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

Ladies and gentlemen, good day, and welcome to LIC's H1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. We have senior management of LIC, led by Mr. Siddhartha Mohanty, Chairperson, on this call. I now hand the conference over to Mr. Siddhartha Mohanty, Chairperson, LIC. Thank you, and over to you, Mr. Mohanty.

Good evening, everyone. I'm Siddhartha Mohanty, Chairperson, LIC. I would like to welcome all of you to the half yearly results call of the financial year 2023/'24. As you are aware, we declared our results a few hours ago, today. And we have also uploaded the detailed results, press release and the investor presentation on our website, as well as the websites of both the exchanges, BSE and NSE. Along with me on this call, I have 4 Managing Directors, Mr. M. Jagannath, Mr. Tablesh Pandey, Mr. Sat Pal Bhanoo, and Mr. R. Doraiswamy. Senior officers of the corporation present on this call are Mr. Dinesh Pant, Appointed Actuary and Executive Director; Mr. KR Ashok, Executive Director from the actuarial team; Mr. Sunil Agrawal, CFO from the finance team; Mr. Ratnakar Patnaik, Executive Director, Investment Front Office and CIO; and Mr. K. Seshagiridhar, Executive Director, Investment Back Office from the investment team; Mr. R. Sudhakar, the Executive Director, Marketing and the CMO; Mr. Hemant Buch, Executive Director Bancassurance; Mrs. Manju Bagga, Executive Director of Group Business; Mrs. Anjubala Purushottam, Executive Director, CRM, Claims Annuities; Mrs. Rachna Khare, Executive Director, CRM, Policy Servicing; and Mr. Sanjay Bajaj, Head Investor Relations. Before I start explaining the highlights of the business, I would like to thank you all for making time to attend this call late in the evening on a very auspicious day of Dhanteras. I wish you a happy Dhanteras. Secondly, I wanted to update you that, starting this presentation, we will be providing the APE breakup of various segments within the individual nonpar business. Historically, we have presented only the NBP breakup of the nonpar segments in the individual business. However, since many analysts have asked us to add the APE breakup in our disclosure, we are providing the same from now onwards. Now let me start with an overview of the business and the financial performance. Premium income. For the 6 months ended September 30, 2023, we have reported a total premium income of INR 2,05,760 crores as compared to total premium income of INR 2,30,456 crores for the 6 months ending September 30, 2022. The individual new business premium income for 6 months ended September 30, 2023, is INR 25,184 crores. And for the corresponding 6 months of last year, it was INR 24,535 crores. Renewal premium income, individual business for 6 months ended September 30, 2023, is INR 1,09,599 crores as compared to INR 1,03,203 crore for 6 months ended September 30, 2022. The Group business total premium income for 6 months ended September 30, 2023, reached INR 70,977 crores, comprising new business premium of INR 67,505 crore. In comparison for 6 months ended September 30, 2022, last year, group business total premium income was INR 1,02,718 crores, and a comprised new business premium of INR 99,707 crores. Therefore, for these 6 months ending September 30, 2023, our total premium income has registered a decline of 10.72%, while the total individual business premium has grown by 5.52% as compared to similar period last year. However, for the 6 months ended September 30, 2023, the total group premium has decreased by 30.9% as compared to a similar period of the previous year. Our market share by last year premium income for 6 months ending September 30, 2023, is 58.50% as per IRDA, and we continue to be market leaders in overall life insurance space in India. For 6 months ended September 30, 2023, we have a market share of 40.35% in individual business and 70.26% in group business as compared to 42.31% in individual business and 80.34% for similar 6-month period last year. While the market share in individual business is relatively stable, there has been a larger impact in market share of group business. We still continue to be market leaders both in individual as well as group segments. The group business has a cyclical nature and certain flows are bulky and therefore has potential to cause variations in market share, and we are confident of addressing the same through various initiatives. Seen on APE basis, the breakup of business is as follows: total annualized premium equivalent, APE, for 6 months ended 30th September, 2023, is INR 22,627 crores, which is comprised individual APE of INR 14,638 crores, and a group APE of INR 7,989 crores. Therefore, on APE basis, individual business accounts for 64.69%, and the group business accounts for 35.31%. Further, of the individual APE, the par business accounts for INR 13,063 crores and the nonpar amounts to INR 1,575 crores. As you can see, our nonpar share of individual APE reached 10.76% and par is 89.24% for 6 months ended September 30, 2023. You will recall that our nonpar share for similar period last year, that is 6 months ended September 30, 2022, on APE basis within the overall individual business was 8.98%, and the APE was INR 1,315 crores. Therefore, the APE of nonpar business has increased by 19.77% on a year-on-year basis. Our product mix strategy is on track, and we are moving ahead in a consistent manner towards a more balanced and value-enhancing product mix in our business portfolio. Profit after tax. The profit after tax for the 6 months ended September 30, 2023, was INR 17,469 crore, which comprises an amount of INR 13,768 crores net of taxes, pertaining to the attrition of the available solvency margin transferred from nonpar funds to shareholders accounts. At this point, I would like to mention that we had to change the accounting policy in September 30, 2022, regarding transfer of accretions on ASM in the nonpar funds to the shareholders fund. As you will recall, the change was effective from January 2022 when our [indiscernible] had taken place, and therefore the tax figure for 6 months ended September 2022, included an amount of INR 4,542 crores net of taxes, which was for the quarter of January to March 2022. Indian embedded value, IEV. The Indian embedded value as on September 30, 2023, has been determined at INR 6,62,605 crores, as compared to INR 5,44,291 crores as on September 30, 2022. Therefore IEV has registered an increase of 21.74% on year-on-year basis. VNB and VNB margins. Net VNB is INR 3,304 crores, and the net VNB margin is 14.6% for the 6 months ended September 30, 2023, as compared to INR 3,677 crores and 14.6%, respectively, for the 6 months ended September 30, 2022. Solvency ratio. The solvency ratio as on 30th September, 2023, improved to 1.90% as against 1.88% on September 30, 2022. Assets under management. Assets under management as on 30th September, 2023, was INR 47,43,389 crores as compared to INR 42,93,778 crores as on September 30, 2022. Therefore, our AUM has shown a growth up 10.47% on year-on-year basis. Product mix and new product launches. Now I would like to inform about new product launches. In line with our strategy of increasing the proportion of nonpar business, we launched 3 new nonpar products: 2 for individual business, namely LIC's Dhan Vriddhi and LIC's Jeevan Kiran; and 1 for group business, namely LIC's Group Post-Retirement Medical Benefit plan during the 6-month period of April to September 2023. Number of policies and agency workforce. During the 6 months ended September 30, 2023, we sold 80,61,000 new policies as compared to 83,59,000 new policies in 6 months ended September 30, 2022, a year ago. As of September 30, 2023, the total number of agents was 13.46 lakh as compared to 13.35 lakh as on September 30, 2022. The market share by number of agents as on September 30, 2023, stands at 49% as compared to 53% for September 30, 2022. On number of policies sold basis, the agency force sold 77.68 lakh policies during the 6 months ended September 30, 2023. Therefore, approximately 96% of our policies in the 6 months ended 30th September, 2023, were sold by our agency force. Even on a premium basis, [indiscernible] above 96% of the NBP came from our agency channel in the past 6 months of current financial year. Contribution by Banca and alternate channels. During the 6 months ended September 30, 2023, other channels, Banca and alternate channels contributed to 2.12% by number of policies and 3.42% by new business premium. For the 6 months ended September 30, 2022, the Banca and alternate channels contributed to 1.73% by number of policies and 3.37% by NB premium. This year, in the first 6 months ending September 30, 2023, we collected new business premium of INR 858.55 crores via these channels as against INR 825.37 crores in the comparable 6-month period last year. Therefore, as you can see, we grew by 4.02% on a year-on-year basis in the Banca channel when measured by new business premium. Further, we sold 1,70,751 policies, and we grew by 18.33% in B&AC channel in this 6 months as compared to similar period last year. The positive improvements in both premium income and the number of policies sold through Banca and alternate channel is a pointer towards progress of another key element of business strategy, which is diversification of channel mix. Our overall expense ratio for the 6 months ended 2nd September, 2023, our overall expense ratio is 15.14% as compared to 16.69% for the past 6 months of last year. Persistency. On a premium basis, the persistency for 13th, 26th, 37th, 49th and 61st months up to 6 months ended September 30, 2023, stands at 78.49%, 71.98%, 70.16%, 64.57% and 62.53% respectively, as compared to 77.62%, 73.84%, 67.85%, 64.73% and 62.77%, respectively, up to the 6 months ended September 30, 2022. A number of policies, the persistency for 13th, 26th, 37th, 49th and the 61st months after the 6 months ended 30 September, 2023 stands at 66.80%, 58.79%, 57.61%, 51.73% and 50.35% as compared to 65.21%, 61.63%, 54.93%, 52.46% and 51.61%, respectively, up to the 6 months ended September 30, 2022. Therefore, while we made efforts to improve persistency across cohorts, during this first 6 months of this financial year we have seen improvement in persistency on both premium and policy basis for the 13th and the 37th month. Operational efficiency and digital progress. In our digital initiatives through the agent-assisted ANANDA app, we have completed [ 5,36,393 ] policies through this app during the 6 months ended September 30, 2023, as compared to 3,14,955 policies for the period ending 30th September, 2022, thereby registering a growth of 69.35% on year-on-year basis. This entailed force of using technology and our digital innovations more effectively to enhance the business and our efficiency. It's another large element of our strategy as we move ahead to creating better value for all stakeholders through focused profitable growth. I am happy to share with you that our digital transformation focused on digital innovations and value enhancement is an area of focus currently. Claims. On the individual claims front, during 6 months ended September 30, 2023, we have processed 86,40,598 number of claims, which includes 82,40,947 maturity claims. On an amount basis during past 6 months ended 30th September, 2023, the total maturity claims were INR 78,984 crores and the total death claims were INR 10,826 crores. On a comparable basis for past 6 months of last year ended the 30th September, 2022, the maturity claims were INR 72,988 crores under death claims were INR 11,665 crores. Therefore, the death claims are lower by 7.19% and the maturity claims are higher by 8.22% on a year-on-year basis. Before I conclude, I would like to thank all our shareholders, policyholders, agents and employees for their faith and the trust in us. Before we take up the question and answer, I would request our CFO to explain the PAT breakup. Sunil Agrawal, CFO. Good evening. Thank you.

Good evening, everyone, and wish you a very happy Dhanteras. First, I'll explain the breakup of the quarter-on-quarter PAT. The PAT of [ INR 15,952 ] crores as at 30th September, 2022, comprised of 3 quarters of ASM income, available solvency margin income, because we have changed our accounting policy during that period. And the accretion started from quarter 4 of FY '22, so therefore it comprised of 3 quarters of DSM income. So quarter 4 FY '22 income was INR 4,542. Quarter 1 FY '23 income was INR 4,149 crores. So if we remove this amount, the balance amount for the quarter, which actually [ pertains ] to quarter 2 of FY '22 -- FY '23, is INR 7,261 crores, which is a comparable figure with our current quarter 2 result, which is INR 7,925 crores. So therefore, the PAT had made an increase of 9% if you look at it on a quarter-on-quarter basis. Now coming to half yearly disclosure. Half yearly, the PAT shown for the last year was INR 16,635 crores, which comprised of 3 quarters. Out of it, if we remove the quarter 4 of FY '22, which is INR 4,542 crores, the PAT pertaining to H1 of last year is INR 12,093 crores as against the PAT of INR 17,469 crores on this year. Therefore, a growth of about 44% when you compare it H1 basis last year. Thank you so much.

And lastly, I wish all those present on this call a very happy and prosperous Diwali and festive season. I now request the moderator on this call to open the floor for the question and answer. Thank you.

[Operator Instructions] The first question is from the line of Avinash Singh from Emkay Global.

A few questions. The first one is on your accounting P&L employee expense part. That has had a lot of volatility due to paying for some kind of a bonus and provision. So if I read correctly, nearly -- of INR 500 crores a quarter you are providing for that pension that was kind of approved, I guess, FY '20 or somewhere, around INR 11,000-odd crore spread over 20-odd quarters, meaning INR 500 crore per quarter, additionally there is something more that changed in the family pension that has led to another I guess, close to INR 11,000-odd crores, where you have, I guess, taken close to 2,900-odd crores of it in this quarter, if I read correctly. So can you sort of break up your employee cost, that okay, what sort of cost is kind of your net and related run rate and what sort of other provisions you keep doing? Because there is a lot of volatility in employee cost, and given that you're kind of in a stable employees and also the way it usually happens. If you can just provide some sort of color on this employee cost mark. So that is one. And second is around -- more to do with, I mean, now -- I mean, as you have changed your accounting policy related to nonpar being transferred to shareholders account, and of course your profitability remains good as well as solvency is accruing, because growth overall is not that strong. In that backdrop, can there be some clarity around what is the sort of a board-mandated flow on solvency, and as long as you are comfortable with that, what sort of dividend can you pay out? Because given that the accounting profit [indiscernible] is pretty good and solvency is gradually increasing. So there should be some kind of a more clarity on the dividend side, because the growth is not that strong. So these are the 2 questions. If anything, I will follow up.

So it is the employee cost actually, because of family pension. So that was allowed by government. So we have to provide for that. So Mr. Dinesh Pant, Appointed Actuary, can elaborate a little maybe first, because the actuary values, once they are approved [indiscernible].

Yes. On employee costs, I didn't get that question very clearly, but to my understanding what you're talking about volatility, I think we see as it comes on the [indiscernible] on the pensions that you mentioned about it. The regular cost is always funded because we [indiscernible] for that thing. Sometimes there are one-off costs, then those also, if a differential statement is to be [ confusing ] that based on the approvals as they are required based on the [indiscernible] information has been talked about. As far as the dividend is there, of course you would have seen last year it was increased from [ 1.5 to 3 ]. Few years ago, our target obviously is [ 1.6 ]. We are very comfortable, and in fact, the solvency ratio on the initial course -- of course, the Board will take appropriate call for balancing the interests of all the stakeholders, depending upon when the distribution -- everything is comfortable.

So sir, yes, on employee cost part again, if I look for this quarter, so INR 2,900-odd crores you have provided for the family pension and there is sort of a INR 500-odd crores kind of a run rate for that initial pension part that was taken in FY '20 or something. So these 2 are kind of a one-off. And what has been a sort of adjustment or kind of additional you provided for the pension part with the actuarial valuation? To just get an idea, because last quarter, of course, you have a number closer to, I guess, INR 5,700-odd crores. This quarter, it's going to INR 10,000-odd crores -- and of course I can differentiate this INR 2,900 crores is one-off. Still, it's like higher than last quarter or another from [indiscernible]. So what has been sort of an adjustment in the actuarial alignment towards pensions?

Yes. As you are seeing around INR 600-some odd figure, as you provided for the additional pension liability, which has already accrued to the pension, the family pension holders of the corporation. For them, the benefits straight away increased. The other portion which possibly you are talking about, it was the onetime pension option, which has given serious debt, which was amortized, which was taken over a period of 5 years as per the decision in that regard. So these are 2 components. And besides that, you would be aware that these pension costs are always provided for the vest [indiscernible] benefit and then there's the current benefit each year. So as it goes on, that is to be provided so for the vesting period. But if any additional service for [indiscernible] as for the standard [indiscernible].

[Operator Instructions] Next question is from the line of Sanjeev Kumar from [ SKD ] Consultants.

Okay. Am I audible? Actually a very good set of numbers you have deduced for this quarter. So congratulations for that and a very warm greetings for the Dhanteras and Diwali. Sir, my basic concern is that, despite all this good performance, our share price is not performing and our issue price has been very high and now the prices have gone down. So I just want to understand that what management is thinking about this, how to reward shareholders, how to recoup the losses of the shareholders. This is my question, sir.

Share movement is a function of many things. As management, we are committed to create shareholders value. And in that direction, we are working. As you see, our nonpar share is going up. And also margins of this corporate segment has -- steady objectivity must improve also, it will improve in coming quarters. From our side, whatever is required to create [indiscernible] value, that's what we are doing. Other things are left to market, and if people actually -- many people, when it went down, it went up to I think 500, something like that. And many people also made good money. They got in large contract tender. So we are concerned with our performance so that the value will be created.

I agree. But sir, you know, sir, that a lot of private sector competition is also coming. And the growth rate of private companies seems to be faster. So in light of all this, how we are going to reorient ourselves and create value for the shareholder? And this is what I would like to again request you to please keep in mind and come out with some sort of innovative ways where you reward shareholders and the value is increased. That is all I want to say.

Thank you. Actually, I can just share, if you have observed our performance in the last 1.5 years post listing, there has been a directional change in our approach with regard to product mix, channel risk and digital introduction. All these 3 areas, we are on the right track. The result is yet to come, total results, it takes time. But as long as we are on right track. So that will definitely create confidence in the market and then let us see.

And one more thing, sir, that you -- I mean, the value of your investment is rising like anything because historically, LIC has been a very old investor on the stock exchange of India. So you are the best beneficiary or the highest beneficiary of the rise in the market. So how to share profitability, this also can be part of that.

Yes. All our stakeholders will benefit from that.

Next question is from the line of [ Sarna Mukherjee ] from BNK Securities.

I have two, three questions. So first one on the VNB walk that you have provided. If you could explain what happened in the impact of the product benefits that resulted in offsetting our benefits of the product mix improvement. And vis-a-vis last year on it, you also have shown a positive impact coming from assumptions. So has there been any assumptions changed in the -- in this current quarter, which is driving that if you could highlight that? That is the first question. Secondly, sir, last -- I think from last few quarters, you have commented in your product mix kind of outlines of focus on the nonpar side. But when I look at the persistency ratios, despite the mix moving slightly towards the nonpar side, the persistency numbers haven't seen any improvement. So just wanted to understand, is there any challenges pushing this product or why is the persistency numbers dropping? And also, I mean, while the persistency numbers look lower vis-a-vis last year, first half with most cohorts, there has been an improvement in the 37th month, both by number of policies and premium. So if you could explain what is different there in that cohort which has resulted in that improvement? These are my questions.

I'm Ashok. I'll be taking the question on the VNB walk. We have already discussed the breakup of the walk. Actually, there are some components which are mentioned on the effect on the business mix. You must have noticed that we are moving and on the trajectory towards nonpar businesses and our nonpar proportion has increased. Actually, this has resulted in -- showing still movement in the VNB margin. And regarding the product benefits, we have to have our products in the competition market. We have to have our products priced competitively. And because of the VNB pricing product competitively, there we had a negative impact on the margins, because if you notice that any increase in benefit obviously will have a worse impact on the market. And regarding the assumptions, that will be mainly impacted due to the risk-free rates going down compared to September '22 year-on-year. And that has reflected the movement towards a negative impact. And primarily, we have also observed a fact that there has been a very good improvement in the mortality improvement in the group business and which has made the margin move in the opposite direction. So the net effect is the margin as after September 30 [indiscernible].

Understood, sir. Sir, just a follow-up on that. So the increase in product benefits, is it on the group annuity side or also on the individual side? If you could maybe give details on which categories of the product you have taken this add benefits?

So actually, the product is -- we have repriced the annuities. So that has [indiscernible] that's some bigger impact on the movement of [ March ].

Okay. On the group side, sir, overall -- or I mean, individual also.

Group and individual growth are related. So whenever we refresh the margins for the individual, the groups are also. Both margins also getting [indiscernible].

Okay, sir. Understood. Very helpful. If you could address the persistency related question, please.

Persistency, if you see, it has actually improved the continuance persistency you see. Continuance persistency rating 77.62%. It has gone up to 78.49% in premium. And in policy, policy also has gone to 65.21%. Last year, it is 66.8%. So persistency there has been some improvement in the initial period, of course subsequent months up and down, both are there. But initially, it is showing some improvements.

Just to supplement that actually you are aware that persistency is measured on a cohort basis, right? So the decision which you just mentioned about like nonpar business, which has been in the -- become the focus for some period of time. And also as to the decisions which have been taken to modify the production -- size of products. For example, a decision which has been taken a year that would start to show the results at the end of the 1 year because entire 1 year cohort has to be completed, it has to be given a period of 13 months, and their updated measures. So typically 13 month is a most approximate way to look at the recent decisions. And 61 month show the long-term view. In between, the behavior which is there is because of those cohorts which are going down in [indiscernible] years. So we are sure that the effective decisions which have been taken in the years between '20 to '23, will have still the outcome so that will be very visibly seen when we go near to the end of this year.

[Operator Instructions] Next question is from the line of [ Udit ], an individual investor.

My question is on the embedded value. So there's a significant increase on the embedded value compared to last year. And from '21 to '22, there was a very small variance. So my question is, can you explain what has led to such a big increase? And over the next 3 years, how will you maintain stability on the embedded value?

[indiscernible] see, actually, you have noticed that embedded value is a conscious -- it's an outcome of the conscious efforts that are taken getting this result. And so the biggest component of the embedded value is the [ ANANDA ], because basically we have -- higher the [indiscernible] product portfolio. And therefore the comparative business is the biggest component in the embedded value. I think I've answered your question.

And I just have one more question on the group premium. I think there's a 30% drop. You did mention that it's a cyclical business, but is this something which you're planning to recover that market share over the next 6 months? Or what will be the period that you are planning to recover that drop in the percentage?

[indiscernible] in the [indiscernible] the group funded business is a bit cyclical with the employer benefit -- employee benefits valuations which are being done by the company, and based on that, some funding also gets happened and there's new things being introduced. We are trying to recover whatever is the degrowth or whatever we could not correct in the first half during the remaining period of the current financial year, and we hope to be showing a good growth over it by the end of the year.

Next question is from the line of Prayesh Jain from Motilal Oswal.

A couple of questions. Firstly, on the group business, is there a significant increase in competition from private players and because of the expense of management regulation, and that is the reason there is a much sharper decline for us in the group business and because of which we are losing out? Is that the case?

[indiscernible] answering. You can't ascribe it to that. It's not that the business -- the premium that has come to us has gone to any competitor. And that note, competition is certain in each sphere of our business activity, and that's continuously shared in meetings. But this -- the degrowth of this impact that we are seeing in the current year, it cannot be said to be increased competition. Yes, the expense of management regulation and [indiscernible] even in terms of commission, to which is being [indiscernible] other companies, but I think it has not directly adjusted in this kind of [indiscernible], which we already explained, and we are trying to get it back as quickly as possible.

And considering the expense of management ratios, are we reconsidering our commission ratios? Have we changed the commission ratio on end of the products for agents? Or what is the thought process?

It depends. It will depend on product to product. Whenever we begin a new product, depending upon market dynamics and need of people and all those things, we will decide at that point of time. [indiscernible] given. So that lever is also [indiscernible].

Got that. And sir, lastly, the agency channel had a very high share of -- relatively to other channels, agency has a good share of [ pilot ] plus ticket size. And we have so many MDRT agents and COT and TOT agents. How has been their experience in the first half after the tax changes? And do you think that more understanding on the tax regulations will allow the agency channel to kind of improve the growth in the second half?

This is Sudhakar, Executive Director of Marketing. As of [indiscernible] the current way to look at it, the ticket sales have actually increased across the various product categories as compared to last year. The impact of [ ending ] of March is not so much significant [indiscernible], and we are expecting to cover that in the coming months without much of it [ repeating ]. The ticket size also in all the plans, happen on the new plans which were introduced currently, as then we'll see. It has been quite significant. It is [ more than 2 lakhs ] per policy.

Sorry, you're sounding a little distant.

You want me to repeat it?

Yes, sir. Your voice was too deep to understand.

I'm Sudhakar, Executive Director, Marketing. I mentioned that the ticket status of all the plans which we have sold in the current year are significantly larger than that of the previous year. If you look at the overall ticket size also, there has been considerable improvement. This is because of various changes and modifications we carried out in the last year in certain plans by raising the minimum [indiscernible] and ticket size in some of the plans, as well as encouraging more of an annuity business, which has got a higher ticket sales component. The growth of annuity business is contributing to higher ticket sales now. And similarly, a new product which was launched in the current year, [indiscernible], which has got education of more than 2 lakhs, is also helping us to increase the percent of compensate for whatever ticket size impact which will be there because of the March business.

And just lastly, one more question. Could you reiterate that -- restate the impact of benefit product mix on the VNB walk? Could you just restate that?

Yes, this is Ashok. Actually, what I was mentioning is, when the benefits are being enhanced in some of the products, particularly the annuity products, there is a downward pressure on the margin. So that is what is getting reflected in the VNB.

Okay. So you're saying that annuity rates have been increased, and because of which the margins on the nonpar products have come down, and that is impacting the overall VNB margins?

Actually, one thing we need to have clarity is that basically these products are highly competitive in nature. And we have to be evaluating, looking at the market movements and correspondingly price the products. And we have been doing that continuously and that will have an impact on the market.

[Operator Instructions] Next question is from Supratim Datta from AMBIT Capital.

My first question is, on this call, previously you mentioned that you have been investing in alternate channels and Banca channels and growing those channels. But if I look at the numbers, it looks like the second quarter, individual NBP sourced through the Banca and alternate channels has declined by around 2%. So if you could talk about what is driving that decline? So that's the first question. The second question is I wanted to understand, within the nonpar, how much of that is coming from the Banca and alternate channel versus agency? And the third question was on the embedded value -- embedded value walk. And now could you let us know what's the portion of this increase is coming from economic variants? That's the third. And finally, on the annuity piece, I just wanted to understand what proportion of your annuities will be coming from PSU employees versus non-PSU employees?

If you see Banca channel, we have shown already more than 18% growth in number of sales there and the premium volume is 4% plus. So it is growing. The share is also more than 3.37% of sales to total premium Banca. I will request [indiscernible].

So I mean just talking about the second quarter. So if I look at the second quarter, then there is a decline of around 2%.

[indiscernible]. Second quarter, if you look at the numbers, basically, I was seeing some [indiscernible]. And to that extent, our numbers have been corrected or lower debt when it comes to single payer contributions from the Banca. But the regular premium contribution has shown a very decent growth, almost [ 31% ] versus [ 7% ]. So naturally when we compare on how it looks, as we compare volume [indiscernible] numbers in the slide [ it equals ] quarter 2 numbers. But overall, when we see the business mix on the [indiscernible] [ the annuities ] side, [indiscernible] and now that we're entering a positive kind of an environment, the number will improve here and both regular as well as [ PSU ] product will continue to do well, and we are constant on looking at [ our options ] [indiscernible].

[indiscernible] Because actually embedded value, [indiscernible], actually, the proportion of the total embedded value stayed flat at around 50%, though that the growth in the NPL, of [ 32% ] year-on-year.

So just to clarify, 50%, as you also mentioned?

Yes, close to 50%, yes.

[Operator Instructions] The next question is from the line of [ Udit ], an individual investor.

Sir, my question is on the product mix. So there was a discussion on the composite insurance license. Any progress on that? And with the [ Meridian ] a very good target for insurance, do you think over the next few years you are looking for a new product mix with combined life insurance with health insurance and other policies should come in?

Yes. Actually, we realize and we actually give the sense of thing that where product of ferings are concerned, we have to look towards the [indiscernible] in which product offerings should be like solutions to the entire basket of their requirements and needs. So typically, as of now, currently what is available for life insurance companies is to work in the area of the market side of [indiscernible]. On the long-term perspective, future planning, [indiscernible] annuities, and to be allowed to have fixed benefit health products also, and the fact that we have [indiscernible] also. So currently, when the product offerings are given in a solution to a customer, the basket of such products and mix of that is considered to get a solution there. Going forward, when a call is finally taken, to what extent the cross-selling between insurance companies or [indiscernible] allowing all those in, in fact, [indiscernible] products allowed that shows on the card. So all those things will be integrated as -- currently, in fact, some of the products have already been [ demo ] coming from the regulatory side, already multiple components of health, accident and life insurance [indiscernible], all are being taken. So we are very, very conscious of it in the current scheme of things, whatever is allowed to us, we are trying to integrate all those things to provide a low [indiscernible] solution we can provide to at that point. And going forward, when the regulations changes, there are larger by [indiscernible] in the run, that will also be an integration to our portfolio.

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

The first one is really on the embedded value. We have seen a significant increase in the first 6 months. Would you kind of say a large -- that a large part of it is because of capital market movement?

Just one clarification is important to have, as you see. One actually very heartening thing that in the case of [indiscernible] this on 1 to 1 year basis, this [indiscernible] revenue growth of around 21% is for us the best we are seeing around at this point of time. Yes, a large central vision comes from the equity component to it. But it is also important to note that even actually the performance of the core business has also significantly contributed to it. And the growth rate from the core business would be even better than what has come from the [indiscernible]. In fact, as we look into the March to current change in embedded value, is the return specifically corresponding to embedded value in operating terms is almost an investment, something around 11.8% or so. So this is -- all these factors contributing, whether it is adjusted net worth, whether it is the core business contribution coming through [ PBSB ] or through the market, all are looking favorably. That is why the 21%-plus sort of growth in [indiscernible ] value, which is very, very robust for such a high-volume base, [ such a big ] base, has come up.

The next question is on your APE disclosure -- and thanks for this -- at the time of IPO, we said that the focus will be to kind of increase nonpar saving, and that kind of improves margins over time. But I think almost like a year down the line, we are still adjust -- I mean, barely not even INR 400 crores of nonpar business. So I was curious whether there is any marketing or any active marketing of these products then at all? And even on the protection side, I know you have changed your pricing, but all that we are doing is something like just around INR 80 crores of protection. So I mean, are these products actively marketed by the marketing team? Such a large army, but the numbers are 1 year down -- or in fact, more than 1 year down the IPO and the numbers are still negligible.

So you see this total volume, it will appear negligible because we are new to this and our agents have been trained to sell all these products that are in the interest of customers as well. And as you see, it has also included the share of nonpar. It has gone beyond 10%, which was 8.99% 1 year before. And total premium also from 39% on nonpar, that is also there. So constantly, there is effort to promote the nonpar, not only for the interest of shareholders, but also policyholders. And all the products which we have launched, those are getting traction in the market. But as we told them, a lot has to be done. So that's where we are on that, working on that.

And a related question is, if I look at the gross margin on the nonpar side, it appears to be kind of a little -- I mean, it is a pretty high margin. So is there a scope where you can probably offer a little bit more to the customer and maybe gain more market share?

Yes. Actually that's an interesting call which eventually we have to take. When you start the at margins that you have -- we started with high margins, then you have to also see ultimately, we have to work towards the value of new business itself. So if there is a balance between those margins, then elasticity of that to the volume of sales which happens. That is what we have seen, for example, what we told earlier in a competitive -- out of competitive situation in any business, the margins are reduced because the benefits have been significantly improved, in fact some of the different products of our different segments [indiscernible] returns to the policyholders. So they are naturally -- the growth has happened, but if the growth does not compensate for the growth in margin for some time until that comes about, there will be set on the [indiscernible]. This is the end of a process in which we continuously consider shareholders' interest, policyholders' interest, overall business dynamics and we will want to grow. So yes, we have already improved our benefits that we are seeing. We continue to offer products which have good reasonable margins for a period of time, ensuring them that the volumes and the business is sustainable. So that's what -- answers your previous question also. This shift in time taken because all the people who are involved have to evolve into that sorter. But once that momentum picks up, this outcome will we see already [indiscernible]. If you actually would have looked at, it's almost double of that proportion a year back. So this is significant change which is happening and good strategy being [indiscernible].

And sorry, I kind of dropped off in between, but did you kind of highlight any specific reason for lower gross margins in the par business?

For the par business. Your question is on the margin?

No, no. I'm saying that a decline in margin in the par business, have you assigned a...

There is no significant decline in the par business, for sure. That has almost been stable, right? There is no significant change in par business because that contributes only 10% towards VNB, right? But what has happened is the growth in par business has been less because of the possible conditions. The carry-over effect from the last quarter of the previous year. In the initial 2 quarters, so that also will be made good. The driver of the VNB margin will be not a par business, that will be drivers continue to make an important contribution in the total VNB, but for [indiscernible] margin, the contribution will largely come from the non-participating business.

I believe you have regrouped I think some of the numbers on the margin. I believe you have regrouped some of the numbers on the margin? Regrouped. If you look at the first half presentation for last year, your VNB gross margin reported as 14.5%, while I think the same number for previous years this time around, you reported that 15.8%.

First [indiscernible] last year, actually, it was 14.6%, rate of 14.5% to be fair and 14.6% this year, but on the rounding effect in 14.6%. If you look at the disclosure, we are now declaring net margins. I think your comparison -- comparing these numbers is the gross margin. [indiscernible]. Net [indiscernible] quarter, customer impacted 14.6% months of number [ 14.5% ] last year, but we round it as a practice. So it's 14.6%.

Next question is from the line of [ Amit Jain ] from Axis Capital.

So I had a question on the other -- the Banca channel that you are incrementally focusing on. So is it purely on the PSU banks that you're focusing on? Or are you in talks with the private banks as well? And secondly, what are your thoughts on fintech as a channel? So do you have any thoughts on incorporating any fintechs to increase your proportion from the other channels? So any thoughts on that would be good.

[indiscernible]. We have [indiscernible] both private businesses mainly, of course, is our [indiscernible] here. But the major contribution, of course, are given by PSUs and some [indiscernible] bank. Coming to the other part of the question, but as I said [indiscernible] more partners, both for private as well as public sector banks. But public sector banks take [indiscernible] almost everybody, except for the [indiscernible] that there's an opportunity with definitely get them onboarded. On the retail side, yes, and other corporations, we are looking this with a lot of excitement. And we have already added the companies, the corporate entities is in the current year has been down. Unfortunately [indiscernible] integration is obviously being tested and will be put in place the extra business grow will start beginning maybe from this point onwards, and that will contribute to the better numbers and improvement in Q3.

Sure, sir. That's very helpful. And secondly, in terms of margins, so just coming on the nonpar business, the margin decline that is 68.7% to 50%. So just wanted some further clarity as to why. Is this only because of pricing? Or is there any other thing out here that has made the declining margins in the nonpar business?

Actually, if you look at the nonpar, the major impact of our reduction in margin is the pricing [indiscernible]. There is also certain [ moderating ] factors due to the changes in the [ registration ]. But yes, the major movement is due to repricing ramp-up.

And sir, on a sustainable basis, so H2 margins were at 14.6%. So for the full year, do you emphasize that these could go up closer to 15%, or like 14.5% to 15% is the range for this year? And incrementally, how are you seeing your margins when you move on to FY '25? Any thoughts on that?

Ideally, we focus mainly on [ seeing ] that our focus customer are clearly shifted towards nonpar product and the nonpar product that still being [indiscernible] quite a decent margin. And as the focus is towards more and more to nonpar products, you can expect that margin to go north.

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

A few questions from my side. First, on the agency front, given that you are shifting your focus towards more of nonpar, over the last, let's say, 12 to 18 months, have you seen any change in the activation rate of the productivity of agents? How do you see that? I mean barring the ticket size, which obviously has been on the amount of the trajectory? How do we see the activation rate in terms of the new agents in terms of how the productivity or churn is kind of shaping up? Second, in terms of the nonpar business, is there more repricing in any of the product segments or entities that you have kind of forecasted, let's say, going into the second half out there? Third question would be in your nonpar savings business, individual nonpar savings business. Can you give some color on whether it would be single pay or regular pay mix? Or what would be the average [ tenor ] or something out there? And lastly, in terms of your group business, you mentioned that you would try to recoup some of the business that the probably did not come through in the first half in 2H. Just wanted to get some color on what are the strategies that you are kind of adopting out there and how confident are you on recouping the businesses in the second half?

[indiscernible] that in direct marketing again. On the agency side, we have about [ 1.3 million ] agents, and training them into the nonpar which is new line of business as far as their customers, we're taking more senior agents to train them because they're already seeing -- having a higher basket of products which we are seeing, they understand much better. At the same time, when the new agents are being added also, we are teaching them 1 or 2 of the nonpar products, especially on the savings side. And that is how the overall percentage of the agents were trained in nonpar. Over the last year, it has increased by almost around 3% to 4% as compared to corresponding period of last year. So the overall total nonpar business also, as you can see, there is an increase in the individual savings by almost 172% or on -- nonpar 19% and annuity by around 9.95% and so on. So that breakup is also being given by us also. [indiscernible]. So it takes some time because [indiscernible] for all agents to come on board as well as understand to start selling the products, mainly due to more senior agents who are understanding the product and are valuable to convey that to the customers.

On the product side, see, yes, in the past, sometimes, we have repriced our products. And just for clarification, when we see overall VNB margins have come down in -- consciously because of competitive reasons in our business. It is not across our all of our businesses. [indiscernible] where we have repriced the product, particularly protection business, the margins have improved also similarly in other lines of businesses also. So it's a conscious call, it depends on the balance of the business. Going forward, our aim is to have our product basket compete, provide a facility toward intermediaries [indiscernible] for clients plan, all the product offerings for [ lifestyle ] requirements. And we are confident that we're going to yield very good results in the coming quarters within this financial year, and thereafterwards.

Sure. My 2 other questions was one on the nonpar mix individual nonpar mix, if you can give some color on the type of product between single or [indiscernible] average policy or something? And the last question was how confident are you on recouping the group business in 2H and what are the incremental strategies you have adopted for that?

Sudhakar here. On the nonpar side, approximately 25% of our business comes from the annuity portion, annuity prospect, and it is continuing to hold the same position as of last year. Apart from this, we have added some savings products in the current year, which are both available as single as well as non-single. So annuities are of course single. But under the annuity, [indiscernible] both single and non-single premium paying more. And there also [indiscernible] premium product. We have also added [ Jeevan Tarun ], which is that of a -- in terms of a medium product which is added at the later end of the second quarter. So it is just gaining traction. And you will see more action on that in the next 2 quarters as it goes on.

On the group side, yes, we have increased our follow-up of it to the various entities from whom we may have to have premiums to be collected. Plus we are working with the new entities will be -- who we have been talking about for quite some time. We are quite confident of getting back whatever we have been doing in the previous year that's showing growth over that by the end of the current year.

Thank you very much. Ladies and gentlemen, we will take that as a last question. I will now hand the conference over to Mr. Mohanty for closing comments.

Well, thank you, all the analysts, because you have given very valuable time during this conference. So on behalf of the corporation, I thank you. And as per our commitment, we are moving ahead and definitely will deliver. There may be some dislocation here and there, but overall, we'll fulfill our commitment. Thank you, all the best.

Thank you very much. On behalf of LIC, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.

Thank you.