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

Ladies and gentlemen, good evening, and welcome to the ICICI Prudential Life Insurance Company Limited H1 FY 2024 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anup Bagchi, MD and CEO of ICICI Prudential Life Insurance. Thank you. And over to you, sir.

Thank you. Thank you very much. Good evening and welcome to the results call of ICICI Prudential Life Insurance Company for the half year ended September 30, 2023. I have several of my senior colleagues with me on this call: Amit Palta, who heads distribution, brand marketing and products; Dhiren Salian, our CFO; [ Ajit ], who heads human resources, customer service and operations; Deepak Kinger, who handles audit, legal, risk and compliance; Manish Kumar, our Chief Investment Officer; Souvik, our appointed actuary; and Dhiraj Chugha, our Chief Investor Relations Officer. Let me take you through some of the key developments during the quarter before moving on to discuss our strategy and performance. First, on the regulatory front, as a step towards moving to RBC regime, IRDAI has directed insurers to undertake a quantitative impact study to assess the impact of the proposed framework for quantification of capital and solvency requirements following a risk-based approach. Additionally, with the objective of aligning India with global accounting standards, the regulators notified the phased implementation of IFRS/Ind AS in the insurance sector, starting April 2025. Second, a recent development in the fixed income market is the introduction of 50-year G-Sec in the H2 FY 2024 borrowing calendar of the government, a long-standing demand particularly by life insurance companies. The introduction of these ultra long-term bonds is a positive move for the entire industry. Third, we had our AGM, 23rd AGM, through the video conference on July 28, 2023. All the items specified in the notice of the AGM's were approved by the shareholders of the company. I'm also pleased to inform you that the members of the company has approved the item of special business pertaining to the appointment of Mr. Solmaz Altin as nonexecutive director, nominated by Prudential Corporation Holding Limited, with effect from August 22, 2023, in place of Mr. Benjamin Bulmer, by way of an ordinary resolution through the postal ballot. Fourth, I would also like to share that ICRA and CRISIL, domestic rating agencies, have reaffirmed the long-standing rating of our subordinated debt program as ICRA AAA and CRISIL AAA, respectively. The outlook on the long-term rating is given as stable by both these agencies. Lastly, I'm happy to share that our company has received an award for the best sustainability report from CMO Asia. Additionally, the company has also been bestowed with the best overall sustainable performance and best sustainability report at the 10th edition of the national awards for excellence in CSR and sustainability from World CSR congress. I'm also pleased to inform you that MSCI, a leader in ESG and research and index provider, has upgraded our ESG rating to AA, which places us as a leader among the life insurers globally on ESG front. In fact, among all the listed insurance peers, we have the highest ESG rating. FTSE Russell has also improved our ESG rating score, which is higher than the life insurance sector average. Lastly, Sustainalytics has retained our company as low risk status, ranking us among the best among all Indian insurers. These awards and rating upgrades are a testimony of our commitment to the ESG practices. I will now move on to discuss the key performance snapshot for H1 2024 presented on Slide 7: Our VNB for H1 2024 stood at INR 10.15 billion, with a margin of 28.8%; our total APE at INR 35.23 billion for H1 2024. Our market share based on RWRP has been increasing every month, growing from 5.2% in April 2023 to 6.3% in September 2023. In Q2 2024, multi-partnership channels have delivered a strong year-on-year growth, with partnership distribution growing by 25.1% and banca excluding ICICI Bank growing up to -- 13%. Direct channel has delivered 19.3%. And agency channel grew by 4.2% year-on-year in Q2 2024. We have been investing in our agency channel over the past few quarters. And we have started to see the benefit coming in through in our monthly business performance, where we have registered double-digit year-on-year growth, except for the month of September 2023. In group business, credit life has continued to witness very strong growth in Q2 2024 as well. Group term business growth has been challenged due to decrease in rates post COVID-19 and increased competitive pressures. We are among the largest players in this segment and understand it well, and we'll underwrite business only if it matches our risk-reward expectations. Our protection APE stood at INR 7.34 billion in H1 2024. The retail protection APE witnessed strong growth of 73.7% year-on-year to INR 2.38 billion in H1 2024. Our persistency improved significantly across cohorts. Our 13th month persistency stood at 86.9%, and 49th month persistency stood at 65.8%. Our cost-to-TWRP for savings line of business stood at 17.2% in H1 2024. When we look at the H1 2024 performance, let me now talk about the strategy and framework adopted by the company. With the customer at the heart of everything that we do, our 4P strategic elements comprising of premium growth, protection business growth, persistency improvement and productivity enhancement continue to play a crucial role in the growth of absolute VNB while we integrate ESG with business management. As detailed in Q1 2024 Earnings Call, to drive our 4P strategic elements, we have a 4D framework: data analytics, diversified propositions, digitalization and depth in partnerships, with focus on quality business in a risk-calibrated manner. The framework has been presented on Slide 5. The 4D framework ensures that the products are aligned with the customer needs, are developed with the highest quality standards and are delivered through the most appropriate distribution channels. The aim is to provide simplified and hassle-free processes to our customers across the product life cycle. In line with our 4D framework, we have recently launched first-of-its-kind ICICI Pru Stack, a suite of platform capabilities encompassing digital tool and analytics to significantly enhance customers' life and create a differentiated experience throughout their journey. The 7 layers of ICICI Pru Stack have been presented on Slide 6. Right from identifying target segments, crafting value propositions as per the customer needs, building capabilities through digital and physical modes to serve the population, integrating partner ecosystems and sales processes to deliver a frictionless experience to provide best pre- and post-sale services, our capabilities allow us to deliver value across the customer life cycle. Our intent is to be the most customer-friendly and partnerable insurers for our distributors. And we have anchored our outcome focused on growth, quality and productivity around the 4D framework. I would also like to talk about claim settlement, which is really the moment of truth for any insurance company. I'm pleased to inform you that ICICI Pru Life had a class-leading claim settlement ratio of 97.9% in Q1 2024. This is a strong testimony to our customer-first philosophy which is ingrained in the business practices that we follow at ICICI Pru Life. I would like to reiterate that the entire 4D framework has been put in place by keeping in mind our core objective to deliver quality business in a risk-calibrated manner. Thank you. I'll now hand it over to Amit to take you through the updates on our 4D framework and our results on the 4P strategic elements, after which, Dhiren will take you through the financial highlights. Over to you, Amit.

Thank you, Anup. Good evening, everyone. As Anup highlighted the strategic importance of our 4D framework in his opening remarks, let me highlight the key initiatives we are undertaking towards strengthening this framework. The first element is data analytics. Over the years, we have invested in data science integrated insights from our own customer data with macroeconomic household data to develop deeper understanding of customers across life stage and income segments. The details of our extensive deployment of analytics capability across the customer life cycle are set out in Slide 30 to 34. A specific example of how we use AI across policy life stages to manage persistency is presented on Slide 34. This has helped us to increase persistency across all cohorts. The second element, diversified propositions, have been detailed from Slide 35 to 37. Our company strategy has been centered on continuously expanding the product portfolio to suit the varying customer needs. This enables us to cater to a wide range of customer spread across income segments, age, affluence and other demographic aspects. Our endeavor to continuously innovate is exhibited through the 3 unique propositions launched in H1, namely ICICI Pru GIFT Pro, iShield and Protect N Gain. On the fund side, we launched Constant Maturity Fund, which was industry's first ULIP debt fund with constant maturity, in H1 FY '24. The details of the same are presented in Slide 37. The third element, digitalization, has been detailed from Slide 38 to 42. Across the customer life cycle, starting from policy purchase to claim settlement, digitalization has underpinned our journey. We have been working extensively to integrate our digital ecosystem with the central agencies to fetch KYC and income estimation details for customers' smooth onboarding experience. In September 2023, around 80% of our policies have been issued using digital KYC. Further, ICICI Pru Stack has enabled the company to issue 20% of the policies on the same day for the savings lines of business. Also, customers' income estimation can now be completed through digital integration of various documents such as through Perfios, GST, CAS, EPFO, Vahan and account aggregator. The fourth element, depth in partnerships, is presented on Slide 44. We are committed to building long-term relationships, and we continue to invest across channels by building existing channels and adding more distribution partners. Through ICICI Pru Stack, we intend to become the most partnerable insurer. And our partner integration team has the capability to onboard any new distribution partner in less than 2 weeks' time. Our strategy in the agency channel is to leverage our strong relationship with agents, with their customers, while we provide institutional support to agents in terms of data analytics and processes. We continued to build capacity by adding more than 18,000 agents during H1, spread across geographies. Within the bank and nonbank channel, we continue to add new partnerships and increase the share of shop in existing partnerships. We have 40 banks and more than 1,000 nonbank partnerships, with an addition of 105 nonbanks and 1 bank partner during H1. We will continue to strengthen our distribution by onboarding additional partners and by investing in our own proprietary channels. Let me now talk about the business performance update through the elements of our 4P strategy, starting with the first P that is premium growth element, which is mentioned from Slide 9 to 12. As you can see on Slide 10, our total APE for Q2 stood at INR 20.62 billion. And for H1, it stood at INR 35.23 billion. Our retail business excluding ICICI Bank grew by 12.9% year-on-year in quarter 2, giving us the confidence that the business is on a growth trajectory. The headwinds we have faced in key distribution channels over the past few years have been carefully mitigated by the distribution diversification we undertook. We have no dependency on any single distributor and we believe our diversified distribution mix will enable us to grow sustainably in the long term. While Anup spoke about the channel-wise growth, let me focus on the agency channel. A few years back, the agency business mix was skewed towards ULIP products. And thus, the first step in this channel was about building capabilities to distribute multiple product categories to multiple customer segments. In the last 1.5 to 2 years, we started building capacity in this channel by scaling up the frontline managers who manage advisers [ of a bank ]. Additionally, we are investing in demand generation tools to expand the agents' natural market. And our analytics-backed digital product nudges are aligned to the right customer segments which are the underlying segments served by our advisers. We'll continue to provide agents with institutional support complemented by data analytics and digital capabilities to drive our business. Considering these investments being done, we expect the agency channel to contribute a larger proportion of the top line going forward. As you can see from Slide 11, our APE from savings business stood at INR 16.72 billion for quarter 2. Linked saving products contributed 44.9%. Nonlinked savings products contributed 25.8%. Protection products contributed 8.9% (sic) [ 18.9% ], annuity 6.1%. And group savings contributed 4.3% of the overall Q2. The nonlinked APE mix has declined from 28.8% in quarter 2 last year to 25.8% in quarter 2 current year, whereas linked APE mix has increased from 41.1% to 44.9% in quarter 2 this year. One of the reasons for the shift in mix is a significant proportion of "more than 5 lakh ticket size" non-par business shifting to linked and par guarantee products. And this trend has been increasing month-on-month in quarter 2 FY '24. The annuity business has declined by 6.7% year-on-year in quarter 2 primarily on account of customer preference shifting to fixed deposits over single premium annuity products in bancassurance channels given the attractive FD rates offered by banks. The decline in the single premium category has been mitigated to a large extent by the strong growth that we saw in regular premium annuity products during the year. We are very diversified in terms of distribution mix and product mix, which allows us to manage the impact of the external environment and respond swiftly to shifting consumer preference. Another important focus area for us is to serve the life protection needs of the customer. On this aspect, let me talk about the second P, which is protection growth, on Slide 14. With an APE of INR 7.34 billion, the overall protection segment saw year-on-year growth of 3.4% leading to an APE mix of 20.8% in H1. Retail protection business, which has seen supply-side constraints in the post-COVID-19 era, has come back on track. The retail protection business has registered a strong year-on-year growth of 73.7% to INR 2.38 billion for H1. Our total new business sum assured stood at INR 4.9 trillion for H1. And our total sum assured stood at INR 31.67 trillion as on September 30, 2023. We believe, given the current levels of underpenetration, retail protection business growth is a multi-decadal opportunity, while credit life and group term business also offer significant opportunities as we witness growth in credit and the economy. Coming to our third P, which is persistency improvement, is -- presented on Slide 16. We believe persistency is the most effective indicator of the quality of sales and is a barometer of customer experience. This is reflected in the significant improvement in persistency ratios across cohorts. Our 13th month persistency ratio improved by 100 basis points to 86.9%. And our 49th month persistency ratio improved by 220 basis points to 65.8% for 5 months 2024. Now moving on to the fourth P, productivity enhancement, presented on Slide 18. Our total expenses grew by 27% year-on-year for H1. This increase in new business commission is attributed to the redesign of our commission structure pursuant to the flexibility provided in IRDAI regulations 2023 issued on March 31, 2023. The operating expenses increase is primarily on account of continued investment in capacity creation to support future growth. Our overall cost-to-TWRP ratio stood at 26.2% and savings lines of business cost-to-TWRP ratio stood at 17.2% for H1. We monitor cost ratios for the savings line of business separately. Our objective is to bring in efficiency in the savings lines of business while we continue to focus on growth in the protection business. Our 4P strategy, together with our 4D framework, has been put in place by keeping in mind our core objectives of increasing the absolute VNB while delivering the value to our customers. I will now hand it over to Dhiren to talk to you through the outcome of 4P strategy and the financial update for H1. Over to you, Dhiren.

Thank you, Amit. Good evening. We regularly monitor our experience in respect of various risks. And the diligent and prudent risk management framework we operate on is reflected in our strong and resilient balance sheet, as presented in Slide 19. Our mortality experience is within our expectation. On the asset quality, 96.4% of our fixed income portfolio is invested in fixed income instruments that are rated sovereign or AAA. And we continue to maintain a track record of not having a single NPA since inception. Of our liability profile, 73.8% of liabilities largely pass on market performance to customers. We use derivatives to hedge interest rate risks in our non-par guaranteed savings and annuities portfolio. We continue to closely monitor our liquidity and ALM positions, and we have no issues to report. As a result of our 4P strategy, the VNB for H1 2024 was INR 10.15 billion. Given our APE of INR 35.23 billion, the resulting VNB margin was 28.8% for H1 2024. The shift in VNB margin is primarily on account of the shift in underlying product mix towards unit linked and the decline in the nonparticipating business. Coming to the financial update. Our profit after tax grew by 27% year-on-year from INR 3.55 billion in H1 2023 to INR 4.51 billion in H1 FY 2024. As presented on Slide 22, the adjusted net worth grew by 21.8% year-on-year to INR 95.66 billion. And the value of in-force business grew by 16.8% year-on-year and stood at INR 289.63 billion on September 30, 2023. With this, our embedded value grew by 18% year-on-year and stood at INR 385.29 billion at September 30, 2023. Assets under management stood at INR 2.7 trillion. And our solvency ratio continued to be strong at 199.4% at the end of this quarter. To summarize. Our financial strength, coupled with our diversified product, distribution and customer mix, makes us resilient and allows us to take advantage of new opportunities in a fast-changing business environment. We will continue to make progress against the 4P strategy through our 4D framework. We expect that our performance in these aspects will translate in to our objective to grow absolute VNB without compromising on our risk management approach. 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 Avinash Singh from Emkay Global.

A couple of questions. First one is on your shareholders' account. If -- I see for the quarter close to 420 crores -- INR 425 crores of investment income. And for the first half, it's more than INR 750 crores -- roughly, I mean, annualized yield of close to 15-odd percent on shareholder investment, so I mean, why such high kind of -- probably investment gain booking? What is driving this? Is it coming from some equity or fixed income? So that is -- [ and why sort of, of this range and ] very unusual than your past? That's number one. Second one. On the margin profile, I do acknowledge that there is shift from -- I mean, towards ULIP; and probably within non-ULIP, maybe some kind of a lowering of non-par guarantee towards par, but at the same time, if I see the most profitable -- retail protection has gained for the first half -- if I'm speaking Y-o-Y, it has gained material share gain, so somewhat, it should have sort of offsets. Is it -- I mean also the margin is also a fact of your costs because the growth is not coming, but I mean, if you look at the commissions and OpEx also, both sort of have gone up. Is it also coming because of the kind of issue which is cost absorption? And as far as OpEx is concerned, you kept saying the capacity building for future growth, but that is what, I mean, we have done for the last few years, that we have been creating capacity to grow, but the growth has not been coming. So I mean, what are the areas where we need to sort of spend towards capacity building? Because I mean the growth has been slower. These are my 2 questions.

Thanks, Avinash. So on your first question of shareholders, yes, we have been able to use the markets to be able to realize some gains. The holding in the shareholder fund is not typically in line with what we hold for the policyholder portfolio, and so in this period, we saw an opportunity to book some gains. That explains, I think, the outcomes of those -- that line of -- that line that we have. With respect to the margin -- so Avinash, yes, this is Dhiren. I thought I would just announce that. With respect to the margin question that you have, there has been a shift of the underlying product mix. Unit linked has grown. Within the nonlinked portfolio, there has been an interesting mix between non-par and going towards par. That has had a part to play. You'd also have noted that, within the annuity portfolio, annuity has declined. We spoke about the fact that there has been a shift away from single premium to regular premium annuities, but by and large, the overall annuity book also has declined, all of which has led to the shift in the product mix, which has resulted in the margin. You're right. We continue to invest in capacity building. And that capacity building outcome is quite visible when you look at the growth in business, net of ICICI Bank, especially on retail side. We saw the 13% growth. That clearly is an outcome of all the efforts that we've been making in stepping up our capacity and building out our distribution [ base ]. We will continue on this path because we are quite clear that we want to be able to -- distribution quite diversified and not concentrated. To that extent, some of the newer channels that we have added, the newer distribution partners that we added, we'll continue to invest in those and build out the channel there.

That just tells me that your ex ICICI banca retail APE of INR 5.2 billion for the first half -- what will be the contribution for, say, the top 3 in that?

So by and large, across my entire APE, we really don't have channels that contribute beyond 5%, if I take out ICICI Bank from a banca perspective or I take out agency. No single distributor typically contributes more than the 5%, 6% range. And this will be the largest distributors outside of ICICI Bank.

So Avinash...

So if you look at the distribution, this is -- we set out in Slide #10. The mix is fairly clear. You've got agency at 25% for H1. You've got direct at about 14%. Banca, net of ICICI Bank, is at 15%; partnership distribution at 14%, so if you look at this, it's fairly well diversified. We really don't have large partnerships in the banca space.

Yes, yes, yes. No, yes, exactly. I mean I was just trying to gather that -- okay, within that 14.8%, if at all there is some kind of an indication around top 3 [ in these efforts ]. I mean you will have -- you have a pretty deep banca partnership, but the banks are of different sizes and scale, so that's...

Yes. You'll also note that we've got close to 40 banks. That is -- still gives us a quite -- large-enough space.

Avinash, also -- Amit Palta, on this side, if I could just add here, the protection impact you spoke about. While there is a very decent 70%-plus growth in retail protection -- but in absolute, if you see, of the overall INR 35 billion H1 APE that we have, in absolute, it still remains INR 2.38 billion, which is a very small percentage. A very high margin on a low absolute will have its reservation about compensating for a big shift that you may have on savings business. So that is just one point that I wanted to add. I'll leave it there.

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

I have 2, 3 questions. So I'll start first on the channel side. If you could explain, say, the difference in how growth is panning out across different channels [ in terms of linked ] direct what we are selling which has resulted in such strong growth in the last couple of quarters. [ Is it a base effect? Or is ] that we are cross-selling more ULIPs which is resulting in that? Vis-à-vis, that agency growth is yet to pick up despite the agency investments that you have put in, in that channel. And on the partnership distribution side, what I am seeing is the sustained growth momentum. So is it coming from adding new partners, or is it organic growth that is happening? If you could give some color on these individual channels. What is driving these different growth trajectories? That is on the channel side. On the product side, if you could give us some color on how the non-par margin has been vis-à-vis what it was last year given the shape of the yield curve and the availability of the [ added ] instruments that are there and the fact that you have mentioned that there has been a shift in the nonlinked portfolio from non-par to par. I'm just wondering. We have launched a new product that is the GIFT pro product. How is the pickup in that? And whether it is compensating for some amount of this move. These are the 2 questions on channels and products. And thirdly, a bookkeeping question. If you could call out the impact of economic variance in EV for the first half.

This is Amit. So on channel front, let me just take the question. So you spoke about the fabric of our performance across channels, so first of all, let me just share with you. On direct business, which comprises -- or proprietary business that comprises our agency and direct constitutes close to 50%, 51% of our overall retail business. And on this direct business, which is showing a growth of 20%-odd for the -- for quarter 2 and almost 23% for entire H1, is largely led by the upselling efforts that we made continually on our existing base. This is one channel which has really invested a lot on digital platform over a period of time and is one of the largest upsell channels in the industry. And this is not something which just happened now, but yes, the market sentiment, the [ buy and see ] that happened on unit linked has contributed to growth coming from unit linked business across channels. And direct channel was no different, but also this channel is really backed with a lot of analytics on the next best products that can be positioned to our existing clients and is approached very systematically through our distribution team to offer most appropriate wealth solutions to our existing customers because of the changing life stage that we experience with our existing customers based on data that we have. One part of our direct business also is what we do through the traffic that we have of our customers on our website, so there is a lot of effort that has been taken in improving customer experience and also navigating and recalibrating our customer journeys based on insights that we picked up on -- pick up on our online channels. So that is also something which, in line with the overall ecosystem growth, ecosystem support that we have on retail protection, has contributed to the overall growth in direct business. In partnership distribution, which is a combination of very, very diverse kind of partners on corporate agency and broker, has an overall net impact which is positive. The overall business in this segment we have experienced has not grown at the partner level, but by virtue of our focus individually with our partners and by institutionalizing ICICI Pru Stack which is our 7-layer support program that we have for our diverse partnerships, we have been able to work towards increasing our share over a period of last 6 months. And that increase in share has led to what you see here as a growth of 17.9% in partnership distribution. Coming to agency. Yes, growth relatively is muted at 4%, but this is largely on account of what we saw in the month of September. If we were to look at performances: Right across May to August, we were seeing a good consolidated 15% to 20% kind of growth month-on-month. However, September, we do understand that this was one area that we could have done better. However, we are applying that analytics to see deep cohorts of our adviser segments where we can improve our performance going forward, but net-net, most of our diversified channels actually are on a growth path. That is the message that I wanted to give. Even bancassurance partnerships, other than corporate agency and broker, other than partnership distribution, right across, while the overall pie may have been constrained because of more than 5 lakh ticket sizes coming down drastically in the industry, but -- by virtue of increasing share and many of our bancassurance partnerships, we have been able to see a growth which is close to around 13% in quarter 2 and close to around 7% in H1.

Understood, sir. Very helpful. Just on a follow-up on the partnership distribution. So what I understand is that you were saying that it is basically a function of increasing counter share and not like any kind of additional inorganic growth that is coming through new partner additions which maybe we have done over the last 6 months which is now kind of becoming more productive. Would that be correct, sir?

We continue to add 70 to 80 partners almost every year. This year, in fact, we've added 100-odd partners, but as you know, there is always a gestation of new partners getting onboarded and getting to start business, so it is very difficult to figure out and single out only those 100 additions as to how much they have contributed. It happens over a period of time, so what you added last year has contributed to business this year. And what you probably added 2 years back has contributed relatively in a higher proportion, so if you ask me is it because of new partners added this year which has contributed to growth, answer is, at this point in time, no, but it will pan out over a period of time.

So Swarnabha, this is Dhiren. On your question on margins. Through this year, we have not seen any movement on margins on the non-par portfolio, so that continues the way it is. With respect to your question on economic variances, we have not broken the EV walk at half year. We will do that at the full year.

All right. Can you give some color whether it is a positive or a negative impact?

Yes. It will be positive. It's quite positive. Given the way the markets have moved, it is quite positive.

Sure. And how is the pickup on the GIFT pro product, if you can give some -- I mean, how should we think about this mix between par and non-par moving, going ahead with new product launches?

What we observed going into quarter 2 and while exiting H1 is that large proportion of guaranteed products have started gravitating towards par guarantee, which has potentially higher upside if we were to deliver a good fund -- management performance on the participating products and on unit-linked products. So what we have seen is that a high mix of nonparticipating has moved some part into par guarantee as well as some part in unit-linked products. So to that extent, within nonparticipating product, this GIFT pro was an addition which cognizes the fact that customer is not probably looking only at IRR end of the day, but it also appreciates the features and benefits that we offer to our customers. So GIFT pro is unique in the sense that, beyond IRR, it offers specific proposition to the customer which addresses the specific need of inflation-adjusted income over a long period of time. That is something that we have seen as really a success. Of the 14% of nonparticipating business that we deliver as a company, almost 22% of this was GIFT pro in month 1 of launch; and today, it is close to around 40% of our overall nonparticipating business. So we have seen this gravitating towards benefit-rich products and not really customer yielding IRR-linked products. That is something that we have seen as a trend.

The next question is from the line of Shreya Shivani from CLSA.

I have 2 questions. Sir, first is on the group protection side. You spoke about how the GTI specifically within group protection is -- have seen challenges, so can you help us understand? Given that GTI is like 50% of the entire protection, which is about 20% of your APE, can you help us understand whether this is an incremental drag on our APE target that we've been speaking about, that we will be able to deliver industry-level growth in the second half? Will this be a negative? Or will this be a drag? Or some color around this. My second question is on the performance in the month of September. So while I understand that you guys are trying to understand the performance of agency channel better in September, but -- can you give us some color on whether this could be because of higher drag from high-ticket policies? Some of your peers have spoken about certain channels seeing more drag from high-ticket policies, et cetera. If you can give us some color on how much drag you guys are seeing on high-ticket policies. And which are the channels which are getting more impacted? And could that be one of the reasons why September was weaker? That's it.

[ Dhiren will ] address this question on group protection. First of all, if I were to look at overall protection, you can broadly say the way contribution is. You can assume that 1/3 of it is retail protection. 1/3 of it is what we do on group protection, not credit life platform. And 1/3 is what is group term for us. So when it comes to retail protection, we've already articulated it is close to around 74% growth for us. Credit life growth also is well ahead of the overall credit growth in the economy. That is largely on account of partners that we are adding over a period of last few months and effort to increase line of businesses within our existing partners and also working on increasing attachment. So credit life growth also is well -- and it is part of group protection, so to that extent, it is well on course. Coming to group term. We articulated that, separately, group term, as you know, for the large period during COVID and immediately after COVID, there was a time when ICICI Prudential was virtually present with a proposition to our clients for that period. And we're one of the very few insurers who were quite prominent in our offering to our corporate employees -- corporate customers. To that extent, we obviously had a very large base up for renewal. And hence, what we have seen after the COVID experience turned out to be much better than what we had anticipated. The pricing went through a big correction subsequent to the experience turning out to be favorable, so it is good for the customers, good for corporates, but eventually it was not very good for APE. So if I were to share with you in terms of number of schemes and number of deals that we have closed as fresh new customers: Actually there is a growth of almost 38% on the number of deals that we closed last year, H1, against what we did this year, but however, the deal size in comparison to what was last year has actually come down significantly by almost 40% to 50%, which has led to overall APE looking suppressed. So we don't want to lose our sleep on this because this is an impact of a better experience leading to a better proposition for the customer. In the interim, during the past period, we may have a little bit of a stress on overall APE, but that's fine. That's how it turns out, so we would not have -- it kept the price at a higher level when the experience turned out to be favorable. So that is the color on group term. We are as much present in group term like the way it was earlier, and we are one of the largest players in the segment and understand it very well. And we will underwrite this business only if it matches our risk-reward expectations. That is something that we are very, very clear about. So even the cases which are coming up for renewal, they are coming up for renewal at a much lower price now. We are happy to offer it to our corporate clients, as long as it is making sense both from risk as well as profitability perspective.

Now Shreya, on your question on September performance, while -- yes, on a Y-o-Y perspective, it seems low, but if I look at it sequentially, I think it's quite a divergence to the market. We've actually grown quite well compared to some of our larger peers and actually had positive growth, which is not what most of the other companies have been at. So it's a little mixed bag when you look at September, but by and large, I think our clear focus is that we'll continue to work at it granularly and keep growing this business from month to month, quarter to quarter. In fact, our market share has been continuously increasing. It was actually 6.3% for the month of September on RWRP basis, just higher than what it's done in the previous period.

Okay, sir. Sir, just coming back to my -- the last question that I'd asked. So our guidance on APE growth. In second half, at industry level, that gets challenged, right, because of group protection. That thesis is correct. Or am I reading it wrong?

So Shreya, we have not given a guidance on APE growth. I think what we have mentioned in our previous calls is that, from a phase-wise perspective, step one would be to move the total APE growth in line with the market. We've not given a time line to that. We want to get to that as soon as possible. And once we get there, step 2 will be to [ create alpha ] over that. That's the trajectory that we want, but I don't -- I'm not able to give you a time line when we'll get there, but we'll be working hard at getting to these objectives, getting to the phase one, first; and then to phase 2.

The next question is from the line of Supratim Datta from AMBIT Capital.

So I have 3 questions. Starting with the first one: [ You all have ] 1,000 partners now on the partnership distribution channel. So just wanted to [Audio Gap] partners of scale out there still which you could add to continue growing this channel. So that's one. The next question that I had was on the product innovation. So this -- yes, in the first half, we did not see a lot of new products, but so going forward, in the second half, do we see -- expect to see more product launches happening? And what, which segments would those product launches be targeting? And lastly, recently there was an article in the press talking about capping commissions for credit life policies at 30%. Just wanted to understand your views about how -- what kind of discussions are you having with your partners on the commission structure post this new UM guideline which has been applicable from 1st April?

[ This is ] Amit again. So let me start with your question on partnership distribution with 1,000-odd partners. See, first of all, let me [ compare here ]. The biggest advantage, natural advantage, that we have with our partnership distribution is the diversity of partners that we have. So we have partners of very, very different, diverse types. Someone who is cross-selling to a captive customer base multiple financial products, large partners, that is one cohort. Then there is a cohort which is essentially working on a cost model looking at secondary distribution to reach out simpler propositions to their customers, coupled with some of the other general insurance products that they are selling. Then there are partners which are largely equity and mutual fund distributors who are also looking at life insurance as an upsell product. So what happens is this diversity allows us to play out in varying or a dynamic environment, economic environment. So at any point in time, any environment, favoring any specific type of distributor helps us, being at a natural advantage, to take benefit of the positive tailwind there. And at the same time, we may have a disadvantage depending upon the kind of environment which may be impacting certain kind. Good part is that we have been net positive because there are some category of partners who are doing better in a given environment, and some partners are getting impacted, but net positive is what we continuously keep working upon. If the environment favors, we get positive. And if not, then we work towards working deeper with our partners through our ICICI Pru Stack, work on 7 layers of development and work on increasing share. If the overall environment constrains growth, then we look at increasing share to keep on a -- keep us on a growth path. So that is how the partnership distribution outlook is, and that is what has kept us with a sustained growth over a period of last 4 to 5 years. If we were to trace back performance of partnership distribution, this is one channel which has consistently grown at 25%-plus over a period of last 4 to 5 years just because of the kind of diversity that we have in our partnerships.

So Supratim, your question on product innovation. I think we've got this detailed out on Slide 37 as well. And if I could just take a minute to refer back to Slide 36, what you can see very clearly is that we've got products for every life stage across each of those opportunity segments. And the objective is to deliver value proposition to all of our customer pools, but specifically if you look at innovation, there are 4 items that we have called out. One, of course, is the GIFT pro that was launched this year. iShield is another product that we have launched. Protect N Gain is the third product that we launched. And in fact, we've got a new fund in the form of a constant maturity fund that was launched during the year as well, so if you were to look at innovation, I think you've got enough examples of innovation on the product side that we've been able to demonstrate.

Dhiren, I was more interested in what is going to come in the second half, if you could give some color on that.

That is competitive information, Supratim. I can't divulge it. So of course, we are at it. We keep picking customer insights. And there is always something which is WIP and we are working on it, so we'll let you know as soon as we launch those products.

So Supratim, on your other question, on credit life, the way we are looking at commissions. Of course, there, with the relaxation in commission levels that have been enabled by regulation, we'll keep working with our distributor to see what is the appropriate and sustainable level of commission through the year. That's what we had to add to this.

Just one follow-up. So are you seeing a pressure from distribution partners for higher commissions? Or is it still at a negotiation stage?

This will always be in a WIP stage, Supratim, but you've seen some evidence of increased commissions across the board, across all lines of business; and it's not unique to us. It's across the industry as well. So yes, after the relaxation in commission levels, commission rates have gone up. Have they settled to find an equilibrium? I think not. It's still a bit of a flux at this point.

The next question is from the line of [ Raj Seya from Arqaam Capital ].

I just wanted to know your strategy in terms of Tier 2 and Tier 3 distribution and business contribution, what -- where you stand currently. And what's the strategy? Because [ I, we see those competitors stress ] on this asset, so I just wanted to know, please.

Amit, this side. Tier 2, Tier 3 strategy actually dovetails into our multi-distribution structure. As you know, if we were to look at the texture of our distribution, they have very good presence right across the geographies across the country. When we look at our products' structures, we look at affluence. We look at life stage. We look at geographies. And we keep turning out products which are most appropriate for the distribution channels who are present in those geographies, so to that extent, through our distribution partners, we believe that we are fairly representing Tier 2, Tier 3 markets today through small finance banks, small banks, new age banks, existing large banks; even to the extent of large banks like ICICI also [ is ] almost 42 -- 45% of the distribution in rural. So to that extent, our presence in Tier 2, Tier 3 market has been there. If you were to look at agency, which is the most micro and diverse distribution structure that we have, 1/3 of our distribution in agency actually is in Tier 3. 1/3 of our distribution is in Tier 2, and 1/3 of the distribution is in top cities. To that extent, I think we are fairly well represented when it comes to Tier 2 and Tier 3.

Okay. Another thing, on annuity, I just wanted to know. Do you divulge information on the split between corporate and retail annuity and what's coming from NPS at this stage...

[ Raj ], no, we've not broken that split out.

The next question is from the line of Madhukar Ladha from Nuvama Wealth Management.

First, on the GTI bit again, you mentioned that 1/3 is -- so the total protection, 1/3 is from GTI. 1/3 is credit protect and then 1/3 is retail protection. For what period is this? Is this for FY '23, or is it for the first half of FY '24? I understand that these are rough numbers. And given the pressures that you have seen in GTI in terms of pricing, how much do we really see this business growing in this year? If you could help us just get a sense of what sort of growth we could get here. And even I -- given the pressure in pricing, are we seeing also margins come off substantially of here is another question that comes to my mind. And frankly, I also know that the VNB development of the business that we had written earlier -- are we seeing any negative variances due to this pricing pressure currently in this business? Are we seeing any negative operating variance of here? So on the GTI, this is -- these are some of the questions. And you mentioned that on the more than INR 5 lakh ticket size there is certain movement towards ULIP, and then you also mentioned another category. Can you just explain that? And finally, if you could quantify: How much is the more than 5 lakh ticket size in the first half versus second half of last year? And how much have we done in the current year? That can -- that will also be helpful, yes. Those are my questions.

So at one level -- the first question that you had is what is the period for. It's broadly for this current year, this 1/3, 1/3, 1/3. Your second question, on GTI and the outlook on growth, I think we've called this out earlier as well. Given the set of challenges in the market, given the increased competition, we are not looking at a growth out of this particular line of business. And we'll continue to seek to defend whatever business that we have and ensure that we deliver adequate profitability out of that business. That's something that we've kept very clear. As [ we've pointed ] earlier also, we're the -- one of the largest in this group term space, and quite clearly, we understand the [ texture ] of the customer that we have onboarded. We understand their mortality. And we would take on business only if it meets the risk-reward framework that we set out. By and large, I think margins on this continue to be stable. There are, of course, calls that we take when we look at where the business is at, but we're quite clear that we wouldn't want to write negative-margin business here. In terms of where this [ tax up ], therefore, has variance. Clearly there's one element of business which was written during the COVID period and in the latter half of the COVID period, the -- whose renewals at this point are obviously netted off for all the COVID [ floating ]. So that clearly has a variance element when we look at the EV walk, beyond which, we are not really seeing any drop in mortality outside of that. You asked a question around the...

Just one thing on this. Dhiren, can you give me the GTI number for FY '23?

GTI number for FY '23 is slightly higher than this broad split that we had given out.

Okay, okay.

What Amit was also referring to earlier when he spoke of the more than 5 lakh ticket size migration. One level of migration was towards unit-linked plans. The second migration is towards participating plans. I think that was your question that you had asked.

Yes, yes, yes. And if you could get -- give us some sense on what is the split between first half and second half of last year. And how much are you doing in more than INR 5 lakh ticket size in the first half of this year?

Yes, Madhukar, we do not call that split out, but I think, the way we look at it, we do understand where the segments are at. And what are the relative advantage of each of the propositions that we have got for below 5 lakhs and more than 5 lakhs. And we continue to build out those propositions through a variety of our new product launches for them. Let us see how that particular segment emerges through the year, but I think we are fairly clear that, irrespective of whether it be on more than 5 lakh or less than 5 lakh, the objective is to be able to build on growth and broad base our customer segments, so we'll continue to work on that line.

See, Madhukar, this HI -- Amit, this side. H1 has been a story of 2 halves, okay? The first half was impacted because of the preponement of demand that happened on large value cases in the month of March, for obvious reasons. And the second impact was the fact that another story of wealth preservation around debt products and mutual fund went through a change, starting quarter 1, so if you ask me, that was the reason why quarter 1 impact was quite obvious and was visible. Eventually, for relatively lesser number of choices available on investments, par guarantee and unit-linked products is where the acceptance started growing while the markets were doing well; as well as -- par guarantee, as you know, since it's also a function of how well you manage your funds. And potential returns will be actually higher than what one can offer on guarantee platform. The preference started moving towards par guarantee products. Preference started moving towards unit linked. If you ask me, net-net, as recent as last month, we have started seeing that "more than 5 lakh" cases, more or less, is quite similar to what it was last year. The only thing is it was all skewed towards one category of products last year. Now it is split between participating products, unit-linked products. And also some element of it still continues to happen on guaranteed products.

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

Just 1 or 2 points. Any sense that you could give in terms of the business trajectory at ICICI Bank? And how do you see the second half's -- second half playing out here?

Yes, Amit this side once again. So ICICI Bank, as they have articulated, they have priority on focusing on protection and annuity range of business. On protection, ICICI is showing a growth of close to around 45% over last year, for the first half, so to that extent, in alignment with what they have stated as their preferred approach, we are seeing a growth on that side. On relative degrowth, month-on-month, we are seeing on the overall APE coming down, so what it was, close to around 35% degrowth in quarter 1, came down to 15% degrowth in quarter 2. We'll have a base effect playing out in quarter 3. We'll see how it goes.

Sure. And if I look at the overall VNB growth for the company, I guess -- obviously we discuss about the challenges in the first quarter or -- that continued in the ] first half. In the third quarter, when I really look at the margin base for 9 months, I think it's still kind of a slightly demanding base, so in the backdrop of that, how do we really look at VNB growth for the year? I know you have a sort of a plan for doubling VNB in a 4-year period, but how do you really look at this year?

So Nischint, we don't -- we haven't put out a plan of doubling VNB. I think we were fairly clear that we want to build on absolute VNB as we go through this particular period. Yes, VNB growth has been challenged for the first half. It is down, but as we look at the base into quarter 3 and into early part of quarter 4, I think the APE basis are a little more benign. And we'd want to build upon those APE basis into the coming year. Quite clearly what we have also spoken of is that VNB development would be largely in turn -- would largely be driven by APE development, with some movement at the margins based on the product mix, so our key focus is to continue to deliver on growth. And as Amit pointed out earlier also, in -- with some of our channels, we should start to see a more benign basis going forward.

See, Nischint, also let me give you a context if you were to look at overall distribution composition [ of parts ]. While all other businesses, whether it is partnership distribution, our direct business, our bancassurance business other than ICICI -- they seem to be on growth path. And the large part of investment that we have done over a period of last 1.5 years or so is about creating enablement for our new partnerships, one; and 2, about scaling up agency. And as you know that agency scale-up is a little longer and has a gestation period, which we need to be patient and watch out for. Close to 4,200-odd frontline managers that we have who manage close to 200,000 agents, we still believe, is a smaller number. And this is one area which has reached to this level only after having hired people over a period of last 1.5 years or so. Our experience and analytics says that it takes almost 18 to 24 months for a frontline manager to start hiring, building -- build capability with advisers, understand customer segments being served by advisers, understand their natural markets, create capability on demand generation and eventually start turning our productivity. So our singular focus at this point in time, without diluting it with any margin pressure at this point in time, is to get our capacity to start turning productive. And that is where agency and our new partnership enablement will take primacy over anything else at this point in time.

On the partnership side and as well as on the agency side of -- in terms of product profile, I believe the initial thought was that you'd probably focus more on traditional products through these channels, but is there a change in the strategy? And are you kind of also kind of looking at [indiscernible] these channels?

Let me clarify, Nischint. We don't have a product-to-channel strategy just by -- based on what we want. Actually we allow our partners to choose based on the kind of customer segments that they have, so we have not mandated to our agency channel to sell only traditional and not ULIP because ULIP is low margin for us. It depends on the customer segment they are serving. So the approach that we have is simple, being: decide on what customer segments we believe are priority segment, are the growth segments for us; where the quantum is. And then we identified which kind of distribution channel has the ability to take the right product and reach out to their customer segment. Now if somebody has an access to an affluent customer and if I control him or control him and not get into -- offer unit-linked products, it will be completely against the customer philosophy. So there is no channel which is mandated to follow any product strategy specific to traditional or nonlinked savings or protection.

So Nischint, as Amit also explained earlier when we had a question on partnership distribution -- he explained about the various types of partners that we have as part of this pool. And you would have understood that there are different strategies that we'll follow for each and every one of these segments, so an equity broker segment, for instance, would have a slightly different approach than a more traditional broker that we have. So clearly the idea is to be able to marry the product with the customer segment and the distribution and create that product market fit that's appropriate for that particular segment there.

Actually this is reflective of the fact that different distribution partners and, within distribution partners, different cohorts and geographies and channels within channels actually have very, very different product mix. And in fact, none of the distribution partners have a product mix which is similar to what ICICI Prudential's overall product mix is. So the color of product mix is drawn from the customer segments of our partners.

[Operator Instructions] We take the next question from the line of Nidhesh from Investec.

The retail protection growth has been reasonably stronger, so can you speak about what is driving that? You mentioned that ICICI Bank growth is around 25%, which means that non-ICICI Bank protection -- retail protection growth may be upwards of 100%. And what is driving that and sustainability of that? And also, post COVID, we have changed the reinsurance strategy, where we were retaining up to 1 crore of risk on our balance sheet. Has there been anything, any change in that strategy now?

So Nidhesh, let me take the second one first. No, we have not made a change in our [ retention ] strategy post what we discussed last. We continue to monitor experience, and it's all within our expectation at this point. Growth within, from retail protection across channels have been quite strong. Overall, as you saw for the period was about 84% for quarter 2. Of course, this is on the fact that the last year's base was quite benign. As we go through into the coming quarters, especially when you get to quarter 4, onwards, they should start to normalize back to more -- lower levels, but we'll continue to record growth across channels and keep it broad-based through the period.

So is there any specific channel which has shown such high growth? Is it online channel, et cetera? If you can give some color on that.

Yes. So some of our online channels have done quite well, but we're seeing strong momentum across all our off-line channels as well.

Okay, okay. And just my follow-up is on the product-level margins. How are the trends on product-level margins on a Y-o-Y basis?

So the shift that you saw in the overall margin has been obviously because of the product mix. That's been the large contributor towards movement in the margin. By and large, at the segment level, we've not seen too much of a change.

[Operator Instructions] The next question is from the line of Vivek Khanjode from Aditya Birla Sun Life.

So I wanted to know. You discussed about group term and group credit life, so I wanted to know. What is the growth story on the group funds for H1 FY '23 versus H1 FY '24?

Group funds for us -- group fund for us is flattish, but we are fairly confident because these are lumpy businesses. We have done close to about -- 550-odd deals have contributed to our group fund business this year. And a few large deals have got deferred, and we are not losing our sleep there at all because we are quite confident of what we have put as a plan for group fund business. It will pan out eventually in the remaining 6 months. So the number of deals, number of customers that we are engaging in is almost showing a 25% growth over the number of customers that we got our group fund participation last year, so to that extent, distribution has been fairly strong, very vintage. And not just on group funds, but even on group term, we are fairly present right across. And our participation is amongst the highest when it comes to group fund and group term opportunity across the corporate sector.

Okay. And so -- and on the annuity fund group, annuity fund, so the pressure from the fixed deposits -- so is it -- are you -- do you have growth on the group annuity funds from FY '23 versus H1 FY '24?

So Vivek, this would all be part of the single premium annuity pool. Quite clearly, as we called out, a lot of folks are looking to defer single premium annuity given that bank FD rates are quite high at this point and competing rates at this point. However, we are seeing good growth come through on the regular premium annuity. And then we'll continue to push of -- the regular premium annuity business at this point.

The next question is from the line of Prayesh Jain from Motilal Oswal.

Most of the questions have been answered. Just on the protection, like, what will be the share of ROP products? And could you highlight whether ROP products are margin dilutive for you with regards to the entire protection margins? And also, how is the ROP kind of moving, say, this year versus last year?

So the return-of-premium variant of the product is roughly about 15% to 20% of the retail protection business.

Okay. And from a profitability perspective, is it any different from the [ pure term ]?

It depends upon the tenure that you choose. So longer tenure gives you higher margins. Shorter tenure gives lower margins there.

Let me just share the fundamental that propositions are not changing from non-ROP products to ROP products. It is only the customer behavior that decides whether he is okay to let go of a premium as an expense or he would like to take his premiums back. Otherwise, the underlying profile of the customer really doesn't change. We have seen this kind of a behavior more prominent [ in mass ], but we have seen even affluent customers at times preferring the return-of-premium products and alternate products where they can get high covers with probably even a higher return of premium by choosing a high cover on a unit-linked platform. So from that perspective, margin really doesn't change by nature of ROP or a non-ROP because underlying customer and the cover that you offer is quite similar.

The next question is from the line of Dipanjan Ghosh from Citi.

Just one question. Are you seeing any change in payouts to any of the distribution partners or any of the [ select ] segments for this -- for any particular partner out there the -- post the guideline changes?

Dipanjan, yes. We discussed this earlier. We have seen commission rates rise for us, and understanding this is not just specific to us. It's for the industry as well. Has it settled down? I am not so sure. I think we'll continue to work through this into the coming quarters as well.

The next question is from the line of Rishi Jhunjhunwala from IIFL Institutional Equities.

Just one question. I mean, even apart from commissions, if I look at -- other OpEx has gone up substantially for us on a 1H-over-1H basis as well, whereas the premium growth, of course, has not been that strong. So just trying to understand. What is driving that, ex of commissions also? And in the backdrop of that, do you think that -- given that it seems like a lot of these commission increase are going to stay here for a while, do you think that VNB growth in this year will be possible?

So Rishi, outside of commissions, some of the larger expense items are, of course, employee costs. Part of it is the capacity creation that we have invested in and we'll continue to invest in given some of the newer channels that we've added on. There are, of course, some of the advertising and sales-related costs that are elevated at this point. Given that commissions are going up, we will seek to kind of keep the overall expenses broadly where they are. This year, of course, will be a bit of a flux, so we'll have to manage it through these coming quarters to see how we can keep that stable at this point.

Also I just want to clarify that, while there has been a question on commission increase, but -- let me share with you that we are well within the guardrails and the direction given to us by the regulator in ensuring that we align our commission structures to promote long-term business, protection business, renewal business; and not at the cost of customer proposition. So since we have not let the customer proposition get impacted, for a short period of time, we were actually seeing that OpEx being -- swelling up. Directionally this entire increase in costs need to get compensated through better OpEx management, and that is what we are intending to do. That is the cusp period is where probably it will take some time before it settles, but we are very clear that, whatever is increasing the cost, it will not come at the cost of customer proposition.

And sir, views on VNB growth this year...

I think, let it emerge, Rishi.

And just on the commission part, right? So wanted to understand. You mentioned about the industries witnessing an increase in commissions. What are your thoughts in terms of how does that dynamic play out given that, say, even for us, agency is proprietary? ICICI Bank is exclusive. And we have direct and group businesses as well, which are possibly within our control, so what kind of pressure is there for commissions to be increased across the board? And what is the risk in case that wouldn't have gone up? Do you really think that the premiums would have severely gotten impacted or the growth around that?

So Rishi, the way we manage each channel is to look at the overall cost of the channel, which -- for which commission is only one aspect of it. So yes, this year is a bit of a flux. We've got other operating expenses that are slightly elevated, but on a steady state, the way we seek to manage each channel is to see whether -- for a product line that it finally delivers, whether the overall cost that it incurs is in line with what we would want to deliver from a VNB perspective. So it's a balance that comes through. I don't think this has impacted growth at all. And commission is essentially only one aspect of the overall spend that each channel does.

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

Just some on the margins. If I want to draw a waterfall on margin compression, how much will we attribute into product mix change and to the cost ratio? Whether the real problem is cost which has dragged the margins or is more the product mix. That's my first question.

Mostly product mix.

Okay. And second, on costs, I just wanted to understand. [ AUM ] was expected to move the cost line items, I mean, between commissions and advertisement, but it was expected to remain on the [ single lines ] because -- but still our OpEx ratio has moved up. But I just wanted to understand that [ AUM ] is structurally increasing the commission cost and other expenses are not going to cut. And therefore, going ahead, we are going to see an -- elevated cost ratios, which could have an impact on the margins.

So Sanketh, like we mentioned earlier, this is a bit of a flux year, so as -- to that level, we're managing across these multiple line items. We're well aware that we'll have to keep overall cost under control to be able to deliver on margins.

The next question is from the line of Neeraj Toshniwal from UBS India.

I wanted to understand that this quarter looks ULIP heavy for the [ UM ]. So what are the early trends we are picking up of the -- for the Q3 and going ahead, what we can expect? And are you hoping to increase the ULIP share again back to a certain level? We do have certain mix in mind that we need to kind of maintain [ so we'll have ] positive VNB by the end of the year.

Neeraj, I think we have spoken about this earlier as well. We are not guiding a "channel to a product" mix. If ULIP is a flavor of the season, we'll be quite happy to take that onboard. Of course, they're quite cognizant that we are looking at delivering absolute VNB, and to that extent, we'll have to deliver additionally on APE as well.

Yes. On that only, what are the trends you are picking up in other segments apart from ULIPs? Can we see -- it's because a lot of your peer called out that non-par savings is possibly returning back or might see uptick from now. Are you also in the similar camp? Or it's too early to call out...

It's a little too early to call out with this last 15, 16 days, but as we mentioned earlier, we constantly are looking for propositions that could work with the various customer segments, even in the non-linked space. Amit...

So yes. So let me add here. Like I have articulated earlier as well, within affluent customer segments, we have seen a trend of a wealth preservation story which has been running so well over a period of last couple of years, giving way to unit-linked and par guaranteed products towards the second half of this H1, which is a clear trend that is visible. Of course, it varies from partner to partner. And the composition of these customers at the partner level decides the mix of what kind of products we're selling there, but if you were to look at these set of customers eventually on an overall household that you look at to urban centers, these are only 10% to 15% of the overall number of households that you have. Almost 80% of the households actually are ranging between an income segment closer to around 300,000 [ to 25 lakhs ], means that there the simplicity of the product and simplicity of the proposition actually takes precedence over any complexity or differentiation that you want to create. There the demand for simpler propositions continue. And as you know, it is about our ability to reach out to these customer segments, identify which distributors have access to these customer segments. That degree of success is a function of how we'll convert this opportunity on simple products. Nonlinked products or participating products [ find its way ] into the overall product mix. That's how it will eventually pan out. There, if you ask me, trends have not changed drastically.

And how this digital stack will help us to achieve this growth, can you elaborate more on that? Which you have created a 7-layer stack which you mentioned.

Yes. So 7-layer stack is our thought process, our enablement framework for our partners. Over years, we have spent a lot of time in analyzing our own data as well as the data, which is available in the ecosystem on understanding customers, on geography, on demographics, on income, on life stage. And we have really been able to segment the customers which are there in the market and customers which are part of the partner ecosystem. And based on the natural advantages of the customer segments of our partners, we have actually worked together and co-created value propositions which are most meaningful to their customer segments and then convert those value propositions into a capability framework for their team, both on digital as well as nondigital platforms. And of course, we do believe that, when it comes to life insurance, the best value propositions and capability eventually need to be supplemented with demand generation models. And that is where our entire focus is to cut across all distribution channels to work exclusively with demand generation. This coupled with sales process integration and network integration with a partner gives us the ability to onboard our customers, give them the experience. Give partner the empowerment to manage the entire policy life cycle is what we have split as a 7-layer process for us. This is something that we are doing in a workshop mode with all our partners, and it actually changes partner to partner. And it's largely a function of the customer base and the primary model of business of our partners.

The next question is from the line of Yash Jain from CNBC.

Am I audible?

Yes, Mr. Jain.

Yes, yes...

So most of the questions which I had have been answered. One thing that I wanted to understand -- and this is with respect to distribution, especially ICICI Bank. We have a setup where, I mean, your peers, the closest peers, HDFC, Max, get about 50%, 60% of their APE from their main banking partner. That is Axis Bank and HDFC Bank. For that, it's come down significantly. It's kept coming down over the quarters. It's about 13.5%. Just last year, same period, it was about 20%. I have 3 very specific questions on this one. One thing, at ICICI Pru Life, do you have an intention to sort of increase your sales across product categories through ICICI Bank? If yes, then my second question is are you doing something about it, looking at ways in which this can be done. This will help the growth come back as well for the company. I just wanted the perspective from the management on this one.

Yes. So Amit, this side, Yash. So one principal partner philosophy that we follow across the new potential partners that we meet and the way we take up our partner stack to other partners both with banks as well as nonbank is to give the decision of what to do and what to propose to their customers, leaving that question entirely with our partners. We do believe that their brand is supreme. And we are subserving to provide services in terms of manpower, technology, product through our partners. We don't play a role in influencing that decision because we do believe and respect that the decision taken by our partners on what they believe is most appropriate for what they want to do and which fits into their overall scheme of things. To that extent, we appreciate that ICICI Bank does look at annuity and protection as 2 complementing products, which is not competing on investment space with banking. And we do appreciate that they prioritize banking products. They prioritize SMEs. They prioritize lending. They prioritize deposits, and we have complete appreciation for that. We'll take it as and when they have any priorities which are aligned to any specific proposition that we have in the basket. We'll be more than happy to offer it and put it on table. At this point in time, we do see a value in what we have on offer, which is retail protection, and what they want as a proposition for their customers. And that's where we are seeing growth of 45% in retail protection with ICICI...

Okay. One final question. I mean, since earlier, you had one guidance on the VNB side, which was doubling VNB in 4 years. Under the new leadership, I just want to understand. Is there one large guiding ambition in terms of quantification that you have, let's say, for the next 2 to 3 years, for a slightly longer period, that you would want the markets to look at and you would want to work towards?

So Yash, Dhiren here. No, we've not put out a target as we have done earlier. I think what we are very clear on is that our objective is to work within each of our partners. We look at it granularly, look at their customer segments that they operate in and ensure that we have got the appropriate products that can be delivered to those customer segments. And so to that extent, we would go deeper into each of those partnerships and, as Amit articulated, help them grow those particular segments using the partner stack that we just discussed. The idea is that, if you're able to sustainably grow each and every one of the diversified channels that we have at this point, then we should be able to look at sustainable growth into the coming years. The fact that we don't have any large distributor outside of ICICI Bank in our distribution mix gives us the confidence that we are able to sustainably build out this particular pool of business by looking at it very, very granularly and looking at it with a deep lens of analytics as well. That is the core focus and that's what we will continue to work towards.

See, overarching theme which has been articulated over a period of last 6 months is a customer to product, to right distribution channel who has access to that customer; and taking the appropriate product. So customer to product, to distribution is the overarching theme. And to support this theme is this 4D framework that we have created, which is power of analytics, data analytics; and diversified propositions on product and taking it to diverse geographies and diverse partners; digitalization by making an experience which is differentiated for the customers; and eventually converting it into a depth of partnership, becoming an inspiration for us to come out with this 7-layer ICICI Pru Stack to enable our partners. Eventually the strategic direction is to become the most partnerable insurer in the industry.

[Operator Instructions] The next question is from Aditi Joshi from JPMorgan.

So my question is on agency side. And I actually wanted to understand if we are targeting further increase in the head count of the agents in the second half of this year. And I'm sorry if I missed it previously. I just wanted to understand. What portion of these new agents are split between Tier 1 or Tier 2 and Tier 3? And just one more question, if I may, on the rider side: We have a pretty good, impressive suite of rider available at a -- to us, so just wondering that -- how much is the push from the management -- or what is your strategy across the channel on using the rider attachment?

Amit, this side. On the distribution side in agency, like I mentioned earlier as well, we are fairly spread out across all types of geographies, whether it is top cities, Tier 1, Tier 2, Tier 3, the way we split it out internally, so we have a fairly distributed representation of advisers as well as our business. The outcome as well is our adviser count is quite spread out across type or geographies, and on new acquisitions as well. New adviser licensing also is fairly in line with our spread of business, so to that extent, going forward, even in H2, I don't see that being different from what we've been following in agency for some time. Idea in agency is about the capacity that we have built to manage this adviser force, not just the existing ones but also to acquire ones. And that is what -- like I mentioned earlier, for some period during COVID, we had refrained from adding cost through capacity addition of frontline managers. That is something that we started doing some 18 months back. And that is something that we are going through a cusp period of building capacity there to manage our advisers better and improve efficiency and productivity over a period of time. I think we are in a cusp. It is expected to improve. And we want to accelerate it and try to cut the learning curve and reduce attrition so that we manage our adviser force even better. Coming to the second question that you had, which was on...

Rider...

Rider.

Riders. See, first of all, riders -- we don't see riders as an attachment product, first of all, so riders need to really add value to our customers and the proposition. We do believe that riders make our proposition very distinct in comparison to anything which is available across financial industry on the investment space. And accident or disability or critical illness add value, so from that perspective: The fabric of attachments are quite similar, which cut across health as well as accident and disability. And we would like to offer it as part of our protection as well as savings proposition. You know that these riders are not available standalone in the industry. And we want to offer it as a value add to our customers on the savings platform, and that is what we have been doing. Even on protection, we look at riders as a very specific strategy to convert our protection solution into a wholesome mortality and morbidity solution which we offer through our flagship protection product where the customer has an option to choose critical illness, accident, ability (sic) [ disability ] and actually both as well, which we call it as an all-in-one proposition, to give a most wholesome proposition on protection for our customers.

The next question is from the line of Prateek Poddar from Nippon Asset Management.

Sir, I have just one question. You called out about like mix shifting, right, in the 5 lakh-plus policy ticket sizes, from entirely non-par to par or slash-ULIP. And then you also called out higher investments as well as higher commissions. In that backdrop, how should we think about VNB margins for the full year? Is it fair to say that, given the mix shift we are seeing towards ULIP/non-par and the higher investments which you need to do because of growing your agency/other channels, margins will be under pressure this year? And next year is where APE [indiscernible].

So Prateek, Dhiren here. A little difficult to call. I think, let it emerge through the year. There are, of course, product mix shifts that can emerge and that can drive where the market would be. That will be one of the core components, within which, of course, let us look at some of the expenses. [ We only could ] manage them through this year as well. A little difficult to call. I think we'd look at the way the product will -- evolves over the second half of the year. You'll even know that the larger portion of the business happens in the second half. So that can kind of dictate where we end up.

Okay. And you also talked about wallet share gains across the board, agencies or with partnership distribution side and with banca side ex ICICI Bank. How much more potential is there for you to gain further wallet share or bulk up the wallet share, whatever we could have done and have been done this year?

No, I don't think there's an aim to wallet share as such. I think the key point is -- while we look at wallet share as outcome, I think the one clear thing is we're looking at how we're able to deliver value to our partners. And that's why some of the partner stack elements that Amit spoke of come into fray. The idea is that, if we are the most partnerable insurer, then naturally we should have a bulk of the business flowing to us. And that ends up as a higher wallet share because very clearly, as we spoke of earlier, we're looking at this product. We're looking at the customer. We're looking at the distribution channel in each of those subsegments or the ones where we have to ensure that we've got the highest of -- the best fit in. And that naturally will give you the move towards our sets of products and our set of distribution rather than some of the other partners that will be there in the shop...

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

See, I have 2 questions. One -- actually, in ICICI Securities call, they also said that they are focusing on protection and annuity, which is very similar to what ICICI Bank is thinking of, so I just wanted to understand how big this [ ISEC ] as a channel for us. And if they continue to follow the way ICICI Bank follows, what likely impacts in near term will we have on the growth? That's point number one. And the second, obviously the question still remains for me, is on non-ICICI Bank channel because the growth for 1H, if I look, seems to be around 7-odd percentage, seems to be very weak. Is it largely driven because of the macro factors because people are making -- or putting money in deposits? Or it's macro related. Or something -- somewhere, we are struggling with market share in the existing channels, and that is leading to some muted growth in the banking channel -- non-ICICI banking channel.

Sanketh, this is Amit. First of all, let me answer question on ICICI Securities. You are right. ICICI Securities also is looking at augmenting their proposition to their clients on protection and annuity. However, unlike ICICI, they are a very small part of our overall pie. They contribute close to around 2.5% to 3% of our business. And like I mentioned earlier as well, we allow our partners to choose what they think is most appropriate for their customers. I think we'll be more than happy even if the top line is lesser and the protection is higher. It is value neutral for us. To that extent, that is fine. We appreciate and respect the decision and direction taken by securities, but they are a very small part of our overall business. Second, you -- secondly, you spoke about the overall growth momentum in non-ICICI channels. And let me just stitch it together once again. First of all, let me give you a number of 13% growth of non-ICICI in quarter 2. So 13% growth is what you witnessed in quarter 2. I did mention that loss of share was not a problem for us because -- while the overall pie at a multi-insurer shop was severely impacted, most severely impacted, because of guaranteed products becoming relatively unattractive in comparison to what was available, in the H2 of last year, on the regular ticket size; and also on large ticket size, for obvious reasons, tax propositions. So all the multi-insurer shops were severely impacted because of this change in the environment. However, we still grew in partnership distribution by close to around 25% in quarter 2. So this is largely on account of increasing share. Otherwise, the overall pie was almost similar or slightly lower than what it was last year, so this increase or this growth that you see in partnership distribution is largely on account of increase in share. And by the way, Sanketh, let me also mention it to you that partnership distribution, what you see here, actually factors in ICICI Securities as well. So despite that 2%, 3% business that we have which is part of partnership distribution -- and having a change in direction actually did not have any impact on the overall partnership distribution growth, which still stayed at 25% for quarter 2. Banca, very similar situation. Direct business, like I told you, both on online as well as upsell, we are doing well. Agency, I've already articulated we are still at a cusp stage. We are very confident that capacity will turn into an outcome for us very soon.

Thank you very much. That was the last question in queue. I would now like to hand the conference back to Mr. Anup Bagchi, MD and CEO of ICICI Prudential Life Insurance, for closing comments.

Thank you for staying back late evening. And thank you very much. Bye.

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