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

Ladies and gentlemen, good day, and welcome to the Q2 FY 2023 Earnings Conference Call of SBI Life Insurance Company. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mahesh Kumar Sharma, Managing Director and CEO, SBI Life Insurance. 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, 2022. The update on the financial results can be accessed on our website as well as on the website of Bombay Stock Exchange. I have along with me Sangramjit Sarangi, President and CFO, Ravi Krishnamurthy, President of Operations of IT; Abhijit Gulanikar, President, Business Strategy; Subhendu Bal, Chief Risk Officer; Prithesh Chaubey, Appointed Actuary; and Smita Verma, SVP, Finance and Investor Relations. Now let me give you some key highlights for this half year ended 30th September 2022. New business premium registered a growth of 27% Y-o-Y and stands at INR 130.9 billion, leading to private market leadership. Individual new business premium stands at INR 84.6 billion with a strong growth of 31% and private market share of 25.3%. Gross written premium stands at INR 279.7 billion, a growth of 21%. Protection new business premium grew by 32% to INR 16 billion. Profit after tax stands at INR 6.4 billion, 36% growth over corresponding same period last year. Value of new business is INR 21.2 billion, registering a strong growth of 53% over the INR 13.8 billion in September 2021. VoNB margin is at 31% with an improvement of 630 basis points over 24.7% in September '21. Embedded value of the company as on September 30, 2022 stands at INR 424.1 billion. Assets under management grew by 16% to INR 2.83 trillion, robust solvency ratio of 2.19 as against the regulatory requirement of 1.5. I would also like to highlight a few key initiatives taken by the company. Considering the various requirement, of the customers, we have launched SBI Life - Retire Smart Plus product, which is a ULIP-linked pension savings product. This product offers a comprehensive range of pension savings with varied fund option with an option to defer the vesting date as [indiscernible]. Earlier [indiscernible], we didn't have this feature. We have a view to broaden -- with a view to broaden our reach, SBI Life has partnered with India Post Payments Bank Limited, a leading bank in rural markets. With this, we'll be to enable our customers, especially the section living in unbanked and underserved India to become financially secure and empowered. We will now update you on each of the key elements. Let me start with the premium. Individual new business has grown to INR 84.6 billion with a growth of 31% Y-o-Y. Single premium contribution 32% of individual new business premium, which can be primarily attributed to growth in our individual annuity products. The company gained private market share of 196 basis points to reach 25.3% market share. All individual rated new business premium stand at INR 60.5 billion with a growth of 21% and private market leadership with a share of 23.7%. Also group new business premium started at INR 46.3 billion with a growth of 21%. We have collected total new business premium of INR 130.9 billion, registered private market share of 23.6%. Renewal premium grew by 16% to INR 148.8 billion, which accounts for 53% of the gross written premium. So GWP stand at INR 279.7 billion with a growth of 21%. In APE terms, premium stands at 68.3 billion registering a growth of 22%. Individual APE stands at INR 61.2 billion with a growth of 22%. During the half year ended September 30, 2022, INR 9.2 lakh new policies were issued and this registered a Y-o-Y growth of 31%. Individual new business registered a growth of 14% over the corresponding period last year, which was -- and which is compared to a growth of 7% at private industry level. Considering our robust performance for H1 FY '23, we continue to expect healthy growth in our performance in H2 FY '23. Let me give you details about the product mix. We are happy to report that the company has steadily moved towards a more balanced product mix. For the half year, basically, our guaranteed non-par trading products are contributing 20% of the individual new business. And on APE basis, this constitutes 26%. Non-par guaranteed new business has registered a growth of 221% Y-o-Y, mainly due to new business contribution of Smart Platina Plus, which is [indiscernible] in the half year ended September 30, 2022. This product was launched in March '22. And has seen a strong traction in the new business premium, mainly due to the product features, which are having a high acceptance in the market. ULIP has remained 1 of the flagship segments for the company. Individual ULIP premium is at INR 43 billion, which now constitutes 51% of individual new business premium. Individual protection is at 4.3 billion registering a growth of 17%. Group protection stands at INR 11.6 billion with a growth of 38%. Credit Life new business premium has grown by 36% and stands at INR 9.1 billion. On APE basis, protection contributes 11% of the new business and has registered a growth of 23%. Annuity business is at INR 19.8 billion and contributes 15% of new business premium. Under [indiscernible], the company is offering immediate organized deferral of annuities. Individual annuity business is growing at 136% over the same period last year. Total annuity in pension under the company is INR 32.8 billion which is a growth of 7% over the half year ended September 30, 2021. Group fund management business is at INR 31.1 billion with a growth of 39%. On our distribution partners, with a strength of more than 54,000 CIF, SBI & RRB bancassurance business contributed 67% and grew the 38% in individual new business premium. And on renewal APE basis, it stands at INR 41.3 billion with a growth of 24.5%. We can see our other major channels registered a new business premium growth of 34% and contributes 18% in the new business premium. Agency individual APE stands at INR 17.1 billion with a growth of 12.5%. As of 30th September 2022, the total number of agents stands at 1,78,357 where in the half year, the company added nearly a net of 32,800 events. During the half year, Other channels grew by 52%, which includes direct corporate agents, brokers, etc. and 45% in individual APE. Protection new business premium through other channels registered growth of 38%. Partnerships like Indian Bank, UCO Bank, South Indian Bank, Punjab & Sind Bank and Yes Bank registered a growth of 52%. These partnerships have started contributing 3% of the individual new business premium. For profitability, this company's PAT for the half year ended 30th September 2022 stands at 6.4 billion with 36% growth Y-o-Y. Our solvency remains strong at 2.19% as on 30th September 2022. Value of new business is at INR 21.2 billion with growth of 53% Y-o-Y against INR 13.8 billion in the corresponding period last year. VoNB margining at 31% vis-a-vis 23.7% in Q1 FY '22 with an improvement of 630 basis points. We have aligned the value of new business and VoNB margin for half year ended 30th September 2021, in line with 30th March 2022 disclosures. Growth in VoNB and VoNB margin is fueled by change in product mix with predominantly non-par segment has contributed and, of course, the volume. With our growth targets and product mix shift, we expect to maintain the healthy VoNB growth rates. Coming to operations efficiency, OpEx ratio reduced to 5.6% for the H1 '23 from 5.8% for the similar period last year. Our total cost ratio stands at 10.2% for the first half compared to 9.5% for the last year same period. We respect the persistency of individual regular premium and limited premium paying policy, 13-month persistency stands at 85.2%. The company has registered a significant improvement in 49th month and 60th month persistency of 276 basis point and 350 basis point respectively. We have this improvement in consistency ratios across all the core. As mentioned in my opening remarks, assets under management stands at INR 2.8 trillion as on September 30, 2022, having grown 15% compared to September 30, 2021. The company continues efficient use of technology for simplification of process. 99% of individual proposals are being submitted digitally, 43% of individual proposals are processed through automated underwriting. To conclude, we continuously endeavor to maintain our leadership position and continue to further increase our market share, offering innovative products that lead the evolving needs of our customers. With our robust distribution network complemented by digital technology, our innovation strength and above all our people power, we are well placed to make the most of the abundant growth opportunities offered in India's underpenetrated insurance sector. We will continue to leverage existing partnerships and explore new partners and launch new products to meet customers' needs. Thank you very much for being patient with me, and we are now happy to take any questions that you might have.

[Operator Instructions] The first question is from the line of Swarnabha Mukherjee from B&K Securities.

I have a couple of questions. First one, I'd like to have your comments on how do you see growth panning out in the second half given that you have a focus on diversification now and what I think the expectation is that ULIP would now be slightly lower proportion of the mix than it used to be earlier. Given that mix generally [indiscernible] will be higher than the rest of the product segment. Correct me if I'm wrong in case if it's not correct. So how do you see growth panning out in APE going ahead for the second half? That would be my first question. Second is on the margin side. So this particular quarter sequentially, there has been an increase in contribution for ULIP. And that is I think the major change in the product mix, along with non-par contribution also going down slightly. So despite the focus being on expansion of the margin, just wanted your thoughts on how to repoint into this. Is this again a function of the cost ratios being lower this quarter? How should we think of this? And what is the operating assumption change that has been shared in VoNB. If you can put some light on that. Those are my questions.

We have growth for the second half, our second half has always been very, very strong. So if you see historically, Q3 and Q4 are extremely strong quarters for SBI Life. And we don't imagine that there is anything that should actually change all that. So our all projections are based on our historical trend of Q3, Q4 being the strongest charters for us. So we look forward to a good robust growth there. I have been maintaining earlier also.. Sorry.

Yes, yes. Sir, please go ahead. I just wanted if you could quantify what would be a growth guidance for the year at least?

So I have already said earlier that we would like to grow at 20% to 25% and that remains. And we are working towards that. I think directionally, we are going right. And like I said, Q3, Q4 being strong quarters for us. We are very confident that we'll be able to achieve our projections. ULIP, I have said earlier also, I think that I remember in all my earlier calls have said this, that ULIP growth will be there. You see a lot of traction already happening for demand for ULIP and ULIP will also continue to grow. Obviously, the non-par product that we have launched was a super hit with our customers. And as a result of that, it appears as if the focus is slightly off ULIP, but ULIP will continue to grow because it's a very -- the products that we have are very customer-friendly products. We will also recollect that I just said about new products that we have launched, Retire Smart Plus. And that's also ULIP-linked product, and that is also expected to do very well going forward. So I think the growth and the whole idea about ticket sizes and all you are right. The ticket sizes of non-ULIP products will be slightly lower. But then our idea is that ULIP will also continue to grow according to usual pace that we grow with, at least. That is a belief that we would expect it to grow. And therefore, we don't see any major reduction in ticket sizes or in our ability to meet our targets. Last question about the VoNB margins, you were asking about margins, how come the margins are continue to be robust, even though I think you said that non-par has gone down or something like that. No such thing has happened. Non-par has grown.

Non-par in the mix. I was pointing towards the mix change. So non-par sharing the...

If the volume grows, obviously that is going to be there, the contribution is going to be there. So the volume has grown overall. So if you see the growth, non-par has grown in this quarter.

Also just to add, a lot of [indiscernible]. You can see some slight reduction in this quarter-to-quarter in the number in the non-par. But we think the non-par saving is also the [indiscernible] no-par, which is having the higher margin mix. The new product that last year we have launched, they have a return option and option has a recurring margin. So there is a shift happening in that. So we were able to optimize those margin using the non-par. And also in data penalty, we have deferring [indiscernible] platform, which we launched subsequently. And that's also helping us to enhance our margins. So if we just contribute -- will help us to maintain the margins that are currently there.

So just to clarify the product mix change is only 2% compared to the other product mix has moved from non-par to ULIP only by 2% in this quarter. So it's not really material change and Prithesh had answered the remaining point.

Yes, sure. That's very helpful. Just a follow-up on the growth side, sir, the growth number guidance that you gave, is that on APE basis or NBP basis.

APE basis.

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

Sir, just I believe that on the VoNB side on the -- these numbers, there has been some restatements, right, out for one each '22.

Correct.

Yes. Sir, could you give us...

What you have done is whatever we had projected in March '22 that same methodology we have used on September '22 -- September '21. So you'll remember that we had -- we were stating on a different basis, and we changed the methodology in March '22. And so to compare the September '22 figure, we have done the same thing in September '21 and come up with these. So 24.7% that you are seeing is as per the new methodology.

Right. Sir, could you help us with this -- that breakup for June '21 and September '21 or if you have it [ handy ].

Breakup of what?

Sorry. The second quarter number in terms of the VoNB margin, which equates to the 31.5% under the same methodology.

We can calculate and give it to you. But I don't think we have that -- I don't have it at this time. So Prithesh will answer.

Okay. So see, earlier, we mentioned that earlier we saw the base number and then you need to give some sensitivity and [indiscernible]. Then we model subsequently in the month of March and [indiscernible] at that point in time. So what we did that just to the comparable number, we have rebased those numbers and that becomes 24.7%. And yes, we are comparing our VoNB margin growth from 24.7% to 31%. So if you look at June as well, I think also we've same approach. So while June opening number was 21.2 unbased, we have reinstated 23.7% and closing under FY '22 was 30.4%. So if you want to compare the competitive number by June '21, the rebased number was 23.7% and for September '21, it's 24.7%.

Okay. So very clear. Sir, the question on the EV sensitivity. It has gone up to 4% in the first half of the year versus, I think, 1.8%, which was in FY '22. Any clarification on that? What is driving the higher sensitivity in EV?

So this is -- this is basically the base effect. So if you see the March, you can see the yield from the March to September has gone up significantly. And when you go to sensitivity from current level, they've failed and. And as a result, you see higher sensitivity coming from the interest rate side.

So sir, would you mind elaborate on that?

So what happens -- what the yield is on 31 March was lower. And when we do this, sensitivities are 1% up. We do the sensitivity from that level. What happened from the March and September, it has gone up. And if you look into the starter duration, it has gone up more than 100 basis points. And as a result, there will be MTM losses coming from -- as compared to the March 2022. And that will be becoming a base. And when you do sensitivity, you start with a lower MTM base. As a result, you see the this number change. The major contribution coming from those funds included particularly the shareholder funds where there is no corresponding liability. So while other LOB has the corresponding liability to get offset on that basis in shareholder fund, there is no subsequent liability. So all MTM will impact your sensitivity. Subsequently, it will also look into this discounting because the EV -- the runoff business of future and initial year, your base has increased. So when you -- it's not linear impact on the imports business on EV. So when you go in fact looking to the higher numbers, the impact will be different. And that's the reason you see hard sensitivity coming on.

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

So the first question, I mean, of course, numbers are too good. But in terms of improvement, I mean, of course, you have hired a good amount of agency workforce over the last 1, 2 years. Now at this juncture, I mean, what kind of productivity improvement, I mean, how do you see the growth across these channels comparing them to bank that, of course, have been signed. So that is my one question that what kind of plans around agency and how do you see this performance improving? That's one. And second, within banca, I mean ex SBI, what will the contribution? Because some of the public sector banks, I think we are already almost with them for 2 to 3 years now. And they've -- I will let first [indiscernible]. So what are overall ex SBI contribution in the banca. Those are my questions.

Yes. So agency, you are right that we have recruited. So what has happened is that in COVID basically, there was a lot of agents who are not able to perform and we are not -- actually removed the agents from our roasters in the -- last year only, we started that process once again to rationalize the numbers. So -- but what we have done is we are going all out to get more and more agents and to increase the agency business. So as you can see, we have the biggest agency in the private sector by a long margin. And our productivity -- per agent productivity is INR 2.5 lakhs. I don't think anybody else has got anything near back. And this is what we would like to grow. So -- and it can go higher also. It's already been a growth of about 0.67% in productivity. But I think there will be a lot of scope there. And plus the numbers, if you see the net number has gone up [ 32,000 ]. And this is not my target, we are targeting a much higher number. So I would say these agents in the same proportion start getting productive and sure agency will contribute much more in the future. The other question regarding the non-SBI banca, so I can say that right now, they've got 3% of the business comes from these banks. And our idea is that this would go way up because if you look at the way SBI has grown, if these public sector banks partnerships that we have, if we can only take -- even take that same trajectory, I think the growth is going to be huge. But having said that, you will notice that these relationships have grown up -- grown by a much bigger amount. So almost 63% growth across the other partners. So that's something which we have already achieved.

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

Wanted to understand our outlook on last quarter and 2 quarter, looking for passing on some benefits in terms of -- over the course of time. So where are we? And how much would that put any effect on our margin expansion? That is the first question. And second is on the -- I wanted to know that we are not too active on third-party [indiscernible] platform, but would there be a single strategy with the opening of this online exchange by the regulator?

Yes. So see, we're -- interest rate, it was basically a thing that we keep calibrating. Now if you look at the movement of the interest rate, you really don't know whether there are going to be any more interest rate hikes, So this is something which we are looking very closely. And the product itself has got a very good demand that we have the non-par guarantee. The guarantee that we are offering is finding very good trade. Right now, we are evaluating, so we'll see how it goes. Obviously, if we increase the guarantee rates, the margin is going to go down by that much amount. As there is no way you can increase the interest rates paid to the customer and increase the margin. So that is not happening. But having -- we'll keep a close look on the interest rate movements and decide whether we want to do any testing. Obviously, the customer is skilled and the customer will buy only if there is a higher guarantee, then obviously, we'll reprice and we'll give a better guarantee there. Bima Sugam was a good initiative by the regulator. I think it is going in the right direction with that kind of a thing. I think we'll have to see what the contours of the platform are going to look like and what kind of business can happen out there. But [indiscernible], I think it's a very good idea. And we were not on these earlier platform because we were very expensive to be on, frankly speaking. So I don't think it has got anything to do with our reluctance to be on a public platform. But we don't like to be on 6 platforms. So platforms, which are fixed by somebody else. So therefore, we were reluctant to be on other platforms. But we got to them coming from the regulator and having all the right credentials, I think -- I don't think we will have any hesitation in going all out on that platform.

The next question is from the line of Anirudh Shetty from Solidarity.

My first question is on our non-par books, and it's grown quite well. I just wanted to get a sense of you see enough availability of any instrument to keep growing this book and the pace that we would look like to desire? And also, typically, what percentage of this book is hedged for us? And also, can you give a sense of what is the average tenure for this book? And how much would be before and how much is immediate?

Yes. So the availability of hedging, obviously, we would like to hedge any kind of such a guaranteed product, we can't go ahead without hedging unless we have a crystal ball and we know exactly how the interest rates are going to behave. So failing to do that, we would like to hedge, and we will continue to hedge as long as the availability is there. So right now, we don't see a real problem with the availability, and we are able to hedge to the extent that we want to cover. And I wouldn't like to give any percentage, it's something which we do at our end. But it's hard to say that we are well hedged to take care of the uncertainties of the nature of the product. It's a long-term premium team product. So it goes from 7 to 10 years. And therefore, we are properly hedged there, and we would like to continue to be hedged there. And right now, we are able to get what we want.

Got it. And sir, there's a lot of opportunity to grow within the SBI branch network. Can you just give a sense of what is the share of branches that are activated, what is the long-term number that you can kind of get to at? And I think...

Almost all branches of SBI are generally active. So it may vary from month to month. But on an average, all the branches of SBI would be active with some minimum number of qualities being sold. So that is something which contributes to our growth in SBI, and that has been very steady if you can see over the past.

And see our number of just under INR 40 lakhs per branch is what we have achieved and which is lower numbers than some of our leading private competitors. We hope to bring that gap over [indiscernible].

What do you think is the right -- that was very helpful. What do you think is the right -- I mean, this productivity of INR 40 lakhs, how do you see that trending over time? And where do you see -- what is a more healthy number...

It can go up. See, what happens in India is not a question of the availability of people who need insurance. It is a limit of the people to understand that they need to buy insurance. So you keep talking to people and like any sale, you talk to 100 people, you get 2, 3 sales. So in insurance, it is like -- it is probably on the lower side there. So you have to talk to a lot of people. It is not a very easy conversation to have. So when you start the conversation saying that suppose you die tomorrow, who will take care of your family. It is not a very easy conversation to start. So that is why insurance business in India is taking a little while to actually reach that penetration level, which is there in many advanced countries. But having said that, there is a huge scope. So there is a lot of scope. And if you ask me, I will tell you the global figures. The overall figure that you see, there is an 82% protection gap in India. So the amount of protection that Indians need overall, only 18% of that is full payment. So you know the kind of potential that exists out there. And that's how [indiscernible] customer also.

Absolutely, sir. And one final question. Typically, at the SBI branches, how many SBI Life employees would be stationed over it as a rule of thumb?

Yes. So I would like to say that every branch would have 1 person who sells -- which would typically be able to sell insurance.

So what happens is we have support given to each and every branch of SBI. And unlike other players, we have multiple bank branches being handled by 1 person. Of course, there are some...

No, no. Not our employees. He is asking about SBI employees. He is asking about SBI employee. You're asking about SBI employees. No?

No sir, SBI Life employees.

I'm sorry, I was talking about SBI employees. Typically, there should be 1 for branch. At least that is a minimum that we need. And in bigger branches, there will be more. Our own employees, we have a very different kind of structure. So there will be about 1 employee per 10 on an average. About 10 branches on an average. So that can change depending on the distance, for example, Northeast, I can't say that I have 10 branches covered by 1 person because the branches can be like 100, 200 kilometers away.

Do you see the need to add more because as you mentioned the protection is a tough product to sell. So do you think adding more is ...

See, the whole idea of our model and why our model is cheaper is because we are following the regulatory instructions of the bank people doing the sale and our people training, handholding them, helping them with the sales process. So that is the model that we are following and that is when we are the lowest cost. If I were to put 1 person per brands to sell from my side, then I would be beating, I would be defeating the requirements for regulation also. And at the same time, it would be a very, very high cost model.

The next question is from the line of Dipanjan Ghosh from Citi.

Congratulations on a good set of results. Two questions from my side. One is, you alluded to the change in product mix within the non-par segment, which kind of supported the margins during the quarter. So would you like to throw some more color into the mix of the products in terms of policy term or customer age or tenure? And second, on credit life, you have last year, you have been guiding that you are focused on increasing the attachment rates that SBI counter. So what is the kind of progress that you see out there on that particular segment?

Yes. So see, the non-par, I think basically what Prithesh was trying to say is that there are products and there are products and therefore, you can't really put a figure from outside on what it is. We do the exact calculation and then we arrive at the margin. So the product there are different products. There are different tenures. For example, even the non-par guaranteed product, it would have a 10-year product, and there would be a [ grade 3 ] product, then there would be an 90 product or 70 products. So everyone every 1 of these will be having different margins. So even a slight shift in those -- that demand would change the margin. So I'm really saying it's not a very big deal. What Abhijit said very clearly, there will be a shift of 2% in the overall mix towards ULIP. And on top of that, the Credit Life has grown very robustly -- and also, if you look at the -- so that can be explained by the inter product changes in margin, et cetera, it would be very difficult. We would have to sit through an Excel sheet and talk about how many of each of those products got sold and all that. We know that, but I don't really can -- we need to discuss on the call. But the other thing is Credit Life, like you say, yes, we would like to increase the attachment rates. And we have increased attachment rate from 47% to 48% in the similar period last year. We ended with 50% attachment rate. And this year, we would want to pay a much higher. I think SBI has already taken higher targets because the team that this is a very good product to -- for their customers to protect themselves and their families. And in fact, the product itself is called a Smart Family Protect. So this is something which I think we will try to increase our attachment rates.

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

The EBITDA higher base impacted the growth in second quarter. And we also have a higher base problem in third quarter of FY '22. Sir, how -- what makes you to tell confidently that the growth of 20% or 25% can be achieved for full year because of the highly decline in the second quarter. If you [indiscernible] even if you grow by 20% in the fourth quarter, still the guidance of 20 to 25% seems to be tough to achieve. So if you can give a little more color on that.

Absolutely. You've got a very good question. But I think what you probably have ignored is that, there was a peculiar circumstance in the last year in which you had April may be totally washed out. So that pent-up demand spilled over into part of it. Of course, everything doesn't get fulfilled because people forget, people don't buy, people don't fulfill. But part of it gets fulfilled in the next quarter. So that was the spike that I was talking about and not the normal spike. Normally, we have a seasonality, which we'll take for the first quarter, the second quarter, the third quarter and fourth quarter. So third and fourth quarter revenue, we see highest seasonality because the numbers are divided as the sale and everything happens in the second and third and fourth quarters. But whole of India works on the basis of a busy second half rather than the first half. The Kharif season is always less disease than Rabi season, okay? So that is where all the money comes, that is where all the harvesting takes place. That is where all the things happen. And as a result of that, the money flow, the demand. And certainly the year-end demand, before the year end, people want to do a lot of things to -- within their budget. So as a result, naturally, during the last 2 quarters, there is always more activity. And last year also, I mean it's not a question of the base, the base is only to explain the lack of -- apparent lack of growth in the second quarter. If you look at the numbers, they are very robust numbers in the second quarter also. Only thing is when you compare it with the quarter of only last year, there is an issue of there where it is and not so with the growth. But if you look at sequentially, it is a very good growth. So going forward, every quarter 3 and quarter 4 has been stronger than quarter 2, all years in the past for SBI Life. So that is where our confidence comes.

And last quarter, you mentioned that income plans of non-par in the second half contributed almost 50% of the [indiscernible] business. If you can put a color on how much it contributes either for run rate for second quarter? And can I say when we said that the product -- it's in the product -- product within the non-par design healthier margin expansion. So is it higher contribution of income plans or higher spreads you made in the current quarter contributed to the margin expansion?

So non-par, I think -- yes, Prithesh, go ahead.

So yes, so you are actually right, that non-par income plan has higher margin and help us to enhance the margin measure. And you see the -- depending on the [indiscernible] we have a 7, 8 and 10. So 10 has higher margin, that really help us. Now we have other non-par product which is endowment. And if you compare to the endowment versus income plan, income has high demand. And is the reason this year -- this quarter, particularly due to while we see this slight decline in the non-par proportion overall, the proportion has increased more toward the Platina Plus income plan, and that clearly help us to give this margins.

So what is that number, sir? Last quarter, you got 30%, you have that number handy?

22 to 25, I think somewhere around those. So if you see that this quarter is around 25% at least.

Okay. Got it, sir. And the another question which I had was you restated VNB based on the revised methodology, which you have tried for FY '22 to fill your numbers. Can you restate the EV in which you reported in 1H FY '22, not based on the methodology we used in FY '23. Because if I use that number of FY '22 of what you reported, and look at EV growth, it looks muted 10%. So naturally, the growth should be better than the 10% because assumptions were probably not appropriate in FY'22 on that. So if you can restate that number, it will be very useful. And related to it, wanted to understand how much we got impacted in 1H FY '23 because of AUM?

So see, we have not published our [ AUM ] from EV -- and since we've not public our AUM we have not restated number publicly, we're not disclosing those numbers. End of the year for financial year, we will go and do that. So you get a like comparison from the margin next March because that number already is new base. So we have not done that. So we don't want to call the number at this point in time. 60% of your MTM as well, I think because, again, this is economic wars coming from that since we have not publicly disclosed those numbers, we do not want to comment on MTM. But the moment you'll see this, our MTM markets will be single to the sensitivity that we shown in 31 March, not different than that. Second find is if you look into the EV growth, which you might be seeing is a muted in the first 6 months of the year, EV growth 10% is quite significant because most of the business is coming in the second half. So EV growth will be much higher. Third point, I think, though, we are given the AUM, I can confirm that the operating variance, all the aspects, including the mortality, expenses, we have a very positive variance. We are expecting even better. Because we have used COVID example as our mortality is concerned and we have not diluted our COVID [indiscernible] 31 March, 2022 [indiscernible]. So by end of the year, we see more operating variance, and you might be seeing more robust ROE. But at that point in time, I think you have to wait till our year end in March '23, we will do that.

Okay. And the last one from my side. See, we are seeing improvement in the cost ratio. We are seeing improvement in the persistency. Our VNB, which is 31% in the first half is still based on last year cost and sensitivity, how that dimension fit? We have not set assumptions yet. I just wanted to understand that, that lever itself is still available for you to report in margin even better than what you have reported in 1H, sir?

See, I think you can expect that margin would be better in the same product mix. But if you see the [indiscernible] will be changing over the next 6 months. So I think while margin will be more or less similar, I do see there will be some investment coming from, but I don't see any downside margin from the current level. On current level, it's not in between 31%, we are looking for some range of 28% to 31% range. But definitely in the past when we revisit, we expect...

Yes. So basically, this is largely conjecture because like I keep saying and I said this, I know still -- I am also bored of saying it that we are basically selling products that customer wants. And that doesn't change. We're not pushing anything down anybody's throat because it has got higher margins. Obviously, the margin will depend a lot on the demand that is there. But we will continue to give meaningful products to our customers, and we will find they will find it useful. And as a result, we will grow our VoNB, we'll grow our EV. And the margin, of course, will be a high healthy margin.

The next question is from the line of Madhukar Ladha from Elara Capital.

Congratulations on a great set of numbers. So most of my questions have been answered. Just I wanted your comments on the new draft regulations on commission and expenses of management. Are expenses of management are significantly lower than that 70%, I believe that will go to 50%, 55%. So what I wanted to understand is -- how can this impact us? And could it lead to a scenario where our largest distribution partner and parent then demands for higher commission payouts. Yes, your thoughts on this please.

I do not speak for our distribution partners. But the whole idea is that our business is good, so long as it is sustainable. And so long as it is like nobody would want to kill the golden goose, okay? So if you're doing good business, and you're getting good results out of it, good revenue out of it, I don't think you want to kill the business by saying that you give me everything and leave the theme for growth. So I don't [indiscernible] situation, first thing. Secondly, I think what is being attempted is that there are a lot of companies which have been constrained because of these regulations, and they would like to have more freedom in the way they spend expenses of management. So I think that is where the regulators looking at giving some higher degree of freedom. But I am very, very confident that the regulator will still be looking carefully at how it is being spent and how it is being managed so that there are no wrong practices coming in. So I'm very confident that the regulator would think about all these things and there's would be a good framework for that. Having said that, we have never been challenged in terms of either AUM or commission payments. So we don't think it is going to affect us directly. But like you were seeing the scenario that you were thinking about, any such scenario looks like coming up, then we'll see what we need to do.

Sir, while as you may not take all of commission, but there can definitely be a scenario where there is some sort of payout increase. Have there been any discussions? Anything on that?

Yes, I think this is all very contractual. This is very contractual. So I won't like to comment on this. If there is something concrete that comes up, then we'll discuss this.

Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal.

I have 2 questions. On the annuity product. So what is really driving such strong market share gains in this business. Like I want to understand how important pricing is behind the growth of this product. Like you have always said that ROP product, the customers are not so price sensitive and they want money in return. So how competitive this product is when it comes to pricing? And if you can also provide some color on distribution mix in respective to this specific line of business.

So annuity product, it is this something which is very transparent in the sense that everybody -- a person can go and search for annuity products, and will know what kind of returns he will get. So if I'm able to sell a product, it has to be competitive. So that's what we have. We have a very competitive product and we are giving value for money, and that's how it's selling.

And all channels are selling, those are selling annuity products.

Yes, yes. All channels are selling.

And so how do you see the growth going forward in this product as interest rate rises and banks are also increasing deposit rates, which will go up sharply.

So see, I don't think there is a direct connection between deposit rates and these products because these products are totally different in structure. Deposit, you will get for 3 years or maximum 10 years. Today, you can get a deposit for 10 years and you can lock in the rate of interest for 10 years back. In the annuity products, we are giving for life, okay? So that flavor is totally different. In the deposit, you get the money back, and you have to deploy it again. So there are 2 things out here. One is the liquidity that you have the money. But again, you will have to deploy it. And there is no guarantee what rate you will get there. So if it is a euro, if you see in the last 30 years, the rates of interest has gone down to 0 and minus also. So if somebody imagine that after 10 years, we'll put it in [indiscernible] and then he will put it again at a better rate or something like that after 10 years, he will not get interested. You'll have to probably pay interest to do that. In the annuity product, I cannot afford to do that. I have to give you whatever I committed today. I have to keep paying him till somebody certifies that you no longer give. So there is a huge difference. I don't think that this is driven only by interest rates. It is driven by the returns that are generated and the guarantee. So you are able to give a guarantee that 50 years on the line if you're alive, I'll give you this much amount. So that is what is driving that business. And I think it's a totally different demand and supply to fixed deposits or any other investment, you can compare it probably with a 40-year bond or something, but that's [indiscernible].

We do see a lot of growth in this annuity business.

Yes, because both retails are covered, both are...

[indiscernible] is maturing. So we get a lot of increases converted to annuity products. And retirement is -- for the people who buy....

Most people don't have any pension or protection.

[indiscernible] demography. This is on a small base, but the fastest growing demography. People about 55, 60 years age.

The next question is from the Ansuman Deb ICICI Securities.

I have 2 questions. One is that you mentioned you had a tie-up with India Post Payments Bank and so has been the case for another leading private life insurer. I just wanted to understand the competitive intensity around the Tier 2 network distribution or Tier 2 kind of [indiscernible]. Has it increased? and how comfortably the SBI sharing an open architecture with like a leading private life insurer. That is the question number one. And question number 2 is, our sensitivity have increased, sensitivity to interest rates. So in terms of strategy, do we have a strategy to kind of lower it down or by changing the -- what you mentioned about product being decided by the consumer, but changing the product mix or changing other things should keep a control on the sensitivity to interest rates. These are the 2 questions.

Yes. So when you're talking your open architecture and with private insurers, you are already in that kind of a situation with some of the banks. So we are already in competition with other insurers in 3 public sector banks and 2 private sector banks apart from this IPPB relationship that we have just started. So there is no question about that. We are the leading insurer in all these relationships. So we have the leading share in all these relationships. So I don't think we are bothered with open architecture per se. We have got us very strong brand name. We have got very strong products, and we have got very good services, and we got a very good company. So I don't think we are bothered about that too much. And of course, we will keep pace with whatever developments are there. So coming to India for Payments Bank limited, basically the idea is that we are -- this would expand our reach into the interline into the deep rural areas, into the unbanked areas, underserved areas. So your state bank is one such medium. So we have about 23,000 branches, then we have about 9,000 branches of RRB. And so this is another attempt on our side to cover all those both dark spot that we would like to change where we don't have our complete presence in rural and urban areas. And this would help us to do that. And also in the urban areas also, we could probably start this whole thing. The idea is that there are more than 600 branches of -- 635-plus branches of IPPB, which are then connected to all of those. So we are trying to have a model which we can then scale up and this is not going to happen overnight. We will work on it, but it's a very -- we think it's a very exciting opportunity. And for the country like ours, we have 2 purposes out here. One is, of course, to grow the company and to make sustainable profits and all that, increase the customer base. But very importantly, to develop insurance in India. We would like to be known as a company that actually grew insurance in India. So that is something which we will take a lot of pride and if we are able to achieve this objective of giving more and more Indian insurance cover.

And sensitivity is just to add that what you explained earlier, this is a similar increase on account of the base effect. And particularly, the shift in the [indiscernible]. And something happened on the account of the [indiscernible], I think I already talked. Having said that, I think we shouldn't be worried about the sensitivity for interest rate because the investment that we are making is held to maturity. And in case interest rate go up, subsequently, I think we'll able to more money on the side as far as growth is concerned. So there is not [indiscernible] that we're going to change our partners I think basically in order to manage that.

You have said it yourself very clear that the consumer is at the center. And therefore, if there is attempt to fix the whole product mix, what we would probably do is we'll try to introduce more products which will find a better accessibility with the customers to try to influence their buying decision or the other way around trying to push our existing product where they are not suitable. So first, we find what is suitable for the customer, what he needs and then we'll give it to him, and if he needs us slightly different, then we'll develop a product and give it to him.

I was just coming from the perspective that you also said, right, for example, in the first half, if I were to calculate the economic variance, you said you can use the sensitivity to calculate it, right? What I'm trying to say is that, let's say, I'm projecting a 2-year EV. And I'm assuming unless the hypothetical 100 basis point increase in interest rates, then your sensitivity is the highest, right? So I'm trying to say that on that perspective, as a business strategy, we have a benchmark sensitivity that it should not go above that or something like that? Just wondering.

Sensitivity is a concern. So basically, we use it to see what -- what is likely -- what could likely happen in the unlikely scale. Like, for example, the sensitivity is that on, say, plus 2%, minus 2% and all that. And that is not something which we are anticipating to happen in the next, say, 1 year or so. But if that happen, what happens [indiscernible] sensitivity out there is may be higher than 2%, but it is still not something which will affect the company negatively in the long run.

Additionally the 2 points, I think we like to mention here. One is that our sensitive even 4% is similar to our other peers in the market. So not very high sensitive. Second point, I think you need to look into that. If you look into our public disposure in the past, we're able to -- successfully able to reduce our sensitivity gradually in the last 4 to 5 years. As we mentioned earlier, this sensitivity is at this point of moment and that also reflects some of the movement in the curve and how the state income has changed. Anyone has to look into the longer term. I think if I look at the March, even longer period, I'm not going to change the strategy because 6 months back, our strategy --- and in 6 months, we're not seeing a lot of impact. Something impact coming from the [indiscernible], but if you see the other side, we're [indiscernible] saving or rising, we're getting [indiscernible] value. So I think we are -- the sensitivity is in our mind, [indiscernible] though we have to [indiscernible]. First reference is the customer. At the same time, we always adopt a long-term view. We see places that we mentioned. And yes, we are not to worry about the start of movement in case in [indiscernible] pressure. And that's the reason I mentioned that we should not be more worry about this [indiscernible] because we're rising the product annuity longer-term, we're able to [indiscernible] able to cook even the unhedged book, we been able to reinvest our coupon for higher yield, ultimately is going to help us in making money [indiscernible] future.

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

Thank you very much, everyone, for all the questions. The questions that we get in the conference always keep us on our toes. And we -- it gives us an opportunity to understand our company even better than we ourselves could. So thank you very much once again. I wish you all a very happy Diwali and hope that going forward, we all keep ourselves insured and safe. Thank you.

Thank you. On behalf of SBI Life Insurance Company, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.