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

Ladies and gentlemen, good day, and welcome to the SBI Life Insurance Company Q2 FY '25 Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Jhingran, Managing Director and CEO. Thank you, and over to you, sir.

Good evening, everyone. We are happy to welcome you all to the results update call of SBI Life Insurance for half year ended September 30, 2024. We appreciate and thank you wholeheartedly for your time for analyzing our results and attending our earnings call. Update on our financial results can also be assessed on our website as well as on the websites of both the stock exchanges. Along with me, Mr. Sangramjit Sarangi, President and CFO; Mr Abhijit Gulanikar, President, Business Strategy; Mr. Subhendu Bal, Chief Actuary and Chief Risk Officer; Mr. Prithesh Chaubey, Appointed Actuary; and Ms. Smita Verma, SVP, Finance and Investor Relations, are present here on the call. I am pleased to share that we have seen progress in several key areas as compared to previous corresponding period, demonstrating the strength and dedication of our team work. We are building a strong base for the year ahead by improving the banca and agency productivity levels, onboarding new agents and digital initiatives. This will ensure that in the long run, the company meets its goal. In response to the evolving needs of our customers, we have taken significant steps to enhance our product offerings. Over the past period, we successfully relaunched 15 existing products, ensuring they align with the regulatory requirement, current market trends and customer expectations. In addition to our relaunch effort, we introduced nine new products that cater to the emerging needs of our customers, five unit-linked insurance products, two term insurance products, one endowment product, et cetera. Further, in its endeavor to provide retirement solutions to the company has also launched annuity product. As of today, the company has 24 products in its portfolio. These new offerings reflect our commitment to proactive approach to addressing the changing landscape of customer and regulatory requirements. By leveraging insights from the market research and customer interactions, we developed these products to provide greater flexibility, improved protection and tailored solutions. While we have experienced slower growth in premium numbers than anticipated due to the high base from last year, we are optimistic that our new product launches and approach in reaching out to the customers will drive growth moving forward. Our focus on adapting to customer needs underscores our dedication to delivering value and security. We believe these initiatives not only strengthen our portfolio but also reinforce our position as a trusted partner in the insurance industry. Moving forward, we remain committed to continuously assessing and refining our offerings, ensuring that we are well equipped to meet the dynamic demands of our customers. We recognize that staying attuned to customer preferences and market trends is essential for our continuous success. Now let me give you some key highlights for this half year ended September 30, 2024. New business premium stands at INR 157.3 billion and maintained private market leadership with share of 21.3%. Individual new business premium stands at INR 114.9 billion with a growth of 13% and private market share of 25.7%. Gross written premium stands at INR 359.9 billion, a growth of 7%. Protection new business premium stands at INR 17.2 billion. Profit after tax stands at INR 10.5 billion with a strong growth of 38% over corresponding period of last year. Value of new business stands at INR 24.2 billion. Value of new business margin stands at 26.8% for period ended September 30, 2024. Embedded value stands at INR 660.7 billion, registering a growth of 29% over INR 512.6 billion in last period. Our assets under management stands at INR 4.39 trillion with a growth of... [Technical Difficulty]

Ladies and gentlemen, the line for the management seems to be disconnected. Please hold while we reconnect. Ladies and gentlemen, thank you for patiently holding. The management has reconnected. Please go ahead, sir.

I'm sorry, probably the call dropped. And I was explaining about the solvency ratio. The solvency ratio is at 2.04 as against a regulatory requirement of 1.50. Now I will update you on each of the key parameters in detail. Individual new business has grown to INR 114.9 billion with a growth of 13% over last period. Single premium contribution is 33% of individual new business premium. If we exclude the annuity business, single premium contributes -- contribution is at 17% of individual business. The company's private market share stands at 25.7%, and industry market share stands at 15.5%. On individual rated new business premium, IRP, we stand at INR 81.0 billion with a growth of 15% over the last period, and maintain our leadership position with private market share of 22.7% and total market share of 15.4%. The company's 2-year CAGR of individual rated new business premium stands at 16%, outpacing the industry CAGR of 14%. This is on a backdrop of a consistent growth in performance which company delivered year-on-year. We have witnessed some headwinds in group business, particularly with our group savings product due to unsustainable rates offered by a few in the market. Group new business premium stands at INR 42.4 billion with contribution of 27% in new business premium. Having said that, we have collected total new business premium of INR 157.3 billion. The company's private market share stands at 21.3% and total market share stands at 8.3% on the new business premium parameter. Renewal premium grew by 16% to INR 202.6 billion, which accounts for 56% of the gross written premium. To sum up, gross written premium stands at INR 359.9 billion with a growth of 7% over corresponding previous period. In terms of APE, premium stands at INR 90.3 billion, registering a growth of 9%. Out of this, individual APE stands at INR 82.6 billion with a growth of 16%. During the half year ended September 30, 2024, total 9.87 lakh new policies were issued. Number of lives covered during the half year ended September 30, 2024, is 11 million. The growth in sum assured serves as a positive indicator of consumer confidence and the increasing awareness of the importance of financial protection. This upward trend reflects a shifting mindset among individuals who recognize the need for comprehensive coverage to safeguard their future. Individual new business sum assured registered a growth of 20% over corresponding previous period. Further, as we continue to innovate and customize our offerings to meet evolving needs and demands, we anticipate growth in the upcoming period. This is already evident in our quarterly growth of individual new business sum assured, which stands at 51%. Let me give you details about the product mix. As on September 30, 2024, our guaranteed non-par saving products are contributing 19% on individual APE basis. Individual ULIP new business premium is at INR 70.4 billion with a growth of 19% over corresponding last year, and it constitutes 61% of individual new business premium. The growth in ULIP can be attributed to the positive movement in equity markets and evolving customer preferences. This trend is evident across the industry as more customers seek products that blend investment opportunities with protection. Individual protection new business premium is at INR 3.2 billion. Individual protection business for Q2 FY '25 has grown 15% on NBP basis as compared to Q1 FY '25. Group protection new business premium stands at INR 13.9 billion. Credit life new business premium has grown by 3% and stands at INR 10.5 billion. Protection business contributes 8% of APE and stands at INR 8 billion. Retirement plan assists customers in building a substantial corpus of funds to maintain the desired lifestyle and manage expenses in their golden years. Total annuity and pension new business underwritten by the company is INR 32.8 billion. Now moving to update on distribution partners. With the strength of more than 58,000 CIFs, State Bank of India and RRBs bancassurance business contribute a share of 58% on total APE basis and on individual APE basis, it stands at INR 50.9 billion with a growth of 7%. SBI branch productivity on individual APE terms stands at INR 4.3 million for the period and registered a growth of 8%. In the first half of the year, we witnessed slower growth in our bancassurance channel as we are prioritizing on the development of robust digital platforms and advanced data analytics with a clear goal to reinvigorate the business model and enabling the bancassurance channel to better service specific customer needs, both in personal and digital. While this may result in a temporary slowdown, we view the pace as a strategic investment for future. The focus will be on customer-initiated journey on YONO platform of the State Bank of India with little or no manual intervention. By enhancing these capabilities, we are laying the groundwork for sustainable growth and improved customer engagement in the long run. With enhanced focus on agency channel and strategic launch of Agency 2.0, we have witnessed improvement in agent activation, agency channel productivity and onboarding of new agents and better collaboration between agents. Our agent productivity for the period stands at INR 2.6 lakhs on individual NBP terms, registering a growth of 21% over corresponding previous period. Agency registered new business premium growth of 14% over corresponding previous period and contributes 23%. Agency channel individual APE showed a growth of 36% over last period and stands at INR 27.9 billion. As on September 30, 2024, the total number of agents working for the company stand at 2,64,058, a growth of 11% over previous period. During the half year ended, the company added more than 50,000 agents, a fair mix of both urban and rural areas. The share of agency channel in individual rated premium has increased from 29% in previous period to 33% in current period. During the half year ended September 30, 2024, other channels that comprise of direct channel, corporate agents, brokers, online, web aggregators, et cetera, grew by 28% in terms of individual new business premium. Linked business through other channels registered a growth of 59% on APE basis. We are investing in building our online business channel. Individual rated premium through this channel has grown by 73% for the current period as compared to the previous period last year, and protection business through this channel on IRP terms grew by 10% as compared to previous period. We are focused to strike optimum balance among various distribution channels and we expect to grow by leveraging these multiple drivers and further strengthen our distribution network. Coming to updates on profitability, the company's profit after tax for the half year ended September 30, 2024, stands at INR 10.5 billion, with a robust growth of 38% as compared to previous period. Our solvency margins remained strong at 204% as against regulatory requirement of 150%. Value of new business stands at INR 24.2 billion with a growth of 2%. VoNB margin stands at 26.8% for the half year ended September '24. The shift in VoNB is mainly on account of increase in share of ULIP business as compared to previous period. Embedded value stands at INR 660.7 million, a growth of 29% over previous period. Embedded value operating profit stands at INR 54.4 billion, and operating return on embedded value is 19.5%. Coming to operational efficiencies. OpEx ratio stands at 5.8% and total cost ratio stands at 10.6% for the half year ended September 30. With respect to persistency of individual regular premium, 13th month persistency stands at 86.4%, an improvement of 98 basis points and 61st month persistency stands at 61.9%, an improvement of 438 basis points. As mentioned in my opening remarks, assets under management stands at INR 4.39 trillion as at September 30, having grown at a rate of 27% over corresponding period. Death claim settlement ratio stands at 99.2%. The company has registered an improvement of 68 basis points over last year. An unwavering commitment to our customer-centric approach remains at the heart of everything we do. Our mis-selling ratio stands at 0.03%, which is one of the lowest in the industry. Digitalization is transforming the life insurance industry, enabling us to deliver enhanced services and a more seamless experience for our customers. As we embrace this digital transformation, we remain committed to innovation and excellence, ensuring that we stay ahead of in an increasingly competitive landscape. The company continues efficient usage of technology for simplification of processes with 99% of individual proposals being submitted digitally. 44% of individual proposals are processed through automated underwriting. We have aligned our business strategies with IRDAI vision and other regulatory initiatives, emphasizing the importance of customer empowerment in driving growth of the industry. To conclude, by fostering a culture of resilience and continuous improvement, supported by our multi-distribution network and dedicated team, we are confidently positioned for the future. Our commitment to exceptional customer service strengthens client relationships and reinforces our status as a trusted leader in the market. With a focus on long-term, sustainable and profitable growth, we aim to create lasting value for our customers, shareholders and communities, paving the way for a prosperous future together. Thank you all. And now we are happy to take any questions that you may have.

[Operator Instructions] First question is from the line of Avinash Singh from Emkay Global.

Two questions. First one, broadly on the growth outlook. We heard you outlining your priorities. Now if we see the reality, I mean, even in the first half, 15% retail APE growth has broadly come, the challenges were partly also on the group side and within retail, within your bank SBI and you sort of suggested some kind of a strategic shift you are doing within that channel. Now in this backdrop, I mean, the reality of what is happening in the group saving markets or the pricing pressure on GTI, that's all affecting our credit life depending upon offtake of loans, entirely affecting the group market -- group business and on the retail side what you are sort of doing within bank. So how do you see the growth panning out? And also we have this new surrender regulation led to some bit of disruption and also October being festive month. So a lot of externalities as well. How do you see sort of a growth panning out in H2? And within bank, I mean, how it will phase this transition and how long this phase will last? I mean, when can we expect sort of a growth to ramp up within bank also? So a broader sort of your commentary around growth. And second, again, related to the margins. Now ULIP, of course, has grown and thankfully for you also, non-par has grown and that is where the margin has come relatively better. But again, the credit life has been slower, probably group term insurance pricing seeing some pressure and now you have this surrender regulation. So how do you sort of in this backdrop with changing sort of your product distribution mix and growth trajectory, how do you see the margin to be playing out? So these are my two questions.

Yes. So talking of the growth first, we have grown in the first half on IRC basis at the rate of 15%. And when you compare our base for the last year and the industry base for the last year, this 15% growth has come on a much higher base. If you look at the 2-year CAGR, we are better placed than the industry. Talking of the bank, we are trying to shift the business from -- to the digital channel where the customer will be initiating the journey on the YONO platform itself. And that shift is creating this temporary kind of blip but we are very sure that this growth will return. Again, bancassurance and particularly SBI is providing the bulk of the business to the company. And this growth again is coming on a very high base. So we must be cognizant of that fact. Regarding the future, we are sure that we will be able to maintain and maybe improve on this 15% growth. So for the entire year, we look forward to a 15% to 17% kind of growth on IRP basis. Talking of margin, you have seen that our margin are the best in the industry. And you are already talking about the product mix, and that is helping the company. In the recent past, we have launched two new products in the protection segment, which you know offer higher margins. And one of these products is protection product for HNI individuals. And there the product is very competitive when compared to the industry rates, and we expect good growth in -- good numbers in that. In the banca channel also, we have launched a protection product, which is based on the data analytics and it is kind of a preapproved auto underwritten kind of product. And in the first month itself, we have seen more than 33,000 policies being sold on the YONO channel initiated by the customer himself. So going forward, we expect that the protection numbers will be better, and they will affect -- they will positively affect our margin also.

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

First of all, if I look at the business trends on a sequential basis, have you seen margins changing at a product level which means that either ULIP margins going up or down on a sequential basis or non-par margins going up or down on a sequential basis?

This is a timing issue. So some point in time that when you try to optimize the value both for the customer and for the shareholder in terms of the margin, we do try to reflect the reality of the market. So at some point in time, even if you see the last quarter, we have passed on the investment-- we at market price passed on whatever margin coming -- pressure coming on the non-par. And last month, we have repriced our non-par products, even ULIP, and hence, we'll see some improvement coming on the margin side. So point I'm trying to make is that in the business, we try to optimize the value for both the customer and shareholders. In this context, you may see there will be some change in the line of business margin, but not significant on that.

Sure. So what you're essentially trying to say is that non-par margins were probably a little lower in second quarter versus first, I think is that what you're trying to say?

I think the first quarter was slightly lower. Second quarter is higher, and we're expecting that in Q3, it will be even better from the current level.

Got it. Just another data was, I think, essentially on operating variance and change in assumptions in EV VOC and VNB VOC, if you could just kind of spell out the components.

So see, first to clarify, there is no change in assumption. So if you look into the VNB VOC since we are doing from the last year's number to this year's number, there is the impact coming from. This impact is only what assumption we make the change in the March. There is no change in other aspects. In terms of the EV VOC, there is no change in assumption, particularly if we're comparing from the March till September. And you see there is the operating variance coming from. And just to clarify, this operating variance is on account of qualitative variance coming on account of expenses, modality and persistency. There is no offsetting impact from us or each and every variance is giving a qualitative contribution to this. Like I was mentioning that we follow a sustainable approach in long term and always we get a qualitative variance all the component on this.

And economic assumption between debt and equity, it's a fairly large number for you in this quarter.

So we don't disclose basically, but you see this component of the economic movement in the market. So you see the equity has grown up around 13% to 14% in the period of 6 months. The bond has gone down by 30 basis points. So most of the contribution is coming mainly on account of the equity side as well.

Sure. And just one last qualitative question is on the agency business. You reported almost a 25% odd growth on the agency side. So how should we kind of think about this going forward? And what gives you confidence on sustaining such a high growth rate?

So we are consciously driving our agency business. And as you must have heard in my initial remarks, we started a program called Agency 2.0 at the company level, where the focus is on improving not only our physical infrastructure, that is the number of branches but also the number of active agents, the agent productivity, the agent activity per frontline manager. So there are several initiatives we are taking on the agency side to push the agency business further. And we are happy to note that the first half our growth on IRP basis in the agency is 33%, which exhibits that our efforts are paying dividend, and we expect to continue this agency enhancement program for the full year and in the medium-term also.

And are you facing any pushback or resistance from agents as we implement the new -- the surrender value guidelines, where you'll probably share some part of the burden with them?

No. So we have not changed our commission structure at all, unlike many players in the industry. And in fact, on surrender value front, our surrender values earlier also were much better than the industry level and the new guidelines have affected us as a company in the least. So as such, there is not much effect of surrender value. Our product mix also, if you see, it is very heavily tilted towards ULIP where, again, there is no effect of surrender value.

The next question is from the line of Shreya Shivani from CLSA.

My question is on the protection segment. So last quarter itself, we had mentioned about launching a new product on the YONO app and an HNI product from August. So in spite of that, the growth is not very strong for the quarter. Is it purely a function of that digital transformation happening in the YONO side? Or if you could just give some color on how has the uptick been on that product given that it's been around for 2 months to 3 months at least? And sir, on my -- the second question is on the topic of surrender value itself. So you had mentioned last time that, if at all there is -- whatever impact there is from surrender value, maybe up to 50 bps for us. So is it fair to say that the 26.8% VNB margin that we are at right now will decline to a 26.3% in the second half and -- or keeping everything else constant, that is? So some color on that would be useful.

Okay. So since you talked about the protection guidance we gave last time, unfortunately, the products that I referred to in the last call were a bit delayed and were launched only in the middle of September. So in fact, the numbers for the September quarter, the effect of the new product launches could not be captured. As I told you that in the last 1 month, we have sold around 30,000 policies, more than 33,000 policies on the YONO platform, that product I was talking about. So that number will be reflected in the current quarter. So that is -- and that is what is making us give the guidance of higher protection percentage in the third quarter of the year. And talking of surrender value, as I already explained, we, as a company, are the least affected by the surrender guidelines and in line with the IRDAI's prescription, I think we were the first company to start relaunching our products from the middle of September itself instead of waiting for the quarter end because we found that these steps, these guidelines are in the interest of the customer and we at SBI Life value the customer centricity as the most. So the effect of the same on the margin, we don't foresee any effect on the margin of the company, and we continue to stick to, say, 26 to 27 percentage kind of margin for the full year also.

Sure, sir. And one just follow-up on that bit. You spoke about you launched your products in September itself. So any color you can give us around how has been the offtake of the new surrender value products to the customers, are customers finding it more attractive, are distributors finding this one easier to sell because it favors the customers, something on that line?

When the sales pitch happen, the surrender value is never in doubt. Let us be honest, you talk to customers that you have to pay premium for 7 years, 10 years, 12 years. So surrender value is in rare cases, if the customer raises objection, only then surrender value discussions happen. So you would not have any color from the customer of surrender value as such, obviously. Eventually, customers will benefit from the new regulation, there is no doubt about that. But in the sales conversation, surrender is not the topic that is got discussed when the sales conversation...

If you are launching a new product for a long term, say, 15, 20 years, you don't tell the customer that you come and get surrendered in the first year itself.

The next question is from the line of Supratim Datta from AMBIT Capital.

I have two questions and both are on the growth side. So I wanted to understand the strategy that we are taking within the bank channel a bit more. So one, in the previous quarters, you have indicated that there is a lot of opportunity still to penetrate within the bank branches. Now I wanted to understand if there is still so much opportunity within the bank branches, why are you looking at YONO or the digital platform as a key source of growth going forward? Is that one reason why the pivot towards YONO now? And the second one was on the YONO the self track business. We have seen aggregators also move from a self track model to an assisted model when it comes to growth through digital channels. Now I wanted to understand that would you be supporting the YONO channel with your own direct sales team? Or how would you -- once it reaches a certain size, how do you plan to drive growth after that? So those were my two questions.

So YONO, State Bank of India is developing YONO as a marketplace also. I mean it is already working towards launching YONO 2.0 with very enhanced features. So our initiation of customer-initiated transactions for the insurance on the YONO platform is also a step in that direction only where we will be offering our products on the YONO marketplace. Having said that, the opportunities you were talking about in the State Bank, you know that our penetration in State Bank account is only around 2% of the actual coverable accounts. So the opportunities remain huge. And we are developing this YONO channel as an eye on the digital transaction, and digital is the future in coming years. So we want to initiate that journey in the first half -- from the very start itself.

Got it, sir. That's very helpful. Sir, just one last question. So if I look at your product development which has happened, a lot of the product developments that happened are on the protection side or non-par side or annuity side. Now typically, in the bank, your model is a bit different wherein you don't have your own people in the branches. So wanted to understand -- and typically, these are products which are more difficult to sell. So how are you bridging this gap? Are you providing more education to the branches? Or how are you incentivizing the branch reps to sell these new policies or motivating them to sell these new policies where you understand there is no incentive?

So yes, you are right that we don't have our employees at the bank who do the sales. The entire banca sales is being done by what we call Certified Insurance Facilitator, the CIF. For that, they have to pass examination and then only they are certified as CIF. To these CIFs, we provide regular training about all our products, including all the products that are being newly launched, be it ULIP, be it non-par or par product. As far as the protection product that I was talking about, that is a product which is offered through YONO platform to the preselected customer based on the data analytics. The bank is running a lot of -- data is coming based on the customer balances, customer income level and his age profile, et cetera. And based on that, this product is being offered on selective basis to the customers. And this product sales are the customer-oriented itself, which are -- I will say that this is a three-click kind of product offered to the selected customers. So the leads are going -- the offer is going to the YONO customer on his YONO app itself, and they are initiating their journey. The role that the branches will play here is making the customer aware that this product is available on your YONO app itself.

Got it. And on the motivation front, is there something that you're doing to motivate the branch reps?

No. So that we have made very clear from the very start that the individual incentives to motivate the staff were stopped by Reserve Bank of India since 2017 itself. And there is no incentive for any of the bank employee to sell the insurance.

Got it. And last question. So you had this HNI protection set up. I just wanted to understand what is the contribution of that to your overall protection fees? And how are you selling that? Are you clubbing that with your ULIP product? Or how is that -- so if you could give some color on that product, that would be helpful.

So this product has very recently been launched and this is, again, a product with a minimum sum assured of INR 2 crore. And to tell you the actual sales experience, the product has been very recently launched. So I will not be able to comment on actual sales experience. Maybe next quarter, we can talk about the numbers and everything, but we have trained our agency force as well as the bank's CIFs about this product, and we hope to see good numbers because this, I assure, is a very competitive kind of product when compared to the protection plans being offered by other companies.

Got it. And is it being clubbed with the ULIP product or is it being sold separately?

So I mean it is not clubbed as such. But yes, the ULIP customers with good premium, it can be a good option. I will not say that it is being clubbed but it may be offered to those customers also.

The next question is from the line of Manas Agrawal from Sanford C. Bernstein.

Sorry to harp on this again, somethings are not making sense. So I'll ask it in a different way. Has there been any change in the channel dynamics with SBI? I'll lay the context before you answer. ULIP is doing very well for the market, and you guys are the leader in that. Banca channel is very skewed towards ULIP. 2Q and 3Q is seasonally strong for banca for us historically. So all of that does not tie in with the fact that our growth in the banca channel is not doing well. Your comment on investing in the digital sales on the banca side is an incremental effort. I don't understand why that should harm your BAU sales. So is there any change in how SBI is approaching SBI Life sales? That's the question.

Sir, if you are talking about any harm to our sales, I don't see any harm. We have grown. Only thing is that growth has come down from, say, 15%, 18% kind of growth that we had last year to 9% this year. So as such, there is no harm. And you have to mind that this 9% growth is coming on a very high base. So the sales are there and there is no change in dynamics between SBI Life and SBI. We continue to be the sole company being offered by SBI to its customers. And we don't foresee any change in near future in that dynamics.

Understood. And anything why your BAU sales are [Audio Gap] channel?

Can you come back again, please?

On the second part of the question, your investment in digital sales in the banca channel, why should they affect the BAU sales is the question.

It is definitely not affecting. The 9% growth is coming on from that channel and those partners only. The digital initiative is very recently launched. What I'm saying is that, going forward, the growth from this channel will be in addition to whatever is being sold from the branches and the CIFs. But we are investing in that channel, and we expect good numbers going forward.

The next question is from the line of Madhukar Ladha from Nuvama Wealth.

I just -- I mean, again, on the same point, actually. So what exactly are you doing in the SBI channel? Because I think you mentioned that you're trying to move that channel into digital. Does that mean that all -- you're trying to also change the way a walk-in customer buys insurance from you? And is that what is impacting your sales? So I think that has not come out clearly as to how the digital channel is actually impacting your overall sales from the SBI channel. So maybe if you can elaborate on that a little bit, that would be useful. And second, you mentioned that your VNB margins will be in the range of 26% to 27% for the full year. In the first half, you are already at 26.8%. I understand that there is some negative -- there may be some negative impact because of surrender value changes, but that you are yourself also saying that will be minimal. But shouldn't then with operating leverage, the margin then for the year should be higher than the current number. That's my second question. So yes, so these would be my two questions right now.

So I think if you're referring to the operating leverage, we have already accounted for in our assumptions, correct? So what we are saying that currently, we hold on the margin of 26.8% and depending on how the business will grow over the period because we have to also optimize the VoNB rather than the margin perspective. And in order to optimize the VoNB, we need to ensure that there is the appropriate growth in APE terms is coming out. And in that context, we are saying that our margin might be a range between 26% to 27%. This is the lower side that we're looking into. There's always upside on the side and that long-term guidance, we are always saying that our -- to maintain the margin of 28%. But I'm saying since we're sitting today at 26.8%, we have to also optimize the APE growth. And in that context, there is possibilities the margins will be range-bound, nothing else.

Just a follow-up on that. So then what would be sort of your VNB growth target like in terms of optimizing, then instead of a margin target, maybe it's better to talk in terms of a VNB target for the year?

It will be commensurate to the APE growth. So if APE growth is happening around 15% to 16%, you're expecting 15% to 17% target, I think VoNB growth will be in the range of 12% to 15% kind of thing.

Got it. Understood. And then on the sales in the SBI channel, that's first question, yes.

Yes. So I already explained that, that we are trying to develop this digital channel where the SBI customer is able to initiate the insurance purchase journey on the YONO platform itself. And the role of CIFs in the branches will continue and the customer base of SBI will be a captive kind of base for SBI Life also going forward, too. There is no impact as of now, but in future, when we are able to develop this channel fully, there will be a positive impact on the number.

And so at the branch level, then for physical walk-ins or that -- the way the business is happening right now, that has not changed at all. Is that understanding correct?

Yes, yes, Madhukar, you're absolutely right. See, SBI, the way the sale has been happening today will continue. The CIFs will sell on behalf of SBI. As MD said, the digital penetration is also another way of looking at the sales, which SBI is looking very strongly, and that is why they have developed the YONO. Now they are venturing into YONO 2.0, that will help definitely to penetrate the customer base of digital savvy customers. So it will be a kind of a digital channel within the SBI channel, which we expect that both will flourish, and we expect that the growth is today it is a 7% growth on a higher base. So we'll see how it will develop in the next 6 months or so. But this is the missed opportunity at SBI who are actually tech savvy to buy the insurance products.

Many of these tech-heavy customers who are digitally enabled and who are using Internet banking in YONO platform, they are not even visiting the branches. So this will be -- that is why we said that it will be having a positive impact once we are able to develop it.

Understood. Got it. And just finally, historically, we've sort of done quite well on growth and despite -- and year after year, we've done quite well. We know that penetration within SBI also remains low. And then -- but you pointed out a high base and especially also if you look at the last 2 months, the VNB -- sorry, the APE numbers don't sort of add up or are a little weak, right? So we do expect that to change. Anything specific that has played out over the last 2 months that you would like to comment on in the SBI channel?

Madhukar, there is no change at all of the strategy and SBI is concerned. As already said, the last year base was quite high for us. So we were actually growing at 18%, and second quarter is also significantly high, almost 30% plus for us as compared to the industry, and banca contributes maximum for us. So that is the reason the base effect has seen this year. And the initiatives which we have taken now, we think that it will come back to the mainstream. But last year, we grew by 12% in SBI. So we expect that similar kind of numbers in this year also.

[Operator Instructions] The next question is from the line of Sanketh Godha from Avendus Spark.

Sir, again, sorry to ask the question on banca. But just the growth for half is 7% from the bank channel. Do you expect the growth from State Bank of India to be in teens at least in the current year, given the current growth trajectory, and probably we will have a little favorable base in the fourth quarter? So just wanted to understand how you are looking, from a full year perspective, the growth to play out. And accordingly, you can also give us a guidance how agency will do going ahead because that number is pretty strong, 36%. So how do you expect this number to play out in numbers? And the second thing is basically I just wanted to check whether, in non-par products, have you made any IRR change to just accommodate higher surrender value? You said that you did not change any in commissions. But any IRR meaningful change on the way just to accommodate surrender-related impact on the non-par business?

I would think the last question first and then pass on to Amit to comment on that. I think non-par, we do reprice those -- the product. And as a part of continuous pricing, we pass on the yield reduction to the customer because yield is going down and we have repriced. So all the non-par product has been repriced and launched in month of August. We do ensure that product is in compliance with the regulation in terms of the surrender value. So surrender value in our product is in line with regulation. I will keep mentioning earlier as well, that our surrender value, even before regulation, is much higher than our PLs. And when we change the product to comply with these things, there is not much impact on the surrender value, except in the year 1, where we have other regulation that don't allow any -- most of the impact in our surrender value coming in year 1. And so to that extent, I can say that the repricing do take care -- at most, care of the falling interest rate. And to some extent might be on the surrender value, but not entirely. We're passing on the impact of surrender value to the customer because it is not beneficiary to the -- purpose of regulation to bring this surrender -- if you're going to reduce this thing, then this means purpose get defeated. So most of the repricing is done on account of falling interest rate. Some part here and there might be passed to the customer as account of surrender value.

So on the agency, I think MD already mentioned that we have grown at 33% in first half, and we expect similar kind of growth, 30% kind of growth, for the second half also. And in banca, we should expect high single-digit or 10% kind of growth...

So on IRP basis, in the first half in banca, we have grown by 9%. And you are aware that October, November, December for the banca channel for SBI Life has always been very strong. So we have a very high base out there. So I expect that the growth in the current quarter will also be somewhere around 9% only.

Okay. Sir, basically -- the simple point is that a 30-odd percent in agency and 10% in the banca is the most likely number to be achieved for the full year?

Yes, we agree with that.

The next question is from the line of Aditi Joshi from JPMorgan.

The first question is actually related to the product mix. Just some details will be helpful. Firstly, why the annuity product was slightly weaker in the second quarter? And also, can you explain again especially related to the participating products, we saw a very strong growth in the second quarter. So just from a product proposition perspective, what is attractive to the customer and how you're trying to sell it? Because just very strong growth in that particular segment. And can -- just a related question is that, if you are able to provide some mix outlook for the second half will be helpful. And just one clarification is needed, if I can ask that. On the YONO, is it just select products that are gaining traction in YONO, especially on the -- only on the protection side? Because as you said that, when the customer walks in, the employees and the banks or the CIF, they ask the customers to check the app and buy the product? Is it, my understanding, correct?

So regarding the YONO product, what I said is that this protection product that we have launched in particular, that is a preapproved kind of product, and this offer is going to select customers based on our data analytics. The offer is going to the YONO apps of these particular customers. In addition to that, the concerned branches are also aware about the offer to these customers. And when these customers visit the branches, the staff makes them aware that this offer is available to you. So we can initiate the journey and complete the project. We will talk about product mix.

Yes. So on the annuity side, we had some small degrowth in the current quarter. But I think there will be -- we don't expect that to be the guidance for full year. We would expect the annuity growth to come back. That market is large, and we would want to tap of that market. On par, I think the base is very small. And on that small base with some focus. We've had a substantial increase in quarter 2. Our new products will be launched after product repricing very soon. 1 or 2 are already there. 1 is already there and remaining will be launched very soon. And we would expect a -- our par is a small component. Our main growth for traditional, we would expect, from protection and focus will also be non-par.

Sure. And in guidance, on how product mix will look like in the second half?

We will continue to maintain our standard of 60-40. So that is what we have maintained and we will continue to do that. So as Abhijit said, so our non-par protection and par will continue to be part of 40 and 60 will be in the [ annuity. ]

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

Two questions from my side. First, can you share some color on your growth across the non-SBI banca partnerships? And do you see traction in some of these channels or your counter share across those channels? And second, while we have seen improvement in persistency across most of the buckets from 1H or 2Q, I just wanted to get some color on, is it more a function of back book product mix? Or are we seeing improvement in persistency across each of the product classes? So if you can give some color on the product-level persistency trends.

Persistency, I think it's about combination of both. So one is the product mix changes, another is the work that we try to do. We do a lot of investment in terms of the -- as a sales initiative to ensure that product -- customer is buying what they are looking for, not pushing any particular product today. We do have taken several initiative at a company level, both from the banca to the corporate level, to ensure that we should have a continuous connect with the customer, try to understand their pain point and try to address those challenges. I think that both are helping us to improve the persistency. And there, the kind of improvement in persistency is being observed as most of the cohort at this point in time. And we hope this will be continued in future as well.

So on the non-banca partners, there is mix. In some partners, we have seen strong growth. Some partners, we have not seen growth. But taken as a group together, we have seen small degrowth in quarter 2 compared to the previous quarter. We are working on these partnerships, how to see, how we can have growth across all partners and not only [ CIF banks ].

Just to get some clarification on the second part. Is it more of a degrowth at those partners? Or is it more of some competitive pressure?

No. We have seen that, in some of the partners, the overall business also has gone down. Overall business, not across all partners, all life insurance player.

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

First, data-keeping question. What percentage of the retail protection is ROP for Q2?

Same, actually, the 90-10. So at this moment, ROP is 90% and 10% on ROI.

And second, sir, on the non-par side, because surrender value, you have not increased, you have not changed the payout of the commission rates. And what I understand, that IRR has also been not changed. So just because surrender value changes, should we expect the margins decline -- margins will be absorbed by the company? Margin reduction will be absorbed by the company?

So not much -- I just clarified and mentioned that when we reprice those product, we pass on the -- reflect the all of the [indiscernible]. And also, to some extent, reflect the surrender value. Objective is not to pass on the entire impact of a surrender value to the customer. This is first point. Second point, we keep mentioning that our surrender value was much higher as compared with our peers in the market earlier as well. And as and when this regulation came and recompute the surrender value, there is not much impact coming from surrender value. Except in the year 1, where surrender was not allowed and we are offering all policy getting lose. So that's the reason there's not much impact coming from. We have passed on -- to some extent to the customer and most of the [ shock ]. And we try to optimize this with the other par category because, within the ramp-up order, we see there are a lot of different product policy term, PPD term, ticket size and other, will have a different margin. So we try to look into the -- analyze the aspects at how we can give the better value to the customer, at the same time, maintain this margin at the product level as well.

Okay. That's very clear. And on the Credit Life in H1, what was the APE this year and last year? If you can get that number.

Credit Life is flat. So last year, it was INR 102 crores and currently also this year, YTD September, is INR 104 crores.

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

Sir, am I audible?

Yes, sir.

just I think on that banca channel part itself that -- clearly, that base effect fatigue is something which we saw probably this year and 10% Y-o-Y growth. But I just had two questions. One is that, when we see this year, would it be good that at least from a life insurance perspective, SBI Life perspective, that this is a year of reset of the base? But that 15%, the ability of SBI Bank to be able to grow 15%, that still remains there? Or you think that the base is becoming large incrementally every year to justify a 10%, 12% kind of a banca growth? That's the first question. And sir, the second part is, so insurance as a product. So what we have seen is that needs that physical element of understanding physical push. So to that extent, do you think that -- so high focus on YONO, at least for a product like life insurance, can that lead to the CIF's distraction in terms of the ability to cross-sell their targets? If you can throw some light that from their KRA perspective, how have things changed versus YONO distribution or selling through YONO or selling through a normal banca channel? Is it same for them? Or are they incentivized more if there is -- or basically, is there a KRA difference between the 2 channels per se? But I think the first part also, if you can also help that, if this 10% is a one-off, as a reset of the base? Or the ability of bank to grow at this pace is 10%, 12% itself?

So I talked about the insurance penetration amongst the population in general and State Bank, in particular, which is our major partner. So the under-insurance or the insurance penetration remains quite low, and a lot of opportunities. And with the kind of economic growth that the country is seeing and the financial awareness that is improving in the country, I'm sure that the opportunities are even better than what was there, say, 5 years, 10 years back. So...

If I may just, sir -- one part is the -- sorry to interrupt. But when we say a product like ULIP par, non-par, I agree that the penetration is low, but these are, in a way, pseudo-financial products cum insurance products, a mix of both of the coverage. Now in that case, that under-penetration story has been there. But I'm just thinking from the ability of the CIFs to be able to do volume. Because to be very fair, we are at volumes which are exceptionally large. Even at banca channel, the APE numbers of INR 13,000 crores, INR 14,000 crores per year is something which is very large enough. So I just want to understand that, from a practical viewpoint, should we have that expectation of the bank to keep running at 15%? Or internally, we should moderate that to a rightly more modest number which is more sustainable?

Another part I wanted to clarify. You talked about the incentivization of the CIFs. So in response to an earlier question also, I have told that, since 2017, there have been no individual incentives to any of the CIFs. Whatever sales are being generated, there are sans any incentive to individual employees of the bank. The ability to sell and ability to make customers understand the product of the CIFs is in no doubt. These CIFs are being trained by us at regular interval about various products, about various new products and various opportunities available in the market. And in addition to that, now the bank is also running data analytics on its customer base and giving leads to the branches about the potential customers who can be insured. So this data analytics will help in identifying the customers in a more precise way in the future, and our CIFs and our branch managers will be in a better position to target the customers who needs insurance. So going forward, I mean, we stick that the ability to grow at 15% remains intact.

Great. Got it, sir. This is very helpful because I think that ability is a key thing to understand. Maybe this year could be a one-off and reset of the base. And sir, on the second part itself, that whether -- I understand there is no incentive. But more from a KRA of the branch managers perspective, is there some -- because for them to be promoted, for them, in normalcy of the business operations, they would be targeting to grow the business by 10% of what it was last year or 15% of what it was last year. Now in that sense, as does YONO as a channel or direct as a channel, do they have any different preferences from top level at SBI?

So YONO as a channel also, the business is attributed to the branch to which the customer belongs to. And as far as the target is concerned, bank employee or a bank manager has 50 to 60 lines of businesses to cater to, and cross-selling is a very small part of that. So it does not materially affect his KRA. But yes, it is a KRA amongst many lines of businesses. There's many lines of parameters that any branch manager has.

The next question is from the line of Rishi Jhunjhunwala from IIFL Institutional Equities.

I mean, most of my questions have been answered. Just one thing. Historically, if we see our business from a retail premium perspective, used to be equally divided between 3Q and 4Q with probably 3Q being slightly better than 4Q in terms of absolute size. We saw that trend breaking down in the past couple of years. And to some extent, it was also driven by potentially SBI's focus a little bit more around CASA in the last quarter of the year. Given our guidance of 15% kind of a growth on APE for the full year, it requires that trend to break and go back to a level where 4Q can match 3Q on absolute basis. Just wanted to understand, do we have any kind of visibility there? Is there a reason why the trends of the past 2 years may not continue this year?

3Q has always been stronger than 4Q as far as SBI Life is concerned and banca channel, SBI channel is concerned. So in 3Q this year also, I already said that we have a very high base of last year. The growth was very good. So expecting a 9%, 10% kind of growth there in the Q3 is somewhat reasonable, and that is what will maintain going forward also.

Right, sir. But I was just trying to understand the drop in 4Q on a sequential basis was quite stark in the past 2 years. So are we expecting a similar drop? Or do you think that could be better this year?

Rishi, we will -- actually, we are evaluating multiple strategies that how we can actually look into the -- particularly on the January and February. Because as you know, the third quarter used to be a very strong quarter for us. So immediately post that, the Jan-Feb used to be a little slow for us. But this year, we are targeting in a different manner because a lot of products have been launched, and we want to capitalize particularly on the protection and non-par. So these two, we plan to run some campaign in SBI Life. So let's see how it will step up in this year because, yes, you are right. We plan to change that cycle for SBI Life, and we are optimistic that this will help in this year to see that result going forward.

The next question is from the line of Subramanian Iyer from Morgan Stanley.

So my question was on VNB margin. So essentially, you were talking about 26% to 27% margin for the second half. Now you already have 27% for the first half. And if you targeting a 60-40 mix, it's actually going to be better in terms of margin-accretive products in the second half. And plus, you are also talking about a higher protection mix as well. So is there anything else that is holding you back from guiding for a margin higher than 27%? Because mathematically, the margin has to be higher in the second half, let's say, assuming the product mix. So yes, that's my first question, if you can answer that.

I think you're right. So if I look at the mathematically side, I think the margins should not be anything less than 27%. And we internally also expecting that margin will be much more than what we have given guidance. Only the point that we're holding up is to ensure the growth because the VNB growth is most critical for us. And like we always keep mentioning, that margin is a number. We're always aiming to grow the VNB. In that context, we are thinking that there is possibility, though we are trying to drive the protection growth will be there, non-par growth will be there, and all new par will contribute. But we also need to ensure the growth in APE, too, and there is a possibility, if there is some changes happen over the period on the -- except for the ULIP, or even if slightly, yield will fall. And then recently, we have revised the par, and at that point in time to be competitive to the market. If we're holding up our return to the customer, there will be certain pressure will come and fall on the margin. In that context, we are saying margins will be 27%. But internally, our long-term guidance and expectation is to -- our margin will be around 28%. So that's a point I will make. There's nothing hidden in between on this side.

The other question is the same question, unfortunately. I mean, everyone is harping upon that. But I will ask you very directly. I mean, this change in the nature of engagement with SBI, has it got to do with basically reducing the involvement of SBI employees? I mean, because we obviously keep seeing a lot of media articles about mis-selling and all that. I mean, although I do understand that your mis-selling ratios are best-in-, they are the lowest. But is it basically, say, got to do with reducing the involvement of SBI employees in any way? And does it -- it also, I would say, kind of coincides with change in guard at SBI. So does that have to play a role as well? So yes, I'm asking it pretty directly.

I don't think what you are saying is correct in any way. I mean, the ability of SBI employees to sell insurance is well established, and it has been growing over the years. In last 10 to 15 years, there have been several changes, regulatory changes, stopping of incentives, et cetera. But all that, the sales have withstood the test of time and have continued to grow. Our effort to digitalize the initiation of insurance purchase journey on digital channel, that is something which we want to take advantage of the digital technology and the tech-savvy customers. We are not undermining the CIF ability to sell, and we don't want to lose that advantage also. And as far as mis-selling is concerned, you already said that our company is having one of the lowest mis-selling ratio at 0.03%. But having said that, even 1 case of miss-selling is not acceptable to us. And wherever customers are complaining any such thing, we are canceling the policy. And if anything else, too, we are also taking action against employees and all. So that portion is very well taken care of. This initiation on YONO, I will again reiterate that we want customers to initiate journey, and the role of CIFs will be important even in that scenario. Because as earlier also somebody was saying, that insurance is a product which needs some kind of explaining. So the role of CIFs in the branch staff will continue to maybe explain the products and guide the customer to initiate the journey in the YONO platform also. So this is one channel which we can use in multiple ways. Customers can initiate on their own. Customers can help initiate by the way of assisted journey from the branch staff and all. So that is what our stand on developing this product is. And we are very sure that, going forward, this will be a very helpful and very potential channel.

Just clarifying. So in terms of the CIF, say, channel, you will continue basically investing in that and growing that as well. So the investments in that will continue. I mean, is that understanding correct?

Yes, definitely. Our training programs for the CIFs are going on.

And the footprint will increase basically. I mean, the...

Yes.

Next question is from the line of from Raghvesh from JM Financial.

I had a question on the Credit Life business. So while the broader market has seen pressured from a slowdown in personal loan and MFIs, my understanding is...

Mr. Raghvesh, Your voice is a bit feeble. Can you please get a bit closer to your speaker?

Yes. Is it better now?

Yes, yes. Please go ahead.

Yes. Sorry for this. Questions on the Credit Life business. So I mean, it was flattish for us. The understanding is the broader market for personal loans and MFI is slowing down. But SBI Life has traditionally had, I think, an 80% share coming from home loans. So why is Credit Life not growing for us?

So credit life, it's flattish. The penetration levels in the bank are slightly lower than what we were expecting. But we expect the penetration levels to come back to the numbers we are expecting. So we expect 9%, 10% kind of growth in Credit Life for the full year.

What we are seeing is that the ticket size of the housing loan in the bank is increasing. And keeping in mind that thing, we are also easing the process of underwriting on the Credit Life business. That is supposed to take effect from some time in this month itself or maybe in the first week or second week of November. So there, the underwriting process for the higher ticket size will be lower, and we expect that the same will help in improving the coverage ratio.

Okay. And the mix remains around 80% as mortgages?

Sorry?

80% remains mortgages for us in terms of the Credit Life business?

Majority is mortgage.

Majority is coming from mortgage only, housing loans, yes.

The last question is from the line of Prayesh Jain from Motilal Oswal.

Just wanted to understand on the HNI protection plan that you have been selling. What is the kind of premium that we've collected in this quarter or quarters?

So I told you this product was just launched towards the end of the quarter, September. So the numbers are negligible. But we expect this product to catch on and provide good numbers in coming quarters.

And the profitability of the product would be similar to the retail protection plan?

Yes, profitability is similar to the retail, and also competitiveness. So both the perspective is that it is a greater proposition to the customer and a shareholder perspective. So we expect this product will have -- and it's a different segment, so there's nothing cannibalized, not happening from one part of the area. We expect this will be more attractive and it will help us to, not only increase our production pipe, but also fulfill the underinsured population because a lot of people have taken the insurance, but with a lower sum assured. That will help them.

And last question, how has October been so far? Any trends that -- early trends on the new products with respect to growth or product mix?

We will disclose the number by end of the month.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Amit Jhingran, Managing Director and CEO, for closing comments.

So thanks to all the analysts who are present here, and thank you giving this time and for all your queries. If you have any other questions, you may get in touch with our Investor Relations team, and we will provide you the requisite clarification. Thank you.

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