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

Ladies and gentlemen, good day, and welcome to the SBI Life Insurance Company Q3 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mahesh Kumar Sharma, MD and CEO, SBI Life Insurance. Thank you, and over to you, sir.

Thank you very much. Good afternoon, everyone. We heartly welcome you to the results update call of SBI Life Insurance for the period ended December 31, 2020. Along with me, I have Sangramjit Sarangi, President and CFO; Anand Pejawar, President, Operations, IT and IB; Abhijit Gulanikar, President, Business strategy; Subhendu Bal, Chief Actuarian, CRO; Prithesh Chaubey, Appointed Actuary; and Smita Verma, SVP, Finance and Investor Relations. Update on our financial results can be accessed on our website as well and on the websites of both the stock exchanges. The key highlights of this financial period are: New business premium stands at INR 144.4 billion. Renewal premium has shown a strong growth of 27% and stands at INR 201.7 billion. Protection new business premium is at INR 16.2 billion. Annuity business witnessed 173% growth and stands at INR 22 billion. Profit after tax has shown a growth of 4% and stands at INR 9.2 billion. Value of new business is INR 14.5 billion. And the VoNB margin is 19.3% on actual tax rate basis. On effective tax rate basis, the VoNB is INR 15.6 billion, and the VoNB margin is 20.8%. Assets under management crossed INR 2 trillion mark during this quarter. We will update you on each of the above elements in detail. The company's performance, coming to the premium, third quarter witnessed very positive signs of growth in new business sales, especially performance in December month has been exceptional. On last year's base of INR 21 billion in the month of December '19, growth of 13% in new business has been delivered with significant contribution from individual business. Maintaining private market leadership position in new business premium, we collected new business premium of INR 144.4 billion, and marked a private market share of 23.7%, an improvement of 133 basis points over last year. Non-Par new business premium has grown by 42% and stands at INR 83.2 billion. Individual rated new business premium stands at INR 65.8 billion, leading to private market leadership with a share of 23.4%. Group new business premium marked a Y-o-Y growth of 44% percent and stands at INR 63.1 billion with private market share of 25.3%. The renewal premium grew by 27% to INR 201.7 billion, and accounts for 58% of the gross written premium. Our GWP stands at INR 346.1 billion, which is a growth of 21%. Annualized premium equivalent stands at INR 74.8 billion. Coming to the product mix. Non-Par has shown a growth of 42% with a share of 58% in the new business premium. Individual protection is at INR 4.9 billion, registering a growth of 36%. Group protection stands at INR 11.3 billion. On APE basis, protection contributes 11% of new business and has registered a growth of 28%. Annuity business is at INR 22 billion, a growth of 173% and contributes 15% of new business premium. ULIP momentum has picked up well in -- from the quarter -- second quarter onwards. And individual ULIP business constitutes 67% of individual new business premium. Guaranteed non-Par savings product is contributing 9% of individual new business and about 5% of the total new business collected. We will continue to grow all the profitable lines of business. Coming to our distribution partners. Bancassurance business marks a share of 67% in individual new business premium. Total number of CIFs stands at 50,352 as on December 31, 2020. Instant policy protection issuance through YONO app of SBI has covered more than 5.6 lakh lives. Agency channel, another very strong channel for us, contributes 26% in the individual business premium. Our total number of agents stands at 169,006 as on December 31, 2020. During the period, other channels, including direct corporate agents, brokers, online and web aggregators, grew by 103% in terms of individual new business premium. Protection new business premium through other channel registered growth of 72%. Coming to profitability. The company's profit after tax for the period ended December 31, 2020 is at INR 9.2 billion as compared to INR 8.9 billion in the period ended December 31, 2019, registering a growth of 4%. Solvency remained strong at 234% as on December 31, 2020. As mentioned in my opening remarks, VoNB is INR 14.5 billion on actual tax rate basis and INR 15.6 billion on effective tax rate basis. This is the outcome of a change in the product mix. VoNB margin is at 19.3% on an actual tax rate basis, improvement of 100 basis points on the last year's number of 18.3%. Effective tax rate basis, this figure is 20.8%. Coming to our operational efficiencies. Cost efficiencies continue to improve with OpEx ratio reducing from 6% in the period ended December 31, 2019 to 5.1% in the period ended December 31, 2020. Our 13th month persistency is 86.2% compared to last year's figure of 85.7%. And the 61st month persistency has gone up significantly from 58.5% last year to 61.7%. On regular premium basis, the 13th month persistency stands at 83.4%. As mentioned earlier, assets under management has crossed INR 2 trillion mark and now stands at INR 2,095 billion as on December 31, 2020, a growth of 28% as compared to December 31, 2019. The company continues efficient use of technology for simplification of processes, with 99% of the individual process -- proposals being submitted digitally. 32% of the individual proposals are processed through automated underwriting. Customer satisfaction is a very key focus area. Our grievances with respect to unfair trade practice stands at 0.06%, which is one of the lowest in the industry. We continue to focus on our commitment to digitalization, automation and providing uninterrupted services to our valued customers. Our continuous endeavor is to maintain sustainable and consistent product mix and to work on value enhancement for all our stakeholders. We will increase the footprint of protection business along with other profitable lines of business, enhance distribution networks and their capability to reach out to customers in an efficient manner and improving customer satisfaction, thereby enabling wealth maximization for all the stakeholders. Thank you very much for listening patiently, and we are now happy to take any questions that you may have.

[Operator Instructions] The first question is from the line of Adarsh Parasrampuria from CLSA.

Congrats on good set of numbers. A couple of questions. One was, there seems to be a very strong momentum we've had in December. In the first few weeks or months after lockdown, we were actually behind some of our peers. But the last few months, there has been a very strong pickup, including like equity-linked -- including ULIPs. Just wanted to understand what changed? Or is this that we are able to distribute now better and branches are more active?

Yes. So Adarsh, thank you very much for the question. Actually, when the whole problem began in the beginning of the year, our main concern was the health of our employees and the well-being of our distribution partners. So initially, we took all the measures to make sure that people are safe. So that was the prime thing that we did. We also set up all the systems that were required. So we -- online onboarding and the end-to-end online processing of proposals, online maturity claims, everything, the contact centers, everything was set up properly, everything had to be done remotely, and we enabled our people through VPN and all the other infrastructure. Then from August onwards, we have been seeing a month-to-month improvement. So it has been a very steady kind of thing. And as the unlock has been happening, we are seeing our people responding to that with more business. The demand is there in the market, it has to be tapped, and we have been able to successfully tap it. So we have been very careful about how our people remain safe, follow all the government directives and everything and don't get too adventurous about their health because we still don't know how the pandemic is going to pan out. It's a very good thing that we have the vaccine now, but still. So that is of paramount importance, and I think that initially, that took a little while for us to actually set up everything. Now everything is set up properly. So -- and our people are also -- they are very happy that they were kept at the forefront, their health was -- and their well-being was the foremost in our mind. And as a result, we have very good performance coming up. And we are very confident that going forward also, we'll see that kind of strong performance.

Just a follow-up question on the protection side, is that our momentum is very strong. We've had, again, a 70%, 80% growth in this quarter on individual protection. If you can just walk through. We started this journey about 2 to -- 2 years back maybe to penetrate as much as how our savings products were penetrated? Where are we in this journey, especially on the banca side, in terms of selling protection?

Yes. So there is no end to it. I mean, in very mature markets, you will find that insurance companies are selling more protection and less of savings. And we are not anywhere out there. And so this is a journey which has started, but it is going very well for us, we can say. So we have increased our protection share of the entire business by a significant amount. And we see us continuing on this. We will be pushing in this direction because, as you know, that we have a huge protection gap in India. And that is what we are trying to serve. And the last figure that comes to my mind is 92% protection gap. So 92% is a huge gap. Even those people who have protection are not protected to the extent they should be protected. So even though more than 8% people are covered, the cover would be lower than what is ideal. So that journey will continue. And we are well on the way, but I will not say that we have reached the target or anything. I think the targets will determine themselves when we go forward, what -- how the industry evolves. But I'm sure it is going to evolve towards more and more protection and more and more awareness about the need for not only protection but also health products and that kind of thing. So that space is definitely going to grow hugely, and we will be there along the journey.

Sir, my question was more to do with, let's say, SBI branches. How many are now actively selling protection? Just to get a sense of, through the banca channel, how much more can be squeezed, right? So like what percentage?

See, just to give you a rough figure, I think SBI has got probably 45 crore customers, is what we hear from SBI. So you can sell to each of these customers. Everybody needs protection. So this is unlimited, the scope is unlimited. And the SBI branches are going in that direction because this is one of our major channels. And we are taking that also as part of the strategy. So it's going well. If you ask me exactly the numbers, we can mail something to you.

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

Sir, again, my question is a follow-up for the protection question. So we are hearing comments of protection demand plateauing, particularly the retail protection, but we have done decently well. So is it short-term that it's plateauing and written-off premium is going very well? How should I read that?

Thanks for the question, Mr. Frederick, but I don't think that the demand for protection is plateauing or anything. I think protection will continue to be in demand for a long time to come. There is a sudden spike due to the extent of the pandemic, and there will be some people who will suddenly jump into it because the pandemic is out there. But I think most of the people have got it in their minds that they need to have protection. And going forward, as our people approach them, explain them the products, they will definitely be buying more protection. So I think to answer your question on plateauing, I don't see any plateauing. There could be some companies which may have done more initially and now are not doing so much of protection and vice versa. But I still think that there's a huge potential for protection going forward.

That's great, sir. My second question is on your new product, which was Smart Future Choices. And it was interesting to see you launch a traditional product when non-Par business is in high demand. So what was the strength behind that decision making to launch that product? And who is it being targeted to? And what are the distributors -- who are the distributors that will be catering to that product?

So the distribution is happening on all channels, and it is being pitched to people who can -- who need that kind of -- who have the kind of money to invest. So it's like, the minimum -- this is INR 1 lakh. So anybody who can invest INR 1 lakhs is the target. So I think in India, that's a huge number. But then, yes, in percentage terms, that would constitute basically the higher end, probably high net worth or even mass affluent kind of customers. So that would be the target.

Understood, sir.

And we have had Par products. Par products we have had for donkeys ages. So I don't think it's a new product or something. What probably has happened is that the flavor of the beginning of the year was non-Par. And as a result of that, I think the Par got shadowed a little bit. But now we have this product, which is a very good product, as you have rightly said. And it is one of the first products that offers flexibility, choice, so many things. It has a total -- totally different look, feel to it. And I'm sure everybody is going to find some benefit for himself in this scheme.

Got it, sir. if I may squeeze just one question. The interest rate sensitivity to VNB versus last, like 1H numbers has worsened a bit. So what actually drove this? Is it because of the non-Par going up? Are we hedging? Are we yet into the FRA market? Or how should I read that, that interest rate sensitivity going up?

Yes. So Prithesh.

Thanks for the question. Just to elaborate this sensitivity, we are doing all kinds of things to manage our interest rate risk, be it the active asset allocations. Also, we invest in the partially paid-up bond, which take care of our future interest rate. We're also investing in the forward rate agreement. And we are investing in the longer-term bond. By doing that, we intended to immunize our balance sheet for interest rate fluctuation. And that's the reason you might be seeing the interest rate sensitivity coming down.

No, it has gone up, sir, from 0.1 to 0.4.

Okay. It's not because what's happened -- okay, let me clarify that. If you're comparing -- what's happened -- we -- earlier, we used to report a sensitivity with 1 quarter lag. So when we reported our results in September, that was based on the business written till June. Now we have removed that lag and when we're reporting today, it is a business written till December 31. So lag has gone. Second, you see the individual business written in the quarter 1 is not significant. So that's the reason you are getting some sensitivity. The moment you come to this, we are giving a proper reference of our business. So 1 quarter business versus 9 quarters business, that will have some impact on that.

Got it, sir. So basically, when we compare like-to-like, you're saying that there will be no like major differences?

Yes.

[Operator Instructions] The next question is from the line of Madhukar Ladha from HDFC Securities.

Congratulations on a great set of numbers. A couple of quick questions. First, I believe your protection pricing was due to be revised, and you had filed for the new product. I wanted to know has that come through? And to what extent has pricing gone up? And -- yes, so that will be my first question. And second question would be, your group protection has declined. Can you give us the split between GTI and Credit Protect and what has happened to Credit Protect? And also, the VNB margin, what are the assumption changes that have resulted in the negative sensitivity? And I'm guessing that the economic change is the lower rate interest. So if you could elaborate on these 3.

So as far as the new product is concerned, it's on the way. And probably this quarter, we'll definitely have it. The -- as far as the...

Second one is the group protection, you said.

Group protection, you said, is going down.

It has gone up.

It has actually gone up.

Yes. So what is happening is that Credit Life has picked up. So group protection is going up. And...

No, sir, I mean in the third quarter.

In the third quarter, there's been a decline.

So if you see from YTD basis, it has actually gone up, 11.3% vis-à-vis 10.9%. And for the quarter, if you ask me, vis-à-vis this quarter 2, it might be because of the -- some of the lines of business. Otherwise -- GTI business because this business typically comes as a renewal. We do the agreement. So that is the reason. Otherwise, everything is on line. So it is actually the YTD basis -- sorry?

How much has Credit Protect grown roughly?

Credit Protect for this quarter has gone up. Actually, there is a growth in Credit Protect. And almost we are now touching the last year's number. And we're quite confident we will cross the last year's number of YTD March also.

So Credit Protect growth for the quarter is in double digits.

Okay, okay. On a Q-o-Q basis?

Yes.

So on protection pricing, how much have we increased the pricing? I think that was not answered.

That is something which you can see when the product is launched. So really speaking, we won't be able to answer it right now. It's under consideration.

Okay. And on the margin change, what assumptions have changed?

So let me clarify that we have not made any assumption change in this quarter. So assumption are same as was there in 31st -- September 30 and the same as March 31 as well. Normally, we change the assumption in the year-end. Whatever you're seeing this assumption change is mainly that assumption change we -- as a company, we did in March 31, '20. So that's -- because you're comparing from December, that's what's reflecting there. So there's no assumption change on that side. And you are right that economic assumption is on account of yield, nothing else.

And just to clarify you, the quarter-on-quarter group protection has gone up by 4%.

Okay. Are you looking at it on an NBV basis? Are you looking at it on an APE basis? And that seems to have...

APE basis, double-digit...

We can take it offline.

APE basis, double digit; and NBV basis, single digit.

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

A few questions from my side. Sir, could you point out as to what would be a ballpark protection margin currently? Also, what is the mix between ROP and pure term in the quarter? I think you had targeted to increase the pure term mix? So are you seeing any traction on that? Or will that happen post the new product launch itself? And my last question would be just, I think, a follow-up to one of the earlier questions. Is the branch footfall back to normal? That's it.

I didn't hear the last part of your question. Can you repeat that? After TROP, you asked me something else?

Yes. Sir, I wanted to ask, is the branch footfall back to normal? And like typically, which product amongst your distribution requires the most face-to-face interaction?

Yes. So we start with the protection margin. So really speaking, the protection margins are higher than all the other products. And this is what we are aiming for. So I wouldn't really like to put a number on that because each product in protection also, within protection, it will have a wide fluctuation. So the protection margins are, suffice to say that they are much higher than the average margin of the company. The TROP, if you ask me, the TROP continues to dominate our this. The percentage, if you ask me, TROP to pure protection would be around 75% to -- 70% -- 80% around. 80% would be TROP and about 20%, like it -- I'll have to check the figure, can send it to you if you want. So that is how it is in terms of TROP. So if you ask me about the footfalls in the branches or how much face-to-face interaction, now the whole world has changed. So I don't think we are measuring in terms of the past way of doing business. So most of our people have got smart, and they are actually contacting people on various modes, many of them digital. So you have video calls. You have Zoom calls, you have WhatsApp call, that kind of thing. So all of them are smart. And like I said earlier also, that we have enabled all our distributors to do end-to-end servicing, end-to-end marketing on -- and onboarding on the digital platforms. So really speaking, that has become slightly immaterial. Having said that now, of course, people are returning to the bank branches, people are having more face-to-face. But that influencing the amount of business, we don't see it influencing the amount of business in such a big way. I think the way of doing business has changed a lot. And we are actually witnessing the benefits of not having -- of being able to sell without having a face-to-face with the customer.

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

One basic question is on data keeping. If you can break up that INR 11.3 billion into Credit Life and the GTL business. And similarly, INR 15.5 billion of non-Par business into annuity and non-Par saving product? And it will be great if you can give the corresponding data for 9 months FY '20 too, on both the data points? Then probably, I have one more question, which I will ask.

Sanketh, the group protection, INR 11.30 billion, the bifurcation is Credit Life is INR 8.70 billion around. And group term insurance is around INR 270 crores.

Yes. And non-Par business? And a similar number, previous quarter -- previous 9 months, if you can share, sir?

I'm not able to -- we're not able to hear you clearly, Sanketh. Can you...

Sir, if you can give the same data for 9 months FY '20, the breakup of INR 10.9 billion.

FY '20, it was INR 1,000 crores, INR 1,085 crores precisely. And Credit Life was INR 944 crores, and the rest was GTI.

INR 945 crores was Credit Protect, right?

Yes.

And can you give that same breakup, sir, for non-Par business, INR 15.5 billion broken down into pure non-Par and annuity?

No, Sanketh, at this moment, we don't have. We can have separately with you.

Okay. Okay, sir. Perfect. Sir, one thing I just wanted to check is that when I look at the product mix, non-Par plus protection put together, which was 15.9 percentage in FY '20 in APE terms, in 9-month FY '20, and it has increased almost to 22-plus percentage in 9 months FY '21. Still -- it's a decent improvement in the product mix towards high-margin products. Despite that, the margin expansion to some extent is just 100 basis points on a year-on-year basis? So we were under the impression that if product mix moves substantially higher, the way it has moved, the expansion should have been relatively higher for us. So just wanted to understand, is something which we are missing, which is not translating exactly into the quantum of VNB margin which we wanted to see with the change in product mix?

I think Sanketh, 100 -- if you see the 100 basis point movement from the year-on-year basis, it is on significantly high side. I mean -- and you see the -- SBI Life, our base is quite high. So every single basis point movement from 1 basis point to other basis point in the margin requires quite a lot of things. So the companies which are having smaller base and if there is a kind of movement happen in the product mix, that will translate to the higher margin, whereas the company like us with a larger base, 100 basis points isn't a significant amount gain to us. And that is precisely the reason that we have stated on account of the change in the product mix.

And just finally one point. With the non-Par business, which is now almost like 11% of our total APE right now, so we have internal any hurdle rate or what you call cap on this line of business, that beyond which we won't be comfortable doing that business? I just wanted to understand, see what would be the cap on this product mix, what you are internally looking at? Or the market of Par has become so active right now that now you might be more comfortable to go even beyond 20-odd percentage in this line of business?

So Sanketh, what we do is like, each call we explain that we look into the customer requirements. So what the customer need is, we just go with the product, place all this bucket to them. There's no hard way that -- what we want to do. What we're doing as a company, we are actively repricing and monitoring these products because -- and we have did -- in the last quarter itself, we repriced the product, all our annuity and non-Par. So we have the close monitoring, not putting any hurdle rates on how much non-Par should be. We are saying, if we are able to sell the product in the rate which is enhancing our margin without taking much interest rate risk, we'll continue to sell that rather fixing some percentage that we want to control the non-Par with 10%, 15%. For us, our non-Par is aiding margin and is a customer requirement as it is simple to offer, it is guaranteed, so it's a lot of value adding to the customer. And to that extent, we'll continue that. And we keep reprice our product in line with interest rate movement.

Okay, sir. Great. And finally, if I you can -- if I can squeeze one more. How much impact of reinsurance rate hardening was there on the margin? I mean if you can quantify that number on the entire VNB walk, so reinsurance rate hardening, how much impact was there on our margin?

No, I don't think we'll be able to quantify that, Sanketh. So what we can say is that there has been an effect on that, but then we have repriced products, and we have relooked at what we are doing. So we keep doing that dynamically. And this is not the first time or the last time that the reinsurers are going to change the rate. And we also do talk to them and try to have them see our point of view. And so it's an ongoing process.

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

Hi, sir, am I audible?

Harshit, very much. Tell me.

Sir, one question. So I just want to understand that when we look at the disclosures, which we have, the public disclosures, so we have around partly paid bonds of INR 14 billion as on H1, around INR 1,400 crores of partly paid bonds were there. And I guess we do not do a lot of FRAs till now. So what I want to understand that, sir, over the last 2 years, we have written around INR 14 billion of non-Par return-guarantee business. And assuming that the total amount of -- it's a 5-year, 6-year average product, then the amount of notional exposure which we are having for that guarantees is somewhere around 5x of INR 14 billion, INR 65 billion, INR 70 billion. Assuming some persistency, it will be slightly lower. I just want to understand our hedging technique given that corresponding partly paid bonds we have looks much lower than that number?

Yes. So we have started doing the FRAs also. And partly paid bonds, of course, continue to be our -- one of our favorite instruments for hedging. And we will continue on both these. And we'll -- the other thing that we are doing actively repricing. So that is also helping us. Overall, we are confident that we'll be able to handle the interest rate risk. It is well within our appetite right now.

What I want to understand is that, so we are actively repricing, but that happens for the new products. For the ones which we have already sold, the INR 14 billion...

Yes, so that...

APE...

That's like I said, we have already -- we have these partly paid bonds, and we also have the FRAs.

But we have those to the extent, similar to the APE, which we have written. I'm asking that the future premiums on the similar product which we have sold, those will also carry a rate risk, which we have already guaranteed. So how do we hedge that part?

Correct. so Harshit, just to tell you, the INR 1,500 crore is -- the first premium is anyway hedged because we invest it immediately, correct? So this INR 1,500 crores goes towards the future only, nothing towards the current, correct? Second thing what we are saying is FRAs we have started, and we will do as required to manage our interest rate risk. I don't think we have a challenge as of now of doing the requisite amount of FRA to manage our interest rate risk.

Sure, sure. Okay, okay. Got it. And yes, sir, just one thing. In the retail protection end, we see it's a 100% increase Y-o-Y. Can you just break it into volume and pricing growth broadly, how would that look?

It's volume growth only Harshit.

It's largely volume. Wow.

Yes.

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

I have actually 2 questions. See, there was -- this is just a follow-up on the previous question. Because the VNB margins of 100 basis points is not significant, you said that the base is high. But I think it should be independent of the base, right? Base is just coming in the denominator and it is for a single year. The APE is for a single year. And if the proportion changes from one way to the other, it should reflect in a higher margin. It is not -- we're looking on -- we're not looking at the EV per se, right? We're just looking at the APE base for a certain year versus the next year?

Yes. So I think what Prithesh meant by the base was that when you are looking at a particular product, you are looking at it in terms of a percentage of the total APE of that particular year, okay? So that is what he meant. So that -- when the margins on that increase, that will translate into a portion of that. So that is why the VNB margin is still growing strongly, but then not to the extent of whatever is a change in that particular product.

So just to add, if you look at the last time, we are around 70 bps up. This time, it has happened around 100 bps up. So that's 30 bps already during this quarter because of this product mix change. And as sir has rightly said that, Prithesh said that your business mix because your base volume is very high in the total APE, there the business will come into consideration, into effect. So you're -- that 1% of the total amount. If you look at it, 18.3% becomes 19.3% it's been crossing 19%, it's really, really very good to that extent, though our APE growth may not be at -- we can't have much more of the gain. So another 1 quarter still to come. So -- and as soon as -- we have not done any assumption changes. So all the assumption changes are pending because it has gone 18.3% to this on the 1 year in between. So all those facts put together, I see 100 bps is really, really very good, reasonable, we believe.

And -- sure. Just one more question. Sir, what are the plans around for Cardiff? Are they looking to sell their stake? Any color on that, if you could kindly give?

So as of now, we don't have any information in this regard. So as and when we get it from them, we will obviously update to the exchange accordingly.

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

Congratulations for a very good performance, firstly. Sir, firstly, last year, we created a bit of buffers in our margins by making revision changes on -- looking at the COVID-related scenario. So what is our sense sitting today, whether you see those assumptions to get reversed in Q4? Or you think that those assumptions will not get reversed in our margins?

No, as I told you, that the provisional for the COVID part has not really taken care to that extent because we are not changing any modality assumption during this particular period. We do it the yearly basis, as you know. So overall, is there any impact or not, whether that will be getting released, whether -- or that could be getting affected or not, exactly, it will depend on the -- your assumption change or assumption setting time at the March. So till that time, we are not impacting anything. So that margin, whatever we kept it earlier, that exactly you can look at in the operating assumption. If you look it again, 1.1% dip is there, so that still is continuing. So we have really kept that margin on as of now also.

Sure. But sir, 9 months, the experience which you have seen versus the expectation that you had at the end of Q4, qualitatively, what is -- in line with that assumption? Or do you see these assumptions -- these margin cutting really starting off? Or is it too difficult to say today?

Yes. It is very difficult to say as of today, to be frank to you. But overall, I can only give this part that so far that internally or quarter-on-quarter wise, if you do all the parameters, including your persistency, everything, if you look at it, even mortality, it's not too far away from where it was. So to be frank, let us complete the year, let us do the whole analysis. And then we'll come to know exactly what is the impact.

Sure, sir, sure. And sir, in the others channel on distribution, we have seen very strong growth. So the banks that are -- that we have added, are they part of bancassurance or they are part of others channels?

No. So actually for public disclosure, banks we show as banca, all bank partners. But internally, when we do investor disclosure, we have SBI and this, so in other channels. So other channels include banks as far as this investor presentation is concerned. And overall, bank partners plus other partners, of course, be largely driven by bank partners, individual APE has grown by about 81% this year vis-a-vis last year.

Yes, yes. And sir, lastly, what would be the growth for 9 months in pure protection on a Y-o-Y basis in APE?

Protection growth in the 9 months Y-o-Y.

Y-o-Y protection growth is 12%.

Is this pure protection product, excluding TORP (sic) [ TROP ]?

TROP?

Excluding, TROP, we'll...

We'll give you separately.

Yes, we'll give you separately.

[Operator Instructions] The next question is from the line of Udit Kariwala from AMBIT Capital.

Am I audible, sir?

Yes, we can hear you, Udit.

Yes. Sir, my question is that if I look at the ULIP mix, the proportion of equity has marginally gone up. So could you highlight, is that a strategy change? Or it's just that the demand at this point is more towards equity?

Yes, it is basically demand.

Markets are up...

It is demand. The markets have gone up. So automatically, the percentages go up.

The valuation will be -- the unrealized gain will go up.

Yes. So you have the unrealized gain. So the whole value of the portfolio goes up. So overall is invested in equity, the proportion of -- the investment proportion will go up slightly.

So the new sales what you are doing is still more towards the debt-focused units?

No, nothing like that. It is almost the same kind of profile, the debt and equity, I don't believe I have done an analysis on that. Sangram, can you help me with this?

Yes. So the new inflows are actually now 60-40. So 60% debt and 40% equity, which was previously 65%, 35%. So that is the only change happened and is predominantly due to the market movement.

And sir, just one last one. In terms of the expense ratio coming down, could you give some color around that?

Yes. So expense ratios, like, we all know that there are a lot of -- there's a lot of less movement. There is a lot of less -- all those conferences and conventions that we normally do. So that is one of the parts to it. And it is not very starkly visible because there is a lot of spend on infrastructure, et cetera, especially the digital infrastructure, all the initiatives that we have, upgrading all the back-end hardware that we have. So all these things take money. So what is happening is that it's slightly come down. But I believe -- I don't think it's a long-term trend or something. There will be some adjustment. But then because our volumes are slated to go up, I think the absolute numbers will go up. But percentage terms, it may be slightly lower than last year. So this year is definitely going to be lower than last year. But going forward, I don't think there will be much of a change. But we are the lowest -- we have the lowest cost in the industry. So we hope to keep that cost leadership.

The next question is from the line of Mayank Bukrediwala from Franklin Templeton.

I just had a question on the TROP product. So have we increased the pricing on that product in the last one year, given that interest rates have come down so much. So has there been a need to raise the price? And have we done that?

No, we have not changed the pricing.

Okay. And so what is our ticket price on the individual protection business right now?

So for TROP, it is about INR 18,000, INR 18,000 to INR 20,000. And pure protection, it is lower than that.

Understood. And just last one question, sir. Last time, in the last call, you have indicated that close to 26% to 30% of your VNB was from protection. How is that tracking in the 9-month period?

Similar lines.

It is similar lines.

It's on similar lines?

Yes.

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

Can you hear me?

Yes, yes.

Sir, couple of questions. Firstly on the bancassurance, just you said that SBI branches, SBI has around 45 crore customers. So what is the strategy? I mean like I think we had just 1 employee of SBI Life addressing 6 to 7 branches of SBI. Is there any strategy that you all have devised with regards to getting more out of that channel, so you have a wide reach there? And my second question is, is there any material change in the individual profitability? I know you don't share the numbers of VNB margins, product wise. But is there any material change within like protection? I would assume that the margins would have come off a bit from [indiscernible]. And with ULIPs volumes going up, whether there is any impact on those VNB margins, particularly of individual products? So that would be my 2 questions.

So SBI, like I said, the potential is there. But then it depends a lot on how we are able to sell there. It is not only a question of our own people being -- looking after a number of branches or something. We have the specified persons in the branches, and they are the ones who are doing the selling. So our endeavor is to increase the number of specified persons, make sure that every branch has at least 1 specified person to sell and then they target all the suitable customers. So we are using -- for SBI, we have very strong analytics, what do you call it, they have a very strong database, and they have the analytics. So they have started using that to sell products to customers, identify customers who could buy specific products. So I think going forward, I think that will be a very good channel for increasing business. So till now, there was a limitation that a person would try to talk to people. And the potential alone doesn't help. You call 100 people or talk to 100 people, a few of them would agree to listen and then you conclude the sale with even lesser. So that limitation now with analytics a more targeted approach will be there from the SBI side and we are hoping from our other bank partners side, and that will result in more business happening.

The question on the VNB margins?

Yes. Prithesh.

On VNB margin, like you mentioned that we have not made any assumption since. So there is no change in VNB margin as such. What we're doing that, and let me mention that, we -- all this interest-sensitive product, we are repricing those products. Objective is to keep intact the margin. So to that extent, all the margin movement happening on account of the sale in the product mix, within the product segment, we intended to intact our margin for the particular product segment here, 10 basis points here and there. So one part. Second part is, within the product, if you look at the protection and how our margin will differentiate, so within the protection or even savings, all product will not have the same margin. So if there is a mix happening within that segment, that will also have some impact on the protection. And within particular product, depending on which term and which ticket size is coming, that will have some impact on that. But as such the margin, not changed that. Coming back to the ULIP, that -- so what is happening, if you sell more and more ULIP, as your ticket size will go up, we'll get some cost effective on that. So economy of the scale will come. So that will enhance your VoNB on that perspective.

You're saying the margins have not gone up. Is that what you're trying to say, from last year?

Margin has gone up on account of the change in the product mix. Within the product, our margin is more or less in similar lines.

Sir, my question is purely on protection. Whether protection is factoring on the TROP male and the term thing, has the margin changed Y-o-Y?

So. No, there is not much change. So if you see the our ROP proportion is improved a little bit, 5% to 10% as compared to year-on-year. So that will have some impact on the enhancement in the margin because protection -- ROP has slightly lower margin than the pure protection. To that extent, if we club together, there is an enhancement in the margin.

The next question is from the line of Jayant Kharote from Crédit Suisse.

I wanted to ask about the attachment rates in credit life. And if they are still below 50%, what is limiting our -- that share to go up?

Yes. So one of the things is that if you look at the average home loan -- homebuyer in India, he is 40-plus. So there are a lot of people in the 50s who are buying houses. So that is one of the factors which will sort of restrict it from going too much higher. Because the -- as you know, the cost increases with the age and that many of the people who already have term cover sometimes do not go for specific protection for this purchase of the property. So that is one of the reasons. But having said that, I don't think 50% or anything is a limit, a real limit or anything. It is a question of all factors put together. The way the product is -- we are able to pick the product, many of the times, like from my personal experience, I can say that when a person is taking a -- buying a house or taking a loan, he's most concerned about getting that process through. And as a result of that, he doesn't want to be distracted into adding on cost or a product or whatever. So many times people do not come at that point of time. What we have done during this year, in the beginning, when -- we had very little new business opportunity in disbursements, was that we go back to the old customers and we tried to cover their loans. So the attachment rates have gone up that way. And even though right now, we are still below 50%, we are about 43% attachment rate. But then there is a huge skew. So if you look at the large part of India, the attachment rates would be very good, maybe above 50%. But in some of the metros, like especially Bombay and Delhi, where the ticket sizes are larger for home loans and the number of loans and number of houses sold is also huge, there, we have lesser attachment rates. So we are trying to get to those customers. And we are succeeding in increasing the attachment rates now. And going forward, I think we'll see a gradual increase in the attachment.

And sir, product-wise, beyond home loans?

Yes. So we have personal loans. We have vehicle loans. There also, we see that. But then till now, if you look at it as a percentage of the total portfolio, the attachment rates are lower.

HL is the highest.

Yes, HL is the highest. And the remaining would be like, I think, in -- up to 10%.

Yes.

Attachment rates.

Education and vehicle loans mostly.

So that is in very low percentages.

96% is the home loan. And rest are the other loans.

Yes, even in terms of the attachment rates, they will be lower.

They vary.

Correct, they vary.

They will be lower.

They vary.

What is causing -- I mean, other products also, why are we not scaling? Why are we not able...

Yes. So car loan, vehicle loan, for example, many people don't want to cover it with a life insurance cover. You have all kinds of cover and a 3-year product, sometimes people don't think it's necessary to do it. In fact, when you actually approach people on the ground, they can't be bothered with that kind of thing. I think attachments rates across the industry...

Is it in line with the industry?

Across the industry must be...

Similar, Yes, similar.

Similar.

And you can't make it mandatory.

For prime borrowers, the attachment rates are similar. I don't see there is any difference in prime borrowers' attachment rates across industry.

Okay. And sir, one last bookkeeping question. What would be the lives covered this 9 months and last full year, individual lives covered, excluding group?

Is it 9 months number?

NOPs, number of lives.

[Foreign Language]

Individual, we have covered 10 lakhs.

10.92 lakhs.

Okay, so what is the stock of this number?

Sorry?

The stock number for the whole book, what would be the individual lives covered excluding group?

Over 60 lakh, yes, yes.

Active is around 65 lakh. So 6.5 million.

Correct.

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

A great set of results. I just want to sort of ask one question, and it's purely a clarifying question. So -- and so at the end of the last year, we changed our operating assumptions, assuming that there might be a cost hit because of lower volumes, there might be persistency hit, there might be mortality hit, those 3, 4 parameters. And then -- so this year, whatever VNB is coming, it is on the base of those assumptions, and hence, we are taking a hit. Is that correct?

That is correct.

That is correct. So now by the end of the year, we will realize -- we will measure again that, okay, we said that persistency would fall to, let's say, 75% but it actually was 78% . so let's give it back. So this is the kind of assessment you would do, right?

Yes.

To some extent, all right. But one point what I mentioned, it is not taking care of the volume of business separate. These are basically the operating assumptions. In a sense, basically, it will be the persistency as you rightly said, could be the expense assumption, could be the mortality assumption like the stuff, not the volume. Volume part, we keep separately.

So basically we....

Exactly. So -- sorry go ahead.

Each year, we review these operating assumptions, which is demographic mainly, other than economic assumptions. And based on that experience, we reset. So in anticipation, we did that. If we're getting better, that will be unwind. And then we reset the assumption to the correct level looking into the future outlook.

Perfect. And some of these assumptions like persistency, like expense ratios, as of now, it seems like they are even better than last year. So if one has to take a uneducated or slightly educated guess, it seems like we will see an unwinding of these negative numbers. And if anything, it might actually see some positive outcomes for the year. Is that?

Hopefully, hopefully.

Got it. And just a clarification, you said 12% growth on individual protection, whereas when I am seeing the individual protection APE, the growth seems to be around 40-odd percent for 9 months?

39%.

39%, precisely.

No, I'm sorry. That was, I think, quarter-on-quarter, I don't remember the figure.

Yes, 40%.

39%.

That's okay. And for the third quarter, we saw that this number was about 100% on an APE basis, individual protection. Is that largely pent-up demand? Or is that because of your change of way of doing the business in the new times, which has become really effective? Or is it because the new banks have started to do protection a lot more? Or there is some other reason, like -- just trying to understand.

Nothing of that sort. One of the things is, like I said, our focus on protection. So therefore, there are a lot of -- there is a lot of emphasis on selling protection. And there's also a matching demand. Without a demand, you can't sell. So our -- all our assumptions of being able to sell more protection is because the market is demanding more protection. And as a result of that, we are offering this, and we are able to direct our people to sell more protection.

And do you sort of see, obviously, not 100% numbers, but like quite 40%, 50% kind of numbers continue?

Yes, it can actually. It depends a lot on how the -- one thing is public memory, they say, is short. So once the pandemic is gone and everybody is vaccinated and everybody is happy and healthy, there is a possibility that people will stop buying insurance or term insurance the way they have been doing right now. But then because this has been highlighted in such very close quarters, unlike in any past event, where it was always distant. People used to read in the newspapers and will hear everybody's family lost somebody or at least somebody is being affected. And I don't think that memory is going to go away very quickly. So I think a behavioral shift will be there. It may not be the 100% that we see right now. But like you rightly said, it could be 30%, 40% or something like that.

Great. Fantastic job on protection and margins overall.

The next question is from the line of A Saraf from Jefferies.

Abhishek here. Congrats for the decent set of numbers.

Sorry, I couldn't hear, what did you say?

My question -- am I audible now?

Yes, yes, yes.

My question is on protection. So sir, like most of our peers have taken a price hike. And it seems that we also had filed our product for higher price. So -- and it has been in the works for some time. So if you can just share some thoughts as why we have still not been able to raise it? And secondly, on the non-Par saving guarantee bit, obviously, it has been the flavor of the market for some time now given that the yield curve has been steep, but now with things probably normalizing and maybe the yield curve has steep -- as the steep yield curve flattens out, so would -- so in that effect, do you think that non-Par guaranteed, we would not be pursuing as much as we have done now, right? So can you just share your thoughts on these 2, please?

So as Prithesh said, that we are repricing our products. They are under approval. So once they get approved, the prices will get repriced. So I mean, there is no -- there is nothing special we have to comment there.

I understand this, sir. But just because I think that it has been pending approval for some time now. So that's what I was a bit curious as to why is it taking a bit longer than probably one would have expected? Or it...

So we have 4 new products, which we have launched in this last quarter. So we got those approvals. So I don't think there is anything specific about this. And yes, I think it will come shortly. We'll be able to launch that product shortly. I really don't have an explanation why the product is still not approved. So -- it's a prerogative of the regulator. And we have been getting our approval. We've launched, like I said, 4 products with all the necessary approvals. So it is just one of those things. And having said that, we already have protection products, which are selling. And it's not as if you know, because of that product, we are -- and in any case, it's not such a huge change. I mean if you look at it, it will -- there will be a slight difference in the pricing, the way we are pricing. But it is not going to impact the company to a very large extent. But having said that, it is a product which will answer to the times. So it will start from this quarter. We are very hopeful that we'll be able to launch that product. Your second question was on...

[indiscernible]

You've answered.

The next question is from the line of Bharat Shah from ASK Investment Managers.

Yes. In a long-term business like life insurance, really speaking, [indiscernible]. So what I really want to know is what are critical long-term parameters based on which, a, you judge your business and its progress? And if you can spill out those critical parameters and from where you are to, say, in 5 years' time where you want to be, that would be most helpful?

Thank you, Bharat. So very, very interesting question. So this is something which, of course, internally we debate a lot. And we have our strategies for going forward in the next -- we have a 3-year strategy. We have a 5-year strategy. So that we do see ourselves in a different place, but then looking at how the changes happen very quickly, we are very adept at dynamically changing those strategies. And if you look at what we -- how we measure our long-term success. So one of the things is the embedded value that we have. We have a very strong embedded value. We have the best embedded value in the industry. And -- so it's INR 32,000 crores. So the embedded value, we have the highest value on that. And plus, if you look at the other parameters, we look at the persistency. So we are very good at persistency. And if you look at our 61st month persistency, which means how many of our people, of our customers are continuing to pay the premium after 5 years, you will see that 62% of our people are paying premium at the end of the fifth year. So that is on the back of a persistency of about 85%, 86% after the first year. And then most of the people -- most of the competitors or most of the players in the industry would have a tapering of 80% every year. So if you look at it that way, it goes to 64% in the second year and then 40%, whatever, in the third year and so on. And to have a persistency of 62%, that is one of our aim, and we want to take it further up. And we are looking for also our 13th month persistency to go in line with developed markets. So right now, we are at 86% plus, and we would like to take it to a different level. Now I wouldn't like to specify the numbers, but IRDA would like to see it at the similar levels as the developed markets. So that is where we would like to take that. And obviously, one of the parameters we look at very carefully is also the accounting profits. And we make very good accounting profits year-on-year, and that is what makes the company strong. We have very strong solvency ratio, so we are able to take care of all our customers' requirements. Even if there is a bad year, even if there is COVID, we are still able to maintain our -- there is a 30% fall in the market, we are able to have levels of solvency above our mandated level. So last year, we saw a 30% fall in equity prices, and we still had 1.95 -- 195% in solvency. So these are the things that we look for going forward.

And what about things like, really life insurance is about protection. Savings seems to have occupied a much bigger place. But how much it will be over a period of time, value of the new business, not VNB margin, but value of new business growth over long term? So what kind of a growth? You spelt out about persistency, you spelt out about embedded value, but return on embedded value that you would like to see over a period of time as well as the growth of the value of new business and mix of the offerings in favor of protection where it can be.

Yes. So protection, in some of the advanced geographies, you'll find that protection is like more than 50%. And the remaining is mostly annuities. There is no -- many of the very developed markets would not have significant amount of savings products in between. So this is something which will probably come sometime in the distant future. But right now, we have been -- India has grown on LIC. And if you see, insurance has always been linked to savings. And that is the way you actually push people towards getting insurance. Otherwise, people would not probably get insured. If you tell somebody in the large parts of India that you have to put this money and that if you don't die, you won't get the money, it doesn't work that way. So that -- so if you want to actually push for insurance, I think the savings products are a very good way to do it. And I don't think there is anything wrong with having savings products with insurance linked on to that. Having said that, we have already said in an -- in the answer to an earlier question that we look for higher protection share, and we are moving towards that. And so that is where we would like to go year after year. We would like to increase our protection share till we reach the optimum. And that could be anything which will be determined at that point of time.

And growth of VNB and return on embedded value.

So I can't put numbers on that. I can't put numbers on that, but yes, we would want to -- if you look at our VNB growth and our VNB margin growth, you will find that it has been consistent. This year, our VNB is slightly lower, but that is a function of the volume of the -- especially the individual business that we have done. And that, as we have said, we'll see that growing. And by the end of the year, we are -- we have targeted for a growth -- net growth. And that is where we would see that. So the VNB, we see growing steadily over the years. There may be some periods of lesser growth, there will be some periods of slightly higher growth, but then I can't put a number to that. It will depend a lot -- we had all these plans last year. And then suddenly, COVID came and the whole thing was turned on its head. But we are still able to sit here and show good growth, good performance, better profit than last year and better persistency than last year. So I think it's a very dynamic thing. But a very interesting question. Thank you very much.

Ladies and gentlemen, we'll take the last question from the line of Deepika Mundra from JPMorgan.

Just one question. Given that the December volume was so strong and is agency also normalized by end of December because for the quarter it still looked down year-on-year?

Yes. So agency is getting back, but banca has been stronger. And going forward, we -- our strategy is that both banca and agency should end up with a positive growth.

So March quarter, you mean both should be positive growth.

That's how we have planned. Thank you very much. So thanks, friends. Thank you very much.

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Mahesh Kumar Sharma for closing comments.

Yes. Thank you very much, friends. I think we've had a very interesting session and lots of very interesting questions, and it was our pleasure to answer all those. Any other questions that you may have, we are available, and we can take you offline. Thank you so much.

Thank you very much, sir. Ladies and gentlemen, on behalf of SBI Life Insurance, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.