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

Thank you very much. Good evening, ladies and gentlemen, and we heartily welcome you all to the reserves update call of SBL Life Insurance Company Limited for the period ended September 30, 2020. Along with me on this call are Mr. Sangramjit Sarangi, President and CFO; Mr. Anand Pejawar, President, Operations and IT; Mr. Abhijit Gulanikar, President, Business Strategy; Mr. Subhendu Bal, Chief Actuary and Risk Officer, and Mr. [indiscernible], Appointed Actuary. I'll give you an update on our financial results, the key highlights and the financial results can be accessed on our website as well as on the website of both the stock exchanges. So the highlights are the new business premium stands at $90 billion. Renewal premium has shown a strong growth of 29% and stands at INR 117.3 billion. Protection new business premium is at INR 9.1 billion. Annuity new business premium witnessed 220% growth and stands at INR 15.7 billion. Profit after tax has grown a strong growth of 38% and stands at INR 6.9 billion. Value of new business is INR 7.5 billion, and the VMB margin is 18.8% on an actual tax rate basis. The Indian embedded value stands at INR 298.6 billion on actual tax rate basis as on September 2020. A growth of 21% compared to September '19. On effective tax rate basis, the value of new business is INR 8 billion, and VMB margin is 20.2%. The ED stands at INR 312.7 billion, a growth of 20%. Assets under management stand at INR 1,863.6 billion, registering a growth of 20%. So we'll talk about each of these elements in detail. So we're coming to premium. The second quarter witnessed very strong signs of recovery in new business sales as containment measures were eased. Maintaining private market leadership portion in new business premium, we collected new business premium of INR 90 billion and marked -- private market share of 24.5%, an improvement of 267 basis points over last year. Non-fund new business premium has grown 51% and stands at INR 58.9 billion. Individual rated new business premium stands at INR 33.2 billion, private market share of 20.7%. Group new business premium marked a growth of 61% and stands at INR 47.9 billion, a private market share of 30.4%. The renewal premium grew by 29% to INR 117.3 billion, which accounts for 57% of the gross written premium. Individual renewal premium has grown by 30%, reflecting the quality of our in-force business and the compounding effect of our focus in regular premium products. Also, earnings through quality renewal business has helped our distributors, especially our agents to weather the financial impacts of the pandemic. Our gross written premium stands at INR 207.3 billion, a growth of 22%. Annualized premium equivalent is INR 39.8 billion. Now coming to the product mix, non-par has shown a growth of 51% with a share of 65% of the new business premium. Individual ULIP business constitutes 65% of the individual new business premium. Individual protection is at INR 2.7 billion, registering a growth of 13%. Group production stands at INR 6.4 billion. On APE basis, production contributes 13% of new business and registered a growth of 23%. Annuity business is at INR 15.7 billion, growth of 220% and contribute 17% of new business premium. ULIP momentum has picked up well in the second quarter. We are hopeful that this trend will further improve. Guaranteed non-par savings product is contributing 10% of individual new business and just 4% of the total new business collected. We will continue to grow all profitable lines of businesses. Institution partners, we -- Bancassurance business marks a share of 66% in individual new business premium. And the second quarter registered a growth of 136% over the first quarter. Total number of CIF stands at 49,864 as of September 30, 2020. Instant protection policy issuance through Yono app LPI has covered more than 4 lakh lives, that is 400,000 lives. Agency channel, another strong channel of the company, contributes 28% in individual business premium, and in the second quarter registered a growth of 68% over the first quarter. Our total number of agents stands at 1,54,158 as on September 30, 2020. During the period, other channels, including the direct corporate agents, brokers, online and web aggregators, grew by 87% in terms of individual new business premium. Protection premium through other channels registered a growth of 79%. For further strengthening our reach, we have tied up with Yes Bank in this quarter. Coming to profitability. The company's profit after tax for the period ended September 30, 2020 is at INR 6.9 billion as compared to $5 billion in the previous period ended September 30, 2019, registering a strong growth of 38%. Our solvency remains strong at 245% as on September 30, 2020. As mentioned in my opening remarks, value of new business is INR 7.5 billion on actual tax rate basis; and on effective tax rate basis, this works to INR 8 billion. This is an outcome of better product mix even after industry decline in APE. VMB margin is at 18.8% on actual tax rate basis, had an improvement of 70 basis points. And on effective tax rate business, it stands at 20.2%. The embedded value stands at INR 298.6 billion on actual tax rate basis, a growth of 21% Y-o-Y; and on effective tax rate basis, this is INR 312.7 billion. This reflects a very strong quality of our in-force business. Operational efficiencies, we are -- we continue to be one of the most cost-efficient companies. It has improved with the OpEx ratio, reducing from 6.4% in the FY '20 to 5.4% in FY '21. Our 13-month persistency ratio is 85.9% as compared to the corresponding last year figure of 85.8%. And the 61st month persistency is at 60.9%, much higher than the last year's figure of 57.5%. On regular premium basis, 13-month persistency stands at 83.2% and 61st month persistency stands at 50% and improvement of 144 basis points vis-a-vis the previous year. With an initial option to pay premium at a later date, our persistency has remained very stable in spite of that. The total assets under management having crossed INR 1.5 trillion mark towards beginning of the financial year is now at EUR 1.863 billion as on September 30, a growth of 20% as compared to the same period last year. The company continues to drive digital expansion across the country with 98% of individual proposals being submitted digitally and 24% individual proposals being processed through automated underwriting. In addition to daily agency activities, we moved our end-to-end [indiscernible] recruitment and training capabilities online. Customer satisfaction is a key focus area. Our grievances with respect to unfair trade practice stands at 0.07%, one of the lowest in the industry. As the economy is on its part of recovery from the global pandemic, we are focused on our commitment to digitalization and providing uninterrupted services to our valued customers. Our continued focus on automation, protection business, enhancing distribution network and customer satisfaction enables wealth maximization for all our stakeholders. Thank you very much for patiently listening. And now we are happy to take any questions that you may have.

[Operator Instructions] First question is from the line of Sanketh Godha from Spark Capital.

Just a couple of questions. One on the VMB margin, the minus 1.2 percentage impact on the VMB margin due to operating assumption changes. Can you just break it down into what -- how much is related to reinsurance hardening on protection business, COVID related provisions and any other additions which have changed with respect to OpEx or persistency. So that is my first question. Second question is on -- it's a data-keeping question, largely related to how can you break down that EV walk into unwind operating variants number. And how much economic variance contributed to the 21% growth in EV? And third is on non-par business. Just wanted to understand, given the whole industry is facing the business in non-par business, especially the savings part, not the annuity part, we seems to be a little skeptical on growing the business. Because we did INR 230 crores last year in AP terms last quarter, first quarter, we continue to do only INR 240 crores, while the industry is doing much bigger number. I just wanted to understand your thought process why we are a little reluctant to grow our nonpar savings business that is patching our productivity. These are my questions.

Yes, thank you very much, Godha, for your questions. I will start with the third question first. As far as growing non-par business is concerned, non-par business, one of the features of this business is that there is a guaranteed return. And towards the beginning of the year, our products, we were selling the product, which was already available with us. And it was very attractive at that point of time because returns were available at a time when the pandemic, everybody was unsure about what will happen, et cetera. And so we were able to sell that. But then this has a variant on our long-term performance, and we cannot actually hand over profits through one set of our customers at the cost of the others in the future. So what we have done is we have slightly repriced the product. And in the meantime, I think what has also happened is that we have a range of other products which are very attractive. So we have been able to focus on that entire bouquet of products. We have products for each and every category of customers, and we have product on -- focused on all those. Because what happens is that if you skew the basket with only 1 product, what happens is that this will catch up with you later when you are -- this will affect your -- affect your performance going forward, maybe in the next year or something like that. This is not something which our company believes in. So we are not very gung-ho about that. But at the same time, we have a very good product, that is Platina and Platina Assure, and that sells very well. But at the same time, like I said, we don't want to guarantee anything which we will not -- we will regret in the future. So that's why I think that the sales of non-par is slightly subdued in the second quarter. And this is part of the plan. We are a little bit skeptical about going the whole hog in some of these guaranteed products. So will take your question on the view of the market.

But sir, on this one -- sir, sorry. Sorry, continuation on that question, just to understand because the market has very, very favorable market available right now, condition market, maybe the supplier partial business interest is there. So the hedging is quite possible in the current venture. So sir, just wanted to understand, is it easy looking from the long-term perspective and avoiding it? Or are you seeing that hedging itself is not possible in this particular product and therefore, therefore, you are avoiding to have a balance sheet risk? And if it is that's the case, what is the percentage of your saving non-par guarantee, excluding you want that business to be as a percentage of your total APE in from a strategy point of view.

Yes. Sangramjit, you can take the...

Sanketh, just to give you the background that in the non-par savings, we have actually grown by 20%. And if I bargain between the 2 lines of business, annuity and Platina which is our non-par guaranteed savings, nonpar guaranteed savings, we have actually grown by more than 30%. This is the last year, half year ending September FY '20. So our focus is on. And as far as the hedging strategy is concerned, we are actually done with the market-paid bonds and we're also supposed to enter any time the agreements because the stars are -- all are ready. So within next week or so, we're heading to the fragmented multiple banks. So we are not in any way restricting our sale as far as the non-par guaranteed savings are concerned. We are doing -- first quarter, it was a bit skewed because the other line of businesses have not shown growth. But this quarter, if you see it is also considering the growth in other products, we are also still going on this non-par guaranteed savings product. So there is no -- any second thought on this kind of product as far as our overall balance of mix is concerned.

Yes. But I still think that our strategy of selling all of our good products and not just focusing on one product is very strong -- what you call it, a very sustainable kind of thing, and this is what we propose to continue doing.

Yes. So at part of your viewing the next question that if you look at it, the change in operating assumption is again 1.2%, the same as it was last quarterly data has been published. And as I told you at that time, also when you do this with the movement year-on-year basis, we generally change our assumption setting only year-end. So basically, from the last quarter, this quarter, if you look at it, there is no change in the assumption or ideal front. However, that 1.2% is the risk margin. We have kept through that year end [indiscernible] because of COVID-19 impact is an impact on the future. We endured expenses last time. So that is -- because there's no other change in assumptions in this quarter, that 1.2% still carrying on as a part of the year. And if every assumption, everything gets little bit of ups and downs, ultimately in the year-end, that will be impacted. As far as your [ news ] is concerned, and last time I told you, the [ news ] had a little lower impact in our -- with our overall amount of the coverage, amount lower. As you know, our protection products are quite a free product. We cannot bring them to see all not reinsured at all. Only the usual do they still have pure individual production. They are also overall, some should be much lower than the early competitors, et cetera. So 2 things, there are some impact in India but exactly have not -- exactly agreed to that line. And because that impact is very minimal. But having said so, only at the year-end, if all the assumptions [indiscernible], and until all the funding it looks like we and you have to wait till 31st March. If everything goes well, then this 1.2% is the exact figure will be coming on. Until IV partners are confirmed, actually, we have not disclosing that year-end so far not be to it. But roughly, you can say that your economic variance on August 1 will be roughly around 5% of this 20% growth, but that exact conclusion will be only available after we complete this even part. As far as complete so already tried to give it to share to everybody.

[Operator Instructions] Next participant is Deepika Mundra from JP Morgan.

Firstly, first question is just on the distribution side. Could you talk about the trends that you're seeing in the month of September across the Banca and agency in terms of goods? And also, if you could highlight what is the productivity in terms of individual new business in agency and Banca in the quarter and trending in the month of September?

Yes. So thank you for the question. So in agency, we'd like to -- the growth -- the trend is that we are growing. Of course, compared to last year, in the initial period, we were -- we had negative growth. But if you look at month-on-month trend, we are growing. So in August 20, the agency, we had INR 231 crores, September, we had INR 282 crores. So this is -- we see a very positive trend going forward. July was INR 247 crores. So it has been good trajectory. And in Banca, you see it was 842 in July '20, 945 in August and 1,374 in September. So as you can see, the trend is very, very positive going forward. And we -- what we think is that this trend is likely to continue, maybe not such a steep growth, but there will be growth month-on-month. And with our strategies and the products that we have, I think we will -- by the end of the year, we will come to some kind of positive growth because we can already see that the -- if we just achieve our internal targets, we should be achieving positive growth by the end of the year.

Understood, sir. And secondly, if I can just follow up with that on the protection growth that you have seen in the quarter, how much of that you think would be like a catch-up effect from 1Q? And in the individual business, in particular, what was -- how much is the share from Yono?

Yono is a very small support of total premium. The number of lives are very large, but ticket sizes are smaller. So we have grown 58% on a rated basis in individual premium in quarter 2 compared to quarter 2 of last year. So credit life is same as last year, and individual protection is 58% higher than last year. And Yono goes into our GTI product, where we get mixed with our employer, employee and all other products also. There also, we have shown growth.

Next question is from the line of Madhukar Ladha from HDFC Securities.

So I'm looking at the interest rate sensitivity. And for rates going higher by 100 basis points, the VoMB is now declining versus at the end of FY '20, it -- where it was -- the movement was positively correlated with industries. What is causing this change?

This is basically -- that's as business mix, to be frank. As you know that at that point of time, your total business mix currently this particular quarter, our overall non-par protection product has been including our protection business. So basically, this is due to the business mix change only. And if you look at it how much it was last time, due to recent change it is coming almost 0.2%, very, very low amount. So this is basically the business mix. We have to wait for some more time and 1 or 2 more quarters to look at it, but they can stabilize what there or not.

But in general, should it be positively correlated?

It depends on the product to product. I mean if you buy specific product or a particular product and like the energy products or sales so say, guaranteed products is not properly head and business is going like this stuff. For this type of product based on that. But as soon as your product mix is different, your every product has a different mix. So your business is come into picture overall sensitivity. This is for the company as a whole.

Right. And sir, when I look at your persistency, all buckets have sort of improved, except for the 49th month. Is there something -- what's happening on there?

Yes, I think there's not too much to be read into that. It's a very marginal change. So what happens is that across the board, the persistency increases, but then persistency is also a factor of the renewal persistencies of the previous years. So there will be some base effect coming out there. So I don't think there is anything significant to look at. But if you look at across the board, except the 49th month, so you will see that there is an increasing trend. And we think this is only because of the base effect. So that's the analysis we've done.

Next question is from the line of A. H. Frederick from B&K Securities.

Sir, my question is with respect to steps taking on increasing the productivity of Banca. So getting some of the checks have come across some of the branches being upgraded to super local branches. So how many super local branches are there? And is it one of the key strategies to improve productivity at the Banca level?

Some of our branches are a small proportion of total branches we have. So not even 5% of the branches are super local. But in selective geographies where the branches are large, we are selectively increasing. For super local, we had not increased for 4 years in a row. This is the first year we are increasing super local after 4 years. So in select geographies like city like Bombay or Delhi, where there are large branches, and we think there is more than 1 opportunity to be exploited is where we have increased super local branches. Otherwise, our strategy, our Banca model remains that 1 BDM or 1 [indiscernible] manages multiple branches so within SBI.

Okay, sir. And on credit protect?

That is not the main productivity. However, it is an incremental fine-tuning of the strategy.

Okay, sir. Okay. And you have -- I mean if you can just some of the strategies you have on improving the Banca product to be at some point something or...

The Banca strategy remains the digitalization is 1 way. There is more coming on Yono. There is digitalization in terms of analytics, which is coming. On terms of renewal, we are seeing significant improvement over last few years through analytics. Now we see new business also, there will be a significant increase in analytics. Selling to existing customer upselling too, there, we have seen some good traction. We are not disclosing that numbers to public. But internally, we are tracking. We are seeing significant improvement both in agency and Banca to upsell to existing customers. That strategy will continue. So it is a combination of analytics plus product optimization plus some other things like Super Turbo alignment that we have said. We have also done -- bank, if you are aware, has done something called Applying for Alignment with financial inclusion in rural area. So there also, we are doing alignment to align our strategy with SBI strategy.

Understood. So on credit project attachment rates from June to September, can you share some numbers?

So now it is 46%, and now credit protect is coming back. Quarter 2 credit protect numbers are same as last year. There is no change. First quarter, we had seen a decline. We hope that as the bank disbursement increases and there are initial trends on home loans increasing, we do see traction coming back to credit protect.

Understood, sir. So we have been pretty good at par products. But recently, we are slightly lagging behind that. What is our strategy to top of par?

So see, as Mr. Sharma said, that our strategy is to sell all products whatever is suitable to customers. [Technical Difficulty]

[Operator Instructions]

Sorry, sir. There is -- we are not deemphasizing part. It is that at the moment, we are finding -- people are finding non-par savings guarantee a little more attractive than par, and that is selling. That is the -- some end substance of what we are trying to do on C. And also what happened is in the last product recycle that happened in last quarter of FY '19-'20, some of the par products to increase value to the customer, we discontinue some of the shorter-term products and made the term little longer. So at the margin, we have lost some protection, but that is in customers' interest and in line with SBI strategy.

Next part is Abhishek Saraf from Jefferies India.

I have 2 questions. If you can just explain on the protection side. This quarter, we have seen very strong growth in term protect. So how much of it is coming primarily on or we also had pricing deals like these affairs have done. The reason I asked is that we lost [indiscernible]

I couldn't hear that clearly. Can you repeat that, please?

So my question was on term protect. So we have had 58% growth this quarter. So what explains this in terms of -- mean how much of it is coming through volume? And if we have also had some price increase, if you can give some color on that. And secondly, the solvency ratio has expanded at a good pace. So is it primarily to do with the fact that our growth is right as subdued or there's more to it than INR 115 crores?

So protection growth, one line answer is coming mainly from volume, not so much from price increase. Number of policies has increased in the same proportion.

Okay. And would the largely the return of premium products that we are writing, right? And also could there more color?

[indiscernible] have increased quite fast, but their base is small. So it is not really showing in the overall numbers because [ pilaf ] is also growing fast and other products are growing faster, but on small base, so they don't really affect the numbers overall basis.

Solvency deficit has been in because of the market only. There's not much more. If you look at this [indiscernible] when it is down there after that, what kind of business has been done very properly. So because of that overall some [indiscernible] due to the market only. So it's actually 2.39% last quarter, and this comes to 2.45. So for the quarter as such, there are not much change there.

Okay. Okay. And if you can give me some breakdown for the group protect in terms of the absolute number for the quarter for GDI and credit protect, if you can share that. And what it was in for last year.

So credit life is same, roughly, as I said, INR 330 crores for both. And in GTI, it was INR 200 crores -- GTI was INR 200 crores versus INR 490 crores. So INR 490 crores this time, INR 200 crores last time.

So the overall protection, we have done 910, okay? And out of this, the group protection is INR 643 crores. The GTI is almost INR 100 crores and credit life is INR 476 crores and others total INR 66 crores.

This is the first half number.

Yes.

Next participant is Adarsh from CLSA.

So sir, a couple of questions. One of your competitors have put out a long-duration product and most companies end up replicating products over a period of time. So what's your view on, say, a 40-, 50-year-old product? And whether you want to replicate it? And the second question is growth kind of come back in the following quarter, the second quarter. What is your implementation [indiscernible] but what's your expectation of growth before long?

Well, we couldn't hear very clearly towards the end of the question. So I'll probably due to repeat it after the first part. So the first part is very easy to answer. We don't look at what the competitor is selling. So -- and we are not definitely going to do what somebody else is doing, especially selling long-duration products, especially 33, 36 years or something, which, I think, the par that you are talking about comes to. So we are not interested in that, and we are not going to go that line. That -- and as far as I understood your second question, you're asking about how we look at the growth happening in the coming couple of quarters. So...

[indiscernible]

Yes. Anything?

No, sir, I was just saying that I asked more from a ULIP perspective, if you can just highlight.

Yes. So ULIP -- we are selling ULIP. We -- we are looking at -- I've been seeing an uptick in ULIP sales. And we are very confident that the ULIP will continue to be a healthy proportion of our sales. We have good ticket sizes. Ticket sizes are also increasing. In fact, I believe the ticket -- average ticket size is more than last year. So the portent is very good, and we think that we'll do pretty well in ULIP sales going ahead.

Sir, last question is a technical on the VMB walk. You've historically indicated that mix gives VMB improvement, but there is a drag from the interest rate side. And historically it indicated that, that drag is because of the timing of the pricing of the non-par saving product, right? Like when you price it and you actually sell it. Given that now there is stability, ideally, at some point that drag should go away, right, because interest rate, while it set it down, it's been less volatile than where we were last year. So ideally, I would have thought that, that interest rate drag as rates remain stable, will start kind of going off. So what's the view on that?

No. What I say, as you know that the economy assumptions part, our interest rate has been getting changed already told. Even if you can look the last quarter also mentioned the similar lines. So last year was of current year, our interest rate has been decreased [indiscernible]. And if you really recall it last time, it was around minus 3 around 4% or so, negative. That is coming now around 2%. So logically to be frank to you, it is improving, because the market getting improving [indiscernible]. However, we have to be to do much more and have to wait for some time, how it is moving on. So overall economy in some part is the markets going up and leverage revenue is coming out, it will come back on again. So as in, it's very difficult to say any comment on this. But yes, only we can say that from last quarter to this quarter, you look at it, there's some improvement on the -- the continuing economy has some impact.

But historically, when we discussed the interest rate sensitivity, it's not -- the rate sensitivity is not as high as what the VNB walks through. So historically, the justification always was that it is caused by the timing between the -- when the product is launched and when it's priced [indiscernible]

I'll probably request you do take it offline, so that you can have a complete discussion on this thing.

Yes. I'll take it.

I request you to take it up with Subhendu separately.

Perfect, I'll take it offline.

[Operator Instructions] Next participant is Nischint Chawathe from Kotak.

I'm actually trying to kind of look at your first half numbers, separating them in the first quarter and the second quarter. And I think if I look at it, the margins for the first quarter, second quarter, first quarter and first half has broadly been similar. Kind of indicates that margin in the second quarter was similar or maybe impact a tad higher. And if I look at the business mix, you have done significantly more with ULIP in the second quarter or to be precise, share of ULIP in the VNB mix has actually gone up to 60% in the second quarter from 48% in the first quarter. So ideally, your margin should have gone down or -- I mean there should have been some change in the margins, but somehow when I look at the first quarter and the first half or first quarter and the second quarter, there is particularly no change in the margin, although there is a significant change in the product -- the overall product breakup.

The production percentage has gone up, if you see and...

Not really, so quarter-on-quarter, it's same, right?

Yes, the percentage is the same, but the number -- the actual -- the number of protection because there is a quantum jump in the total business that has been done vis-a-vis the first quarter. So the protection, which has got a huge margin, so that has actually compensated for the increase in ULIP because it is not only ULIP which has grown. Everything else has grown; ULIP has grown more. Okay? So -- but protection has sort of balanced the margin part of it.

[indiscernible] also a little bit in case you can look at it comparatively from the last time. So that was ...

What has increased, if you can repeat? You just broke up.

If you can't compare these things with last quarter, this number might be [ more certain ]. So your margin will depend on the product mix for that quarter. So we are having the protection where we what Mr. Sharma just mentioned. With ULIP, we have the protection, we have the non-par. And we are doing active repricing for the non-par part as well. And that will reflect -- and we are doing the active asset liability mentioned. This helped our investment strategy will help to manage the margin. Objective is to increase the protection also in case of [indiscernible], but maintain and even grow the margin side. So that's why it might be seen as reflecting. So maybe exactly compare that why ULIP has gone up, the margin no because other products that we're selling that their margin is higher and that compresses on the ULIP side.

Because protection share is at 12.6%, 12.6%. I think that's not changed. Non-par, which is a high-margin product, has also gone down. So I mean what seems to be the case is that ULIP, which is a low-margin product, is going up and [ non-par ] is also going down. Protection has remained the same. So in that sense, some of it doesn't really add up and the other factors.

If you see individual protection premium, from 6.9% in quarter 1 to 8.2% in quarter 2. So that is a significant 1.3% increase in legal protection. Even credit life had shown growth. So credit life also is marginally higher. On the other protection products are similar. So that is why the overall rated basis, total rated basis, the protection share is similar, 11.8% in quarter 1, but -- and 12% in quarter 2. But the mix within that is favoring individual and credit life; both are more profitable than other protection products. So that is showing the results in our margin overall.

Next question is from the line of [ Crea Shane ] from Yes Securities.

Just continuing on the previous question. Also, is there a change in the protection margins for say, actually percentage change on the individual side, particularly basically, given that the price hike so you wouldn't have come through the first quarter completely and you would have raised prices from July onwards. something of that doesn't happened in Q2 where the individual protection margins would have also?

No, we have not raised pricing. So margin is intact on that basis.

Okay. So the margins basically remain the same what it used to be earlier.

Yes.

Okay. Secondly, just 1 more clarification on the power business. At 1 point, you mentioned that you have discontinued the shorter-term product. And on the other side, you are also mentioning that you are not looking to enter very long vision product. So is it right to understand that you're looking at a much medium-term tenure or somewhere like 10 to 20 years kind of product only in the par business?

See, I think what -- I think you misunderstood my answer to the earlier question. What I meant to say was that I don't want to sell only one kind of product and skew the basket that I have. So that is the only thing -- the point that I made. The question was about why you are not doing what some competitor is doing about selling more par business. So I'm not going to skew my basket by selling one type of product. And that was the only point that I made. We also sell par products. So we are doing it. And we are not actually -- we are not pushing products on the customer. We are actually -- we have a whole basket of products. We have products for everybody from a -- from [indiscernible] to a very rich man, okay? So what we are doing here, we are going to them with a big book of products. And typically, our salesman goes to them and tell them that this is what would probably be your requirement. And now you sell it. And then after we tell the features of the product, he selects the product. So we don't push par products on anybody or non-par products for anybody. But it's only a question that because of the circumstances, sometimes non-par guaranteed product appeals to people when there are in kinds of uncertainty. And the par product is a traditional product which has got a specific kind of a target. So those products will sell at those appropriate points of time. So there will be variations during particular periods of time. But as a company, we are not pushing any particular product. What we definitely do is, we definitely try to position some products as more beneficial for the customers and which have good margins like protection, for example, which is very good for -- even if you look at it, society-wise, is it good for the country. So going on a totally different level. This is an investor meet and I should be talking only profit. But typically, we don't think about that. We think about also serving the customers that we have. And we feel that if we give the customer the product that he wants, he will come back for the other products too. So that is the basic thing. So we are not discouraging sale of par products or anything. What I'm saying is that we will not copy a competitor and push some par product just because it is selling for them.

[Operator Instructions] Next question is from Nidhesh Jain from Investec Capital.

Can you share the percent mix of pure protection in retail protection? And how it has moved on a Y-o-Y basis for the first half.

As I said earlier, it is similar, 85% roughly is pure and remaining 15% is fuel production.

And last year also next one?

Similar number, similar number, not -- the only marginal change compared to last year. This year will be marginally lower than last year. That's all.

Next participant is [ Arshi Wenka ] from RP Capital.

I just wanted to understand that you are growing very well in your group savings business. I just wanted to understand what is driving this growth? And what kind of margins do you earn in this business?

So group savings business is not a conscious strategy. What has happened is this year, our rate, the last declared rate has been significantly higher than LIC. So customers are putting money, then these are all CFOs or Head of HR who decide where the group business should go. So it is not being pushed from our side. It is that the money is coming. Historically, if you see our P&L over last 3, 4 years, we have made a profit on this business.

The next participant is Rishi Jhunjhunwala from IIFL.

Just 1 question on the embedded value. So basically, we seem to have added roughly INR 36 billion in this -- in the first half of the year versus March. Out of that, you can see about 7.5 comes from VNB and then even if we assume an 8% unwind, we would have probably added INR 10 billion, INR 11 billion from the unwind. So that's about $18 billion. The rest, INR 18 billion, can you elaborate where it is coming from?

I think, once we'll do this AUM, we'll come back on this, agreed? So we just explained that we are in the process of review by rest of our [indiscernible]. Once we review, then maybe a couple of day, we will upload these things. That will give clear picture where the AV is growing from that number.

Okay. And so just another one to follow up on the previous question. On the group savings business, versus the rates that you have mentioned that were quoted, are the spots rate further down from there considering how the rates have gone down? And as a result, how much of that is a risk to the VNB or the VNB margin this year based on current spot rates?

So we will revise the rate as required. Now 31st March, we have to declare rates in large -- so we have 2 products here where we declare in advance and where we declare at the end of the year. What in advance we have already reduced and in what is at the end of the year, we will review the return we are earning and our expectation about interest rates and revise it downward if required. We have continuously revised it downward for 3 or 4 years in a row.

As of now, it's profitable, I mean mark-to-market?

As I told you, in the last 4 years, you see our P&L. Group savings is a separate segment. We have made money in each year.

[Operator Instructions] Next participant is [ Sonal Menas ] from Prince Capital.

This is [ Sonal Menas ]. So my question was around pricing of the protection products. Have we gone for a round of repricing these products in the last quarter? And if not, what is the time line we are looking at if at all for repricing these products?

So we have repriced. We have filed the product with the regulator and we'll come back on this. Once we get approval, we'll go to the market. Just now we have maintained that we mention that we have maintained the current premium rate and is quite profitable. But we wanted to optimize, bringing some new feature to the -- for the customer. And that's the reason we have repriced the product and we filed to the regulator for approval.

Okay. And sir, subjectively, I'm not asking comparison to competitors, but how far off from competition would be in terms of our pricing, if -- as of now, given that we are waiting for repricing of this product? Just subjective information would be enough.

It will be quite competitive. So we -- that I mentioned that we have tried to optimize the value for the customer as well value for the company. So it will be competitive because we wanted to increase the protections here. So unless you have a competitor in mind, we can't increase the production. So it will be completed. It will be trade value case for the shareholder.

Next question is from Nitin Aggarwal from Motilal Oswal.

Sir, I just want to understand what is the view on OpEx now like we have demonstrated very good control on OpEx ratios. So do you think that these have been found out?

See, OpEx, we have always had a very good OpEx here. Our model mix shows that we have the lowest -- one of the lowest OpEx in the market. So we think that it will continue because all these advantages that we have as a company, we are, they are still there, and they will continue to be there as in the future that I can see. And therefore, our OpEx is definitely going to be very competitive. But having said that, there will be some elements of the expenses which may be like under this -- under, what you call it, maybe not shown during the COVID period. So there could be a slight increase in the OpEx vis-a-vis what numbers we are seeing right now. But then it will be well in line with our target, and it will also be in line with what the kind of reduction that we've had over the last few years. We'll still be optimizing the cost. So we don't see any drastic changes out there.

Okay, sure. And just 1 clarification. We reported 70 basis point increase in margins on actual tax rate, but our margins on ETR has been the same. And if I disregard the assumption changes, then this number should be a much bigger increase because both the operating assumption and the common assumption change in margin is a negative. So why the ETR margin is the same?

Is it to add -- we actually had last chance to discuss this point possibly. If you look at your effective tax rate and actual tax rate now, coming post that regulatory change and some tax on process change, it come roughly as a very close vial. The question is that it really depends on what types of business you are doing it. If the business are in the pension that the product or how much dividend you're getting for the which type of top that has due to the impact. So if impact is calculated, it really depends on your business mix coming on to it from the outside. So if you look at the 20.2 and 20.2, it still is flat from the last time, but it has not come down as such. Though our business profit if you look at it, different types of business change. So basically, it depends on how much impact is there for the particular product is concerned. Every product not have these type of tax and based on the division we're getting. Also at the same time, how much is the pension business over the life business.

Okay. And this margin based on ATR is not reflecting any change in [indiscernible]?

We don't take any items to do as I just told you. So that is not impacting anything as of now.

Next participant is Harshit Toshniwal from PremjiInvest.

Just 1 question. So when we look at protection, I think we did around INR 190 crores, INR 200 crores of retail protection in 2Q, which is probably highest in the last 8 to 12 quarters, I guess, I think highest to date. Now this number has been very volatile. So there have been few quarters when we did well. But again, it has always remained a bit volatile after 2 or 3 quarters of good growth. We again go back to a sluggish trajectory. So when we look at the INR 200 crore number this time, how much is the pent-up demand from Q1? And maybe in the balance half and going forward, what is the kind of number which we should go ahead with? And what has specifically helped you do so good in retail protection this quarter specifically?

You see, it has not been volatile. Only volatile part was Q1 of last year, there was a big spike. Otherwise, if you exclude the Q1 of FY '19, '20, on a proportionate basis -- on proportion of business basis, obviously, insurance company sales are very seasonal. But as a proportion of business, if you see, it has been increasing continuously or at least steady compared to last quarter. And we do think this traction will continue in Q3 and Q4. So you exclude Q1 of '19, '20, and you will see that the business is not volatile.

Got it. Right. And when I do that, sir, I think it has been improving from, say, INR 600 crores, INR 700 crores run rate in end of FY '19 to -- it was a INR 200 crore run rate in this quarter. So how much of this quarter's number you think is sustainable going forward? So again, there this quarter, there was a sharp improvement. Any guidance would be very helpful, sir.

Harshit, at the moment, we do think that COVID has created heightened awareness about protection across the board. For the whole industry, that is a big benefit we are getting at least as far as protection is concerned.

If I may just add 1 thing, sir. So for the industrial, we have seen around 50%, 55% volume growth broadly. And for the industry, I think Q1 was very good, but Q2 for the industry was much lower than your number. So this has actually done phenomenally well in this quarter when we look at the number of retail protection. But -- yes.

I think we have -- I mean I can give you some explanation like agencies also kicked in earlier we [indiscernible]. So there are other reasons, but I think that is all optimal utilization of the channels that we have. I can't have any other explanation.

Next question is from Neeraj Toshniwal from UBS.

Congrats on good set of numbers. I just wanted to understand the strategy behind the agent pipeline we're adding. I think -- we have been -- we were at 130 and overall we are now at 154. So current times, I think what is the strategy we are having despite the productivity being lower? And what is the product we currently we have in terms of an agency [indiscernible] if you have, and the bank also if you have numbers?

So in agency, last year this time, we had about 123,000 agents, Now we have 154,000 agents, okay? So what has happened is that because of COVID, a lot of people were not able to sell during the first quarter. And because of all the restrictions in movement and not meeting people and all, a lot of our agents were not able to do much business. In normal terms, what would happen is that there would be some minimum business requirement, and we would remove them from the roster. What we have done is we have kept all these people because they will deliver and they have started delivering. So that is one of the reasons why you will see the average productivity per agent has gone down slightly. So if you take a look at what the total number of agents who are actually active, it will be very much similar to what was there last year. And the -- if you look at the productivity the numbers would be slight marginally here or there. So I don't know exactly how much -- Abhijit, do we have a calculation on that?

No, sir, because it is lower, 1.6 lakh compared to I think 1.8.

1.542 lakh and the earlier one was on 1.23. So rough calculations, you will see that it's almost very similar if you look at last year's numbers. And the number of people who might not have had an opportunity to really go in the market and do it. But the thing that is to be seen out here is that in spite of all this COVID and everything, we have been able to add 23,000 agents. And to get the goal and to get the certifications and everything, we have done the thing last year, we added 26,000 around the same period. And this time, we have added 23,000. So that is phenomenal, I should say. And if we continue like this, I'm sure that each of these agencies is going to give more productivity and we can already see that the agency channel is growing quite well. And we are very sure that this is a more productive quarter, I should say, in any year, Q3. So Q3 will definitely be very good.

Okay. And the other question I have is on your protections ability. You have been given the limited traction that has increased apart from the LP -- we were trying to push LP as well. So where are we right now and what is strategy going ahead?

Yes. So the ratio continues to be 85:15 because that term insurance, though it sounds very nice to say pure term and all that. But the effect is the same. You get a cover for a particular amount and then you get some amount at the end of the term, and that is a symbolic amount, actually, I should say, because the return of premium, if you look at the number of years that generally last. So it's a nominal amount compared to the number of years that the policy is running. Okay? So it's a very kind of like [indiscernible]. So I think is as good as a protection product. If you ask the persons who are covered, it serves the same purpose. So I don't think we make a differentiation here on this or that. And I think the margins are largely good in both types of products.

Next participant is Dhaval Gada from DSP Investment Managers.

Sir, a couple of questions. First is on the VNB margin that you've put on Slide 9. So just wanted to understand, conceptually, the sensitivity should be a very good indicator of how the risk rate will impact margins. And if I look at your sort of sensitivity over the last 4 quarters, the 100 basis point reference rate impact on VNB is about 0.3% to 0.5%. So what explains this 2% kind of impact that you've had on margins? Because just across the board, this kind of drop has not happened to explain a 2% impact. So that is the first question. And the second question is just your comments around the long-term par business. So I mean I know you've clarified on this point. But just in terms of -- typically in par business, the implicit guarantee is very, very low. So I just want to understand -- and last part of the risk is also shared by the policyholder. So given that the company is more focused on customer centricity, what is the issue with the offering long-term par to the customer? And in concept of design, is there any specific risk that one should be aware of, and that's the reason SBI Life is not keen to pursue on that opportunity? Those were 2 questions.

Okay, so I will take first -- second question first. On the par, we don't see any constraint as far as designing is concerned, as far as risk is concerned. What we tried to explain on this call, that SBI Life, we wanted to follow a balanced product strategy. We are looking to the customer need and looking the customer segmentations. So we're not saying that we'll offer not our short-term product, and neither we're saying we offer the longer-term product. What we're saying that we'll always have the okay of the product, even the par, whether it's short-term or a longer term. We look into the customer requirement. We offer a choice to customer. And depending on customer requirement, customers choose startup as we offer startup. Customer choose longer par product, we'll offer the longer par product. There is no constraint as such from SBI Life company is concerned. And -- but we wanted to follow a balanced product mix. We are not pushing any one segment or longer term or shorter term that. So that's the second question. I hope I addressed your concern. Coming back to the first question. See, for some things the sensitivity is coming 1 quarter lag. So last quarter, we have seen -- based on the March data. This quarter, we're looking to June quarter. So the product mix is changed in the June quarter as compared to the March quarter. So that's the reason it's coming lower.

Sorry, on the second part, sir, actually, I've seen last 6 quarters data, and you can check that. The deviation is 0.3% to 0.5% on VoMB.

Yes. So the other point is, see, we do allow the -- from the point of sale valuation day, all our investment strategy fully. And as a result, as a company, if you see that we follow this signal LM policy, and we try to manage our asset equivalent to the liability duration. And we have taken a lot of active action on that side to reflect our company's strategy on the asset side. And we do consider that in this thing. As a result, this is coming lower. Second part, we do have a dynamic pricing approach, where we revisit our offering in the market aligned with the offering and try to reprice the product. As a result, you might see this sensitivity will coming down. This truly reflect our asset liability management, active action and improvement that we have done on site.

Next question is from Yash from Genesis Investments.

Just 1 little question. So what is driving [indiscernible]

[Operator Instructions]

So I just wanted to check what is driving the growth on the other segment? Like which -- like within the INR 600-odd crore APE, what are the channels within that other that are contributing really on the individual side?

So we have now many tie-ups, right. So we had tied up with Indian Bank and Eneba bank last year. Indian Bank in the second half and Eneba Bank before that. South Indian Bank and PSB have been there with us for quite some time. This year, in the first quarter, we tied up with UCO Bank and now we have tied up with Yes Bank. Of course, UCO Bank and Yes Bank have just started this way because the tie-up is new. But the old tie-ups, which we have, that is Indian Bank, Punjab and Sind Bank and South Indian Bank, both are driving the other business essentially.

So I thought all the bank would be in Banca, right? Because these are anchor channels.

So we have Banca channels, but we are showing Banca as SBI and others are being shown as others. So technically, they are Banca ISB.

Right. So out of this INR 600-odd crores others, what is coming from online channels, like it would be your website or policy bazaar?

Negligible amount.

Negligible. And any reason why [indiscernible]

[Operator Instructions]

Yes, sorry. I'm just asking presently why we are not going fully on policy bazaar because as we can see, policy bazaar is growing possibly double -- 60%, 80% and our competitors are sort of getting a lot of benefit from there. So what's the reason why we are not going to that channel?

I'm not very sure how much benefit anybody gets out of that because there is a -- there are a lot of things that you need to do to be visible on policy bazaar. And so all those web aggregators and all, they don't work for free. And it's very difficult for us to do something which is outside of -- to make any kind of adjustments to what is not in the regulation. So I think as a matter of principle, we are not very gung ho on that particular avenue at all. So what we are doing, of course, is that we are selling a lot of policies on the Yono platform of SBI, and that is the route that we would like to take. So we are now with all our banking partner channel partners, we would like to be on their website, we would be like to be on their digital platforms. We are developing a digital platform of our own. I mean we do have a digital platform, but then we are improving it and giving it a new name and then we'll drive the sales through these platforms as well. But as -- I mean I do not think it is right to say that digital channels are more profitable because what is actually happening is that what you see as your digital sale is not your digital sale. Most of the sales are assisted. So if somebody actually goes to your website and takes a look or something, there is a whole big call center which is behind there and which people will have to call and talk to you and help you with the process. So what you look at as digital sale is not actually pure digital sale. There's very, very little buying on the digital level, just people going on their own, clicking, buying. It doesn't work like that.

And just last question. We have been sort of consistently underperforming the industry numbers on an individual APE basis, And even in the last couple of months. So what is -- what, in your view, what is the reason for this market share loss? What are the few top drivers?

Well, like I said, we do not adjust our products to market share. We go to the customers with products that we want, and then we try to offer them the best. So there are times when we are not able to push some products like, for example, when there's no demand or something like that by artificially changing the price to make it more attractive or to increase the guaranteed return or something. We don't do any of those things. But what I can say is that overall, the strategy seems to have worked for us. Every year, we are growing. Every year, our value of new business is growing. Every year, our VNB margin is growing. Every year, our embedded value is growing. So I think we will be doing something right. We are the top in terms of new business premium across all the private sector companies. So I think we -- we stick to doing what we do best. And we are not trying to emulate anybody from the competition. We have seen that there are players who were growing at super speed like a rocket last year, suddenly going down low trading like a rocket. We don't want to be in that. [Foreign Language] So we are not in that game at all. But having said that, you can very well see that our model is very sustainable, we have been able to sell an all-round booking of products. We are delivering value to our customers. At the same time, we are a profitable company. And our persistency, if you look at the persistency over all categories, you will find that we have a better persistency. So that shows -- reflects the quality of sales, quality of products, quality of customers that we have and the quality of service that we deliver to our customers. And we will go with this. We do not want a certain quantum jump in our margins at the cost of either customer or regulation. So what we will continue to do is we'll continue to follow regulations properly, ethically sell, try to get customers who will stay with us for a long time who will be happy to -- at the time of maturity and not only at the time of onboarding. So these are the things that we do, and I think we are doing it very successfully. So we'll continue to do that.

[Operator Instructions] Next participant is Mayank from Franklin Templeton.

I just wanted to -- my questions were sort of on the protection side where we have done so well in this quarter. So 2 things, sir, what is the average ticket size of our retail protection business, one? Second, if you can tell what is the contribution of the protection business to our VMBs in this 1 half or maybe for the quarter, split between retail and the non-retail protection. And sir, just 1 more question after that is that generally on the product margins of the savings business, if I talk about your ULIP or the participating business, how have the product margins trended over the last couple of quarters? Have they been stable? Or has there been some decrease in the product margins?

Well, the product margin part is very easy. There has been no significant change in the product margins, so ...

The ticket size of protection product has remained roughly the same, between INR 18,000 to INR 20,000 per policy.

Okay. Got it. And the contribution of the protection business to overall VMB?

It is around 26% of the total VoMB.

In the first half, is it?

Yes, yes.

Next question is from [ Rachel Avala ] from Finvest Advisors.

I just wanted to know a simple thing that why there is such a difficulty between the individual APE premium that you show and the new business premium.

I think it's a question of what is the difference between the APE and the total new business. So in total...

Single premium will be taken at 100%.

10%, 10% yes.

10%. And that is the key difference. And of course, there are some small monthly, quarterly more policies, but that impact is very minimal.

Okay. Now sir, going ahead, what do you think which will be the major products which will run? Now I think from the protection ability we think that people will go more for savings as the economy starts doing well.

See, what we have been saying and I think we have been emphasizing is that the savings products are selling as good as anything else. The protection is a focus this year. And I think it will -- there will be a focus continuing in the future also. Because of the sudden stock, the reality is that were exposed during the pandemic and people were -- people came to know about how valuable it is to have some kind of protection and that anybody can be affected and -- or probably more brutally to say anybody can die suddenly of pandemic. So that has been brought on very, very rudely to the people. So I think the protection has been emphasized and now people actually going out to buy protection. Earlier, people used to ask, what do I get? So now they realize what they get. So now I think that, that shift will be there. But apart from that, like I said, our ULIPs are selling well. And so they are growing. So probably, they'll catch up with the performance that we have done earlier because the feel for savings has not gone away. And even due to pandemic, it doesn't go away. So people who have the money, they have to put it somewhere, and with the bank deposit rates going down, they will have to invest somewhere and plus with the protection. So there is a theme of insurance. So a lot of people think about it in terms of dual advantage that they get, the insurance cover plus the savings aspect of it. So insurance products will be in favor going forward. I don't think there will be a certain jump in anything except protection, where, like I said, because of pandemic, there will be more focus.

Okay. And sir, ULIP, what has been the breakup between the equity part and the debt part? What is the customer's preference?

Yes. So the preferential debt. So largely, what happens is that there will be -- even in the equity portfolio, you will have -- roughly, if you say debt is 63% and equity is 37%. So there is a slight preference of debt over equity.

Okay. And that will continue?

Yes. So more or less, more or less. So it depends a lot on the market. So people suddenly see that equities have become riskier, some shift -- slight shift may be there. But I don't believe that the people who go for equity, they have the risk appetite. And suddenly, you can't make a person who trades on the stock market suddenly invest in fixed deposits. So that mentality difference will be there. There will be people who invest in debt, there will be people who will invest in equity.

And just a last question from my side. We have total NBT of INR 9,000 crores. Out of this, group was INR 4,000 crores and ULIP was INR 2,700 crores, last chunk goes in these 2 heads. So when do you think the other businesses like individual par, non-par and individual protection can become really big? Because they will be the main contributor to the [indiscernible].

I think you got it wrong. So what has happened here is the group business, because of the beginning of the year, nothing else happened the first 1.5 to 2 months, and nothing will happen to the group savings business because the companies are there and the gratuity, so many things have to be arranged for, certainly it doesn't change or go away because of the pandemic. But all the other businesses actually suffered a degrowth in the first 1.5 months. So that's the only reason why this is showing as a bigger figure out here. This slightly more accentuated because what happens is that we have built relationships over a long period of time. And some of the corporates would have probably decided that this is a time to invest with us. So that also has played a part.

Okay. So as we go ahead, I think probably that other part, which has not grown so much, will do that.

Yes, definitely.

Next question is from the line of Ravi Naredi from Naredi Investment.

Very nice result you have given. So my point is there, suppose on January 1, 2015, anyone paid yearly policy to take a yearly policy of INR 1 lakh, and he has paid only 1 installment and how do you deal with this premium now in our accounts?

See, the kind of accounting will be depending upon the kind of product. So it is a bit different for ULIP, it will be different for traditional. So if you're talking about ULIP?

Traditional.

Traditional. So traditional, it will be not applicable because if you have paid January 1, 2015, so it would have gone in lapsed. So technically, it is on the last stage as far as the policy status is concerned.

So when you will take INR 1 lakh in profit and loss accounting profit side, in which year?

No, no, see, that is totally different as per the norms, we do that. So it is totally different as far as the accounting statement is concerned for all the traditional funds and the ULIP funds are concerned.

Ladies and gentlemen, we'll take the last question from the line of [ Keshav Vilani ] from [ Micros ] Capital.

Just 1 clarification. You mentioned 26% of the VNB comes from protection. I would assume you were referring this to as individual protection.

Yes. So we generally considered our credit life and individual protection together to our total VoMB.

So for first half, you are saying 26% of VoMB comes from individual and group protection put together. Is that a correct understanding?

Absolutely, absolutely. Absolutely.

I will now hand the conference over to Mr. Mahesh Kumar Sharma for closing remarks.

Yes. So ladies and gentlemen, thank you very much. It has been a good performance by the company, and we are very happy that all of you have shown keen interest in the results, and we hope that you will stay invested and going forward, that we are able to deliver a better performance, even better performance as we have discussed today. Thank you very much. Have a safe -- stay safe, and have a good night.

Thank you very much.