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

Good evening, everyone, and we heartily welcome you all to the results update call of SBI Life Insurance Company Limited for the period ended June 30, 2020. Along with me, I have Mr. Sanjeev Pujari, President, Actuarial and Risk Management; Mr. Abhijit Gulanikar, President, Business Strategy; Mr. Sangramjit Sarangi, President and CFO; Mr. Subhendu Kumar Bal, Appointed Actuary; and Anand Pejawar, President, IT and operations. Update on our financial results and key recent highlights can be accessed on our website as well as on stock exchanges. Due to the restrictions on movement, the slowed growth momentum in the last 15 days of March and -- which continued till around mid-May, we -- and also based on the local administrative instructions and relaxations, we can see that there was a very slow growth in April and until the middle of May, and the operational environment has improved to some extent. And this is also getting reflected in the monthly numbers. In the month of June, the growth rate in individual premium returned to positive on a heavy base of 30%-plus growth of last year. The key highlights for this financial period are: the new business premium stands at INR 30.6 billion; new renewal premium has shown a very strong growth of 30% and stands at INR 45.8 billion; annuity new business premium witnessed 170% growth and stands at INR 5.2 billion; protection new business premium is at INR 2.9 billion; non-par new business premium has grown by 37%; VoNB is INR 2.4 billion; and VoNB margin is 18.7% on actual tax rate basis; assets under management stand at INR 1,753.5 billion, registering a growth of 19%. We will update you on each of the other relevance in detail. The premium, we come to the premium first. Maintaining private market leadership portion in new business premium, we collected new business premium of INR 30.6 billion, and marked private market share of 23.9%, an improvement of 398 basis points over last year. Individual-rated new business premium stands at INR 10.5 billion, leading to private market share of 18%. Share of single premium in individual business stands at 24%, mainly on account of higher sales in immediate annuity products as compared to other lines of business. Group new business premium marked a growth of 34% and stands at INR 17.2 billion with a private market share of 33%. The renewal premium grew by 30% to INR 45.8 billion and accounts for 60% of the gross written premium. Individual renewal premium has grown by 20%. Our gross written premium stands at INR 76.43 billion, a growth of 14% over last year. Annualized premium equivalent is INR 12.7 billion. Non-par products, coming to the product mix, non-par has shown a growth of 37%, with a share of 70% in the new business premium, ULIP contributes 59% of individual new business premium. Group protection stands at INR 2.2 billion with a share of 13% in group new business premium. Annuity business is at INR 5.2 billion, a growth of 170% and contributes 17% of new business premium. Traditional business, our savings business, including group savings, accounts for 65% of the new business premium in this year, registering a growth of 42%. We will continue to grow our profitable lines of business. Coming to distribution partners. Bancassurance business marks a share of 41% of total new business premium. Total number of with CIS with our -- in our bancassurance stands at 50,821 as on June 30, 2020. Instant protection policy issuance through YONO app of SBI has covered more than 1,96,000 lives in this year. Our extensive agency channel contributes 14% of the new business premium. Our total number of agents stands at 1,37,000 as on June 30, 2020. During the period, other channels, direct corporate agents, brokers and web aggregators grew by 76% in terms of new business premium. Protection premium through other channels registered growth of 8%. Coming to profitability. The company's profit after tax for the period ended 30 June 2020 is at INR 3.9 billion as compared to INR 3.7 billion previously recorded in the year 2019 for June 30 on account of the new business that we have undertaken. Our solvency as on June 30, 2020, is 239%. This is against statutory requirement of 150%. Value of new business is at INR 2.6 billion on an effective tax rate basis and on actual tax rate basis, INR 2.4 billion. VoNB was impacted mainly on account of lower business growth. So this is directly coming from that. VoNB margin is at 18.7% on actual tax rate basis, an improvement of 80 basis points on the effective tax rate basis -- sorry, of 80 basis points on the last year. And on effective tax rate, this is at 20.1%. Coming to operational efficiency, cost efficiencies continue to improve, with OpEx ratio dropping from 7.3% last year to 7.0% this year. Our 13-month persistency ratio is 85.4%, a small drop from 85.9% last year. And the 61st-month persistency has increased significantly to 61.2% as compared to 56.8% in the corresponding period last year. On regular premium basis, 13-month persistency stands at 82.6% as compared to last year, 84.5%. The total AUM has crossed the INR 1.75 trillion mark and stands at INR 1,753.5 billion, a growth of 19% as compared to last year. The company continues to drive digital expansion across the company with 97% of the individual process -- proposals being submitted digitally, and 22% individual proposals being processed through automated underwriting. Customer satisfaction is a key focus area. Our grievances with respect to unfair trade practices, stands at 0.08%, one of the lowest in the industry and lower than our figure for March. In the past 1 year, we are focused on building and improving our online processes to further strengthen our competitive advantages and improve service parameters. In the current pandemic situation also, the said developments have assisted in servicing our customers better, and we have been able to connect with our distributors seamlessly. The company supports various city- and district-level programs for the larger benefit of society. So under our CSR program, we have made a huge contribution to medical supplies and also technological assistance to the medical heroes and the fighters, the COVID fighters, like drones for surveillance, temperature checking, distance measurement, et cetera. The company has strong foundation experience and in the past, successfully managed the business during disturbing environments, and this has been proved once again. We will continue to focus on our vision and our strategies of pushing individual as well as group protection, innovation, customer satisfaction, stronger digital connect and automation, and we have a very strong and remarkable team to put all this in place. During these times of slowdown, we continue to maintain stability and consistency in financial growth strengthen the controlled environment and ensure trust to create good value -- great value for our stakeholders. Thank you very much. And now we'll be very happy to take any questions that you may have.

[Operator Instructions] The first question is from the line of Dhaval Gada from DSP Investment Managers.

I had a few questions. First was related to persistency and collection trends for the quarter. So if I look at the March to May persistency, the 13-month persistency and even the renewal premium persistency, there seems to be some decline. Could you comment some -- on that front? I mean, how are we trying to sort of pull back on this 13-month persistency? That is the first part. And also some trends around collections, how they were in June? And are things returning back to normal? The second question I had was related to individual protection. So this quarter, basically, I know there was an impact on business. But just in general, how do we see growth in this segment? And last year, we did about INR 500 crore-plus of new business premium. How do you see this sort of doubling from that base? And how much -- what is the potential and how much time do you think it will take to double from that base? So that was the second. And lastly, some thoughts around the full year business -- new business volumes. How do you see that panning out for the rest of the year?

Yes. So full year new business, we have targeted for it as if it's a normal year. So we are targeting a marginal growth over last year. And we shall be going about it in that fashion. We are very confident that if things are like what we have seen in June and July and things improve further, then we should be able to catch up on whatever we have lost. So April was probably the only month which we really lost. And if you look at our figures right now, so for the first 3 months, whatever we would normally have got, we have acquired a business of about 30% to 36% less. So that is exactly 1 month, and that is a slightly a slacker month of April, which we have lost. So I think we should be able to make that up. So I've take the last question first. About persistency and collections, I'll request my colleague, Anand Pejawar, who's on the line, Head of Operations, he'll answer your questions in detail.

Thank you, sir. Thanks for asking this question. As far as the persistency and renewal is concerned, as you all know, the COVID thing hit us at the end of March. So the last 10 days of March and the whole of April, there were major lockdowns and all. So obviously, in that month, there was a dip in the renewal collections. But at the same time, we also have to keep in mind that the regulator had given additional time for the grace period, additional 1 month for the grace period for these customers to pay their renewals, taking the COVID scenario into consideration. So if you look at April to May, May to June, we have done substantially far, far better. April was a low period for us, which was there for all the industries in the country, followed by May, where we saw a good amount of collection happening, and June was a real good month because of which, we could meet all the renewal targets that have been in place. July also is a good month. The inflows are coming in the manner which it should be -- which are expected. So we are very hopeful of meeting the renewal budgets also in this particular quarter. Thank you, sir.

Yes. As far as the individual protection business is concerned, we have set internal targets for growth. We shall be growing over what we have achieved last year. And it's a continuous process. So we will grow, so we don't -- we won't give any particular figure for that because we will play it as it goes along this year. I think there will be a strong demand for protection and protection products. So we are working towards having more products in the protection space, and it depends on how and when -- how quickly we can get the products in place, including the regulatory approvals, et cetera. And once we do that, then we will go about, but I'm -- we have an ambitious internal target, and we shall be growing in protection.

Sir, just to follow-up on that last answer on protection. So last year, we did about 40%-plus kind of new business growth, and you expect that this year as well. Will you be able to achieve that kind of volumes at the end of the year, by the end of the year?

Dhaval, I think what we are -- what MD also said, that we are looking these protection numbers month-on-month. And as we have planned for this year, definitely, there will be growth. So we will come back to you by the numbers when the December numbers will be out. But we are very positive on protection. And as said, individual as well as Credit Life, both we are eying for good numbers this year.

Let me add to that. Sangram has told December, even in September, you will be able to see -- I mean, like quarter-on-quarter, you'll be able to see the difference.

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

I have 2 questions. One with respect to the persistency itself. The number which we see in the result sheet, which is filed in the BSE exchanges, that number, the 13th-month persistency reflects as 81.6%. While in the Page #10, 13-month of persistency is 85.4% and excluding single premium is 82.6%. So there are 3 different numbers with respect to the persistency. So just wanted to understand what is the number which we need to track? That is point number one. And second question which I wanted to understand is VoNB itself. The change in operating assumption number -- I mean, assumptions have been minus 120 bps negative impact on the VoNB margin. Can you just explain what exactly it is, and then also with respect to the accounting assumption changes? And finally a data keeping point, group credit protect, can you break it down into credit protection details?

Sanketh, just to clarify, the disclosures, which has been made to exchange, that figure, which is 81.55%, that is for the quarter. And this is the format as per the exchange, correct? But if you go to the Slide #10 that talks about our total persistency, which includes our single premium and paid-up policies also. So that is at 86.1%. And if you go to the other slide, that is talked about -- Slide #25, that is only the persistency for regular premium basis. So that is at 83.7%. So this is the 3 different formats and persistency for 13-month as far as Slide 10 is concerned, it has improved. And it is almost, I think, equal to last 85.9% to 85.4%. And as far as the 25th, 37th, 49th and 61st month persistency is concerned, in across boards, we have improved. And as you know, the renewal business for us has grown by almost 30%. And we're very strong on the renewal side. So it will give us the result also in subsequent quarters. The other one I request Subhendu to...

What about on VoNB?

Yes. As far as the VoNB in concerned, as I said that only effect is that change in economic assumption has happened due to the RFR change. Like each and every time, you are saying that your risk-free rate is coming down, so your economy -- change in economy also nothing, but the only most of the impact is coming due to the RFR change. So RFR over last year of June versus this current year June 2020. And as you know, we do the month-on-month basis, all put together, that RFR change is coming under the 4.2% or that INR 54 billion. As per the change in operating assumption, there are no other assumption changes mostly, but the part of that -- how much minimal amount of negative swing is because of the [ new rate ] change. As you know that we have been already being -- have the similar types of product, and April onward this quarter, the reasons people have been changing their premium rate and we are repricing also some designing change of all those thing, work is still going on, we'll be coming out with some product in near future. So that part because of that impact of -- nothing else other than that reasons have been impacted, hence this negative part is looking up. Whether we will reprice the product is [ taking care ], also this part of operating assumption due to insurance part will be coming positive.

Okay. So sir, 120 basis point is largely with respect to the reinsurance rate, where the price hike has kicked in, but we did not take the price hike to the protection business?

Correct, correct, correct. But that work is still going on. Yes, exactly.

Yes. And sir, Sangramjit sir, to your answer, so what is the mathematical difference between the persistency, what you show it in exchange and what you show in the presentation? So sorry for asking the basic question. What is the basic difference there?

So here in our presentation, we are showing on a 12 rolling basis. 12-month rolling basis is a consistent basis, which show across all quarters. So you get enough time to recover. This is -- what you are seeing in the exchange is only for the quarter, first quarter.

Correct.

Okay. Perfect. And sir, can you break down that into detail -- credit protect in detail, group protection?

Yes. Total group protection, we have done INR 324 crores, and out of which INR 274 crores were from Credit Life and INR 45 crores -- INR 50 crores from GTI.

Okay. And sir, our strategy of trying to target the older mortgage customers, did it play out in the current year? And how much it contributed to this INR 274 crores?

What is the strategy, I don't understand the question.

Sir, we -- previously, we told that the incremental disbursement in home loans probably would have slowed down. And probably we were thinking of targeting the old customers, who have a home loan, but did not buy a credit protect from us. So just wanted to understand this INR 274 crores broken down into -- or a qualitative comment on how it was linked to the incremental disbursement growth in home loans in State Bank of India? And how much we have managed to target the older customers, where people would have not bought Credit Life?

Actually, we have not -- we do not give out those figures because it is a very complicated thing. And also, it's not -- we don't think that it is mature enough right now to analyze that. We will do that going ahead, maybe after we have done it for a year or so. Because we -- this time, especially during the lockdown, we have gone about doing that. We have targeted because there was a dearth of new customers, there was a dearth of new disbursements also. And so what happened was that we were targeting our existing home loan customers of State Bank of India. So the banca channel has targeted those people and try to get them to cover the loan. So typically, what happens is that when a person takes a house, at that time, sometimes he may not be able to afford the insurance or he may not be in a mood to actually listen to the pitch for insurance. But once he's settled into the house or he's procured the house, after that, he becomes more settled in his mind. So that gives him an opportunity to fully think and then decide that it's a good idea to protect. So that strategy is working very well, but I don't think we have the figures to give out right now.

The next question is from the line of Ansuman Deb from ICICI Securities.

Question was regarding the protection price increase. So our price increase has been lower than the competitors. And so what amount of margin increase can we expect driven by price hikes? That is one. Second is that we have seen a substantial increase in our mix of online channel from 8% in Q1 FY '20 to around 18% in Q1 FY '21. If you can show -- if you can share some elements of this transformation. How we are focusing on the online channel?

Just to talk about the protection margin and then protection premium perspective. If you -- last time also we have mentioned this line. As the reinsurance people have increased their rate, all the protection product is still under review. We are taking into account how to price it, like that stuff. So we want to make the good balance between the 2 and that we want to make it competitive. At the same time, we do not want to make our profitability, also to that extent, down. So to that balance, what we have is currently going on, and I'm quite sure that just as I said that in the near future, we are already working on this. It's roughly on the final state. When we come back to this type of product, you'll find that our product, when initially, it was not so competitive, it will be really competitive now. And to that extent, also our margin will be roughly impact. And the impact in the sense, how much margin are there, maybe a little bit here and there, but overall margin will be protected. So with that good balance we are working upon. And we also try to put in some of the extra benefit, extra feature, whether we can put it on the protection product so that, that can fulfill the other types of customer needs.

So sir, if I understand correctly, then now you are saying that because of your competitive pricing, you would gain more volume growth, so your overall profitability would be maybe stay intact?

Agreed, agreed. To the extent, as I said also, I have to pass on some of them onto our current rate. I have not priced them so far, right? So currently, our premium will be much lower. So hence, the margin may be getting affected because of that reason only. But when we are repricing is such a way that I'll take care of the little bit of margin part and also the volume also increase because of the competitive nature, overall margin also and overall value new business will be growing.

And so sir, that benefit was there in the month of June, I suppose, because of the volume growth that we see, that would be a right understanding?

Not to that extent. Because the [ halo ], as you saw, our overall business volume is not that much. Month of May, we have roughly not done in April, as you know. And only we have done a little bit of June only. So that volume has not increased to that extent. As soon as we increase, that part will come into picture. But as of today, as I said that I have not increased the premium or I have not reduced the premium. Our early premium is exactly as it is. So a little bit impact in our business has got hit but that has been coming down to the extent of the extra reinsurance loading.

Right, sir. And sir, on the online channel phase, we have had a wonderful increase in the online mix share. If you can share some color on that.

Amit (sic) [ Ansuman, ] actually, I think you are referring to Slide #7. We talked about contribution of the alternate channels. Actually, just to clarify, that includes my group business also. So the direct is nothing but my group business, and online and web aggregators are the 2 other channels. So overall, this is majorly contributed by the group business. So direct and online channel is still on, and we are doing numbers, but I think we will improve accordingly in coming time to come.

Sir, I was referring to Slide #23, where there is banca agency and others. So this others has gone from -- to around 18%.

Correct.

Others is the other banks we have tied up with. That is a major contribution there.

Okay. Okay. Understood.

So that is growing. That is 18%. So that is correct.

So there has been some Y-o-Y increase in contribution from other banks.

Yes. Yes. Yes. There has been an absolute growth in the premium numbers coming from other channels.

The next question is from the line of Ajox Frederick from B&K Securities.

Sir, if you can briefly talk about the strategy to push retail protection through banks, like any steps you have in mind.

Yes. So Abhijit?

So there are multiple work that is already going on, on retail protection. As we said, that we are very confident that the year-on-year, we will show growth this year in retail protection compared to the numbers we have seen last year. So we had seen some, how do I say, unseemly price war in the retail protection, which is no longer applicable. So that itself will help us in the quarter when a couple of insurance companies have taken price hike, and I'm sure that there are others who are going to pay, and our product will become much more competitive. Also, there is a significant amount of work, for example, which had gone on in YONO. And in YONO, in first quarter, which is a simple 3-click process, we have done more premium than what we did whole of last 12 months. So whatever premium we did in FY '19/'20 full year, that premium we have already exceeded in first quarter of FY '20/'21. And we are having other similar other strategies for retail protection coming through both agency channel as well as banca channel. Also, work is going on [ non-Trov ] products, and we have seen good increase coming in the [ non-Trov] products also.

Yes, sir. That was my next question actually. Because earlier, the return on premium was our focus. So now bank seems to be focusing on non -- written on premiums.

Let me be honest. [ Trov ] will continue to dominate our protection, but the share of [ Trov ] will come down compared to what it was in past.

So it was somewhere close to 80% to 85%. So where do you see that moving around?

We are not giving any guidance on that, but it will definitely come down from that.

We are not aiming for reducing the [ Trov ]. If people want [ Trov ], they'll get [ Trov ]. But we will also be pushing pure protection. So whatever pure protection will do, it will be probably growing the market and going in for more protection. So it will be like, for example, the YONO, has already covered 1.95 lakh lives in the first 3 months. So that is the direction that we'll be taking. More protection products will be available but we are not going to discourage or stop [ Trov ] . I think what works for the people Customer is what is best.

Okay. Okay, sir. And sir, on guaranteed business, what is our view there? So banks, have they shifted towards guarantees now?

So the guaranteed business, again, the same thing. The guaranteed business is not something which we will be consciously trying to stop or something. But what happens is that there are a lot of constraints around the pricing. So what happens is with this kind of a market, and the yields going down and the equity markets being uncertain, what happens is that the guaranteed -- the amount that we can guarantee or the returns that we can guarantee will probably come down, and they may lose their attractiveness to some extent. So that may cause the customers to prefer it less. But in uncertain times, you can never say. So in uncertain times, lower return may also be acceptable. So going ahead, we are prepared for that also.

Perfect, sir. Perfect. And agency has just started doing protection to a greater extent recently, sir?

Yes, yes. [indiscernible] all our internal targets. Abhijit, please.

Sorry. So we have -- so agency, we will see our year-over-year growth in the protection business that we had. We have already seen in quarter 1, and that trend will continue.

Have you tweaked any incentive structure towards protection for agency?

See, we do a lot of things. I mean I really don't think I can specify all the things. Yes, we do a lot of things to motivate our staff to also -- so we have -- the products that we feel that are good for the company and for the customer, and we make sure that our people sell those.

The next question is from the line of Harshit Toshniwal from PremjiInvest.

A couple of questions. Firstly, on the retail protection, when do we plan to take the price hikes? You said near term, but is it going to be in the next 1 month itself? And second, sir, of the -- I think INR 0.7 billion APEs are individual retail protection. Of this, how much has come in June month? If you can classify broadly how much percentage. And how has the traction been in July versus when we see the retail protection?

We are -- so July figure, I think it is too premature to say, but we do see growth over last year. That is the simple statement I will make as far as July is concerned, without going into details of this. And as far as protection month-on-month is concerned, I think June contributes, if I'm not wrong, 60% of the total protection we have done for the quarter. But I will double check that number and come to you off-line.

Got it, sir. And second, sir, on the Credit Protect Life in...

Credit Life Protection.

Hello?

Yes. Go ahead.

Sir, on the return guarantee part first. So we -- I think we might not push that as a strategy, but whatever business we get, how -- what is our hedging strategy currently? Are we using -- have we started using IFRS? Or right now, we still are dependent on partly paid bonds?

As of now, we are doing through the partly paid bond because our business is roughly debited, and we are able to hedge it in a similar line. But if they're really are [indiscernible] based on the market demand, it will go a little beyond, also already in place, we can go for [that ] also. So administrative-wide we're still able to hedge it anyway. But as of now, we are able to hedge it through the partly paid bonds.

Got it, got it. And third, sir, on the expense. So clearly, this -- there was some margin impact in the protection side because of the price hike not being getting passed on. But otherwise, when we look at the expense in the savings business, how have we accounted for? Have we taken it as same as last year? Or have you factored in some kind of slower growth for the current year?

No expense is concerned. If you look at our company, it has been already having these type of expenses over and has been gone long that. So if it really, year-on-year, our expense is very low in the market. And also as for the assumption base is there, it is really steady expenses. So we have taken exactly the [ hornet ] in the actual experience into account that is taken to [ in year ] 31 March 2020 evaluation. The same expense -- assumption have been taken into account. So though you will found that our expense margins -- actually expense, the issue is coming down, but we are going to take care of our actual expense issue. So there's no question of expense will be going here and there, which can really affect our overall margin as far as expense is concerned.

Got it. And lastly, sir. So I think in retail protection, I agree that pricing is obviously for SBI was slightly higher than others earlier. But is pricing the only reason that we faced headwinds? Because I think in our distribution channel, which is predominantly SBI and maybe agency to some extent. Is pricing that bigger point instead of 10%, 15% higher also, if we are there, versus the industry, then you think that is the key problem? Or is it the push or the incentive towards -- to the distribution channel, which becomes more relevant?

So it's a complex answer, but pricing does play a important factor because customer, it's the easiest product to compare. Let us compare it to any other product in the market, pricing is easier. So you just search online term plan and it will instantly [indiscernible] plus with PolicyBazaars and so many other players advertising so much on the mass media, saying that you can get policy for INR 200 a day, INR 50 a day, INR 500, so the customer is aware. It's not that they are not aware. So we have done significant amount of business. Last year, we did INR 500 crores partially of pure retail, partially coming from the fact that the SBI customer inherently trust SBI. And there are many other benefits that you get the fact that 10 years later, if the claim is required, then who will be there. So that also plays a role. We don't deny that, but pricing does play a role. And there are many other processes, which we are doing, which is constant work in progress, which will continue, I think, for next couple of years till we get maturity on the protection business.

Got it. And sir, the new product will come when? I think you said that in near term, but if you can give some more clarity, when will that in most cases happen?

Okay. Let me put it. We are already ready almost ready with the product the question, as you know, the process is there. We'll be filing maybe another 1 or 2 months' time down the line. But the question that we will get approval, that will depend on the approval process. But I am expecting possibly by -- within that quarter, next quarter, possibly we get it.

So this quarter also will be selling the protection with lower margin?

Not really lower margin. As I said, it's a little bit much lower than earlier one, I can say. But the protection margin is very good in our product as you know.

Yes. Our margins have been good. We don't really know about the other -- I mean, our competitors why they were pricing it lower and why they are pricing it higher, we don't have the rationale that they have. So we can't really talk -- I think the question comes from the other insurers increasing their rates and not from us. So the question doesn't come from SBI Life. It comes from the other competitors. So I think sitting inside, we wouldn't be able to answer it from that point of view. For us, the margin remains the same, and we are doing the same things.

The next question is from the line of Nidhesh Jain from Investec Capital.

The first question is on VoNB margin. Last year, we built a bit of conservatism of 130 basis points, preempting the impact of COVID. So we are -- versus some assumptions on persistency and mortality. So we are well within those assumptions as of now? Or do you see the needs of that margin in this financial year?

No. Actually, as you know, we generally do the all of our assumptions setting only once in a year. That was what we mentioned last time. So in our annual VoNB calculation, or annual calculation, do generally change the margin. However, we do take care of the qualitative approach to check if how the other various parameters are moving on, like whether it's persistency, whether it's mortality, whether expenses, that we'll take care. But we never changed the margin assumption for the purpose of calculation. So this is exactly same assumption as we have taken on the March 2020.

Sir, my question is basically, we have made some conservatism with respect to COVID.

Yes. That is still on. That is still on. Let me put this way, that is still on.

That is still on. And your expectation is broadly playing out there? Or do you see some...

Yes. No. As far as we see it, very short period of time, as far as we know, only 1 quarter. And also in the first month, we have not done much more business. So exactly, [indiscernible] has not been that much as we imagined. Let me -- for example, let me give 1 example, the mortality part. Mortality is reporting much lower as of now. So very difficult. The data is so low that you cannot really exactly check it, whether that would be emerging or not. So we have to wait for another quarter or 2 quarter to look in to how it moves.

Second, sir, in retail protection, what will be the share of ROP in our retail protection for Q1? And in group protection, what will be the share of group for Credit Life?

In the individual protection, the ROP is almost around 80%, 85% is the [ROP] product. And as far as the group protection is concerned, Credit Life is almost around -- it will be in the range of around 80%, 83%.

In Credit Life, how are we able to reduce this decline? Because I believe that bank disbursement would have been fallen by 70%, 60%, 70% in this quarter. But we have shown reasonable less decline in Credit Life. So what is the reason for that, sir?

Because we have covered past loans.

Correct. Correct. I think we answered that in an earlier question also that was there. We didn't give a breakup, but then we have been targeting customers who took the loans but did not cover those loans with Credit Life, say, in the last year or so. And then we have approached them.

Do you see further opportunity in Q2 of covering past loans? Or...

Yes, yes, yes. There is huge opportunity.

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

Just a couple of questions. I see that a lot of, sir, mix improvement in the margin is possibly coming from non-par. If you could give us some breakup on the non-par business, how much is annuity and how much is the guaranteed product?

Non-par total, we have done almost INR 350 crores-plus. And out of which INR 155 crores is individual non-par annuity, and INR 194 crores is non-par guaranteed savings plan.

Okay. Is that also the reason as to why your reference rate sensitivity has gone up quite in the first quarter versus last year for VoNB?

Yes. Yes. To a certain extent, you are right. Actually, the guaranteed savings product or annuity product, they are much more sensitive to interest rate. And the last time, we have mentioned this part is that, again, we have called the same thing that when you do generally do the sensitive analysis, we do the some quarter [ lag ]. So business amount of how much we have done that your -- the guaranteed savings product or annuity all put together, that ratio has [ impacted ] because of that regionally, a little bit impacted in here and here. But what if you look at both of our [ regional ] lines, little increasing because of the business we have been increased towards this product, right?

Okay. But is there a strategy to increase the guaranteed product quite significantly over the next year or 2?

No. We don't know the -- any aim to increase the guaranteed products over this period. But like I said, we don't have any -- we are not looking to suppress the sale of these products. But then with the repricing or the ongoing repricing that would take place, depending on the situation, the demand may sort of fall or rise.

Okay. Sir, lastly, would you be able to give product-wise margins for the quarter, protection versus savings?

I'm very sorry. No. Not -- the margins, we would not be able to give those product-wise. But roughly, you know that they wrote some of the products have higher margins like protection, for example, has a higher margin. And some of the others have lower margins like the guaranteed products. So that remains.

The next question is from the line of Shweta Runwal from IIFL Wealth.

Hello?

Yes. We can hear you or we could hear you, actually.

Ms. Shweta, we are not able to hear you, ma'am.

I think we can come back to her later when her audio problems are gone. [Technical Difficulty]

Hello?

Yes.

I actually wanted to ask that there are these numbers given in the presentation, that is 96% for -- sorry, 97% for digital applications. So are these is only between a 3-month period? Or is it like -- because even the last press release, it was 96%, 97%...

Basically, all of the applications are uploaded digitally, almost all, except where there is no connectivity or something, and then it is done manually.

No, but the period of these applications, the 3 months only, right? Like...

Yes. Yes. Yes. The 97%, the actual figure is for the 3 months. But then if you look at last year, maybe it was 96% or whatever. I don't have the exact figures.

It has gone up to 98%.

Yes. Okay.

Okay. Right. And also or the solvency ratio, which has increased to 2.39% -- times from 1.95, like how do you all benefit by that? Like what are you...

So we don't benefit from that. But what happens is that the solvency ratio is a minimum statutory requirement, so we are required to keep 1.5, okay? That's solvency ratio. So now what has happened is that because of the -- because of various factors, you know that the markets crashed in March. And on March 31, we happen to have the lowest prices for all our assets. So as a result of that, the solvency ratio, because that is a percentage -- I mean, it's a function of the value of the assets that we are holding. So the solvency ratio went down to 1.95. Now 1.95 is a very good solvency ratio. We have always been around 2, 2.12 in the past years, and 1.95 is very close to 2. So it is a very good figure, and it is much above the statutory requirement of 1.5, and even our own Board-mandated requirement of 1.8. So we are a very prudential company. So we have 1.8 at our minimum -- this Board-mandated requirement, and we were much above that. So there is nothing to benefit or anything. But now our solvency ratio is much better at 239%. So 239% means that when you do a sensitivity analysis or whatever, you have the strength to take a bigger effect. Like, for example, the biggest hit that came was March 31. So you had all those all equities crashing and everything were in haywire. And still, we were able to keep our solvency ratio much higher. That shows that our company is very, very strong financially.

Then the COVID impact, the all-in payouts and redemptions, like since the number is so high and so good and much improved than the last quarter. There were around...

Yes. COVID has impacted everyone. Across the board, COVID has impacted. So what has happened is that what we would have done without COVID, we have not been able to do, okay? So that is one of the things that COVID has impacted. And then there are the human elements to it. So we have to arrange for work-from-home, and we have to do -- we had to do a lot of things that we would not have done without COVID. So actually, COVID has affected. But if you ask whether COVID has affected us, more than anybody else, no because we have been able to do all those things which are required. As a disaster management, we have -- within the minimum possible time, we have got all our systems working and servicing the clients and everything. So it is almost business as usual in spite of the lockdown out there.

[Operator Instructions] The next question is from the line of Abhishek Saraf from Jefferies India.

Sir, just wanted to understand one bit on VoNB, the guaranteed products. So basically, this quarter, you're saying we have done around INR 194 crore-odd on non-par guaranteed. And if I compare that with last year's, total was around INR 600 crore. So clearly, on a quarterly run rate basis, also, we are running pretty high as such. So just the way to understand this, what could be the tolerance level? I understand this is a bit -- I mean, a higher-margin product. And obviously, there is a certain market out there. But if you can just give some indication in terms of the percentage of APE that probably you would be looking at capping that product as such because there could be some systemic limitations to the hedging mechanism.

So we hit -- if we are anywhere aware that there will a systemic risk around hedging, we will immediately stop the product. As of now, we don't see any systemic issues with hedging. And as earlier explained, we are not actively pushing the product, and we have repriced to a lower guarantee level as of 1st of June 2020. So our older rates were available only for month of April and May. And if customers are happy with the lower guarantee which we have -- where we have protected our margin, so be it. I mean, we will be willing to sell. But if there is any threat that we will not be able to hedge the underlying cash flow, I think we will go extremely slow on that product.

Okay. And we are able to protect our margin with lower guarantees as such, right? So that...

Yes.

Okay. Okay. One bit on this VoNB walk, I don't -- you probably might have touched upon it because I just dropped out in the call for some time. So sir, change in economic assumptions, I see that there is a 4.2% [indiscernible]. Is it largely because of the RFR change?

Yes. Yes. This is because of the RFR change. You're right.

Okay. Okay. And lastly, on our cost assumption base, if I can understand because this has been a lower volume quarter. And obviously, that would mean that there would be some kind of negative leverage effect playing through. So have we factored that in our view and the assumptions as well? Or do we true it up with a lag?

No. No. As I told you last time also that whenever we do this OR, we do all the annual basis, and we do check quarterly how the things are going. We never change the parameter during the quarter. But if you can recall, our March 2020 results, we mentioned that we have kept some risk margin, which take care of the COVID matter, nothing only on the persistency, mortality expense all put together, right? So that margin, also, as I said, this is already intact, so we have not touched that one. So to the rest, I said that the whether expense will be a little bit up and down because of the volume play, may not really that much impacted, that one part. And secondly, if it is impacted that it has not taken into account. But that already being -- indirectly being taken care.

The next question is from the line of Nischint Chawathe from Kotak.

Most of my questions have been answered. So just on the non-par side, if you could give some guidance in terms of what portion of non-par are you targeting for this year? The second is that if I look at this on a year-on-year basis, that is 1Q last year versus 1Q this year, there is a significant increase in the non-par shares, but somehow it's not getting reflected in margins or it's getting reflected in the margins, very moderate way. So I would have expected the margins to expand much more given the -- considering the extent to which non-par has grown?

Still, non-par, like I said, we are -- we do not have an active idea to discourage non-par or limit non-par or something. Like Abhijit explained to the last question, we will keep looking at it. The moment -- so long as we can reprice it and keep our margins, we will do that. And if at all we find that we are not able to hedge or we are not able to reprice to protect our margins, then we will probably think of going slow on that or maybe discontinuing it. So that option, we always have. But right now, we do not have any such idea because it was going very much in line with what our expectations were. It may be slightly higher than the quarterly business that we would be doing, but it is accentuated by the fact that we have dropped down on some other business. So that is why this is showing up. But overall, I think it would be very healthy if we could grow the whole book at this rate. So we are okay with that.

So the same -- the second side of the same thing, right, that when your non-par is getting replaced by ULIP, ideally, we should have expected to see a margin expansion and somehow it's not happening. So...

No, no. Actually, it is happening. If you look at our VoNB movement, you can found, because of our new business mix and profile, we've gained around 6.2%. So basically, it is happening. It's not like it's not happening. What you have look at the 18.7%, that 80 bps up from the last June, the one of the reasons is that -- this type of business mix. So if you really look at our overall VoNB margin part, because the APE does not go to that extent of the last June, we haven't lose some value. Other area of value that we increased to the extent of INR 78 billion due to the business mix only and this -- as you rightly said, this should be done throughout to certain extent of the non-par business. That's the one part. Second part, what is happening annuity types of product, you have to always reprice as the market comes out. But that only has a little bit of lag because you -- when you price the product, your whole process has to follow. By the time, market will go here and there. So little bit of gap here and there. It should be there. So to that extent, I think margin has been up to the extent of the non-par business or the proper business we said will come into picture.

So the way to look at it is, Nischint, to our mix gain has been effectively negated by reinsurance change and RFR change. If these 2 are not there, we would have had a massive gain on our margin because of mix change.

the next question is from the line of Hitesh Arora from Unifi Capital.

I just wanted to touch base on the economic assumption point again. You mentioned that the change is primarily -- and you commented around on the RFR change. But wouldn't it be correct to say you also hold -- your portfolio is largely fixed income, right? So as the rates go down, the value in fixed income portfolio also goes up. So to that extent, you should also benefit, right?

No. No. No. You are right, but I think last time, I explained this line. It really depends on lots of other things. When your existing business gets that benefit because you are already [ hired ] all the value of bonds, or when you buy it earlier, if the interest rate is down, then you get the value appreciation from new policy assets invested. But in case of a new business part, you are getting the value as of today, right? And when you're getting the money today and putting it today, you'll not get that much of a gain, right? So basically, it is based on the overall company, which is how your -- how much duration asset we have been holding for what purpose. For the VoNB purpose, you are getting the assets today, and you are getting today on the market price, and you're putting on that and getting this gain. But if you have the assets, existing assets, you're right. So that impact may be coming in your [ IAV ] more so than your VoNB part.

By the same logic, if it is for the new business, then the fact that the rates have gone down, it shouldn't matter actually because then you're only looking at only looking at new business, right? Then the...

No, you're right. So let me put this line is 4.2%, whatever you are saying the negative 4.2%. That -- I mean, coming from the June 2020 till you are coming from the up to June -- sorry, June 2019 to June 2020, right? And when you do this particular VoNB margin calculation, we tail the RFR rate for each and every month. And each and every month, what our business will do in the account, that comes into calculation, maybe do a 1 whole year calculation. Our RFR, if we look at this plan is every year, it is coming down one by one, right? So how much gain you are getting for the particular shorter period of time? Parts of that gain was your overall business margin. So that ratio is really dependent on how you view this non-par.

Accrual will happen.

The next question is from the line of Yash Sidana from Genesis.

Abhijit, you spoke about the persistency, the 3 levels of persistency that you've shown. But just for our understanding, what is the persistency number of the 3 that we analysts should see so as to figure out whether going forward, there could be persistency-linked assumption -- sorry, experience positives or negatives? Like which is the one to sort of look for?

So internally, we always look at 12 rolling months. See, what happens is, when you look at 12 rolling months, you get a period which is high business month -- period and low business period, right? So you will have March and a December, which are high business period for us. And when you take a 12 rolling months, there will always be March 1 or December 1 in that, plus you will allow collections over 12 months to be collected. So internally, we always track on a 12-rolling-month basis, as far as management analysis and management action is concerned.

And which number is that again, sorry. Is it 81?

That is the one in the presentation. So both. So you can see on a regular premium basis, which is given in the appendix. You can see regular plus single premium, which is given in Slide #10.

85.4%. 85.4% which you would see for this quarter.

Got it. And minor question, the actuarial liability in Q1 has gone up significantly. What is a function of that?

It is purely based on the market. So the total liability includes ULIP plus the traditional. So it goes up and down. It's based on the market volatility.

Just because the AUM has gone up?

ULIP has gone up, right.

Yes, yes. And finally, on the VoNB margin walk that, obviously, all of us are sort of confused by. Is this a life -- like is this a standard number that everyone reports because just before you, there was another competitor that reported. I don't know whether they showed this number or not, but because of mix change, they had a massive VoNB margin uptick, whereas for you guys, it seems a lot more muted just comparatively. How should we think about this RFR change on a quarterly basis?

No, but I put this in, if you look at our VoNB moment, what we are showing, we are consistently showing for every quarter from the starting till today. So we are showing that in the similar line, just to understand how we are moving for each and every factor into account. About the competitor, as you said, different people will have different way, I really exactly cannot make that comment on that. But as you rightly said, for the economic assumptions per se that already show as a separate item. So each and every part, you look at it, be it quarter, how much only due to the RFR change come into picture that we already show you as a separate item as the last item, before the [ final year ] has come to picture. So when RFR...

On the VoNB -- just to add here. On the VoNB margin, typically, what happens is when we calculate the VoNB, there is no asset backing as such. Because VoNB is calculated at 0.0 at the month of inception. So for the April business, you're right, we basically calculate as on April; May business, we calculate as on May. And then we roll it forward through a risk-free rate till the end of the year. That is uniformly done across the industry. There is no asset backing. So basically, there is nothing, no asset backing to offset the rise in interest rates with fixed interest, which is backing the liability. That is not there. So typically, what happens for savings business, because a corpus is rolled up, so when the interest rate rises, the margin rises. For protection business, it's kind of neutral because there is hardly any corpus that is rolled up. For unit linked, it is the reverse. So that is how it is for us. Unit linked, when the interest rate goes up, the margin goes down. But unit linked is very insensitive. So it doesn't really make much of a difference. The sensitivity that we saw on VoNB margin, again, this is universally done across the industry because we feel that once you write the business, we don't kind of do a sensitivity at 0, we do it at 0-plus. So basically, there is an asset backing, and then we try to neutralize the change in VoNB margin through that asset backing. So that is how -- because that is more realistic than what we see on the margin. So margin is basically, as and when you write the business, there is no asset backing. Your return is essentially the risk-free rate. And if there is any change in risk free rate, then know what kind of margin deviation that we'll have. So it's essentially that there is no single direction. The direction can be either plus or minus. It depends on the kind of mix that you have. So if you have more savings business, then obviously, your margin will move in a particular direction in response to the interest rate change, otherwise, it will go in another direction.

So what you assume is that when you're writing that VoNB, this is the risk-free rate that I'm getting. And hence, this is what my asset would yield every year.

I don't have any asset at that point of time. All I have is basically my returns would be the risk-free rate going forward.

The next question is from the line of Prateek Poddar from Nippon India Mutual Fund.

Sir, just on your operating assumption changes. Is it fair to say that the entire of this 120 basis points, which I see is mostly related to inability of us to pass on the reinsurance price hike, which we will pass on in the subsequent quarters? And hence, the new business which we underwrite on the protection side, we will get that margin benefit. I mean, we will get this 120 basis points of benefit back?

To a certain extent, it is all right, but you exactly cannot generate this line because of 2 reasoning. Obviously, main purpose of the reason that [ as I said ], but another purpose is you have to understand we have some groups in parts of the business, right? There are also lots of [ areas ] and depend on the your market and also cost of guarantee, ability to fund is also coming to picture. So that -- it is not exactly due to only the reinsurance part. In that quarter, I would say, it is not like that if the reinsurance have been profoundly priced fully, that this 1.2 will become 0 or positive or negative. So basically, these are impact on the overall operating assumption. But [indiscernible] one of the main reasons on the reinsurance part, we haven't taken into account. But you are rightly said, when whether we'll do this news is panning to our pricing. Still margin will be up or down from the last quarter. It could be a little again down because last quarter margin was down on some [ different annual ] basis. We'll be coming out with our premium. That will be on an annual basis. As I told you, we are taking a balance between the 2. We want to be competitive as well as we want to keep our margin to shorten our expected level. So that margin -- overall margin can be a little bit here and there. But other than that, this impact will be there.

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

Sir, 2 questions from my side. One, on this, VoNB walk, Sorry, I'm harping on it again, despite some of [ my friends ] are asking. Sir, the question is, VoNB margin walk will relate to [ existed ] business that you've done in this quarter? And given that the rates keep moving, et cetera, does it still not give you time to adjust rates? So if market rates have gone down on non-par business, and you've also adjusted it, why do you still have as big a drag on new business profit from the interest rate movement.

I think what was stated earlier is, typically, there is a lag. So for example, annuity or whether it's a guaranteed product. I mean, these are the ones which are very sensitive to interest rate. And by the time you realize that you want to reprice, there is a filing process and an approval process, which takes a little bit of time. So you would have written maybe 1 month business or a couple of months business at a price which may not have been sustainable at that point of time when you're writing that business. Now for annuity, for [semi-annual] group and the group annuity, you have to necessarily write because it's a mandatory product in a sense that the pension policyholders have to reoffered group annuity product. You cannot withdraw it from the market. In any case, withdrawing a product for the market is a very difficult operation because you would like to reprice, get it approved then roll it out again. So there would be a lag, particularly for annuity business and for the guaranteed business because you've got to reprice every now and then. And when the interest rate moves to the extent that they have moved during the last 1 year, it becomes a more -- it becomes very difficult operation, trying to maintain the margin that way. So that is the reason that even though you would reprice. Try to maintain your margin at some point of time, possibly for a brief period, you might suffer in terms of demand.

So sir, would it be correct to understand that if in quarter 2, you do not get the new product or new rate approved, there could still be further negative drag on VoNB walk?

Yes. If you decide not to withdraw the product, then there will be drag. At the moment, Platina has been priced. The individual ULIP has been priced. We are kind of rolling out the group annuity. So once we do that, I think we are kind of aligned to the current period of interest.

Sir, Platina has been priced to the new rate?

Yes. That has been priced.

Okay. Sir, the second thing is on this persistency. Can you clarify what is the persistency on a 13th month basis based on normal premium businesses? Because I believe the way you calculate it, include the single premium impact also, right?

Yes, that is there in the presentation, Slide 25. It's there. Platina is there.

Yes. it is Slide 25.

25.

So that you can refer. So which talks about 82.6% vis-à-vis 84.5%. That is for 13th month persistency.

Okay. And any clarity on how this 82.5% is trending with, let's say, a 15-month tag because there was moratorium that was effected?

No, no, no. I think we -- it is not required to calculate that because it doesn't make any kind of sense to crunch those numbers. So what we are now following is actually the correct process, and this gives us the correct picture also.

So is basically 82.6% a sustainable number? Or do you think it can improve and go back to the...

It can improve, it will definitely improve. From what we see, it will definitely improve. If you look at our 61st month persistency, for example, so this is -- even on the same pace, it is at 50% which is the same as last year, okay?

Better than last year.

Yes, slightly better than last year and as good as the year before that. And if you look at all the others, like, for example, 37th month, that is also slightly more than last year, about 2% more than last year. And then if you look at the 25th month also, that's also better than last year. So what does happen is that it depends a lot on -- now if you come to the 61st month persistency, what does that number mean? It means that the customer has been renewing his -- paying his premiums for 5 years continuously, okay? So that customer is a good customer. So we have a lot of -- so if you look at only the 13th month persistency, you may actually be swayed by the difference between single premium added and that kind of thing. But if you look at the numbers down the line and if you look at the regular premium persistency, then you will come to know who is performing, who is faring better and who is getting his customers to pay premiums on time.

I think on an optimistic note, yes, typically, what happens is you have, say, around -- I'm just throwing out numbers, say, around 30%, 40% paying -- 30%, 40% of the people paying during the grace period, you would have another 30%, 40%, possibly 1 month after. So basically, people keep paying till, say, around 6 months a particular due because they don't require -- there is no revival requirement within 6 months, even though life cover is not there. What possibly we might be seeing is a delay because of the stress, financial stress people are facing. So people who would pay during the grace period, possibly would prefer to pay 2 months later, kind of thing. So if that happens, then we would see a recovery, that people start paying the premium, which was due in April or May or whatever, we'll see the persistency climbing back. Other than that, I think what we are internally trying to do is push revival. So we are approaching the customers to revive their policy as and when we can, and then giving them incentive to revive in terms of -- we haven't done that, but we can do that in terms of waiving part of the interest and all those things. That is something that we could do.

Last question, sir. Out of your customer base, how many would have been the unfortunate death because of COVID?

The total we have as of now is 97 claims, and -- which consist of INR 8.5 crores total payout.

The next question is from the line of Abhishek Saraf from Jefferies India.

Yes. My follow-up question has been answered.

Ladies and gentlemen, due to time constraint, we'll take this as the last question. I would now like to hand the conference over to Mr. Mahesh Kumar Sharma for closing comments.

Yes. Thank you very much. I think it has been very interesting. Most of the -- many of the questions around [indiscernible], this is something which is a mathematical construct and that is probably why there is so much confusion about it. But really speaking, when you look at an insurance company, what you need to look at is the pedigree and also the consistency of the policies that the company adopts and also the financial strength. So in financial strength, if you see, our solvency ratio is 2.39, which means that people are very, very sure that they will get their insurance claims and their maturity amounts and their living benefit going ahead in time. So that is the main thing. So thank you so much. But I think maybe you can look at us as having a very solid background supported by the State Bank of India. And also a very good business model, which is growing, which has been growing even in very difficult times and which will -- which has actually been very resilient during this unprecedented kind of period. 3 months, we have never seen any 3-month period like this in our lives. So we have been able to face that, and we have been able to come out very, very strong. I would request you to look at it that way. Thank you very much for showing your interest and participating in this call. And once again, wish you all the best, stay safe. The corona epidemic, whatever we say about all the things we need to protect ourselves. So stay safe and keep insured.

Thank you.