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

Ladies and gentlemen, good day, and welcome to the ICICI Prudential Life Insurance Company Limited 9 Months FY 2022 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. N.S. Kannan, MD and CEO of ICICI Prudential Life Insurance. Thank you, and over to you, sir.

Thank you. I hope I am audible.

Yes, sir, you are. Please go ahead.

Yes. Thank you. Good evening to you all, and welcome to the results call of ICICI Prudential Life Insurance Company for the 9 months ended December 31 of the current financial year 2022. I have several of my senior colleagues with me on the call: Satyan Jambunathan, the CFO; Judhajit Das, who heads Human Resources, Customer Service and Operations; Amit Palta, who heads Distribution, Brand and Marketing and Products; Deepak Kinger, who is responsible for Audit, Legal, Risk and Compliance; Manish Kumar, who manages investments; Souvik Jash Appointed Actuary; Dhiren Salian, our Deputy CFO; and Mukesh Boobana from the Investor Relations team. As you are aware, as a country, we are seeing a fresh surge in COVID-19 infections beginning the last week of December 2021. Our thoughts are with the families who are grappling with health issues, lost lives, and livelihood issues. We continue to follow COVID-19 safety protocols at our branches and of our employees. 99% have got single dose and 92% have got both doses of vaccination. While several of our employees have been infected in the last couple of weeks, most of them are either asymptomatic or have mild symptoms with less than 1% of them being hospitalized. We have reemphasized the COVID-19 protocols and launched a 24/7 dedicated helpline to facilitate physical and mental health counseling, RT-PCR testing, including isolation centers as well as provision of hospital beds, oxygen support and ambulance. Work-from-home and isolation have once again become the norm and our systems as well as processes are fully geared for remote working. Wherever warranted, we have also practiced proactive isolation to ensure effective business continuity. In terms of the impact of the fresh surge in COVID-19 on mortality claims, the initial sense we are getting is that though there may be a sharp spike in infection. The result in mortality is not expected to be high given the increased level of vaccination in the country and the reported nature of this in terms of this new variant. We have covered the details of the impact of COVID-19 on mortality claims as well as the additional amount provided as of December 2021 later in the presentation. So before that, let me start by talking about a couple of developments during the quarter before moving on to our performance. I'm happy to inform you that during the quarter, we have won multiple awards across business functions. Our customer mobile app has won Silver in the Best Mobile App of the Year category in the Velocity Awards 2021. We also won ET BFSI Excellence in Innovation Award in the best use of emerging technology for business growth category for our Humanoid, a voice bot for renewal premium reminder calling. Further, the League of American Communications Professionals LLC has awarded us with Gold in 2021 Spotlight Awards for Excellence for our Annual Report of financial year 2021. We believe these awards are a testimony to our responsiveness to the environment, our ability to innovate as well as meeting the expectations of our stakeholders and this gives us the confidence to set the newer benchmarks as we move forward. As you may know, we started our ESG journey in financial year 2020 by enhancing disclosures on our practices and have been taking various steps to incorporate ESG principles in our day-to-day business activities. During the quarter, we have become a signatory to the United Nations Principles for Responsible Investment, the first insurance company in India to do so. We are happy to note that our initiatives and progress on ESG front are now getting reflected in improvement in ESG ratings and scores given by some of the external agencies. Moving on to products. We enhanced our product suite further by adding 2 new products during the quarter. We launched an income plan Gift long term, which provides customers a guaranteed income for up to 30 years along with life cover. We also launched a term plan with the return of premium. It has 2 innovative features: first, the insurance cover gets automatically adjusted based on the customer's life stage; second, it provides financial cover against 64 critical illnesses, which is one of the most comprehensive and widest to the industry. I will now move on to our performance for the quarter. Our 4P strategic elements, that is premium growth, protection business growth, persistency improvement and productivity enhancement, continue to guide us towards our objective of growing the absolute value of new business, while ensuring that our customer is at the core of everything we do. And this, as always, is depicted in our Slide 4. I will talk through our performance on the 4Ps through Slide 5 to 10 of our presentation and then conclude with a commentary on the VNB. Let me start with the first P of our strategic elements, which is premium growth. Our annualized premium equivalent, APE, grew by 16% to INR 19.29 billion in Q3 of FY 2022, resulting in a 30% year-on-year growth for the 9 months ended December 2021. Our total new business premium for the 9 months ended December 2021 also grew by 30% year-on-year. Within this, our retail new business premium actually grew at a higher rate of 38% year-on-year. Our market share based on retail weighted received premium stood at 7.4% for the 9 months of this fiscal as compared to 7.2% for the last fiscal. The strong growth in premium was driven by our diversified product mix as well as the distribution mix. For the 9 months of this financial year, the contribution from linked savings products stood at 50%, non-linked savings at 29%, protection at 17% and balance 4% from group savings. Within non-linked saving products, if you can look at the chart, annuity was 4% of our total APE. On the distribution front, we continue to maintain a diversified distribution mix. In our 9-month fiscal 2022 APE, the bancassurance channel share was 39%; agency share was 24%, direct business share was 13%, the share of other partnerships was 9% and the balance was contributed by group business. Moving on to the second P of protection business on Slide 7. First, on retail protection. As you are aware, there has been a lot of discussion about the reinsurance price hike. In pricing the product to our customers, our approach has been to calibrate the pricing with the mortality outcomes, using segmentation-based data analytics, recalibrate the underwriting standards based on emerging mortality experience across segments, review the retention limits based on our past outcomes and preserve the overall VNB margin of the protection segment. As a result of this approach, we have been able to limit the increase in pricing at 0% to 10% across various segments without compromising on the VNB margin of the protection business. Given this marginal increase in prices, we do not expect it to have any material impact of the demand. Over the medium term to long term, given the significant other penetration, we continue to believe it to be a multi-decade opportunity and specifically for a company like us, which has a strong customer proposition and a wide distribution network. Coming to this quarter's performance, despite the supply side constraints, we are happy to note that the decline in retail protection has been arrested sequentially when compared to the last quarter. Second, group term business. We continue to cater to the increased demand with a risk-calibrated approach. We have significantly scaled up the business, primarily driven by increase in pricing. Given the push on vaccination by large employers like us, their willingness to financially cover larger base of their employees and the early evidence of low mortality claims from the third wave, we see this to be a great opportunity. This should also give us inroads into the retail protection business over a period of time. Third, credit life business. Similar to the group term, the pricing has already been revised for the credit life segment as well. Further, with pickup in credit demand and improved disbursement, we have seen a higher growth in this segment also. Given the performance of these 3 segments, our total protection APE grew by 20% to INR 3.06 billion in the third quarter, resulting in 22% year-on-year growth for the 9 months compared to the same period last year. Also, our protection mix has actually increased to 16.7% in 9 months of this financial year as compared to 16.2% in financial year 2021. I would like to highlight that based on total new business sum assured, our market share has actually increased to 12.7% in 9 months of this fiscal from 12.5% in the whole of last financial year. With this, we continue to maintain the private market leadership in sum assured. Now moving on to the third P of persistency presented in Slide 8. We continue to see further improvements across most cohorts. While the 13th month persistency ratio has been stable at 84.8%, our 61st month persistency ratio improved from 49.8% in March 2021 to 52.7% at -- in December 2021. On the fourth P of productivity presented in Slide 9, our total expenses grew by 25% year-on-year for the 9-month period of this financial year. The growth in expenses was lower than the new business growth, which stood at 30% for the same period. Alongside our 4P strategy framework, we continue to maintain a resilient balance sheet on mortality risk for 9 months of this fiscal. Gross claims on account of COVID-19 stood at INR 20.45 billion. And net of reinsurance, the claim amount was INR 9.82 billion. This net claim amount includes settled as well as notified as well as in-process claims. Further, at December 2021, we hold results of INR 2.03 billion towards COVID-19 claims. Satyan, will talk about this in more detail. Our solvency ratio was 202% as of December 2021 as compared to the required ratio -- regulatory required ratio 150%. On credit risk, only 0.2% of our fixed income portfolio is invested in bonds rated below AA, and we continue to maintain a track record of not having a single NPA since inception. Of our total liabilities, nonpar guaranteed return products comprise only about 1.6%. We continue to closely monitor our liquidity and ALM position, and we have no issues to report it. As a result of this above driver, the VNB for 9 months of this fiscal was INR 13.88 billion, a significant growth of 35% over 9 months of last financial year. Given our APE of INR 51.25 billion, the resultant VNB margin was 27.1% for 9M FY 2022 as compared to 25.1% for the whole of last financial year. As we have always articulated in the past, we continue to focus on absolute VNB growth, which is our stated objective. Before I hand over to Satyan, to talk us through some of the details, I would like to maintain that we continue to maintain our objective of doubling our financial year 2019 VNB by financial year 2023, which requires a compounded annual growth rate of 28% over the current and the next financial years, as we have articulated earlier. With the VNB growth of 35% for this 9 months of this fiscal year on a year-on-year basis, we believe that we are on track to achieve this aspiration. Thank you all for joining the call. I will now hand it over to Satyan. Thank you.

Thank you, Kannan. I hope I'm clear. Okay. Good evening, everyone. Our primary focus continues to be to grow the absolute value of new business that is the VNB. So the 4P strategy of premium growth, protection business growth, persistency improvement and productivity improvement. The first element of premium growth. Our product range with propositions to suit different risk characteristics of customers has been a very important enabler of premium growth. In terms of our performance on Slide 15, we have registered a strong growth year-on-year across all segments, except group funds business, which tends to be lumpy in nature. Within this, our annuity business grew by 77%, linked business grew by 35%, non-linked savings grew by 29% and protection grew by 22%, resulting in an overall APE growth of 30% year-on-year for the 9 months ending December 2021. In terms of new business received premium for 9 months FY '22, annuity business contribution stood at 20%, significantly higher than 15% in the same period last year. With a premium amount of INR 12.21 billion in 9 months FY '22, we were one of the largest pension and annuity providers in the market. Our wholly owned subsidiary, ICICI Prudential Pension Funds Management Company Limited, distributes products under the National Pension System, and is registered as a Pension Fund Manager and a Point of Presence. This business is synergistic to our annuity offerings and is expected to support growth of the annuity business in future. The AUM managed by the PFM has increased by 58% over December 2020 to INR 104.41 billion at December 2021. The PFM has a market share of 15.6% in the private sector, AUM, at December 31, 2021. Moving on to distribution. We have continued to enhance our distribution network across channels. In the agency channel, the approach has been to ring-fence our highly productive agents. We also added about 18,000 new agents in 9 months FY 2022. Within the bancassurance channel, we have a total of 23 bank partnerships. On partnership distribution, we added 72 partnerships during the 9 months and now have about 700 partnerships across traditional and nontraditional distributors such as web aggregators, payment banks, small finance banks and insurance marketing firms. For the direct channel, the strategy has been that of upsell to our existing customers, aided by analytics. Coming to the performance of these distribution channels on Slide 18. We saw strong growth across distribution channels. Our bancassurance channel APE grew by 21% year-on-year to INR 20.22 billion in 9M FY 2022. Specifically, the business share of ICICI Bank to overall APE was stable at about 28% for 9 months FY '22 as it has been in the last 2 quarters. The annuity business from ICICI Bank grew by 78% year-on-year in 9 months FY 2022. Our new bank partnerships continue to contribute to a significant share of bancassurance APE. Our agency channel APE grew by 32% year-on-year to INR 12.53 billion. Direct and partnership channels grew by 34% and 35%, respectively, in the same period over last year. The second element of protection growth on Slide 20. Given the pandemic environment, supply side constraints, including revised underwriting guidelines continue to impact the pure term retail protection business. One of our responses to these challenges has been a system integration with a document aggregator. With the customer's consent, this integration seamlessly fetches digital bank statements and income tax returns. For the month of December, when we started this, more than 1,300 applications were processed using this facility. Further, as Kannan mentioned earlier, we also launched a return of premium plan in the month of December 2021. This proposition allows us to cater to a newer customer set. For 9 months FY 2022, the overall protection APE grew by 22% to INR 8.56 billion. In terms of new business received premium, protection contributed 28% of the total new business premium for 9 months FY 2022. With this, I would like to highlight that almost half of the new business premium for the period has been contributed by the protection and annuity segments, which are significantly underpenetrated parts of the market. The third element of persistency on Slide 22. We continue to have a strong focus on improving the quality of business and customer retention, which is reflected in our persistency ratios. We have seen further improvement in persistency ratios across most cohorts during 9 months FY 2022. Our 13th month persistency ratio at December 2021 was 84.8%. While this ratio is stable as compared to March 2021, it has significantly improved from 82.7% to 84.8% as compared to December '20. This makes us believe that directionally, we should end the year with a 13th month persistency ratio being better than the full year last year. The fourth element of productivity on Slide 25. On the cost side, the most significant increase has been in manpower costs. We continue to invest in our distribution expansion. Even with the cost increase, our cost to assets under management has been stable at 2.1% for 9 months FY 2022. Also, we continued to leverage technology for process reengineering and to drive productivity. Some of the key technology initiatives that we took during the quarter include, an improved user interface and user experience in the mobile app providing simplified purchase as well as servicing experience. We also enhanced our app to include a fitness tracker for the customer. Empowered, we also empowered at our partners to accept customer requests, including claim intimations on their platform. And as I mentioned earlier in the context of simplification of protection onboarding journey, leveraging the ecosystem to obtain digital bank statements and income tax returns for financial underwriting has been a new initiative. In terms of digital capabilities too, we have got some significant achievements. Our website is the most visited website amongst the private sector life insurance companies. Similarly, our mobile app has been rated the highest within the life insurance industry. Over 90% of service transactions that is roughly 3 million a month are done through self-help or digital mode. In terms of insurance applications, the digital adoption rate is at 96%. The outcome of our focus on these 4P, as you may see on Slide 27, has resulted in a VNB of INR 13.88 billion for 9 months FY '22, a growth of 35% over 9 months FY 2021. Given our APE of INR 51.25 billion, the resultant VNB margin was 27.1% for 9M FY'22 as compared to 25.1% in FY '21. We continue to focus on absolute VNB growth, which is our stated objective. Now moving on to the trend in COVID-19 claims. We continued to receive COVID-19 claims in Q3 FY '22, but most of these were claims pertaining to previous periods, that is delayed intimations. COVID-19 claims pertaining to the current quarter have not been significant. As a result, our COVID-19 claims, net of reinsurance, stood at INR 9.82 billion for 9 months FY '22. Every claim that has been notified at any of our touch points is accounted for in this number, even as they are being processed further. Coming to the provision held for potential COVID-19 claims. There is a declining impact of COVID-19 claims that we have seen for Q3 FY '22. Also, the emerging experience from other countries is that the mortality rate for the Omicron variant is significantly lower than the other earlier variants. Third -- in India, the third wave hasn't peaked yet, and we still have a section of population that is yet to be vaccinated. We therefore believe that it is prudent to continue to hold provisions for future COVID-19 claims at December 2021. We now hold provisions of INR 2.03 billion towards potential COVID-19 claims. These include provisions for claims that have been incurred but not reported as well as probable claims in the future, based on the emerging trends. On the financial metrics, profit after tax for 9 months FY 2022 stood at INR 5.69 billion. Our solvency ratio was about 200 -- at 202.2% at the end of December 2021. Our AUM was more than INR 2.37 trillion at 31st December 2021, a growth of 16% from December 2020. To summarize, we monitor ourselves on the 4P framework of premium growth, protection business growth, persistency improvement and productivity improvement to improve expense ratios. Our performance on these dimensions is what we expect to feed into our VNB growth over time. Thank you, and we are now happy to take any questions that you may have.

[Operator Instructions] The first question is from the line of Arav Sangai from VT Capital.

Yes. Sir, hope all good at your end. Sir, my first question was pertaining to growth that we have seen in quarter 3. So I think we have shown a little lesser growth compared to some of our private peers, even though we kind of had a base impact. And we have almost filled all the product gaps that we had with respect to, say, the nonpar and par everything. So how are we seeing the things pan out for, say, the next -- this quarter and specifically for the next year to reach our goal of VNB doubling like what products might drive this growth and why were we a little lower than industry for this particular quarter? Any reason and something of that sort?

Yes. Arav, we are doing good. Thank you for joining the call and ask the questions. I will ask my colleague Amit, who is the CDO to supplement my answer. Yes, if you look at the quarterly growth rate, we had overall growth of about 15% on a year-on-year basis. So that is probably what we are -- what you are referring to. So the way we look at it is that rather than looking at the quarter-to-quarter number on the specific APE or anything, we would rather be focused on the full year VNB, which I talked about. The fact that we have already grown the VNB at 35%, there should not be any concern at all whatsoever in terms of our VNB development for the rest of this period as well as for the next financial year. So that is the way we would plan it. Now coming to specifically the channel side. Satyan, already talked about ICICI Bank having -- been stable between 27% and 28% during the last few quarters, so that is the way we would expect ICICI Bank to continue. All the other areas have actually grown at a much higher rate. And depending on the channel you look at, have grown between 20% to 30%. So we do have the momentum going for us. And given the strategy changes in ICICI Bank that has been broadly stable at 27%, 28%. So that's the way we will look at the top line. But if you look at the product side, some of the steps we have taken, be it the protection product or some of the long-term gift, which is our non-linked plan savings solutions. They have really been kicked in by -- during the end of December. So a full benefit of those initiatives we have taken on the product side will play out in the last quarter. So we do have enough product levers available, and we do have the channel momentum going with us. And finally, I would also like to say that the bank partnerships which we have tied up, they are growing at a much faster rate compared to the company average. And you know how some of these banks closed the fourth quarter. So we do believe that, that also will give us a leg up in terms of the growth. And the last point I want to talk about though, we have talked about it in our opening remarks, is that on the retail protection also, things are -- while there's been a year-on-year decline, we have got our act together in terms of our pricing strategy, which has led to only 0 to 10% increase in pricing, as we said. And with that out of the way, with the group term as well as credit life momentum going with us, even retail should come to our benefit. In fact, if I look at the quarterly margins and the 9-month margins, even with a little bit of slowness in the retail, we've been able to maintain and grow the margins compared to last year, not just because of the other lines of business in protection other than retail, but also because we've been carefully able to calibrate all our non-linked savings products by increase elongating the tenure as well as by increasing the annuity. So just to summarize, we have enough levers available on the product side as well as on the distribution side to have a good closure to this fourth quarter and ensure that we are on track regarding the VNB absolute VNB growth objective. With this, I would like to hand it over to Amit to see if he wants to add anything, any color on the distribution side. Amit, over to you.

Yes. Kannan, I just want to extend the point that you made on a healthy growth that we have been able to witness outside ICICI channel. I just want to reiterate here. In terms of numbers, if you were to look at excluding ICICI, our growth actually has been in excess of 40%. As you know that industry has grown at around 19.5%, and private insurance have grown close to 30%. So to that extent, excluding ICICI, our growth has been quite commendable and in excess of 40%. So in terms of ICICI recalibration of strategy, we have stated in the previous quarters as well, that they are pretty focused on driving VNB-led products for us which is principally driven by annuity and protection range of products. So they continue to do well on annuity, and their growth of almost 78% over last year is estimated to their commitment to annuity range of business. But as you know that weighted business, annuity doesn't contribute to the top line, same way while protection still remains one of the principal driver of ICICI. But the ecosystem challenges which were placed for the entire industry probably had an impact on ICICI as well, which I'm sure as things pan out to the introduction of new products, ICICI will once again become a primary contributor to our entire journey on protection side of the business as well. So these are the things that I wanted to just talk to you about channels perspective. On the products, you know that what we today have our linked business almost been contributing close to 50% of our overall portfolio. And at times, you will get upside of a good market sentiment, and there will be volatility in between times. Good part is that in comparison to how we used to run unit linked business in the past, now we have any diversified fund strategy also to support our unit growth, which was further supported by some of the new funds that we launched in quarter 3. So at times, some months, you may see a good tailwind supporting unit linked business, which is still a significant part of our overall portfolio. In couple of months because of volatility, you may see some migration may happen from unit linked to non-linked savings business. But good part is that irrespective of the market volatility, you may see some migration here and there, but our comprehensiveness of our product suite should take care of growth aspects, specifically in channels, which is out of ICICI. These are the 2 points on product and channel funds that I just wanted to support.

Right. So my second question is around retail protection. So I think the industry has gone through a lot of consolidation in the past year and with all the price hikes and everything done, how are you thinking about retail protection? Like, which already that this quarter, we might see a pickup or in the next quarter, we might see a pickup. And especially the second part I have in this question is with regards to the ROP product that we have launched. So ROP is a very -- it's a very famous product and people have demand for that product. And there's one peer of ours, which is very active in this segment. So how are we looking to compete in this segment? And what proportion of our overall protection do you think ROP can become, given it is a favorable product amidst in the audience? And whether that would affect our margins at the company level, but since ticket size is also higher, so VNB overall might remain same, but the margins might dilute a little. So any color on the ROP and the retail protection demand going ahead?

Yes, Arav, thanks for asking those questions. Kannan, again. I will give my sense on retail protection, where do we see it going from here. And then I will request Amit to talk about some of the specific features of our ROP product, which we believe is quite a differentiated proposition in the market. I will also request, Satyan, to address your concern on what kind of margin impact which could be there and how we are planning about it. The first part on the retail protection. As you know, we have seen a year-on-year decline in retail protection, which I talked about. The good news is that between Q2 and Q3, we have broadly stable in terms of the retail protection. So that's the first point I want to talk about. The second point is that if I look at Q3, from -- let's say, within that while we give only the disclosures at the end of the year on what is the constituent retail protection, I can tell you that between October to November to December, we have seen a sequential growth in terms of the retail protection growing. Again, as I said, we are looking at our VNB at the VNB margin with a lot of positive attitude because even with this kind of retail protection, we've been able to maintain the margins and grow our VNB. So growing from -- going from here what, since this stabilization has happened, we do believe that on a quarterly basis, at least we can improve the retail protection from here on because the increase in price has been marginal. And so we do not expect any material impact on demand when it comes to the price elasticity perspective, so we don't see any problem. And of course, the medium-to-longer term, we see the demand growing every day, Arav. I mean, absolutely, there's no doubt of demand. So that way, I would say that under penetration opportunity medium- to long-term opportunity is quite intact. So what we have done, given all this is that trying to take the momentum forward by keeping the price rises to a minimum, cutting out completely undesirable profile, focusing on profile, a desirable profile is how we have really calibrated this business. So we are quite confident of retail protection growing. The only pinch of salt, if at all, I would like to add is about the third way, we talked about. We are seeing the prevalence of the disease amongst the employees as well as the distributors and also ensure from the customer's perspective also, the fulfillment, et cetera. So that we'll have to sort of a little bit calibrate, I feel. But I do see that more of a January issue here and now issue rather than even the February issue, given the severity of the disease and all the statements and the data which we are seeing, this probably be -- we'll have to watch that physical fulfillment issues on retail protection only for probably January. So that is how we are planning the year and that is how we believe that things will pan out from here. Now I would request Amit to talk about ROP product. Early days in terms of giving your volumes too early. But I will ask him to give a sense of product features and how we expect today. Margin issue, we have done a full analysis of margin issue because -- after introduction of ROP, that part I would request, Satyan, to elaborate. Thank you, Arav.

Thanks, Kannan. So while we have done our recalibration of pricing post the changes that happened subsequent to reinsure our price hike, to ring-fence our best and most desired profiles in the affluent customer segment. That is something that Satyan will elaborate further. But specifically, how we have now gone about adding to the overall target segments is by introducing this return of premium product, which is to create for mass and mass affluent customer segment. And the insight that we were working on were twofold. One was that customer who wanted something in return and was not willing to invest on an expense towards covering his life and wanted something in return, which was the most obvious insight that everybody is working on. And there were markets -- there were products which are available in the market, addressing that insight. So we have introduced level cover products, which returns premium to the customer at the end of policy term. What we have done as an extension is given an option to the customer to convert his return of premium lump sum into an income form. So smartly product can be positioned as something which covers your life till you need cover and converts into an income once you need annuity. Similarly, there is another variant, which is most appropriate for young urban where the need for protection may not be very high when they start at an age of 25 to 30. But his cover increases, which is the increase in liability, increase in loans that he undertakes over a period of time. So the variant within this return of premium also for specifically urban and young customers, it allows him to have a variable cover, which increases and decreases right through the life stage and also give option to the customer to take his entire return of premium much earlier than the completion of policy term, which means that you actually get in hand your entire premium back when you are active and when you're healthy. So you can enjoy that return of premium in the lump sum payout and while your cover continues right to the policy term. So I think there's quite a few things that we have tried to do it decently in the return of premium variant. And I guess we will be able to go beyond what is most obvious segment, which is being addressed through the return of premium products available in the industry today. Thanks. Over to you, Satyan.

Thanks, Amit. So from a margin point of view, Arav, you summarized it very well yourself, when you said that actually in absolute VNB terms, it should not adversely impact and that's how we look at it. What we had also said is that we would disclose the volume of business that we do in the ROP category separately. It was trivial in the last quarter, but it was still disclosed in this slide. Going forward as well, we will disclose it. The most important way -- the way I would summarize what Kannan and Amit also spoke about is that in the short term, given that we are not a one-trick pony anymore but have multiple levers of growth in VNB expansion, one segment does not hurt us so much. Second, the longer-term prospects of retail protection indeed our belief that over a period of time, this will grow to become a much larger opportunity than what it is even today. Third, the new product offerings, the way Amit described it and the way I would add to it is, by the way, it also offers a return of premium. It's the richness of the features beyond return of premium, which is important. And four, from a VNB absolute point of view, given that it is an incremental market opportunity, we would like to believe that this is an incremental VNB opportunity and not a substitution from the retail protection. So one doesn't really have to worry about margins in that context.

The next question is from the line of Suresh Ganapathy from Macquarie.

Kannan, I have 2 questions. One is, you have just shown a 0 to 10% hike. Is it that -- I mean, that's what you're expecting on the protection side? Is it that there is a greater amount of retention on your book compared to what it is, if you can share some numbers because we just wanted to know whether you are actually willing to take a higher risk so that the protection price hikes are limited? So that's the first question.

So Suresh, yes, we have increased retention. The earlier retention in the protection was INR 2 million we have taken it up to INR 10 million. The reason we have done it is that we believe that with the underwriting practices that we have put in place with the risk selection procedures that we have put in place and with the new price that we are offering. This will, indeed, be a profitable business, which we can choose to retain with ourselves. And therefore, the main purpose of reinsurance now is less about risk management, more about capital management. And whatever we do on retentions will be for the purpose of capital management and not for the purpose of risk management. So yes, we have increased it after having been convinced ourselves, that the proposition and the process that we are delivering is indeed continues to be as profitable as it was before.

Okay. So earlier, anything above INR 2 million was reinsured, now everything about INR 10 million is reinsured, right?

That is correct.

So in terms of percentage, what would be? If I were to really look at retail protection, would it be, earlier, 50% reinsured, now it'd be 70% reinsured in terms of the overall protection premiums? Or how should I look at that number?

So earlier, it used to be almost 60% to 70% reinsured. Now it will come down to less than 50% being reinsured.

Okay. But Satyan, I'm not convinced on the risk aspect. The fact that the reinsurers were -- I mean, suppose if there is going to be another big COVID wave, you are taking undue amount of risk on your book. How can you say that this is only a capital management issue?

So Suresh, the whole point of the risk here is not just that the COVID. The fundamental part of risk here is about price commensurate with who we are selling it to. And that is where the underwriting norms and the target markets come into play. If you heard what Amit described some time back, the way we have now repositioned our entire product suite is that the term life, which is the earlier product without return of premium will be positioned more as a better demographic profile-oriented product. The mass and mass affluent customer base to whom we were earlier selling some part of the term life will now -- we will now seek to migrate them to the term with return of premium, which has far more relaxed or liberal or higher expected mortality outcome pricing to it. So we are now looking at operating in this spectrum of customers with a series of products, each of which, from a mortality outcome point of view, we consider the suitable fit to the segment that we are offering. Particularly with respect to your question on COVID, will a higher retention increase exposure to single event? It may very well increase exposure to single event. But we believe that in the longer term, the higher retention is commensurate with the outcome that we are expecting in the product. And in the shorter term, whether it is a single event or otherwise, we would much rather manage it from a risk management point of view through capital provision or catastrophic reinsurance to deal with non-pandemic-related single events.

Satyan, sorry, I'm going to hop on this a bit more because this is just important for everybody in the call. I mean, the challenge here is this is not going to stop here, right? So the reinsurance hikes, I expect further happen, is the competition really tying your hands for you to really force yourself to take a decision because nothing was -- nothing like this was hinted in the previous call. Suddenly, you have decided to take a higher risk on your book. So are the -- is the competition tying your hands, therefore, you have gone ahead and taken this decision? And if there are subsequent further reinsurance hikes, what is going to be your strategy? Are you going to keep retaining more? Because at some point in time, the price hikes have to be 25%, 30%, if you can't retain so much on your book?

Yes. First, I'll take competition, Suresh, and then I will hand it over to Satyan to talk about the future reinsurance approach, et cetera. On the competition, first, I want to tell you that competition is not making us to do this at all, because if you look at -- even today, if I keep out the return on premium, if we look at the pure term life, we are the market leader among the private players. So in the entire industry, we are the market leader on the pure retail. The issue of the frictions on the ground in terms of medical examinations, underwriting standards, et cetera, has impacted everybody all of us together. And even within that, we have been able to maintain our market leadership, absolutely no problem on that. So we will not be guided by what competitors are doing in terms of our pricing strategy because last time around also, when we thought that we should be increasing the price higher than others, we did it. We didn't have any -- we didn't even think about it a couple of times. So that is our approach. So I want to assure you that it is not driven by competition at all. It is totally driven by our own data analytics on what has been our experience on that book of INR 1 crore and above and how we should be looking at it. So with all the decision of the Risk Committee of the Board and the Board, we have taken this call. So I just want to assure you that it has nothing to do with the competition because if that is the case, then even before we introduced all that, we would not be showing a 27% margin and the growth of VNB of 35% for this 9 months, which is actually higher than our target at VNB growth. So that, I want to assure you. I would like to hand it over to Satyan to talk about our overall reinsurance approach. Satyan?

Suresh, one of the things, again, that I have been harping on across the past almost now 8 quarters, is it matters less what reinsurance price is. It matters more whether the mortality outcome is in line with pricing or not. And I've said this repeatedly every time at the results call, that view exactly remains the same. And therefore, from a reinsurance price point of view, to the extent that I'm reinsured. If this is a price change, of course, I will have to reflect it in the price to the customer. But the most important part of this is to deliver an underlying mortality experience, which is consistent with what we priced for. And with a higher retention, we are basically standing up and saying that I have even more faith that my price will work for the underwriting norms that I have put in.

Okay. So Satyan, with long COVID and all these kinds of issues, how can one be so confident about mortality experience, right? Are you appropriately pricing long COVID into your products and stuff, so just for us to get a bit more clarity?

No, I totally agree with your concern, Suresh, but I cannot be having a different underwriting standard for retaining in my book and different underrating standards if I have to reinsure. It will come and bite me and I will run out of capacity or they will increase the price so much in the next cycle to recover all the losses, so that has not been our approach at all. I mean, whether I do the risk management or reinsurance does the risk management. My underwriting service have to be the same. I cannot say that this -- somebody is going to backstop me because of that, I can relax my underwriting standards. That will come back and bite us. That's not the way the industry itself operates and definitely, we don't operate that way. So it is just that based on a INR 1 crore portfolio in the past, how the mortality has moved, and we are getting the confidence that whether they do it or we do, it doesn't matter, I would rather retain the profit in that segment. And then we will do a reinsurance as a capital management. And finally, the catastrophic cover is also exists. That is not going to really create a larger problem for the company. So that -- I would request you to look at it from that perspective rather than saying that I will relax my standard if there is a reinsurance as an I will -- that is not the way we can really build the portfolio. Satyan, you want to supplement anything?

One last point, Kannan. I mean all said and done, we have been talking about percentage price hike, Suresh, but again, you have seen the comparison of prices. We're still not the cheapest in the market. The pricing strategy still is not to be the cheapest product.

Okay. I think I'm fine with this.

Just one thing, if I could add also Satyan, I would like to clarify that we have segmented through deep analytics, our entire target market for our pure term cover. And not only we are prioritizing some of our desired profiles, there are also some profiles that we have elevated in our strategy going forward. So which has improved our capacity to not only have the best pricing to our best customers and also at the same time, reduce risk because of eliminating some of the profiles in geography where we had the adverse profiles. So that's where something which helps us create capacity to keep our pricing hike limited.

The next question is from the line of Swarnabha Mukherjee from B&K Securities.

Sir, a couple of questions. First, again, on the retail protection side, I wanted to understand that now that you are pressing on this multiple reverse of price hike and changing the underwriting things. So does that imply that over time, your supply side consideration would then come down and your growth will be more volume driven as opposed to just the price driven growth that we expect to see because of the hike? And addition to that is in terms of again the ROP product. So I got a little bit confused in terms of the strategy because if you were planning to sell it to the mass and mass affluent customer segment where you also sell the individual -- your products, then how would you be seeing this as an incremental gain opportunity. So if you could throw some color on that? And then which channels would address that. So would this be again sold by ICICI bank largely or across channels? So this is my first question.

So maybe I'll first talk about the supply side constraint. So fundamentally, what we are seeing is supply side constraints, Swarnabha, are driven by some of the pandemic-related situation. So as long as the pandemic is live, some of them may very well continue to be there. Only once the pandemic subsides and the environment improves, will some of these become tailwinds, if you will, from a growth point of view. And therefore, in this context, what is more important is not to go after unbridled growth in volume but to ensure that what we write is written on terms that we are comfortable with for the 30 or 40 years that we'll be retaining the risk on the book. Going forward, beyond the pandemic period, of course, we would expect the volume-driven growth to be the big driver. That is also our entire thesis with respect to the opportunity where at the current point of time, our estimation is just about 10% of the addressable population for term life actually has term life cover. So yes, indeed, over a medium-to-long term, it will be a volume-driven business. But in the short term, there are multiple levers that we will have to operate on to ensure that we write the business in a sensible fashion. To your question on, is there a confusion on the positioning of the product, we would like to think not, because fundamentally, if I were to look at myself or yourself as a consumer, typically, the more affluent people will not see value in a return of premium proposition, they would much rather go for a product, which may not return premium, but provides a higher cover, which is what they are looking at. But typically, the more mass and mass affluent customers are the people who express a view to say that, look, I don't have money to spend on insurance. At least what I can do is to convert part of that into savings, but still get sizable insurance cover. And that is the customer need, which is driving into the return of premium variant. But more importantly, like Amit described earlier in the conversation, this is not just a return of premium product. It is actually a product with a host of innovative features, which also has a return of premium feature. So to that extent, given the customer segment who typically prefer a pure term, and who typically prefer a return of premium. You can see it in the industry data already for us today. The average sum assured of people writing pure term is 70 lakhs to 80 lakhs. The average sum assured of people that are selling term with return of premium is probably closer to 25 lakhs. It's a very different customer segment, which clearly is being established even by the current people who are selling the product. And that's the reason why we believe it will be an incremental opportunity.

Okay. Okay. That's very helpful, sir. Sir, my second question is on the reserve side for basically the COVID-19 claims. So you, at the end of this quarter, had INR 2.23 billion in terms of provisions, while at the end of last quarter, it was at INR 4.12 billion. So could you kindly tell us how the flow has been in this? Because I just wanted to know if there has been a reserve release because I can see that the incremental claim has been INR 1.2 billion net of reinsurance between Q2 and Q3. So if you could explain the flow in the provision?

Yes, there has been a release of reserves. So I will talk through the numbers. And when we spoke of the numbers last quarter, the way we typically tag claims as potentially COVID is based on what submission the customer has made. Eventually, when they assess the claim, then they do the final classification of [indiscernible] COVID. So in a way, there's a bit of redoing of the part numbers as well, so I'll talk through some of the numbers. During this quarter, of the intimation that came to us in the quarter, claims on account of COVID net of reinsurance was INR 0.7 billion. Out of this INR 0.7 billion, a bulk of it, which is INR 0.65 billion pertained to debts, which have happened prior to October 1, which means Q1 and Q2. Like you mentioned, at the end of the last quarter, we had an IBNR provision of INR 1.13 billion, out of which we ended up utilizing roughly INR 0.65 billion. So to that extent, our provision at the end of the last quarter was still more than sufficient to cover what intimations we got with delays during the last quarter. We closed the year with an IBNR provision of INR 0.24 billion. So net-net, there was some release net of claims that we saw during the quarter. Under claims -- under provision for future COVID claims, we had a provision of almost INR 3 billion at the end of last quarter. During the quarter, we only got about 0.05 billion worth of claims in that context. As again, claims intimated of 0.05 billion, which were not accounted in the last quarter end. Against that, we continue to hold a provision of almost INR 1.8 billion. So net-net, when I put all of this together, I indeed have a provision release net of claims that they booked in the quarter of roughly INR 2 billion. In the financial statement, I do have a net provision release of about INR 2 billion. But when I look at the balance sheet provision, a further INR 1.8 billion of COVID plus INR 0.24 billion of IBNR, which is the INR 2 billion plus that we spoke about, is still in the context of only INR 0.05 billion of intimated claims that we had in the last quarter. So we still think that, that is a fairly prudent level of provision to carry as we go into the last quarter.

Right, sir. That's very clear. And if I may, within -- one further question. On the non-linked savings side, so this quarter has been slightly slower on this side. Now that a new product has come with very competitive IRR. Your thoughts on how do you see it panning out and which channels you want to utilize considering that your larger partner is not selling traditional product.

Amit, do you want to talk about the new product and the new IRR?

Yes. So thanks, Kannan, so we have introduced this guaranteed product in the long-term income space. As you know, that guaranteed space is segmented into 3 type of customer benefits. One is lump sum, where a customer pays for a specific period and then gets some lump sum after the policy term. Then there are short-term income, which is 5 years, 7 years, 10 years kind of a time frame, for which -- over which customer gets guaranteed income. And then there was a large market which was catering to long-term guaranteed income requirement of the customer. That is the space where we have introduced this new product with a few additional features, and that is something which is a very recent phenomenon. You are right that one of -- that our larger partner, our bank insurance partner is not selling traditional products. Nevertheless, we believe in customer proposition and going by what we saw as early demand from some of our other distribution channels, we found it worthwhile to complete our offering. If you recollect, we launched our guaranteed products over a period of last 15 months in a graded manner. And we built ability over a period of last 12 to 15 months to keep adding to our guaranteed product proposition. So we want to watch it closely. It has been taken up well. This is a space and demand which is already existing. It will be competitive pricing at some point in time, it goes through a recalibration almost every month. There are committees in various insurance companies to take stock on pricing. It is, as you know, it is also linked to overall policy rates and government [indiscernible] as well. So it is a dynamic world. And at times, you may look competitive, at times you may not, but this is something that we'll take it, which is part of this product design that we will go and see closely. But we are happy with almost 70% like what Kannan mentioned, almost 72% of our business is now outside ICICI. So no longer one can say that a large part of our distribution is not contributing. So we still have 72% of our distribution, which is non-ICICI. And we are very happy to take care of product design, which exclusively suits this remaining part of our non-ICICI distribution.

Yes, your question was specifically about here on now January and Q4, I would expect it to be taken up by the corporate agents, broker shops and non-ICICI multi-partner banks. So that is where I would see some momentum coming through during this quarter.

Just -- one thing just I want to add, contrary to believe that mass and mass affluent customers tend to prefer guaranteed range of products. But actually, in case of a market volatility, we have seen quite a few of affluent customers looking at guaranteed product as part of the diversification strategy. So even when the markets were doing well, we did not see customers going away from their asset diversification in which they were making a choice on guaranteed range of products. And that is the trend which we are continuing to see. Markets have gone up and down a couple of times in last quarter as well. But the demand for guaranteed space suggests that it is going to stay and it was not temporarily only linked to a market volatility. I guess it is a good diversification tool even for affluent customers. So we expect this trend to continue in [indiscernible].

Sure, sir. That's very helpful. [indiscernible].

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

Neha. Sir, question, going back to reinsurance. If the threshold moves from INR 2 million to INR 10 million, the reinsurance levels could drop a lot more than that less than 50, right? It could be a much more significant drop, if you could just -- because I believe your average retail term insurance protection tickets were like INR 7 million, INR 8 million. So correct me if it's wrong, the retentions could fall quite a lot more than closer to being 50?

It could, Adarsh. But what I'm looking at is, with the change in our approach to underwriting and price, we have to see what proportion of our business comes above INR 1 crore. With a new product launch, which is tuned more at the mass, mass affluent, which is expected to take up some of the smaller sum assured that we were selling in the retail protection. We have to see how much of it moves into that segment. That product carries a retention of INR 4 million. The pure term has a retention of INR 10 million, the term with return of premium has a retention of INR 4 million. So the reason I'm putting it somewhere in between is that there are too many moving parts right now. We have to see where the mix gravitates before we are able to definitively conclude. But you are right, it could even end up being more -- being retained with us.

Sorry to interrupt. May I request Mr. Adarsh to please rejoin the queue. We have participants waiting for the turn.

Yes. I'll just complete this question. So Satyan, just continuing on the same question is -- the way to look at it is this should be an industry-level phenomena, correct? And it's broadly not a choice you have, right? It's what reinsurers really would have wanted more skin in the game. Broadly, is that the way to look or approaches are going to be dramatically different across insurance players here?

They can be quite different, Adarsh. What you said is correct. It is indeed the expectation of reinsurers and insurers to retain more. But I don't think any reinsurer is asking for retention to go up from INR 2 million to INR 10 million. And therefore, that is a choice that individual companies, depending on the strength of their balance sheet depending on capital position and depending on their own comfort on the price and underwriting will have to make a decision individually. So you could end up with a range of practices across the industry after the change of reinsurance rates.

And this means, right, when you take the threshold so high, as you make a choice, you're almost saying that I'm quite comfortable with my pricing now. So there should not be a need for more protection rate hikes for the category that you want to underwrite over the next 2, 3 years? Because if it requires a hike, then it means that you would lose money somewhere, right?

Absolutely. You're right. That is a fair inference to make.

It does require high conviction, which we have, Adarsh.

Yes. Sorry, I'll go off the queue, but I think the only important element here is that when you cut across the categories, while I agree with the long term, it's about how much tightening that the systems had on underwriting so that the volume covers -- and when it recovers? That's the only thing, Satyan...

I think that's a fair point to make, Adarsh, which is why I -- like I said before, the approach is no longer restricted to 1 product with 1 underwriting. The approach is now spread across 2 products with differential underwriting norms depending on the segment of customers that we are offering it to, to ensure that at the end of the day, each of these segments delivers an outcome of mortality, which is consistent with the price that we are having. Therefore, to that extent, the extension of the offering through the new product that we have made, which, like I said, has higher expected mortality assumptions actually widens the market for us.

Sorry to interrupt. May I request Mr. Adarsh to please rejoin the queue, sir.

Yes, I'm done. Sorry about putting in so many questions.

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

Satyan, we -- at peak levels, we did almost retail protection business of 780 -- 770, of course, in FY '20. So if the numbers go back to those levels, and we largely retain the sum assureds on that kind of a business on our books. So assuming that numbers come back and we beating large part, then likely impact on the solvency, which is around [ 202 percentage ] right now. So just wondering, given the strain it has and new business strain it has and then also the capital consumption goes up, do -- what likely impact would be there on solvency because of the quantum of business if you do in, say, '22 or '23. '23, rather, I would say.

So we'll watch it as it comes and if the point that you make is, indeed, correct, higher retention will mean a higher capital consumption.

Yes. But expectation...

Our own expectation at this point of time is when we are projecting into FY '23, we still see ourselves as being comfortably capitalized. Beyond FY '23, what is the utilization of capital we will have to monitor. But the point really means that if a strategy of retention helps us retain more profit within the company at a risk that the balance sheet is able to take, then that is something which is worth deploying capital for.

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

Is it based on the distribution mix? Can you tell us what was the non-ICICI Bank partner mix during the quarter? And also the lines of ICICI banks who sell ROP product along with pure term and annually.

On the first question, we've already said that ICICI Bank has been going between 27 and 28. So that has been the number for the ICICI Bank. The overall bank assurance is between 39 and 40 actually. So you can conclude that non-ICICI bank would be about 12% of the mix. So that is broadly the numbers for the nonbank, which has started becoming very significant, non-ICICI Bank numbers for the clients has also started becoming significant now. The second issue of ICICI Bank selling ROP, definitely, yes, I would request Amit to just supplement if there anything else you want to say about ICICI Bank taking up ROP. Amit, go ahead.

Yes. So absolutely, Kannan, ICICI Bank, its stated strategy will continue to look at variants across protection category of products to take care of the requirements across their customer segments, which is both value banking, which they call it as mass and mass affluent customers, [Polish] banking customers as well as [ wealth ] customers. It is very much in line to be launched with ICICI Bank as well.

The next question is from the line of Avinash Singh from Emkay Global.

A quick question or 2. One, if you can provide some color on your -- for the 9-month retail protection policy count trend growth and the ticket size change. And on the -- your retail side again. So have you changed your retention policy on GTI and credit life? And In the backdrop of GTI seeing a meaningful price increase in the last 2 quarters. And so far, I mean, COVID, I mean being benign in the last 2 quarters, do you see your GTI profitability for this year could surprise positively?

So from a GTI point of view, yes, we will see how the experience emerges. We have built in certain elements of pricing for expected COVID. To the extent that actual claims are different from that, we will keep recalibrating our pricing, because you don't want to be in a situation where you're not adding value to a customer. So that is something that we will track. So if indeed, claims are lower, then it may be a positive surprise at the end of the year with respect to profitability of that portfolio. In answer to your question on retention strategy, right now, our retention strategy increase is for retail protection. It is possible at some point of time in the future that we consider extending into the other segments of protection as well. But for now, it is only on the retail protection. In answer to your question on the number of policies on retail protection. That's not something that we have disclosed publicly, separately, Avinash. We'll have to wait till the end of the year when we give the full breakup of all of these segments to give that color.

The next question is from the line of Abhishek from Jefferies.

So my question is just that I understood correctly. So going forward, our focus will be more on the ROP product in term life. So what kind of mix should one expect for, let's say, FY '22 and '23, the split between ROP kind of product and term life and pure term products. Secondly, in pure term product, how are we going to protect our margins that their retention could be higher because of higher seater. And that might mean that the reinsurance price hike will be flowing through more than that product.

So Abhishek, ROP, I don't think we said that we are shifting our strategy to ROP. All I'm saying is we have added another product, another proposition, another offering to our arsenal, which helps us to expand the target market, quite honestly, where the mix will settle down is uncertain because there are a number of new segments that we are trying to create with the product that we have launched. So we will wait to see at least one full quarter which is this quarter to understand where the mix of that is settling down. With respect to the question on the reinsurance price hike, if I'm retaining more effectively, the reinsurance price hike has a lesser pass through effect to customers. And therefore, to that extent, by retaining more, I'm actually saying that I'm less exposed from an end customer price point of view and an end profitability point of view to future changes in reinsurance price hike.

The next question is from the line of Madhukar Ladha from Elara Capital.

Most of my questions have been answered. I just wanted to get a clarification on the COVID hit number for this quarter. So I believe you said that there's a reserve release of about INR 2 billion. But if we look at the net claims post reinsurance, they're at about INR 9.8 billion. And if I were to add that number for the first 2 quarters, that would be at about INR 8.6 billion, so there's about an additional INR 1.2 billion charge for this quarter. Have I missed anything? Or...

No, no, you haven't missed anything. Like I said earlier on, Madhukar, when we talk about claim amount on account of COVID, initially, we do it based on the information submitted by the customer as part of the claim. Subsequently, when we complete the assessment of the claim, then we may very well find that something which was represented as a COVID claim may not be or which was not represented as a COVID claim may actually be. Therefore, to that extent, for the past period, there is a bit of reclassification which happened. So overall, if I were to see YTD minus YTD, you're right, the number looks more like INR 1.1 billion. But for the quarter, purely of claims that got intimated to us, only INR 0.7 billion was recorded as claims on account of COVID. The reason I use that number is to illustrate very clearly that the pattern of claims on account of COVID has come down very sharply to Q3 compared to the prior period. So yes, there is a little bit of reclassification back to the earlier period as we have some [indiscernible] claims assessment.

Both this -- your number you would be driving -- deriving around 1.2 as again 0.7, right?

Right, yes.

So both are right in their own way if you just map back the date of debt, which -- the information for which was obtained subsequently.

The next question is from the line of Manish Shukla from Citi Group.

Satyan, just a clarification, going back to reinsurance. You said that at INR 2 million, that covered 60% to 70% of your portfolio. Given your customer positioning and ticket size, I would have expected that number to be significantly higher in the proportion.

No, no. We were reinsuring 60% to 70%, Manish.

No. Sir, anything more than INR 2 million was automatically reinsured or it was discretionary?

I think it was automatically -- no, no, it was automatically reinsured.

Yes. So that's what I'm saying, right? So your ticket size and customer segment in which you've been operating deal did before ROP. I would have expected a much larger proportion of your policies to qualify at INR 2 million plus.

No. We had an average semester of about INR 7 million -- between INR 6 million and INR 7 million. So given the INR 7 million average with a retention of INR 2 million, give or take, it is 1/3 retention in that sense. So between 30% to 40% is whatever is retaining, the rest was reinsured. I'm using broadly rough number over there.

I. Understood. Yes. Fair point. Got it. And the change of threshold was effective what [ date ] in terms of retention to do INR 5 million to INR 10 million?

December -- last week of December.

Last week of December. All right. Okay.

The next question is from the line of Harshit Toshniwal from Premji Invest.

So the question is with respect to our targets VNB by VNB by '23. So -- I mean if I just look at the ask rate standing today, even if we kind of maintain a stable margins, we would be looking for a 15% to 20% -- around 20% top line growth in '23. Now I just want to understand that, again, when we look at the recent month numbers in November, December, our Y-o-Y growth rates have started moderating to a 10%, 15% levels. But I just want to understand the confidence level for achieving the 15%, 20% growth on last year's base -- basically on FY '22 base. How do you look at that target? I agree that we clearly have the aspirational target on VNB. But I think VNB margin is something which we would expect to be stable over there. But clocking a INR 90 billion kind of APE in FY '23, how do you achieve that INR 90 billion or rather INR 100 billion APE, how should we look at that number?

Sure. So maybe I'll start off and then hand over to Amit to explain. I think fundamentally, what we are looking at is multiple channels contributing to the group. If you see all of the channels that we have been building out during this year, whether it is agency, whether it is new bank partnerships, whether it is nonbank partnership, all of them, and like Amit mentioned this in answer to an earlier question, collectively have been growing in excess of 40% this year. And particularly even in the third quarter, they have been growing closer to the 20% number that you spoke about. So 15% to 20% in the context of the build-out that we are putting on these channels to us seems reasonable. Amit, do you want to add?

Just on 2 elements I want to just add, Satyan, to what you're talking. See, first of all, this year has been -- the large part of this year, almost 9 months, has been quite muted on protection line of business, introduction of new products. And what we have now opened a new segment to RFP. While we will, of course, have a play for entire 12-month period next year. That is one. A couple of more interventions that we did even on non-linked savings business. which was addressing almost 40%, 45% of the overall guaranteed space, which we have now opened for us, which was applicable only for 3, 4 months in this year will actually be available to us for entire 12-month period. That's the second one. Third is by organic nature of some of our distribution channels, like, for instance, partnership distribution, we add 50 to 100 partners every year. And that is what we have seen both through organic, which is efficiency-led growth and also through inorganic addition of partners, we have been consistently growing in excess of 30% in the entire distribution space of partnership distribution. That is something which gives us confidence. And other than banks, if you ask me, we still believe that at the current penetration levels which exists in our existing bank partners and with completeness of the product profile that we have added over a period of time. I guess this is only the first full 12-month period that we have experienced with our new partners. And they will, of course, organically, we expect them to grow further from where they are currently. We are seeing some of our partners actually experiencing growth in excess of 40%, where the entire growth has been contributed only because of partnership with us. So their existing incumbent partner has been able to stay at a similar level or a single-digit growth, but the large part of growth has been contributed by us. And they are all 3 hungry distribution channels. And we do believe that their 3 aspirations will only grow from their current levels. And we will be beneficiaries in terms of growing through our partnerships further in next financial year over what we have delivered this year.

Got it. Got it. The reason I just asked is to ensure that I think going forward, it's going to be the APE growth, which will be the key driver for us to track in terms of the achievement of that 2x VNB.

Again, like I said, it will be a mix of -- it will be a mix of both, like I just mentioned, because protection, the annuity range of products as well as what I mentioned about non-linked savings guaranteed products, these were the introductions towards the latter part of the year this year. which will be available for the entire 12-month period, which may contribute towards margin expansion as well. So it be a combination how it pans out starting next year, we'll see. But of course, a large part of it will be equity driven, but margin expansion is also not ruled out.

Yes. No, I think that...

Same thing, Amit.

The next question is from the line of Nidhesh Jain from Investec.

Firstly, on the long-term guaranteed products, we have been staying away from those products in the past. So what makes us confident to launch these products in this quarter from a hedging perspective?

There's 2 aspects, Nidhesh. We said that 2 aspects of this business can make it bad. One is that assuming a large level of lapsation and assuming that guarantee will be paid for by the lapsation. So that approach continues. So to that extent, we are not factoring in lapsation and all that. We are just mindful of the last patient being higher, still having to deliver. [indiscernible] laundry is something which you are taking [indiscernible] actual persistency experience in our past non-linked savings products. The second is clearly that we have talked about the market instruments and derivatives being available. And to the extent it can be manufactured well, we will be able to execute this product. That has been our approach for that. So we are getting more instruments available, more counterparties are coming today. We never believed in internal hedging and all that, so we never wanted to do that, and so the second point of objection to launching this product in a big way. So here also, if you look at a premium payment term is up to 10 years only and each start up new business, we'll be designing a hedging program. And the market seems to be quite liquid today. And we have locked in the yield for the future premium. And of course, we look at the underlying bonds for derivatives selected keeping in mind the liability tenure. So those instruments are available today. So -- and we do believe that this is something which can be executed without taking too much risk. That's why we are getting more confident today than in the past, launching and selling these products. Of course, we will review pricing based on that interest rate environment that may not be applicable for the [indiscernible ] already sold. But the future, we will keep calibrating it, so we make sure that we are quite on track for that. Secondary on the reinsurance strategy just thinking about it, it doesn't look very, very obvious because we keep on hearing that the reinsurers have been making losses even before COVID, they were making losses on this portfolio. And now we are increasing our retention rate quite significantly. So we are helping that we -- our portfolio, the insurers are making profit, and we believe that -- and we want to make that profit on our own than give you passing on that benefit to reinsurers. Is the way that we are ending?

Not really, Nidhesh. I would hesitate to say that. All I'm saying is, and this is something that Kannan spoke about earlier and Amit also repeated. The way we looked at our experience of the portfolio, we broke it up into segments of where we were getting favorable experience and where we were not getting favorable experience. And we also looked at what -- so what we were also looking at is what is the proportion of business, which was giving us a less favorability. So all that we have done is to cut the tail on those segments of business which were giving us more planes, so that we could bring the experience back in line with the price. Like I said before, whether it is my price or the reinsurancer's price is less relevant. What is more important is how do we bring experience to align with price, and that's the reason why the offering that we are now making of the old term without return of premium product is going to be slightly different from whoever is offering it to. So there are some segments that I'm consciously to ensure that claims are within the limit. So I'm not saying that reinsurance have not made a lot because of me. But I'm saying that I've got enough data from segments in the past to give me comfort, that for those segments, I can underwrite it in a profitable fashion.

Yes, in that prospect, sir...

I would ask you to rejoin the queue, sir.

Just finish this question, I think he is asking the supplement -- the same...

Yes.

Okay. Go ahead.

In that context, doesn't make logical sense that pure protection except outside of ROP, we'll not see a very meaningful growth even next year because we will cut down some segments which were not profitable in the past.

So that's the interesting part of it, Nidhesh. The size of the tail that was contributing to the core experience is actually not very much. So the loss of business because of cutting it is really not something we would worry about in the context of the opportunity. All that we have to do is to make sure that we are disciplined about not taking on those things. So I don't think that this will affect the growth prospects. We are not in that way restricting the target market to say half of what it was before. That's not what we are doing.. We are cutting the tail. It's a small tail in volume, but a big tail in terms of experience.

That is the analysis we had already made before we went to the Board committee. I look at -- I mean just a natural question by any board saying that if you cut that, take it how much of the business you're going to take, so that was really something which is so very manageable by us and just look at the base today of the retail protection. We do believe that from here on, it can only be one way, which is the way up. So those are a couple of analysis, which we did, we are very confident. And also 1 area, which probably we don't focus a lot on, is that even we talked about retail protection and so on. We have backfilled it quite well through the credit life and group term business, which has really helped us during this period, even as our retail was still struggling on a year-on-year degrowth because of various reasons. We have been able to manage the overall protection growth of 22% through that. I think that is something which probably -- we don't spend so much time. We get all of us sort of focus so much on retail protection and the price increase that we have been able to work on the other areas to significantly bring the overall -- or at least mitigate the risk arising out of low volumes in retail protection. Another area what we have done is really, if you really look at the non protection businesses, and non-linked products. There, we have been able to work a lot in terms of enhancing the margins by elongating the tenure and so on. I think today, the confidence we have in our margin or the overall VNB story is that we have multiple levers available. So -- and also in some of the cases, we have done increased attachment of [ riders ]. So while, yes, we were talking a lot in the public about retail protection because that is retail protection and the price increase because that is the flavor of the day. We worked systematically on various aspects of our business, non-linked how to increase the margins, how to bring in attachments of riders to increase. In protection, how do we increase our pricing in retail -- sorry, in group credit life, how to increase the pricing in the group term and still get the volumes up. I think those are 5, 6 things, which we don't discuss much because the cost got too much carried away by retail protection during this period. So today, I would say to -- again, to summarize, the kind of levers which are available to us, both from a channel perspective and the product perspective to aid our growth aspiration on VNB is much more, much more the day today compared to what was there 3 years back. That assurance I want to give you all.

The next question is from the line of Ajox Frederick from Unifi Capital.

Sir, as long as I have known , I have known ICICI Prudential as a cautious and a conservative firm because be it nonpart, we took our time to come in -- be it long-term products, we took our time. Price hike on protection, we target completely last year. But right now, I'm seeing a pretty aggressive stance across board, be it the IRR rates or retention rates. So what is giving us this shift in stance. If you can touch upon your capability increase or the document area that you're talking about. So apart from the usual topics that you had already discussed, what else are you giving as the content ?

Yes. So first question, I would say that our approach of being cautious and especially when it comes to risk management hasn't changed at all. I want to assure you that suddenly, it's not that we have become aggressive and that's doing various things. I will request Satyan to talk about the issue around the logic for retention. But I would like to say the IRR rate, which we talked about is based on full coverage of our ability to execute this rate based on the cash instrument plus derivative. So what we do is that every quarter we go to the board and we tell them that what is the rate which we are able to execute with a cash plus derivative on the book, which is being sold in that particular month. What sir, what is what we promised to the customers. Because that, we don't do that business. And you have seen the rate going up, and we have seen certain movements in the financial markets because of that we have been able to pass the rate. Even now, we may not be extremely competitive when it comes to our IRR competitors, but so be it. That is our approach towards what IRR we want to progress in the nonlinked business. Coming to retention again. The approach we have taken is that in a particular portfolio, which is greater than INR 1 crore, if the experience is so good that we don't require reinsurance, why part of the profits in the reinsurer. Reinsurance are required for an area, which is like a catastrophe where there is a lot of -- the loss given default is very high or in an area where we require their presence because we are not yet sure of the full emergence of mortality. Those are the 2 situations where we require their presence much more. So what we have done is that, as Satyan mentioned earlier, a certain percentage of business we have cut out because the mortality experience was adverse. To that extent, it tend entail any cross [ subsidization ] with other businesses are increasing the pricing in the other segments. That is one part we have done. And other part we have done is that we looked at the INR 1 crore or portfolio. We're very happy with the retaining it because of the kind of mortality emergence, which has been there in the portfolio in the past. And that is the basis on which we have done. So any such move will continue to be guided by our framework of being cautious and, at the same time, ensuring that we take the market realities into account and ensure that we do it in a flexible manner. So Satyan, do you want to just elaborate anything on IRR setting as well as the retention philosophy beyond what I mentioned. Thank you.

So Kannan, I was off the call for a bit, so I didn't pick up all of it.

Satyan, if you can touch upon the technology piece, but because you guys have really, I mean, showcased your ability there. And I'm assuming that, that is also helping you when pricing that is in a much better fashion. So some color on that document aggregator? Or is that helping you a lot on that side of it? Yes. So I will have Satyan supplement. But essentially, the way we looked at -- during this phase, these are 2 things. One, we have some kind of friction on the ground to do the fulfillment because of the pandemic triggered environment. On the other side, we are seeing a huge transformation when it comes to payment and financial ecosystem. You've seen the payments, the way it is going, the aggregators, account aggregators and so on coming in. We thought we should combine these 2 and that's how we came with this -- how to make it smooth -- without asking customers for too many things, how based on his approval and what is available in the ecosystem, how we can issue the policy in a seamless manner. So that customer convenience has been a motivator to come with this kind of solutions. And to answer more comprehensively our technology initiatives, I would request Satyan to come in now. Satyan, go ahead.

Sure. So the entire technology piece has been premised on, like Kannan said, at the first level, from a protection business point of view, how can we analyze our book and experience better to improve the way we are doing risk management and pricing. And that's what we have been describing multiple times through the conversation today. The second part of the technology initiative has been around integrating with ecosystems, like Kannan said, to reduce the friction of onboarding to the extent that it is possible. But clearly, at this point of time, it is also contingent on the customer giving consent. As the entire payment ecosystem evolves and as the account aggregator system evolves, I would expect that to further ease the entire documentation and verification process. As far as our own assessment of an individual's earning capacity or a demographic profile are concerned. So as we go ahead, I would only expect the ecosystem information and integration to further ease the way onboarding happens. And clearly, as we capture more and more information about customers, our ability to segment them further and then bring that back into a more customized pricing stroke underwriting process is what will actually set us apart from others.

The next question is from the line of [ Sukumar ] from PhillipCapital.

Just coming back again to foresee strategy. So -- but our retention strategy now moving to INR 1 crore plus, and we are targeting more better than geographic customers. So are we also changing our mortality is that so? Does the current pricing takes at home for that? And are the pricing with margin [indiscernible]?

So here, the assumption is finally an outcome. The way it is stacking up today is there is a price I'm offering. There is an expected mortality for the underlying segment that is suited for that price. Given that these 2 are a good fit, we are choosing to retain what we are retaining and offer the price that we are offering. Assumptions eventually will be set once the elements of experience start to crystallize. If the experience emerges as we expected to then from a profitability point of view, which is the retention strategy and with the pricing strategy that we have now deployed on the ground, we expect the portfolio margins to be at similar levels to what it was before and not be reduced. So that's really the objective. Protect margins ensure that the price and the expected mortality outcome are in sync, given the underwriting that we want to deploy and the target market that we want to get it.

The next question is from the line of Swarnabha Mukherjee from B&K Securities.

One quick question on the cost side. So your cost ratios because as you mentioned, the additional manpower hiring and technology they're a bit elevated compared to where it was last year. So I was wondering what has been based in to the EV calculation at the assumptions we stated at the end of the last year. And because of these higher cost ratios, do we expect to see any kind of negative impact of say, operating variances or assumption changes may happen and gets completed.

So [ Swarnabha ] the expense ratios as we report them, which is the cost to total base received premium, whether we like it or not is a bit of a composite measure, which has in the numerator part and in the denominator, all premiums, including renewal fees. In reality, when we set assumptions for expenses or when we measure the cost of acquisition of a business, it is more related to new business. And when we measure maintenance cost of a business, it is more related to in-force book. And therefore, from what we are seeing in the current year, while this ratio that you're observing is becoming higher, given that the cost to increase is actually less than the new business growth increase, we don't expect any adverse implication from margin point of view arising out of cost.

Okay. All right. And I mean this is also in sync with the assumptions that have been set, right? So that's...

The margins that we have used -- yes, the margins that we have reported for 9 months for them are based on 9 months of actual costs and 3 months of projected costs. When we do full year reporting next quarter, it will actually -- it will be based on the full actual part for the year, there will be no expense overheads.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you. Thank you once again to everyone for joining the call and asking these questions. I do hope that my team and I have answered most of your questions satisfactorily. In case anything else is pending or you would like further clarifications, please feel to reach out my team or me any time. Thank you once again. Have a good evening. Good night.

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