Ladies and gentlemen, good day and welcome to HDFC Life Insurance Company Limited's conference call to discuss the company's full year results. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Vibha Padalkar, MD and CEO of HDFC Life Insurance Company Limited. Thank you, and over to you, ma'am.
Thank you, Sagar. Good evening, everyone. Thank you for joining this conference call to discuss our company's results for the year ended March 31st, 2024. Our results, which include the investor presentation, press release, and regulatory disclosures, have already been made available on both our website and the stock exchanges. Joining me are Suresh Badami, Deputy Managing Director, Niraj Shah, ED and CFO, Eshwari Murugan, our appointed actuary, and Kunal Jain, representing investor relations. Let's delve into the key business updates for the fiscal year 2024, starting with operating performance.
Despite the budget changes impacting high-ticket-sized business this year, we delivered a healthy growth of 20% for Q4 after adjusting for the one-off business of INR 1,000 crore in March 2023, which we had guided for. Our stated aspiration of a double-digit growth for the full year was achieved with us clocking an 11% growth for FY24 on a normalized basis.
We achieved individual APE growth of 1% on an unadjusted basis. During the first 11 months, we have grown faster than the overall industry growth of 9%. During the same period, our private market share stood at 15.4%, and we maintained our position amongst the top three life insurers across individual and group businesses. On a full year basis, our premiums reflect a healthy two-year CAGR of 13% despite the headwinds during this period. We have established a sustainable foundation for FY 2025 through targeted initiatives aimed at key growth metrics as follows. Growth momentum continued across ticket sizes up to INR 5,000,000, with robust growth of over 22% in Q4 and 19% for full year. Tier 2/3 markets recorded a growth of 13% against overall company growth of 1%.
In line with our intent to broaden the customer base, the number of policies for the year increased by 11%, which is almost 3X overall industry growth based on first 11 months data. In Q4, NOP growth was 14%. On a two-year CAGR, average ticket size has grown by 5%. We insured 6.6 crore lives during FY 2024. More than 70% of the retail customers onboarded are new to HDFC Life, and almost half of these are below the age of 35 years. Sum assured witnessed robust growth of 47% aided by growth in pure term, return of premium, high protection cover embedded in savings products, and riders. With product innovation across product segments, our average sum assured per policy has increased by 33% on overall basis and 39% for savings business. Annuity and protection put together contributed to nearly half of overall new business premium in FY 2024.
Retail protection grew by 27% based on individual APE, and we believe that the momentum will sustain into FY2025. Credit Protect recorded 13% growth in spite of a cautious lending environment in H2 and increased competitive intensity in certain segments. We continue to be a market leader in this segment. Moving forward, we remain committed to pursuing sustainable and profitable growth in this segment. We remain optimistic about the growth potential of the annuity segment in India, considering its nascent stage, and believe that the long-term opportunity remains promising. While we observed aggressive pricing strategies with certain peers, we will continue to pursue a balanced approach to growth by enhancing our product offerings and maintaining pricing discipline. We maintained a healthy balance in terms of product mix with UL, or unit-linked policies, at 35%, non-par savings at 30%, participating products at 23%, retail term at 5%, and annuity at 6%.
Unit-linked products continue to see a strong traction driven by buoyant equity markets with a surge in popularity even in higher-than-INR 2.5 million segment, which is taxable. Click 2 Achieve, our first DIY non-par savings solution has been received well across channels, leading to a healthy increase in the non-par savings proportion in the last quarter. FY 2024 has been another landmark year for product launches, fueled by relentless product innovation. We are committed to delivering products that are relevant and tailored to meet our customers' evolving requirements. Moving on to key financial and operating metrics, our new business margins are 26.3% compared to 27.6% last year. The drop of 130 basis points was primarily due to two reasons.
The first one amounting to 70 basis points being the operating leverage gap caused by the one-time INR 1,000 crore additional APE received in FY 2023 due to the budget changes, and the second one amounting to 40 basis points due to higher unit-linked proportion thanks to buoyant equity markets. Higher product-level margin profile on account of longer tenure, higher sum assured multiples, and rider attachment has helped us counter the impact of product mix to some degree. The current business mix sets a strong platform for us to continue delivering robust top-line and VNB growth in FY 2025 and beyond. Our business objectives entail further enhancing our presence across geographies and customer segments and maximizing the potential of our distribution channels. In line with this long-term strategy, we will sustain investments in infrastructure, people, and technology with a forward-looking three-to-four-year perspective on the business.
We believe that VNB growth will continue to be led by APE growth. If we see significant incremental growth opportunities, we will be flexible to trade-off margins while maximizing VNB growth. Value of new business is INR 3,501 crore, implying a year-on-year degrowth of 5% and a two-year CAGR of 14%. Embedded value stands at INR 47,468 crore, with an operating return on embedded value of 17.5%. We have delivered a strong profit after tax of INR 1,569 crore, implying a year-on-year increase of 15% fueled by an 18% increase in profit emergence from backbook. Solvency continues to be healthy at 187%. The board has recommended a final dividend of INR 2 per share, aggregating to payout of about INR 430 crore. Renewal collections remain strong at 18% year-on-year, demonstrating our customers' continued trust in us. Persistency for the 13th month and 51st month was 87% and 53%, respectively.
We anticipate a shift in 13-month persistency going forward, influenced by product mix and prevalent customer segments in FY2024. We are committed to maintaining persistency levels across all relevant cohorts. Moving on to distribution, the bankca ssurance channel has grown 17% year-on-year on an unadjusted basis. HDFC Bank counter-share continues to trend well. We are happy to report that we have ended the year at 63% counter-share against 56% same time last year. We maintain close collaboration with all our bankc assurance partners to tailor our innovative products to meet the needs of their specific customer segments. Furthermore, we consistently refine our product offerings, service quality, and technological capabilities to enhance our partnerships, ensuring a mutually beneficial relationship. While our agency channel growth was slower due to a high base last year, it has shown a robust growth of 14% on a two-year CAGR basis.
We are steadfast in our efforts to build capacity for future growth. Our agency channel is ranked number 2 in the industry in terms of distribution expansion for the first 11 months, with over 80,000 agents added during the year. Moreover, we opened 75 new branches in FY2024 and anticipate our presence to exceed 600 touchpoints in the next fiscal year. Our objective is to broaden our footprint and enhance our reach through a multifaceted approach, which includes strategically adding branches, attracting high-performing distributors, and continually investing in technology and capability enhancement. Moving on to our subsidiaries, our subsidiary HDFC Pension Management Company achieved a milestone by crossing the INR 75,000 crore AUM mark, showcasing remarkable growth of 70%. We have maintained our market leadership in the pension category, commanding a market share of 43%.
Additionally, we are actively advancing our expansion plan for the GIFT City business with the introduction of innovative U.S. dollar-denominated life and health insurance products like U.S. Dollar Global Education Plan and Global Student Health Care Plan, etc. We are available from GIFT City. We are already making strides in penetrating the NRI segment. Additionally, we have plans to roll out further offerings to continue strengthening our presence in this space. Turning to tech, we are currently implementing Project Inspire, a comprehensive technological transformation. This project aims to enhance customer, distributor, and employee experiences while increasing operational efficiency. It focuses on faster product launches, flexible partner onboarding with shorter turnaround times, digital customer acquisition journeys, intuitive zero-touch services, a plug-and-play integration environment, among other features. We are likely to see a gradual rise in technology expenses over the years, which will be accompanied by corresponding benefits to the business.
Moving on to key announcements, we would like to inform that Mr. Deepak Parekh has decided to step down as chairman and non-executive director of the company, with effect from close of business hours on April 18, 2024, to comply with regulatory requirements. Being the founder chairman of our company, Mr. Parekh has been instrumental in guiding and nurturing the company over the past 24 odd years. We thank Mr. Parekh for the immense contributions made by him and wish him the very best for the future. We are also pleased to inform that our board has unanimously approved the appointment of Mr. K.K. Mistry as the chairman of the board. Mr. Mistry has been associated with the company since December 2000 and is currently non-executive director on our board. Under his stewardship, we aim to achieve many more remarkable milestones and emerge stronger and more resilient than ever before.
Lastly, we are proud to share that we have been recognized as the best organization for women in 2024 by The Economic Times. This is a testament to the progress we have made in creating a supportive work environment for women and our unwavering belief in the power of diversity, equity, and inclusion. In conclusion, the vast unmet need of protection in our country speaks of a compelling opportunity. We aim to be at the forefront of developing innovative solutions to bridge this gap. We have delivered consistent, predictable, and sustained performance by doubling all key metrics over the last four years and will continue to move ahead with this aspiration while prioritizing VNB growth to build profitable business in the long run.
We also appreciate the efforts of our regulator for introducing enabling measures aimed at broadening accessibility of life insurance, improving customer experience, and enhancing ease of doing business. The detailed disclosure on our results is available in our investor presentation. We now invite any questions from the audience.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of M.W. Kim from J.P. Morgan. Please go ahead.
Thank you so much for this opportunity.
I have here the one big picture question related to the accounting. Firstly, could you please confirm the fixed timeline of IFRS 17 adoption schedule? Then secondly, the company's presentation, page 11, and also the historical product mix would suggest that HDFC Life has a differentiated liability reserve structure compared to other private peers. So my question would be, under IFRS 17, do you expect relatively different CSM release rate or the CSM amortization rate among life insurers? And lastly, what could be the expected major tailwind and then headwind under the new accounting standard, please? Oh, do you need it?
Yeah. Hi, MW. So to your first point in terms of the timelines, we are in regular touch with the regulatory authority. We still await directions from the Indian accounting boards and from IRDA as far as the specific timelines are concerned.
Of course, there is phase one in terms of gap assessment. It's something that all the companies that were required to be a part of phase one have submitted. And IRDA would be looking at the readiness of various companies around that. And we believe that this implementation is likely to happen in a phased manner. The timelines, as we speak today, there is no timeline that we are completely aware of. So I think it looks like it could be in the next 24-36 months. That could be one timeline that we could be looking at. But if we hear something different from the regulator, of course, we will keep everyone posted as far as that is concerned. Our readiness is going to be to be ready ahead of time.
We have engaged external expertise to be able to transition to the new accounting standard over a period of time. As we speak, we are looking at any significant changes or shifts in our business according to the new standard. We believe not. We do not expect any significant change in the way we conduct our business. So that is not something that we are looking at at this point in time. To your specific question around the business mix that we have and the emergence of CSM, I think it's a little early, MW, to answer that specifically. What we would definitely want to do is that once we get more clarity on the timelines, we would want to put some bridging disclosures out in the open to be able to guide you to what you can expect once the new guidelines come into once they are implemented. Okay.
Yeah. Thank you so much, MW, for clarity about the timeline.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please restrict your questions to two per person. If you have any follow-up questions, you can rejoin the queue. The next question is from the line of Hitesh Gulati from Haitong. Please go ahead.
Yeah. Thank you for taking my question. My question is on the regulatory front. Now that
Mr. Hitesh Gulati, your voice is sounding a lot muffled. So if you're using the speakerphone, may we request to use the handset mode, please?
Okay. Is this better now? Yes, sir. Please. Yeah. My question is on the regulatory front. Now with the surrender draft kind of behind us, are we seeing anything more that could probably be in the regulator's mind?
Something on the lines of what the finance minister spoke in one of the interviews recently, where she's touched upon the topic of insurance mis-selling. So have we seen the regulator or some notification or some draft that has been communicated on this front? Just if you could throw some light on that.
Yeah. Hi, Hitesh. So the notified set of surrender regulations, I think those were a good outcome, and there were a few changes in there. Those are not having any material impact on the company. In terms of what else could be out there, here's our view, and also a lot of our peers share this view, is as follows. And this is something that we have engaged with the regulator and continue to do that. Wherever there is mis-selling, we certainly return money, and I'm sure some of our other peers also do that.
So we need to get the mis-selling out of this conversation. Wherever it is other than mis-selling, people just say that, "I wanted something else. I've changed my mind." For those people, I think we have a slightly different view as against the more popular narrative in media that is emerging because there are no other long-term guaranteed products at all. So if somebody wants liquidity after one year, especially discerning customers and I think we can't take a proxy to say if 1,000,000 ticket size is there, then that customer is by no means someone who is unable to understand or not in a position or in a weak position to understand what is being sold to him or her. And the dangers are that there is more of flips rather than any other purpose as to why they want to withdraw.
So rather than changing the architecture of the product, for us to have enough guardrails so that people are made aware that if you want liquidity, early liquidity and by that, I mean one, two, three years, then perhaps this is not the product for you. However, if you want certainty of outcomes, especially in your golden years, then it's not very dissimilar to PPF, wherein all of us hopefully have accounts with PPF. And the first time we ever get to see any money is at the end of seventh year. And that too, there's an involved formula, and we're fine with that. So these products are no different. Plus, they have a life cover which PPF doesn't have, and so on.
Now, worst-case situation, what this could if it's misguided and there's early exit, then it could change the construct of the product and make it very unattractive and/or also put the organization at some level of threat because of ALM not being robust enough because of early exit, especially with sharp interest rate movements. So the regulator is seized of the matter, and that's why let us possibly look at the construct of the product, the objectives that we're trying to also, the fact that early persistency is fairly high in the 90s with the customers. So really, it is few people who are complaining, and so on. So that's where it is. We continue to engage at various levels with our regulator. Ongoing dialogues do happen. And the notification has recently come in, and that's where it is at this point in time.
Sure. Thank you, MW.
That's it from me, sir. Thank you.
Thank you. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Yeah. Hi, MW. A couple of questions. The first one is particularly on the margins that if I were to look, say, three years so FY21 margin and FY24 margin are broadly flat. Within that, I mean, in terms of product composition, yes. I mean, in FY21, par used to be slightly higher share. Now, ULIP has got higher share. But then, I mean, the scale of operation today is very different, nearly at least 50% higher APE. So some part of operating leverage could have played out. So I mean, what is that? I mean, the margin I have. I mean, of course, I'm cognizant of that when I'm comparing with the last year.
But if I look at the three-year horizon also, why sort of despite the scale getting better, certain NVT segment a bit increasing, protection folding up where it used to be, still the margins sort of have a struggle? So I mean, why that operating leverage is not playing out or is it something different that I'm missing in this entire margin picture? That's number one. Second, in terms of now looking ahead, I can sort of hear and read what you are saying that, okay, now you are more going to change growth even if it comes with some kind of a compromise on margins. In this backdrop, at this juncture, what kind of now every anomaly is behind? And also, there is more sort of a regulatory clarity. So in that backdrop, what kind of growth you would be looking in FY25? Yeah. My question, I guess. Yeah.
Hi, Avinash. You're absolutely right in terms of operating leverage. However, the other angle here is the product mix. So you mentioned FY21. So while you were speaking, I was looking at some data. In FY21, FY22, and FY23, our unit-linked business was range-bound in about one-fifth to one-fourth in that zone, right? While if you were to look at FY24, it is 35%. So more than a third of our business is now unit-linked business. Is that always going to be the case? Possibly not. But we have to remember that we, as a sector, went through a fairly material shift because of the tax change. And we will slowly start inching up like we have done quarter on quarter. We will start inching up in terms of our other-than-unit-linked business.
That clearly, if you were to look at standalone quarter four for us, our unit-linked business is now comfortably about 30% after being in the mid-20s. So that shift is happening, but it will take some time. So it is two-pronged in terms of or three-pronged. So there is the scale of the business itself, then your unit cost that if they continue to trend southwards, which is the case for us. And then the third is the product mix. I think all three need to be in the zone and for margins to move up. But you will admit that the sector over the last two, three years have gone through a fair bit of change. And we also forget COVID in all of this.
So given all of that, I think the fact that at least some of the participants in the sector, including us, have not dropped margins, say, below 25%, I think is reasonably commendable while continuing to steer the company through a fairly tectonic shift in terms of attractiveness and moving a lot more in terms of inroads into Bharat. So two-thirds of our business, new business that we've written this year, has come from non-Tier 1 cities. Or another way of looking at it is that while overall unadjusted growth is 1%, the growth from tier 2 and three is 13%. If you were to look at number of policies, it was flat for the last three years, which was bothering us to some extent.
But if you were to look at this year, we have managed to perhaps thanks to the tax nudge, we have managed to really grow the number of people that we sell to. And that's a very healthy 14% growth in quarter four standalone. And many such data points to say that the engine is getting a lot more granular in terms of retail growth and away from only high-ticket cases. Niraj, you want to add anything?
Yeah. Let me just a couple of things to that. One is if you were to look at FY21 and today across different segments, one of the challenges has been to maintain inherent margins of each of the segments. And I mean, there has been enough examples of that, especially starting with protection. We've seen where protection pricing is versus where we believe it should be, especially as you get deeper into India.
So while the margins of protection are fairly healthy still, they are obviously lower than what they were 3-4 years ago. So that is something that we are I mean, from a real-world perspective, that's something that we have to acknowledge as a sector. Also, if you were to look at some of the other product categories, whether it's annuities, non-participating products, there is intense competition as far as rates are concerned. Well, some of us have managed to adhere to some sort of pricing discipline. And that is also visible in terms of a direct comparison that you could make. And that is also a factor in terms of where the margins are today versus where they probably were 3 years back.
Adjusting for everything else that we are talking about, whether it's product mix or even in terms of you yourself mentioned we are 50% higher than what we were that time. We've also expanded our resourcing to be able to get to this kind of scale. A lot of this investment, especially in proprietary, is upfront. The benefits are coming, but some of them will come with a lag as well. Also, technology is something that we need to keep investing in every block of three to four years. That is also something that we don't want to really back out of. We want to ensure that our operating model stays relevant and current. That also requires significant continued investments.
So we are basically maintaining our margins and have delivered VNB growth of about 17-odd% in this period, 14% on a two-year basis and higher on a four-year basis. That is, in some sense, in spite of a lot of these aspects that are being seen in the market. And while the market continues to grow, these are certain things that we need to acknowledge as well.
And I want to add there. See, if I'm a bank, can I compete? I'm competing with mostly listed banks. That's not the case in insurance for various reasons. So apart from three or four companies, you don't have listed entities. And the reason I'm calling that out is there's very little disclosure in terms of actuarial walk, embedded value walk, sensitivity analysis, and the rest of it.
So the competitive intensity will only continue to go up until the roadmap to listing starts happening. Are there such plans? I'm sure that they used to be earlier, but that's a natural culmination. It's a matter of when and not if that roadmap starts fanning out. There's a little bit more four corners within which most of the senior players operate.
Yeah. My second question, thanks. And my second question on growth guidance for FY25 and particularly if you can just give some color around channels of value growth.
Yeah. Right. So we don't really give guidance except for saying that historically, the private sector has grown in the range of 12%-15%. So we should grow at least by that, if not a shade higher than that. And we could comfortably grow higher if, again, if you're looking at listed players.
But if you were to look at overall, at least this kind of on the upper end of this kind of band is what we should grow, and the VNB should grow. Just preempting your next question. And all our channels should grow. In my comments, I talked about HDFC Bank countershare. That's already reached in less than nine-month time frame since the merger. It's reached 63%. We'll continue to make further inroads. And so that should grow faster than company-level growth. And our agency channel, that agency and broking channel that were disproportionately hit on the higher-ticket-sized cases, that too, with a base reset, should grow fairly robustly. I think that's and some of the new partnerships that are completely nascent, that also new tie-ups and so on, that should also grow. So really, all of the channels should do well in FY25.
Okay. Thank you.
Thank you, Avinash.
Thank you. The next question is from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
Hi. Thanks for the opportunity. We are seeing questions. First one is on the agency side. Your agency business was down around 11% for the year and almost down 30% in the fourth quarter. Now, what we see over here is that ULIP and agency has grown handsomely, but it's the traditional business that's down. So we're just trying to understand that trend as to why this has happened. And I believe a chunk of the agency would have come from Exide, which probably was not focusing so much on the high-ticket business. That's the first question.
Yeah. Hi. Nice to hear you, Sir. So it's not that our agency channel also did not have the base effect of greater than 5X.
I think if you looked at our agency institutions, there were a fair number of the large financial product distributors as well as the MDRT distributors who did operate in tier one on greater than 5x. So on a two-year basis, of course, our agency business has been growing at almost 14%. So we see the trajectory over the long run. There has been a one-year effect of the greater than 5x. Now, there are two, three things that we do believe that agency will. One, of course, is we are increasing the distribution presence across. We're adding a lot of branches. We are expanding into tier two, tier three. Second, if you look at the number of new FC or new consultant additions that we have done, it's been the second best in the industry with more than 80,000 agents.
On your question on the Exide, that particular business has been growing. Yes, they may not have been because they're primarily present in the tier two, tier three, and in some of the south markets. They're not present in the higher-ticket side. But there, we are actually looking at a retail NOP growth strategy where we'll be expanding into many more markets in the tier two, tier three, and grow on that basis. So really, it's a question of how does the regular agency grow in terms of the retail penetration as it expands to tier two, tier three, and the fact that the new agents are coming on board. The quality of our top agents in terms of people who are qualifying for MDRT, that has been increasing fairly a bit year-over-year.
So we do believe that with our focus on new agent recruitment in terms of the productivity, the product mix that we are selling, over a period of time, some of the product through the agency channel will also correct to the balanced product mix that we normally do. And Nischint, Sir, if I were to deconstruct in numbers, the up to 5x agency channel has grown reasonably, almost at par company-level growth. So 8% is the growth in terms of up to 5x. The drag has been the above 5x, which is why for next year, with this base reset, it should get back on its feet. Sure. Got it. The second question is on new business strain as a percentage of APE. And this ratio has gone up from 34% last year to 40% this year despite the fact that share of ULIPs has gone up.
So I was just trying to understand the trend.
Yeah. Good. So the strain depends on the product composition and the expenses. As you already mentioned in the call, the operating leverage in FY24 has been weak. So there's an impact of expenses on the new business case. And since the UL mix has increased significantly from 19% in FY23 to 35% in FY24, and UL has the highest strain because the reserves are linked to the value of the fund value, value of the fund, and hence, the strain is the highest. That is one of the main reasons for the increase in the strain from last year to this year. And just to add there, Nischint, we are typically capacitated in terms of manpower and so on and our branches to grow at between 15%-18%. But we have grown on an unadjusted basis.
We have grown 1%. So that's what I think Eshwari means in terms of the operating leverage not coming through or, in other words, impacting the strain on new business.
Got it. Just a last one to squeeze in. And this is on the VNB walk trajectory. We can see the fixed cost absorption being negative at around 70 basis points. Is that for the same reason, or is it something because of the IT expenses that kind of?
No. It's the same reason. It's absolutely nothing else. Just the same INR 1,000 crore. And the uplift that we have given another way for you to triangulate this is if I were to look at my VNB last year, the VNB growth in FY23 in quarter four was 69%, right?
So a large chunk of this also came from that INR 1,000 crore because we have never grown 69% in a rare year, I think, from my memory, that 69%. So that, again, is manifesting in the same; the margin is because of that 70 basis points impact of the 130 basis points is just that INR 1,000 crore. But actually, if I look at the VNB walk last year, even then, fixed cost absorption was a negative when I think your growth was really, really good. That must have been maybe Exide Life because we were in the process of the merger, and their margin profile was significantly lower than ours, post which we have done a lot of rationalization in people and branches. There was also a Project Inspire that we talked about in terms of the INR 50 crore investment that we did at that time. Sure.
So the question, I think, essentially is that if this is project Inspire and it kind of continues for next year, then in all possibilities, there might be a similar drag next year. I think that's what I'm coming to. Or is it something that if it grew at 15%, it won't be there?
Yeah. So see, the biggest drag really is in terms of the gap between capacity and actual growth, which is that 15%-17% number that we're talking about. That is something that is, in some sense, if the growth comes back to where we want it to be next year, a lot of this number could actually go away. Some part of it will stay because of a continued investment that we've done. But a large part of this drag is going to be addressed to the growth coming back in FY25. Perfect.
Got it.
Thank you very much, and all the best.
Thank you.
Thank you. The next question is from the line of Sanketh Godha from Avendus Spark. Please go ahead.
Yeah. Thank you for the opportunity. I have three questions, rather. Sir, the first question, obviously, Vibha, you said you will grow broadly in line with the private sector, which you expect to be 12%-15%. But given we are at 63% market share in HDFC Bank and potentially it goes to 17 next year, then ideally, your growth guidance or growth expectation should be better than the private sector. So I just wanted to understand that your growth will be around 15-ish, or it could be better than that because of the market share gain in the bank. That's my first question.
Yeah. On that Sanketh, see, it's very difficult to know relatives.
So somebody else might have had some other tie-up with some other bank and so on. And that's why things will unfold as we see some of the other relationships. That's why. But yes, as far as we are concerned, our growth, HDFC Bank clearly is like you articulated. And other channels also, as we discussed in a couple of earlier questions, given agency rebasing and some of our other channels like direct channel rebasing, some of our newer partnerships beginning to take shape, it should be. But relative growth becomes difficult to know.
Okay. Perfect. And the second question is basically, you made in initial remarks that you are okay to trade off margin for growth. Then related two questions, which means that you will be okay to breach ULIP more than 35% of the total APE what you have today.
If ULIP grows, as you highlighted, it creates a new business strain, then do you expect the solvency should go further down, or it will cap your ability to do ULIP even if the demand is there? So Sanketh, I think on ULIP mix, even while it is at 35%, historically, for the past 5 years, it has been in the 20%-25% zone. So can ULIP in a particular quarter be higher? The answer is yes. Was it higher in quarter four? If you were to look at the full-year numbers, 35% versus 19% of last year, obviously, quarter four, ULIP was higher, right?
So that is not practically the situation. So we also maintained always that we don't want to micromanage this on a quarterly basis.
We definitely want to take cognizance of the demand where it's coming from and whether we can actually balance our objectives in terms of can we sell more protection on ULIP links? Can we sell more riders? Can we improve persistency? Can we just increase inherently the margin of all our segments? That is something that we would focus on. We are not too fussed about where it goes to in a particular quarter. But over a period of time, we definitely want to still maintain between our savings products anywhere between a fourth to a third across each of the segments. And just again, a slightly different point, but on the same issue, is that there are a lot of perceived headwinds against non-participating products in this period.
But our product mix on Non-par has actually moved to the mid-30s in this period and much higher than what it was in the nine-month period. So that basically tells you that there are ways to kind of get to a particular sort of outcome keeping in mind the overall demand drivers in the market. So as such, we would like to maintain a fairly reasonable window within which we have each of these segments coming in. Your question on solvency, again, like Eshwari mentioned, each product category has a different dimension. Unit-linked products will have a much higher requirement given the base on which it is calculated. But also, the capital requirement is for a shorter period compared to for Non-par or for participating products. So some of these things do balance each other out.
In certain products, which are more profitable, you need to hold more capital for a longer period of time. Certain products like Unit links, which in our case are relatively less profitable, you need more capital at inception, but that capital requirement comes down over a period of time. So we would obviously want to maintain our solvency, which is in a good zone. And we've managed to do that, all things considered.
Niraj, the reason I was asking that question is that if market demands as buoyant as they are today and ULIP demands remain persistent, then whether your solvency will become a limitation to cap the growth because the demand is for that particular product in that sense, as it is in the current year?
So while the solvency requirement will be dependent on the mix, it's not that if ULIP is going to be at a very high percentage, the requirement will increase exponentially because, as we discussed, there are different influences. Ultimately, the requirement for capital is lower compared to a Non-par. So the requirement itself, so it's lower at the start. And then because of the persistency being lower compared to a Non-par, the trajectory of the requirement of the capital is going to be lower. So it will balance it out. And we don't expect it to be a big strain on the growth, especially since we are at 187% solvency. There's a good cushion between the minimum required of 150% by the regulator and the 187%. In INR crore, it's a very big number because our actual solvency capital that we have is around 15,000-odd crore.
So that gives us the comfort that they don't restrain the growth, even if the ULIP mix has to go a little higher.
Got it. And lastly, from my side, is that? Sorry. Market to manage it. Yeah. Go ahead. Sorry. The last question from my side is that, see, the surrender norms definitely have a negative impact. The revised surrender norms are definitely watered down. But definitely, it has some impact on two products, especially the limited 5-Pay Non-par and to some extent, the deferred regular-pay annuity. So just wanted to understand how much 5-Pay contributes to our total premium and deferred regular-pay annuity contributes to total premium.
So given it is linked to the FSV, so just wanted to understand how much portion of the business is linked to it and how can you transition it to, say, 7Pay, 8Pay, or 10Pay to overcome this problem if it is there? So Sanketh, while the allowance is based on the premium paying term, it is also based on product category in that sense. Now, in terms of various segments that we have, whether it is participating, non-participating, and unit links, the product commercials are different across different categories. So the allowance is also something that is managed at an overall level. It does not really become a critical point in terms of managing growth or your expense ratios. So the allowance is something that gets managed at an overall level, as you know, between par and Non-par. Within Non-par, you have different categories.
You have unit links on which the commercials are very, very different compared to some of the other product categories, which are sold at a longer end. So a large part of our significant portion of our non-unit link business comes at PPTs, which are 8-10 as well. So a lot of this balancing happens within channels who have a different premium paying term mix. At an overall level, we are able to optimize to get to the answer that is required. But Niraj, would you be okay to quantify how much 5-Pay contributes to our total 5-Pay Non-par contributes to our total APE and how much deferred regular pay annuity contributes to our total APE? No. So we won't do that. But I can tell you that as far as Non-par business is concerned, different channels have a different kind of mix.
So banks would typically sell something which is relatively shorter pay compared to agency. Agency, direct, all the brokers, large part of that business would be sold in a long-term premium paying mix. So there is a healthy balance of all of these categories. We won't want to specifically call out because it's fairly dynamic as well. And as far as deferred annuity is concerned, do you mean the single premium product or the? The regular pay deferred annuity. Regular pay deferred annuity is a fairly small segment so far. And again, there is a fairly good balance between shorter pay and longer pay. It's a recently introduced category, and it's a fairly small portion of our business as things stand today.
Okay. Thank you, Niraj. That's it from my side.
Thanks, Sanketh. Thank you.
Participants, in order to ensure that the management is able to address questions from all the participants in the conference, please restrict your questions to one per participant. If you have any follow-up questions, you can rejoin the queue. The next question is from the line of Please go ahead.
Thank you for the opportunity. So my question is going back to the growth topic. You had mentioned that the tier two, three cities have seen some 12%-13% growth. Now, I remember from the last conference call, you guys had mentioned that it will take you at least 12-18 months for some of the partnerships that you are making in these geographies to start delivering on numbers. So I just wanted to understand that tier two, three cities growth of 12%-13%, how much higher can it get?
Will it be more towards FY26 rather than in FY25 because that would be in the timeline of 12 to 18 months that you were mentioning? So is it that in this year, the main trigger for growth would be HDFC Bank counter-share increasing and the expansion in the smaller geographies of 2, 3 cities will actually start delivering probably from second half or the exit months of FY25? That's my question. Thank you.
Yeah. Hi. So this is Suresh. So two parts, right? One, of course, HDFC Bank has a clear SURU market growth strategy, and so do many of our other large national banca partners. There are a lot of partners who we have added on which are present in the tier two, tier three, and the regional geographies. So clearly, that is something which has started coming into play.
Even outside HDFC Bank, a lot of our other banca corporate agent partners have grown faster in the range of 13%-15%. So that has already started playing out for us this particular year. And a lot of that has come from tier two and tier three. But it's not that it will all come only in 2026. Some of it has also started playing out. Our growth has almost from tier two, tier three market. The composition has grown by more than 10% in this particular year itself. And like we mentioned, it is more as part of a retail NOP growth strategy. So yes, to your second part, there is also the fact that, look, we will increase our market share, hopefully, at HDFC Bank. Clearly, we have to work for it.
And if it grows from 63, if the bank grows and we are able to increase our market share, that will give us overall growth as far as the bancassurance is concerned. On top of that, we do believe that our both agency and the broking business have kind of set base because the greater than INR 5 lakh has now gone off the base for this particular year. So both of them, both those channels will also grow. And third, clearly, the tier two, tier three market in terms of the products and the fact that, look, we are seeing a lot of distribution expansion, including 75 new branches that we are looking at expanding, that will also add. That may probably take 12-18 months for us to deliver in terms of an agency buildup in these markets and hence the business volumes coming in.
But there are actually three, four lines which are helping us build the tier two, tier three business, and they are all phased out. Got it. So we were also surprised, Shreya, that if I were to look at growth in, say, protection, tier one has grown 26%, tier two has grown 22%, and tier three has grown 32%. And the ticket sizes are just a 10% differential between each of the tiers, right? So if I look at each one of these different segments, the growth from non-tier one is healthy, and the ticket size isn't that much because we are going after the upper quartile of tier two and likewise for tier three. And then there is, of course, SURU which Suresh talked about, of both HDFC Bank and other banks. But equally important is our strategy for agency.
For example, of the new agents added, the 80,000 agents added, 85%-90% of those agents are from tier two and three. Of the 75 branches that we have opened last year, a significant portion, similar kind of percentage, is in tier two and three. So all of that means that we're somewhat agnostic of channel. So the channel, if you visualize, is the vertical and the horizontal cutting across are the tier two and three opportunities. So it will be fairly widespread across channels. Got it. So if I could summarize in one line, probably the BANbanca delivery on growth in those cities will be faster. Probably agency may be more towards second half of FY25. Does that summarize properly? And I am hoping that agency is faster from quarter one. Okay. Okay. Sure. Okay. That's useful. Thank you so much. Thank you.
The next question is from the line of Suresh Ganapathy from Macquarie Capital. Please go ahead.
Yeah. Just two questions. Niraj, is it possible to get product-level margins? One of your peers discloses it. So can you at least do that on an annual basis? So Suresh, for us, it becomes each channel and each product is a very different outcome. So it's like a and we have 300 partners. So it is not that it is simplistic that term is this margin because what is the margin I make on term depends on what are my commercials with that partner and what is the mix with that partner. So it gets a lot more involved than this.
So I think once we have some of the same fears, also disclosing very clearly what is par and Non-par or what is credit life and retail, then I think we'll have those discussions.
Okay. Got it. Okay. And now one big question on this growth versus margin debate because, of course, we have been discussing this in this call. Different strategic debate? So if you look at from FY17 to FY22, excluding deliberately FY23 as the year which got distorted because of the tax thing, I saw broadly you as well as your peers growing at anywhere between 20%-25% VNB growth, right, bee it was a pretty benign period for margins. So it really looks like you're struggling to get 12%-15%, right, because Hello? Yes. Yes. Yes. Is there an issue with the line here? Sorry. Everyone seems to be dropping off. Yes.
There was an issue with the line. We are just getting it checked. Okay. Let us know. Sure. So it's working fine now. Should we go ahead?
Yeah. Let's do that. All right. So we'll move on to the next question.
The next question is from the line of Vivek from Aditya Birla Capital. Please go ahead.
Thank you for the opportunity, sir. The first question is on credit protect business. Just wanted to understand what is the percentage growth in credit protect year-on-year. And the second, the follow-up question on that is that since the business on GIFT City has been mentioned during the call, wanted to understand, do you see any potential in credit protect business in GIFT City, or are we going to target any market in terms of credit protect business in GIFT City? So yeah. Hi.
So in two parts, the credit protect business grew by 13% for us in this year, which is fairly good given quarter four, we did see some kind of a slowdown in terms of disbursements in the market. All our partners remain intact in terms of our partnerships. There have been some segments that we have gone up, some segments we have gone down. But overall, we continue to retain the kind of market share that we have on the credit protect business. On your question on GIFT City, yes, there is an opportunity down the line. Right now, all the products that we are looking at are in terms of the individual dollar denominated products. But tomorrow, down the line, if there are banks which set up their branches out of GIFT City and they look at it, we will definitely look at similar product structures there.
But right now, all products that we are looking at, there are products that we will be looking at once the US dollar loans start coming into from GIFT City. Okay, sir. And one more thing. Do you see any potential in group term in GIFT City, and are you going to target any market in that? We are a very small market in terms of what we are looking at because the yeah. So I think it's more the employee-based. It is there in some of these GIFT City similar to what we have at DIFC. But that will be a very marginal business. In any case, it's hard for us. So we are not really targeting that as a particular product now. We do believe the savings kind of products which will help us grow that particular market.
It is like the education plan, some products on health, some products on travel. That's the kind of opportunity that we are tracking now given what kind of segments are available internationally and where we believe will be much more competitive and nuanced.
Okay, sir. Thank you.
Thank you. Participants who were in the question queue would request all of you all to press star and one to rejoin the queue. We'll take the next question from the line of Suresh Ganapathy from Macquarie Capital. Please go ahead.
Yeah. Sorry. My question got cut out. Am I audible now? Yes, sir. You're audible. Please go ahead. Yeah. Yeah. Sure. Yeah. My question is just on the VNB outlook because as we're looking FY17 to FY22, broadly, the industry as well as you guys have grown between 20%-25%, right? It's been a good VNB trajectory.
Now we are talking about 12%-15%, right? One of your peers reported a 23% margin. They're arguing now in the revised VNB environment that is the margins at which maybe the industry might operate considering the pressure from all directions. How are you looking at this? Because even you at the start of the call, Vibha, made a statement that there is a trade-off between growth and margin, and we will let go of margin to get growth, right? Are we really looking at a lower VNB growth this cycle, and do you think margins can really go down considering the way the industry is evolving now? No. I want to clarify here a couple of things. One is that we want to hold VNB growth very similar to APE growth, right? That is number one.
So the limited point I'm saying is that there will always be something or the other that's happening, either a macro event, war is there, or some equity market. So I don't want to not engage with the customer when the customer wants to buy something. That's the limited point. So I would like to go in for obviously wanting VNB growth while growing top line faster than the overall industry. That's the objective. But are we looking at completely yo-yoing on margins wherein you're talking about lower by 300-400 basis points in one quarter? I don't think so. That's not what I'm saying. I'm saying a little bit here and there, we will seek that flexibility so that we are able to engage with customer. Don't turn away the customer to say, "Okay.
You don't meet my margin threshold, and so I will not sell you a policy." That's the limited point that I'm making. So holistically, we want to grow, like I said, 12%-15% industry growth. On the upper end of that or a shade more than that would be a good place to be. VNB in similar kind of zone, return on embedded value in the 17%-18% zone which we have, again, delivered. I think that kind of a holistic growth and a score card is what we are looking at. So Vibha, protection margins are 4-5 times that of the other product margins. And if indeed the narrative on protection is so strong, why this complete U-turn? Not for you specifically.
In general, for the industry itself that they're struggling to improve margins despite those products having better opportunity and 3-4 times margin potential than other products.
So on that, Suresh and Niraj, you can add. This is what it used to be. Over the last 4 years, it has changed completely. I think one of the earlier callers, Niraj, explained over there wherein given almost irrational competitive pressures on pricing, especially through aggregators on protection, it is a very different game today. For a INR 1 crore cover in India, it is cheaper than a INR 1 crore cover in Hong Kong or many other geographies. How is that possible? So we have to get back, and some of that will come in. One of the earlier callers also mentioned that unlike in banks, insurance companies are largely competing with unlisted players with next-to-no disclosures.
So this will move and grow into a sector wherein either one lists or there is a roadmap or there is disclosures that are similar to listing. Something will happen. With that, that will rein in a lot of exuberance on pricing and aggressiveness on pricing, both in term pricing and on annuity pricing. We're seeing on both ends. Hence, we need to stay focused on building profitable business. We continue to do that, which is why perhaps we are not the cheapest because if I were to cut my prices by 30%, as an insurer, I will definitely have 0% margin, best-case scenario. We'll do that. But because of this competition, the kind of multiples that you're talking no longer exist. That's a fact. Will it come back?
I think I'm of the school of thought that it will come back in terms of rationality in pricing due to the reasons that I mentioned. But today, it is not there. And so we need to sustain this competitive intensity for now until margins start climbing back again. Do you want to add anything?
Yeah. So there's just one point to add here. There was earlier call. MW had asked in the context of IFRS and Ind AS, how can things change?
So while I said the business, we don't expect to change the way we do our business. What is definitely likely to change at an overall sector level is that contracts or business which is priced upfront at negative margins or at very low margins and coinciding that with risk-based capital that will also come in during this period. It will be extremely difficult for someone to, on a sustained basis, price or misprice products and look at only top line. So the whole definition of top line itself will change and evolve, as you are aware, going forward. So I think, unfortunately, protection margins are not where they should be. I mean, that's something that we would have liked it to be the case. Like it is in all other parts of the world, it is not the case in India. So that's really our reality right now.
So just as a continuation, I know you guys won't discuss product level, but just for our understanding, is it possible to at least tell the magnitude of the difference between, say, if you had a protection margin of, say, X% 3, 4 years ago, would that be down 10 percentage points or 20 percentage points?
I'm just a rough number would also be great, the magnitude of difference or delta. So I can just tell you one very broad number. So protection margins 4 years, 5 years back used to be in three digits. Now, they are much higher than company average margins but nowhere close to where they used to be.
Okay. That's really clear. Thank you so much, Niraj.
Thank you. A reminder to all the participants, please restrict your questions to one per participant. If you have a follow-up question, you can rejoin the queue.
The next question is from the line of Harshit Toshniwal from Premji Invest. Please go ahead. Hi
. Hi, Madam. So I think two questions just said. So following from the previous one, that the margins on protection have been slightly lower. But despite that, at an overall level as an industry and as a company, we have all been able to maintain that margin in the 25%-27% range. And even if I look at 4Q, despite the ULIP mix increase, the drop in margins has not been very significant. So wanted to get a sense that if ULIP margins are at a standalone product level, how much has that improved? And also to do it with the fact that probably the approach of HDFC Bank towards looking at HDFC Life, that has also evolved over the last two, three years.
So apart from just the wallet share shift, is it also that the product-level margins in that segment is something which are more in line to the overall structure which we would have wanted to be with? So some color on that and to that point which you mentioned, that in a market like this, demand is something which is not controllable. Probably last two, three years, we saw a very good phase for ULIP. And staying away from a particular product might not make sense in this kind of an environment. So rather than controlling the product mix, making sure that individual product margin keeps on improving. So just wanted to get your thought that ULIP as a product, how has that changed for us for the last two, three years? Right. So good question. And we look at every segment continuing to just give me a second. Yeah.
Every segment continuing to give higher and higher, meaning eking out differences so for example, in participating products, we would urge our channels to sell for longer term, even toggling between what is the level of sum assured versus what is the bonus that we give. So we do believe that we are right up there in each one of the segments because we are really, really granular on how we are not leaving money on the table, and this certainly is also good for the customer. So that's what we've done on par. To your question on unit link today, some of our products so for example, Smart Protect has a 100x cover. So now that we sell all policies at 100x, but those that want a one-stop solution, also, we are able to get much better unit link margins than otherwise.
Also, if you were to look at steady improvement in persistency, that has helped because we do change our actual assumptions and mark to market it. So if you see a positive trend in persistency, we wait for two years. But after two years, we do change the inherent assumptions which will, and then new business also will get that uplift on the change in assumptions. So many such reasons that help us in goal-seeking in a way for margins, and that has become a DNA of the organization. We also have channel CEOs who have to balance their top line and bottom line. They want to sell more unit link. It could be through something like Smart Protect. It could be through attachment of riders. It could be productivity improvement on cost.
It could be many such things, all the technology investments that we are doing wherein we need lesser people. So it's a combination of all of these things that is in term, of course. And term has been steady. We've grown 27%. We've also grown in the 50s in terms of sum assured, which clearly means that we are covering higher levels of mortality in various mechanisms that we can do it. And all of that is margin accretive. So ma'am, I think just on this part itself, so very clearly understand that you're saying that the DNA has shifted towards improving the margins of a product level. And so say somewhat like a ULIP, which probably at a point, we would have had to do with a single-digit margin.
Is it fair to say that now it is not that a case that if the market is expecting that product to be sold in greater proportion, then we are not running that race single leg because of some factors? And just trying to understand that in order to mold ourselves to what the market demands, the profitability of each of the products at the ROE level should be competitive enough. So wanted to check that in the previous avatar, a lot of things on the distribution part restricted the margins on ULIP as a product. Has that changed very specifically?
Yeah. We have a lot more levers for us to be able to deliver margins in a particular zone that we have consistently operated in. And I don't want to reveal all of it.
Suffices to say that, for example, our product committee meets every fortnight to really look at not just high-level par, Non-par, and so on, but many, many nuances of what is selling, to which channel, to which cost of acquisition, where are we leaving money on the table by not cross-selling, attaching, so many such things. So it's really a nuanced approach that is looking at both top line growth and bottom line. But I would struggle to share beyond that because that is really how we're looking at things. We don't do it only at a corporate level. It is done even at a decentralized channel CEO level. Understood.
One last question, ma'am. I think this is from a later perspective. Hello? Yeah. Go ahead. Yeah.
Now, I mean, when we look at insurance as an industry, there are effectively five, six nature of products which we have been selling from a long period of time. Only recently and probably the regulators intend to look at each product through a different lenses, try to see whether it fits the customer, etc. Now, I mean, more from an industry point of view, can adding new products so somewhat there have been talks of composites. But I'm thinking that even within savings I mean, do you think that industry as a whole needs new products beyond the three, four ones which are typical structures under which we are selling insurance?
Absolutely. And that is there in the regulatory review report. We are part of that along with many other peers. I'll give you an example. Earlier, there was a caller about a GIFT City product.
Now, we have a dollar-denominated education product which is approved by the DFSA. And there, you don't necessarily have to have a 10x cover. You could have, say, a 5x cover because your objectives might be different, or you might already have some level of insurance, and that's not what you're looking for today. It's not zero, but it doesn't have to be much higher levels of insurance. There are tweaks like that. Or it could be wherein you could take a premium holiday without necessarily lapsing your product because there are some constraints that you have on the financial front. Many such things within the existing avatar can certainly be done to expand the pie by offering flexibility. And it's already there as a series of recommendations to our regulators. Ma'am, from a regulator's angle Harshit, so give me just two or three questions, if you would, please.
Thank you. The next question is from the line of . Please go ahead.
Hi. Good evening. Just two questions from my side. First, on the tier two and tier three markets, I mean, if you can kind of give some color on what you think could be the right to win in this market, be it for HDFC Life or any other competitor, will it be a distribution strategy or the product innovation strategy? And in that context, if you can give some color on the plate of this 13% growth that we are seeing in tier two and three between maybe the specific product cohort, like you mentioned that retail protection was probably 20% or 30% not in some of these geographies.
And secondly, if you can just give a dedicated question, if you can just give what was the contribution of HDFC Bank in your individual business for the year or what you give the counter-share, but if you can just give the contribution in your overall business. Thank you. Yeah. Hi. So I'll answer the third one first. HDFC Bank, obviously, we gained fair market share. There's also been a little bit muted because of the high base and our broking and agency. So we have hit almost a 52%-53% kind of contribution on the retail individual from HDFC Bank. It's still fairly diversified because we have many other partners.
But given our focus on proprietary, given our focus on some of the alternate channels as well as other bank of partners who are supporting us, it'll probably go up and down a little even if HDFC Bank were to grow the next year. Right? So that's broadly where we are in terms of the contribution from HDFC Bank. On your question of right to win, frankly, it's really a very competitive market. So I think every key lever falls into place, especially with somebody like even an HDFC Bank who is looking at what is the right composition which is going across to the customer.
So right from in terms of how the product, how the IRR, what kind of operational efficiency is coming in, we constantly benchmark ourselves on we constantly benchmark ourselves in terms of where do we stand in terms of operational efficiency, product IRR, resources on the ground, training and capability. And we do believe that there are many such innovative things that we can bring onto the market where we add value to our partners, especially across all. And it's not that we are specific to one particular partner, but we look at whether we can come out with propositions like GIFT City, whether we can come out with deferred annuity kind of products. Click 2 Achieve as a product has had a huge advantage which has brought to us in terms of the innovative product or the customized solution that we are able to bring.
So really, it's a question of how do we go back and benchmark ourselves across each of these parameters and make sure that, look, we are number one or at the worst, number two as far as the value proposition to each of our partners is concerned. Shreyas, you can kind of break up the 30% growth in tier two, tier three between maybe some product cohorts if that's what you. So I think the same set of products at different ticket sizes have been moving across both the tier two and tier three kind of markets also. We do believe that there is a segment within tier two and tier three because they're fairly less underpenetrated.
But yes, the less than INR 5 lakh cohort in this Tier 2, Tier 3 market has seen a much faster growth because of the NOP penetration that we are able to get into each of these markets. Right? So the Tier 3 has, for instance, grown at almost 17%. The Tier 2, Tier 3 overall has grown faster than the industry-level growth which is there in the market. So those advantages are clearly coming in in terms of and it's 13%, not the number I couldn't hear whether you said 30 or 30, but 13% is what we were mentioning in the Tier 2 and Tier 3. Right? But the less than INR 5 lakhs has been growing in high teens. Our NOP growth also has been in the mid-teens in terms of each of these segments. Got it. Thank you and all the best. Thank you.
Thank you. The next question is from the line of Madhukar Ladha from Nuvama Wealth. Please go ahead.
Hi. Just two quick housekeeping questions from me. First, can you give me a split of your more than INR 5 lakh and less than INR 5 lakh ticket size in the total individual APE? Sorry, can't hear you very well. Hello. Am I audible now? Yes. Hello. Hello. Yes. Please go ahead. Yeah. I wanted to get a split between the high ticket size and the low ticket size in total individual APE for FY24. And my second question would be we see that the economic variances are about INR 1,300 crore. So what is the split between fixed income and equity of there? And yeah, those would be my two questions. Thanks. Yeah.
So on the first one, we had mentioned at the beginning of this year, just after the budget, that the impact we see is around 12% of overall APE. And today, greater than INR 5 lakh, the basic same category is about 6%-7% of our business. It is definitely lower than what it was last year, but it is still a fairly significant number. And that is something that we expect to continue as we go forward as well. If you can sorry, please come back on your second question. The economic variance breakdown for that, please. Yeah. So that's primarily due to equity. Out of the INR 1,300 crore, about INR 1,200 crore is due to equity. The rest is due to the lower yields in this period compared to the same period last year. Understood.
Just on the 6%-7% high ticket size, what would be the composition sort of mix of product categories actually contribute to that? So these are all basically the traditional products, non-unit-linked. Unit-linked, in fact, is if you include unit-linked in this, the mix would be even higher than 6%-7%. So we are only referring to the non-par category which we spoke about in the context of last year. Right. Right. Understood. Understood. Yeah. Makes sense. Yeah. Also, what you've seen is in this period I was referring to in an earlier conversation about non-pars having gone up in this period to the mid-30s% from less than 30% in the nine-month period.
A large part of that is due to one of the new product launches that we've had, which has also helped us garner business in high ticket size as well in spite of where we are as far as the tax regulations are concerned. Understood. Got it. Thanks a lot. Thank you.
The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah. Hi, everyone. So firstly, on the tier one, tier two, tier three that we spoke about, any thoughts that you can share in terms of how has been the experience there with regards to mortality, persistency, any of those parameters, and how should we look at it from a medium-term perspective? And secondly, on your overall product mix, how would you look at something like a protection or an annuity's going ahead?
So the point that I'm trying to get out here is if protection and annuities, although the protection margins have come up, but still, they are significantly better at the company level. But if the share of protection and annuities can go up in the next year, you can see some margin bump up. So just trying to understand that as to how the product mix, particularly from these two products, are likely to shape up in FY25. Yeah. Those are the two questions. Yeah. So let me take the first question. See, protection clearly for us has been growing well. And also, when you triangulate that with the level of sum assured, so despite us not necessarily playing the price war, like one of the earlier callers had a discussion, it should grow faster than overall company level.
We are very, very happy that the retail sum assured, for example, has grown just shy of 50%. And retail protection on a standalone basis has grown by 27%. So that kind of while some of it was base, in fact, in the first three quarters, but even in the fourth quarter, we have done okay. So the growing faster than company mix should certainly continue, thereby giving us some margin uplift. And more than the margin uplift, it is core to insurance, and we want to grow more of that. So 4% has become 5%, and this inching up in terms of percentage of APE should happen. Right? In terms of persistency, what is, again, heartening is that the difference between tier one and tier two, maybe 300-400 basis points, and again, between tier two and tier three is thereabouts.
So it's not that it is in the late 60s or early 70s. So that's what that's how it is panning out because, again, we're not throwing caution to the winds and wading into profiles that we don't understand. There are a lot of filters. And like I mentioned earlier, we are looking at the upper quartile in a tier two and upper quartile in a tier three so that we are being very selective of where are we going in terms of the places. It could be a small industry. It could be a missionary. It could be a school. It could be something which is generating a certain income of the population that is dependent on that income-generating activity.
So about the point that I was trying to make or wanting to ask was, if the same product is sold in tier two, tier three via the same channel, say, for example, HDFC Bank sells ULIP product in a tier two, tier three, and HDFC Bank brand sells it in tier one, would your margin be would be any different, or how should you think about it? Just to elaborate on the point that Vibha mentioned, while tier one, tier two, tier three will play a role in the persistency as well as mortality experience, that is not the only parameter. The other parameters, like at what level of underwriting they've taken the risk on board, what is the income level, what is the kind of ticket size or sum assured, what kind of products, all those things influence the experience.
We look at the experience by all these parameters, and we factor that in the calculation of the margin. And while we are not able to exactly carve out different different products for all these categories, but whatever products are sold more predominantly in these segments, all those products have the actual experience captured in the margin. So for example, in a tier two, in a certain ticket size, the persistency will be better than a lower ticket size in a tier one. So those are the elements and ones that they're referring to. So it's not a very clear differentiation only between the tiers or only between differentiation of one parameter that is looked at when the experience is analyzed.
See, right now, largely margin neutral because it is more that profile of a human life is choosing to live in that particular place as against living in a top 10 city. That's how we are seeing it. And so not huge difference. Over a period of time, we'll get nuanced wherein it is possible that we might introduce bespoke products, and we are working on that in a tier two with a higher charge extraction to take care of higher or poorer mortality and persistency experience. As the volume starts picking up, it is possible that we will look at that as well. Sure. Thanks. Thank you.
Thank you. Ladies and gentlemen, we will take the last two questions. The next question is from the line of Supratim Datta from Ambit Capital. Please go ahead.
Hi. Thanks a lot for the opportunity.
So my two questions are, one, could you let us know what is the contribution from the non-HDFC Bank partners to the APE, and what would be the two or three key partnerships here? And given this is a fairly competitive channel which has seen commissions going up after the new EM guidelines coming in, what are your growth aspirations in this channel? That is one question. And two is a follow-up to a person who previously asked this question on protection. You seem to be very confident around protection growing. But when I look at your retail protection, the growth has been slowing for the last two quarters now. So just wanted to understand, is this anything specific to these two quarters and that should reverse next year, or how are you thinking why do you think that this growth will slow down, accelerate going forward? Thank you.
And I think the second part that I added over to Suresh, on the term, it's really because of the base effect, nothing else, because we did have the base, if you look at the quarter four term of last year, it had grown higher. Again, I won't go into some of the reasons, specifics of that that happened in that particular quarter, but that's what it is. Otherwise, in rupee value, quarter-on-quarter, you'll find a steady growth. Got it. Got it. Right. Suresh, over to you. So on your first question on what is the non-HDFC Bank contribution in terms of the other banca channels, around 12%-13% of our overall business. But then a lot of our partnerships have the large partnerships have also come on board over the last two-three years.
We're still making forays in terms of market share as well as our presence across each of these partners. So for instance, even last year, we have added on Karnataka Bank and Karur Vysya Bank, our partnership with Yes Bank, and some of them are growing stronger. Some of the earlier partnerships with IDFC, RBL, so they continue to remain strong partnerships for us. And just if I could ask, what was this 12%-13%, say, around three, four years back? So really, it has not that it has shifted dramatically because look, at one end, HDFC Bank has grown in contribution, and so the denominator has grown because we've gained significant market share there.
Secondly, the proprietary focus also is helping us grow, like we mentioned, our agency business over a 2-year period has grown by 14%, has been going faster than in the last few years. So really, we do look at each one of them in isolation in terms of growth year-on-year. But we do believe that the bank insurance partners are growing at around 10%+ also year-on-year. And just to add to what Suresh was mentioning, also what's happened is, like Suresh mentioned, HDFC Bank this year, of course, has grown faster than our other bank partnerships. But over the last 3-4 years, the contribution of other banca partners has almost doubled to the overall banca business.
So it used to be in single digits till a few years back, but a lot of these new partnerships that we spoke about have scaled up in this period, and now they're contributing to almost 20%-25% of our bank insurance business if you were to just normalize for the HDFC Bank business growth in this period. Got it. Got it. Thank you. Thank you. We will take our last question from the line of Swarnabha Mukherjee from B&K Securities. Please go ahead. Yeah. Thank you for the opportunity. So a couple of questions. First one on the growth versus margin. So last year, you had highlighted that you were capacitized to grow by 17%-18%. But since you expected around, say, a 15% kind of a growth, so there was a kind of impact on margin that was expected. Where are we this year?
So are we, again, kind of budgeting in a cost structure for 17%-18% growth? And given the fact that you are guiding for a kind of a 12%-15% industry growth and maybe a little bit ahead of that, is there a risk of shortfall from that 17%-18% number? And consequently, there could be an operating leverage towards the end as we progress in the year, should we kind of think of such a risk being out on the margins this year also? So that is the first one. And second, in terms of the 13th-month persistency in the initial speech, you had highlighted that you expect some shift in that. Sorry, you have already given some color on that. I noted the mistake. So if you could maybe elaborate on that a bit. Thank you. Yeah.
So to your first question in terms of where we headed in terms of growth for FY25 and consequently the margins, basically, we are expecting the sector to grow in this range, 12%-15%. We expect to grow at the top end of that range and hopefully faster. We are not targeting a margin expansion in this period. We are definitely continuing to see competitive intensity. We are continuing to see our distribution expansion happen, our resource allocation increasing. So all of those things will, in some sense, counterbalance each other. We are definitely targeting a similar VNB growth to the top-line growth that we have, which in some sense implies margins should be in a zone that we are at this current point in time.
If we are able to actually let's say the product mix becomes more margin accretive or we're able to extract more segment-level margins, we will evaluate plowing some of that back to get growth, as we've discussed. Something very similar to what has happened in quarter four. We've seen unit-linked mix go up. We have taken that growth on board without significantly diluting our margin profile. So these are some of the trade-offs that we've spoken right through this call, and that's where we are. Linking it back to the VNB walk that we spoke about earlier on the call as well, significant part of that 130 basis points is coming out of that operating leverage gap because of the difference between the capacity and the actual growth.
We do not see that repeat in FY25 because we expect growth to come back fairly strongly in FY25. So that is something that will only be balanced by our continued investments. So that's the only factor that we will talk about. Product mix will, of course, evolve. We are at a reasonable balance at this point in time, but we will retain the flexibility to evolve the product mix based on how the market shapes up. Your second point on persistency, what we have been talking about is in the context of our expansion deeper into the Indian markets. We did speak about Vibha spoke about persistency across the three tiers being different by about 300-400 basis points at the 13-month level, not dramatically different.
So all of these still put us in the 80s handle, even in the tier three market, exactly because of the ticket size at which we are operating in. We do expect we will task ourselves with improving persistency on a like-to-like basis, but the mix effect will be something that we will not hold as a constraint to growing profitably. So if the contribution from tier two tier three keeps increasing, can it have impact on the overall headline persistency? It could, but that's something that we would price into our business model. Understood. Just one follow-up on this. So this shift that you are expecting, so would we expect any kind of impact in our, say, operating assumption changes in our VNB or EV because of this? No, it's already covered it.
We would put it up at the end of every year. We do review our assumptions in line with our actual experience, and we do reset that at the end. We have to renew every year. We've done that in our EV walk this period as well, as you can see. This is basically, in some sense, anticipating what we are likely to see in the coming year. Right. So that's already baked in, if I understood correctly. Indeed. VNB walk, you can see a 0.2% impact on the margin due to assumption change. So some of the difference is already baked in. Okay. Understood. Very clear. Thank you so much. Thanks and all the best. Thank you. We will take that as a last question for today. I would now like to hand the conference over to Ms. Vibha Padalkar for closing comments. Thank you, Sagar.
Thank you, everyone, for joining today's call. It was good interacting with all of you. Please feel free to reach out to our IR team in case of any further queries. Thank you and good evening. Thank you. On behalf of HDFC Life Insurance Company Limited, that concludes this conference. Thank you for joining us. You may now disconnect the line.