SBI Life Insurance Company Limited (SBILIFE) Earnings Call Transcript & Summary

Thank you very much. Good evening, everyone, and we happily welcome you on to the results update call of SBI Insurance Company Limited for the year ended March 31, 2020. Along with me are Mr. Mahesh Sharma, Deputy CEO; Mr. Sanjeev Pujari, President, Actuarial and Risk Management; Mr. Abhijit Gulanikar, President, Business Strategy; Mr. Sangramjit Sarangi, President and Chief Financial Officer; Mr. Subhendu Kumar Bal, Appointed Actuary; and Chief Investments Officer, Mr. Gopi Shenoy. Update on our financial results and the key highlights can be accessed on our website. The key highlights of this financial year for SBI Life are, new business premium registered a growth of 20%, and is now at INR 165.9 billion. Individual protection new business premium grew by 42%. Non-PAR and ULIP new business premium has grown by 28%. Annuity new business premium witnessed 307% growth and stands at INR 11.3 billion. Renewal premium has shown a strong growth of 25%, and now stands at INR 240.40 billion. On effective tax rate basis, value of new business is INR 22.2 billion, a growth of 16%, and VoNB margin at 20.7 percentages. Indian Embedded Value stands at INR 276.4 billion, growth of 16% on effective tax rate basis. Asset under management stands at INR 1,603.6 billion, registering a growth of 14%. We will update you on each of these about [ elements and details. ] In the share of premiums, we maintained leadership position in individual new business premium. We collected individual new business premium of INR 112.40 billion, achieving a growth of 17%. Private sector grew by 8%. The company maintained its leadership position in individual rated new business premium, which stands at INR 97.7 billion, growth of 9%, leading to private market share of 23.20 percentages, showing an improvement of 90 basis points over last year. New business premium marked a growth of 20%, and private market share of 20.50 percentages, an improvement of 147 basis points. The renewal premium grew by 25% to INR 240.4 billion and accounts 59% of the gross written premium. Individual renewal premium grew by 27 percentages. Our gross written premium stands at INR 406.30 billion, a growth of 23%. Annualized premium equivalent grew by 11%. In the area of product mix, ULIP continues to show good growth of 10% in this year with a share of 49% in new business premium. Non-PAR has shown a growth of 56%, with a share of 44% in new business premium. Individual protection business is at INR 5.3 billion, a growth of 42% and contributes 5% of individual new business. Group protection, new business premium grew by 22%, with Credit Life business growing at 20%. Annuity business at INR 11.3 billion, a growth of 307% and contribution of 7% to the new business premium. Traditional savings business, including group savings, accounts for 39% of the new business premium in this year, registering a growth of 33%. We shall continue to grow all profitable lines of businesses. About the distribution partners, Bancassurance business has shown a growth of 14% in new business premium, with a share of 60%. Total number of CIFs stood at 53,096 as on March 31, 2020. Instant protection policy issuance through YONO app of SBI has covered more than 1.38 lakh lives in this year. Our [ extensive ] agency channel grew by 13%, contributing 20% of new business premiums. Our total number of agents stood at 1,30,418 as of March 31, 2020. During the year, Others channels -- that is, direct, corporate agents, brokers and web aggregators, grew by 60% in terms of new business premium. Protection premium through online channel -- that is, web sales and web aggregators, registered growth of 41%. In the area of profitability, the company's profit after tax for the year ended March 31, 2020 is at INR 14.2 billion as compared to INR 13.3 billion in the previous year ended March 31, 2019. Our solvency as on March 31, 2020 is 195%. As mentioned in my opening remarks, Value of New Business has shown strong growth of 16% and is now at INR 22.2 billion on effective tax rate basis and on actual tax rate basis at INR 20.1 billion. VoNB margin at 20.7 percentages on effective tax rate basis, improvement of 90 basis points and on an actual tax rate basis at 18.70 percentages. Embedded value stands at INR 276.40 billion on effective tax rate basis, a growth of 16% and on actual tax rate basis at INR 262.9 billion. In the area of operational efficiencies, our cost efficiencies continued to improve with OpEx ratio reducing from 6.3 percentages in FY '19 to 5.9% in FY '20. Our 13-month persistency ratio is 86.1 percentages as compared to corresponding last year of 85.10 percentages, showing an improvement of 107 basis points. On regular premium basis, 13-month persistency stands at 83.7 percentages and 61st month persistency at 50.0 percentages, an improvement of 254 basis points in the latter. The total assets under management stood at INR 1,603.6 billion as on March 31, 2020, largest among all the private life insurers now with a growth of 14% as compared to March 31, 2019. The company continues to drive digital expansion across the company, with 96% of the proposals being submitted digitally and 37% proposals being processed through automated underwriting. Customer satisfaction, a key focus area for the company -- our grievances with respect to unfair trade practices stood at 0.09%, one of the lowest in the industry. We shall continue to focus on our vision backed strategies of innovation, customer satisfaction, stronger digital connect and automation. During these times of slowdown, we continue to maintain stability and consistency in financial growth, strengthen the control environment and ensure trust to create sustained value for all the stakeholders. Thank you very much for giving me this opportunity, and we are now happy to take any questions that you may have. Thank you.

[Operator Instructions] The first question is from the line of Ansuman Deb from ICICI Securities.

Sir, if you could -- if I see the APE walk, APE's mix of our products, we have done some amount of non-PAR business in Q4 as well. If you could give us an outlook of our strategy in the non-PAR business, considering a lower interest rate outlook, that will be great.

Yes. This is Sanjeev. I think most of the business that we have done was in quarter 2 and quarter 3. In quarter 4, it has tapered off. And that too I think very intentionally in line with the reduction in interest rates. So quarter 4, we didn't do much of individual non-PAR business. When I say individual non-PAR, it's -- I think you would be referring to the product with the guarantees that come with the product. Going forward, for the next year, I don't think this will be one of our staple products. Like last year, we did a fair amount of business compared to the previous year. But again, I think next year, looking at the situation, we'll be kind of moderate on this product. I won't say we'll totally eliminate it, but again we will be moderate. And then this product requires hedging mechanisms and then the availability of that. So it to some extent would depend on that as well.

Right. And sir, the negative economic variance in the VNB work would largely be due to this product?

Yes. That is one. So there are -- [ a yes ]. In terms of negative economic variance, I think we are talking of the assumptions -- the [ RFR ] assumptions, where we get hit because of this product, to some extent, on the [ FMC ] product also to a small extent. The annuity, we were able to reprice at a good time. So there was no issue on that.

The next question is from the line of Madhukar Ladha from HDFC Securities.

Can you provide us some color on the growth outlook and for this quarter, for 1Q FY '21? And what our strategy has been in terms of -- trying to grow the business and which products can move and which can add something in some sense of -- there?

So what I would say is that times are uncertain -- there's a lot of ambiguity in terms of what is going to happen, what is not going to happen. And the economy is certainly, at the moment, at stand still. So first quarter is going to be a little lower than what has been done in the previous -- in the first quarter. But certainly, we have ambitions -- we show growth. So we are not committing to any number at this point in time with you. But certainly, we'll be happy to show some sort of a single-digit growth. Now that single digit could be whatever. But certainly, we are still considering that our growth even in these difficult times is possible to be achieved. And for that, whatever changes in terms of the offerings and pronounced selling of a certain kind of product, which could be suitable for these circumstances, will be the way forward for the company. And certainly, the digital route as well with SBI, which is the YONO application, our own website, and our sales force engaging in a digital way with the customers. So that if a face-to-face contact is not possible, certainly, we can communicate and inform the customer, explain things to him and get our sales through. So I would request Abhijit to please add on to this.

Just to add, I would agree that first quarter will be low activity periods. So only from second quarter would be seen how the economy picks up and how we are able to do sale. Having said that, there are various measures being implemented by the company to meet ambition of showing positive number over risk, that is FY '21 positive number over FY '20. But at the moment, it's too early to say how it will pan out. Second thing I would want to say is we do think that our protection will continue to gain customer preference and other [ references on ] protection will continue in the current year. And there, we do think that we will be able to -- we are quite confident that we'll be able to show significant growth over the number we have shown in FY '20.

Right. And on the cost side, how much -- what can we do? What are our plans over FY '21? How much -- can you like talk a little bit about how much is fixed and how much is variable? And how much can we control the fixed costs so that our margins are not severely impacted. So how do you think about that?

Sanjeev, can you please tell...

Okay. Just to give you the perspective, we are -- currently, if you see the OpEx is under very much control. And this is the right time for us. We have to invest, and we have been investing a lot in our infrastructure as far as the IT and our processes are concerned. And what we believe is that at this moment, we have already started putting a lot of infrastructure in place for training of our agents and through digitally. So we will be putting effort on the expense side. And we are not at all at this moment, the status where we are in the OpEx side, much worried. The position, we believe that we -- which [ are conditions ] for us to increase our growth will help us through the expense to a little extent. And overall, what we have decided that this year will be [ morely ] focused on digital. And there are a lot of states have already been established as far as the frontline sales is concerned. And we'll continue to do that. And we don't feel any issue at all from the overall expense side at this moment, and we will evaluate and we're monitoring it very closely. And we'll see how this is going to stand out for next 6 months, and then we'll see.

Look, SBI Life already has the lowest -- one of the lowest cost ratio, which is 9.9% overall, 5.9% on the OpEx side and 4% on the commission side. Now we have the highest number of branches, the SBI Life branches, 930 odd. So certainly, our presence is well diversified. We are well encouraged in every part of the company. So we can certainly look to if we decide, if we see -- if we've seen going forward, that this is an area where we need to curtail or we need to make that investment, we'll define it accordingly. Areas where an advanced decision has to be made for the year, that is what we are doing; where over evolution of the period, certain expenses have to be curtailed, certainly, we will do that. But not something which is going to lead to business, which is leading to capacity expansion. So it will be all about judging the situation as we go and then taking steps which are possible to be taken at that point in time. So in these circumstances, nothing can be cast in stone, and it will always be a flexible shifting position depending on how things are panning out. Sanjeev, you were saying something.

Yes. I think almost entirely -- it's same whatever you are saying there. What I am saying is, at this point of time, it's too early to do anything which disrupts the current business model. For example, we kind of lay a focus on agency channel, which is [ considerably expensive ]. So we continue to lay focus on the agency channel. And then going forward, depending on the situation, how -- to what extent, over what period this situation continues? Possibly, [ we'll have to play to all ] subsequently. But again, at this point of time or maybe towards the next quarter end, I don't think any sensible decision can be taken regarding radical changes in the business model. Now having said that, whatever we have been doing over the last 2, 3 years in terms of digitalization, in terms of uses of IT, of all sort of -- automation and all those things, would continue unabated. So that is not going to change.

Okay. Just one last question. The provisions for -- on investments has increased considerably. So in FY '20, the total number is about 12 -- about INR 130-odd-crores.

Yes, INR 130 crores.

Yes. So can you give me a breakup of that? And maybe also let us know if there's any outstanding stressed exposures still left?

Gopi or Sangramjit, anybody.

Yes. For the year only, as far as stressed assets are concerned, we were having only the DHFL, which we have already spoken about, and it is fully provided. And at this moment, we don't see any issue on our exposures are concerned. And as and when the situation will arise, we will take it all appropriately. So we don't see any issue at this moment because 92% of our portfolio is now above -- AAA bonds, and we are very much comfortably placed at this moment. So we will see how the situation will arise.

And can you give a breakup of that INR 130 crores.

We will come back to separately. We'll come back to separately on that.

[Operator Instructions] The next question is from the line of Ajox Frederick from B&K Securities.

Sir, my question is related to ULIP. We have reported a lower fall in Q4 in comparison to competitors who have released that result. What is -- what are we doing differently? And do you think this difference should continue in FY '21 as well?

Yes. Can I take this? Yes. So in ULIP, one is -- in terms of debt, the component of debt is higher than equity. You must remember that the bond fund which we have is the highest in terms of value, it's a INR 22,000 crore fund. Last year, we have gone through all the pain in terms of owning mid caps. Because if you look at year before last, mid-caps were doing well. And last year, it went through the pain and we reduced our exposure to cap to a large extent. So just to give you some numbers, it was 20% plus, and we are now at around 6%, 7%. So this has helped us significantly in terms of outperforming. And we held our view that things were actually looking very expensive. And we tried to be as near to the benchmark as possible. And in terms of outperformance, we thought that within the benchmark stocks, if we are tweaking the weights and trying to outperform, should be good. So net to net, the answer is, debt has helped us, debt has not actually moved anywhere. The component of equity, we were very cautious in terms of what we are buying, and we tried to be more defensive. This is what has helped us compared to the index and compared to competition.

Sir, I was more talking on the growth aspect. The -- ULIPs have degrown by only 14% in Q4, whereas the competition has reported close to 40% kind of dip on on APE.

Okay. You're talking about the pre-APE [indiscernible] growth. Abhijit, anything?

No. So for us, we have continued to sell ULIP. It continues to be a profitable product for us. And given our mix, our customers are comfortable with what they are buying. So we don't see any reason why we should curtail ULIP growth. If customers are buying, and it is a reasonably profitable line for us, we will continue.

Yes. I just want to add to that. I think we have got a satisfied group of ULIP customers. One possibly, they understand the business pretty well, the product pretty well. So we're very focused on a mix of debt and equity, that is number one. If you look at the surrender ratios that we have on ULIP, it is by far the least in the industry. It's fallen from 5.2% to 3.9%. So that is -- if you ask me, that is some testimony to the kind of customers we are selling to -- it's not necessarily elite customers or high ticket price customers. We sell to customers across the country of all profiles. But again, I think we are doing well as far as the ULIP sale is concerned.

Got it, sir. So just a question on protection rate hikes. We haven't taken any hike yet. So will our margins be impacted going forward?

Yes, I think that's an interesting question in the sense that after the hike from other companies for the rates, we are close to our competitors' rates. So essentially, we are marginally costlier than HDFC and then we are cheaper than ICICI. So all along, we are selling protection at a substantially higher rate. After the repricing from other companies, we are more or less on par with the major peer companies. What we'll do is we are planning to enhance the product features. We are waiting for the rates to come through in the market, which have done that. We are waiting for the reinsurance to spell out their revised rates. So we have got that. So there will be some feature enhancement in our bucket of protection product. And then we'll align the rate marginally. It doesn't require a great deal of enhancement. So profitability margins are not going to be impacted at all.

[Operator Instructions] The next question is from the line of Nidhesh from Investec Capital.

Sir, on the EV bucket and VNB bucket, if you can explain the change in operating assumption, what is causing that? And why it is positive on EV and negative on VNB?

Yes. On the VNB, if you look at the walk, there is an improvement because of mix, which you would appreciate comes from [ line of ] greater production, more amount of individual non-PAR that we sold. So it's [ about ] the product mix. On the assumption, not a great deal of change other than there is a provision of additional CRM adjust in the assumptions that we have today. So the current assumption was carried roughly around 2% to 2.5% of the APE as additional risk margin provision. That is for the risk that we see in the coming year -- this is a risk of higher acquisition expenses, the risk of overall higher expenses. I don't think there is a great deal of that will happen on the claims side -- maybe marginally. But it's mostly expenses, not because we'll be spending more, we'll be spending less, but because there is a likelihood that the business volume would go down. So this -- the impact of 1.3% negative is entirely recoverable. And there are a few components regarding [ 1.3%, ] like persistency moves a little bit here and there.

And what is the assumption change in the EV box, sir?

EV box, again, the [ rupees ] and [indiscernible] expenses do change because we move on -- always move onto the actual expenses. There will be changes in persistency, adjustments here and there, that can have [indiscernible] -- whole lot of things. But there is nothing very specific that we have to change -- 1 particular assumption a great deal, [ we thought of that. ] So it's a -- basically a continuous evolution of the assumptions. There's nothing really [indiscernible]. And the number is also not great. I don't think it's a big number; it's a small number only.

And sir, going forward, whether we should look at the effective tax rate because going forward, the tax rate benefit we are not going to get after dividend income. So whether we should focus on effective tax rate EV or without effective tax rate EV?

My point of view here is that different people would have different points of view. Remember, in my point of view, here would be that for this year because what happens is there is an effective tax rate available for this year, '19, '20. So as of March '20, there is an effective tax rate. But then if you carry that to -- if you carry that to 2021 with Section 80M coming in, and then we are not paying any dividend this year, so obviously, the effective tax rate is the same as the actual tax rate. So theoretically, that is the position. So what we have done is you see our presentation, we are presenting the main numbers, the basic numbers as on the actual tax basis. But again, down below, we have given a comparison that if you use the effective tax rate, we are not calling it the basis. If you use an effective tax rate of 19.3, this will be our EV, and that is more comparative . Now going forward, a lot of things depend on whether we'll pay a dividend next year, we didn't pay this year. So what kind of -- the dividends will receive the investment mix and all those things. There are a whole lot of other considerations. But again, the major one is the dividend payout. Because today, the tax relief would depend on how much of dividend that we pay. That is an uncertain situation at this time. Maybe 6 months, 9 months down the line when things improve, the future prospects look good, then we'll say, okay, we are back on track as far as dividend payment is concerned. So that is the uncertainty that we are facing at this point.

Sure, sir, sure. And lastly, if I look at Q4 performance, our 9-month performance was pretty strong in terms of protection growth, APE growth. But if I just look at Q4 number in terms of premium protection, the Y-o-Y numbers are quite flattish. So what is the reason for such subdued performance in Q4?

As for the volume overall itself has taken a hit because of March impact of last 15, 20 days of March not being available, primarily.

Okay. Because I think the protection was even slower in the month of Feb? Because if I look at the monthly numbers, we have the commercial group for the month of Feb was also quite subdued. So I was just wondering whether protection had started slowing down earlier? Or it is just in last 10 days impact.

No, no. Last 10, 15 days impact largely.

I think it's a March impact that we see largely.

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

Just in the EV walk, persistency were around INR 240-odd-crores compared to INR 5 crore of last year -- looks on the higher side. Just wanted to understand whether we have significantly -- did we change anything with respect to assumption changes with respect to persistency? And I just also want to know what exactly we are building with respect to persistency? In [ BRS still ] we mentioned it is a rolling peer average. We are still sticking to it or we actually [indiscernible] as we experience what we realize in the year to calculate the purchasing [indiscernible] impact on [ VNB ].

No, across the major segments like ULIP and PAR, individual non-PAR, we used to get a significant persistency positive. We used to get that earlier on. So we used to get a knock on basically the group GTI and other because we used to assume a 3-year business. And if our annual one year annual kind of business, the schemes that would not renew, we used to take them as the last, nonpersistent. What change we have done is basically that we're now assuming the 1-year business are 1 year business so the persistency and price are [ in sync ]. So earlier, we used to get positive, but again, it used to be knocked off -- offset by some segments. So that is all.

Okay. Okay. And just can you break down that INR 700 crores economic warrant into equity bonds in DHFL?

Yes. Yes. Yes. I can do that for you. The debt mark-to-market and equity mark-to-market virtually cancel each other. So equity mark-to-market to INR 990 crore negative. Debt, we have got a positive of around INR 915 million. So overall, on the mark-to-market side, we are getting a net INR 75 crores negative. And then we have the usual revenue account investment surplus of around INR 560 crores. The shareholders get their profit, which is around INR 400 crores. There are a few other things, changes, second order changes, which is around INR 500 crores. So net-net, that is what we are showing around INR 710 crores odd. The economic assumption change, that is a change of the yield curve, is around minus INR 1,200 crores. So that is a big component there.

Okay. And then when you say bond INR [ 960 ] crore, it includes DHFL out of this?

No, this is all mark-to-market. DHFL, whatever provision is there, that would have already flowed through the profitable loss account. So that is already there. So this is apart from that.

Okay. Okay. And sir, just wanted to understand, given you don't want to focus on non-PAR going ahead given the guaranteed interest rate cycle and ULIP probably the demand could be lower compared to what it was last year. Then I just wanted to know, given we are confident on delivering the single-digit growth even in this environment, what -- which product will drive growth? And with channels, do you see that kind of a growth, basically? And how -- just wanted to understand your overall broad strategy, why you are confident that given non-PAR also [ not there, ] ULIP taking a loss due to the lower demand, the growth of around the low single-digit is still possible for you?

Abhijit.

[indiscernible] showing the growth over last couple of years. I think if people are uncomfortable with ULIP, the PAR could make a little bit of comeback. On non-PAR, we are saying that we will -- if the customer is willing to buy, we are happy to sell. We have already repriced the product for low leads. [ Any ] required [ basics ] from this [ may, ] it will get repriced. If required and interest rates go down further, we will reprice. So we will reprice at whatever is the market requirement. And if at that rate, customer is happy to buy it, I think we have no challenges in selling the product at that level. Plus, as you have seen, our ULIP continues to do reasonably well. We do think that if people -- after the activity starts in second quarter, there could be some sales coming from there. Broadly speaking, what we are saying is we will see significant growth in protection. The remaining will depend on how the market pans out and how -- what customers want to take, whether PAR, non-PAR or ULIP. As far as channels are concerned, we have one more big tie-up in terms of UCO Bank, and there are more which are coming for tie-up. But probably this year may not contribute significantly as they could come in second half of this year. But SBI and agency, both our [ main case ] channel. If we could get, and we are not guiding margin and positive growth, we should be happy. But we would get a significant growth from the new tie-ups that we have over what we have got over last 12, 15 months plus UCO Bank, which we have just got in [indiscernible].

So, basically, the substitution between ULIP and PAR is quite possible to your customer base, basically. That's the way should I look at it?

Correct, correct. Yes. Yes.

Okay. And just a bookkeeping question. Group Protection, can you break it down into credit product and retail for the current year and last year?

Group...

Credit product is roughly INR 1,300 crore, single came in INR 1,350 crore, and remaining .

Okay. Okay. And last year, if you can tell me...

[indiscernible] Similar number [ 15, 16 only. ] No, no -- last year was a lower number, INR 1,200 crores roughly on credit product.

I'll give the numbers. Individual was INR 371 million last year, it was INR 529 crores this time on a NBP basis. INR 1,130 crores was [ rate like ] last time. This is INR 1,351 crore. 142 was GTI last year and was INR 202 crores this year. Total, you can add it up, it's somewhere around INR 2000-crores-plus. INR 2,000 crores this year.

Yes. Yes.

Against INR 1,643 crore last time, 27% growth.

The next question is from the line of Sumeet Kariwala from Morgan Stanley.

I have got two questions. One is persistency. If you can just give some color on the regular persistency number, if you can just share for ULIP and protection, please?

And sir, you have that revenue and ]?

Sumeet, can we come to you off-line on this, please?

Okay. And the second question was operating assumption change. Did you share some color on that? What drove that this year?

Operating assumption change...

Yes, Sanjeev shared for the last question, we answered it. In the last question, I think, last.

Yes. I mean, if you're talking of the ULP walk through, so there, I'm saying on the VNB, it's mostly coming from -- there are a few changes not radical changes. But again, on the VNB, what you see that 1.3% negative is mostly because of the increase in the CRM expense. That is a risk provision that we have done for the following year. We see additional risk of maybe expenses rising or persistency falling. So that is the major component there. But again, there is no severe changes on the operating assumptions anywhere else.

I'm talking about the embedded value movement. So in that there's a positive operating assumption change of INR 1.2 billion, right? That -- what is driving that?

So if you see Slide 27 or 28, we have given a break up.

Yes. So there are some changes -- are there pretty much there.

Okay. And last question. So operating experience variance, there is other category of INR 1.9 billion. Any color on that, that's quite meaningful at this point?

Operating?

Operating variance in the other category, there is a positive variant of INR 1.9 billion.

Yes. That is a mix of many things. I mean, you would have -- just a moment. You would have reinsurance, you would have revival, you would have a whole lot of things, small things, basically, you would have some mismatches of numbers. So those kind of things would be there, you would have basically change in the [ creating rate ] also sitting there. So there are around 8, 10 items which contribute together, then you would have the provision that we do for [ statutory basis, ] global results and all those things. So a lot of things, small, small amounts put together would give rise to that kind of thing, that will be a number of things. But again, you won't have anything major there. I think the major thing that sits within the other operating variance is the release of the margin. The major component is that, if you look at it, other things are very small. And when I say relief of the margin is whatever is provided for the CRM charge last year as a risk margin, [ we would ] not actually come through this year. So that is a relief that we get, which fits within that other operating variance.

Got it. And any color with respect to persistency trends in the month of March and April?

Sorry, persistency?

Any color on consistency trends in the month of March and April. Because the number that you have given is over February, right, like what everyone does.

Sorry, I'm not getting it.

Persistency.

Persistency. So the persistency number, we do think that there has been a little bit slowdown in month of April as far as collections are concerned. We have broadly hit our targets, but slightly lower than what you would expect. But we will have to see as we go forward, whether this trend will continue on what we would be able to give a concrete comment only by June

[indiscernible] Carry on.

What I would say, [ what I can add in ] over here -- as you have rightly said that February data we have seen [ as in March ] is persistency. But however, the March persistence or April persistency will be taken care of by the other factor. As you know, the regulator has been -- comes out with the extend some of the grace period. So basically, if you calculate it today or tomorrow, it can really [ get in change on this slide. ] So what Abhijit just said, also at the end of the quarter, we may have the exact clarity that how the things are moving on. Because this is the part everybody who knows current situation, people are getting -- instead of 30 days, they're getting 60 days time to come back to do the -- pay their premium. Though common parts would be there, obviously it affects the overall salary, all this is going to impact it. But having said so, they are having more timing. So if you calculate as of today, maybe still, it can go a little beyond also. So either you have to take this [ 15 million ], [ 16 million ] to calculate or you have to wait for some time to [ debt ] to see it how it improves. On a broad basis, what I would apprise you is that the target that we have set for renewals for the month of April has been achieved by us. It was a little lower than what we would want because we wanted more. But the target was exceeded by us in the month of April.

Sumeet, just to give you the numbers which you asked in the first question, the ULIP persistency is almost same as of last time. So we are at around 85 plus. And in the PAR, there's an improvement, we are at now 80-plus. So both -- we have seen an improvement.

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

I just wanted to understand there is a fairly sharp dip in our solvency ratios on a Q-o-Q basis, almost 35 percentage points. Just wanted to understand the breakdown of that and also considering that the worst sales get to come in 1Q, where do you think we are on solvency going [ by ]?

Just for a second. So what I try to say, if you look at that part, you're rightly said, as of December, March, if you look at the overall market had fall. Because of the market fall, your asset value and abbreviation would be little bit impacted. And that is not true for only SBI Life, that is true for the -- almost all the companies that are in line with that. Not only it depends on your business [indiscernible], because different business [ the solvency factor ], what we do as for the statutory solvency, all of you must know this is the factor on this. So factoring the solvency based on which type of product, so accordingly, solvency is a [ platform ]. So being we are doing a little bit more production in also our business growth is a little bit around [ 10 ] ECs whatever you are doing. So put together all the footings put together and because the market fall, your asset value falls, obviously, solvency to [indiscernible] to that extent. And that is the only reason for that. But having said so, I say, that being so much of debt on market down of the equity as a base, which is the equity for the -- both the policy as well as the non-Par policy. Still our [indiscernible] is around 1.95. So if you look at for last 2, 3 years, our company having around 2 or so little bit after here and there, around that only. So having all this but it to 1.95%, which mark not had than the your regulatory requirement. So yes, the main vision for this down is nothing but the only ASM down to that extent. And also the business weeks and new business stain as it should suffer to happen. And to build your knowledge, and you would be already aware, the regulatory norm is 1.5. Of course, our Board stipulates a higher listing. But even when March, in the month of March, we as insurance company have made a representation that the solvency ratio should be either got down to 1 because the equity markets are falling. So in terms of cushion, we have the available cushion. And if at all something needs to be done as a coping mechanism, certainly we'll be open to go scoping mechanics.

Great. And secondly, on protection, right? If I understand it correctly, a large part of your retail protection policies are ROP. And probably one of the reasons why pricing also is higher because there is some bit of savings baked into that. So when you say that you're basically going to wait to see how the pricing settles and as a result, decide on your protection policy. Just wanted to understand how are we managing the margin on that front, considering the product mix that we sell versus some of the peers sell different.

Here -- any refreshing here, we are talking in terms of the peer production. So that is the individual term business, not the ROP business. ROP business, I think the way it is priced, in any case, we return the premium in the end. So we are kind of okay with that. It's subsequently acceptable. What we are trying to push is the fuel protection. And then whatever has happened, whatever has transpired in the last month or so in the month of April would help us. Because the rates generally in the market has gone up by around 15% to 20%. So that rate of the peers come pretty much close to what we have today on our existing business without us doing any kind of repricing. So in that sense, it protects our margin. And even if you change a rate, it will be very minor, just it looking or trying to align with the rates in the market or really making the long-term a little bit cheaper so that you will see the profitability coming through. So that is basically also -- that is the focus as far as repricing is concerned. On the ROP, we are comfortable there. So whatever we are getting, we are okay. There is no

So, what is the mix of ROP versus pure? And how much do we reinsure as a proportion?

Our protection products around -- it depends on the kind of products. But again, on the large ticket size products, we would be reinsuring somewhere around 70% to 80% of the business or at least 60% of the business.

Okay. And split between protect, pure and ROP?

I think for banca, it is pretty large. But I need to say, overall, I think it comes to, Abhijit, [ comparatively ] around 80% as ROP.

Yes, yes. 80%, 20%. Yes.

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

So you have been sharing or discussing this in the past. So I just wanted to check what would be the VNB of the protection business?

VNB on the whole, because we have got a mix of -- the spectrum is pretty light from this end to that end. On one side, we have the ROP product, it's the protection. But again it's an element of investment. And the other side, we have Credit Life. So on the average, if you take it, it falls somewhere at around 70%, 75% for the entire set of product.

Sure. The other thing was on the defective -- sorry, on the effective unwinding rate, so the impact of movement in interest rates, basically should get reflected in the next year's discounting rate? Or should it get reflected this current year?

It's a theoretical position only, in practice, it doesn't really make much of a decline. Because if you see the unwinding rate, what we have taken this year at 8.5%, that would appear at the top of the analytical movement. But subsequently lower down, that rate is adjusted to eventually the actual rate for all the movement. So that is how it goes on every year. So we might decide to [ looking ] going forward, possibly, the interest rate would come down. So the best estimate rate is we will go down from 8.5% to 8%. But again, what really matters is what rate you actually earn during this. And that is, in essence, what comes to. These are all just as a presentation.

Sure. And just one thing, you don't gave the backup of economic change of INR 710 crores. So I think, can you give that , please? So if you could just give that piece-by-piece, once again.

Once again. Okay, sorry. I think . Yes. The debt [ to ] mark-to-market is INR 900 crores, and just rounding it up, INR 900 crores. Then equity mark-to-market is around INR 1,000 crores. So net, we have a loss of around INR 75 crores. We got an investment surplus in the revenue account of around INR 550 crores. Then shareholders earned INR 436 crores. If you take it as 430 crores. There are a few secondary items. Another secondary items, investment income has a bearing or unit-linked business going forward. Because the SNC would increase. So that is roughly around INR 500 crores. If you take that, it comes to around INR 475 crores. All these items that I said, there is a INR INR 45 crores and so leave that out. INR 475 crores on the assumptions change from the change in the yield curve as of March '20, that is a negative of around INR 1,200 crores. So roughly, it comes to around INR 700 crore.

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

Sir, firstly, on the sensitivity part, I just -- I noticed that your sensitivity thing NBV from interest rates is significantly higher at the end of the year versus what you reported, I think, last quarter. So any specific reason for that? And just to reclarify on persistency. I believe you mentioned that the improvement in ULIP was minimal. The ULIP remains largely flat, yet we are seeing persistency basically improving across most of the major [ reports ]. So what would be the key driver of that persistency improvement?

Persistency improvement happens across the board, all the products. So ULIP improves, the other products also do improve along with ULIP. So the improvement is right across all the products. So it's not confined to any single product at all.

Okay. And sir, could you clarify on the sensitivity based on the interest rate for NPV?

Let's see. I don't think there is any major change, except I'm just looking, trying to look at the slide. It's -- could be business mix. If it has increased, it could be because of the -- not the individual non-Par product. It could be because of that to a great extent. Because that is the only product where the proportion has increased significantly.

The question is from the line of Udit Gadia from Khazanah Nasional.

[ F'21 ] is likely to be a challenging year for the bank. So maybe the focus of SBI's management and even employees could be on collection vis-à-vis to promote or cross-sell. So how do you guys -- anything there?

Abhijit, you could say anything.

There would be a challenge. I don't deny that. And that is why we are saying that it is extremely difficult to give guidance at this moment for the current year. Of course, we are working out new innovative way with SBI to reach out to customers. We do think that we [indiscernible] through this.

Yes. I think I'll second your point that the collection of premium would be a significant activity during the year. Because at whatever cost opportunity you have to think [indiscernible] have kept up.

Okay. And how much proportion of the customers have opted for the grace period during the month of April and May? And how has been the customer [ sit over there ]?

I don't think anybody has been applied as such in a formal way, but that is already been communicated to almost all the customers, they are having as far as the policy due date. And if we add the grace period, another extra 30 days given for month of March and April. So nobody has been really as such comes out in this line. But as I say, indirectly, as you can see, what our is saying that our renewal premium is coming or similar lines may and what is expected to come, that means it looks like that people may be taking some of them and some of them may not be taking still now. That's the way to us, actually. There are nobody's to comment and tell that I want to take this particular features.

And maybe we can give this number later on by getting in touch with our operations department if...

The only reflection integration of that will get is whether the collection in the -- during the grace period is slowing down. So are we collecting? So in that case, we understand that people are in that facility. So typically, we have around 60% of the people saying during the grace period, 60%, 65%. So that is something that we'll have to see as the grace period gets over, no. So essentially, in any case, after the grace period, the policy lapses, we -- the policies in our book actually last till after 6 months. But again, the debt covers period here additional months is available to cover the -- in prevent that claim also during the grace period. So that is something that number will come through gradually, you want get some more

And lastly, on protection margins, do you foresee it going down in F '21, given it's like 75% and [ up 20 ]%?

No, there is no reason why it should go down unless we see a large number of claims coming through or the experience is deteriorating. And then I don't see any reason why the [indiscernible] experience will deteriorate. I mean in spite of COVID or whatever, I don't think our portfolio would be significantly weak because the number of claims that have come is very miniscule, directly as a result of COVID. So it's not going to impact. And we don't anticipate a big repricing in terms of trying to lower rates. So that is also not on the plan, the rates would virtually remain the same because that is where the market rates are.

The next question is from the line of Anirban from Principal ANP.

My questions have been answered.

The next question is from the line of Kush from Edelweiss.

First of all, it's great to hear that your sales varying for global. My other question is the insurance thing such as intermediated product. And if the channel is pushing 1 or 2 months, properly, and it being a small portion of our business, how are you so confident of growth in NBP in first the quarter? And also, sir, what would be your experience of April numbers as compared to last April, year-on-year?

I think when we said that we are looking for single-digit growth, we do not say that we are absolutely confident that we -- what we are saying is we are still kicking in for some growth in our budgeted numbers so that the sales force feels that an attempt has to be made. In these times when they are uncertain and you don't know how things are going to pan out, certainly, an element of suddenness or surprises will always be there. So we are not saying that we are absolutely confident. We are saying that we are moving on the premise that an element of a single-digit growth should keep the momentum going for our people and for the company. And if things improve and if there's a ray of positivity in the economy, et cetera, we could perhaps still feel that growth, right?

Understood. And sir, in terms of April numbers, do you give the kind of productivity or any kind of you are seeing currently in the channel?

Can you please repeat it? A little muffled voice.

So I was asking about the April growth [indiscernible].

April growth was not up to the mark because it was a virtual lockdown. And it is only now that in the last 5, 6 days that we have started opening branches on the ground. So I would say roughly 200-odd branches out of 900 branches have now started functioning. So there has been a lock down. There has been a slowdown. There has a real worry among the sales force. And we get the interest, the health language of our workforce as a top priority. So naturally, things were not usual in the month of April, and there has been a dip. But now we are certainly moving back into our arena, and we will see how we can let things moving faster.

The next question is from the line of [indiscernible] from Franklin Templeton.

I'm sorry, I want to belabor on that investment variance again. The reason I'm asking the question is, if I look at your sensitivities that you had publicly or earlier, a 3.6% increase in EVN, 1% decline in rate and a close to 1.4% decline or a 10% decline in equity [ value ]. So this INR 700 crores based on just the stable does not really add up. So just wanted to get a sense on what we are missing here.

No, I don't think we are missing anything. INR 700 crores is all taken together. So you have got positives, you have got -- on the debt, there is a capital appreciation. On the equity, there is capital loss. And there are other components positives also there. So if you're looking at INR 700, a net of around 6, 7, 8 different items. So there is income from shareholders. They all are bunched together in the economic area. So that is basically the value-add from your -- through investment activity. So there is no single component, it's around price that component. And that is why it's coming through like that. So equity loss is roughly around INR 990 crores, but gain is around INR 960 crores. Because the yield have gone down, so we have gained on the debt side.

All of that is on the shareholder book, is it this INR 900 crore

Yes. All of this is under shareholder.

So then the -- I remember in last time when someone asked this question, you said there is a negative INR 1,200 crores. So how much change in yield growth?

Yes. So that is for the future assumption, that hits the future process. So that is not on the network. So that is all the future profits. But again, the future profit at a different yield curve or lower yield curve gives you a hit of around INR 1,200 crores negative.

So my understanding was that on [ MCV ], when we sort of decline, will we lower the interest rate, that should lead to an increase in the present value of future profits, right? I'm just trying to understand this point as to why the decline in yield curve has led to a decline in profitability, declining the value of future profits here?

Yes, that is what we said. If the yield goes down -- so it depends on different segments, and different segments behave differently. Like, say, if you take ULIP, it's very insensitive, possibly, you get a positive if interest rate goes down. But again, if you see the major traditional investments, whether it is the individual non-Par, the participating or, for example, our group saving, they are very sensitive to the interest rates going down. When the interest rate goes down, then you lose because these are spread business. The less you earn, obviously, your profits coming from the spread reduces. And then what we get on the movement of interest rate is a mix of this. But for our portfolio as a whole, which is different to other companies' portfolio, we get a negative when the interest rate go down. And that is what is reflected in this INR 1,200 crores negative.

Understood. Just one more question. You had indicated that on the VNB , you have taken more stricter assumptions around the cost of residual risk. Is this part of the reason why your operating assumption is negative on VNB? On EV, have we reflected those same adverse or more stress assumptions on the

Yes. Yes. on the EV also, it is there.

On the EV. It's reflected.

The next question is from the line of Prakhar Sharma from Jefferies.

I just want to confirm this part. I'm actually, for this year, you have reported approximately 20% growth in the New Business Premium. And if I look at your VNB flow, basically, based on the volumes only, there is a 10% growth in the VNB. There are adjustments from a mix and then operating assumption as well. So I'm just ignoring that, I'm trying to compare that you have a 20% growth in New Business Premium. And a 10% growth in new profit, ex of mix change of operating changes. In this segment, are you seeing compression in margins?

No, no, here, nothing happens because this is on the basis of AP, not NBP. So it's the APE growth, which comes because the margins are calculated on APE.

Right. So that number is also like 16%, 17%, right? The APE number growth?

APE is 11%.

APE number growth, 11%. Yes. So that is 11%.

11%.

11%. Yes.

Sure. And just to reconfirm this VoNB level. Economic assumption changes of INR 270-odd-crores, this is mostly risk-free returns, right? This has not to do anything with investment values and all?

No, no, no. Just risk-free returns.

Okay. So since then have, at a portfolio level for you, have these gone down even more? Because this would have been till March 31 only, right?

It's a market rate available on March 31. So after that, I don't think the yields have moved a great deal.

The next question is from the line of Hitesh Gulati from Haitong.

So I just wanted to know the new business strain numbers for FY '20 and the contribution of protection to it?

I have got for '20, the new business strain is around INR 2,200 crores. For protection, I don't have that number. I have to give it out separately.

Okay. And sir, approximately, this will be largely protection in ULIP. Is that the correct understanding?

ULIP will not be much, protection would be a significant part of this. Maybe if you take almost 50% wouldn't be protection for ULIP.

The next question is from the line of from [ VP ] Capital.

So I just had two questions. My first question would be, so have you done any kind of scenario analysis on the portfolio. Because given that we have a significant component of non-Par, do you feel that any going guide, if anything, deteriorates our solvency would be still [indiscernible]?

Not really. We have done some of the initial analysis. But as we have already discussed, our non-Par portfolio, if you look at it, there are only 2 types of product mostly or 2 to the 3 types of product. One is the pure protection, which is not so much of sensitive in the interest rate. Second one is Smart Platina product where we have a little bit of interest rate guarantee products. But it's already, to a certain extent, [ agented ] business and thorough is a return of premium product. So you not also that much sensitive. So to that extent, as all non-Par product is concerned, that's not much more impact other than the overall production in the more new instant. So overall solvency cost, as we have said, if we do the single line, as you can see it, as we have already discussed, last year, [ 2.13 ] is become [ 1.95 ] current year. So the fuller types of business lease has taken that much of fleet on the solvency. But having said so, we are already good, strong business, we are doing it. So some of the business, this production increases, your other business line activities and all our business can have the lower recommend of the . So those, how it will be treat it out or how it will be , they are not much more effect on the solvency. No doubt, the market, how it bears tomorrow, how the persistence solvency income that can have an impact. But as of now what we have been already internally very broad way, we don't have any concern about the solvency in currently.

All right, sir, my second question, so again, just one clarification on the sensitivity part. So I assume a couple of quarters back when we're discussing the sensitivity, I remember you are mentioning that as the hedging instruments are going up in India, our sensitivity to that part, specifically the group ones business and all should reduce a bit. So in the sensitivity part of VNB to interest rate changes have increased, can we assume that you're not facing some problem in finding the correct hedging instruments?

We do have hedging instruments, either it will be a derivative, the power rate agreement. Or it should be a partly bond, it would kind of replicate the liability on the asset side. So we have taken reports to the [ partly paid ] bonds. On the forward rate arrangement is something that is work in progress. It's ongoing at the moment. So if we can push that through, then we'll have the necessary hedging. I think otherwise, internally, in terms of successes, we are prepared with all the necessary SOPs and policies and approval. Everything is there on board.

Yes. Just going away, we might see some kind of dip in the [indiscernible] from the sensitivity, is that the right way to think?

Dip in sensitivity, no. I mean if you are properly adequately helped, then obviously, sensitivity would decrease. So the concern is if you are not helped, the sensitivity will go up. So either way, I mean if you are covering your risk, then the sensitivity, you would be insulated from the interest rate changes. So that is how it will be.

The next question is from the line of Prayesh Jain from Yes Securities.

Just one question on the protection margins. You said that we were in the 70% to 75% range, has it changed materially from last year?

No. It has been very, very consistent.

It has been consistent. Okay. And secondly, on the agency channel, what is the strategy going ahead? Do you think that you'll be able to hire more? And how do you plan to improve the agent efficiency?

Abhijit?

For agencies, we will continue to remain focused on the agency channel with some higher engagement with our individual advisers. We are making some investment in terms of hiring more people like select location as required. And there is some analytic going on to do better upselling to the existing customers of those advisers, and we are working on that to -- then improving their business performance.

And lastly, on the group sale, how does the [indiscernible] is there?

You'll have to repeat that.

Not clear, please.

Yes, I'm asking, sir, group savings, how is the interest rate sensitivity in the group savings segment?

It's typically higher than the usual kind of regimen. On the EV side because you have backing assets. So obviously, that asset is mostly debt. So that is consecutive interest share. And going forward, also future profits also because it's a spread readiness, so it's specific to interest rate only.

So that is the reason why you have such a high sensitivity to interest rates, that would -- because you have a very high share of group saving in interest rate.

Our sensitivity to interest rate is I think somewhere around 1.7%, 1.8%. So it's not particularly high. [Audio Gap]