ICICI Prudential Life Insurance Company Limited (ICICIPRULI.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the ICICI Prudential Life Insurance Company Limited 9M FY 2026 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to Mr. Anup Bagchi, MD and CEO of ICICI Prudential Life Insurance Company Limited for opening remarks. Thank you, and over to you, sir.

Thank you. Good afternoon, and welcome to the results call of ICICI Prudential Life Insurance Company for the 9 months ended December 31, 2025. I have several of my senior colleagues with me on this call, Amit Palta, Chief Products and Distribution Officer; Dhiren Salian, CFO; Chief of Service Delivery; Manish Kumar, Chief Investment Officer; Souvik, Appointed Actuary; and Dhiraj, Chief Investor Relations Officer. Let me start by taking about -- talking about some of the key developments during the quarter. We are proud to celebrate 25 years of service to our customers trusted by over 20 crores Indians. We have carried the responsibility and pride in protecting families and supporting them in their long-term savings goal. We extend our deepest gratitude to all our stakeholders whose trust and partnership have shared this journey. The President of India has approved amendments to the Insurance Act through the Sabka Bhima Sabki Raksha at 2025. This is a move towards achieving insurance for all by 2047. Raising the FDI limit from 74% to 100% is expected to attract long-term capital to the insurance sector. The act also enhances ease of doing business, prioritizes policy holder protection and positions India for accelerated growth and development. Now let me talk about Q3 FY 2026 business overview. In Q3, the life insurance sector saw a surge in demand following the recent GST reforms, strong GDP growth, low inflation and stable equity markets. Collectively, these factors have provided a conducive environment for the industry. The key highlights of our business performance are as follows: Q3 2026 Retail APE grew by 9.9% year-on-year on a base of 20.8% growth in the previous year Q3. Retail number of policies grew by 11.7% year-on-year. The recent GST reforms partly aided the strong performance of our Retail Protection segment. In Q3 2026 this segment registered a 40.8% year-on-year growth. Consequently, the retail sum assured witnessed robust 51.6% year-on-year growth during the quarter. Overall, APE grew by 3.6% year-on-year in Q3 FY 2026. 9-month retail and overall APE stood at similar levels to previous years. VNB for Q3 2026 stood at INR 6.15 billion. The 9-month 2026 VNB stood at INR 16.64 billion, with a margin of 24.4%. Cost-to-premium ratio for 9 months 2026 reduced from 19.3% from previous year's ratio of 19.8%. This includes the impact of withdrawal of input tax credit. As you are aware, over the past 2 years, we have undertaken several optimization initiatives to make our cost structure leaner and better align to our product mix, and we'll continue to work on the same. Our 13-month persistency stood at 84.4%, and claim settlement ratio stood at 99.3% with an average turnaround time of 1.1 days for non-investigated individual death claims. To summarize, we are committed to deliver sustainable revenue growth through a balanced focus on business growth, profitability and risk management. This approach ensures we remain resilient and ready to scale of the emerging opportunities regardless of the ever-changing external landscape. Thank you, and I'll now hand it over to Amit to take you through the business updates.

Thank you, Anup. Good afternoon, everyone. Let me start with the business overview. As mentioned by Anup, quarter 3 FY '26 retail APE grew by 9.9%. Consequently, the 2-year retail APE CAGR for quarter 3 stood at 15.2%. The Retail Savings and Protection segment both registered growth in quarter 3 of this financial year. Linked business also grew by 8.3% year-on-year, driven by renewed customer confidence as equity markets returned to growth after quarter 2. Within Linked business, we continue to focus on products which are not only aimed at wealth creation, but also offer goal protection, high sum assured and comprehensive benefit for nominees. This approach helps us cater to wider needs of customers apart from wealth creation. Non-linked savings business grew by 15.2% year-on-year, primarily led by nonparticipating products as customers locked in guaranteed yields in the declining interest rate environment. Annuity business declined by 16.4% in quarter 3 on the back of 50% growth in previous year same period. Within the Annuity business, single premium continues to perform well as it offers attractive rates compared to other investment alternatives. We expect this segment to return to growth as the baseline normalizes in the coming quarters. Long-term life insurance savings product represents a steady growth opportunity, and we capitalize on this through continuous innovation and expansion of our product portfolio. Recently, we introduced 3 products designed for long-term wealth creation. ICICI Pru Wealth Forever, a legacy plan that helps build long-term corpus. ICICI Pru SmartKid 360, a plan to secure a child's future milestones. And third, ICICI Pru Wealth Elite Pro, a ULIP offering, which incentivizes customers to stay invested for long-term wealth creation. Our core focus area, the retail protection segment continues to grow registering 40.8% year-on-year growth, with only 13% of the addressable population currently being covered. We believe this segment offers a strong multi-decadal opportunity for growth. Group Protection, which includes credit life and group term business grew by 6.2% year-on-year. In credit life business, MFI segment has started showing signs of revival with growth in quarter 3. We expect the momentum to continue as industry stabilizes. Group term business has grown, and we expect this segment to continue growth over long-term as we remain focused on selecting businesses which meet our defined risk reward expectations. Group funds business declined by 43.5% year-on-year in quarter 3 on a high base of 348.3% growth in the previous year. This business is typically lumpy in nature. Moving on to the channel-wise growth and contribution. Agency channel grew by 0.8% and Direct channel grew by 1.1% in quarter 3 and together, these channels contribute 52% to Retail APE. This performance is on the back of high growth delivered in previous year, where Agency channel grew by 26% and Direct channel grew by 23.1% in quarter 3 last year. Over the period, these channels, that is Agency and Direct, have demonstrated their ability to deliver continuous growth across various business cycles with 5-year CAGR of approximately 14% in 9 months FY '26. Given the current macroeconomic environment, favoring both market linked and traditional products, we believe these channels are well placed to capture the growth opportunities. On Bancassurance channel, we grew by 10.5% year-on-year and contributed 26.7% to APE in quarter 3. Partnership distribution channel grew by 51.6% year-on-year in quarter 3 on a base of 7.1% year-on-year growth in the previous year quarter 3. The Channel contributed 13.5% to APE mix in quarter 3. Group business declined by 20.1% year-on-year in quarter 3 on a high base of Group fund business last year. The channel contributed 16.2% to APE mix in quarter 3. Our distribution reach is provided on Slide 23. We continue to strengthen and deepen our distribution network and have added more than 46,000 agents, 140-plus partnerships and 3 bank tie-ups in 9 months FY '26. Today, we have the strength of 2.35 lakhs plus advisers, 51 bank partnerships with access to more than 24,500 bank branches and 1,400-plus nonbank partnerships. To summarize, we will continue to offer the right product to the right customer and deliver it through the right channel. By leveraging our strong brand, continuous product innovation and well-diversified distribution, we are confident in our ability to deliver sustainable business growth. We finished Q3 on a positive trajectory and expect the momentum to continue in quarter 4. I will now hand it over to Dhiren to talk to you through the financial update.

Thank you, Amit. Good afternoon, everyone. Now let me take you through the financial metrics. Our VNB for quarter 3 FY 2026 stood at INR 6.15 billion, the VNB for 9 months financial year 2026 was INR 16.64 billion, with a VNB margin at 24.4%. As you are aware, effective September 22, 2025, the input tax credit on individual business is no longer available. Despite this, we have maintained 9-month margins at levels similar to that of H1. This movement in margin is primarily due to higher retail protection mix, improvement in product level profitability through increasing sum assured multiples, longer-tenure policies and increasing right attachment, and a favorable movement in the yield curve during quarter 3. The above movement has helped us cushion the impact of an increase in expenses due to the unavailability of input tax credit, and therefore, maintain healthy profitability. On the efficiency front, we continue to optimize expenses and improve productivity. As you can see, cost-to-premium ratio has reduced by 50 basis points to 19.3% in 9 months financial year 2026. This includes an increase in quarter 3 expenses resulting from the unavailability of input tax credit. The reduction in cost is a result of our endeavor over the past 2 years to continuously align our cost structure with that of the product mix that's demanded by the customer. Notably, the cost-to-premium ratio for our Savings line of business has also reduced by 90 basis points to 12.7% in 9 months financial 2026. Our 13-month persistency stood at 84.4%. We have observed some challenges in specific channel and product pockets where persistency ratios are lower than the initial assumptions. To address this, corrective actions have been initiated aimed at improving these levels and that's being monitored closely. Coming to the other financial metrics. The company's PAT grew by 19.6% year-on-year to INR 3.9 billion in quarter 3 financial year 2026 and 23.5% year-on-year to INR 9.92 billion in 9 months of this fiscal, primarily driven by higher investment income from shareholder funds. Our Solvency ratio stood at 214.8% at December 31, 2025. During the quarter, the company had called back INR 12 billion that had been previously raised in November 2020. Subsequently, the company raised fresh subordinated debt to replace the amount called back. Our assets under management grew by 6.5% year-on-year to INR 3.31 trillion at December 31, 2025. Thank you, and we are now happy to take any questions that you may have.

[Operator Instructions] We take the first question from the line of Shreya Shivani from Nomura.

Congratulations on a good set of numbers. I have 3 questions. My first question is on the VNB margins of 3Q, while you have explained what has driven the almost flat margins. I wanted to understand if the new label or impact of those have been priced into this quarter's financials in terms of the margins? If not, will it come in the next quarter? If you can help us explain how much would that impact be whether it -- how much of it is recurring and so on and so forth, some details around that would be useful? My second question is on the persistency bucket, where you've spoken about the 13-month persistency. I also want to understand what's going on with the 61st month because over the years, the persistency trend in this bucket has gone up to as high as 66% probably in the FY '24 numbers. And now it is in a different trajectory. Before that, it was as low as 56-57%. So if you can help us understand the wide movement and what is causing this amount of wide movement over here? My third question is, RBI has spoke about the distribution reforms, product innovation that they look forward to in the insurance sector. If you can help us understand what kind of reforms should we expect from the industry? What could be the time lines and so on and so forth?

Shreya, Dhiren here. Let me take your questions one by one. To address the first point that you raised in terms of the impact of the labor law, yes, we have taken the impact. We have put this as part of our disclosures as well. The charge that we're taking is to the tune of INR 11 crores, and that's all that we have at this point. So this -- the question, of course, next question would be that why was it so small in relative to the overall liabilities that we hold. Quite frankly, the way that we had set out our internal policy is pretty much offset whatever was required by the new labor code. So the delta of INR 11 crores is what we have taken at this point. There's nothing residual for the future from this particular pool. Coming to your second question on persistency, 61st month. Over the years, a couple of changes have happened in terms of the way 61st month has to be measured, and that's also stemming from the product regulations. Unit-linked does have an element where earlier, they would get foreclosed at the end of 61st month. Now the new set of regulations that has happened over the last -- actually in 2019, these require the policies to remain active and the foreclosure dates have been pushed back. What that does is that it depresses the persistency at this point. However, given the fact that these are going -- the AUM continues to stay with us, we continue to fund off that. There is a similar regulatory change that happened some time back for traditional book as well, which therefore elongates the foreclosures. Coming to your third point, I think, frankly, in terms of innovation, you're seeing us do quite a bit. Innovation is not just centered around products. Amit gave you a brief of some of the products that we have recently launched. But innovation also works around in terms of process, efficiency and costs, because all of these go back to be able to deliver value to customers. Frankly, there are 2 businesses that we run, Savings and Protection. In the Savings business, continuous innovation to be able to drive better cost ratios is where we give better value back to customers. That is something that we will continue to keep pushing. And in terms of claims ratios for protection, that's something that we monitor very, very closely.

Just a follow-up on that, distribution reforms is not -- I mean, any -- I understand the product process innovation build, but we have anything -- any inkling on the distribution reforms?

Not at this point, Shreya. I think we will await any inputs from the regulator or the committees that they've set out.

Okay. All right. And just 1 follow-up on the persistency with the traditional book of foreclosures getting elongated that happened when? I understand ULIP policies were changed in 2019.

Yes. That's also the same 2019 period.

Okay. All of this is in 2019. So basically, the new regulation allowed the account to remain active, is it?

Yes, that's right. That's right. It stays with the company for longer, gives additional time for the customer to revise the policy.

We take the next question from the line of Swarnabha Mukherjee from B&K Securities.

Congrats on a good set of numbers. Three questions from my side. First of all, on the channel strategy. So I take the point that you mentioned that channels like APE, Banca had a high base previously. So now I think we are sitting on the inflection point. So as we have -- as we move on, what are the on ground trends are we seeing in terms of these channels, what kind of products we are selling and how are the uptake is looking vis-a-vis say, the base in the previous year for fourth quarter, although I understand these are early days, but some comments related to that would give us some better understanding about how we should think about growth as we move ahead. And in terms of the partnership distribution channel, just wanted to understand that, what kind of products were sold through this channel? And is there any impact of any product launch, et cetera, that was there in this particular quarter? And on the GST side. So our negotiations largely done and the impact absorbed? Or should we expect another quarter for that to happen? And also like -- so once everything is absorbed, then the margin run rate that we are seeing currently, do we expect it to increase in the coming year just purely on the basis of that? And last one, I think I wanted to understand that all these changes in operating parameters, like, say, cost ratios or persistency, have we already baked the changes in our VNB calculation? Yes, that would be all for my speech.

Thanks, Swarnabha. Let me address a couple of questions before I hand over to Amit. One is in terms of the negotiations that we have on GST with distribution. See frankly, again, we're reiterating what we had said the last time around. We strongly believe that these reforms they will help usher in growth. And they're going to -- we expect them to be value accretive for all our stakeholders, customers, distributors as well as the company. And you've seen the increase in business that has happened in the current quarter post the reforms that had been announced. Now everyone has benefited. Customers have seen the value of 0 GST. We have seen the benefit of volumes. And we have also -- distributors have also seen the benefit of these volumes come through. Now we've got multiple types of partners. Our approach is very different with each of these partners. Given that this diversification exists, I guess, closing some of these commercials may take time over the period. But they're progressively addressing each of these, and we'll work towards the win-win proposition for us as well as our distributors on this. The fundamental point is, it's not the margin. It's growing the absolute business and therefore, the absolute VNB and from a partner perspective, growing their earnings as well. So that's the process that we have adopted, and we continue to make headway at it. Anything else that comes through the coming quarter, we will keep you updated on that front. Coming to your question on cost ratios. Again, we have a view of where we'll end up for the year in terms of our cost ratio. Does it take into account all of the savings that we have got over the past few quarters? To some degree, yes. But of course, it depends on how we do well in the coming quarter. And we will anyway update all of these cost ratios at the end of the year. At this point, it is looking positive. So we are very clearly working to ensure that we do not have any surprises on the cost front at all.

Yes, Amit, this side. Amit, this side, on channels front, you spoke about high base of last year. So let me just define what contributed to high base last year. One was, of course, the markets were very favorable. They were [ buying ]. Second, we had the right products to capitalize on the positivity that existed in the market. We introduced new products as well as the unit-linked platform, which supported our growth on the unit-linked side. And third is the annuity business that we experimented with the new product, which got us the upside last year. So last year, we had a very strong growth in first 3 quarters which was largely driven through our proprietary channels, which is Agency and Direct. So over years, we have drawn confidence from the fact that whenever there has been a change in the macro environment, our direct channels, our proprietary channels have been able to align to the shift in the customer demand or any change in the macro environment. So this is something that we witnessed even in H1 as well. So while there was a decline, there was a stress because of high base. But progressively, we have seen our decline coming down from quarter 1 to quarter 2 and eventually, we turned the corner in quarter 3 by turning positive. So 2 years CAGR gives us comfort that on a little long-ish basis, we have the ability through our proprietary channels to start growing every time there is a shift in the environment. So these are the things. In between, like I mentioned, even in my opening note as well, looking at where the current environment is, which actually is quite a dual opportunity because economy has started doing well, markets are much better than what it was in H1 of the year. So quarter 3 is looking good, and we are supported it with new product reductions as well. So we are quite prepared in terms of availability of products, which are most -- the most appropriate at this point in time because the opportunity doesn't even exist -- doesn't just exist in unit-linked products, but it also exists on the guaranteed platform products. So hence, we have seen an uptick on both sides in quarter 3, which gives us the confidence that with these new introductions that we have done, which I spoke in the opening note as well, we are fairly placed in carrying on with the momentum in quarter 4 as well in our direct channels. Your second question was on partnership distribution. See, partnership distribution, of course, it has a lot of -- almost about 1,400-odd partners we have and they all follow very different models. So there is no one model that supplies all 1,400 partners. So different partners have different primary businesses, somebody is in general insurance, somebody is in broking distribution, somebody is in equity distribution, so the fabric of our partners in the entire partnership distribution space actually varies quite a lot. And hence, it's very difficult to single out and say 1 product strategy works across. So different cohorts of partners respond differently to different economic environment. So we have seen the current environment is quite favorable when it comes to guaranteed products, and that is where we have seen maximum momentum.

Right, sir. That's very helpful. Just 1 bookkeeping question. In the non-linked part, if you could give us the split between par and non-par that will be very helpful.

Swarnabha, we are roughly at about 60-40 right now, par to non-par.

We take the next question from the line of Kushagra Goel from CLSA.

Congrats on a good set of numbers. Just first question was on the regulatory front. I know you said that there is no update on the distribution reforms. But in general, just wanted to understand, are we expecting any other types of reforms to come in over, let's say, next 3 to 6 months period. So anything that is in the works, if you could give some more color? And second was on the Banca side. So one, just a bookkeeping question, if you could give the APE mix for ICICI Bank and the other banks? I just wanted to understand, like this quarter, did we see higher growth on the other bank side? Or how was it on the Banca channel?

Kushagra, bank to non-ICICI Bank roughly is half, in that range. ICICI Bank is steady as in -- you see the composition of ICICI Bank business is unit-linked and protection. Protection has done very well in this quarter as has every other channel. So they've been able to partake in the growth and do well as well. And unit-linked is dependent upon how the general market environment is. So to that extent, otherwise, generally broadly in the range of INR 100 crores, INR 120 crores is typically what they do per month. Coming to your first question in terms of distribution reform, I think I've answered that, there's nothing more that I can add at this point that's in the public domain.

Any other reforms or anything else, which is in the works that can come up in the space, anything that you have heard?

No, no. I think we'll wait for the committee to come up with their recommendations.

We take the next question from the line of [ Madhukar ] from JPMorgan.

Congratulations on a good set of numbers. So first, see protection has done very, very well for us, 40% year-over-year growth that we're seeing, and that's in retail protection. So my question is, a lot of it is driven by pent-up demand, I'm guessing, and obviously, the GST reduction factor. So how should we think about it in the coming quarters, what should be sort of more -- if you could help us understand what sort of growth can we see in protection? And second, also on -- on an overall basis, individual APE growth this year has been slightly muted in 3Q. Of course, you've seen an improvement but going into 4Q, how should you look at individual APE growth? How much do you think we can -- on an overall basis, we should be sort of penciling in for APE growth over the next couple of years, individual APE growth?

So on your comment on protection. Well, as you know, that once the GST waiver was announced on 22nd of September, we did see demand for consumers picking up, and that was as simple as 18% cheaper product. So if you ask me, that is something which has really triggered demand across channels that we have witnessed and in the industry. And I don't really believe that for a country where penetration is only 13% to the addressable market, where still there is a long way to go. There could be anything which is pent-up. So it's just the cost economics, suddenly 18% cheaper product is now available is pushing customers to think again and get the purchase decision to be taken faster. And the organizations and us as well, we are making access of these products more and more easy for the customers, getting processes streamlined and making it available to our customers. So last year also, if you look at quarter 3, we had actually grown by 40%. So actually, it is quite a sustained effort that is required in protection. There is a lot of infrastructure that is required to be built to do protection business at large, right? So which is something that where we are investing over a very long period of time. And just that GST waiver has given fillip to the kind of growth that we have witnessed in the last 3 months. And if you ask me the outlook for future, again looks very, very good on protection. Eventually, it is protection that really differentiates this industry from any other industry in BFSI. So from that perspective, it's a great move by the government. Consumer demand exists, and we'll keep investing in our processes and systems and our practices to ensure that experiences are good while onboarding our customers and demand keeps picking up from current levels. So I expect this momentum to continue. On APE growth, you spoke about relatively a muted growth in first half and turning positive in quarter 3. I had explained as an answer to the previous question, that we did have a large base in the last year, which was driven by a positive market environment, unit-linked products, new product launches that we did on unit-linked platform and the experiment that we did with one of our products in the Annuity category, all that led to a very large base. So the way to look at our overall 9-month performance is on a 2-year CAGR basis, where we look quite in line with the industry, right? So to that extent, you can say 2 years RWRP CAGR, if it is 13.8% for the -- 13.8% for us, for industry it is about 13.3%. But good part is that quarter 3 onwards, it will start getting normalized. And for the momentum that now we have seen turning positive in quarter 3, hopefully it will only get better in quarter 4.

Got it. Understood. And just 1 follow-up question on new pricing. Any thoughts on protection repricing any time soon?

So Madhukar, on-mark repricing is not something that one should expect, quite frankly. So at all points in time, we keep assessing and this is business as usual for us. We keep assessing segments. We keep assessing the process. We keep assessing the pricing. And wherever there are micro adjustments, we keep doing that along the way. This is in the quarter, previous quarters as well, and that's something that we will continue to do. So in a nutshell, there is no secular price increase that has happened. This is, I'm referring to the price hikes that we had seen back in 2020 and '22, nothing of that sort has happened.

It's not happened, but given that you are obviously absorbing some bit of the GST though, any chance of you taking a price hike in protection in the near term?

Madhukar, objective is to be able to grow absolute VNB. As I explained earlier that if you're able to get demand by way of this reform, then everyone is happier along with its customers, distributors as well as us. So it is the objective of growing absolute VNB, which helps us in this endeavor. And again, I think maybe I should draw your attention to the protection number, 40% retail protection growth in the quarter is quite strong.

We take the next question from the line of Umang Shah from Banyan Tree Advisors, PMS.

Am I audible?

Yes. Umang, go ahead, please.

Sir, first question was what is the rationale of transferring the pension management subsidiary to ICICI Bank?

You want to complete the questions, I can take them.

Okay, sure. So this was the first question. Second question was in partnership distribution, how much revenue or how much premium will be coming from online aggregators? That was the second question. And third was, do we continue selling [ 0 center ] products? Or have we discontinued them all together? Just these 3 questions.

Sure. In terms of the 0 center product, it's still on our shelf, but we don't have so much of volumes at this point. In terms of partnership distribution and specifically looking at web aggregator, let me just remind you, we have a very diversified distribution. Our largest channel is ICICI Bank as a single entity and most distribution doesn't really cross the 4%, 5% market at all as a single distribution entity. So I have not called out web aggregator in specific, but you get the sense that we are extremely diversified in that sense. Coming to the question on PFM, there is a little bit of synergy that can happen with the PFM being integrated as a direct subsidiary of the bank. And this is in line with the strategy that the bank has put out. And to that extent, we were looking at the value that was done through an independent valuer, that's the value that we have transferred the PFM to the bank.

Okay. Okay. Considering that it's a long-term product, we would have thought that life insurance company and pension fund management will be better -- will have a better synergy as such. Anyway, just and one more followup...

Yes, good question. The point is it's -- the entire pension is broken up into 2 parts, the accumulation and the de-accumulation phase. So the accumulation phase, typically on the NPS is done by the PFM entity. But it's the de-accumulation phase which is the annuity phase where only we can participate in. So to the extent that the PFM grows, whether it's a direct subsidiary or it is a sister concern, as long as we get the annuity, I think we should be able to reap benefits of that. So that doesn't change our strategy in that perspective.

Right, sir. Right, sir. Got it. Got it. And sir, on partnership distribution, the growth in that channel was even higher than any of the products that were growing. So if you could just highlight which products did PD do really well in, that would be great?

Very simple to explain here, this is Amit. See partnership distribution, like I explained for direct distribution, we were supported by very strong growth in annuity and unit-linked business last year. Partnership distribution is not much into the Linked business. So they had relatively a subdued base of last year. So on that subdued base, they have grown quite phenomenally. And this year's environment, which is more on guarantee platform, favorable on guaranteed platform, partnership distribution partners have actually done well, right.

We take the next question from the line of Sanketh Godha from Avendus Spark.

Dhiren, I had 1 question on the margin, 24.5%. If you can give a broader waterfall, the 24.5% in 1H falling to 24 -- marginally to 24.4%. How much was dragged by GST and how much it was pulled up by either product level margins or product mix change? If you can give a broader color there, it is -- it gives an understanding how it plays out? And how do you see it to play out from a full year perspective that the margins in that sense? So that's my first question. And the second question is cost cutting which alluded to supported the margins and it has been on a focus area for them. That exercise is broadly done? Or you still believe there are efficiencies to play out further and which can contribute incrementally more to the margin. These are the 2 questions on the margin. And I have 1 more question on growth, maybe if you answer these 2, then maybe I'll ask later.

So Sanketh, I have not given a walk. But when you look at the breakup, as I mentioned earlier, there are these elements that are offsetting the GST cost. One is the fact that the higher protection mix, which is the entire product mix shift, that has contributed towards an uptick. You can see that in quarter 3, retail protection is at 8.2% versus 7.2% that you have seen in H1. There is an improvement in the product profitability, where we had spoken about increasing sum assured, policy tenures, like attachment that has contributed quite well. And of course, some degree of movement in the yield curve. Now these are the counterbalancing elements. I'm not getting into a breakup of it, but these have counteracted each other and we are broadly flattish from H1 to 9 months. In terms of your question on cost, I think the right phrasing that we should use is actually waste cutting. It's not cost cutting. Clearly, we are not cutting into any of the muscle. What we are assessing at every point in time is what can be a better allocation of our resources to be able to deliver sustainable growth. So very clearly, identification of waste across the organization, across departments, across processes and across systems, that's something that we have started a few quarters back, and we will continue to do it at this point. But having said that, obviously, the bigger chunks of cutting has already happened. We will continue to keep working and cutting further in terms of all of these wastes. But of course, the big jumps that you have seen in terms of cost ratio drops, that may not be as large going forward.

Understood. And on margin trajectory, the levers of product mix and product level margins sustained, then this 24.5% kind of margin should hold up for next 2 years, over this year and the next year?

Yes. Largely, it is going to be product mix that kind of dictates where the final margin lands up. Are we able to deliver on VNB, it's growth in the premium, which is APE and to whatever extent the mix shifts, then that should add to VNB growth. That formula continues.

Understood. And the second question actually was on growth, which you probably alluded at. See, 2 years CAGR with 13%, 14% growth. Maybe as you rightly said the higher base had an implication on the current 9 months growth. Then is it fair to say that now given the distributions have broadly settled, whether it's ICICI Bank or others, we will be in a position to deliver a growth of 13%, 14% industry growth going ahead. Is it a fair number to believe that now the recent base can give us a growth of 13%, 14% going ahead?

That's exactly is the endeavor, Sanketh. And after having turned our quarter 3 positive going through the high base challenge of last year, we are fairly confident about building it up from here.

Got it. And lastly, on Group Protection, which was 5%, 6% growth in 9 months or the third quarter. If you can give a color whether it's largely credit life led slowdown or the combination of both credit life and retail slowdown?

So in the 9 months, we do have an impact of slower growth rather decline that we have seen in the MFI business of credit life. So the good part that we're starting to see now is that MFI has now started to turn around. I wouldn't say it's out of the woods yet. But very clearly, we have started to see a turnaround coming through in quarter 3. So again, this is in line with the commentary that you're also hearing generally around MFI credit, the core business of credit. So as that business starts to build up, we should be a natural beneficiary of that.

We take the next question from the line of Nidhesh from Investec.

First question is on GST impact. So have we passed on that impact to the distributor or we intend to pass it on in coming quarters? And what will be the strategy there?

So Nidhesh, I covered this earlier as well. Again, GST reforms should help usher in growth. They're again, value accretive for all our shareholders, stakeholders, customers, distributors, company. See, post the change in reform, we have seen growth come through. That's again, to our sense, it's a demand that's been built up. That's quite positive. We are able to add VNB. At the same time, partners earnings are also coming through. Now given the diversity of partnerships that we have, some of these conversations take longer to conclude. We are working towards this, and the idea is to be able to bring a win-win proposition for everyone.

Sure, sure. Secondly, so this quarter, we also got benefit of yield curve being in our favor, which also helped our margins. How do you see that playing out over medium term, whether you will pass on that benefit to the customer or you will be able to retain that because then that will have an implication on the future margins?

Yes, you're right, Nidhesh, but the final changes in pricing or if there any change in pricing will be a function of how the yield curve moves, what the market dynamics are, what our distributor conversations are as well as growth. So it will be -- it's a multifactor equation. I can't simply pick up 1 thing that will determine whether price will move positively or negatively.

And last question is on persistency. So there has been a sharp drop in 13-month persistency, which you have explained. But how do you see the trend in FY '27, should we again go back to the 88%, 89% persistency on a 13-month basis? Or this 85% is the new normal? And how do you see the impact of lower persistency in our operating variances for the full year?

So you're right, we've seen some challenges in specific channel product cohorts, and we're working at this. As we fix those particular pools, we should see persistency rise. That's the endeavor. We should hit 85 and above as we go through into the later part of -- or the mid part of next year. How much more can we get through to the 87, 88, I think we'll have to wait and watch how that shapes -- how the underlying business shapes up. How we take a look at that on terms of our EV? I think we'll do the final assessment as we go through to the end of the quarter, and then we'll bring that to the market.

We take the next question from the line of Prayesh Jain from Motilal Oswal Financial Services Limited.

Just firstly, on the growth front. While Amit Ji mentioned that we are looking at a good 2-year CAGR. But if I actually look at the trends, even in FY '24, it was kind of a low base where ICICI Bank was possibly growing at a declining. And from that base in FY '25, we saw most quarters, a very strong growth, obviously, because of product innovations and product new launches that we have done. And again, on that high base, you've seen a low growth in this fiscal so far. So it's been up and down. So do you think that we are now in a position that we can be a more consistent growth company from all product perspective or from a channel perspective now that all these corrections have been done, we should be a more stable growth company?

Okay. I'll take this. Amit, this side. So you spoke about FY '24 challenges because of decline in our primary channel and subsequently product launches and innovation. See, one big learning from last year after having witnessed growth in first 9 months. When the demand was very strong on unit-linked products, we took a strategic call to align our cost structure to ensure that we don't create a bias, artificial bias in selecting products which gives margin and we called out absolute VNB as an objective. But to follow that strategy, it is very important that you take those hard calls, cut the waste, relook at the structure, work on every area of cost rationalization, so that you are aligned as an organization to the demand based on the macro environment. So having done that hard work, now created products across category, not creating biases on what we believe is right for us internally, but going truly with the consumer demand, I think we are fairly well placed with our current cost structure as well as the availability of products that we have created. So if you ask me on a growth perspective, we are very confident in aligning to any change in the macro environment that may happen in times to come. And this situation is very different from where we were 2 years back when there were issues about concentration of business with one of the large partners, which is now fairly diversified. And even on products, we are fairly diversified and have availability of products to take care of any change in the environment. So from a degree of confidence, I can say now things look much better because at cost structures that we have currently, we can take care of the volatility much better.

That's helpful. Dhiren, you mentioned that the product mix in between in the non-linked part is 60-40 between par, nonpar, but I think in the Q2 call, you mentioned it was 50-50. So this -- has the par share gone up?

Sorry. Yes, it's 60-40. Roughly in that range.

Okay. Okay. Because in the previous call, you had mentioned the mix is 50-50, that's the reason I'm asking. And the third question is the solvency increases because of what in spite of we seeing such a strong growth in protection?

Solvency increases largely because of addition in PAT. There's not too much of movement, whatever that we need in terms of required solvency that was added up. Nothing unusual there, Prayesh.

We take the next question from the line of Harshal from Asian Market Securities.

Two set of questions. First is in terms of annuity book. So if you can help us explain how is the current experience tracking versus [ assumptions ] whether any impact on EV from annuity surrenders has been recognized or is expected going forward? That was the first question. And secondly, in terms of commission costs, so we have seen a sharp increase in the single premium commissions. So could you help us understand the key drivers behind the same.

So in terms of the final quantification of whatever hit that we have, if any, on to EV, we'll bring that at the end of the year. Yes, in the RP annuity book, the persistency is lower than what we had initially set out. In terms of single premium overall, you have seen the commission grow. That's also because the growth that we have seen in parts of the credit life business.

We take the next question from the line of Dipanjan Ghosh from Citigroup.

Just a few questions from my side. First, if I look at your protection business, it seems that after quite some time, your non-ROP business has grown at a very, very significant pace. So just wanted to get some sense of this demand growth that we have seen, let's say, post GST rate cuts and its linkage to pure term. Did you see some linkage out there? Then secondly, is the non-ROP product significantly higher on the margin profile, which kind of benefited you during the quarter? Second, on the credit life mix, I think this question has been kind of asked by previous participant. But I just wanted to kind of extend the discussion in terms of your mix between MFI and non-MFI, how much that will be, let's say, for the 9 months, so that we can gauge what can be the growth in case microfinance were to improve in FY '27? And the last question is on the [ non-banca ] channels. Do you see any sort of competitive pressure rising? Or do you kind of hold on to the counter shares that you would have, let's say, seen over the past half or 9 months or rather in case they have increased from the previous levels?

So the Dipanjan, bulk of our retail protection business is actually non-ROP. ROP is a very small component of that. That's roughly in the range of about 10%. So that's never been the big mainstay. Most of our retail protection has been pure term without ROP. And that's seen a big spike over these last few quarters also. We've not broken up the split between MFI and non-MFI within the credit life, but it's fair to say that MFI is fairly significant within our portfolio. Coming to the third question that you had in terms of non-ICICI Bank multi-insurer, I think we've been holding our counter share in all of these shops. So competition, of course is intense in all of these shops, but we've been holding our counter share here. Amit, do you want to add anything?

Yes. So most of our bancassurance partnerships outside ICICI are multi-insurance with the exception of 1 multinational bank that we have. And there, the competitive pressures are always there. So we play by the year, the only guardrail threshold that we keep in mind is a risk-reward ratio as well as the quality. And based on that, we play out and see how it goes. But yes, competition is very active. But most of the shops we have been able to hold on to our share or even better there, so that's something which is only on the improving side.

We take the next question from the line of Vinod Rajamani from Nirmal Bang.

I had 2 questions. One is on this ULIP portfolio, what is the proportion of, say, these hybrid units say, the ULIPs on the similar lines of say, protection gain and so on, where you offer a higher summer short. So just [indiscernible] what the proportion of ULIPs in the entire ULIPs place. Secondly, on riders, what is the attachment rate is the attachment rate on -- are you attaching only on say, the new products -- new sales or on the existing portfolio as well? And what kind of attachment rates are you seeing? So these are the 2 questions I had.

No, Vinod, we haven't called out the share of high sum assured ULIPs, but it's safe to say that it started to pick up materially over this current fiscal. In terms of riders, these are on to new products, new sales only. A little difficult to go back to existing customers and then look at an upsell of a rider on an existing plan. So it's easier done with a new sale primarily because the amount of premium that we are taking is quite small. So going back to existing customers using our distribution force is not as cost effective.

Fair point. Just on this a follow-up to this hybrid unit question. Is there any -- do you see any issue in terms of say, a substitution effect in the sense that if you're selling these high sum assured ULIPS, you could be kind of some customers who would have wanted to buy, say, a large term policies, they might be wanting -- they might just end up finally buying hybrid ULIPs, which have higher sum assured. So is there some substitution effect that is possibly playing there? Also, is that some -- is this substitution effect also playing to some extent on the non-par too kind of -- on hybrid ULIP. So the customer profile is different, but is the agency force trying to kind of sell these hybrid ULIPs as a substitute for non-par. Is that happening?

So let me answer this, Amit, this side. See, the profile of customers that we are intending to penetrate through our high sum assured ULIP, are those mass affluent and affluent customers who have dual objective of wealth creation and protection, right? So to that extent, even somebody who does purchase a peer protection doesn't stop planning for wealth creation. So to that extent, he does plan wealth creation as well. So these are typically mass affluent and affluent customers who tend to take these products. But you are right, for somebody who intends to go for a very high cover, we have a choice of going with this affordability and seeing what he can spare for pure protection and can choose a cheaper product, right? So to that extent, I don't see this coming as a replacement for pure protection because the affordability and what you get is premium is very, very different in these 2 category of products. right? So they are not a similar premium-sized product, giving similar kind of cover and 1 giving wealth creation, other not giving wealth creation. So it's very different from an affordability perspective by customer cycles. And we have not witnessed. To be very honest, give you a direct answer. We have not witnessed any replacement of pure protection with high [indiscernible].

Because Vinod, a pure protection plan at 1 level gives you 400-plus times the premium in terms of cover. Whereas these products give you anywhere between 40 to 100 in terms of the coverage to the premium. So clearly, different areas, different objectives that we're trying to meet with this. And despite this, you've seen a 40% growth in retail protection in quarter 3.

[Technical Difficulty].

I do apologize to interrupt you there. Your audio is not coming in clear.

Yes. No, the only reason I brought this up is none of your similar-sized peers have launched this high sum assured ULIPs. So that was the reason that's it, So that was -- that's why I was wondering if there's some substitution effect at play.

Let us clarify this product is being offered though a little differently, but mostly it is available across quite a few organizations now. We are not the only 1.

We take the next question from the line of Shobhit Sharma from HDFC Securities Limited.

I have a question on your growth. So how should we think about your growth on the individual business side for the next 2, 3 years? Why I'm asking this question is like if I look at your 5 years CAGR it's actually less than 1/3 of the CAGR of the private players. And it is now almost 2 years from the time we have [ reached ] our margin profile and the constant changes we have made to our product portfolio. So that's first. Secondly, on to the product strategy, if I look at it, so we -- so 2 years, so we have thought about no cost ULIP, we have pushed for that. We launched annuity product with 100% return of premium on surrender. Now we have launched a new product on the ULIP side with a return of premium allocation charges and we have slowed down on to the annuity products. So just wanted to understand our thought process on that? And what kind of new products should we expect in the upcoming quarters, now. Yes.

Okay. I'll take this, Amit, this side. You spoke about -- see, there's always a context and the power of context cannot be taken away. And that has been the journey that we had reversed over a period of last 4 to 5 years. And we focused on things which we prioritized at a given point in time and looked at protecting our margins, diversifying our channel mix, diversifying end products at a time when there was a shift in strategic priorities with the primary bank partnership. And we are very happy to say that the guidance that we had given of doubling our FY '19 VNB by '23 VNB, still was achieved. We doubled that VNB. Though the path we chose was through channel diversification, new partnerships and product diversification. So path was different from the growth objective that we would have probably otherwise followed. So subsequent to that, there has been some changes in the environment to which we have aligned whenever the opportunity has been favorable. And when it has been challenged like the way it was challenged last year with a very high base and we're capitalizing on that base of unit-linked opportunity, market positive and annuity as an experiment that we did in light of the fact that surrender guidelines were 6 months down the line going to become a new norm, and we thought it was a good experiment to do with our affluent customers with our [ select ] channels, and it did work for a short while and it gave us a good growth last year. So there is a context to what you witnessed over a period of last so many years. And today, which is most important is the context where we are today. Where we are on our product strategy is that in terms of availability of products right across categories we have on category of products, whether it is unit-linked, market link, par guarantee, full guarantee, annuity, nearing retirement age customers, younger customers, protection, return of premium, exit as a special feature for our customers, exclusive products for self-employed. So virtually, from benefit perspective and from a category choice perspective, we have almost our basket being full. And we have already articulated that we will not follow an internal expectation on which product need to deliver how much. We have allowed customer demand to dictate what is purchased in the market and we have aligned our cost structures down to deliver this objective of being true to consumer demand. So from that perspective, like I mentioned again, the context that we have witnessed in most recent times, which is quarter 3, I think coming out of a challenging base in H1 and getting into a positive growth in quarter 3 gives us fair confidence, that with all the availability of products we have and for the dual opportunity that we see both from the market perspective as well as on guaranteed product platform. And with this support that we see on protection business with consumer demand increasing, I think we are in a fairly decent spot in terms of delivering a stable growth going forward.

Yes. Just a follow-up on this Amit, which channel do you think would be key in driving the overall growth for yourself?

See all channels are dear to us. There is no channel that we can really articulate, as Dhiren mentioned in his -- as an answer to a previous question, that no channel apart from ICICI delivers more than 6% to 7% of our overall portfolio. So I don't have the luxury of focusing only on 1 channel, right? Because apart from ICICI, almost every channel is 5% to 6% contribution to overall. So from that perspective, our effort is to look at the cohorts of our distribution, which is multi-insurance partnership distribution as 1 cohort, direct distribution, which is both online as well as offline as 1 cohort. Agency, a third cohort and bancassurance, ICICI and non-ICICI Bank partnerships as other cohorts. And we would like to invest in all depending upon the strategic priorities chosen by our partners. We keep aligning ourselves and keep making the products available, make processes efficient and keep cost under control and deliver growth in a balanced manner.

And our approach on the product strategy, what kind of new products should we expect in the upcoming quarters now?

I mentioned 3 products we have launched very recently, one on a unit-linked platform and second on a legacy platform, and third, on a children platform. So that is one effort that we'll keep making. So I can't really say how many and when, but we'll keep working on across categories and see -- and align our effort to the natural demand that we will witness based on the environmental factors.

Okay. And Dhiren, just 1 question to you. So should we expect our VNB growth outpace our APE growth? Because we now see benefit of the cost savings, the cost -- the efficiency in the cost. So should we expect that to happen now?

No, I'm not giving a guidance on this. The fundamental that we are looking at is growing VNB. As we bring some stability to the business, you will see that AP will be the lead to getting growth in VNB.

We take the next question from the line of Nischint Chawathe from Kotak Securities.

I have a simple question. When you say that your conversations with distributors are going on, with respect to the GST input tax credit deficit, what do you really mean? Does it mean that next quarter, supposing you kind of get into more favorable conversation than some of the ITC provision that you have made this quarter kind of reverses? Or what happens to the business that has been done till date?

Nischint, it's not about ITC provisions, the input tax credit is no longer available, and that is the cost that we have taken on the P&L as well as VNB. Now as our conversations with distributions come to a close, if there is an element in terms of cutting commission, then we will get that implemented in the coming periods if that is effective 1st October, then it will be effective since then as well. But overall, these conversations. Yes.

No, no. So when you say that there is going to be maybe some revision in commissions from October 1, then you obviously made some assumptions and commissions for the business in the last 3 months, right? So that kind of completely gets reset in the fourth quarter? Is that how we should think about it?

No, no, that it doesn't. That doesn't. So commissions will anyway be applicable going forward. And what we are looking at doing is optimizing along with commission, everything else that we have within our capabilities, technology, operations, to be able to give better value in terms of operating leverage.

Okay. So basically, what you're trying to say is that whatever is the conversation that happens will be for prospective business and not really for retrospective business. Is that how we should think about it?

Yes.

We take the next question from the line of Mohit from Centrum Broking.

I have 2 questions. My first question, I was looking at your Bancassurance, where we have around 51 banca partnership, 1 year before, we had around 46. Despite adding new banks, their share in the protection and annuity has declined from 13% to 11%. So how should we interpret this kind of decline basically?

So Mohit, the banks that we've added are actually quite small. Yes, the count has gone up from about 47 to now 51. But the banks that we've added are actually quite strong. So they would not have materially moved the mix at this point.

Okay. So is there any concentration risk within this, within the banca business?

No, not really, like I mentioned earlier, the largest single distributor is ICICI Bank, which is roughly about 15%, beyond which everyone is in the -- at best in the 5% range, and most others are quite small.

Understood. That's helpful. My second question is towards the retail protection. So I think is it safe to say that your return of premium demand is going down and basically the focus is on selling pure term policies?

Mohit, I answered this in another context. Bulk of our business has always been a pure term. The return of premium has been quite small in the range 10% to 15%. At this point, it was 10%. And that's what it is. At this stage, we are seeing that a bigger demand is visible in the pure protection plan. And very clearly, the impact of 0% GST is most felt on that plan.

Understood. And just to confirm, basically, we are not repricing any of the retail protection policy, right?

So there is no on-mass repricing that is planned.

We take the next question from the line of Raghvesh from JM Financial.

Congratulations on your strong results. Now I just have one question that you mentioned persistency has been bad in some buckets. Now we will decide on the operating variance at the end of 4Q. But whatever the impact is there on the new business that is that should be visible in VNB, that has been taken already? Or will that also be reassessed at the end of 4Q?

So Raghvesh, if there's an assumption update that we need to do that will impact VNB. Assumption updates are typically can be either directions. Generally, when I look at assumption updates, these will be in the context of persistency, mortality and expense ratios. And these are the elements that we look at in terms of whether these are permanent. Whatever is permanent gets passed through as an assumption update, whatever is temporary goes through as variance. This exercise will be done in the last quarter, and we will take all of those updates at the March end financials.

Okay. So essentially, there can be an update on the VNB margins as well.

No, not really, not so much on the VNB.

Ladies and gentlemen, as there are no further questions from the participants. I now hand the conference over to Mr. Anup Bagchi for his closing comments.

Thank you very much for joining. Have a good day. Thank you.

Thank you. On behalf of ICICI Prudential Life Insurance Company Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.