines are there in place. So you will find that people will migrate to insurance because the awareness is there and the ability to pay is slightly better. And I think now that the second wave is fairly serious, a lot of people who were on the border line of taking a decision will come back. So we see higher awareness and higher inclination to buy these products. So I don't think the slowdown will be like the way we saw in Q1 and Q2 of previous year. But operationally, yes, we will see a little bit of a slowdown because people will not go for medicals. Our sales force will probably have to work only on remote and that is not as fully effective as what could have been earlier. But by -- I would say H1 would probably be marginally better, very difficult to project. We'll have to wait and watch for the next 1 or 2 months. Savings products, will, I think, clearly do well. Because, look, people do realize that they need to invest in insurance for a long period of time. There are some fantastic products from our side on the non-par and par side, which are competing with many other asset classes, given what kind of rates are in the market. So I would say savings products will continue to do well, given the kind of -- the customer has to put the money somewhere, and they will migrate it into insurance.

The next question is from the line of Hitesh Gulati from Haitong.

Congratulations on a very good set of numbers. And sir, my question is, what would be the quantum of COVID death claims paid by us on a gross and net of the insurance basis?

Niraj, go ahead. You want to give the numbers.

Yes. So Hitesh, COVID death claims paid were about INR 145 crores on a net basis. Gross basis was INR 231 crores. And number of claims were 2,324.

[Operator Instructions] We take the next question from the line of from Madhukar Ladha from Elara Capital.

Congratulations on great set of numbers. Most of my questions have been answered. I just wanted to get a comment on what sort of persistencies are you seeing in the guaranteed non-par segment? Are they above what we have budgeted or below? And some sense on what those numbers are?

Yes, we are seeing a very good uptick it is 93%. We have put out the numbers here. Of course, the numbers here are the entire traditional book. But yes, non-par book also is -- has positively surprised us. We were expecting robust, but it's trending extremely well. So -- yes, and as a consequence, we are also quite happy that down the line in terms of all the future cohorts also should continue to stay robust. So very much in line with our assumption.

The next question is from the line of Nischint Chawathe from Kotak Securities.

Just trying to understand, if I look at the infected unwinding rate, that seems to have gone up in FY'21 versus FY'20. So just trying to understand is there a specific reason for the same?

Srini, you want to answer that?

Yes. So last quarter -- sorry, last year, in FY'20, since the markets were falling, we were little bit extra cautious since the battle started or at least the lockdown started mid-March, late March, and we were a little bit worried about the economic impact. And as a result, we -- the extra conservative, we reduced our expected individual assumptions or the unwind assumptions. But since at the start of this year, we saw markets running sharply, we had recalibrated the expected returns assumptions to 8.4%. That is unwind rate, which have kept constant all through the year. So you see that this 8.4% this year has not been one-off, but it's been there for the last 4 quarters.

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

I have 3 questions, all based on your distribution channels. So first one is on the bank, very strong growth this year. How much of that growth is from HDFC Bank? And in a pandemic year like this, what's really driving such a strong growth on the banker channel. Second, the direct business, which is doing so well for the last 4, 5 years, seems shade weaker compared to other channels this year. So any color on why that has happened on the direct channel this particular year? And last on the agency channel, what is your sense of the incremental growth that you can deliver on the agency channel versus the incremental investment you have to put into the pyramid as in for the same fixed cost on agency right now, how much more growth can we do further over there?

Vibha, I'll take these. So I'll quickly answer on the bank first. Yes, frankly, this year has been good on the bancassurance across all our partners. We have seen a fairly decent growth Y-on-Y, especially from HDFC Bank. I think they have primarily done very well. Two, three reasons. One, I do believe that they have done very good work in terms of the distribution expansion, in terms of the [indiscernible] over there. There's a full fledge understanding training. And they picked up at the right time. Since it was an essential service, if the banks were open even in the initial 6 months. Asset businesses are a bit lower, I guess. And in any case, all the specified persons at the branches. So all the customers who reached out were converted both on savings as well as for a term product. So we didn't really see a slowdown both on the savings as well as in the term. HDFC Bank has done very well for us. So have some of the other banks who are expanding, people like IDFC has also grown Y-on-Y. So even though we had a multi-tie coming in at some of our partners this year, our overall Y-on-Y growth from all banker partners has been fairly good. I would say, one, because of the fact that it will be continued through the entire pandemic period in some form because of essential services to a lot of relationship with the customer level with leverage in terms of being able to sell insurance because the customers are more aware. Three, a lot of effort by our team in terms of mapping each of them. And there's been a lot of effort that we have done in terms of strengthening our whole bancassurance proposition. With our partners on the product as well as all the support in terms of what we can do on conversion. So I think all of it came together. And frankly, this year, bancassurance performed. On the direct business, your point is valid. We did see a neutral performance. We kind of expected this also. Direct business is primarily our sales force who is on the ground, and there are 2, 3 verticals through which we typically do this business. The primary large business line that we do it is through the what we call the BCS or the branch sales model for us, which is through our HDFC Life branches. Now given that, look, while we were essential services, we were only servicing our customers for critical needs on claims and maturity, which are happening at the branches. The footfalls are lower. And it is not like a high banking transaction kind of a branch. So when the footfalls are lower, that particular channel for the first half of the year, slowdown in terms of its numbers. Similarly, a lot of the other frontline were working on customers that they worked with directly in the market. They were also advised to stay at home and not go out. So for the first 6 months, our direct channel saw a slowdown. But as you see as things opened up in Q3 and Q4 our quarter-wise growth was quite sequential even in direct, and they ended flat. So while there was a huge de-growth given the fact that the direct business was just not available in H1. H2 was fairly decent, and we do believe that, depending on the situation, we will again come back in terms of the various revenues of direct business that we are looking at. But the year was affected in direct. On your third question on agency. In terms of what kind of incremental growth we can expect by putting in the same amount of money as compared to other guys. Look, the way we look at agency is slightly different. It is -- we are one of the few most profitable agencies in the industry. Secondly, the quality of our agency business is very, very good. It has one of the highest persistencies in the market. And over the last few years, we have been growing that fairly fast. We do see an advantage in an agency business in some sense because it's proprietary to us. There's a huge amount of effort that we can put in terms of recruiting new financial consultants. There's a very clear strategy in recruiting active and high-quality consultants. There is also a fact that we can train them better. And three, they are much more loyal to us for a very, very long period of time, given -- for many of them, it's a primary source of business. So as long as they're associate with a brand like HDFC, they stay with us for multiple years. Some of us may be have been here for 7, 8 years, but there are financial consultants who have been with us since -- for 20 years. So we are investing in that business more at a strategic call. We do get fairly good returns also. It is not that the agency productivity is lower. We have to manage the cost of acquisition in agency channel to make it profitable. But frankly, the term business and the product mix that the agency channel is able to deliver for us, makes it fast-growing as well as profitable. So we are heavily invested in the way it is.

I want to make a couple of more points and add to what Suresh has just said. Mayank, if you look at our Slide 18 of our presentation and direct channel, you will notice that our annuity business has gone up very significantly, it's being sold through direct channel. An annuity is a single premium. And so we are turning the wheels in our direct channel, wherein they can directly sell annuities and focus on that. And so they need to do a lot of running to deliver the same level of EPI. But yes, It will take a year or so for us to turn the wheels there. And so optically, it will look like the EPI has -- is flat, but a lot more profitable. That is point one as far as the direct. Also, you'll notice that the unit-linked business has been curtailed quite significantly by 400 basis points. So that too, in a way, their wins have been clipped, if they were allowed to do and pretty much sell whatever they can sell or want to sell, perhaps that growth would have been more than what we ended up with. So we are going through a bit of a change management in the direct channel. As far as the agency is concerned, we remain extremely bullish all the reasons that Suresh mentioned, and also extend the term in your post online channels, it is the highest in terms of the term share trending anything between 11%, 12-odd percent. So we do see a lot of potential for us to continue to do that. And also in some of the other emerging markets, you do find that agency channel is very well placed to sell more and more of protection because of their deep and continued relationships at a family level. And so that gives us the leverage to -- the more protection that they sell, gives us the leverage to plow it back into the agency channel and start becoming a self-fulfilling processes, the like of being able to fund their own group.

So agency grew on a fairly high base. So even though we had a fairly good growth last year, even then we managed to do -- so you have to look at it from that perspective, in a COVID year, they've grown despite a very high base. Even on banker, for instance, while our growth primarily came from HDFC Bank, some of our new partners like Bandhan delivered very well for us. And now we have Yes Bank, we have SBI Caps. Quite a few of these new partners who are looking at where we can see similar growth which can come in, in the following year.

Yes. To that point, and maybe the final point. If you look at a 2-year CAGR of agency channel, it's been about 19%. And a 2-year CAGR of our bancassurance channel has been about 15%. So one year because of some COVID specifics of not being able to meet in person, looks a little bit muted at about 6%. But if you look at a slightly longer horizon of 24 months, they have done exceptionally well.

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

Sir, you have strengthened the mortality variance have you like strengthen your base assumption itself? And you have done so, are you factoring in worse of impact in the general population of India because of COVID?

Yes. So I'll take this question. We don't know what is in medium-term or long-term impact of COVID going to be. So just to be a sign of caution, we thought we'll take more sort of a shift under trend level mortality as well in addition to the one-off reserves that we talked about earlier.

So -- I mean, just to get this right, probably, if you are having better experience will reverse this base essentially in the future, let's say, 2, 3 years down the line.

If we do -- yes, if we get a better experience, we will reverse gradually, yes. But we don't know -- there is something called long COVID and we don't know how the actual is going to pan out over the next 2, 3 years. But yes, if it does turn out favorably, we will reverse these strengthening.

Okay. Okay, sir, and you have increased the IRRs of Sanchay Plus. And we are, I mean, slightly above the comfortable range, probably 35% or below. Is 40% let's still comforting for us on non-profit?

Sorry, IRR, can you repeat? Your voice was not very audible to me.

No. During the quarter, we have seen the IRR -- the return of Sanchay Plus products going up. And our mix also is pretty close to 40% on non-par side. Are we comfortable with the 40% mix? Or do we expect the mix to be ranged in the 45-odd percent on non-par.

On non-par was 30%, if I'm not wrong, It's -- I don't think it was 40% or 31% for the full year. Last year, it was 40%, this year it was 30%. Am I audible?

Yes, yes, yes, yes. I can hear you. Was just saying [ 61% ] it looks, and unless you're including annuities in it?

Overall, overall.

So annuities are a significant portion, right? That was 5%, 6%. Non-par is just about 30%, 32%.

That's the range we'll be targeting, right? We will be in that range 32.2%

32%, 35% is what we're comfortable with. And of course, it depends on how the environment is and customer preference, but broadly, that range, yes.

The next question is from the line of Prayesh Jain from Yes Securities.

Just one question is on your VNB margin project, Vibha you mentioned that? Can you comment that a improvement in margins took up. So this would be driven by premium growth, obviously, when we're looking at premium growth, but more on profitability of individual segments, you sum that the protection margins are likely to improve from what we have seen in last year, mainly because of the fact that Q1 was a low-margin quarter. There could be some push from there. But what about other products? You had mentioned during the year about par profitability improving because of the largest [indiscernible]. And so what is the sense on what will drive the real margin expansion in the next year?

So we have a philosophy where in every channel is company level profitable in the long-term as well as like Suresh alluded to agency channel being, is more profitable as well as every segment. So it is a mix and combination of all of these, which help in giving the margin accretion. So it is not just 1 factor like protection or non-par, but I -- that's the point I also made on the last call. And so -- if I were to understand your question, yes, par, very much contribute towards the margin accretion, and we'll continue to do that and also judicious product mix at a channel and subchannel also plays an important aspect, plus product innovation hitting the market. There are so many products that we've been the originator of those products, whether it's the deferred annuity or whether it is in the non-par space, wherein Sanchay Plus is almost become phenomenous with the category and now Sanchay Par Advantage. So all of them do their bit in helping with the margin accretion.

The next question is from the line of [ Nawaz ] Dalal & Broacha. There seems to be no response. The next question is from the line of Nidhesh Jain from Investec.

So as we know VNB bought -- we see a assumption change, a negative impact of 70 basis points. Is this entirely because of mortality? Or are there any more other assumption changes that impacted this?

Srini, you want to...

Only mortality. So there are expenses and persistency were both positive. And we set up this INR 165 crores of corporate reserves and net of taxes already. He's also part of this assumptions change. Additionally, we also strengthened the mortality assumption also, which is to the tune of INR 120 crores. So the negative items and the assumptions changes are only due to mortality.

Sure, sure. And in our protection sales, so what would be the share of our online channel or -- and the aggregators, respectively? And how do we see the increasing influence of the aggregators, specifically on the protection phase?

On the second part of your question, web aggregators actually started off largely selling protection. But now, at least for us, we are diversifying very well and really the customers of aggregators pretty much by the entire suite of products. And that is really the maturing of any channel. And you will see on Slide 18, this is, of course, combined online channel. But you will see how, say, non-par was 0 in FY'18 and that trended upward from 18% last year to 29% in FY'21. So -- and that is, like I said, the maturing of a channel, and we are quite happy with that kind of an outcome. Niraj do you want to give some of the splits detail?

Yes. So aggregate has tipped around 4% to 5% of our overall business, Nidhesh. And like Vibha mentioned, that the remaining within the aggregator space, it's about -- after diversification it's about 35% to 40% would be protection, the rest would be savings. So that's a significant shift over the last few years. Also in terms of geography, the shift has been fairly significant. Tier 2, Tier 3 contributes a fair bit of the business there, upwards of 50%. Apart from that, the online business would be people coming to our site directly. And also some of our traditional distribution partners having a full end-to-end online journey. So that would be our overall business on online operation.

The next question is from the line of Shyam Srinivasan from Goldman Sachs.

Just to -- just continuing on this online one, I recollect you to bit under direct channel, right? And that number was 50% of direct was online. Would that number be right?

That's right.

Yes. So just looking at the growth, then direct has not grown. So I remember you told the challenges around direct from an employee perspective, first 2 quarters, but online should have ideally grown, right? So a little surprising that, that percentage is not increased vis-à-vis fiscal '20?

Yes. So if you -- so Suresh spoke about the offline channel. On the online side, we've had -- if you recollect in quarter 1, we had a -- that was really the only channel that grew online because of this whole lockdown situation, face to face not being possible while we had the tools, we still had to get everything in place in terms of getting the customer ready to speak to us. And online was the only channel really which the customer kind of sought us out or working through the aggregators and some of the other distribution channels. But as the time progressed, we saw that the face-to-face model started coming back. Hybrid model of distribution started coming back. And online by itself, we saw -- if you look at the trends in Google Search, they started normalizing through the year because initially, everything was driven by this whole fair psychosis and the need for protection, which we saw a growth of 50% in quarter 1, which started normalizing through the rest of the year. And that coincided with that effect as well for online. And if you were to look at relatively how within the online searches on Google, what has been the case with HDFC Life, it has been at the top of the charts in terms of what people are really searching for when looking at a specific brand. But in terms of how things have panned along the way, it have been more a hybrid model using a combination of digital as well as face to face to give people comfort and confidence around some of these aspects of business. And we also mentioned the change in mix, right? Initially, which was only protection a few years back, is now a combination of savings and protection. So within the 2 segments, there is a difference. Savings has definitely grown. It's just that protection, which is something that has throwed down in the second half of the year. So overall, that is basically the impact. And market share within aggregators is -- it's protected very similar to where we were at the same time last year.

We have one last question queue. We take the last question from the line of Rishi Jhunjhunwala from IIFL.

Just one question. When you split out your online business as well. So just wanted to understand, can you break down how much of your business today you can do completely digitally, right, and spread across distribution channels, given that the regulations and other things have been eased off in the past one year because of COVID in terms of each [indiscernible] around? And secondly, in the online channel, why is it that we are either not able to or not selling par at all?

So Rishi, just to add, I think, look, if you -- we could leave aside the customer going for the medical, the way we have invested in building our processes, we can do all our business basically, whether it's through the agency channel, whether it's through the broking channel, of course, of the online net banking, clearly, but I believe we can do the end-to-end without actually meeting the customer front. We spoke about platform last time. Our entire application submission process, payment process, FR submission, medical appointment set up, everything can be done digitally, right, which is why if you see the online contribution overall through net banking of banker partners as well as our own online website is significantly high. And a lot of customers are now looking at -- so the way we always look at it is there's an assisted online and unassisted online, unassisted online is still very small. But technically, everything can be done digital. And I think we have invested fairly high on that. So we tell you exactly what we are telling our teams even now to say that, look, you don't really need to go out and meet a customer. Yes, there are -- obviously, there are some products that the customer would like to be face-to-face. So follow all the safety protocols in need. But as far as possible, we can actually sit and do this end-to-end from your branch or your home or wherever it is required. So that's where we are in terms of the digital then. In terms of par being sold through the online product, there are certain products which come in easier in terms of explanation, ease of conversion as well as the customer adopting on certain sides. Our non-par product proposition on Sanchay Plus was very, very strong. So the way we look at the entire online journey is customers who are able to decide end-to-end by themselves and are able to search and you have some assisted. And in term of, obviously, the first primary product which can come in. But given that non-par proposition is quite strong and people are able to explain this product proposition, that has also got built up. Par in some sense, will still take some time for customers to adapt to going online and seeing out because there are a lot more questions that they probably want to ask. But as we go, one, with more digital tools, and second, when customers start buying the second par product. The first par product, maybe a face to face as they go and look at the product that they have already bought earlier, you'll see a little bit of migration happening even on par product.

Got it. And just to wrap up, can you remind me then to gain impact the reason for increase in sensitivity to interest rate?

Yes. So the sensitivity increase is mainly due to the excess assets or the expected profits that will come when you write a policy. So what happens is every policy has got an inbuilt profit loading in it, so that profit as you hedge all the liability cash flows, what you're left with, that is unhedged is the profit cash flows. And as you grow -- as the scale grows, that surplus or the excess assets that we held, which is not required to meet any liability cash flows, but excess assets keep growing. And that is like a shareholder fund, if you like, which doesn't have a matching liability cash flow. So this excess cash flow will be sensitive. And if you look at the sensitivity signs, it is actually counter to what you might expect. So in non-par, particularly, the risk is actually in say, is falling. Since the excess assets are there without in matching cash flows, when interstates go down, it actually -- the EV goes up and vice versa then interests go up. So it is really not a risk of interest rates falling. So it behaves more like any other fund, which doesn't have a matching liability cash flow. So that's why as the business grows in size, excess assets also grow in size. And as a result, the sensitivity also will keep going up. I hope that's answered the question?

Thank you very much. That was the last question in queue. I would now like to hand the conference back to Ms. Vibha Padalkar for closing comments.

Thank you. The detailed disclosure on our results is available in our investor presentation. We would like to thank all of you for participating in our results call. Stay safe. Good evening.

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.