Ladies and gentlemen, good day, and welcome to the Q1 FY 2024 Earnings Conference Call of HDFC Life Insurance Company Limited. 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 0 on your touchtone 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. Thank you, and over to you, ma'am.
Thank you, Michelle. Good evening, everyone. Thank you for participating in this conference call to discuss the financial highlights of the quarter ended June 30th, 2023. 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. Accompanying me are Suresh Badami, Deputy Managing Director, Niraj Shah, ED and CFO, Eshwari Murugan, our Appointed Actuary, and Kunal Jain, representing Investor Relations.
I will provide an overview of our Q1 FY 2024 results, will be happy to respond to any queries thereafter. We are happy to report that the merger of HDFC Limited with HDFC Bank has been successfully completed, that we are now a subsidiary of HDFC Bank.
As you may know, HDFC Limited recently has increased its stake in HDFC Life to more than 50%, as a result, HDFC Bank now holds 50.4% in HDFC Life. Our focus is on strengthening our partnership with HDFC Bank, enhancing collaboration and maximizing customer engagement within our group.
Moving on to our operating performance for the quarter. For ease of comparison, all previous year numbers in our disclosures are on a merged basis, i.e., after including the performance of our then subsidiary, Exide Life Insurance. We closed the quarter with a robust growth of 12% in individual WRP, which was 1.5x of private industry, despite coming off a strong March.
Our quarter one FY 2024 market share was 16.4% and 10.6% in the private and overall sector, clocking an expansion of 60 and 90 basis points, respectively. Over the last four years, despite facing open architecture and intense competition from unlisted insurers, our market share has steadily increased from 12.5% in FY 2019 to 16.5% in FY 2023 in the private sector, and 7.2% to 10.8% at an overall industry level.
We anticipate that growth will progressively accelerate as the year progresses, with quarter two expected to outpace quarter one, and H2 showing stronger growth compared to H1 after adjusting for the one-time excess demand in the month of March.
We have also been able to grow the number of individual policies sold by 9% in Q1 FY 2024, in line with our stated objective of broadening our customer base. We expect our efforts to enhance our distribution capability to reflect in the growth of policy count during the course of the year. We covered more than INR 2 lakh lives in retail policies and INR 1.6 crore lives overall in Q1 FY 2024, a growth of 8% and 34%, respectively, over Q1 FY 2023. Retail sum assured recorded an increase of 55% and overall sum assured, 73%, and our overall market share in Q1 FY 2024, was 16.9%. We feel privileged to have led the way in helping bridge the protection gap in our country by being the market leader in terms of total sum assured.
Our overall product mix remains balanced. Amongst the savings products, non-par savings stood at 33%, participating products at 26%, ULIP at 25% of individual APE. Other categories, which include annuity and protection, were 9% and 6%, respectively. This quarter witnessed product launches in the pension and ULIP categories, which have been specifically tailored to meet previously unaddressed customer requirements and paving the way for new product subcategories.
Overall protection has grown by 35% in quarter one, FY 2024, on a new business premium basis. Retail protection trends remain encouraging, with year-on-year growth of 45% in quarter one, FY 2024. While the growth is accentuated by a favorable base, we do believe that the pickup in protection is sustainable and growth is likely to be healthy for the year.
In quarter one, FY 2024, our annuity business contributed to 19% of the new business premium, with APE growth of 51%, mainly driven by increased demand for our limited pay annuity product, Systematic Retirement Plan.
Moving on to key financial and operating metrics. On a like-for-like consolidated basis, i.e., including our erstwhile subsidiary, Exide Life, our new business margin for the quarter was 26.2%, as against 25.1% in quarter one, FY 2023. This has enabled us to deliver value of new business of INR 610 crore, which is a growth of 18%. We had achieved margin neutrality in FY 2023, would have continued to do so in quarter one, FY 2024, had the demand upfronting in March due to the sunsetting of tax benefits not happened.
We are capacitized for higher growth with upfront investments in manpower, distribution, infrastructure, and technology. With new business APE growth expected to be better in H2, we expect our full year FY 2024 margins to be similar to FY 2023 NBM by the end of the year. As indicated by us earlier, we expect VNB expansion in FY 2024 to be led by APE growth rather than any significant margin expansion.
Our embedded value stood at INR 41,843 crore as on June 30th, 2023, with an operating return on embedded value of 16% for the quarter. Profit after tax for Q1 FY 2024 was INR 415 crore, representing a year-on-year increase of 15%. The profit emergence from our back book continues to show strong growth of 19%.
We have included an additional slide in the presentation to provide some perspective on the timing of profit emergence across product categories and correlation to risk or value in force at an overall company level. The board recommended a dividend of INR 1.90 per share, aggregating to a payout of INR 408 crore, subject to approval by our shareholders. Our solvency ratio was 200% as on June 30th, 2023.
Renewal collection trends continue to be healthy on the back of steady persistency. Our 13th and 61st month persistency was 87% and 53%, respectively, versus 87% and 52% last year, despite making inroads into Tier 2 and Tier 3 towns. Persistency has seen an improvement across product categories, cohorts, and geographies over the last few years.
Over the last three years, our persistency has improved from 89% to 92% in Tier 1 markets, from 84% to 87% in Tier 2 markets, and from 80% to 84% in Tier 3 markets. This performance gives us the confidence to continue our journey of deepening our customer engagement beyond metro cities.
Next, on channel performance. Our bank insurance channel has grown by over 25% in quarter one FY 2024, based on individual APE. We are witnessing robust growth across all our large partnerships. With HDFC Bank as our promoter, we will work towards enhancing the availability and accessibility of insurance across the bank's customer base and increasing our market presence within the bank's operations. Our agency channel grew by more than 1.5x company growth in terms of individual APE.
We continue to increase our agent network by adding over 15,000 agents in Q1 FY 2024. With respect to our acquisition, we are effectively realizing synergies, both in terms of revenue generation and expense management. Our efforts are on track. People-centric workplace. While we remain optimistic about growth opportunities in the life insurance sector, our vision extends beyond just following a customer-centric approach.
We remain steadfast in our mission to insure India and ensure financial security for families and individuals across the nation. We believe that widespread financial protection is a crucial aspect of economic growth. We are enthusiastic about it to contribute meaning to this collective work. The detailed disclosure on our results is available in our investor presentation. We are happy to take questions now.
Thank you very much, ma'am. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, let us wait for a moment while the question queue assembles. The first question is from the line of Suresh Ganapathy from Macquarie Capital. Please go ahead.
Yeah, hi. Vibha, two questions. One is on the HDFC Bank channel, the counter share was 55%. Has it changed this quarter? Have you seen better traction? Anything on that?
Yes, Suresh. This has been targeted in the sense that some of the branches that have been somewhat of laggards, there's been a fairly deep and joint focus on those, and that has seen traction. Overall, close to about just shy of 100 basis points has been the traction that we have seen, between 50 to 100 basis points, depending on which zone you see in terms of overall market share. Early days, but in the positive direction.
Another interesting point, while that was not your question, is that our uptick in protection that we are able to sell at HDFC Bank, just collaborating in terms of what are the right products to sell and so on. There also, we have managed to make a fair bit of inroad in. This is something we've always been mentioning, that protection levels at HDFC Bank can be higher, and that is something that we have managed to do and will continue to do.
Mr. Ganapathy, do you have any other questions?
Yeah, yeah, one more question. Vibha, just on the VNB margins and growth I had. I mean, your original guidance was 15% APE growth, excluding the INR 1,000 crore one-off of last year, right? That translates into a 7% reported APE growth. If I were to extrapolate saying that the margins are flat, you're looking at, say, a 7% VNB growth.
My point here is, I mean, margins are lower than what your competitors are, closer to 30%. What explains this difference? Also the fact that you would expect better synergies coming from Exide Life, then why is the margin product projection a bit more conservative despite protection actually growing pretty fast? Thanks.
Yeah, a few points here. One of the largest, I'll come to the versus peers, comparison. On a standalone basis, first is that first quarter of last year, we did not have Exide Life, and we did mention at that point in time that Exide Life had low single-digit margins. From H1 onwards, we started showing consolidated margins. If you were to look at slide 24 of our investor presentation, we have given the walk for both with Exide Life and without Exide Life.
Second point is we have said that margin neutrality. We feel reasonably confident that by the end of the year there will be margin neutrality. There, one of the or perhaps the only reason in terms of not having falling slightly short of margin neutrality, which means standalone HDFC Life margins in quarter one, is purely because of the tax reason.
Typically, our growth rate has been in the range of 17%-18% versus an APE growth that we've seen of 13%, total APE growth of 13%. That shortfall and we're capacitized for 17%-18%. Once we start making up for that shortfall, margins will rise and month-on-month, we have continued to trend upwards. It's more in terms of fixed cost leverage because of the capacitization.
The protection will not help you. I mean, the fact that it's growing faster. Yeah.
It is. It is, but in terms of VNB and the volume, I have to sell maybe three protection policies for one saving, you know, in terms of the volume of it. That is one. Second is, while protection has gone up, but non-par savings has gone down. To some extent, there has been a trade-off. Second is you will also see in our investor presentation on product mix. For the quarter, unit link has gone up slightly because of the market.
Very, very small numbers. If you were to look at, this is slide 16, you'll see quarter one FY 2023, unit link towards 23%, versus this quarter is 25%. 200 basis points, which will correct. We're very sure that it will correct over a period of time. In customer interest, it, typically, when markets do well, there is a bit of uptick in Unit Link, and par has gone down a little bit. There have been trade-offs between protection versus others. If this scenario had panned out wherein protection uptick had happened, and tax changes had not happened, then clearly no question about it, margin uplift would have happened very significantly.
In the whole scheme of things, given that, if you recall, just two or three months ago, post the tax changes, the industry was expected best case scenario to be flat. Against that, I think the 13%, just goes to show that the correlation between tax, that being the only play that is clearly has been refuted. Every month we have grown very well, each month has successively been better than the earlier month. That's why that gives us the confidence about quarter two being better than quarter one, you know, overall H2 being better than H1. Overall, we have grown 1.5x the industry.
Coming to your question on industry, Suresh, we can get to 30% if we were to lose market share, but our market share, as you see, has actually expanded by 90 bps, right? There will always be a trade-off in terms of we want to stay relevant. We don't want to lose our ranking as amongst the top three in the, including LIC in the life insurance space. Actually, if you look at slide six, you'll see that every year from FY 2019 to FY 2023, we have grown faster than the overall private sector and overall sector and our market share expansion. We were 12.5% in FY 2019, and we reached 16.5% in FY 2023.
That is the philosophy of triangulating and not wanting to lose our position in terms of ranking. And that hopefully answers the: Why can't it be 30%? It can easily be 30%, right? It's this triangulation wherein we will grow brick by brick. The pause was only because of the tax. This year we will come out similar margin neutral to last year, and next year we will continue to move upwards.
Thank you, ma'am. The next question is from the line of Adarsh from CLSA. Please go ahead.
Hi, Vibha. Congrats. The question on protection, obviously protection is now growing from a low base. Just wanted to understand.
Sorry, Adarsh, can you come closer to the mic, please?
Sir, your voice is muffled actually. We are not able to hear you clearly.
Sure. I think hopefully this should be better.
Sir, can you use your handset, please?
Using my phone, so should be okay now.
Could you please keep it a little bit far from your mouth and speak?
This is better, or I'll come back later.
Yes, sir. Please continue.
Okay. I sorry about this. Protection, just wanted to understand how, you know, even You and I-Pru , seen a good pickup. Just wanted to ask how sustainable this pickup looks, what are the factors driving this now?
Yeah, I'll hand this over to Suresh.
Yeah, hi. you know, of course, there are multiple elements in terms of why we are seeing a protection uptake. first, of course, yes, we see a customer demand, and we believe that will be sustainable. in terms of, you know, whether we see the kind of web searches which are happening, HDFC Life name search in terms of term and protection, which is happening. C learly we are seeing a customer level demand.
The second piece also is that we are now looking at moving higher activation on our frontline sales across all geographies, in a very calibrated and, you know, product-centric approach.
What we are trying to do is trying to see whether we can have return of premium products in the Tier 2 and Tier 3, whether we can have, you know, better mix of term products in the larger markets, and based on which, what has happened is we have been trying to grow the overall retail protection.
Of course, on the credit life side, you know, given that we are a little agnostic in terms of how our protection is growing between retail and credit life, we have managed to maintain our market share across most of our credit life partners. Their disbursements have grown. On top of that, our penetration and value penetration have grown across multiple verticals, which is there. We are also using a lot of, you know, brand awareness in terms of protection.
You must have recently seen the Rishabh Pant, you know, campaign that we have done. We do believe that with a combination of visibility, data analytics, a lot of those efforts at a specific customer level, we are able to push protection, and this focused effort will probably remain right through the year.
Last point I want to mention here, Adarsh, is that if you just look at slide 16 in our product mix, even if you look at the bancassurance, you will see that term has gone up from 4%- 5%. On 50% of our business, you're looking at, you know, an uptake. It was 3%, and then it went to 4%. Well, 4% was quarter 1 of last year, and then 5%. That kind of a meaningful growth that you're beginning to see, which is what I alluded to in the earlier question, across our channels is. And this is without, and I want to stress, this is without doing anything adventurous on the underwriting guidelines or even on pricing.
In a calibrated but focused basis, of course, some of this, is also, whatever we went through, during COVID and then repricing and then price increases. There was a little bit of, one had to socialize that all of these changes had happened, and people deferring decisions to buy protection. The combination of all of that, coming through, and also, I'll be honest, because this on savings, what we did, go through as a sector, forced us to also focus on protection, which also we alluded to in April.
Let me also add, I think, you know, it's not just in terms of the product, features as such, as well as the activation. I think there's a lot of effort in terms of our conversion efficiency, there is spent effort in terms of, you know, how do we look at the overall end-to-end throughput, the speed of being able to convert the policies which have got logged in. We are seeing significant upward movement on that front also.
Got it. Thank you. The broker channel, right, which has seen a doubling of the share of term, does that include online players? I just wanted to check that.
That is right. you know, some of the players like Policybazaar and all, are now moved from a web aggregator to a broking code, so they reflect under the broker code.
Got it. The second question is, now, if you go back to the last call or what you have been saying with the merger of the group, the share will end the year, or you aspire to end the year with a 70% wallet share, which is a very big move from where we were last year. You know, obviously, you started moving in this quarter, small changes in branches you mentioned. What's the big change that will happen on ground for you to. Then do you see that playing out to up to 70%, or it will be a little more gradual?
I'll add on to what Vibha mentioned in the first answer to Suresh. you know, we have seen a slight increase on 0.5% to 1% increase overall in terms of our market share across HDFC Bank. To your point, to say will it be gradual or will be overnight? I think it will be gradual, and it is because it is going to be calibrated both at the bank level as well as at our level.
We have multiple levers that we have, you know, identified in terms of how do we increase our market share, whether it's in terms of certain branches in certain geographies where we believe we need to put in more effort, whether it's in terms of certain products that we need to focus on jointly, whether it's in terms of manpower that we need to deploy at a certain number of branches.
There are these six, seven levers where there is a high level of engagement between the bank part and third-party team, as well as our team, in terms of what is it that we want to do? Clearly, we don't want to dilute any of the underwriting standards, or we want to change too much in terms of pricing. It will be, you know, moving up on a calibrated manner.
Given the messaging which has come from the senior management of the bank and the ground level effort that our team has been putting in, we can see the traction has started to show across multiple geographies.
Got it. I will just thanks for this clarification. Just wanted to check, is because that 70% still remains an aspiration by the year end or on-ground implementation can be a little more spaced out?
You see, the 70% is not a number that we are articulating, it's up to the bank how they see it. See, it's not even been a month since the final confirmation of the merger. The bank will be in a new avatar of a conglomerate as against a bank. As that organically starts seeping in and how leadership at the bank have said how we can upsell many things to the customer.
It's just, it's a strategy that will be led by the bank as the parent. What Suresh alluded to are all the things that we are doing so that no stone is left unturned. To meet them halfway, to say that, okay, we've earned our spurs, we have done XYZ things, and we have really been efficient on conversion, on how we are handling complaints and so on.
Then it's up to the bank to see as to how they execute what they have already started articulating in terms of various bouquet of products that they can upsell to the customer. Yeah, it will be brick by brick, Adarsh, in terms of how we collaborate. It is being done every day, on a daily basis, these conversations are happening at various levels.
Perfect. Thank you, Vibha, for your answers.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management will be 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, please rejoin the queue. Thank you. The next question is from the line of Anuj Singla from Bank of America. Please go ahead.
Yeah, good evening, Vibha. Thanks for the opportunity. Vibha, following up on the protection side only, can you give some color on how the strategy of growth in Tier 2 and three cities has progressed on the policy split side, first of all? If you can give some color how the policy split up has been shaping up since we started this focus.
Secondly, can you also talk about how the mix of protection is changing in Tier 2, three, like you mentioned in your remarks, are more ROP probably, and maybe lower ticket size. Should we expect the VNB margins of protection growth in these cities being lower versus the back- book?
Yeah, sure. What we are looking at is, I'll just give you a step back in terms of why we were hesitant. Earlier, we were a little bit hesitant because of couple of things. Lesser of salaried, non-standard in-income proofs and how we process that from an underwriting perspective. Also, reinsurers were hesitant also against the COVID backdrop.
Some of those things we have managed to continue to iron out with reinsurers, wherein we've gone very in a detailed manner to say, from a strategy perspective or an objective perspective, we want to get into Tier 2 and Tier 3. How do we make ourselves comfortable with non-standard in-income proof? We started off by also piggybacking and learning from a lot of NBFCs that do this.
They don't do medical underwriting. At least financial underwriting. Doing that, starting to take less than maybe INR 50 lakh cover on our books. Having conversations with reinsurers to say this book is something that they can look at. Whether they want to do a quota share on that book. We've, we'd already started writing that business and showing skin in the game rather than just being a pass-through.
We looked at the return of premium, because just in terms of pitch for that segment, we realized that it's probably being seen even more so as an expense than, "Okay, I get protection, but I'll get my money back." Like we've always said, we don't want to sit in judgment in terms of what should the customer be doing and thinking for the customer, just the way all of us on this call are able to think or our priorities are different.
We said: Fine, we'll do that as long as we are able to explain that these are all the different protection products that they have as a choice, as against only return of premium. Looking at that aspect.
Looking at what we realized, and also we had some preconception, that the ticket sizes will be quite small. We were actually surprised that the ticket sizes of Tier 1 versus Tier 2, if Tier 1 is a little bit over INR 1 lakh, about INR 1.3 lakh, Tier 2 was about INR 85 or INR 1,000, and not INR 50,000 or INR 40,000, right?
We were ourselves surprised when we started going deeper, that Tier 3 ticket sizes would be in the range of about INR 70- odd thousand, INR 70,000-INR 75,000. We were able to get more and more comfortable with that. The only thing is, that's why in my opening remarks, I talked about persistency.
In different cohorts, whether it is protection or whether it is in savings, persistency is going to be different, and we are no longer afraid of it. You know, demand is away from the top 10 cities. Over a period of time, we will disclose, we certainly track internally as to different cohorts. Tier 1, what is the persistency?
Like I shared just now. As long as within that cohort, the persistency is the same or slightly better, then the mix impact is something we should not be afraid of. It was a bit of a revelation moment for us after Exide Life, because what happened with Exide Life, and we told you this, that the persistency of Exide Life business was inferior to HDFC Life business.
The persistency of Exide Life business standalone has started improving by about 400 basis points on almost every cohort, just because of some simple things of getting standing instructions, making callings, and, you know, that calling well in advance and, you know, that sort of thing.
We realize that we are okay with that as long as, you know, those cohorts, the persistency is what it is. And this improvement is something that we will continue to see. And over the last three years, like I mentioned in my opening remarks also, that the improvement is something we have seen across this quarter. So it's a combination of underwriting risks that we see, as well as the product pitch to the customer.
The distributors also, thanks to EOM guidelines and many other things, distributors are also aligned to it, and us getting over what will persistency be, what will mortality experience be, and so on.
As long as we're pricing it right, even the mortality experience, while it is likely to be inferior to perhaps a salaried metro kind of a profile, it's something that, you know, we are, we think that there's an opportunity, and that opportunity can be mined in a sensible manner.
Got it. Got it, Vibha. Thank you. The second question is on EOM regulations. How do you see the commission levels? Is there some commission pressure, and how is the competitive landscape on the distribution side changing because of this?
You know, the regulator, the reason they've given us this flexibility is to say that, you know, you guys are now, you've been around for a while, and please behave responsibly. We would want to respect that ethos to be able to say that it's not completely, you know, just because you can do much higher levels, it will be done irresponsibly.
What we might do is that it could be that some activities were paid for separately to the distributor, now you pay it as a fully loaded commission, and say, tell the distributor or the partner that you guys can run those activities for us that as customer outreach and so on. That's what it will be. I don't see any difference, any impact on the customer or any impact on the organization.
Got it. Got it, Vibha. Thank you very much. All the best.
Thank you.
Thank you. The next question is from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
Hi, thanks for thanks for taking my question. Two questions from my side, actually. you know, we can see that the you know, in the individual APE, the the share of bancassurance has gone up significantly. In fact, the overall growth in bancassurance is very high. you know, how should we read this?
You kind of mentioned that your counter share in HDFC Bank has sort of just about inched up. Is it something that HDFC Bank has kind of grown at a very strong you know, rate this quarter, or is it the contribution of other banks?
Nischint, Suresh here, Three to four points on this. One, of course, HDFC Bank has seen a fairly good growth in quarter one as compared to last year. You know, at an overall level, while our market share has inched up, they have shown fairly good growth. Second, we have obviously been supported by a lot of other large partners, whether it's Yes Bank, IDFC Bank, One Bank, multiple such large partners, including many of the SOPs, where we have very strong presence, who have also helped us grow. It's not that our proprietary has not grown, our agency business continues to do well and has also grown, gone fairly well.
There has been a little bit of a dip in the broker segment, which has led to an increased contribution because broker has had a little bit higher share of the higher ticket sizes, you know, par and non-par, and that has slowed down. Both our agency as well as our overall banker have shown significant growth, and once broker comes back, over this year, we will find all channels, firing again.
Thanks. The second question is really on, you know, group savings and annuity, and, you know, that proportion increased significantly this quarter. What kind of an impact it would probably have on the margins for you? Similarly, if you could comment on the segmental margins in the non-par business, given the fact that some of these products have to be repriced.
You know, on group savings, it is not usually margin accretive, it is more, it's more. You know, the reason we are in this business is more in terms of relationships and being in the market. By group savings, presumably you mean all the funds that we manage, right? Group funds.
That's it, that's it.
Yeah. Not very, it's accretive, but not hugely accretive. I would say that it gives more of as a bulk than anything else. You know, and it tends to be lumpy. You are in discussions for a long time with a particular corporate or PSU and so on, and then it comes through, or they have shifted from one insurer to the other, or, you know. It tends to be seasonal also. It could, but I would not read too much from a margin perspective.
If I can add, you know, I mean, similar to we have been managing balance product mix on the retail side, I think even last year, if you had seen, we had calibrated our approach on the group savings, and group credit life as such had grown significantly for us, which continues to grow. We have been shifting within group savings, the unit link kind of products, which are better in terms of profitability. You may find that a little moderated, but it'll be much more profitable than the regular traditional group savings products like this.
Got it. On the segmental margins in the non-par.
You want to take?
Yes, margins are fairly similar compared to what we've had in the past. Just adjusting for this gap in the growth that we spoke about earlier on the call. Basically, our clear aspiration is to grow higher than what we have in quarter one. Adjusted for that, margins have been fairly similar, given that as such, nothing much has changed in terms of average ticket price.
At very high ticket prices, of course, the volume has got impacted to some extent as expected, but it's been more than made up by the growth in the other ticket sizes, where at an overall level, the average ticket size has been maintained for the segment. As a consequence of that, margins are more or less where they were earlier as well.
There are competitive pressures, as you can expect in all categories, including this one, but we've been maintaining a pricing discipline by and large over the period since we launched this product category. There could be maybe a lag of a month or so here and there in terms of getting back to the pricing levels that we would like, but we've been fairly disciplined about that to be able to achieve this.
Perfect. Thank you. Thank you very much. That answers my question. All the best.
Thank you.
Thank you. The next question is from the line of Rishi Jhunjhunwala from IIFL Institutional Equities. Please go ahead.
Yeah, thanks for the opportunity. Can you hear me clearly?
Yes, sir. Please proceed.
Okay, great. Just wanted to, you know, understand, you've put in the slide this time, slide 12, which talks about emergence of existing business surplus. How do we read that? You know, if on that, you're talking about shifting costs for longer-term savings. If you look at EV surplus as a percentage of VIF that is in change now, what would be the reason for that?
The reason really is in terms of longer-term products, release Indian GAAP profits over a longer period of time. That's all there is to it. If you see that slide that you're referring to on the left-hand side, by category of products, you will see the emergence is happening over a different period. If you take unit link, for example, a large part of the surplus is getting generated in the first, you know, five years of the product being sold.
If you look at traditional products, you find that just about 20% - 25% is happening in the first five years, and a lot of it is back-ended. That's just the nature of the product and the situation that arises because of the accounting treatment that we have at this point in time.
From an economic perspective, it's clearly more value accretive. It's just that the cash generation or release to the Indian GAAP profits happens over different points in time. That's the reason why we've, you know, highlighted this across the 3 main product categories: traditional savings, protection, which includes both individual and group, which lies somewhere in the middle, and then you have unit link products.
On the right-hand side, what you basically have is that at what percentage of the VIF can you actually give or take, think of the business surplus that can emerge over a period of time. That is in the 19%-20% zone. As, you know, the product profile has been changing over the last three to four years.
What used to emerge earlier because of, let's say, in FY 2018 and prior to that, unit link used to be about 45%-50% of the mix, that has now become 25% of the mix. While the margin expansion has happened over the same period, the generation of surplus is happening over a longer period of time.
To basically give comfort in terms of delivery of this is basically operating variances, which have been positive right through this period. That does give us that comfort that while the surplus is emerging over a longer period of time, it is more value-adding in terms of economic terms, and operating variances being positive tells us that this is definitely coming.
Understood. Just secondly, on the, you know, last time you had called out, you know, spends that you're doing on your new technology initiative, just so just wanted to understand, you know, where are we on that, for this year, and, you know, how much it could be next year, and, what is the impact of that on margins, if at all material?
We are continuing on track with our tech transformation, which is Project Inspire. We have completed our diagnostics in terms of our as is, as well as where do we want to be towards, which are the projects that we want to focus on and change immediately. Now we are in the process of identifying some of the specialist partners who can start work on changing some of those. It could be, without giving away too much in terms of a CRM, or it could be in terms of how we integrate, how we have seamless onboarding and so on. We are in that phase right now.
We did say that it is a INR 250 crore outlay in total, of which INR 50 crore was expended last year. This year, we are on track to spend INR 100 crore, and next year, INR 100 crore. This could be a little bit off here or there, depending on, what, you know, do we include more upfront? Do we phase it out a little bit more to next year? Largely, it's on track.
Got it. Thank you so much, all of us.
Yeah. I'm not sure whether you want me to repeat in terms of what are the benefits, or that is reasonably clear?
No, that's clear. Thank you very much.
Okay. Okay, 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. The first question is from data keeping. The unwind rate seems to be at 8%, which is very similar to last year. Just wanted to understand, it seems to be conservative. You want to maintain it at that level or how should we read this number, given the equity markets are doing well? Second, on the data keeping is INR 8 - 10 crore, can you split the number into equity and debt on how where it has come from, basically? That's my first question. Second, I have more on bank, which might ask after you answer this.
Yeah, I'll pass it on to Eshwari. Go ahead, Eshwari.
On the unwind rate, we look at the assets that we are holding, and with the expected return, the unwind rate is computed. If you look at the unwind rate of last year, it was based on the expected yield of the debt assets, which were again split into short term and longer term, the short term yields were lower, whereas the long term returns were very high.
I think is that this year, the yield curve has flattened, the yields have changed across the tenures, but the increase is not similar across the different tenures. The weighted average increase is quite small if you look at all the tenures of the bonds that you are holding.
We hold a lot of bonds in the longer end, so while the shorter end has increased a lot, on a weighted average basis, it's very small number. That's why you see that there's a small increase. Maybe the perception that it is conservative is not so. It's a very mathematical calculation based on the assets and the expected returns.
On the equity, yes, last year, we were expecting a flattish investment return, and the upside that we expected this year has been incorporated, but that's getting offset to some extent from the Exide Life bank book. Well, Exide Life bank book doesn't have a lot of equity, given that they are mostly power business with a low equity exposure. That's why that offsetting impact is reflected in the unwind rate of 8.2%.
On the investment variance of INR 8-10 crore, that is broadly spaced between the impact of equity and impact of debt. In both, we have positive impact. In equity, the markets have rallied, and it's around 10% return this quarter, compared to our expectation of 2%-2.5%. That's where positive upside around INR 500 crore.
On the debt, the short end has flattened, but, sorry, I mean, deepened a little compared to March 2023. Does that in a value of the debt for the shareholder point of view, we track it. That impacts around INR 260-270 crore, and the balance is some impact because of the credit spreads narrowing.
Okay. Thank you, ma'am, for that. Second question, Vibha, for you is basically, we understand that HDFC Bank will probably will market share will increase as the time will progress. If you can give a little clear thought process, how it will happen, whether you will penetrate more into the customers, what is our current penetration ratio, whether it is the NOP strategy or the ticket size strategy, whether you will add more people, which products you are targeting?
Maybe you have touched upon some points here, but if you can little explain in more clarity, how exactly this 55 to 70 journey or closer to that number will be evolved in say, next two or three years, whatever the target might be?
See even in other relationships wherein there is no parent, child, parent, subsidiary, kind of connection, there are shares, counter shares that go up and down. It's not just that, it is driven because of the customer, but it's often driven within the bank that strategically X insurer versus Y insurer. The way to do it is there isn't a one way, there are many ways.
For example, there could be, right, you know, maybe lesser people at the branch because I am of the school of thought that learning from some of the other geographies, perhaps at bank insurance, unbridled kind of number of insurance people being deployed at branches is not optimal from the bank, any bank's point of view. One way is to curtail.
If today it is not curtailed, one way is to curtail and for the bank to curtail, and then to, maybe like in home loans, for example, and that's how HDFC has been doing, that there are leads, and you don't really need three people depending on a customer at a branch. It could be that the lead is passed on to the customer, or there is a virtual fulfillment, with the aid of the RM, you know, and so on.
That, that is one way of doing things, which, against what it is today, say, at HDFC Bank, wherein they aren't really focused on how many people do they want at each of the branches.
That is one, and that itself, today, my market share, my people market share, people share, if we don't state at HDFC Bank, is 40%, but my market share is in the mid-50s. That itself, in terms of curtailment, could give an uplift.
Another way to do this is, if you recall, really at HDFC Bank, even before multi-tie, it was HDFC Life that had trained all of HDFC Bank peoples into becoming specified personnel, and then it was handed over under the construct of open architecture. Insurers that came in under open architecture benefited from the investment in terms of training and collaboration and getting them licensed and training on insurance, that HDFC Life had done the heavy lifting.
It could be that for some time, a new branch does not have all companies at that branch. There are various such ways, but obviously, it's these are inter-se discussions between parent and subsidiaries, and not really something that I want to go into for reasons I'm sure you'll understand.
Yes.
Suresh, you want to add anything to this?
Yeah. I, you know, I think the fee revenue for the bank is also important, and I think the branch team understands at fair depth in terms of the branch level penetration, the customer penetration. I think they are actively looking at how, like Vibha mentioned, how do they increase the number of branches which are activated?
There is a huge amount of focus which is coming in from the bank, who have specified persons who are, you know, present at each of these branches. We can obviously support in terms of training, in terms of certification. We can look at how do we ensure that they are trained and then they are activated. At a unit level, there is a fair amount of, you know, focus in terms of how do we get more and more participation.
Clearly, the bank has a huge focus on deposits. There's a huge focus on many of the other bank products, but the ability for our team, as well as some of the other insurers, to ensure that insurance as a product penetrates deeper, I think that is fairly well settled, and HDFC Bank has been delivering year-over-year.
There's been no doubt, if you look at the kind of growth that the bank has been able to perform. At our end, clearly, you know, what can we do to improve our product proposition? How do we improve our operational efficiencies? How do we come out with products which are better than competition? How do we get people to get better lead conversion ratios on the leads that are passed on to us?
I think there is a fair amount of focus, and that will automatically come in.
Got it. Got it. last one from my side, probably. it's a known fact now that our cost associated with HDFC Bank is relatively on the higher side. Now, given that the relationship changes between parent and child, then do we expect that the cost what we pay to HDFC Bank will still remain at those levels? Or it will broadly grow in line with the APE growth what channel will give us?
We look at this as fully loaded cost, and, what the bank has been able to give us, is that, you know, a very different category of customer, so ability for us to mine that customer. I think it is not quite right to say, one particular distributor's costs are more or... It's a, what margin does one make out of it? What is the persistency? So expense is one aspect, but mortality expenses, experience at the same expense is a different.
All of those assumptions will impact what the, you know, the margin is. If I understand your question right, whether the bank will take into consideration that we are now a subsidiary and leave something on the table. I think these kind of conversations are more for the bank, when the bank says parent, child, I think it subsumes many such big and small things, which will come out of these discussions, which I are sure are happening at a very regular basis. I think it will happen, because for them also to switch hats from being a bank to a conglomerate, is not even a month old.
Got it. Got it. Final one. At the board, the bank people have started sitting. I mean, wanted to understand, when the board constitution will change so that we have people from bank sitting in the board?
Renu Karnad, who has been the HDFC Limited nominee, today was her last day at this AGM, so her tenure is not getting renewed for now. And so on. Some of these changes are not very far off in terms of somebody from the banks and coming onto our board.
Got it. Thanks, thank you for that so much.
Sure.
Thank you. The next question is from the line of Supratim Datta from Ambit Capital. Please go ahead.
Hi, thanks for the opportunity. Starting off with the first question: Could you give me the proportion of policies in quarter one that was about 5 lakhs, and how has that changed compared to last year? The second question that I had was, it seems like you have in this quarter been able to get around INR 100 million in synergies from the Exide Life acquisition.
Could you talk about what more synergies could you extract from that business and what, you know, how much more synergies is left to be gotten from that business? Lastly, the third question that I had was, could you talk about the strategy of, you know, separating the growth and focus markets in the agency channel, and what kind of productivity improvement and APE growth we need to deliver?
Yeah. Supratim, I'll start off with the first. First one is about INR 5 lakhs is about high single digits. I'll pass on to Niraj Shah for the Exide Life, and then maybe Suresh Badami can tell the, you know, the agency split.
Right. On the Exide Life synergies, we basically started off with very simply in terms of what is it that we can do to protect the revenues, and what is it that we can do in terms of rationalizing costs. From a cost perspective, any infrastructure which was, you know, something which was in, let's say, duplication was something that was addressed first up in terms of branch infrastructure. Also in terms of all corporate expenses, obviously, all of them are something which gets done as one unit now.
These are some of the things that kind of came in, which helped us get to margin neutrality ahead of plan. If you recollect, when we were talking about the transaction in the early days, we had basically said that we want to get to first is to get to margin neutrality on pre-merger basis, which we did. Since then, the focus as the integration completely has got done now in terms of using technology to get the Exide Life distribution to be able to use HDFC Life digital assets, as well as in terms of access to products, which is something that has already started showing up in terms of the channel growth as well as in terms of the changing ticket sizes.
A lot of these things have started to happen, and now obviously the entire business is completely aligned into our overall agency business. The Tier 2, Tier 3 story that we're talking about is something that is only getting enhanced by this entire combination. We did speak about the Tier 1, Tier 2, Tier 3 distribution and how things have progressed in the past few months. This is something that is definitely adding to that. Persistency is improving, ticket sizes are getting bigger. The quality of business that is coming through from these markets is definitely better than what it used to be three years and five years back.
That gives us more confidence to actually, get this model into other geographies, compared to where it was when it started off. That's, you know, how things are progressing on the merger front. Suresh, you want to...?
Yeah. I'll start off where Niraj left on the agency business partner and the Exide integration. The good thing is that not only is the technology integrated, the entire business model has integrated with our agency business partner model, and we've kind of unified both the teams in the sense that we are completely on course in terms of how do we now build that business.
Exide obviously had a very large presence in South India, in the Tier 2, Tier 3 markets. They had a well-set model. We have learned, we have expanded, and now we probably want to be able to take that model to many of the other geographies. That will clearly help us grow along with the tied agency business that we have been doing right across.
Even on our agency model, you know, you may have to step back a few years. I think we were 8 on the agency model, and over the years, you know, you have seen the steady growth on our agency model from a number eight position to a number two, three on an annualized basis. A lot of that has come in terms of the focus that we have brought on the quality of business, the quality of new FC addition that we have got, the activation of our financial consultants, as well as reaching out into different markets. Two, three new initiatives that we have taken, which would be beyond what we have done on agency in the past.
One is clearly that we have now relooked at our entire agency business on the tied side, on a focus and growth market. The growth market is clearly focusing on Tier 2 and Tier 3 cities. We will be adding around 75 new branches. Plus, we will be looking at a hub and spoke in terms of how do we go into further geographies, which can help us expand into these markets.
Second, you know, there has been a significant transition on agency model from a frontline productivity linked model to a agency activation and digitization model. There are huge amount of data analytics and other initiatives that we have taken. There are hyper-personalization projects running, there are micro-market segments running. I mean, there are fair amount of effort that we have put in terms of how do we identify which cohort of agents in which markets, and how do we enable them, which will help us grow?
You know, we know at a pin code level, we know how many financial consultants are there, how many customers are we sourcing, which where is it on insurance density, which we are lower? How do we grow that? How do we improve the quality of financial consultants who are getting onboarded with us? What is the mix changing between housewives, students, as well as financial distributors? How do we reduce the death rate or what do you call the attrition rate of new agents? How do we activate earlier agents? How do we increase the number of MDRT agents? You know, there are multiple such things that I think our team is working.
I don't want to expand, but clearly, we do believe that the proprietary engine is running well, and we should be able to show our growth over the last 4... as we have shown in the last 4, 5 years.
Thanks a lot for the answers. Just on the first one, could you let me know what was the percentage of high ticket size policies last year as well? This year, it's high single digit.
That indicated, when the, after the budget announcement, it was about 10% of the total APE, which is now.
Okay, I just thought that, you know, quarterly it would be different. Okay, fine. Thank you.
No, no, not really. It's fairly similar. It's now a few percentage points lower, which was completely expected.
I mean, in fact, March would have been higher because of what happened, otherwise it was fairly similar across the year.
Got it. Thank you. Thank you.
Thank you.
Thank you. Ladies and gentlemen, a request to all the participants. In the interest of addressing all the questions, please limit your questions to one per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Avinash from Emkay Global. Please go ahead.
Yeah. Good evening. Yeah, thanks a lot for adding that slide 12. That sort of helps in sort of connecting your EV reporting new business margin, the GAAP profitability. My question again, going back to margins, particularly with the details you have given on slide 24. If I see year-on-year basis, the product profile has changed to us more profitable, like if I look at the annuity as well as protection that has increased. Yet the sort of gain from that, you know, the margin gain from new business profile changed... is very, very limited.
Now, has, you know, product pro-profitability has changed over here? The second, I mean, in related to this, you are still hopeful of sort of being flattish of, say, for 2023 margin.
If I look over the year, I mean, because of the high base of March, I mean, right now, the growth is 12%, 13%. That means that you are expecting, even with that higher base of March, the full year growth to be above this number? I mean, the product profile, product margin profiles changed? On a year-on-year basis, did that reported base FY 2023 APE, you're expecting APE growth now to be more than the 12%, 13%? Thanks.
Let's just go through the slide that you're talking about. Basically, the reason why we've given these two walks or waterfalls is really to explain what has happened on a pre- and a post-merger basis. If you were to look at on a combined, 25.1 was the starting point, and 26.2 is where we are now. If you see the bars in terms of the fixed cost absorption, that's largely indicating in terms of what is happening in terms of the synergy realization that was, you know, through the earlier question.
The last part of the expansion is obviously in terms of the growth that has happened, and also in terms of from a product mix perspective, things have been in some sense in on a balance.
Unit link has increased, non-par has come down by maybe a 1 percentage point, term has increased, annuity has gone up. They've kind of in some sense balanced out each other as far as the absolute VNB is concerned. In terms of margin profile, that's added to about half of this delta. Between 25.1 and 26.2, the change in business profile has added to about 50 basis points, which is very significant to your point. If you look at the starting point on a standalone basis, 26.8 to 26.2, that's largely on account of the gap in growth that we spoke about earlier on the call. Our aspiration is to be 15%, 16% on a normalized basis.
To that, while we've grown faster than the sector, we're still at 12% in quarter one. That's largely the gap which you see on the again, on the fixed cost absorption side in terms of VNB as well as in terms of new business margin. To your second question, yeah, our aspiration is to grow faster than we know what we have in quarter one. We do expect to be able to generate that kind of growth progressively as the quarters progress. That's something that we had mentioned in April as well, and we hold on to that.
We continue to watch what's happening on the ground, the signs are encouraging in terms of our ability to broad-base the business into Tier 2, Tier 3 markets without getting any meaningful impact on average ticket size. The 12% APE growth has been delivered largely on account of volume expansion, 9% policy growth, and 3% average ticket size expansion. That's how we are thinking about things as we go forward.
Okay. I mean, on, sort of, you know, with that reported base of March, you are still expecting, I mean, the full year growth to cross this 12% number? That March is a kind of a bump up of 5%, 6%, 7% on a full year basis. I mean, if you are expecting, I mean, the cost absorption going to be better, that means that on a reported basis for the full year, the growth will or at least hopeful of crossing that 12%.
No, I mean, as I think, that will be, you know, not the right way to look at it, because, if you recollect, 9 months as well as 11 months, we are growing at 15%, 16% last year. Because of March, our overall growth was significantly higher. That is something that once we back that out, on that basis, we are talking about 15%, 16% growth. Adjusting for that will probably be, you know, single digits. I mean, on a reported basis.
Yeah, we articulated about INR 1,000 - 1,100 crore of incremental business is what we had explained on the April call. What Niraj Shah is saying is that you back that out, it will be somewhat more muted.
Okay. Thank you. Thank you.
Thank you. The next question is from the line of Prakash Kapadia from Anived Portfolio Managers Private Limited. Please go ahead.
Thank you. My questions have been answered.
Thank you.
Thank you. The next question is from the line of Pravesh Jain from Motilal Oswal. Please go ahead.
Yeah. Hi, everybody. mostly on, the non-par savings getting digested, what has been the experience, you know, while, you know, the share has definitely gone down? Do you think that the experience has been better or worse than expected from what you would have thought about it, you know, when the regulations were impacted? Just to extend that question, when you say that the margins will improve in the second half, how much of the recovery in margins would you attribute to improvement in non-par business? Yeah.
Yeah, I am of the school of thought that this will get digested, and I said to a lot of you, even after the tax changes and then continued to say that in April. You know, that money relatively will flow to wherever, you know, wherever you can best.
Excuse me, ma'am, we couldn't hear you, ma'am. Your audio. Ladies and gentlemen, the management line has been disconnected. Kindly stay connected while we try to reconnect the management. Thank you. Ladies and gentlemen, the management's line has been connected. Over to you, ma'am.
What I was saying is that, you know, I did allude even in April, that we do believe that once the new tax regulations are socialized, are digested, people will come around and see where else can they invest, wherein they get long-term guaranteed returns. There's really no other option that gives them a better deal than non-par products. It's a one-stop shop of guaranteed income, which has caught the imagination of a lot of people, and at the same time, also having a life cover.
We've already seen the pick up, and I think what was expected as a best case scenario was flattish growth, and against that, we have grown 13% on an APE basis and 12% in retail. That gives us the confidence that what we thought is logically how things should pan out, is how it is panning out. Some of it was up fronting in March. If you were to discount the slightly slower start in Q1, I think the numbers are very much on track to getting back to normalized growth numbers of 17%-18%, which is doubling every 4 years. That's what we have been demonstrating over the last 8 years.
That's what gives us the confidence that this above INR 5 lakh, below INR 5 lakh, will start becoming less relevant. Even now, you know, what we said earlier was 12% is before the tax changes is kind of the percentage that has gone down to low single digits. It hasn't gone down to 1% or 2%, and that's what gives us a lot of confidence. I think what a lot of people were expecting is that nobody will really, nobody in their right mind will invest in a product like this. That just has not panned out. We believe that this will pick up, and will continue to be, you know, more and more relevant, like I mentioned.
While that happens, we are seeing that, in the, INR 2 lakh to maybe INR 4 lakh kind of category, growth has been between 30%-40% in Q1 for us in this segment, in non-par segment. A lot of people are allocating, their funds, as we reach out to more and more customers, focus on, more customers rather than higher ticket sizes, which is, again, something we explained in April. That is how it is panning out. Do you want to add anything, Niraj?
Just, you know, to your point in terms of what gives us the confidence of the margins expanding to last year levels by the end of the year, it's basically the intrinsic product margins haven't really changed too much. What is really something that we spoke about is the gap in the aspire, the growth that we aspire for, which is the 15%, 17% number, versus the 12% in Q1. That is largely the differential in the margin, which is something that we expect to even out as the year progresses.
Great. Just on the protection profitability, when you are getting into the lower tier towns, Tier 2, Tier 3, would you say that that would be on the much, relatively much lower side as compared to what you would be doing, say, in the metros and the Tier 1s?
No, no. It is priced for all the risks that I mentioned to at an earlier question. Whether it is for lesser, maybe mortality, slightly worse mortality levels or persistency level, all of that has been priced in.
Perfect. Thank you so much.
Thank you.
Thank you. The next question is from the line of Prudvi Raj Saya, an individual investor. Please go ahead.
Hi. I wanted to ask about the annuity new business. We know that NPS is a significant contributor for this business, at least going forward. Can you give some color and quantify in terms of what is the contribution of NPS, and how do you expect that in terms of long term or medium term? Thanks.
It's a fairly meaningful portion now. It used to be in the early single digits. Now it is, you know, at least about more than 20 odd % of our business really comes from that source. Apart from what happens on the individual pension products at West, people allocating their discretionary savings, as well as, people retiring from corporates. It's become a fairly meaningful segment, as you rightly mentioned.
Okay. You expect that to grow aggressively going forward? Is that right to assume?
If you were to triangulate NPS, our subsidiary, the pension company, is the largest in the private space and also growing very fast. It recently crossed INR 50,000 crore. Now it's about INR 52,000-53,000 crore of AUM. Just that traction will mean more and more people will come up to the stage wherein annuities have to be bought. It will be a natural culmination of our subsidiary, wholly owned subsidiary, being the feeder into annuity.
Okay, great. Thank you.
Thank you.
Thank you. The next question is from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Hi. Most of my questions have been answered. Just one thing on the nonpar savings bit. Obviously, the rate curve has flattened right now, and other competing products also offer attractive rates compared to, you know, the last few years. Are we seeing any constraints in terms of availability of FRAs, demand for the product, and the rates that we can offer? Because obviously, you know, these things have to be changed with respect to the environment in which we are operating in. Yeah, that's one question from me.
Thanks, Madhukar. Demand, like we discussed, nothing much has really changed. Of course, it'll get reoriented in terms of how it is positioned or propositioned to the customer. That is something that is ongoing.
As far as the underlying is concerned in terms of rates, we will keep ensuring that we can give the best based on what is available in the marketplace. While the yield curve is flat, our proposition is at the longer end. We do not compete with instruments which offer similar rates at the shorter end, as you know. As such, nothing much really changes there, either on the demand side or in terms of the rates we are able to offer.
As far as the ability to manage risk is concerned, again, on that front, no real issue in terms of FRAs being available as more banks are coming into the fold to be able to offer that instrument, apart from our own internal hedging capacity, which we continue to have. Spreads on that can keep changing from time to time, depending on the shape of the curve, but that is just, you know, something that we would price in depending on the commercials that we get from the counterparties.
Would you sort of put a number to, you know, that you would be able to maintain X% of your sales mix in non-par savings, irrespective of market conditions? Would you be sort of comfortable in saying something like that?
Actually, if you track what happened since March 20, I think, when we launched the product in the first quarter, it was about 60%, after which we basically said that we will try and get into the 30%-35% zone, which we did as the rest of the year progressed. Since then, we've had multiple cycles, as you can appreciate, in terms of credit growth being a lot more than deposit growth. We've had situations where the yield curve shape has changed, the slope has changed.
The product mix that you see over the last three years has been in the 30%-35% range. Closer to the budget, of course, it touched 40% for that period, again, it's back to the 33%-34% range. Across these 16, 17 quarters through which we've had this product, we are reasonably comfortable to say that we don't see this dramatically changing.
Got it. Got it. That answers my question. Thank you and all the best.
Thank you.
Thank you. We have the next question from the line of Dipanjan Ghosh from Citigroup. Please go ahead.
Hi, good evening. Just two questions from my side. First, if you can quantify your share of HDFC Bank in overall APE for the quarter. Second, if you can give some color on the annuity business, on the individual annuity business. Has there been any repricing of products in the particular category or the mix between products? You mentioned Limited Pay has been witnessing traction, but if you can give some product color on that.
Yes, share is in the 45%-50% range, and it's broadly in that same zone. Given what, you know, Suresh mentioned earlier on the call, while the bank has grown well, our other banking partners have also grown well. Our proprietary distribution has also grown quite, you know, quite well. Basically, the share is fairly similar to what it was last year, in a, you know, in that band of 45%-50%.
Sure, on the annuities?
Sorry, what was the question on the annuities?
So the question is, has there been any repricing of any product within the annuity segment and the broad mix of the sub-product classes within that witnessed traction during the quarter?
Annuity repricing is a very, very regular BAU affair, and it happens every other month, depending on which way the interest rates are moving. That is something that happens from time to time. Within that, the two subcategories that we have are immediate annuities, deferred annuity on single premium side, and then now the limited period annuities. Limited pay annuities are a relatively recent launch that has continued to do well and is becoming a very meaningful part of the business.
Deferred annuities and limited annuity on the single premium side are, you know, still the bulk of the business, and average deferment period remains in the 3-4 years zone. Average age at which the product is sold is around 60.
Nothing much has dramatically changed there, except that, the new product that has got launched is something that is now becoming a fairly meaningful contributor.
Sure. Just a small data cleaning question, if you can give the operating balance breakup for the quarter?
Yeah. Basically, again, everything positive. Mortality is small positive, persistency is fairly, I mean, significantly positive, and expense variance is also on the positive side.
Sure. Thank you and all the best.
Thank you.
Thank you. Ladies and gentlemen, this would be the last question for today, which is from the line of Ashish Agarwal from BNP Paribas. Please go ahead. Mr. Agarwal, I have unmuted your line. Kindly proceed with your question. As the current participant is not answering, this would be the end of the Q&A session. I would now like to hand the conference over to Ms. Vibha Padalkar, MD and CEO of HDFC Life, for closing comments. Over to you, ma'am.
Thank you, everyone, for joining us on the call today. Feel free to reach out to our IR team if you require further information or if you have any follow-on queries. We look forward to speaking with you again. Take care and have a good weekend.
Thank you, ma'am.
Thank you.
Ladies and gentlemen, on behalf of HDFC Life Insurance Company Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines.