ICICI Prudential Life Insurance Company Limited ($ICICIPRULI)

Ladies and gentlemen, good day, and welcome to the ICICI Prudential Life Insurance Company Limited FY 2026 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Anup Bagchi, MD and CEO of ICICI Prudential Life Insurance Company Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, and welcome to the results call of ICICI Potential Life Insurance Company for the year ended March 31, 2026. I have several of my senior colleagues with me on this call, Amit Palta, Chief Products and Distribution Officer; Dhiren Salian, CFO; Judhajit, Chief Service Delivery; Manish, Chief Investment Officer; Souvik, Appointed Actuary; and Dhiraj, Chief Investor Relations Officer. We are also joined today by Amish Banker. Amish started his career in branch operations and has a deep understanding of the customer life cycle and organization processes and systems. He's currently the Chief Operations Officer and will be taking over as Chief Distribution Officer from Amit Palta. Amit, as you would have noted in the exchange update, is moving on from the company having spent more than 2 decades in the ICICI Group. We wish him all the very best for his future endeavors. Let me start with some key updates. On the regulatory front, we will [indiscernible] transition to Ind AS, which will align our financial reporting with global standards. This shift enhances transparency and market comparability, ensuring that our financial statements reflect an improved picture of value accretion. On the economic front, in FY 2026, the Indian economy displays revenues while navigating external turbulence due to trade tariffs and geopolitical contracts. The stability was anchored by direct tax relief, GST reforms and RBS supportive monetary policy stance aimed at stimulating the domestic consumption. As a company, we also exhibited agility and resilience, achieving a VNB of INR 26.29 billion with VNB growth of 10.9% in FY 2026 and work to deliver long-term value to our shareholders. our VNB margin stood at 24.7% as compared to 22.8% in FY 2025. That grew strongly by 34.6% year-on-year to INR 16 million. Life Insurance products, particularly the retail protection segment, received a significant boost partly aided by the GST reform effective September 25. The retail sum assured growth for the industry were higher by 2.5x in the first reform period as compared to the pre-reform period. In the current year, our retail new business sum assured reached INR 4.5 trillion, led by 50.9% year-on-year growth in retail protection in H2 2026, demonstrating our dominant position in this segment. In the savings category, despite the external volatility of FY 2026, our [indiscernible] steady and similar to the previous year. New business premium registered a year-on-year growth of approximately 10% to INR 248.10 billion in FY 2026. Our business growth has also been delivered on the foundation of risk and prudence and has exhibited in our resilient balance sheet. In FY 2026, we maintained an industry-leading claim settlement ratio of 99.3% with an average turnaround time of 1.1 days. Our early claims ratio stood at 22%, best in class in the industry, highlighting our focus on quality business [ host ] to other years. Our 13-month persistency stood at 84.5%. Our solvency ratio stood at 227.3%, well [indiscernible] and much ahead of the regulatory requirement of 150%. We continue to maintain our track record of not having a single nonperforming assets in our investment portfolio since the inception of our company. We remain committed to deliver delivering superior value to our customers by leveraging economies of scale and aligning our cost structure closely with our evolving product mix. Notably, technology and digital solutions have enabled us to increase efficiency, resulting in a reduction of 40 basis points to 12.1% in our savings, cost per premium ratio during FY 2026. Our AUM stood at INR 3.14 trillion and a total [ inflow ] sum assured grew by 16.9% year-on-year to INR 46.11 trillion at March 31, 2026. In the same year, our embedded value grew by 10.5% year-on-year to reach INR 529.89 billion. To summarize this year, as we said, over 25 years of its service to our customers, we would like to reaffirm our commitment to deliver sustainable [indiscernible] growth by balancing business growth, profitability and risk and prudence. Towards this, we believe all the necessary levers continue to be available with us. Thank you, and I'll now hand it over to Amit to take you through the business update.

Thank you, Anup. Good afternoon, everyone. As Anup mentioned, the past year was defined by changing macroeconomic landscape, shaped by both global and domestic shifts. And additionally, we also had a relatively high base of last year, particularly in H1. Quarter 3 onwards, the growth momentum returned with retail APE growth of 10% year-on-year. This positive trajectory sustained throughout quarter 4 until renewed geopolitical disruptions emerged in March 2026. Despite these disruptions, we managed to deliver growth in quarter 4 with APE registering 9.54% year-on-year growth. On a full year basis, APE grew by 2.2% year-on-year to INR 106.41 billion. Coming to product price performance, our core focus area, retail protection grew by 60.5% year-on-year in quarter 4, resulting in a full year growth of 32.3% with an estimated 13% of the addressable population currently being covered through retail protection, we believe this segment offers a multi-machine growth opportunity. Group Protection, which includes credit life and group term business grew by 7.1% year-on-year in FY 26. Within that, group term business grew by 14.6% year-on-year and credit life business grew by 1.8% year-on-year. MFI segment, which witnessed challenges at the start of the year has seen recovery from quarter 3 onwards. Linked business APE grew by 1.6% year-on-year in FY '26, impacted by volatile equity markets. Two years [indiscernible] for linked business AP stood at 14.2%. We continue to focus on increasing contribution from high [indiscernible] in this segment. Such products are less impacted by market volatility, thereby providing stability to [indiscernible] category to a large extent. The non-main savings APE grew at 15.4% year-on-year for the first 9 months. Last year, in quarter 4, we launched a new product in this segment, which had a very good response. This year, quarter 4, as business from that product normalized, non-linked business has declined year-on-year in quarter 4. On a full year basis, the business and contribution from non-linked savings business is at a similar level to last year. Annuity business 4-year CAGR stood at approximately 20%. This business has stabilized at around 7% of our retail mix. The Group Funds business grew by 26% year-on-year. Now let me talk about channel-wise performance. Agency channel APE stood at INR [ 26.86 billion ] and direct channel APE stood at INR 14.30 billion in FY 2026. Together, these channels contributed 47.4% to overall utility. These channels have declined this year, primarily due to the high base up to date and annuity businesses in the previous year. In the agency channel, growth trajectory has shown consistent sequential improvement throughout this year. As a strategic priority, we have been investing in the channel from a long-term perspective. Our road map centers on micro market-led brand strategy and using technology and analytics as a productivity lever by equipping agents with tools and analytics to automate administrative tasks, take and pivot their focus towards high-value revenue-generating activities. In the direct channel, focus will be to deepen [indiscernible] segment through GIFT [indiscernible] and scale up online channel through differentiated offerings. Bank insurance channel grew by 3.6% year-on-year and contributed 29.8% to total APE. Partnership distribution channel grew by 23.4% year-on-year and contributed 13.2% to APE mix in FY '26. In [indiscernible] and partnership distribution channel, our focus continues to be on adding new partnerships and including the share of shop in each partnership. Group business grew by 14.5% year-on-year and contributed to the overall APE mix in FY 2026. Today, we have the strength of 2.42 lakhs advisers, 53 bank partnerships with access to more than 26,400 bank branches and 1,500-plus nonbank partnerships. To summarize, our primary focus will be to drive business growth through our micro market strategy in proprietary channels. By deepening our distribution, we shall gain access to a wider range of customer profiles, which enhances our ability to seamlessly shift between product segments as per macro environment. We believe this will help us keep our product with channel mix balanced and deliver sustainable growth irrespective of the market environment over the long term. I will now hand it over to Dhiren to talk you through the financial update.

Thank you, Amit. Good afternoon, everyone. Let me start with some efficiency-related aspects. As you are aware, we have undertaken various cost optimization initiatives in the past two years to make our cost structure aligned to our prevailing product mix. One of them being the use of AIML, which is being embedded across the entire customer journey that is driving targeted demand generation, automated underwriting improved renewal retention, enhanced customer service and effective claims investigation. Upsell programs and digital lead conversion, both supported by machine learning models continue to contribute to growth. while advanced fraud reduction and early claim identification help mitigate risk and improve profitability, we have also deployed AI-led face matching between KYC documents and customary measures to reduce fraud risk. Gen AI-based categorization of incoming [ custom email ] has significantly improved turnaround times and AI-driven medical summarization is enabling faster and more efficient underwriting decisions. Further details on usage of AIML across our processes is shown on Slide #36 of the presentation. As can be seen on Slide 12, the various productivity enhancements have helped in reducing cost to premium ratios for our savings line of business by 40 basis points to 12.1% in FY 2026. This cost reduction is after accounting for unavailability of input tax credit, which was effective September 22, 2025. Our total cost to premium ratios for FY 2026 stood at [ 18.2% ] and remains stable at previous year's level. The company's profit after tax grew by 34.6% year-on-year to INR 16 billion in FY 2026, primarily driven by higher investment income from shareholder funds. This includes a gain of INR 1.14 billion realized from sale of 100% equity shareholding in ICICI Pension Fund Management Company, which was also called ICICI Prudential Pension Fund Management Company Limited. Excluding the sale transaction, PAT grew by 25% year-on-year in FY 2026. Our solvency ratio continues to be strong at 227.3%. The improvement in solvency is primarily due to increase in profit after tax and realization from sale of subsidiary. Our assets under management stood at INR 3.13 trillion as of March 31, 2026. Value of new business, VNB grew by 10.9% year-on-year to INR 26.9 billion. As you are aware, our focus is on growing the absolute VNB, which we have been able to achieve through improvement in product mix and operational efficiencies even after accounting for the unavailability of input tax credit. Margin expanded by 190 basis points year-on-year to 24.7% in the current year. Margin expansion has been led by improvements in new business profile and economic assumption changes. Protection mix for the year has increased by 2.2% year-on-year to 17.9%. Additionally, we have also been working towards improving the profitability of each line of business through longer tenured policies, higher sum assured multiples and increasing rider attachment. The policy term on the savings line of business has increased from 26 years in FY 2025 to 29 years in 2026. Retail sum assured has grown by 35% year-on-year in the current year. The expansion was offset by operating assumption changes, which is primarily due to unavailability of input tax related on individual businesses and some of these to persistency. As shown on slide 16, our embedded value grew by 10.5% year-on-year to INR 529.89 billion at March 31, 2026. Our embedded value operating profit stood at INR 57.02 billion in FY 2026. The breakup of the EVOP is as follows: unbind contribution for FY 2026 is 7.4% of the opening EV. VNB of INR 26.29 billion is 5.5% of the opening EV. Unbind and VNB together constitutes 12.9% of the opening EV. Operating assumption change is 0.5% of the opening EV negative and primarily on account of unavailability of input tax [indiscernible] from updates to persistency, as I mentioned earlier. Both mortality and expense variance are positive for the year and broadly in line with our expectations. Persistency variance is a negative INR 2.64 billion, which is largely on account of the 100% premium back annuity products where the persistency [ experience short ] of long-term assumptions. As you're aware, it was an industry-first product and coincided with regulatory discussions aimed at increasing [indiscernible] values for traditional savings products. During the year, given the market volatility and tight liquidity scenarios by market in terms of negative, we believe that customers use the amount of withdrawal in times of need. While we ensure that the economic benefit of [indiscernible] from our company's perspective, the future earnings, which is part of EV was impacted due to [indiscernible]. Consequently, the RoEV for financial year 2026 stands at 11.9%. The total economic and investment variance is negative INR 7.78 billion due to a shift in the [indiscernible] curve and equity market movements. Our VNB and EV have been reviewed independently by [indiscernible] LLP, and their opinion is available in the results [indiscernible] submitted to the exchanges. Further sensitivity details are available on Slide 17. This concludes the financial performance. I will now hand it over to Judhajit to talk you through the ESG updates.

Thank you, Dhiren. I will be sharing the salient aspects of our ESG journey. We continue to retain the highest ranking in the Indian life insurance industry as per leading global and Indian ESG rating agencies. We are also delighted to share that during Q4 2026, we achieved the Platinum Award for our ESG report for 2025 at the Vision Award organized by the League of American Communications Professionals. We were also recognize among India's top 60 most sustainable companies by Business World. I will now share the key highlights under each of the ESG focus areas. Environment, we continue to look at ways and means of reducing our carbon footprint by [ erupting ] green energy across various branches across India. Apart from the [indiscernible] platinum certificate, which is a green building rating for the company's -- our headquarters here, we have also got the IGBC Platinum and [indiscernible] certification for 4 other branches. And responsible investing, we are [indiscernible] principles for responsible investment. We have completed our third annual reporting on responsible investing activities, and we shall continue to remain committed to promote ESG factors in our investment decisions. On the diversity front, our gender diversity is now at 30%, and we shall continue to strive to improve it from here. As far as communities are concerned, our goal has been to increase financial inclusion through especially designed micro-insurance products, targeting socially and economically retail sections, and we have covered 53.8 million lives as of March 31, 2026. This year, we settled more than 3 lakh retail and group claims with an overall claim settlement ratio of 99.8%. On the CSR [indiscernible], through ICICI Foundation, we have established [indiscernible] at 4 locations to facilitate advanced industrial [indiscernible] training, while in the area of health care, the support of the Indian Cancer Society to conduct surgeries for almost more than 90 patients. Government. Our Board has a majority of independent directors, enabling the separation of the Board supervisory rules on executive management. I would like to reaffirm our commitment again to create a culture that embraces sustainability and goes beyond goals and targets. Thank you very much. We're now happy to take any questions that you may have.

[Operator Instructions] We'll take a first question from the line of Swarnabha Mukherjee from B&K Securities.

Congrats on a good set of numbers. So I have three questions. First of all, just wanted to understand in terms of growth, how should we think about in the upcoming year, given that this particular year, how the growth has trended, I mean, it gives us a very favorable base to grow. So if you could outline your strategy of how you are thinking about FY '27. And given that last year, there was this launch of par product and you highlighted that which would have led to a slower growth in the non-linked channel. But what are your thoughts on the non-par category? How do you see it? And [ parallel ] also if you could provide us the mix for par, non-par for the quarter. That's one. And then, sir, on the VNB margin side, if you could highlight, have all the persistency-led changes that you are seeing, you're experiencing, has that been taken into the assumptions? Or can something incremental come? Or if you are observing anything due to the calender value regulation that you might want to highlight? And in that case then, how should we think about the VNB margin numbers? Should we take the current year numbers more a baseline if kind of the product mix sustained? So this is -- yes, I think, sir, this is broadly my queries, if you could answer.

Swarna, this is Dhiren here. So let me pick up some of your questions. In terms of growth for the next financial year, I think this is quite a volatile time at this stage. And I'm sure you would have seen the way the markets have been toward the last month of the financial year. I think this is still going to be a bit of a wait and watch. You're right, specifically for us, we do have a base that is good for us. But again, it is dependent upon how things shape up in the environment. So it's a little early for us to comment as to what the number should look like for the rest of the year. But rest assured, in the way that we're approaching the problem is that we would continue to go granular, continue to understand who are these customer segments that we should be looking at, what are the product fix that we would need, work with our distribution channels to be able to deliver the right proposition for customers as well as shareholders. That objective and that process continues. There's no unwavering on that front. Coming to your second question in terms of what is the split between par and non-par. For the year, it's roughly 2:1 ratio. It's been broadly in that range, some quarters a little higher, some quarters a little lower but you are in the [ close to 1 ] range for the year. Coming to your third question, which is on the persistency experience, we are -- process around looking at assumptions and experiences we used to look at what is temporary and what is permanent. So -- and we do this every year towards the end of the year in terms of how these assumptions are shaping up. So whatever is known at this point, we will incorporate as part of our assumption setting. If there are experiences that we see are temporary in nature or they pertain to [indiscernible] portfolios, they'll allow it to go through the variance. So at this point, we have factored what we know in terms of consistency, in terms of mortality and in terms of expenses as part of our margins. So this essentially becomes the baseline for us going forward.

Very helpful. Just a couple of follow-ups on two aspects. One is on the growth, as you mentioned, I understand that this is a volatile year, but like if I were to look at from the channel side also, I mean this year's growth has been primarily [indiscernible] by your partnerships. So I mean, what would be -- what -- how should we think about, say, the other channels, for example, the agency this year has been tepid. So how do you plan to activate or go about driving that channel? I understand that [indiscernible] given the base of ICICI bank, there might be a steadiness in that number, but particularly on the agency, I wanted to query. And also like on the persistency part in surrender value with recent regulations, are you seeing any delta apart from the annuity product? That's what I wanted to understand.

Yes. So on the early experience of surrender value products, we're not seeing anything too different, but it's a little too early to call because you only got about 5 to 6 months of experience, and we'd love the whole year to pan out for that. In terms of growth, you're right, agency has not had a great year in the sense, the growth has not been great. So that extent, it does form a fairly good base for us into the coming years. But like I mentioned, we'll continue to work at it granularly, understand what are these micro segments that we need to go after and work with that.

We'll take our next question from the line of Supratim Datta from Jefferies.

I have three questions, starting with the growth aspect. Could you help us understand how customer behavior has changed with respect to products post the start of this Middle East war? Are you seeing any increase in demand for non-par policies in this current environment? And how are you seeing the demand of [indiscernible] in late March and early April, if you could give us some color around the trends that would be helpful. Because what I see is in March, despite the lower base the agency channel has declined, and this channel should ideally have lower [ EBIT ] exposure. So trying to understand what's happening there. On the margin bit, what I wanted to understand is, despite the rise in group funds in fourth quarter, ICICI has witnessed a sequential rise in margins. Is this a function of higher use in some of the non-par products and potentially protection as well? Or is there some other drivers here that we should look at? And lastly, coming to the Ind AS transition, now with Ind AS rolling out from first of April, I wanted to understand, would you be sharing the Ind AS accounts from next quarter? And how would this compared with the [ CSM ] in force, if you could give us some color on how does this change your capital position as well? If you could give us some color on that, that also will be very helpful.

Supratim, let me cover Ind AS first. So yes, technically, we are live -- we should be live with Ind AS. But as approved by the Board, we will be seeking board bearings for a year. One of the more fundamental points are that some of the decisions around how the inputs could be provided for computing the CSM. I think we still await some clarity from the joint export group. The other thing also is that this is too short a time for us to transition into Ind AS given the fact that we are typically live with our results by the first 15 days of the quarter. So we would need some time to be able to get our systems up to be able to manage the transition there. In terms of the capital position, I believe the regulator still wants us to use the [indiscernible] solvency formulas. So until we wait to see how the [ RBC ] gets implemented, we will continue with our current solvency basis on which we are quite strong at 220%. Coming to your second question that you had asked, which is on margin. The margin support has largely come in by the growth in protection that you can see for the current quarter, which has been quite strong. In addition to, of course, all the improvements to profitability that we've been doing across all other savings lines of business, as I mentioned earlier. Your first question was on what are the upcoming trends. A little too early to call, Supratim, and let it settle. I do believe that the war in West Asia has, to some extent, impacted new business sales in the month of March. Difficult to guess how much it would be, but clearly, there has been some impact.

Just wanted to understand has the impact been more of ULIP or has it been across the board a slowdown in demand in late March?

It's been across the board, except for protection.

Next question is from the line of Shreya Shivani from Nomura.

Yes. Congratulations on a good set of numbers. I have two questions both on the EV work. First is the operating assumption changes that we've taken, is it only the persistency operating assumption? Or there are certain changes you've done with assumptions in mortality or expense, et cetera? And second is, I mean, it's the RoEVs, it's at 11.9%. Now I mean even if I had assumed a zero value for operating assumption changes and zero for persistency variance instead of a negative number, I would still be at 12.9% or so. So what is generally our steady-state RoEVs that we should assume? Because we are already under the cost of equity in FY '26. And, how should I think about it for that matter?

So [indiscernible] your question on operating assumption changes in EV, as I mentioned in my opening remarks, is primarily on account of unavailability of input tax credit and then some updates to persistency. Now this entire -- if you recall, this conversation has started within September as to the impact of the unavailability of input tax that reduced to GST reforms that has been the bigger component out of this operating assumption change. Now coming to RoEVs, yes, this -- without the assumption changes and variance, we are at the 13% range. Now technically, on a longer-term basis, we should still be at the 13% to 14% range, depending, of course, on how the yield curve shapes up, depending, of course, on how they're able to grow VNB. And that becomes the two primary drivers of how you determine RoEV. But from that sense, the Ind AS should be live, actually is live this year and if you get the [indiscernible] then we will go live on that next year. Looking at returns on earnings will become much easier when you look at the Ind AS numbers. The RoEV will have less significance going forward.

Got it. So with Ind AS, it does not impact the RoEV whatsoever, but probably we'll not be looking at the RoEVs going ahead is what your point of view is, right?

My sense is most commentators and analysts would end up looking at RoEVs because then that would be at least comparable to how the rest of the market is outside of insurance. Comparison becomes much easier then. If you want any other metric, we are in this RoEV world at this point.

Right. And there is no impact whatsoever of IFRS on the EV work, right? Nothing from the -- even if, say, a risk-based solvency comes to, nothing gets changed in these metrics, right?

No. Risk-based solvency only determine your capital position.

We'll take our next question from the line of Prayesh Jain from Motilal Oswal.

A couple of questions. First, on -- if I look at the production business, premium would exceed the sum assured group, how should we read that whether it's more -- written of premium products that has come in or how should we kind of read that? That's one. And second is more of a structural question on [indiscernible] values and where in FY '24, we had a mortality variance then in FY '25 we had assumption change, and now we have a persistency impact both on variance as well as assumption change. [indiscernible] has been constantly negative for us over the past 3 fiscals, how should we kind of think about this going ahead? And whether [indiscernible] stress test the EV to an extent that [indiscernible] are more conservative and you could start looking at more positive variance or assumption [indiscernible] just some color on that, that would be helpful.

So Prayesh, right, when you look at the protection, sum assured growth, that's been at about 48%. Sum assured on -- so the growth on retail protection has been higher at about 60%. The retail new business sum assured actually consists of both protection and savings. So you will have to offset the two together. So the retail submission is not purely protection. Because see, by the fundamental construct of products in India, savings products in India, you end up providing 10x cover for most of our products. So that [indiscernible] sum assured that comes on board, right? Coming to your question on [indiscernible] value and how we look at how our assumptions are being set. See frankly, we run a very diversified portfolio. And our approach to setting assumptions is to understand whether these potential differences between an assumption that we have set and the resulting experience that we see at this point, is that temporary or permanent? Now the way you always look at the businesses that come in, if you put them into cohorts. And as you look at each part, you are trying to identify whether cohorts look alike or do you need to separate these cohorts. And again, given the underlying variability of the -- and the underlying diversity of our business, you have to start looking at each of these cohorts as they gain meaningful size. As they have separation, you start to see assumption changes. If I had a homogeneous portfolio, then ideally you should not see any assumption changes at all or even variances. But given the diversity of the underlying business that we bring, you have to look at cohorts and you have to then start segregating these cohorts as they start to gain size and significance. So in any case, as you look at the overall experience and assumption changes, these are marginal. There have been points in time when we had positive assumption changes as well. But overall, you see that the business has been ensured that the underlying assumptions that go in are reflective of what we see today.

Got it. And the economic assumption changes, could you split that between equity and debt?

It's largely debt. Almost all of it.

We'll take our next question from the line of Madhukar Ladha from JPMorgan.

First, See, in the beginning of last year, we were sort of targeting above or at least at par with private life insurance retail APE growth. I mean, we've significantly sort of underperformed that level. Now going into sort of FY '27 and onwards, what do you think should be your target, I mean, how do you think you will achieve that target? Like if you can sort of quantify any sort of meaningful changes that you are doing that will lead us to believe that we will be able to sort of achieve higher retail sort of growth, right? So that's my first question. And second, also, if I look at persistency, we are seeing a decline for the 61st month, 30th month and also the [ 36th ] month. So what's happening over there? Third, with significant -- I mean interest rates have gone up, bond yields have sort of gone up. That should help our margins. What will enable us to sell more non-par or as a company, what -- as a management, how can you sell more non-par would be my question. Yes, these would be my 3 questions. And also, if you can split your economic variance between debt and equity.

I just answered the question on [indiscernible]. The economic variance is largely debt. Okay. In your first question that you mentioned about growth. Actually, when you look at the 2-year CAGR, we're still in the range of 7%, 8%. Yes, it is not in line with the market, but then we continue to see -- continue to work at a granular level to see what are those customer segments that are available to us through our distribution and they can be generated growth from. So we are not -- the [indiscernible] on the market is very clearly, we're looking at -- [indiscernible] at least at the market and then look to work beyond that. Largely, when you look at the market, the 2-year growth seems to be in the range of 10% to 11%. We are in the range of about 7% to 8%. So some work left, but we're not too far off. You asked another question on...

Sorry of interrupt on that. But if you look at 2-year CAGR, then that may be the case. But if you come to more recent time, then last year's number, FY '26 would suggest that we are losing some more ground, right? So in that sense, there'd be more to catch up moving into FY '27 [indiscernible].

Yes. So Madhukar, we have discussed this earlier also. I think the focus for our company is to be able to grow VNB in a sustainable fashion, right? The large component of VNB does absolutely come from APE. So as you rightly pointed out, yes, 2 years slightly lower than market, but when I look at this year's numbers in terms of APE at 2% growth, VNB is at 11% growth. And you can see the consistency in the margin that has held up all through the year. So I think we're working at it sustainably to work at it granularly to see how we can deliver growth in a sustainable format. Your second question was on persistency. 61st month you discussed earlier, this has been due to a regulated definition change. 25th month is a new phenomena. Yes, I think some of the spillover from the 13th month is coming through to the 25th month at this point. You had another question in terms of how can we sustainably grow non-par. I think one of the challenges that we run up as an industry is that our product does get compared to what bank FD rates are in the current environment and bank FD rates continue to be fairly steep. The product that we price -- the product that we offer does not look as attractive because very clearly, the way that we set up our products is to price off the [indiscernible]. And so the return over the longer term has to be paid off [indiscernible]. There may be other considerations that banks may be using to set up their deposit rate. But whenever there is a dichotomy between the deposit rates and the non-par IRRs, then you will see customers swing from one to another.

Next question is from the line of Umang Shah from [ Banyan Tree Advisors, PMS ].

Sir, one question was for FY '24, we were given VNB breakup among the various segments. If you can give that number for FY '26 and FY '25, that would be great.

We aligned with the market on this [ point of month ].

Okay. Sure, sir. That is very -- I mean, that is [indiscernible] quite helpful. But sure, I understand. Sir, second question was the consistency decline in 13th month core, has it -- does it have a large part of annuity products or it's across segments?

A large part driven by annuity. There are, of course, some segments that you have seen some product channel cohorts that have not performed on par.

Okay. And sir, when we have a persistency, which is worse than what you were expecting, does it benefit the VNB or does it not benefit the VNB?

Umang, it doesn't benefit. So the way we look at our assumption setting is that we evaluated it the end of the year, we take a view as to which of these are permanent impairments in that sense. For those, we take an assumption change. Those that we believe are temporary. They love that to run for the variance.

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

I just -- most of my questions were answered. I just had one question. What happens to the negotiations that were going on with the distributors on commission and so on? Should we expect that they are mostly done? And if so, then could we see agency doing all channels, but especially are we achieving better in FY '27? That was the only question I had.

So without the negotiations and conversations with distribution, the agency or otherwise is always on. We look to offer remuneration that is appropriate in line with the product and the pricing that we have built that is accretive to both shareholders as well. So at all points in time, this is a continuous conversation. There is never a start or a stop to this. It will continue -- it has continued. It will continue and will keep going forward as well. So it is a continuous exercise as we bring out new products and new propositions. We will continue to work with that distribution to see how we could deliver these products to the relevant customer bases in an efficient format.

Okay. So no conclusion so far. I mean this was -- it's ongoing for some time. So there's been no, what do you say, there will be no agreement of something reached or how should we look at it?

No. Agreements have been reached with all our distribution. We are where we are, and we are seeing the 24.7% VNB margin.

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

I have a few questions. Just to start with. The uptick in the margin in the fourth quarter around 25.2%, can we attribute predominantly to the favorable [indiscernible] at least in the month of March? And related to that, in the VNB work, what we see as 250 basis point addition to the VNB margin due to [indiscernible] whereas [indiscernible] largely because of the [indiscernible] benefit which is displayed in the current year to bump up the market?

Sanketh, when you look at the yield curve and especially in the perspective of non-par products and which also includes protection, one has to look at what the pricing is and what the yield curve is and what is the expected margin that one wants out of it. So as vehicles move depending upon your underlying costs, and of course, you know this year, there has been an impact of GSP, pricing has swung in that direction. So if we have got a benefit of the yield curves, we would not have changed. We didn't change the pricing [indiscernible] within that fashion... Yes?

Sir, what you're trying to say that you did not change the IRR of the end consumer -- to the end consumer despite the benefit and probably because of that, [indiscernible] impact to some extent, got negative?

Yes. So if you look at the VNB work, right, what we have called out is the movement across from 22.7% to [ 25.27% ]. Now here, the product repricing, whatever that we have done is all sitting as part of the new business profile, right? And all the yield curve changes are now part of the economic resumption change. So if I'm making any pricing changes, [indiscernible] new products that have come on board.

Understood. No, my point was that you got double benefit, right? Your product mix also changed. And on top of it, you've got [indiscernible] economic variance number. But actually, the GST impact of money [ 3.9 ] will be there in the VNB. So just wanted to assume that the product mix moved favorably and also you took the benefit of economic variance to largely negate the impact of other [indiscernible], which might be largely related to [ GST ].

You take everything together, Sanketh. So one of -- we have been working very hard at cost efficiencies across the years, which I spoke of earlier. So the benefit of the cost efficiency is something that we have taken on board as we've got our pricing. Because I'm getting cost efficiencies, I can continue to hold the price as it is. Now this is [indiscernible] some of my cost efficiency was negated due to the GST impact. So technically, I should have changed my pricing. But then I also had the improving real curve, which allowed me to hold on to prices at that point. Actually, if you look at the entire period, there have been very marginal price changes led to in certain cohorts, not across the board. And I believe we had answered the other question earlier as well, one did not expect On March price changes to happen, and that has not happened.

Okay. Sir, the reason I was asking this question is that given growth is becoming soft a bit now, and probably [indiscernible] becomes much more steeper, which was very visible in the month of March. Is it safe to say that to flip the growth, you will pass on some benefit to the consumers? And maybe that could play a role for the growth? And related to that point only is that given -- we largely did only single premium annuity in the current year, given trial lock-ins will be better or bond forward lock-ins will be better. Will you go back to deferred annuity in a different format to flip back the growth given the economics are in your favor or in your or industry favor right now?

So let me give you a [indiscernible]. If the yield curve moves downwards. I will reprice, right? Your second point was around regular pay annuity. We do have regular pay annuities and we continue to sell those as well. Yes, it's on a little more towards single pay but we've built our regulatory annuity business as well, and we'll continue to sell that.

Understood. And two more questions. One question is that given it's almost 6 months -- closer to 6 months that the GST impact was taken on the protection. Have we started repricing or industry has started repricing the individual protection business due to the extent of input credit not available? Or we still are on the old pricing nature only? And related to that, Dhiren, given we had a very strong third quarter. Now fourth quarter growth is still there, but it is turning down a bit. So the impact of GST, which was there in third quarter, is it fair to say that now, now it is coming back to normal demand?

Sanketh, you saw the 60% growth in retail protection in the quarter, right? So I think what we have been doing is working at this [ granular to one ], make sure that protection growth continues. In terms of your question on how we would look at pricing and have people taken step changes, I believe, by and large, the industry has not taken step changes. You might have one or two players who have taken some minor increases in prices on [ mass ] price changes back to again to a degree of 1% to 3% across the board. Most -- we have stayed away from doing [indiscernible] price changes, we have taken cohorts and worked at those cohorts where we need to make updates to pricing. That has been our perspective how we could manage this entire transition of GST. And you have seen the numbers come to in terms of 60% growth.

[indiscernible] Sorry wrong number, my bad. Actually, I saw total production growth number so it's a while back I'll just give you [indiscernible] number. Lastly, then if you're okay to give the mix of ULIP, which has a higher sum assured, and largely, just to come from [indiscernible]. In your PPT, you gave persistency -- 13-month persistency [ product wide ] is really non-linked. And naturally, the non-linked part fell from 86.8% to 73.2%. So I'm assuming it's predominantly due to the zero surrender, the [indiscernible] plan?

Yes. So the non-linked persistency drop is due to the annuity plan debt. And no, we have not called out the split of the high sum assured.

We'll take our next question from the line of Nidhesh Jain from Investec.

First question is on EV split. So if I look at the last 25 EV split between different network for this -- in this presentation, it's different from the last year presentation. So is there any change in EV -- network methodology?

Yes. So Nidhesh, you can refer to Slide 63. We've called that out and given you a [ work ] from '22 to '26. The key change is that the shareholder share of the MTM that's on the assets and derivatives and the policyholder funds, that's been reclassified to [indiscernible]. That has absolutely no impact on the EVs just a reclassification within [indiscernible]. And this is consistent without [indiscernible].

[indiscernible].

Yes, the MTM derivatives and assets and derivatives of the policyholders have been classified under this [indiscernible] for the change.

[indiscernible]. Last year, Q4 declined 50%. This year, again, it will decline on a lower base. So what is exactly happening in this channel? Why [indiscernible]?

In a large part, due to the higher base that we had of annuity in the previous year, that has set the base that we have to work against. Again, if you look at from a longer time frame, we still have a fairly decent growth on agency. But these are the shorter term, it has been a bit of a challenge. But like I mentioned earlier, we are looking at working granularly at agency looking at these micro segments, building efficiency within the agency distribution itself.

And [indiscernible] in terms of growth this year, last year also, I think Q4, it was weak.

Yes, that's right. There was a base effect of [ direct ] as well.

So in terms of expansion of [indiscernible], are we planning to add more [indiscernible] or open more offices or -- I'm just trying to understand how are we trying to, let's say, deliver growth in [indiscernible] and how are you planning today for that group?

So as I mentioned earlier, we are looking at these growth centers on our data-driven platform, especially with the micro market-led branch strategy that we have, again, using technology, analytics with productivity levers. So we will continue to work at it granularly, Nidhesh, and then I'm not working with the fact that the growth numbers have not been strong. We work at improving these as we go down granularly into each of these segments.

Sure. Third question is on the non-par business. So since the yield curve has been quite favorable, why don't we offer [indiscernible] to the customers? So fixed deposits have some cut of margins, but deliver better APE growth, why we are not doing that?.

See, one of the things that they should understand is that you get priced off the G-sec I think by and large, insurers in India have been quite disciplined an approach to actually work off the G-sec, which may not have been the case in geographies outside of India. The pricing of deposits does not really follow the G-sec threshold. So to that extent, at certain points in time when deposit gets priced extremely well relative to nonpar products, which are and we have built from a longer-term perspective, customers can swing from one to another. So if you were to actually start to cut margins to be able to deliver on growth on one part, it may not be accretive to shareholders. The whole perspective that we carry, Nidhesh, is that, again, look at absolute VNB. It's not a question of trying to push one particular product versus another, it's to identify what are these opportunities that exist at this, point, and you're right in the sense that the non-par offers you a great opportunity in sense that the yield curve is great, that it is steep and is able to give you a good IRR but the competition that also comes about at least from a sticker price comparison is FDs, which are still running a fairly steep rate. So to that extent, the non-par does get subdued.

Sure. And lastly, if you can share the breakup of group protection between term protection [indiscernible]

Yes, that's in part of [indiscernible] of this back -- that's on Slide 56.

Next question is from the line [indiscernible] Strategic Advisors.

Just want to have a couple...

I'm sorry, sir, can you use your handset mode, please.

Yes. Am I audible now?

Yes. This [indiscernible] Go ahead, please.

Yes. Slide 64 EV work, I just wanted to understand under the persistence and the other [indiscernible] how much is [indiscernible] FY '26.

Sorry, can you repeat the question again?

Yes. So we have INR 2.61 billion persistency and other variants in the EV work, right? I just want to understand how much of that is attributed to VNB or APE [indiscernible] for FY '26?

Almost none. No.

This is all [indiscernible]?

Yes.

Next question is from the line of Manas Agrawal from Bernstein.

My question relates to potential regulations on commissions. A, Do we have any understanding of what is happening and when is it expected to happen? And B, if there are like various levels of cuts to commissions, how would your margins and your growth assumptions change?

Manas, we are not aware of discussions. We do -- we do acknowledge that the regulators asked for data, which we have provided, but we have not heard anything beyond that.

Okay. And second question, let's say, the regulator does something. What would be the sensitivity to growth and margins on that front?

I don't know what the regulator is thinking on that at this front. So it will be a little difficult to comment.

We'll take our next question from the line of Shobhit Sharma from HDFC Securities.

I have a question for Anup, sir. Anup, sir, if I look at our retail business growth over the last two, three years, it has not been that strong. If you can help us understand what are the key challenges, which is impacting our growth. Does that cost optimization initiative which we have taken over the last 2, 3 years are impacting our growth trajectory? And given market remains like this for the entire year and as we remain really focused, how do you internally plan growth and do you think we can grow in line with the private players? And secondly, we have been very, very -- we have a very granular distribution and agency plays a very important role. The share of agency channel has been coming down over the last two years, if you look at. So is it because we have seen larger agents moving to the competition? Or is there -- are there any other individuals impacted the growth of this channel?

I think from a growth perspective, I think it might be useful to look at a slightly longer period than do a seizure of growth and take volatility and [ base effect ] into consideration, I don't think that cost optimization comes in the way of growth at all. In fact, in our industry, I would say that since we've done largely two kinds of businesses, one is protection-led businesses, which are risk-based businesses completely. And second is savings-oriented business, which essentially either get priced off the equity return or net price of G-sec. In both cases, what we can give to the customer is get the margins and less the commission cost. So with that in context, taking like in all asset management businesses, one has to keep working on cost structure both on your fixed cost as well as optimizing on the commission costs and distribution costs actually in areas where it is not adding value, but it is giving top line. So there are always pockets in large distributions where you will see that there are larger payouts and it is not even commensurate. Margins of commensurate profit or profit [indiscernible] so that is a constant area of optimization that one has to do. And then on the protection side, one has to be focused on the risk, which is early claims and make sure that your underwriting is proper and your pricing is better. So I don't think there is anything sort of coming in the way of growth. So we have to go more granular and we have to get back [indiscernible]. There are base effects and which [indiscernible]. And like [indiscernible] earlier said, if you look at 2 years, 3 years, even if you look at 2 years here, we are slightly behind, but we do have to catch up. I understand the sentiment in the group that we have to do more growth. But our focus, like we have always said, is absolute VNB and in absolute VNB, there are other levers in addition to the APE. APE is a very important lever, not to say that it is not. But there are levers also, which seems to be flexed to get the VNB and make the whole business [indiscernible] more robust. So there is nothing sort of -- at this point of time, we don't see cost optimization or things like that comes in the way of [ work ] at all.

And secondly, sir, on the agency channel, how we plan to revise that channel?

I think agency channels, we have had some large base of it two years back. And if you look at CAGR a few years, it is running at 12%, 13%. And as the base of it goes, I think it will come back. And we are also certainly looking at micro market-led agency. So hopefully, it will come back sooner than we think.

Next question is from the line of [ Ritika Dua from Bandhan AMC ].

I'm just saying that [indiscernible] question. One is that on the [indiscernible] on the reclassification on the EV side. So while Dhiren, you clarified that it doesn't have a impact on the EV. But just could you just explain what we have done and the objective of the same to do it today? That's one question. And the second question is that while I know we are very early days of IFRS, but just maybe to hear your initial thoughts as to how the KPIs would be maybe in our IFRS world. So those are the two questions.

IFRS let's wait until it gets implemented. As we see forbearance, the current year will be on the existing [indiscernible] Ind AS will form financial information, which will be subsidiary financials. So let's wait until that settles because we'll have to -- as we create the OBS and then look at the quarterly financials as they're being generated. Coming to your first question on this reclassification. This is just alignment with what we've seen the market at, nothing more than that. So total EV does not change, it's just alignment. There is no specific guidance on where this particular MTM specific. We realize that it's better to align with the way the market is presenting it, so that you have comparability.

And if you don't mind, Dhiren, could you just explain the change again. I'll obviously go through the presentation, but if you don't mind, could just explain the change again.

This is the mark-to-market on the assets and derivatives of the policyholder funds. That is the component that has been reclassified. It's just the mark-to-market on assets and [indiscernible].

Next question is from the line of Dipanjan Ghosh from Citi.

A few questions from my side. First, Dhiren, you mentioned on how you really go about looking at assumption changes in variances and on the persistency and back book. You specifically mentioned that once a select cohort kind of becomes meaningful from a size and scale, that's why the variability can come out to be a meaningful number from an EV perspective in case there are some differences between assumptions and reality of life. Now on that backdrop, you also mentioned that barring the annuity product also, there are certain other products and cohorts where you have witnessed some challenges. So I wanted to get some color on what this product or cohorts would be? And is it any particular mask market strategy or any particular product, which is really driving this? Just wanted to get some sense of how these things can shape up, let's say, from the next 2 to 3 years also if your product or customer strategies kind of like to remain the same. The second question was on the banking channel. In your opening remarks, you mentioned that you want to focus on increasing your counter share. So ex of ICICI Bank now that the [indiscernible] partnership [indiscernible] have kind of increased in vintage. Could you give some quantitative color on your counter share or at least the movement in counter share over the last few years or maybe this year? And finally, third question is on the ULIP side. It seems that your unit margins have been moving up over the last two years. This is of course the efforts that we have undertaken, be it in terms of riders or [indiscernible] issue. So how much headroom would you believe that you have in this category to kind of further scale up the margin profile? And just one small data keeping question, if you used to break up the unwinding into reference rate and real world returns. If you can kind of quantify that number.

Yes. But again, that's alignment with how the market is presenting it. We are not breaking the unwind up at this point. In terms of persistency, see, there are always going to be some products that are doing better than the expected persistency and some that are doing worse. The way that we have seen this evolve is that there are certain products and channel cohorts where we need to do some work where the persistency has not been in line and that is the reason why we said we will keep continuing to watch this and see how we could improve these persistencies in the years going forward. As Anup also pointed out, we continuously look at our distribution and seeing what adds value. Very clearly, if there are cohorts that are not adding value, then we look to step away from those cohorts. And we're not able to fix them. So to that extent, there is a continuous reaching of our distribution of what customer segments that we want to onboard through specific distribution and corrective actions get taken along with the distribution teams on the ground. So I don't want to call out any specific channel or any product, but there are some small cohorts here and there that we need to fix and that we'll continue to work at in the years as well. Within the non-ICICI Bank, we did mention that we've had an increase in market share by and large. Again, a lot of the work has gone in across all of these partnerships to be able to drive our share. But again, it depends upon each particular shop, what our share is in that [indiscernible] shop. But by and large, we've been seeing a positive trend in terms of increasing share in most places. Coming to a question on unit linked and its margin. Yes, you're right. Over the years, we've been able to improve the margin of our unit-linked by addition of high sum assured by elongating terms. But I think the way to look at the unit-linked product is it is a very transparent product. If you're able to add sufficient protection to it, it makes it far more meaningful. It is not a mutual fund product and that has to be very well understood but making sure that you're adding protection and propositions very specifically, you are able to cater to various needs of customers and fulfill whatever needs that they set out. So that's been our approach to product development and proposition set up for our customers, and we'll continue to keep working at this when I'm covering newer segments that we want to expand this into.

Can I just -- one small clarification. I mean in the post [indiscernible] question, you mentioned that you'll be working through these products and customer cohorts incrementally throughout the year and going ahead also, right? I mean is that the right understanding?

That's right. It's a continuous exercise. Like as Anup also pointed out, there are always going to be some segments that are not up to par. The point is you try to fix it because you start with the underlying proposition that is being provided to customers and the sales process. If it doesn't work, then you stop selling.

Next question is from the line of Nischint Chawathe from Kotak.

Just [indiscernible] on the protection side of the retail term side, we have seen a lot of tailwinds because of GST. And hopefully, we can see this continuing as well. Is this because there is a natural uptake or as the industry or specifically you sign a [indiscernible] certain products or looked at certain segments or probably even more investments to grow the segment. And in that sense, probably if you could give us some sense of how long [indiscernible] to understand [indiscernible].

So Nischint, if the question is have we created new products and innovative products? The answer is yes. We have done that through the year by providing newer and newer propositions along the way. But I think one of the biggest tailwinds that we have got as an industry has been the GST reform, and that is faced most in protection, in retail protection because that's where you see the 18% go off. So to the customer, you're seeing this improved benefit come through immediately. In fact, this is not just for new customers. It's also available for existing customers because as they pay the renewal, the renewals are that much cheaper. So the way I'm looking at it is that it has actually helped create positive word of mouth on retail protection because very clearly, I think this is one of the essences of our industry. Selling protection has to become one of the cores of what this industry does. In fact, we called it out also in the earlier part of our commentary. The retail sum assured growth for the industry actually was 2.5x post the reform than what it was pre-reformed through this financial year. So very clearly, I think everyone, and it's not just like if everyone has latched on to this particular moat. And it's up to the industry to make this a success which it has for the half year that we've seen.

Got it. Just now on -- I believe [indiscernible] is setting up a [indiscernible] business. So is there a partnership or any [indiscernible] between [indiscernible] and Prudential? Or is it [indiscernible] completely separately?

No, I believe that's a separate company.

And if -- I mean, hypothetically if Prudential wants to move from health to life. Do they need an [indiscernible]?

Again, these are shareholder matters. I think we could [indiscernible] the conversation to financial results.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to Mr. Anup Bagchi, MD and CEO, for closing comments. Over to you, sir.

Thank you. Thank you very much, everyone. Have a good day.

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