Life Insurance Corporation of India (LICI) Earnings Call Transcript & Summary

Ladies and gentleman, good day, and welcome to LIC Quarterly Earnings Call Q1 FY 2022, '23. We have senior management of LIC led by Shri M.R. Kumar, Chairperson on this call. The senior management team members on the call, along with the Chairperson are: Shri M.R. Kumar, Chairperson; Shri Raj Kumar, Managing Director; Shri Siddhartha Mohanty, Managing Director; Smt. Mini Ipe, Managing Director; Shri B.C. Patnaik, Managing Director; Shri S.M. Jain, Executive Director, F&A; Shri Dinesh Pant, Appointed Actuary and ED; Shri K.R. Ashok, Executive Director, Actuarial; Shri Sunil Agrawal, CFO; Shri R. Sudhakar, Executive Director of Marketing; Shri Hemant Buch, Additional Executive Director, Bancassurance; Shri Sanjay Bajaj, Head-Investor Relations. Before we hand over the call to the LIC management [Operator Instructions] Please note that this conference is being recorded. We now request the management of LIC to start the call. And I now hand the conference to Chairperson of LIC, Shri M.R. Kumar for starting this conference. Thank you, and over to you, sir.

Thank you. Good evening, everyone. I am M.R. Kumar, Chairperson of LIC. On behalf of the senior management team, I warmly welcome all of you to the results update call of Life Insurance Corporation of India for the quarter ended, 30 June 2022. The results at the presentation can be accessed on our website and on the websites of both the stock exchanges, BSE and NSE. Along with me, I have our Managing Directors, Mr. Raj Kumar and madam, Mini Ipe. I also have present with me in the call Mr. S.M. Jain, Executive Director of Finance and Account; Mr. Sunil Agrawal, CFO; Mr. Dinesh Pant, Appointed Actuary; Mr. K.R. Ashok, Executive Director, Actuarial; Mr. R. Sudhakar, Executive Director of Marketing; Mr. Hemant Buch, Executive Director of marketing, Bancassurance and Alternate channels; and Mr. Sanjay Bajaj, Head-Investor Relations. Just before I start to provide an overview and detailed highlights of our performance in April to June 2022 quarter, I would like to share with you that LIC is now part of the Fortune 500 list globally with a rank of 98 in the list. With this, LIC is highest-rank Indian company in the Fortune 500 list, and it's a great matter of pride for all of us. Now moving to the key business, operational and financial highlights for the first quarter of the financial year 2022, '23. Premium income. We have reported a total premium income of INR 98,352 crores, which is a growth of 20.35% as compared to Q1 of last year. Of this individual new business premium income is INR 10,938 crores. Renewal premium income is INR 49,069 crores and group business premium income is INR 38,345 crores. With this, we have not only retained our #1 slot in the industry, but also grown our market share consistently since the beginning of the calendar year 2022. Our market share, as per IRDA published data, was 63.25% for the year ended March 2022 and is now 65.42% for the quarter ended 30th June 2022, thereby showing an increase of more than 2% within the quarter. If we were to split the new business premium by individual and group business, it will translate to INR 60,000 (sic) [ 60,007 ] crores for individual business and INR 38,345 crores for group business. Therefore, we have a market share of 43.86% in individual business and 76.43% in the group business. Further, the individual NB premium has grown by 36.04% year-on-year, and group business has grown by 33.92% year-on-year. [indiscernible] business as follows: Total annualized premium equivalent that is APE for quarter ended 30th June, 2022, is INR 10,270 crores, which is comprised of individual APE of INR 6,450 crores and group APE of INR 3,819 crores. Further, of the individual APE, the Par business accounts for INR 5,950 crores and non-Par amounts to INR 500 crores. As you can see, our non-par share of individual APE is 7.75% and Par is 92.25%. Our renewal book has stayed strong at INR 49,069 crores, registering a growth of 8.93% as compared to the same period last year. The profit after tax for the quarter ended 30th June, 2022, was INR 682.88 crores as against INR 2.94 crores for the quarter ended 30th June, 2021. Value of new business, VNB gross is INR 1,861 crores for the quarter ended 30th June 2022. Further, the VNB margin is 13.6% as of 30th June, 2022, which was 15.1% as on March 31, 2022. Assets under management as on 30th June 2022, grew by 7.57% to INR 41.02 lakh crores as compared to INR 38.13 lakh crores as on 31st March 2022. Our solvency ratio is at 1.88 as against regulatory requirement of 1.5 and our Board mandated requirement of maintaining 1.6. Now I would like to inform you about new product launches. In line with our strategy, for increasing the proportion of the non-Par business without compromising on our existing Par business, we launched two new non-Par products during the quarter to cater to customer requirements, namely LIC's Bima Ratna and LIC's Dhan Sanchay. In addition, we launched one group accident benefit rider also during the quarter. What is interesting for us is that for the first time, we launched this channel-specific product which is LIC's Bima Ratna and that has been launched only for the bancassurance channel. During the quarter, we did complete the test runs of our system integration with Policybazaar, and we have achieved a soft launch. During the quarter ended 30th June 2022, we sold more than 36.81 lakhs new policies, registered a growth of 59.56% over the quarter ended 30th June, 2021. Individual new business commercial registered a growth of 60.7% over the corresponding quarter last year. VNB margin is higher by about 46% as of June '22, over September 2021, which was the first VNB determination post bifurcation of Pars. VNB as on June 2022, that is INR 1,397 crores is about 88% of post-bifurcation September 2021 VNB, which is INR 1,583 crores. However, freight reduction in VNB margin in Q1 June 2022 as compared to March 2022 is largely due to increase in annuity rates and change in product mix in the group business where higher proportion of front-based business has been registered, which has relatively lower VNB margins. Strategic decisions to increase customer benefits is a cautious decision that drives profitable volumes in a competitive environment and also striking the right balance towards the interest of all stakeholders, including shareholders and policyholders. Going forward during the year, we expect a higher growth in volumes to contribute towards higher absolute value of their business. As on June 30, 2022, the total number of agents was 13,32,782 as compared to 13,26,432 as of 31st March 2022, showing an increase, thereby indicating that our agency recruitment has started to pick up pace again. Number of policies sold basis, the agency force sold 35,93,940 policies during the quarter ended June 30, 2022, as compared to 22,35,321 policies during the same quarter last year, registering an increase of 60.78%. During the quarter, other channels that is the bancassurance alternate channel grew by 96.13%, a number of [indiscernible] and 135.36% of new business premium base. Our management expense ratio stands at 14.59% for the quarter ended 30 June, 2022, as compared to 15.85% for the same quarter last year. With respect to persistency on premium basis, 13th-month persistency stands at 75.75% for Q1 FY'22, '23, as compared to 72.49% for Q1 FY'21, '22, reflecting an improvement of 3.26. Similarly, for 25th, 37th, 49th and 61st month persistency was 67.78, 64.34, 60.82 and 58.99 respectively for the quarter ended June 30, 2022. We continue to focus on making our processes efficient, and I must mention here our initiative called print to post, a slide on the same will find in the presentation also. We're also [indiscernible] printing a delivery of the same to post office and found it very efficient since it has released a large number of man hours and brought speed to the delivery. I'm glad to share with you that we have dispatched 80.5 lakh policies to policyholders since Jan 2022 until 30 June 2022 using this initiative. To summarize, I would say that LICs have worked extremely hard, and our people, including our agency force has fought the last 2 tough years due to COVID bravely and started to regain lost market share now. We are dedicated to build further on our technology base, our alternate channels, add and strengthen new partnerships like Policybazaar and bring new products to the market which meets the need to the customer. Further, we intend to enhance our ESG awareness and activities as we grow the business in a sustainable manner. At the core of all, we have done for the last 65 odd years and going forward, like the customer care spirit expressed through [Foreign Language] which means your welfare is my responsibility, a statement that every -- and each and every LIC is very proud of. Thank you very much, and we are now happy to take any questions that you may have.

[Operator Instructions] First question is from the line of Shyam Srinivasan from Goldman Sachs.

Just wanted to understand some of the disclosures, LIC team this is the first time you're putting out on a quarterly basis. So APE, what is the growth? Because I can't see that in the presentation. So any sense on what's the Y-o-Y growth so that correlated with the WRP growth or something which has been of help? And also, what was the margin last year same time if it's been calculated?

By APE, this is [indiscernible]. By APE, the growth on quarter-to-quarter basis around 47.6% and the growth in Par segment is about 59.5% and actually non-Par individuals, the growth is significant, around 300% or so by APE and group business is around 23% and the product mix contribution individual Par has come down by 8% and non-Par has gone up by 8% total mix.

[indiscernible] first number you repeated, what is the growth, 46 is it? If I could [indiscernible]

At this current year quarter APE is at around INR 10,270 crores.

Last year?

Last year, APE of about INR 6,957 crores, right. So this translates to a growth of 47.6% for the overall business quarter-to-quarter.

Fair enough. That's helpful. Mr. Kumar, just question on the growth in the non-Par, so 300-plus percent Y-o-Y basis. So can you outline some of the products that are driving this? What is the strategy, if it's more like you said, 7% of individual APE? But where can we see this stay in 12, 18, 24 months? And what are some of the strategies around this?

This is Sudhakar, Executive Director of Marketing speaking. If I take the percentage of non-Par products, it comes to around less than 7%, as you said. But the contribution from premium is 23%. So what is driving the non-Par business is annuities as well as the ULIP, which forms a substantial part of the -- almost 50% of it comes from annuities and another -- almost 30% comes out of the ULIP as premiums. And if you look at the numbers, then it is almost shared equally between the annuities, ULIPs, term, health and savings products. There's not much of a difference when it comes to the percentage of policies which are being sold. It is more or less equally spread among that. So going forward, the increase in the annuity as well as ULIP is something which the organizers have been working on. And month-on-month during the first quarter, we have seen the improvement happening. And our expectation is exactly continued.

[indiscernible] non-Par products are -- you're not expected to -- our [ nonproduct ] margins are in good 3 figures. So as this strategy towards moving to a non-par business increases, the VNB bound to happen. And similarly, within that, also in group business as well as in individual business, and it can also be driver. So ULIPs -- we also have to consider one fact that while VNB is important, being able to satisfy the requirement of larger Indian population and being able to provide coverage is also going to be there, even though have a lower VNB margin, but that's still remains a very important part of [indiscernible] -- so -- and our participating business is also reasonably around this average VNB figure. So hardly move towards -- and we have a Chairperson who was explaining, we have recently in the past actually 2, 3 quarters filed a lot of non-Par saving products. which are picking up now and that can also be the huge drivers of VNB growth here onwards.

Just trying to dissect the INR 500 crores of non-Par APE into the individual component. I think you have given us a new business premium split, but it would be helpful maybe going forward if we get like an APE split as well just to see how that 7-odd percent is slipping out. I know small numbers today, but maybe at least you track the progress on non-Par, it will be useful for us. So that's just one request I'm putting. If I were to look at the next question. Second question is on the margins. I think in the opening remarks, Chairman sir talked about increase in annuity rates leading to compression in margins. I think you're comparing to fiscal '22, 15.1% versus the 13.6%, if you would elaborate that a little bit?

Yes. Let's -- appreciate -- the point here is that our annuities have been given good 3-digits margins, but ultimately, as a mission, we have to ensure that the market share also grows. So in the last quarter of last financial year, we had the increase in annuity rates because the markets were in the competitive scenario. In the competitive scenario, the markets we saw a large gap in the annuities rates between us and the other competitors. So as a strategy to get more market share, the benefits were increased that naturally translates into reduction in VNB margins. Now -- but interesting point is that the growth in the [indiscernible] in the first quarter has been more than 50% goes by APE as well as by a number of policies. And the strategy is to enhance this growth rate so that the overall VNB margin can be -- we are all aware that when the benefits will increase VNB margins would come down. So what we are looking forward is to the high multiple of VNB margin and the sales volumes for APE, so that the overall VNB amount increases in line with the expectations of the [indiscernible] planned marketing strategy [indiscernible] that was one point -- so that was one point which was stated by Chair sir. Some other point was about -- in the first quarter, we all appreciate that the insurance business is cyclic and the business starts picking up from quarter-to-quarter and the heaviest and most [indiscernible] quarter is the last one. In the first quarter, the product mix slightly changed. While importantly, as we are stating earlier also, the growth in Par was around 59% in APE, non-Par growth in group business over 23%, but within that, larger growth driver for this first quarter was a fund-based business as compared to annuity. Since the fund base business has got lower margins. So therefore, it did impact the overall the VNB margins for the quarter. So that was one of the second reason for which slight decrease seen there but as we go from quarter-to-quarter, next quarter, a larger pickup takes place in savings products, annuity products and other products. We would expect this to come back to the debt rate and from there onwards to the higher [indiscernible]

Got it. My last question, just a follow-up on this one. What are -- what is your flagship product in the annuity space. There are our rates versus, say, competition? You said you've increased the rates. So are we now on par? Or do you think rates have moved further on because of the overall interest rate scenario?

That's very interesting thing, actually, it's a very dynamic environment, and we all know interest rate cycles can be very volatile. Annuity is a long-term business. So we all know profit and losses in the non-Par business [indiscernible] and we have to take a very calibrated approach. At all the times, depending upon the situation, investment opportunities and our ability to [indiscernible] we want to be competitive, but we do not want to [indiscernible] the competition, so that the ultimate aim of the profitability is not lost out. So we are very resilient, and you would have seen, we have been very dynamic now that -- from last -- some period in taking a review. In fact, this was for the first time, possibly after long that LIC increased the annuity recently last quarter. So we are very open to approach depending on the investment opportunities available and the investment cycles as they go, looking into annuity rate upwards or downwards as is required.

Our next question is from the line of [ Jayant ] from Credit Suisse.

Congratulations on a good set of numbers. I would actually like to follow up on [indiscernible] non-Par products as well. Could you help us give more color on what are the products that is driving bulk of this sales that has come through in the first quarter? And also, how much was the increase in rates that you took in this quarter? And this was after how many years?

If we talk about the product measurement driver in the non-Par side, then annuities have been the [indiscernible] driver of the growth there. We have seen growth in ULIPs, which has been significant growth and actually -- and then we have also now started getting in development traction because we recently filed saving products in the non-Par. So they were also there. And we are also getting good now -- attraction towards the production-based business, though the volumes are still not that big. Our ticket price is reasonably good there, and we are closely monitoring that also. So we -- our strategy is that we will focus -- continue to focus on ULIP because that's a less capital-intensive business. But from VNB point of view, I think corporation will continue to focus on annuities as well as saving products, along with production-based products also.

Sir, on the annuity product, can you give us a name of the top two products that are selling and also the average ticket price for annuity also?

Top 2 products, we have got one immediate annuity product which is Jeevan Akshay, and in the deferred annuity segment also we have a product, which is called Jeevan Shanti.

And sir, the average ticket price?

Around INR 10 lakhs -- INR 11 lakhs.

INR 11 lakhs for Akshay and INR 12 lakhs in Shanti.

Right.

Sir, lastly, just one thing I will ask, how much rate increase did you took in this product in this quarter?

In the last quarter, actually, [indiscernible] prices and information, we will not get into it but that will be translated if we can see from even benefit illustration. What happens when the interest rates are changed, the change in the benefit across the ages is not uniform. It changes from age to age. So on a typically, it can be the ranging depending on the -- ultimately it is not benefit, which has increased. We take a review on the available investment opportunity, and we'll review based on that thing. So there was a revision which was done on that business. The translation was almost 8% to 10%, 11% benefits change across the ages from 7% to 11%, 12% rate for the year, so which changed in the last quarter.

And this was largely being sold by the Asian Network only, right?

Largely sold by?

Asian Network?

Yes, it is sold to agents also. We have got direct online business also coming for that. And it is coming under our patient [indiscernible] business also and you can [indiscernible] also take annuities.

[indiscernible]

[indiscernible] are selling that. But yes, this continue to remain the largest [indiscernible]

Sir, sorry, and just lastly on this. After you've moved the rates, have you seen better pickup? I mean what is the lag sort of [indiscernible]

[indiscernible] there was almost from -- on quarter-to-quarter basis when we compare Q1 of last year and Q2 because Q1 was clearly actually, last quarter was mix of the 2 rates, we did in between the quarter. But if you compare Q1 of last year versus this year, the growth in number of policies is 54% and 53% almost, we can take it to 50% plus, though we would want and we expect it to go further.

Our next question is from the line of [ Manoj Singla ] from Bank of America.

Sir, first question is with regards to the growth on a Y-o-Y basis. You did talk about funds business, driving a significant portion of that. And from my understanding, this tends to be lumpy. So if we were to exclude the funds business on a Y-o-Y basis, what kind of APE growth you would have recorded?

That would have been much more. We had to really slightly work out the figure. But we can say roughly the APE of fund based -- but [indiscernible] it's around 91% -- we'll have to really work out that figure. But that will be definitely more than 80% or so.

92%.

92% or so.

So just to get a clarity, sir, out of the total APE, what will be the APEs from fund-based business in this quarter?

Fund based is almost around 38% total group business out of that [indiscernible] 32%, 33% would be -- 32%, almost maybe 1/3.

1/3 of?

Around 1/3 of the total APE roughly, I'm giving you the figure -- roughly 1/3 of the APE, it's around INR 3,300 crores plus here and there would be the APE at the funds business.

Okay. And sir, will it be fair to assume that this tends to be lumpy. So this is kind of a number which we shouldn't extrapolate for the upcoming quarters as well. And so if we are projecting from a full year basis, this is something we should exclude from the similar growth, we shouldn't be expecting for the rest of the quarter. Is that a fair assessment?