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

Ladies and gentlemen, good day, and welcome to the LIC Earnings Conference Call H1 FY 2022-2023. We have senior management of LIC led by Shri. MR Kumar, Chairperson on this call. Before we hand over the call to LIC management, [Operator Instructions] We now request the management of LIC to start the call, and I now hand over the conference to chairperson of LIC, Shri. MR Kumar for starting the call. Thank you and over to Chairperson, LIC.

Good morning, everyone. I am MR Kumar, Chairperson LIC. On behalf of senior management team, I warmly welcome all of you to the results update call of Life Insurance Corporation for the second quarter and half year ended September 30th, 2022. The results in the presentation can be accessed on our website, and on website of both the stock exchanges. BSE and NSE. Along with me, I have our 4 Managing Directors, Mr. Raj Kumar; Mr. Siddarth Mohanty; Miss Mini Ipe; and Mr. BC Patnaik. Senior officials with the corporation present on this call are Mr. S.M. Jain, Executive Director of Finance and Accounts; Mr. Sunil Agrawal, CFO from the Finance team; Mr. Dinesh Pant, appointed actually as Executive Director; and Mr.KR Ashok, Executive Director from our actuarial team. Mr.PR Mishra, Executive Director, Investment Front Office and the Chief Investment Officer; and Mr. RK Jha, Executive Director, Investment Back Office of the investment team; Mr. Sudhakar, R. Sudhakar Executive Director, Marketing, is joining through phone. Mr. Hemant Buch, Additional Executive Director of Marketing, Bancassurance and Alternate Channel is available here from the marketing team. Also present are Miss Anjubala Purushottam, Executive Director, CRM Claims and Miss Rachna Khare, Executive Director, CRM Policy Servicing from our CRM team. Mrs. Manju Bagga, Executive Director of Pension and Group Schemes; and Mr. Sanjay Bajaj, Head Investor Relations. Before I provide an overview and detailed highlights of our performance for the half year ended September 30th, 2022 and H1 FY '23. I would like to inform 2 important points to all the investors and analysts who have gathered on this call. First that starting now, we will be able to present all data on a comparable basis with previous years' time period. Second, that as we had mentioned in our July 15th Analyst Call, we will be presenting to the market our Indian Embedded Value that is IEV this time, along with the results and I reiterate that going forward, we shall be disclosing the IEV twice a year, both as a 31st March and 30th September every year, along with our financial results. Now moving to key business operational financial highlights for the first half of the financial year 2022-2023. For the half year ended September 30th, 2022, we have reported a total premium income of INR 2,30,456 crore showing a growth of 23.87% over the corresponding period of last year, that is September 30th, 2021. The individual new business premium income for H1 FY '23 is INR 24,535 crore. And for H1 FY '22, it was INR 21,964 crore. Renewal premium income on individual business for H1 FY '23 is INR 1,03,203 crore. As compared to INR 97,793 crore for H1 FY '22. The group business premium income for H1 FY '23 is INR 1,02,718 crore as compared to INR 66,296 crore for the corresponding period of last year. With this, we have not only retained our #1 slot in the industry, but we share consistently quarter-on-quarter since the beginning of the calendar year 2022. Our market share as per IRDA published data was 63.25% for year ended March 2022, and is now 68.25% for the half year ended September 30th, 2022,thereby showing an increase of 5% in the last 6 months. If we were to split the total premium of H1 FY '23 by individual and group business, it would translate to INR 1,27,738 crore for individual business and INR 1,02,718 crore for group business. Therefore, we have a market share of 42.31% in individual business, and 80.34% of the group business. As you can see that our market share on total premium basis continues to be the largest in both individual as well as group segments. Let's look at the APE basis; total annualized premium equivalent APE for half year ended September 30th, 2022 is INR 25,228 crore, which comprised of individual APE of INR 14,643 crore and group APE of INR 10,585 crore. Therefore, on APE business, the individual business accounts for 58.04% and group business accounts for 41.96%. Further, the individual APE, the power business accounts for INR 13328 crore and non par amounts to INR 1315 crore. As you can see our non par share of individual APE is 8.99% and par is 91.01% for H1 FY '23. On a comparable basis, you will recall that our non-par share for year ended 31st March 2022 on APE basis, within the overall individual business was 7.12% and was 7.75% for quarter ended June 30th, 2022. Therefore, we continue to increase the share of non par business within our individual business, with every passing quarter. The profit after tax backed for the half year ended September 30th, 2022 was INR 16,635 crore, as against INR 1,437 crore for the half year ended September 30th, 2021. At this point, I would like to mention, that the current period profit has increased due to transfer of an amount of INR 14,271.80 crore net of tax, pertaining to the accretions of the available solvency margin from non par to shareholders account. Further to break up this amount of INR 14271.80 crore, it comprises of INR 5580.72 crores for the quarter ended September 30th, 2022. Besides INR 4148.78 crore and INR 4542.31 crore for the preceding 2 quarters respectively. Also while on the subject of profitability, as a matter of prudence, we have made a provision of INR 11,544 crore for employees retirement benefits on account of the wage revision, which has fallen due with effect from 1st August, 2022. Further, I would like to inform all of you that we have received an amount of INR 25,527 crore from the income tax department, and it comprises of income tax refund amount of INR 18,900 crore and interest of INR 6627 crore on the same. Later on this call, the management team present here led by myself, will be happy to answer in detail any questions that you may have on the elements of profitability just explained. VNB and [indiscernible] markets. Gross value of new business, VNB is INR 4836 crores, and net VNB is INR 3,677 crore for half year ended September 30th, 2022. Further, the net VNB margin for the half year of FY '23 is 14.6% as compared to 9.3% for the half year ended September 30th, 2021. Further, you may recall that for the full year ended March 31st, 2022, the comparable VNB margin was 15.1%. Also, for the first quarter ending June 30th, 2022, the VNB margin was 13.6%. The net VNB margin is higher by about 5.3%, as the 30th September, 2022 over 30th September, 2021. Our IEV, Indian Embedded Value as on September 30th, 2022 is INR 5,44,291 crore as compared to INR 5,41,492 crore for March 31st, 2022 and INR 5,39,686 crore on September 30th, 2021. The IEV has increased by 0.85% as on September 30th, 2022 over the IEV as of September 30th, 2021 and 0.52% over the IEV as of March 31st, 2022. The assets under management as on 30th September, 2022 grew by 8.69% over the previous half year, to wire INR 42,93,778 crore, as compared to INR 39,50,633 crore as on 30th September, 2021. Now I would like to inform you about our new product launches. In line with our strategy of increasing the proportion of the non par business, we launched 3 new non par products during the first year of FY2022-2023 to cater to customer requirements, namely LIC's Bima Ratna, LIC's Dhan Sanchay and LIC's New Pension Plus respectively. During the half year ended September 30th, 2022, we sold 83,59,029 new policies, as compared to 73,61,410 policies in the half year ended September 30th, 2021, registering a growth of 13.55% over the corresponding period of last year. As on September 30th, 2022, the total number of agents was 13,34,811,as compared to 13,26,432 as on 31st March 2022. And 13,43,587 is 13September, 2021.The market share by number of agents as on September 30th, 2022 stands at 53.36% as against 55.97% for September 30th, 2021. On number of policies sold basis, the agency force sold 80,47,578 policies during the half year as compared to 70,17,123 policies during the corresponding period of last year, registering an increase of 14.75%. That way you can see that more than 96% of our policies for the first half of FY '23 were sold by our agency force. Even on premium basis, a little above 96% of new business premium came from our agency channel for H1 FY '23. During the half year ended September 30th, 2022, other channels, that is the backup and ordinary channels contributed to 1.72% by number of policies and 3.37% by new business premium. For the half year ended September 30th, '21, the Banca had contributed 1.41% by policies and 2.31% by premium. This channel has grown by approximately 39% on number of policies bases, and 63% on new business premium on year on year basis. Our management expenses ratio stands at 16.69% for the half year ended 30th September '22,as compared to 15.33% for the same period of last year. To give you some idea of persistency, numbers that the -- on premium basis, the persistency for 13th, 25th, 37, 49, 61st [ month ] for H1 '23 stands at 77.62%, 73.84%, 67.85%, 64.73% and 62.77% respectively. That's compared to 78.77%, 70.91%, 67.6%, 64.81% and 60.57% especially for H1 '22.On numbers or policies basis, the persistency for the same period, for H1 FY '23 stands at 65.21%, 61.63%, 54.93%, 52.46%, and 51.61% respectively as compared to 67.69%, 58.27%, 55.35%, 53.67%, and 49.38% respectively for the previous year. On operational efficiency and digital process, we continue to focus on making our processes efficient, and you may be aware that in the previous call on August 12th, 2022, I had mentioned to you about our print-to-post initiative. I'm happy to report an update, that we have completed dispatching of 1.22 crore policyholders since Jan '22 till 30th September 2022, using this initiative. In our digital initiative, through the agent assisted ANANDA App, we have completed 3,14,955 policies using this app. During the 6 month period ended 30th September 2022, as compared to 1,44,645 policies for the comparable period ended September 30th, 2021, thereby registering a growth of 118% on year on year basis. On the claims front, during H1 FY '23 we have processed 87,65,411 total number of claims, which includes individual and group claims together. On an amount basis, during H1 '23, the total maturity claims were INR 72,988 crore and the total death claims were INR 11,665 crore. On a comparable basis for H1 FY' 22, the total maturity claims were INR 78,146 crore, and total death claims were INR 21,314 crore. Therefore, the death claims are lower by 45.27% and the maturity claims are lower by 6.6% on a year-to-year basis. We have a feet on street approach to business. We have a committed and trained workforce, employees of 1,01,313 as of September 30th, 2022, out of which 95% are in the branch and division offices, enabling them to be in close proximity to our customers, reinforcing our feet on street approach. Given the business progress, you will appreciate that we are firing on all cylinders of changing product mix, enhanced digitization, increasing market share, diversification of channels for distribution and new product launches. While doing all the above, each and every LIC-ian team holds close to their hearts our philosophy of Yogakshemam Vahamyaham, which means your welfare is my responsibility, while discharging their duties to all our stakeholders. I thank you very much for listening in and we are now happy to take any questions that you may have.

[Operator Instructions] The first question is from the line of Swarnabha Mukherjee from B&K Securities.

Sir, my first question is on the VNB margin walk that you have disclosed. So margins have expanded sequentially between first quarter and second quarter. Now if I compare the VNB margin walk for what you have disclosed in first quarter and what you have been disclosed now, I see that between these 2 quarters there is a significant impact of changing assumptions, that is driving the sequential margin increase, while there is a slight negative impact of product mix change. So if you could give some color on what is this change in assumption, that is the first part? And the second part is that, in terms of product mix, I see that share of group has increased, while share of par has gone down slightly. Now in the gross VNB margins that you have disclosed, the margin for the group products are slightly higher than par. So my second question of on this is that, if the higher margin product is going up slightly, why there is a negative impact? And that would be my first question, if we could do that.

This is Ashok, Executive Director, Actuarial. Regarding the first part, the major component of assumption that has changed, and that is having a profound impact on VNB is the risk free rate. The risk free rate you know its market -- direct from the market basis and it changes on a frequent basis and the increase in the risk free rates has actually --has been increasing the VNB margin. Coming to the second part, yes, it is true that the group business has shown an increase in the margin overall. The reason being that within the group business, the annuities increased, the proportion of annuities have increased compared to the previous period that has resulted in the increase.

Right, sir. Sir, my question was that since the product mix is turning favorable from end of FY '22 numbers, why do we see a negative impact of product mix that you have disclosed in the rework?

Actually, it's the -- if you look at the total volume that is being done, group has done a significant volume. But if we except average, the VNB for the company as a whole which is the average, the groups' VNB is less than the average and therefore, it is actually holding it down from the 15% reported as at March. But, however, because of the internal product which within the group it has increased in the -- it has resulted in the increase in VNB over what was reported to the -- in the previous quarter as in June.

Okay. Actually, sir, what I see is that, in group, individually also margin has increased from what it was in last quarter. So that is where my confusion is on this? Anyway, sir, so I will take this offline. Also if you could give the drivers of EV? So EV has been broadly stable in the last 6 months. So is there any non-operating variance, in fact, which is driving this and -- or any operating variance also if you can throw some color on that?

Actually, we have -- we will be disclosing the [ AOM ], which -- WACC of EV on an annual basis and I think in that next reporting period when we disclose, I think it will become more clearer.

Okay, sir. Any -- even if not exact numbers, if you can give some qualitative comments on that, that will help us understand, please, which is better.

Yes, qualitatively -- actually what is happening is, there are some market movements and the impact on market movements actually brings the EV down and the operating variances including the unwind plus VNB increases [ this up ] and that has resulted in overall increases.

Okay, sir. That's very helpful. And last one, a bookkeeping question, sir, if you could share last year second quarter AP by product line or channel -- by channel that would be very helpful because otherwise last year first quarter was impacted by the Delta wave and hence, it is -- there is some distortion in the normalized business environment. So difficult to gauge the 2Q performance in isolation. So if you could share that, that would be helpful.

Share that, we can do that later.

Sure, sir. I'll get in, get in touch with you for that.

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

Just 2 questions from me. So firstly, if we look at the EV breakup, the VIF is down quarter versus March '22 and ANW has actually increased. So can you give the reasons for both? Because with the VNB accumulation and unwind, we should have seen VIF doing a little bit better. So can you explain both of those 2 components of EV?

Yes. This is Ashok. Actually, you must have heard our Chairman saying that there has been a movement from ASM fund to the profit and loss account in order to make the UC capital-efficient, and that has resulted in the movement between value in force and ANW. Therefore, what the overall it doesn't have much of an impact. But amongst the VIF and the ANW, there has been a movement due to these transfers.

Understood, sir. And, sir, any thoughts on the draft commission and expense of management rules put by IRDAI and how LIC falls within that framework?

Well, yes, Dinesh Pant here. We have examined the draft regulations which have come from IRDAI and LIC was in excess few lines of business well within and we are sure whatever actually has been proposed now also will make LIC's position more comfortable than existing. So we are okay with it. So I think the draft regulations which have come related to the commissioners, et cetera. On an overall basis, we expect to be well within that.

So well within the 70% limit, right?

I'm not sure whether that 70% which we have been talked about continuous because since then a lot of discussions have happened within the industry and the IRDAI and possibly the draft is still in the review stages, lot of discussions are happening. So I'm not sure at the end of it whether the 70% thing will remain or whether it will be [ billing ] to overall, but to our understanding whatever last draft was shared between the industry, our position becomes more comfortable than this.

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

Sir, just 2 questions. First, of course, you don't take the EV break up, but sir, the market will give valuations only if EV goes up and if your EV flat since first half of last year, even if you record any amount of VNB, sir, people won't give valuation. So we need to get the EV growth up. So we are seeing INR 10,000 crores of VNB addition, but if EV flat, then clearly that's a challenge. So we want to know the outlook on what kind of EV growth that one can expect going forward because it is absolutely flat since first half of '22. So that's an outlook question. The second thing is, I am looking your net earned premium, that's up 27%, but your gross written premium is down 4% in the P&L that we are seeing. Now, this is net of reinsurance and this number is usually lower than the gross written premium, but this quarter it is 30% higher than GWP, the net earned premium. Can you explain what exactly is this discrepancy here?

Regarding the question on IEV, yes, actually, you may be aware that the fund bifurcation effect is performed on a IEV and that is one of the reasons that initial growth in IEV is a little bit slow. But I think the way corporation is performing, we can hope to see better numbers going forward.

Okay. And the second question, sir? Net earned premium being higher than gross written premium and significantly higher.

Sunil, do you want to take that? [Audio Gap]

Which number are you referring to? In the...

No. So if you look at it, the GWP is INR 1 trillion in 2Q. The NEP is INR 1.3 trillion. This is a 30% higher number, GWP and NEP, whereas this number is always lower in the earlier quarters. [Audio Gap] This is before the investment income line item, that is NEP.

It is not there in the presentation anywhere. So, which...

Okay. It is there in your release that you have given, the financial result release. Okay, maybe I can take this offline. Yes, because this is the biggest contributor to your surplus from operations, so therefore we thought this line item becomes important.

Press release, can you refer which paragraph?

Okay, I'll just have a look at this and I'll come back to you. I just wanted to know this transfer from VIF to ANW. What line item will it go through the P&L? Where will you reflect it?

Actually it is a movement from the investment income from the ASM fund and it is a little bit get reflected in the par business only, non-par business.

And it will be ultimately deciding in the -- balance in the profit and loss account under reserves and surplus.

The next question is from the line of Shyam Srinivasan from Goldman Sachs.

Just the first one on the non-par, the vision or strategy that we have to increase it. So it's grown for the first half at 75%, individual non-par I am talking about. Sir, so can you highlight some of the products that are doing well? It was 300% last quarter Y-o-Y growth, maybe there is a base effect there but it's come down to 75%. Just your thoughts on how this particular piece will likely pan out?

Sudhakar, can you take it? He is on the phone, right?

Maybe, I know in the current year almost -- see -- if you see the current mix of LIC's product is 20 non-par products and 16 participating products. And in the recent past we have launched -- and in fact, in the current year itself there have been 5 products which have been launched. And if you look into this product details, they cater to different segments including specific niche segment of Banka, as well as saving, as well as pension segment also. Currently, we are doing very well. The pickup has taken place in all these segments. The large -- one of the great contributors that we expect to be is the Pension Plus product which we've launched in the ULIP products. Plus the saving products and non-par also going to lead the growth in VNB margins, as well as VNB -- and the change in product portfolio mix. So the strategy is, we are -- in fact, we are seeing even in the group segment we have added certain riders because riders, though, seem to be very smaller part of it, but they also can add value to the regular product and the margins, there in are very strong. So the strategy is now I think the growth strategy for the corporation coming to the engine of non-par products will be all around -- in fact, ULIP's we have now full range of products in the ULIP and the saving products are also there. So all of them are getting the traction now and pick up has started in their direction. So I think all these savings products, as well as ULIP products are good driver and plus protection products also we are having a look -- relook into. So entire it is going to be a combination of now the revised marketing strategy, as well as the available product market which is there and we also expect some more products to be added to this par segment.

I'll just add, Kumar here, just to give you a perspective on the non-par savings as of September '22, we are growing at almost 200%. No, sorry, 251% and on the annuity, non-par annuity is growing at 7% and the ULIPs have grown at 79%.

251% on non-par savings, you said 7% on non-par annuity, is that what you're saying, sir?

Yes, that's true. Annuity, because of the base and quite a large base. I can give you the figures if you -- non-par annuity, in terms of premium is INR 5,833 crore. That growing at 7.15%. And ULIP INR 1,507 crore, growing at 79%. Non-profit savings slightly slower start, but still it has picked up, almost INR 200 crores, growing at 251%.

Sir, what are we selling? So which is the -- Is there a guaranteed product now that we are selling fully in the non-par savings?

The non-par products typically itself means guaranteed, that the traffic difference between participating and non-participating products. Everything there is guaranteed. So, though, we may have certain features of guaranteed edition, but the benefits in the non-par products are guaranteed. So, typically all these non-par products have guarantees.

And just trying to compare versus, say, competition, what are some of our guarantee -- for your flagship products, where are the guarantees like rough range? And also associated in terms of the hedging, if you could highlight us, please?

As far as guarantees are there, in some of the products that we have recently launched our one product single premium product which is a close-ended product, where the returns, IRRs to the policyholder -- it's actually a typical model, points can go up to 6% plus also. There's a range, you would appreciate that depending on the age and the term that is select and the returns could vary that I'm telling you the top end of that could be 6% plus also, which is fairly attractive. So that...

What's the name of this product?

Dhan Varsha. LIC's Dhan Varsha. It's a typical 10, 15-year product, we're allowing single premium and lot of options are there. And so, it really works out very well for the -- starting from age 3 to age 60 that range at which it is available. And other products are also not exactly in the single premium is a close-ended product and we still have some other products in the pipeline also. So that we'll continue to work on that.

Got it, sir. And then last question is on the gross margins that you share on some of the product lines. We don't have net margins per product, but looks like group business margins have gone up, right, half-over-half. So can you just walk us through some of the drivers of that?

See, what happens in the group business also, you would appreciate that there is a mix of business, it ranges from products and technical risk cover to annuity. The annuity generally are higher [indiscernible]. So within the group also when the product portfolio within the group changes, higher annuity products or term protection products would lead to higher margins. So yes, you're right in there that within the group also the margins can move from the 10-plus to 12-plus, around 2.5% or so roughly there's a change because the driver of the growth has there been annuity products within the group of potential products.

And would you share some split of the group business between annuity and non-annuity? Is that...

Exactly at this point of time because right now we are giving on the largest overall line of business wise that is what we have shared.

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

I hope I'm audible. 3 questions from my side. First, you alluded to the fact that you will not be giving the embedded value work on a biannual basis. But if you can shed some light on if you're unwinding rates are materially different during the first half of the current system compared to the second half of the last fiscal? This was my first question.

Can I answer that or should I -- you will be continuing all the questions? Okay, I'll answer that. I think you are referring it to the unwind of VNB portion question, am I right?

Unwind of the EV.

Sorry?

Unwind of the embedded value.

Okay. Yes. See, as I have already mentioned, the unwind portion, I can give you a flavor of it because the -- we have -- we will be disclosing -- preparing and disclosing the analysis of movement on a yearly basis. But now, since you have asked, what I can suggest is, the unwind is the expected experience, which is in the interest rate and in the long run, we can expect the unwind to be close to the best estimate assumptions, which should be between 8% and 9%.

Sure. Second question is on the gross VNB margin that you report product wise. You have launched some amount of new products on the individual non-par business. And if I look at the last 1 or 2 halves of the last fiscal or even the last annual numbers, it seems that your individual non-participating gross VNB margins have tapered down a bit. So do you want to shed some color on that? Is it like something related to the product level concept?

Yes, sure. Actually, the major reason for this is the repricing of annuities to make it more competitive.

Sure. And my third question is more a data keeping question. Since the time of your listing and the first management report, we have not got some color on the global reserves that you have been holding. And I understand it is dynamic and it keeps on changing, but if you want to shed any color on that portion of your book.

The global results are more or less, it doesn't vary much on a quarter-to-quarter basis. So it -- we can assume that it is more or less at the levels of the March '22.

Okay. And your COVID-19 reserves, they stay at that INR 70 billion to INR 80 billion range?

Sorry? Can you...

The COVID-19 reserves, which were around I think INR 70 billion to INR 75 billion. They stay around that number?

See, actually, though, the claims have started falling, we have not yet reduced the COVID reserve. We are still maintaining it and we are continuously reviewing it. So when the opportunity comes, right time comes, we will look at it.

The next question is from the line of Anuj Singla from Bank of America.

The first question is on persistency. So if I look at the press release, the persistency for this quarter, 13 months is down by around 500 basis points on a Q-o-Q basis. Even when I look at the presentation, so I think persistency continues to be very low for us and that's declined even further. Can you talk about maybe some of the challenges? And secondly, you talked about the [Technical Difficulty] and kind of negative operating [Technical Difficulty]

Sorry to interrupt you Mr. Anuj, but your voice is not clear, sir. It is sounding muffled.

We're not able to hear it clearly. Kindly repeat from the beginning if you don't mind.

Is it better, sir?

Yes.

Yes. Sir, first question is with regards to persistency. So the persistency for the 13-month is very muted for us and has declined actually in this -- the half year as well. And when I look at the press release, there seems to be a 500 basis points declining persistency for the 13-month in September versus June quarter. Can you talk about the drivers of [Technical Difficulty] driving this? And is it getting to any kind of operating variance in our EV work?

See, actually, the persistency from quarter-to-quarter can at times be little variable and because of the type of the business which is sold therein. As far as persistency's impact on easy walk, I'm not sure it is going to be any significant, that won't be much significant. However, the corporation has done a lot of steps have been taken in the recent times. We looked into our product portfolio and there were certain products which had the challenge in terms of persistency. So actually within this -- from -- we had review on 2 of our large selling products of the corporation in the micro segments and they were modified, the ticket size was increased. And then recently in the last month also some of the products which where we found persistency to be a challenge, have been revised and their ticket size have been changed. The structures have been changed because there were few of them were large selling products with some proficiency issues that -- we are very sure that with this sort of correction, even this short-term persistency corrections will happen very fast because that remains the area of very important focus for the corporation.

Okay. Sir, second question is on the group side of business, while you did not give the break up for the group business as such, is it possible to get some sense of what saving -- group savings will be contributing to the group business? The reason I asked this question is because a lot of growth in this quarter has been driven by group and we understand that group savings business tends to be lumpy. So just trying to get a sense of the sustainability of the growth in the group segment.

Within group business also the largest contributor is the fund-based business, the pension business which is a significant contributor for this thing, for our group business. Almost like I would say that around 60% of that would be coming from fund-based business, but then almost 40% or so, slightly less than around that is also coming from other lines of businesses, including insurance and the annuity. So it's a fairly -- because the business has been there for quite long and let's also appreciate while we -- at times get concerned about the VNB margin, frankly speaking. But group business has been contributing almost equal amount of embedded value as the overall portfolio par business. So in that context -- in context of contribution to VNB, group has been contributed significantly. Of course, the VNB margins are lower and good thing is that, even in the group business, as explained earlier, because of larger contribution now coming from annuity business and pension business, the VNB margins have also taken upside.

[Operator Instructions] The next question is from the line of Nischint Chawathe from Kotak.

I'm looking at Slide #34 and this is essentially the breakup of new business premium. Is it possible for you to share a breakup in terms of AP in a similar manner?

We can do that. As of -- immediately, I may not have it. Kumar here. We can share it with you, no problem.

That would be nice, sir. The other thing is, in this EV calculation, what proportion of business have you included? I mean, is it like 92%, 95%? Or have you not been able to model the entire 100% business?

Sorry, can you repeat that question?

Yes. If I go back, in the EV that you had calculated in the past, you had included around 92% of the business and some part of the business could not be modeled in the EV calculation. So the current EV that we can see for first half of FY '23, does it model 100% of the business?

Yes. All the products have been modeled and every time a new product is launched that is also modeled.

Okay. So there is no business of the corporation which is currently not part of the EV calculation?

Is there anything not part of the EV?

So at the time of IPO, I think some part of the business [indiscernible]. Yes. Okay. Perfect. That's fine.

[Operator Instructions] The next question is from the line of Neeraj Toshniwal from UBS India.

So on Slide 21, I just wanted your thoughts, as you already explained that, obviously, margin had tripped down in the individual non-par business. But can we further expect it to taper off here because markets are getting competitive in annuities and given this competition and with the rise in IRR in the non-par saving as well, how do you think this will even go further down from this level?

No, no. See, here, let's be clear that, though, we are saying that VNB margins have come down, it's not a significant come down from there, right? You would appreciate that this VNB margin even from any period of review would also depend upon the type of business, the model points, the nature of the -- because within a product also depending upon which areas or which groups or which terms it is sold, VNB margins can vary. As rightly said earlier also, yes, it has to be right balance between what should be because in a competitive market we have to be careful about what type of returns and benefits are being offered in the competition. So it's the right mix and right balance between VNB margin, as well as what is available and what is most useful for the policyholder is also going to be concerned. So this -- typically VNB margin would also depend upon what is available in the market, what is the overall strategy. So they may -- but largely as we said earlier also, beyond VNB margin, the corporation is focused on consistent improvements in VNB, the value also. So it is very difficult to say VNB margin will come down or go up because when the products mix higher, VNB margin will pick up, that can go up also. But ultimately the market will reach a -- because we appreciate, suppose this 100% sort of VNB margins cannot be achieved by any company. So right balance will have to be there between the benefits which are given and as the benefits increase, margins can come down but then VNB as such a value can go up. So we are focused on striking the right balance. Keeping the balance between the -- what is good for the customers, what is good for the shareholder and what is overall good for the company in overall.

So my question is actually how much in the repricing journey we -- how much we have actually achieved and how much would have been -- will -- you might see in the coming quarters?

I think if we look at the past that's suggestive of it, it was around 9.6% in September '21, it was 15% plus in March, slightly it came down to 13.6% and now back to 14.6%. So journey can be seen and if we compare these VNB values, the significant growth is going to be there. I would like to remain focused on that upward journey only from here onwards.

Okay. And on the, sir, non-par saving mix if you can guide through on the internal targets to kind of change our product mix, if you can give more color on that how we are planning to, over the next 2 to 3 years?

Yes, rightly so if you are listening to the earlier responses, clearly the growth rate in non-par products is very nice. But as an overall part of the portfolio, they continue to be around 5% or so, 5% to 6% or so. I'm talking about the individual business, while the overall it is 30%. So, of course, the focus of the corporation, if you observe that in the recent past, for almost one year we have been filing only non-par products and now because the traction is developing there. The immediate goal is that, within next few years, the product portfolio mix in the individual segment could possibly turn around to 75-25 sort of proportion from current 95-5 or 93-7 sort of a proportion. That is the ultimate goal. Once that happens there could be significant change in the VNB margins also. We can just take the weighted average of what the value would be there, so there could be significant change in the margin, as well as the VNB for the corporation.

Got it. And sir, on the sign up with Policybazaar, I think now with Bima Sugam coming in, what would be our strategy to increase the business from the Policybazaar platform or we would actually look at other means and look at Bima Sugam more seriously and get all in over there. So what would be your strategy and with the guidelines with the opening of the [indiscernible] from the government, any color on that?

See, overall the corporate strategy is to leverage all the channels and scopes and platforms which are available, without naming any -- because our ultimate goal is that, we have to be on the trajectory of growth and naturally in that journey the digital is going to be very important and critical. So whether available from outside platforms or within our own technology sophistication, we have corporations working hard in that direction because we realize that this technology -- it's not that corporation have not done, almost large part of our business with government, as well as transactions are happening on digital platform. So we are working on this direction that all the sources of handles of the growth in the directions are taken care of. So that's important for us.

But particularly any feedback on the Bima Sugam platform?

I think it's a good initiative and we are all examining in what best manner we can leverage that for -- within our marketing strategy.

Got it. And sir, one generic last question on the sensitivity. If I see between the [ ADs ] while the increase on 100 basis point is 1.2% on the VNB and minus 0.6% on the EV, are they used variation on the same decrease of 100 basis point? Generally we see the division, but it's quite on the higher side. What kind of mix we have in the portfolio and why such variation?

This is Ashok. Actually, the -- you're right, I think you're referring to the sensitivity of reference rates to embedded value or to VNB.

Yes.

See, in case of embedded value, because of the base, the impact on reference rates are not much. At the same time, you cannot expect the movement, both upside and downside to be the same because of the nonlinearity in the model itself. In case of value of new business, the decrease in the reference rate is around 3.4%, which has come down from 4.7% reported in the last period of March '22.

The next question is from the line of Mahek Shah from Emkay Global.

I have 2 questions. I would first like to ask, where will the INR 115 billion wage revision appear in the EV move? Actually, I'm sorry if I just missed it. And the second question is on the INR 145 billion transfer from non-par to shareholder fund. So you have mentioned that INR 45 billion appear is pertaining to Q4 of FY '22. So any color on how you could change the accounts like when they were already published? That are my 2 questions.

We're not changing on accounts. We are mentioning it as a disclosure of the accounting policy changes that happened in this -- during this reporting period. And because of that there were certain acquisitions that had happened in the previous 3 quarters, which has been accounted now and has been disclosed as a part of the change in accounting policies. And the break up of all the 3 quarter figures net of taxes are mentioned in the disclosure.

Sure, sir. And so, on the INR 115 billion wage revision, which part of the EV will it appear in? Yes, like the economic variance or the operating variance with that?

See, first of all, it is a clarification that is not actual wage revision. It's [ covert ] tap on the part of the corporation to provide for it so that it's systematic provisioning can be made. This support an EV comment upon actual wage revision or any distribution. Secondly, it is a part of the expense only.

The next question is from the line of Ashish Agarwal from BNP Paribas.

I just have 1 question is that, when I look at persistency numbers for 13 months or let's say on Q1 and Q2 basis, I can see that there is an improvement year-on-year. But when I look at the press release and persistency has been disclosed on premium basis on 1H '23 numbers, I see a decline on 13-month level. So what is the reason behind that?

I think this was answered partly early also. I think it depends on the nature of business as Dinesh was saying, 13-month going forward, I mean, we'll see how we can improve it. But it would mean that we have to look at the 13-month of the previous year as well. And the kind of business, and the lines of business that we have. It's a changing lines of business. I believe short-term there could be some fluctuation like this, but we are confident that the long-term that will be able to improve this structure.

See, typically it's a reflection of the covert of the business done. For example, as I've explaining to you, there were certain products which had lower persistency in the past, right? The real step which have been taken for them now will get reflected in the following 13-month persistencies because the current 13-month would be including business done in the past. So any number coming down today, does not necessarily reflect these steps and decisions of today because as I was explaining 4 products have been reviewed recently, so you will see the impact of the same will get reflected as going forward 13 months from quarter-to-quarter will be seen from there. [indiscernible] we're working on how to bring about higher value.

No, sir. Just one thing is that, how is that -- I mean, arithmetically how are we calculating? Because on quarterly level, both quarters Q1 and Q2, if we are showing improvement on year-on-year level, then how on half year it's coming down by 1%? So, I mean, Q1 and Q2 is showing an improvement on 13-month year-on-year level but half year it's coming down impressively. So, I mean, I'm not able to understand that part.

So actually if you see there is 2 metrics which are very important, one is 13 months and another the 61st month. So 13 months, as Mr. Dinesh answered to you, there was some product which were seeing a lot of relaxations so it has been closed down. So along with it some products which should have been renewed also it did not get renewed. So it is having that 0.5% what you can call dip, but if you see the 61st month persistency, it is risen by almost 150, yes, 200 basis points from 60.57% to 62.77%. So those are the areas of concentration. So that large number of policies remain in force for longer period of time. And yes, on the first year business when you find something going very wrong, we have to take a corrective action that has got reflected here.

Okay. I'll take it offline.

The next question is from the line of [indiscernible] Kumaraswamy, an individual investor.

This is regarding the transfer of profit from attrition of non-par -- attrition from non-par account to the shareholders account. Is there anything pending for the before period? It's actually showing for 3 quarters. Is there anything pending that needs to be transferred to shareholder account?

Transfer the accretion is anything left or resolve this kind of question?

[ Kiran? ]

So bifurcation of the fund happened in the month of Jan. And the attrition started when the fund was broken into participating, non-participating, although it happened effective September, but actually the fund got bifurcated in the month of Jan. And since then whatever attritions happened in the non-par front has been taken care by the way of this transfer.

September will the attrition in the future.

The future attritions will be regularly now accounted for in the respective quarters.

Okay. What is the dividend policy at the company?

Dividend policy, it's something which is decided by the Board. We'll not be able to comment on this.

Okay. No prefix policy, like 30% of profits?

No prefixed policy. The call will be taken by the Board, which is already provided in the relevant decisions and the provisions of the [ Act] itself.

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Kumar, Chairperson, LIC for closing comments.

Thank you very much for all those who have joined in and thank you, Ritu, and thank you management team and my colleagues here. Thank you. All the best, everyone.

Thank you. On behalf of Life Insurance Corporation of India, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.