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

Ladies and gentlemen, good day, and welcome to SBI Life Insurance Company Q2 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mahesh Sharma, MD and CEO. Thank you, and over to you, sir.

Yes. Thank you very much. Good evening, everyone, and we heartily welcome you all to the results update call of SBI Life Insurance for the half year ended September 30, 2021. Hope you and your families are safe and well. An update on our financial results can be accessed on our website as well as on our -- on the websites of both the stock exchanges. Along with me, I have our CFO, Sangramjit Sarangi; President Operations and IT, Anand Pejawar; Abhijit Gulanikar, President, Business Strategy; Subhendu Bal, our Chief Risk Officer; Prithesh Chaubey appointed Actuary; and Smita Verma, SVP, Finance and Investor Relations. Before I brief you on all the performance highlights, let me acknowledge the efforts taken out by our employees, distribution partners and business associates for their dedication and professionalism, which is helping our customers to navigate through challenging times and with uninterrupted support. Thanks to their efforts, we are able to maintain the new business momentum since the last 3 quarters. And once again, we have delivered a strong performance in this quarter as well. Now let me give some key highlights for this half year ended 30th September 2021. Individual new business premium stands at INR 64.8 billion, a strong growth of 54%. Renewal premium stands at INR 128.1 billion, growth of 9%. Gross written premium stands at INR 231 billion, growth of 11%. Production New business premium grew by 33% to INR 12.1 billion, with 166 basis points increase in production share. Individual production, new business premium grew by 38% over half year ended September 30, 2020 to INR 3.7 billion. Annuity business stands at INR 14.2 billion, profit after tax stands at INR 4.7 billion. On actual tax rate basis, value of new business is INR 12.2 billion, registered a strong growth of 64% over the half year ended September 30, 2020. And VoNB margin is at 21.8%, with an improvement of 300 basis points. Indian numbered value stands at INR 352.9 billion, growth of 18% on actual tax rate basis. Assets under management grew by 31% to INR 2.4 trillion. We will update you on each of these elements in detail. Let me start with the premium. Individual business has always been a focus area for the company. Individual new business premium has grown by -- grown to INR 64.8 billion, that is a growth of 54%. Single premium contribution is 25% of individual new business premium. This is mainly attributed to growth in individual annuity product. Individual rated new business premium stands at INR 49.9 billion with a strong growth of 50%, which is leading to market -- private market leadership with a share of 23.6% and this is an improvement of 289 basis points over the same period last year. We collected new business premium of INR 102.9 billion with a private market share of 21.9%. Group new business premium stands at INR 38.1 billion. The renewal premium grew by 9% to INR 103.1 billion, which accounts for 55% of the gross written premium. Our gross written premium stands at INR 231 billion with a growth of 11%. Total APE stands at INR 56 billion, registering a growth of 41%. Out of these individual APE stands at INR 50.3 billion with a growth of 52%. During the half year ended September 30, 2021, totaled 7.7 lakh new policies were issued and which registered a growth of 39%. Some are shown under individual products registered growth of 28% over previous year that compared to negative growth of 10% at the private industry level. Now let me give you some details about the product mix. Individual protection is at INR 3.7 billion, registering a grew to 38%. During the quarter, we launched eShield Next, a pure production product, which offers 3 options, level cover, increasing cover and level cover with future proofing benefit. This product is based on the dynamic risk pricing calculated gains on the customer profile at the time of onboarding as required by the reinsurer. So the product prices will be stable for the next 1 year. Group production stands at INR 8.4 billion with growth of 31%. On APE basis, production contributes 11% of new business and registered a growth of 25%. Credit Life business has grown by 41% and stands at $6.7 billion. Annuity business at INR 14.2 billion and contributes 14% of the new business premium. During the quarter, we added deferred annuity option for group clients and the option will extend to individual customers in the coming quarter. Total annuity and pension underwritten by the company is INR 30.6 billion, registering a growth of 20% over the corresponding half year ended 30th September 2020 on account of boiled capital markets, individual ULIP business is at INR 45.4 billion, which constitute 70% of individual new business premium and has shown a growth of 67%. Guaranteed non-par savings product is contributing 8% of individual new business, and on total APE basis, this contributes 10%. As mentioned in the Q1 call, non-par guaranteed product as seems traction in quarter 2. Growth over quarter 1 stands at 282%, while over Q2 FY '21, growth is over 100%. We strongly believe that by year-end, this product will contribute around 12% to 13% on total APE basis. Fund management business is at INR 22.4 billion. Look at the distribution partners with strength of more than 50,000 CIS that is specified persons, bancassurance business marks a share of 63% and grew by 48% in individual new business premium. Bancassurance [indiscernible] individual APE stands at INR 33.2 billion with a growth of 48%. Instant production policy issuance through YONO app of SBI has covered more than 1.2 lakh lives. Even 3 another very strong channel registered grew business premium growth of 60% and contributes 90% in the new business premium. Agency channel, individual APE stands at INR 15.2 billion with a growth of 60%. During the half year 1, the company added more than 20,000 agents. And as of September 2021, the total number of agents stands at 100,433,232. There is significant improvement in active agents and productivity levels as compared to the previous year, and greater use of technology is assisting in better engagement in the entire value chain from recruitment and trading through to lead generation, sales and customer service. During the period, other channels, direct corporate agents, brokers, organizers, web aggregators grew by 96% in terms of individual new business premium and 65% in individual APE. Production new business premium through other channels registered a growth of 15%. New partnerships like Indian Bank, UCO Bank, South Indian Bank, Yes Bank registered growth of 64%. We are confident that all these partnerships will start contributing significantly in the coming period. Coming on to profitability. During the period, COVID claims net of reinsurance paid as well as outstanding stands at INR 13.4 billion, covering various lines of businesses. The company has kept additional reserves amounting to INR 2.7 billion for COVID-19 pandemic over and above the [indiscernible] liability. Our volatility assumptions are well within our estimates. The company's profit after tax for the year ended -- half year ended September 30, 2021 stands at INR 4.7 billion. Our solvency remains strong at 212% as on September 30, 2021. As mentioned in my opening remarks, VoNB is INR 12.2 billion on actual tax rate basis with a growth of 64%. And if you compare it on a -- an effective tax rate basis, it is INR 14.2 billion with a growth of 77%. Similarly, the new business margin is at 21.8% on actual tax rate basis with an improvement of 300 basis over the last year half -- H1 2020. And on effective tax rate basis, this is 25.3%, an improvement of 510 basis points. Individual value stands at INR 384.9 billion on effective tax rate basis, a growth of 23% on actual tax rate, this would be INR 352.9 billion with a growth of 18% over the corresponding period last year. Coming to operational efficiency, cost efficiencies continue to be maintained with total cost ratio at 9.5% and the OpEx ratio at 5.8% for the half year ended September 30, 2021. 13-month persistency ratio of all policies that is regular as well as single and limited premium -- pay premium stands at 87.7% as compared to 85.9% last year. In -- according -- in accordingly with the recent regulatory requirement with respect to persistency of individual regular premium and limited premium pay policy, 13 persistency stands at 84.7% compared to 83.2% in the corresponding period last year. As mentioned in the opening remarks, assets under management has crossed INR 2.4 trillion as on 30 September 2021, with a growth of 31% compared to the similar period last year. The company continues efficient use of technology for simplification of processes with 99% of the individual proposals being submitted digitally. 45% of individual proposals are processed through automated underwriting. Customer satisfaction is a key focus area of [indiscernible] with respect to uncertain trade practices stand at 0.08%, one of the lowest in the industries. To conclude, we will continuously aim on production and other lines of profitable business. Efforts are to expand our vast distribution network to increase our reach. We will continue to make a sustainable and consistent product mix, focus on automation and digitalization for enhancing customer satisfaction and provide value to all our stakeholders. Thank you very much, and we are now happy to take any questions that you may have.

[Operator Instructions] The first question is from the line of Gaurav Rohit from BNP Paribas. [Operator Instruction]

Am I audible?

Yes, we can hear you. Go ahead.

Sir, I can't hear you clearly, actually.

If you were hearing me clearly until now, then we have not changed anything. So maybe it's at your end.

Yes, that's the issue. I was not able to hear you properly. Am I audible now?

Yes, yes, yes. You are audible. Go ahead.

So my question is regarding the reach on rate hike. So all your peers have mentioned that they have received notices from reinsurers for hiking the reinsurance premium. So I just want to understand that that's the case SBI Life as well. And what is the quantum of possible rate hike that you're seeing?

Yes. So what we said, that's why we included in my opening remarks itself that we are not [indiscernible] rate hike on our protection products for the next 1 year.

Okay. Sorry, because I was not able to hear you properly. I couldn't...

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

Sir, just wanted to understand the drivers for the VNB margin, I think it's increased by more than 500 bps. So how do we explain that? And also to understand better the VNB margin, the competition, your peers only give 1 number. So which one do we look at to compare with competition. And also, if you could just explain a little bit more on the 2 numbers, what is the difference? What drives the difference of staff, which is almost on 400 basis? What drives the difference? if you could kindly dive on this, please.

Yes. So I'll take one thing at a time. So why the -- first question was why the VNB margins have gone up? So basically, the -- there are many factors for going up. One is the volume of business. As you can see, the growth has been quite subvendor, so that is one of the major drivers for that. The other is the product mix also. So the product mix and also the pricing. So we have -- in the past also, we have been dynamically adjusting the prices of some of our products. Wherever we see that there is a change in the environment and that we need to treat the prices, we have been doing that. And it's a result of basically these 3 factors. These are the major 3 factors. There would be many other things out there. So that is the basic thing why we have been able to deliver growth on the VNB margin. Now coming to your question of what is the -- of why are we doing this on effective and actual tax rate basis because we have always been reporting on actual tax rate basis. Some of the other peers are reporting on effective tax rate basis. So now we are -- because we want you to compare properly. And that is why we are quoting the effective tax rate basis numbers also. And also, as a [indiscernible] because sometimes you have to change, even though you may be doing things more rightly. But if the whole market is going to be showing 1 figure, you can't be showing another figure, even though you may be right in doing that because that is more sustainable, that is more accurate, and that is more easily understandable. So now what has happened is that we have also gone into quoting the effective tax rate basis and maybe we'll start reporting only 1 figure of effective tax rate basis going forward. So we are working on that so that there is no confusion on that. So now if you ask me about what is the difference between the actual tax rate basis and effective tax rate basis, that is wherever there are any differences in the treatment of tax because of the -- because of whatever the type of business that we are doing and whatever enablers that we get out of that, like, for example, we get some -- there are some dividend -- there is no dividend tax or something or something like that. So all those things are taken into account and then this effective tax rate basis is calculated. Would you like to add something, Prithesh?

No, no. I think sir, you had it all covered. Just to give a little bit more on the margin enhancement on the side. See, one is the product mix. Other is within the product line, we have keep doing the active pricing. So we have repriced the annuities. We have come out with a term plan. We have repriced our existing term plan from the May. So all this term plan has reflected the current experience and that's really reflecting us to the leave the -- enhance the margin. If you look to the savings part as well, retina, so we have repriced, it'll certainly give a lot of traction. But we see the yield has gone up on that perspective, we are able to hold up that return and that's also enabled us to enhance our margins. So that's the perspective is coming from the margin.

Just one last question, before I hand over to other. Our unit portfolio is still...

You have to be more clear.

Sorry. I'm saying our unit portfolio is still around 60% of our total APE. As you know, you listened to your other peers, the larger peers who are earlier ULIP heavy are trying to go to a more balanced portfolio. And ULIP is also driven a lot by market forces, right? Equity markets clearly, where you see a strong growth in Europe and vice versa. Any thoughts around diversification from there?

I don't think we need to drastically change anything out here. There is a demand for these products, and that is what we are doing. And I don't think we are losing any money on units. And we -- our customers are satisfied. And I think savings plus cover is serving some of our customers very, very well. And that shows in the popularity of the unit product and the stupendous growth that we've had of 67% of -- in ULIPs, that was the popularity of the product. And also, the fact that we have the lowest -- one of the lowest mis-selling ratios in the industry also shows that we are selling these ULIPs to the right people. Now why would I want to change that?

The next question is from the line of Shashank Mundra from Reliance Nippon Life Insurance.

So you mentioned about the COVID-net claims. I want to know what are the gross and net claims total, COVID and non-COVID put together?

Yes. So the net claims are 3,098 crores, that is the total, okay? And COVID death claims are 1,338 net. You want the gross also. The gross is 3,695 for overall and net of reinsurance is INR 3,098 and in the COVID, I have only the net claims. So that is 3,038.

The next question is from the line of Shyam Srinivasan from Goldman Sachs.

Just again on the margins and the expansion of that. And I'm trying to look at the way you plan report margins with the others at 25% now. I'm just surprised that despite being unit heavy, we have margins which are now almost in touching range of the others. So I just want to understand, you have always been made to believe that ULIP margins are very low. So is there something in our product, which makes it different? So just want to understand your thoughts there.

So first thing is that the ULIP margins are not very, very low, okay? So the ULIP margins may be slightly lower than the company margins, but then the ULIP margins are quite significant for us. So what happens is that, along with the high margins on the other products, we are able to still make a good margin. I don't know about the others because I have not really studied the ULIP business of some of the other people, and they are -- since some of the big names are sheading a lot of ULIP business, it will not be profitable for them. But it is very profitable for us.

Sir, so that's what I'm trying to understand. So [indiscernible] actually gives the number out clearly on what is linked margins, and it's like 11%, 12%. And you're telling us it's closer to 25%. So would -- just trying to understand how would that be?

I said, it is closer to 25%. What I said, they did lower than the company's margin, we make a significant margin on that. I wouldn't like to put any numbers out there right now because we don't want to actually put any numbers out there. It is internal, it is dynamic. It keeps changing from time to time we reprice products, we have changes in product mixes. So that is there. But what I'm saying is that we make a good net margin on the ULIP products. And the other products because the overall -- the other products have got very good margins, the average comes out to 25%.

So the way to look at it is our lowest cost ratio helps us re margin on [indiscernible] across all products, including ULIP because the charges that we get from the customers are similar across all competitors, but since our cost is lower, we make more margin.

Fair enough. Second question is on retail protection. We have seen good sequential growth as well as Y-o-Y. Industry is struggling a bit here in terms of growing it. Can you tell us is it the ROP that is helping you here? Or is it -- you also -- like you said, you have relaunched ratios?

No, sir. My ratios are similar. ROP, non-ROP, this ratio is the same. So we are growing at the same rate. So my ROP is growing at 33%, my other non-ROP is also growing at 33%. So that's how it is. And as far as we are concerned, we never went overboard on trying to push production by underpricing or anything. We have always had very sustainable pricing. And I have been saying the same boring thing for the last 1.5 years. But it is true that you do the right thing, you would -- I mean, you get the returns -- rewards for it.

Got it. Sir, last question is on renewals. I think that is where we have seen the slowest growth, 8%, 9%. So anything to read into that? Or do you think that's a function of time?

Sorry. Let me have a small correction. My colleagues have corrected me. It's not 33%. It's 38%, yes. Sorry. Go ahead.

No, on renewals, sir. On renewals, the growth has been slower. Is it a function of what we have been writing in the past? Or do you think renewal growth will also pick up?

No, renewal see. Renewals are a function of what -- how we've been doing. So last year, we grew renewal rate at almost 30%, 29%, we grew renewals. Now there is only so much renewal that you can renew. So if you look at the growth of renewals, we have first 3 years that -- last year, we had a huge increase in the renewals. So when you are looking at that base, then the growth -- further growth is going to be like a large part is the existing base.

So persistency has gone up, but last year's new business growth because of pandemic was not very high. We grew only by 4%, 5% last year. So that has reflected partially in this year's renewal growth. But the key factor to watch its persistency, which has improved across cohorts.

And of course, the single premium also has gone up slightly. So that is also one of the contributing factors.

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

A couple of questions. One is on, let's say till 2020, the margin was a steady 100 bps increase over 2, 3 years' time period. In the last couple of years for the industry and for us, the margin pace has accelerated, and our product mix hasn't moved as much. So can you like -- would it be possible for you to throw a little more light about margin outlook over the next 2 to 3 years' time, what do you expect with the product mix improvement?

Yes. So like you have noticed, the overall mix has not changed very significantly, but the margins have ticked up very well because that is -- one is the product mix came slightly, and we are focusing on some of the things with higher margins. So we are doing more of that business like production and this so that definitely contributes to higher margin. But you will also -- we also see that the pricing that we have been doing. So that is one of the things that really helps us. We have been on the ball on pricing for some time now, and that has also contributed to this thing. So that is basically how it is. So we see our -- we will continue to do these improvements. We will continue to focus on protection. We have got a very good product, and that should see more customers, especially eShield Next the product that we have launch last quarter, should do very well. So that is there. And then, of course, we have Platina, which is a very good product. I think it is -- with our dynamic repricing over time, we have made sure that we get the right kind of customers there. So these are some of the things that we do.

And sir, second question is on the non-par mix. Obviously, the non-par business has kind of gone up as you rightly alluded, I wanted to understand that you did indicate that it could be 12%, 13%, and then I think around 3 years are at 20%, 30%. And that's been one of the key margin drivers for some of your peers. So if you take a little more longer-term view, let's say, next 2 to 3 years' time, any specific target because this product does require a lot of hedging. So any target on where you want to take the non-par?

Yes. So I don't think we are going to be looking at the numbers of our peers to emulate or anything. I don't think -- they've got their own model, maybe it works for them. For us, I think we are looking at something like where we are plus something, so let's say, about 15%, 16%, I wouldn't mind 18% also. But then I'm not pushing any of these things. I'm not trying to tell people, don't buy ULIP, buy Platina or something like that. So the product is -- the products are good. People -- there is a very good demand for this product. And guaranteed -- the guarantee after the COVID, people have really been attracted to guaranteed products. I think the traction will be there. But because we are growing all our business lines, all the ULIPs will continue to grow, protection will continue to grow. But I don't think the mix will get skewed too much. But of course, I will be happy with 15% to 18% in Platina going forward.

Got it, sir. And last will be margin improvement, you did talk about margin outlook. Any specific guidance over a 2-, 3-year period on VNB margin?

I wouldn't like to give any numbers out there. But what we have seen, you would have also seen in the last 4 years. We have continuously quarter-on-quarter being improving our margins, and that is what we would like to continue doing. Now the quantum itself will like may go up or down a little bit, the quantum of increase. But then we would like to have -- directionally, we would like to be increasing the margins for some more time going forward.

Got it. And sir, last clarification. Any one-offs in the margin that we have, which should -- one should assume is not sustainable? Or all this margin improvement looks quite sustainable?

It is very sustainable. And like [indiscernible] sir, also mentioned that. We have continuous monitoring and growing the dynamic pricing.

There is no one -- there is no one-off item.

So the margin and you see we have not made any assumption change during this reporting period. So that in this quarter or half year, you can look into that. We always see the assumption in the mark. So there's nothing extraordinary that we reflected here and that will not be sustained. What we do -- the number we reported, based on the assumption, which is sustainable for longer term. And in that perspective, we are saying that this margin enhancement will even sustainable for future as well.

The next question is from the line of Neeraj Toshniwal from UBS.

Yes, sir. First question is on the interest rate density. I think that others kind of [indiscernible], is it largely because of change in the mix coming from non-par savings or anything else we should be looking for?

It is just the change of the profile. If you compare with the previous year [indiscernible] reported in this number, it is largely on account of change in the profile. And further also, the yield has gone up. So if you go to higher yield, there will be some secondary impact will happen on the sensitivity as well. And nothing extra ordinary in there.

Okay. But the yield is going up, as you mentioned in the starting statement that we are maintaining our IRR. Ideally, we should get the benefit of lower and higher usage. That should be a reverse benefit we could be getting.

I mean you need looking to this yield enhancement, it is going up will have the different impact on the different [indiscernible]. So if you look at traditional product where you're giving a guarantee that even in the past product, interest is going up will be in the party side. If you look at the [indiscernible] business, if interest will go up, MTM of the asset will fall down and then the future earnings will be higher. So there will be [indiscernible]. So if you look at the change of profile will have some impact. So our profile currently remains same each and every reporting period. So there will -- slightly changes happen, that will reflect some of the change in the sensitivity.

Got it. And second question is on the COVID change, given the possibility is obviously a little higher for us compared to peers, likely because of the lower income support. Wanted to understand what our strategy will be in terms of the reinsurance going forward, given we have launched a few term and you want to focus with that segment now. So are we looking to retain more or kind of reinsurance? And what should be terms in the current scenario, if at all, we are looking at in those lines.

No, we have enough -- we have reinsurance support for the product that we have launched. So I don't see any issues out there.

Okay. And the COVID claims are largely behind. We have kind of taken there or anything of prices?

Sir, that is what we are assuming that if you look at the graph of deaths and you look at the graph of morbidities in India, then you will find that there is a tapering off. And a similar kind of thing, we are -- we have seen in the claims also. And since there is a lag, we are being slightly more cautious in keeping some amount aside for the next 6 months for COVID claims. But apart from that, we think that we have largely crossed over the main problem. So in fact, 70% of the adults have been vaccinated at least once. And the figure for full vaccination is also close to 35%, so 30%, 35%. So I don't think -- I think we are over it.

And the last question on the pure term. How is the response for that stood out? And at what mix we -- guidance we likely to have some 85-15 we have been maintained some quite some time. Can we expect that moving and...

The response is really good. And we launched it only in the last quarter. So the numbers will start showing going forward, but the response is good. But I think our term with return of premium is a very good product. So that will not suddenly crash away and go. The markets are different. The customers for eShield Next are different from the customer for my tier of products. So I can grow both of them. By -- as far as the 85-15 is concerned, well, I've not overly bothered about the numbers at assets. But I'm sure that with more and more eShield customers onboard probably change that slightly.

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

Sir, I have a question on the margin side. So if you can just help me understand the delta in margin Y-o-Y on actual tax rate basis and effective tax rate basis. So on actual tax rate it has moved by around 300 basis points, while our effective tax rate it has moved up by around 500 basis points. So can just help understand why that has happened? And sir, second, on the COVID-claim side, I understand that the worst is definitely behind us. Just trying to kind of get my head around it. So like in last quarter, we had 5.7 billion of claims and then I think you've provided 4.4 billion of results, if I'm -- everything serves me right. So that makes around 10.1 billion. But on top of that, you have actually seen 13.4 billion claims in total for the first half. And then we have further added INR 2.7 billion as a result. So is that the right to understand, sir?

Yes, yes, yes. Absolutely.

So would we have...

The effective and actual tax rate basis is concerned, I didn't understand your question. Can you just repeat what you're actually asking?

So the delta, I thought that the delta of the margin, whether it be on effective tax rate or actual tax rate between 2 periods should be broadly similar. So like on actual tax rate basis, it has moved up by around 300 basis points Y-o-Y. But on effective tax rate basis, it has moved up by around 500 basis points. So just wanted to understand.

I don't think it is linear. Pritesh, can you please explain.

So see, if you look at the actual tax basis, the margin enhancement from the 300 basis points reflect the product mix, reflect within the product, which kind of product we are basically within the different product lines. So that's base. If you move from the base -- actual tax basis to the effective tax basis, it's also depend on what kind of investments you are having and the perspective tax free bonds and all. I will have a differential treatment tax statement and that differential treatment will have that impact. So all assets that you are able to invest 1-year back and today, that we'll have the back by the new business will have a different and that will have differential benefits coming on account of the tax incentive benefit that we can claim for. Second part is just to add on that perspective that if you look into the pension, if you're writing more and more pension free, within the [indiscernible], you are writing some of the product, which is higher pension. Pension product don't protect much of taxable benefit. So that will have the higher effective benefit -- tax benefit coming from that customer.

Okay. So largely, this product mix actually in this year vs last year?

Is absolutely, absolutely.

Wider gap. Okay. And sir, lastly, 1 data keeping question on the group protection part. If you can help me understand on a Q-o-Q -- sorry, Y-o-Y basis, for this quarter, what was the growth for credit protect and what -- GTI, if we have written any on that? Y-o-Y sir...

H1. H1 to H1 or Q2 to Q2?

Q2 to Q2.

Okay. So Q2 to Q2, Credit Life has grown by 33% on NBP terms. And AP terms also the similar number, 33%. And Y-o-Y basis, it has grown by 41% on the Credit Life.

And this is for only second quarter, sir? Y-o-Y is 41%.

The second figure that he said 18% is half year on half year.

Abhishek, the H1, FY '22 vis-a-vis H1 '21, It was grown by 41%. And quarter-on-quarter, quarter 2, FY '22, vis-à-vis quarter 2, FY '21, it has grown by 33%.

Okay. And this is on NBP basis?

Both NBP, APE both, similar.

And on a group term, how are we approaching that and have we written business on that part?

Group part increased actually during this quarter -- second quarter, that is Q2 FY '22, vis-à-vis Q2 FY '21 grown by 13%.

13%?

Yes.

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

On the protection side, you mentioned that you've already taken some pricing action over there. So just want to -- with the new products, I just want to understand the quantum of the pricing action and in terms of where do you stack up versus the top tier competitors on pricing?

See our pricing is very good, very cooperative. And I think with the reinsurance companies putting pressure on the others and they're hiking their -- they're having to hike their prices. If they have to do it, then we'll be even more competitive.

Okay. But sir, why would -- I understand that you're not facing a reinsurance hike, you've already launched at a particular price. But wouldn't the mortality profile not sadly be too different. So shouldn't -- why would SBI Life be on the lower end of the pricing versus peers?

No, no, It's not that basis. So what's happened, we have recently launched this product. So when you price the product, we look into our geography and target market and customer base, customer profile we are selling into. Accordingly, we discussed with the reinsurer and agreed for reinsurance rate for longer term. So in that perspective, we are saying that since we have already taken account of the reinsurance premium rate in the new product, this premium rate is going to be sustained further along the period, I guess. At least for the next 12 to 18 months, we don't expect the reinsurer will be going to change. Because all the effect that we've seen in the past have accounted for. Whereas in the peers -- our peers, they might be working on the earlier rate, and they are going to reflect the current claim experience worsening on that perspective.

Okay. Okay. Understood. And similarly, on the non-par side, again, you mentioned some pricing action. Can you give a little bit more color on that?

So if you look at the non-par side, we have recently priced our -- Platina product which is saving product -- saving. So what happens if you see the yield has gone up significantly over the last 6 months. And there is a possibility for passing on some of the benefits to the customer. To that extent, we have repriced and passed on some benefit to the customer. And that perspective is still we're -- our margin has been enhancing significantly.

Understood.

And we roughly increased 20 basis points in the pricing action.

It [indiscernible].

Got it. That's very clear. And just last question. I mean we've been disclosing this actual and effective tax rate basis, VNB for quite some amount of time now. But what has been the key hurdle in not including it in the EV or in the reported EV thus far?

No, It is all about the consistency. There is no hurdle on that perspective because what has happened when you're reporting the several times in the several months and quarters on the effective and actual tax basis. We wanted to continue on that basis, we want to assess that prospective before we're just moving to the one number. So because some people -- still today also, some people were looking for the actual tax basically has an effective tax base. That's the reason we wanted to do that. But I think the industry is -- most of the peers have moved to that basis. So there is a possibility we might also start reporting only 1 number.

But there is no objection from the auditor or anything of that sort to include an effective tax rate basis, which is why you've not been doing it so far.

Our MD has actually mentioned that. I just -- personal good governance perspective and our thought process is to report on actual tax basis. And then we want to give the number. Because people are comparing our numbers with the market. So we have to do that. There is no hurdle, and there's no constraint on that perspective, which is our choice that we are reporting that.

So we are also moving the -- like I said earlier also, we are already -- we have decided to move on to the effective tax rate basis only. So maybe we will give the actual tax rate basis in brackets.

The next question is from the line of Nitin Agarwal from Motilal Oswal Securities.

Sir, I have 2 questions around growth. Like 1 is like we have been reporting very strong momentum in the last few months and 50% sort of individual APE growth even higher run rate in the second quarter. So how do you expect this momentum to sustain over the coming months? And any outlook if you can suggest over the next 2, 3 years in terms of growth?

Yes. So we have changed -- I mean, we have improved the way we are doing business. So we have done a lot of analysis of what we were doing and how we can get better growth. So some of these changes that we have made, not very drastic one, but incremental improvements in what -- how we do our business has effected -- effectively done this, the power of the 1% duly change kind of thing. So that's what we are doing. And because we are doing that, we are very confident that going forward also, we'll be able to maintain the momentum. As I said earlier also, on this call, the quantum -- actual quantum may go down from 50% to, say, 40% or it may go up to 60% some quarters. But then the direction will be the same and the numbers will be good.

That's very good to know. And secondly, sir, on the annuity business in particular, where we are reporting strong NBP growth. But if I look at on APE basis, you have reported a 9% decline over 1H. While some of our peers have reported very strong growth in NBP. So how do we see this business line?

Yes. This is because of group annuity, so that is where we have degrown group annuity, individual annuity, we have a very strong growth.

And in group annuity also it is lumpy, so you will see some spikes coming. So at the year-end, we expect that on group annuity also we will have improvement.

Like last year, first quarter, we had a huge...

One particular client with a huge number...

Yes, huge -- and this is not something which happens every month, what happens is that you engage with the clients and then finally, you get the account. So it takes some time.

The next question is from the line of Avinash Singh from Emkay Global.

Two questions. The first one is on your persistency. I mean, the half year number versus quarter is immaterial if we compare with others. Does that mean that your renewal typically comes even with a delay of more than a month, I mean, a material process. I mean just, I would like to get some color on that persistency, definitely material when it is compared to, say, first half versus quarter. So that's one. And second, on your COVID-19, like in the first half, we took kind of a charges closer to INR 10 billion odd number, I mean, including the reserve and the sort of intimated claims. Now we are sort of somewhere closer to INR 13.4 billion plus INR 2.6 billion, closer to INR 16-odd billion. So does that mean that there is INR 6 billion of charge, COVID related charge has come in Q2. These are my 2 questions.

Your question on persistency, I'm sorry, I didn't understand. On COVID, basically, that -- like what we said, we had already made our provisions earlier. And we have largely been in line with -- I mean, the claims were largely in line with expectations. There was some additional amount that we had to pay last quarter. But then apart from that, it has been pretty much accurate. So if that answers your question because that was something which I didn't really.

Yes. No. So I mean -- so I mean, at Q1, we were closer to INR 10 billion. I mean, kind of a INR 5-point something million in the claims reserves and additional 4-point something as an additional reserve. But now when we are at the end of it, the number is almost like I was saying that the INR 13.4 billion is the COVID-claims cost. And additionally, we are sitting on INR 2.6 billion. It has come closer to INR 16 billion. So that means that, okay, the INR 10 billion has gone to INR 16 billion, whereas sort of COVID-related, I mean the wave has almost ended by June. So that means that, okay, INR 6 billion almost -- INR 10 billion has gone INR 16 billion. So that looks like a material sort of...

No, I think you are -- you see there is a lag in the timing of the claims. So if you look at the deaths that occurred, the deaths were occurring until June, July, okay? So the maximum deaths occurred from February to July, and most of it from March to June, okay? So the claims come with a lag. The claims come with a lag. So what happens is that the June, July and maybe the May claims also would have come in the last quarter. Largely speaking, we have seen the tapering off of the claims in September. And therefore, we are saying that going forward, we don't probably need to keep the same kind of -- set aside the same kind of money that we were setting aside earlier.

So there will be a lag. But when you are providing for IBNR and all, I mean that sort of takes care of your expected, that [indiscernible] has not been intimated, INR 10 billion going to INR 16 billion in a quarter. I mean, it's material diversion -- I mean, material development in a quarter when -- I mean, COVID...

So lots of people have died. See, the whole thing is related to the death claims. We are talking about death claims. Actual people have died out there. And that is why we are having these claims, and that is what we are paying.

So let me just therefore add the 2-point one this. One is, if you're looking into the claims reported in this Q2 quarter. It is -- most of the part will come from -- on account of 2 parts. One is the new claim happened during the year and reporting this quarter. And there is lag coming from -- this happened in the Q1 and reported into Q2. Those reported in Q2 and happened in Q1 is mainly classified as IBNR and that is separately as a part of the IBNR provision that we tended to make from several years, not new. When we are in the June, we are not very sure about this wave, how stringent that wave we will be and continue to be in Q2 and all. So then we made a provision of INR 445 crores to take care of the 9 months new claims. Just 1 for the new incident happened -- not on the -- not on account of the death happened and not reported. When you come to the 30th September, we have seen the wave has stabilized -- finished now. And still, we wanted to be prudent on that side, we're saying, okay, in case there will be some infection will continue to drive certain level. There will be -- some death will happen. And we are saying that INR 266 crores that we -- that we are making today, would be sufficient to meet any new COVID deaths that may incur from the -- in Q3 and Q4 and reported subsequently. Not about the -- this provision is not about the late reporting delay because that is separately dealt as a part of our IBNR provisions.

Okay. So -- yes. So broadly, that INR 6 billion sort of cost, it has come in this quarter, I mean, on account of COVID. Is that my understanding clear?

Yes, if you look at the COVID, that's true, but some of the -- you don't -- you shouldn't compare that with the COVID provision that we make for it. Because most of the claim is coming on account of IBNR. That IBNR was already there and weighted off on that prospect.

Okay. Okay. And the second that your material difference in your persistency numbers for the quarter vis-à-vis half year. So is my understanding correct that your renewals are happening? I mean they're happening, but even beyond 30 days, that's why I mean kind of -- when we move to 1-year persistency or like 6 months is much better when it compares to certain quarters?

Yes, Avinash, you're absolutely correct. So if you see a half yearly basis, the persistency has actually improved. And that is precisely the point we mentioned in the earlier remarks that the renewals are going as per plan. And we expect that this will also improve because the majority of our 60% business comes in the last 6 months. And what we have seen current year that the track study, the policyholders' payment stream is quite robust, and we believe that it will also improve. So for the quarter per se, if you compare this quarter vis-à-vis last -- first quarter, then there is a slight, slight dip. But as far as YTD fast up to YTD FY '21, then there is an improvement and a substantial improvement.

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

Actually my question pertains to the movement in the -- over the last 6 months. If I really kind of -- if you look at this number, the increase in EVs just around INR 19 billion or so, of which your VNB itself was around INR 12 billion. I know you don't reserve the company's movement on a half yearly basis [indiscernible], I was just wondering if you could [indiscernible] quarters.

EV. You are talking about the EV, I'm not able to...

You're not very clear. Actually, your voice is cranking. Can you repeat your question, please?

Yes. Is it better now?

Yes, yes.

Sure. So the increase in EV over the last 6 months was around INR 19 billion -- INR 1,900-odd crores, and the VNB for the quarter was around INR 1,200 crores. I would believe that there will be some unwinding, et cetera, as well. So I was just wondering if you could give us a walk in terms of what really happened if there was a dividend payout or if there was a large investment variance or if there was a large operating variance because of COVID. If you could give us some color on that.

See, what happened if you compare the VNB it will be a future profit for the business that we have written, the VNB. Now when we write a VNB there will be some cost associated with that. That will have impact on ANW. Similarly, if there is unwinding coming from this perspective. But there is some movement that will happen from the VIF to ANW as well. So there is -- if you start compare -- if you compare with the VNB with the EV, may not give real picture. Because it is composition of the adjusted net worth and VIF. And VIF will only -- if you look at only VIF -- VIF growth, then you can say unwinding and be of new business will make sense on that perspective.

Sir, my question is that, was there a large negative operating variance in the first half?

No, no, no.

And on the investment variance side?

No. Hardly, you can see that some of the impact will happen on the adjusted net worth on account of the market movement on EVs because your net worth value will fall down on that perspective. So there will be some adjustment that is part of the adjusted net worth, not as part of VIF.

Not as a part of VIF, but you probably have operating variance, right, or nonoperating variance in this case or investment variance?

So we have the -- we don't have any extraordinary variance in the operating variance during the 6 months.

And on the nonoperating side, was there a dividend payout? Or was there economic assumption change?

No, no dividend payouts. Economic assumption will always keep changing with the current yield. So otherwise there is no change in assumption as well.

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

Sir, I have a very small clarification on COVID provisioning. So at the end of March, the COVID provisioning was INR 183 crores. At the end of June, it was INR 445 crores. Sir, just wanted to understand what is the balance sheet provisioning number, which is on September 21. So how much it has increased? If we have added INR 266 crores of provisioning -- additional provisioning in the current quarter?

So if you see the balance sheet provisioning which is unutilized is INR 266 crores, as on 30 September.

So basically, INR 445 crores getting down to INR 266 crores, you have dipped into the provisions to pay COVID claims, right?

Yes. Yes.

Okay. Sir, so basically, out of that INR 13.7 billion of COVID claims, around INR 2.5 billion was supported by the reserves, which you created during Q1.

Yes.

[indiscernible]

Okay. Perfect, which explains the COVID movement. And second question, sir, basically, the persistency, if you look at for the new method of calculation, If you look at 61 persistency has substantially come off compared to previous year. And if I juxtapose that number along with the surrender numbers going up, sir, is it fair to assume that after 5 years locking, you have seen a significant redemption versus the persistency led to the fall?

Yes, there is an increase. There is an increase because the market is good. So we have a large number of units that we have written. And people who have made good money on their investment, many of them would like to lock into that benefit. So that movement we are seeing.

Okay, sir. And finally, just wanted to understand the extra provisioning what you have made with respect to unfavorable Supreme Court judgment on the group product, which were sold a couple -- many years back in State Bank of India. Sir, we provided a INR 1.6 billion, including interest only for 1 product or we have provided for both products where we have a litigation?

There are only 1 product because there is a judgment there. The other is sub judice. So we have made a remark of contingent liability on the balance sheet.

Sir, including interest costs, what would be that likely hit, sir, if we assume it doesn't go in our favor?

No, that thing is we have already disclosed in our -- this is what we have taken contingent liability. So there is -- we don't want to conjecture on this because it is in Supreme Court.

And just -- just to add, Sanketh, the first one which you asked, INR 115 crore, is inclusive of interest.

Yes, sir. For first one, it is there. I'm just wondering, second one, we know the actual number. So including interest cost, what would be the likely figure if in a worst case scenario, we lose the case?

Like I said, it's...

Fair point, sir. And finally, on the margin profile of eShield or to basically to understand is that the new product of eShield is launched with the new reinsurance rates, which other companies are facing right now. So for 12 to 18 months, the pricing of the new eShield is fully protected. And therefore, we don't see a price hike risk to us for that particular product, right?

Yes, that's correct.

And finally, the margin profile of new eShield will be far superior compared to ROP or it is similar to ROP?

No, it is superior to the ROP.

It will be superior to ROP.

I mean, If you can give you x multiple 1.2x, 1.3x kind of...

We don't want to give out the figures. We don't want to give out the figures. If I say something like x and whatever multiple of x, then I'm almost giving you the figure. But basically, we don't want to really get into that thing. It becomes very, very -- I don't know why some of the competitors are giving out these figures and all, but it doesn't add to any knowledge gain in society. So the idea is that the business should be run profitably and customers should gain out of it along with the company.

Got you, sir. Sir, sir, finally, the non-par growth, what we have seen is only Platina. Or we have launched any other factor because we have a missing product with respect to income plan in non-par, which all other players in the industry have, and we don't have it. So it was completely driven by Platina. And any plans to how to intend to launch the income plan on non-par?

We have the income product, we are launching multiproduct. We'll launch an income product also. And we already have one more product, which is a Smart Samriddhi, which is along with Platina that is our other non-par guaranteed product. So we already have Smart Samriddhi and then we have this. And then, of course, the annuity -- individual annuity is there, and that is also a non-par product.

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

I wanted to understand what will be the -- I have 2 questions, sir. On our guaranteed products right now after the repricing?

What? I didn't get it?

Sir, the range of IRR for the guarantee-return products?

It varies from 3.5% to 5.5%, depending on the term and depending on the premium ticket size.

What is the range like?

Almost 3 -- 4% to 5.5%.

4% to 5.5%. Sir, secondly, I wanted to discuss a little bit on YONO lines and premiums. I believe you had done around INR 30 crores of premiums in FY '21 on YONO. So how much has been first half this year? And when you say you have done 1.3 lakh new lives, I mean what is the cumulative lives so far sold through YONO? And if you could talk a little bit about what is the strategy going ahead? I mean what kind of products are you doing and if you plan to add anything more?

Yes. So YONO, this year, we have done INR 10 crores and the last year's business that we had done, so there are a lot of renewals out there. So that renewal business is also there. What we are talking INR 10 crores is new business premium. So what happens is there are the digital platform, we will have to expand the number of customers who go to the digital platform and buy. So that we are working on right now. Because the people who -- the low-hanging fruits as said, the cliche that we have already tapped and now comes the difficult part of tapping the people who normally wouldn't go digital to buy these things. So that is -- that is what SBI is trying to do.

And sorry, if I got it correctly, you mean, the INR 30 crore included in renewal premium or INR 30 crores was a new business number last year?

INR 30 crores, because the last year, we hardly had the -- we had done very little business in the previous year. So that INR 30 crores was new business premium for the last year. Now what is happening is that when those people renew that comes in the renewal business, commission...

On top of the INR 10 crores?

And INR 10 crores is the new business commission that we have.

And sir, this is sachet life products or is this?

You can call them sachet life products.

And sir, number of lives covered over here, I mean, this 1.2 lakhs add up to, what is the cumulative lives covered through YONO so far?

Around -- I think the outstanding number of lives that we have covered would be around 5 lakhs, including maybe more.

Sir, last year, you mentioned 6.3 lakhs so if I add this it goes to 7.5 lakhs, roughly.

Yes. So something the renewals will not be -- the persistency will not be 100%. There is something like -- the persistency is more like 80% or something. Let me take a look at the figures. I'm just guessing. Around 7.5 lakhs. Yes. So that 30 -- whatever some dropout will be there.

Okay. Sir, -- and overall, what is your digital strategy outlook right now? And how -- because we even say, INR 30 crores, INR 50 crore number is good 5% to 10% -- not 10% but 5% to 7%, 8% of your protection mix. So how do you plan to -- and where do you see it going?

It will go up, see what happens is this is not the only channel. So YONO is one of the channels, then we will be putting more products on the YONO channel and State Bank of India. So that will also add to the digital reach of our products. Then we are also working on our own proprietary channel, the digital channel that we have on our website. So we will be selling more and more. In fact, there has been a significant increase in the number from 2,000 to 20,000 policies and it is INR 11 crores now in this half year compared to INR 5 crores last year. But then this is on a very small base. So INR 11 crores, but this will go up going forward. So this is one of the channels which will really give us a lot of business going forward.

The next question is from the line of Sahej Mittal from HDFC Securities.

Sir, most of my questions have been answered. Just wanted to check what's the current activation rate for the state branches? And how is that -- how is this number being panned out in last...

Activation for state bank branches?

Yes.

Yes. So 65%.

And how has this number moved in the last couple of months given that you've seen the strong growth?

It's moving up, actually. If you compare it with last year, it is 10% more. And from last quarter also, it has gone up. Last quarter figure, I'll just try to pull out. One second, just give me a moment. Yes. So basically, from April was around 45%, May was 32%, and then it's been going up.

And any aspirations to grow this activation rate going ahead?

Yes, yes. Absolutely. In fact, in fact, the idea would be to have 100% activation. How successful we are, will depend a lot on various things. But then normally, every year, by the end of the year, we reached an activation rate very close to 100%. So 85% is -- 86% is what we have achieved in the last 2 years. I'm sure that at least that will be reached -- we are aiming for 100%.

The next question is from the line of Dhaval Gada from DSP Mutual Fund.

Congrats on a good set of numbers. So I had 2 questions. One was the clarification on margin expansion, one of the reasons that you talked about was pricing improvement. Will there be a non-par guaranteed product that was the main driver on pricing improvement? Or there are other segments where you've seen a benefit in the last year or so? And second...

Non-par product, the pricing, what has actually happened is that we have actually made the price better for the customer for -- because the yields have gone up. As a result of that, we have been able to sell 42% more, okay? So that has resulted in the...

So sorry, help me understand. When you say for the margin expansion, pricing improvement was one of the contributors. So which segment drove that? Which segment where we saw pricing increase? That was my question.

So it is across the board. So particularly for the non-par parts. If you look into the non-par savings, either individual annuity as well as group annuity and also on the protection side. So we have repriced our term plan, existing term plan. We launched a new term plan with higher RPM rates. We have increased this annuity -- annuity -- repriced annuity and others. So that really helped us to drive the margin.

Understood. And the second question was on the migration to effective tax rate. So just wanted to understand, normally, I mean, would we see actuarial -- actuary change here? And if yes, then would there be a change in other EV assumptions as well? Because I think Towers Watson has a more stringent EV methodology compared to others. So any comments that you have on that?

So we'll not comment on that because Towers Watson is our reviewer and they have signed off our number, and we are aligned with our methodology. So no comment on that basis. I think we are following the best practices that's required by the regulation and particularly [indiscernible], both the SBI Life as such from a -- particularly by a -- being a product we're following that process. And when you go to the Towers Watson to review, they are also filling that process. So we are following very best robust process as well. Just to give -- within Towers Watson, they do the peer review in the global format. So I don't think there is any comment we should make in our reviewer actually who will review our numbers. So there is no comment on this side. As far the effective taxes rates there, if there were required some changes in the model and other parts at the moment when we start reporting 1 number, we will take care of that. And as you know, the public disclosure also coming now that a company -- listed company, [indiscernible] to disclose their number, which need to be independently reviewed by the independent actuary. If you look at the SBI, we will not comment on others, but even this requirement were not there, half early basis when we disclosed our EV and VNB, on annual basis, when we disclosed our EV and VNB, including sensitivity and other movement, it was independently and duly reviewed by the Towers Watson. So we are following the best practices as a company, and we'll continue to follow that practice.

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

Thank you very much, a very comprehensive set of questions, and we thank you very much for logging in and listening to us and also giving us your feedback and your questions. I hope we were able to answer all of them. And of course, we look forward to your investing and I thank you all once again for supporting us at SBI Life, stay safe, and I hope that you have a great year ahead. Thank you.

Thank you. 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.