Q1 20/21

Jul 21, 2020

Ladies and gentlemen, good day, and welcome to the HDFC Life Insurance Company Limited q one f y twenty one earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to miss Viva Pedalkar, MD and CEO of ATFC Life Insurance Company. Thank you, and over to you, ma'am. Thank you. Good evening, everyone. Thank you for joining us for the discussion on our performance for the quarter ended 06/30/2020. Our results, including the investor presentation, press release, and regulatory disclosures are already available on our web as well as that of the stock exchanges. I have with me Suresh Badami, executive director Niraj Shah, CFO Srinivasan Patsarthi, our appointed actuary and Kunal Jayan from investor relations. I will run through the key highlights of our q one FY twenty one results and would be happy to take questions for that. Starting with an update on business performance. As the economy is coming to terms with the effects of the pandemic, we are increasingly witnessing encouraging on ground trends. Business has started to pick up on a month on month basis, and we are seeing higher traction, traction, especially in the individual protection business. As the situation begins to normalize, we expect life insurance to emerge as an important avenue for both protection as well as long term savings and consequently help attract a higher quantum of inflows from Indian households. While we have been able to operationalize more than 75% of our branches across the country over the last two to three months, we are increasingly able to both garner new business digitally as well as continue to service our customers by providing 24 by seven access and frictionless experience through our digital touch points. We have also been experiencing improving renewal premium collection trends with quarter one clocking 24% growth. However, we remain cautious about the sustainability of these trends given the possibility of multiple lockdowns going forward and the consequent impact on jobs and small businesses. Our individual WRP market share increased by hundred basis points from 17.5% in quarter one f y twenty to 18.5% in quarter one f y twenty one. We degrew by 19% during quarter one f y twenty one on a high base of 63% growth same quarter last year and delivered better than the private industry, which degrew by 23% on a base of 24% growth same quarter last year. We sold nearly one lakh 90,000 policies in the quarter, registering a degrowth of 4%. In the month of June, our degrowth was 3% on a base of 87% growth in the same month last year, thereby showing improving business momentum. Our market share for both the group and overall new business segments was at 20.7% each for quarter one FY twenty one. A calibrated approach of maintaining a balanced product mix has again enabled us to maneuver to a turbulent environment and adapt faster than the overall market. A wide bouquet of product offerings across segments resulted in EULIPs participating, nonparticipating, all accounting for 27 to 30% share each in our product mix. While we expect the demand for unit linked products to remain soft through the year, a suite of innovative traditional products would help us address demand for long term savings solutions. We also saw a 50% growth in individual protection APE with the share of protection doubling from 5% last quarter one to 11% this quarter. Despite the expected drop in business volumes, we delivered a healthy new business margin of 24.3% on the back of a favorable product mix and cost management measures. Value of new business was rupees $2.91 crores for the quarter with an operating return on embedded value of 15.8%. While we have not had to utilize the COVID reserve of of around 40 crores set up in the previous quarter, we believe that it is prudent for us to continue to carry it forward. As of 07/15/2020, '30 '9 valid COVID claims have been reported, of which only two are for term policies and others are in the savings segment. Total Summit risk net of reinsurance is less than 2 crores. Significant proportion of our cost is variable or semi variable in nature. This along with cost management initiative and deferral of discretionary expenditure has resulted in a lower cost ratio of 11.5% for the quarter, down from 13.4% in quarter one of the previous year. Having said this, even during these difficult times, we have continued to invest in technology, training, and employee well-being, such as counseling support. Our profit after tax grew by six percent to rupees $4.51 crores with new business strain being offset by sustained profit emergence from our back book, which grew by 10%. Our solvency position remains healthy at 190% compared to 184% as on 03/31/2020. The solvency was aided by strong pat emergence and favorable market conditions. Next on channel performance. Our digital assets have seen strong adoption across all our distribution channels. A positive outcome of the pandemic is that we are seeing online evolve from being a channel to a way of doing business across our distribution with customers increasingly getting comfortable in transacting in a non face to face manner. We have witnessed higher share of volumes in the BankAssurance channel, especially in the months of May and June, assisted by a bounce back witnessed by our partner banks. Almost all our distribution channels were able to materially improve their respective term share with our Bank Assurance online and agency, increasing their respective contributions by 200, three hundred, seven hundred basis points this quarter. Moving on to product performance. As is witnessed across financial savings products, inflows into insurance led savings remain subdued with customers wishing to conserve cash. As mentioned earlier, our balanced product mix strategy has been effective even in the current scenario, and we expect demand to pick up in the latter part of this year. We continue to focus on the protection segment with term protection growing by 50 over previous year to rupees hundred and 13 crores. As was expected, our credit protect business de grew by 74% due to a tepid lending environment. We expect a meaningful improvement in CP only by quarter three. Next on technology. Our continued investments in technology have enabled us to offer an improved customer journey while also helping us realize cost efficiencies. Our video based sales enablement tool wise enables our sales team to connect with customers over video, thereby providing a virtual impression of a face to face sale. Our chat based verification process has seen increasing adoption by our customers with over 65% of verifications being carried out to this mode. There is an increasing adoption of online payments and services by our customers whereby about about 89% of renewals are made through online or direct debit modes. I'm also pleased to share that HTSC Life shares will be included in the Nifty fifty index with effect from 07/31/2020. To conclude, we are pleased to have maintained our performance across key metrics despite the prevalent scenario and are seeing encouraging signs on the ground. We remain upbeat about the medium to long term prospects of our business and continue to focus on our strategy to build a sustainable and profitable business, thereby adding value to all our key stakeholders. The detailed disclosure on our results is available in our investor presentation. In the end, I would like to thank all of you for your continued support of our company. We are happy to take questions now. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of NW King from JPMorgan. Please go ahead. Yeah. Thank you so much for the opportunity. I have two question to the management. Number one is about product mix strategy. The results shows that management is highly flexible on the product mix strategy on the different the macro or the social scenario. So if the COVID nineteen, the situation, would last for next twelve months and bond age remains very low, what would be the the company's optimized strategy to deliver the best the value? So that's the first question. The second question is big picture question. Now if we actually look at the developed market, normally, the vaccine is the part of the insurance coverage. We are actually hearing a lot of hope about the COVID nineteen vaccine moving forward. Do you think that in India, so the COVID nineteen vaccine could be the part of the the insurance coverage under the group cover or the private health cover, or it should be the just the other pocket? The my understanding is that if it is included in a in a the insurance scheme, perhaps that could be a very positive in the sector. So I want to get the the opinion from the management. Thank you so much. Yeah. Hi, MW. So couple of questions that you asked. On the first one, on the on the optimal product mix, actually, we are fairly there. We've always said that balanced product mix, so you'll see between UL, par, and nonpart savings, we hovering in the in the zone of about 27 to 30%, give or take here or there. So perhaps Unit Linked can go down a little bit further, and the other two can pick up a little bit of share, but more or less, we're there. What we would love to see, and and we're fairly confident is term and annuity continuing to ramp up. You will see that quarter one itself 11% term versus about 6% last q one of last year. And that kind of attraction that you've seen, we'll continue to see that. And also annuity will be we believe that the focus on on on that segment also will start seeing more of annuity business. So a little bit more of that, but largely very similar to what we have right now. On your second question about vaccine, you know, as it is in terms of what we can do on health indemnity is fairly restricted. We can only do fixed benefit on health, although that's a separate conversation. We are, as an industry, trying to appeal to the regulator to allow us to sell health indemnity that we used to be allowed to earlier. As far as the general and stand alone health insurance companies, would suspect that this would be out of pocket. Mhmm. I see. That's very clear. Thank you so much, madam. Thank you. Thank you. The next question is from the line of Ajax Henry from BNK Securities. Please go ahead. Thank you for your opportunity. Ma'am, my question is again on the short term. So you have witnessed a very strong growth. How far is that driven because of the Tata hiking its prices? So earlier, you had problems in HTC Bank. And what I mean the problem is that there's no work compared to Now that Tata is more expensive, do you think that being a big support for you going forward as well in HSBC Bank particularly? See, relative to our pricing, there will always be somebody or the other who is pricing it lower. And if not Tata that you mentioned, somebody else will, and that will continue. So we have a a brand promise. We have technology. We have been first movers in this space, and there will always be in a pandemic situation. You you will find that there is a there will be a strong preference for the top two or three players at at least as far as term is concerned. So it's more a pandemic letting as well as our focus rather than one company or another company having much lower rates. And and, you know, even with the rates, they will one could play the the game of having lower rates for some time, but you will find time and again companies repricing it. So that's okay. That's all part of how you do business. So I I I think it's a deeper play rather than just someone who's pricing, you know, lesser of the area. And, you it's a fairly large market. So it's not that what I win, somebody else has to lose. What ideally we would like to given where how low penetration rates are, there is enough for everyone to grow. Makes sense. Makes sense, ma'am. Ma'am, and on in the month of June, we did see a very good business still happening. To what extent is that because of the ATC being deferred till June? I know that it's not the the operation why customer buys it. But do we see any shift in that not only for you, for the industry, for June to be a good month, or is this a structural thing you're looking at, like, to much better and henceforth? Yeah. You know, the whole APC, we are not in we've never talked about it because when you look at slide 29 of our presentation, you'll find there's an AC Neil Nielsen study Yeah. Study, which shows that it is now seventh or eighth reason. It's nowhere in the ninth reason, in fact, now. So nowhere in the reckoning and not certainly for the mass affluent class customer base that that typically are our customers. So not at all. In fact, no mention of it even by our agency channel. You know, and and our focus has been largely on protection and annuity, which really has no bearing for ATC. So next to nothing, we as a management team, I don't even recall us having mentioned it once in the last month, for example. My my next question is on Sunshine Path. So is it being sold to the same customer segment as Sunshine Path? And do we cross sell the product to the existing Sunshine Path customers since Sunshine Path has been a huge hit? So what's our strategy for Sanjay Plus? So Sanjay Plus, when you look at, you will you will see this is on slide 12 wherein we have tried to deconstruct it in terms of age wise. And you will find that it is actually spread across as against when you see the the non par. Non par, you will see that the 50 and above and a you know, so so slightly different. Also, the risk appetite is different. Also, when you look at what is the underlying product mix, which is segment wise, you will find that that is quite different. So our agency channel tends to do very well on, you know, you know, on selling participating products. Also, the feature that you have on such a power, which has immediate cashback, is an attractive proposition for someone who is somewhat stretched on their budget, at the same time, want to have a fair level of security and very little exposure to to equity markets. Perfect, ma'am. Perfect. And on BNB margin, ma'am, what is the impact on RFR move? Srini, you want to answer that? I think we have a slide here. So where we've given the walk through. There, you see that, you know, we don't have any impact for economic variance in the VNB because, you know, if the as economic conditions change, we also constantly reprice. So when you're looking at the value of the new business return in this quarter, that is with respect to the economic conditions prevailing in this quarter. So therefore, we don't see any impact coming through because of the moment in the year from last quarter of in the last year to this year. Okay. Okay. Even after you, like, increase the rates, like, in June in plus. That's what I'm saying. We constantly reprice to the preventive investment conditions. So I think you probably your question is why we are not seeing the yield curve shift from the last quarter to this quarter. Right. Because we because we constantly reprice almost every month or every other month whenever you see a significant shift in the economic, know, parameters. And therefore, the products we are selling today or this quarter corresponds to the economic conditions in this quarter. So therefore, if for us, we don't think it's relevant for us compared to an yield curve that was prevailing in a, you know, one or two years back. Alright. Alright, sir. Thanks a lot. I'll I'll get back in the queue if I have further queries. Thanks a lot for your time. Thank you. Thank you. The next question is from Utsav Gogrevar from Investec. Please go ahead. Thanks for the opportunity. I just have two questions. To start off with on the cost front, the cost hasn't significantly improved in this quarter. I just want to understand what are the key measures we'll do on the cost front and how we look at the cost ratios for the full year business. Yes. So costs, you've discussed in the past, we have broadly we think about it in two ways, really. One is the cost which is linked to volumes, either in terms of top line or in terms of the kind of mix. The second one is in terms of the fixed cost. So across each of these elements, the approach is different. Now as we've seen in this quarter, we've had a degrowth on the individual business about 19 odd percent, and we've had degrowth in CP by about 74%. Last part of the cost related to volume are reflective of that phenomenon. As far as the fixed cost is concerned, there have been initiatives that have been taken. The largest element within fixed cost is manpower. While we've been considerate in this quarter in terms of not doing any sort of mass layoffs, and there's no intent to do that going forward as well, we have taken all initiatives such as not doing any new hiring or taking sort of no increments in this year at senior levels or taking bonus cuts at senior levels in the company. So those are the things that have been done to try and contain that cost. Discretionary expenses, which will not come in the way of us being able to service customers or write new business using technology, they have been deferred. There are certain other cost initiatives that have been taken. We are looking at servicing customers in a way which does not necessarily be dependent on the physical branch infrastructure that we have. The virtual servicing, some of those elements are the way we are thinking about cost queries. So what you see is that the cost ratio, which has fallen from 30 about 30.4 to 11.5, is largely reflective of all of this. Going forward, as the volumes pick up, we do expect some of this to normalize. And we are hopeful that we'll be able to, between these two elements, get to a cost ratio which is fairly similar to last year. Okay. Thanks. Second question is with respect to the business from the banker channel, I think we have gained a very good decent amount of mark you know, market share in the protection business. What is what are the things happen at the at the banker level? Because, you know, the branches into the customer group one may not be that much. So which channel or how the, you know, bank is able to increase sold of protection? Just wondering. Harish, you wanna answer that? Yeah. So, you know, look, I I think, like, Dobar had mentioned in one of the earlier questions, we believe the potential in terms of how much we can sell term and some of the par and nonpar product continues to be fairly high. ULIP has been slightly volatile in the market, so, you know, we need to be very careful based on the customer requirement. So while there has been a lesser footfall at the bank branches, I think the bank has done a tremendous job, not just it definitely has scaled up. Some of our other bank of partners also have looked at cross selling and reaching out to customers. So there's a lot of digital reach out because haven't a lot of enablement that we have done. If you really look at the prospecting that we can do digitally end to end from reaching out to a new customer to finally giving them the policy can actually be enabled online. The only place where we kind of got affected was on medicals and done that, you the customer has to go for hospital, so there has been a little bit of a slowdown there. But, otherwise, given the heightened awareness, given the, you know, banks looking out for reaching out insurance, plus the entire tech enablement, we've managed to get a fair amount of growth. I I think good support from all our partners, and I do believe that this will continue for some time through the banker channels. Even agency initially, agency and booking, which has slowed down, I I guess over a period of time, they'll get used to the new way of selling, and we will see an increase or uptick in the kind of sales that is happening on insurance. Sure. Thanks. And third question is on the persistency. I think, you know, the persistency has declined for us as well as, you know, for peers, which is on the expected line. I just wanna understand two things over here. Which segment, you which has like, is it the unit only or any other segment which has impacted the persistency? And how do you see at initial comment, you have mentioned that very we have to track on the renewals front. But is there any expected persistency for the end of the year targets you have? So if you look at slide 31, you'll see channel wise persistency. Yeah. And, yes, see, now as we as we are into July, we are almost tracking what we are meant to be collecting. So as against what we were seeing right at the start in April, we are in a much position, but we will remain cautious because of people generally wanting to conserve cash. We are seeing it across, but lesser in terms of non par as more in terms of EULIP. More stress in terms of your in the EULIP segment. Sure. Thank you. That's it from my side. Sure. Thank you. Before we take the next question, we'd like to inform participants that in order that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we request you to rejoin the queue. We take the next question from the line of Akul Mehra from Motilaloswar. Please go ahead. Yeah. Hi. Thank you, and good evening, everyone, and congratulations on strong performance and extraordinary environment. My question is on this is slide 52. Basically, over here, one of the observations seems to do with the power product policy term being substantially higher this this year versus the previous year. So any particular reason for this and any any of the profitability measures for ourselves being impacted positively because of this higher tenure? Yeah. Atul, this is largely due to our new product, Sanjay Power, which is which is now flagship power product, and that has a whole life architecture. And that's why you see a much longer tenure of our of people paying the premiums. Right. So so stay to assume that the profitability metrics. Even otherwise, you know, our focus has been on longer term par rather than the shorter end. So that we've just extended a little bit more. And, ma'am, on the profitability side, this should have a a much better positive impact on the V and D margins. Right? Yes. Absolutely. Policy term being much higher. Yes. Absolutely. Yeah. Right. And secondly, in terms of the pure term as a product, you've seen very good momentum on the business at 50% plus growth. In terms of anything on the online side, how are things shaping up? And especially on third party online, like, say, policy, Has that in terms of picked up also quite materially and our market share in lot of the third party channels, how is it that shaping up? Yeah. So if you look at slide 15, you'll see that the term versus FY '20 has gone up from 37 to 40%. This subsumes aggregators as well as our own, you know, self sourced people who come directly onto our website. So that traction continues. In fact, we are we'll soon trend towards the higher numbers of what we saw in FY eighteen wherein we started off small. So now on a bigger and bigger base, we are able to hold our term share. What is happening is that one of the earlier callers that I mentioned, the the senior four or five maybe three or four players is where largely the slightly more evolved customer is wanting to move towards. Not very dissimilar to banks. And then with a lot of stress around, they really don't want to go bargain hunting and do want a safe haven, and it's a whole host of things. It's it's price is one aspect, but not the only aspect, and that is clearly coming out. And usually, in a when when the times are tough, we find that HFC Life has come out stronger, and that's what you're seeing on term over here. That doesn't mean that, you know, we have to continue to innovate and continue to focus on giving best value to the customer as well as the channel or distributor. But I think with the pandemic, there is a there's a equal amount of pool also for for term. Right. Sure. Thank you so much, and wish everyone all the best. Take care. Yeah. Thanks a lot. Thank you. The next question is from the line of Sanket Goda from Spark Capital. Please go ahead. Yeah. Thanks for the opportunity. I have two, three questions, honestly. Sir, the unwind rate in the current quarter is is at around if I analyze it, it comes to around eight one 8.1%, which is higher than what was there last year around seven and a half. So when the interest rates are coming down, why why the unwind rate has gone up for us? So that is first question. Second second question was was basically with respect to the VNB walk, The 60 basis point impact due to change in assumption is largely related to the reinsurance rate hardening where we have not completely passed on the price hike. And and the third question, just I just wanted to check, When we when we when we show these persistency in our numbers, is it rolling twelve month persistency or the persistency for the quarter? So on the last question, Sanket, yes, it is rolling twelve months. I will ask Srini to answer your your earlier two questions. Sanket, on the unwind question, so we've been doing the quarterly reset of the expected returns. And since, as you know, in the March, when the stock market crashed, we were a little bit more competitive and brought down the rates to seven and a half percent levels. Okay. And now since the market has bounced back, we think, you know, we can go back to normal levels, and therefore, it has come to 8.4%. And if you look at the unwind rate for other, you know, players, listed players, you would see that the unwind rate varies between eight to 9%. So we come back to basically normal levels since, you know, in the last quarter, we are a little bit more conservative because of whatever happened in March. So that's the unwind thing. The second thing is on the process of the assumption oh, sorry. The change of assumptions. And this is largely to do with the annual exercise we carry out, you know, every March end and we put to, you know, in in April. So that's that's the impact on the that and particularly, percent, we strengthened in Got it. Got it. Yeah. Yeah. I didn't want the right. Yeah. Yeah. Yeah. Yeah. Sorry. Yeah. Yeah. And this this is on EV walk. That's 1,100 crores of economic variance. Can you break break it down to equity, ULIPS related, and and also maybe bond related thing? Yeah. I can do that. So the equity is about 400 crores, Sanket, On the the interest rate fall, it's about 200 crores, 1 80, 2 hundred crores. Yep. And the there is actually a slope change as well this quarter because of RBA's operation twist. The shorter end of the curve actually come down much sharply about 90 basis points Right. Compared to the longer end. Mhmm. And that has actually also helped our our since, you know, the there are lots of excess assets that we have. I think you'd be able to see in the in the risk slides. So that also has helped our this the slope change has helped our EV to go up by around 400 odd crores. And the credit spread has also narrowed down in this quarter by about 30 odd bps, and that was again contributed positively to our EV by hundred and 60 crores. So overall, it's $11.54 crores. Okay. So yearly premium is affected in the equity only. Right? 400 crores? No. It it the yield is part of the the equity is let me yield will be between equity and the yield curve fall. Yield curve fall is actually, like I said, the shorter end of the Yeah. Curve has come down sharply. And that is where most of the yield profits are because the yield is a relatively a shorter term. This is the average, you know, payback period, if you like, is five to six years. And therefore, any movement in the short end of the curve has got a higher upside on the yield profits, and that is where you will just actually sitting in both the yield curve fall as well as the equity going up. So it's between the two lines. Oh, okay. So credit spread, one sixty, can you explain a little I mean, I do not get it what exactly that that it means. It's the credit spreads are narrowing, increasing it to one sixty growth. What exactly it implies to? The credit spread mattering means we the bond the the copper bonds are in premium of the copper bonds are much higher than what we purchased at. Yeah. I've got it. Got it. Yeah. Thanks. That's it for my time. Thank you, Sankhya. Thank you. Before we take the next question, a reminder to participants to please limit their questions to two per participant. The next question is from the line of Rishi Junjunwala from IIFL. Please go ahead. Yeah. Thanks for the opportunity. Just give me some color on the changing of product mix. So, basically, we have seen after, you know, almost four or five quarters that you will actually have seen, you know, know, the decline is not as sharp. Whereas, we have seen some declines or rather muted performance on annuity and probably guaranteed returns. So, basically, we're a nonpart savings part. So just wanted to understand, you know, in terms of positioning, are we trying to change anything there? What is the reason for, you know, this movement that that had happened. And, of course, you know, you've talked about power also which comes into picture. So just trying to understand how do you navigate between these three. So, Rishi, if you look at slide 15, I'll explain in context of that and how we drive product mix. So we don't drive product mix at the company level. So what you what you've referred to of UL and the sharp correction in terms of non pass savings and so on, that is actually a summation of underlying channels. And so we've given each one of the large channels, and there you'll see that a UL has has been about a third of banker business, but it has been a lot lower in in agency business as well as direct business. Business. So and then the growth rates of the underlying channels is the summation that you see at a company level. So if a particular channel grows faster, then the product mix that we are driving at that channel level is what will have a overbearing on what the company numbers look like. We are less fast about overall at a company level as much because and why do we do that? We do that because of couple of reasons. One is that the channel economics vary quite a bit. Their cost structure vary, as well as what is right for the customer also varies. And the risk appetite of the customers and the suitability of the products also varies. And so we drive it that way. But overall, we would say that, you know, we we we've always liked the balanced product mix at least for the last five, six years. We've never been a EULIP driven company. And so this is not very different from what we've been consistently saying. And banker has about 30% EULIP. It could go down a little bit more if the if the volatility continues, or it could go up a little bit if COVID recedes as a pandemic and market bounce back. But but, you know, it it'll always remain range bound. It's not going to become 80% of our business for example. Understood. But, again, I I I think that other than the fact that when we look at the channel economics as well as what's the right fit for the customer being sold by that particular channel, I think we are also very closely in terms of what kind of quality of business comes in. We also, you know, in in the front end, what kind of capability building we have done in terms of the current for those products. So if we find that an agency, we work on with partners of financial consultants who give a very, very high persistency, which is why our agency persistency is very high. And the URL mix is right. And then what Bilal was saying based on customer, based on channel economics, as well as the capabilities that we do to build, as well as quality, it all totals up at an overall distribution level in terms of what is the mix. So in some months, you will find when bank growth is high, then you will maybe slightly higher, but where agencies will be far and non far, maybe slightly higher. But term and annuity would be uniformly pushed across all the channels because those are clearly good products and clear segments that we can grow. Fair enough. And and secondly, on protection. So, you know, apologies if I'm repeating a previous question, but just wanted to understand how much, you know, on the retail protection side, how much pricing increase we have already taken versus probably something that we will in the near future? And secondly, on on credit protect, you know, there has margin extended as a result of a significant decline in, you know, the MVP. And you had mentioned in the past that you would, you know, give away some of the tail accounts there. So just wanted to understand how things are playing out there. Thank you. Yeah. So, Rishi, on the on your first point on term pricing in the individual space, I had mentioned this in the April call that it's not just gonna be a simple spreadsheet wherein whatever reinsurers hike up the rates, gonna pass it on to the customer. We haven't done that, but we've done it in a risk based calibrated manner to wherever we see a stress on mortality experience and only selectively we have increased in certain age groups because that is adequate. Because we need to also be competitive. We most of our partners are in multi type scenario as against having a one is to one relationship wherein, you know, then there isn't that much of requirement for elasticity of pricing and demand. While for us, we do require the there because there is a very high level of elasticity between the two. And so keeping that in mind, we have only done it very, very selectively wherein we are seeing poor mortality. Yes. We will you know, as and when we see a certain profile generating poor mortality, we will increase rates there. And we might relax where we see no stress at all or next to no stress. So it will this will be an ongoing exercise. We have repriced for a product, and when we get approval, we will have the ability to increase it further increase prices further if we see stress on mortality. But it'll all depend on how that is panning out. On Credit Life, we continue to to go back to our partners if we see very disproportionate levels of poor mortality experience. And, you know, we we have to renegotiate commercials or even be prepared to walk out because, like, with anything we do, we don't want to have a top line just for the sake of top line. And it has to be a win win for for the distributor, the customer, and for the insurer. So, yes, we we we continue to have those conversations. And usually, the partner does see where we are coming from, and usually, we have succeeded in in a sensible kind of free pricing. Thank you. Thanks. Thank you. The next question is from the line of Abhishek Sarra from Jefferies India. Please go ahead. Yeah. Hi. Good evening, everyone. Thanks for taking my question. Ma'am, just a few things from my side. On non pass savings part, obviously, we had grown last year very fast on the guaranteed product. And so this quarter, we have settled with a much lower share. Just if you can share your thoughts on how we see it going forward, and is it that we have slowed down primarily because we had reached a certain level within our own mix? Or you are also witnessing, like, the market is also getting a bit tighter in the nonfast savings given that many players have now jumped in with the guaranteed product. So just your thoughts on how you see this product evolving in your mix and the overall scenario. And secondly, on the margin front, so there's clearly a very reasonable hit on account of fixed cost absorption. This so which presumably is because of the lower scale right now. So is there a likelihood that as we gain the normalized scale back or the scale rises, so we could see a reversal of that fixed cost absorption that we have shown this quarter? Yeah. So very valid question, Abhishek. On the nonpart savings, frankly, demand is not the issue. We have in the spirit of balanced product mix, we have reined it in. If we did not want to rein it in, we could pretty much get to similar levels that we had in q one of last year. But we did tell all of you that we will rein it in because q one last year was an aberration. We did not, frankly, expect it to do so well and to be accepted by people so well. But so, you know, so that is what has caused that. It's not that we don't have enough paper to back it up or we others have gotten. Others will always get in. And and, you know, also, you know, the others who have gotten were the very ones who said that product was not worth it or not the right product to sell, but that's a different story. So so, you know, it's more a conscious demand curbing rather than not being able to sell that. And we're happy because, you know, balanced product mix is what helps us as a company do well in all the turbulence that one is bound to see, whether it's in macro environment or whether it's regulatory or customer preferences or a combination of all these things. So so it's in the spirit of that. As regards margin and cost absorption, you're absolutely right that it is only because of the top line. In fact, when I deconstruct our cost and look at fixed cost and variable cost, fixed cost rupee value of fixed cost is absolutely fast flat rupee to rupee despite at least at at lower levels and, you know, full year impact of people we hired at lower levels last year and so on. Despite that, it's it's absolutely flat. And and so when you look at some channels, like, say, an agency channel, which has about 70 odd percent fixed cost or 65 to 70% fixed cost. As agency channels, some of the other channels start recovering in terms of their growth, you will find the fixed cost leverage coming through or getting better absorbed, and that's when the throughput to margins will come in. A point I wanna make here is that our new business margins, the costs are based on actual costs and not our full year estimates of lower costs. Sure. Sure. Thanks a lot, ma'am. One last bit, if I can assist in this question on solvency. So, obviously, it's 190%. We are we should generally be in the lower end amongst you as you said, but we have managed it well. But going forward, miss, how are we seeing on the solvency front and on our alternate capital base plan? So if can just give some light on that. Yeah. So solvency has been fairly steady and, you know, comfortable in the one eighty to 200% range, and we've been comfortable with this right through. So it's it's never been a situation where we've thought otherwise. In the current situation and what we saw in the last quarter, circumstances did lead us to think about shoring this up to build some cushion because you were expecting two events to continue and, you know, build up over a period of time, and we mentioned that in the April call as well. The first one was the volatility in the equity markets. We expect that to continue, for the foreseeable future. And at the same time, we expect demand for protection products to really, take off from here. And both of these things imply it would be a good position to actually build some cushion. That's the reason why we are looking at raising some debt to the extent that that we can. 600 crores would give us about a 15% additional cushion to deal with both these situations. Equity market volatility that we saw in the last quarter, some of it which has got basically recouped in this quarter. But that that can go in either direction over a period of time. As far as protection is concerned, we will need more capital when the protection mix goes up significantly from here on. So we want to plan ahead and and go with that. So that's that's how we're thinking about it. Sure. Sure. Thanks a lot, Niraj. Thanks a lot, Viva. Thank you. Sure. Thanks, Ashish. Thank you. The next question is from the line of Prakash Kapadia from Univate Portfolio Managers. Please go ahead. Yeah. Thanks. I have two questions. You know, one on the eulip side, you know, given the low base and capital market recovering, why are we still so cautious for remainder of the year? Because for now, the base has been low for quite some time. The way, you know, markets have stabilized and, in fact, recovered quite a bit. Why so much of caution on the EULIP side? So, you know, it's not that we are having being cautious. It's just that my earlier comment about balanced product mix, whether it is non par, whether it's UL, we've never been a 80% UL or a 80% non par on a full year basis kind of a company just because market today offers well for a particular kind of product. It's really in light of that. And also, ULIP typically has had poor persistency. And time and again, we've seen that at the end of five years, people say, you know, I want my money back, and I these are financial investors. The higher the ULIP ticket size, the more it's the person who's a financial investor and not an insurance coverage seeker. So so we've always remained there is a definitely a place under the sun for unit linked, but for a particular DNA of the customer. And so we we when you overlay unit link with the DNA of the customer, with the segment customer segmentation, his understanding of the product, the channel economics, then this is the kind of outcome you optimum outcome that you arrive at. There will always be some pulls and pushes. If the customer wants to buy EULIP, it's not that they're gonna say I won't sell you a EULIP, but it's a it's also that the customer today is not looking to actively buy a lot of Ulan. Some of it is there, but not it's not a huge pool of pocket. Oh, and, Vivo, if I can add, I think even the customers who where we sell Ulan is part of the overall allocation, That is one of the reasons why UL through Banker, where the bank RN does a lot of financial planning and allocation for their set of customers. So, you know, it is much higher there, and we have seen better quality business coming in through Banker, and that's how we kind of be cautious on where we sell you well through Banca channel. And similarly, on the agency side where we have financial consultants who are very, very good in terms of financial planning and all of that, there is a bit of allowance in terms of you all there. Have we seen any major change in ticket sizes in Ulib over the last quarter or two? Has gone down by about about close to 20%. Okay. Okay. And, you know, secondly, if I looked at, you know, year on year performance, you want, you know, had some base effect of last year. So does because of that, the growth look optically lower or not real? When it's yeah. Basically, it definitely does. If you look at slide five, you will find that on, you know, the top left hand side, the month on month that you see, you'll see that June, for example, degrew about 3%, but the base effect was 87%. On a quarter basis to 19% degrew, the base was 63%, which is significantly more if you look at the right hand side, industry if you were to look at overall industry, the q one of last year, the growth was 14%. And against that 14%, there was a degrowth of 18%. We had a growth of 63, and then we had a similar kind of a degrowth. So, yes, huge base impact. Which slide you said? Sorry. I missed that. Slide five. Slide five. Yeah. So that that one if you had okay. Yeah. Exactly. Your question is what we'll try to answer here of giving the case effect. So it is the norm, you know, when some of these products have got launched. So last year, last quarter, we had launched some very good products where there was a spike. But if you really look at it from a full year basis also, last year, we took a market share at 1.6 basis points and already in quarter one in market share as well. So that's the other way to look at it to say it's not just the base effect. Are are we trying to see whether growth is happening and market share is also improving? And and given, you know, the current situation, there seems to be room for improvement of market share for the remainder of there. What is that then? Because, you know, some of the smaller players will get affected. There could be more volatility as you said. Yeah. Yeah. So, you know, if you see the top 10 private companies have 88% market share, and it's getting bigger and bigger. So there is a clear consolidation that's happening on market share, and this will this will continue to pay in the, say, the bottom 15 players. Just just to add, again, in terms of how that moves within the top 10 would also depend on, you know, how wide the product bouquet is for various players. And for for a player like us, the the bouquet is is fairly wide, and the protection journey continues, but so does the momentum on savings as well. So that's that's something that has put us in the position that we are, and we we hope to continue on the path. No. And I will add that, look, it's always a balance between top line market share, quality of business, as well as the profitable product mix. So, you know, all three have rebalanced well. And and you know to the point of your top 10 market share in in fact, you know, if I look at the top five, they have been, I think, sixty, sixty five market share for quite some time. So Right. Even though six to 10 can, you know, get marginalized over a period of time because, you know, these top five have been more or less in that range. Yeah. Yeah. Absolutely. You're right. See, it's also one needs to have strong bank assurance as well as other channels, broker, online. Without that, if if one only has one kind of a channel, it could be a small bank assurance, it could be just agency channel. Rather than being multichannel across and growing and taking advantage of opportunities as they come up, Without that, I think getting scale starts becoming difficult. Because you also have mid tier companies that have a lot of banks with them, but little of else anything else and really haven't done very well. Understood. That's helpful. Thanks. All the best. Sure. Thank you, Prakash. Thank you. The next question is from the line of Harshita Toshimar from ClaimGMS. Please go ahead. Hi, ma'am. Hi. The. Just one question. So when I compare q one of last year versus this one, I think on protection, yes, slightly. The mix has reduced primarily because of the lower credit protect. And even in the savings, we have done more of par and less of nonpar on a relative term. But the impact of new business margin in the BNP from the business mix is just hundred basis points. So just want to understand that, has any of the segments, like par or non par become become more profitable for us that it has compensated for for for for the product mix shift. And is it that the say power, power has replaced Ulysses quite a bit. You know? So and and it's a fairly long tenured part, like, years full life part. So fairly profitable. And unit linked ad at best would be low single digits of of profitability. And protection has also gone up. The retail protection has doubled Right. To five to 11%. So that has also helped. Okay. Okay. Because in, ma'am, so it is largely flat and maybe plus 200, three hundred basis points in this quarter, but I think the par has improved much more. And one more thing, so I'm not sure if that's the right way to look at it, but in par, the expense is a pass through predominantly. So you see that doing more of par in today's environment, is the margin in some way? You know, when we it is it is better than a lot of channels. It it's not so much shielding the margins. Indian gap, yes, there is some shield on Indian gap, but not so much the margins. And also, you know, when you look at ULEC, it is not just just what you see at the total company level in terms of 26, 20 seven percent, but it's also important that where the underlying which channel has sold that underlying unit. Because, again, the channel economics are very important. Then okay. Got it. So, typically, since since agency has been doing much better related to the last quarter, you have got the benefit. Just one thing, ma'am. So if we compare, let's say, ten year paid Panchay Plus versus a twenty five, thirty year old ten year par product which we sell, will the margins be very different, or they would both be very profitable products? I should both are profitable. It it would vary based on the PPP and the term mix. Sensia Plus is a Sensia Power Advantage is also a long term product. This whole life Right. Has multiple options that the customer can choose and so is Sensay Plus. So Right. Margin for nonfires, I mean, directionally are higher, but not as dramatically different for a well constructed part of the trading product. Got it. Got it. This this part product, for example, is a is definitely a a much richer design both for the customer as well as for the shareholder. Got it. Great. Thanks a lot, and congratulations on great Thank you. You. Before we move to the next question, we'd like to inform participants to please limit your questions to one per participant. The next question is from the line of Arat Sangi from BP Capital. Please go ahead. Hi, ma'am. Thank you for the opportunity and congrats on a good set of numbers. So I just wanted to know, ma'am, what is driving Because I wasn't expecting much of a demand for our business in this quarter. So what is the online situation that is driving the firewood and will it continue throughout the year? So some color on that. So, you know, we've been working on this product for a while, and we felt that there is a certain segment. First of all, we intrinsically believe in power product. We do believe that power also has a place in the sun just like Unit Linked has a place in the sun. And that and that conviction is important so that it's it's not just a gratuitous reason for selling something. And then when we looked at deep analysis of, you know, customer segmentation and then having a pitch on on power. And on top of it, there is an immediate cash flow that starts coming to the customer. So it it is a holistic proposition. And, you know, somehow, the timing has been great just as timing of Sanjay Plus was very good. Similarly, timing of Sanjay Par, we were blessed by the timing. Because in boom times, it might not have done as well as it is as it as it has been doing now. So the combination of those reasons that, you know, the why you've seen already acceptance by the market. And also we you know, the the products that we launch are first of its kind, and so there is a good reception by the market. And, usually, they're solving for something that is anyway worrying prospective policyholder. Right. So, ma'am, like, on the slide number 13, there's some new group tuners that are planned that are launched. So I just wanted to know, are we trying to move into the group term insurance business also dramatically? And, like, if we are then what are the kind of margins that we see there? Will it be very accretive? So I'm really happy that you spotted it. Ashiri, you want to talk a little bit more? Yeah. Okay. Yeah. Sure. So the key difference between this new product and the GTI that you mentioned is the GTA is usually one year renewable term insurance product versus this new product, which is, you know, the which is actually like a individual term. You can buy for a thirty year, forty year, or fifty year term, and you can offer it to your employees. And, you know, it works exactly like an individual term, but with a good wrapper around it. So you can actually give it as a long term retention scheme for employer to retain their employees. So, you know, it's it's a we we can do lot of various term offerings at a group level. And, you know, you can also do it for an affinity scheme, meaning not necessarily an employer employee relationship. You know, you can give it to a safe trip card customers or different, you know, types of different variety of customer bases can be, you know, exposed to this product. So that's the in that sense, it's new in the market. So therefore, since it's very much, like, an individual term product with a good wrapper around it, the margins are also as good as can be as good as an individual term depending on how you price the product. And, also, we believe that lot of onboarding happens that you have an individual term. You know, you can probably have a higher nonmedical if you are confident about the employ employee base that you are selling this to. So there's a lot of these different dynamics can be explored with this product. It's first of its kind in in the market. So we need to see how we can, you know, capture that white space that is currently there. So we will we'll see how things pan out. Thank you. The next question is from the line of Harish Kavalkar, who's an individual investor. Please go ahead. Hi. Good evening, ma'am. Hi, Harish. Good evening. I just want to congratulate the management for the great performance in worst environment. I just wanted a single question from my side. The question regarding the you have any any any technology upgradation over the period of time, like artificial intelligence or data analytics? So, Harish, if you look at the slide 16 onwards, 16 to 18, you know and I'll I'll take only one example. This is on slide 17. While there are lots wherein everything from servicing the customer to do business sales, using bots in a lot of areas that to handle right from customer queries to resolutions to risk management and so on. One example I will take is on slide 17, which is under the we've launched a platform go to market platform called Wise. This is the industry first. What this does is first of all, it's on it's on a your handheld device, so there's no setup. There is no it's it's not onerous for the to engage with the prospective customer. You would be able to do your authentication. You would be able to do your pitch, product pitch, right selling, run some videos, and hometown on the product, do illustration, and then do the KYC of the customer, help him with the filling of the field, which are anyway fairly concise. Telemedicals, if if that is required. Capture his photograph. You you can record it if he wants for posterity. Issue him with a digital policy. He makes the after he's made the payment online and complete the verification call. Everything can be done in be done in one sitting. Everything that one can do with sitting next to next on you know, front of the customer or prospective customer, you can do it. You can have a tri party connect. So for example, if a bank assurance person he's the guy who has a relationship with the prospect and but he doesn't know insurance products very deeply. He can rope in our person and have a three way connect on this platform. So this is something which is which has been phenomenal, and we are in the process of rolling out. Some of the channels have embraced it. Others are coming up to speed on this. So this is a game changer wherein we are very decisively moving away from necessarily having a face to face to be able to do everything that you can do face to face. Now some channels have taken to this very well, and surprisingly, for example, our agency channel is tracking well when actually for April and May, we were worried whether, you know, they'll be able to shift from largely being a face to face to moving digital, but it's it's right up there when we track channel wise that our agency channel has has taken to this well. Some of some of our partners under the broker channel also have taken to this well. Now if we are waiting for our bank assurance to really take this off because that's where large numbers can happen. And so we're very proud of several such innovations that we have that have enabled business, and, of course, overall on the cloud platform. Thank you. The next question is from the line of Ashish. She's an individual investor. Please go ahead. Ashish? Hello? Hi, Ashish. Yeah. I have a very busy question that is I am facing. Actually, I'm a research analyst and also working with the HDFC Life as an agency channel. So what I find difficult on ground is one thing that you are providing a 5% discount to HDFC bank customers by paying online payment, okay, all policies. And in HDFC, in life agency channel, there is no such type of discounts allowed to the customer If if I can take this question of yours offline line because this is more on the results related forum that we have. Yeah. I know. But it is the main thing to grow your agency channel. It is I don't face this type of problems in any other company. So this is the basic problem which I'm facing in your company. If you could give give your full name, Ashish, we'll certainly have we'll reach out to you. Ashish, Shikhar, and Buddha. Yeah. Ashish will reach out to you. I think we'll explain it to you as to how it works and what the advantages and how the whole system works. We will connect back to you. Thank you. We move to the next question. The next question is from Raj Mehta from Raj Mehta Associates. Please go ahead. Thank you, ma'am, for giving me the opportunity. Last time, I got the opportunity to meet you face to face, but this time, the ATM was working late, so I could not get the opportunity to ask question in ATM. So I wanted to ask one question with respect to your term plan. And I wanted to know what what are the basic margins you own in term plan? Because if you look at the industry level, Bajaj Alliance and ICIC Prudential, Tata AIG, and the HDFC Life. These four companies are well recognized in the market, and your premiums in Tom brand are basically way higher than the lower end of Bajaj or, say, Tata AIG. So if we have grown this retail segment by a total of 50%, so customers are preferring as a HDFC as a brand, not just focusing on the premium aspect, but also on the focusing on the brand aspect. So what do you expect the margin on this comp plans? So, Raj, you know, we take a portfolio approach rather than just one segment because it is a fairly involved matrix, and there is no one margin as such. But I can give you the in sequence, protection margins are right up there followed by nonpart savings, followed by participating products, and then the last is unit linked order. So that is the picking order. Now it gets more complex because which channel is selling what. So for example, a particular channel that is selling car might have fairly good margins while somebody else who's selling protection might actually not have that great margin because of the intrinsic cost of acquisition and so on. So that's why there is no one particular. So we we have to ensure that overall, both in terms of getting traction on top line volumes, like you mentioned, wherein the bigger companies are attracting more of term growth. And what is the intrinsic cost of those channels put together is what the portfolio approach that we take. And we have to keep tweaking that so that overall at the company level, we are able to give a smooth upward curve. Thank you. The next question is from the line of Saloni Jindal from Compound Everyday Capital. Please go ahead. Good evening, ma'am. Congratulations for good set of numbers. I want to ask the reason for the change in valuation reserve for year on year. It's just a huge change in the figure. Yeah. So, Saloni, the this is in the in our financial statements. Right? Yes, ma'am. In the PME. Yeah. It is nothing but mark to market on our unit linked portfolio. So it is totally because of that, ma'am, only? Or is it the mark to market change? That's correct. Yes. Oh, thank you so much, ma'am. It's pass through for us. Okay. Thank you. Thank you. The next question is from Aradh Sangi from BP Capital. Please go ahead. Yeah. Hi, ma'am. Thank you for the opportunity again. I just had two bookkeeping questions if it's really possible for you to share. So this new product plan, how will you be keeping it? Will it come under the first renewal premium kind of setting? And my second bookkeeping question is, is it possible for you to share a hierarchy of new business team? Because essentially, focusing a lot of production, I believe it requires a lot of capital going on. Thank you. Shreevi, you want to answer that on the two points? Yeah. On the first one, yes. It is a it does have a renewal premium. So persistency would be a a factor to reckon with. But we believe since most of the sales will be to a employer employee kind of a relationship, and we believe that it will be used as a retention tool. We believe the persistence will be much better than what you are getting on the individual. But, yes, there is a renewal premium involved in this. But you can also have a single premium also over a five year or a ten year product. So we have a single premium option also. So depending on what the employer would prefer, he can go for either a single premium or a regular premium. Yeah. And then second question, hierarchy of new business. Same. If I catch your question, when you say hierarchy, can you just explain? In terms of Ma'am, I just no, ma'am. So suppose since we'll be writing a lot of protection, and I believe protection is right there on top of like, it requires a more as a percentage, it requires the highest amount of new business team. So just wanted to know if that's the case with you all as well. So I'll I'll answer this question, Deepak. So, Tarik, the strain, if you have to take down strain into different components, you have an expense strain. You have Okay. You know, a reserving strain, and you have a capital strain. So different strains are operating. So for example, capital strength will not come through in the P and L at all because it's it just directly goes to the balance sheet. But if you are looking at only the stream that affects the P and L, then, you know, they're all fairly clustered around a fairly narrow range. Even you all, since the charge extraction is very, very low, the first year compared to the expenses that we incur in procuring the business, you will also have got a a massive strain. So all the products have got a similar strain. Some will have an additional strain because of capital, which doesn't flow through the balance sheet. It will directly go to the sort of, you know, solvency of the company. So I know so short answer is, from my gap perspective, a lot of these businesses are fairly clustered together in terms of strain, barring probably some of the single premium businesses where you could have a very low strain. But all the renewal premium businesses will be whether it's UL or nonpart, will have a similar kind of a strain profile. But participating will have a very, very low strain profile. They are close to zero on the the power book. But the all the nonparticipating books, whether it's evil or protection, will have there or thereabouts. They have sort of, you know, very very low between the two sets of business. Alright. That's very helpful. Thank you for another very best. Thank you. Thank you very much. That was the last question in queue. I would now like to hand the conference back to the management team for closing comments. As mentioned, the detailed disclosure on our results is available in our investment investor presentation. I would like to thank all of you for participating in this quarterly results call. Take care and stay safe. Good night. Thank you very much. On behalf of HDFC Life Insurance Company Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines. Lines.