Ladies and gentlemen, good day, and welcome to the HDFC Life Insurance Co Ltd Results Conference Call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Vibha Padalkar, MD and CEO of HDFC Life Insurance Co Ltd. Thank you, and over to you, ma'am.
Thank you, Donovan. Good afternoon, everyone. Thank you for taking part in this conference call to discuss the business performance for half year ended September 30, 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. Joining me are Suresh Badami, Deputy Managing Director; Niraj Shah, ED and CFO; Eshwari Murugan, our Appointed Actuary; and Kunal Jain from Investor Relations. I will provide an overview of our H1 FY 2024 results and will be happy to address any queries thereafter. Starting with operating performance for the quarter. Despite the recent budget changes that were perceived to be unfavorable for the sector, the life insurance industry has demonstrated remarkable resilience. Insurance companies have successfully harnessed their extensive distribution networks, tailored product offerings, and favorable regulatory developments to address latent insurance needs of their customers.
This has been exhibited by close to double-digit growth in new business premiums and strong growth in policy count for private players. We affirm our belief in the medium to long-term growth opportunity for the sector and HDFC Life's continued ability to navigate through such disruptions, only to emerge stronger. With this as the backdrop, we recorded a healthy growth of 10% in individual WRP versus 8% for overall industry for the half year ended September 30, 2023. Our H1 FY 2024 market share was 15.7% and 10.3% in the private and overall sector, respectively. We continued to grow faster than the overall industry, and we ranked amongst the top three life insurers across individual and group business. We saw an uptick of 10% in the number of individual policies sold, beating industry growth.
This healthy volume growth is in line with our stated objective of broadening our customer base. We have insured more than 3 crore lives across our individual and group businesses, which represents a YoY growth of 16%. More than two-thirds of the retail customers onboarded are new to HDFC Life, and almost half of these are below the age of 35 years. Growth from Tier 2 and Tier 3 locations has been double that of Tier 1 locations. Growth and protection was robust at 28% on new business premium. Retail protection registered YoY growth of 46% in H1 FY 2024. Sum assured recorded healthy growth, with retail and overall sum assured growing by 61% and 45%, respectively.
We continue to lead in terms of sum assured, and our private market share, based on overall sum assured, stood at 18% for H1 FY 2024. Annuity APE grew by 17%, and the segment contributed to 18% of new business premium. Annuity and protection put together contributed to about 55% of new business premium in H1 FY 2024. Our average ticket size has stayed intact despite moderation seen in higher ticket size businesses. Policies of up to INR 5 lakh ticket size issued have seen double-digit growth, with improvements in average ticket size across various cohorts. While there is degrowth in the above INR 5 lakh segment, we are seeing this get progressively better in some channels, such as bancassurance.
While the gap is wider in channels such as private wealth partners, we expect improved overall traction in this segment in the second half of the fiscal on the back of product launches, and both the distributors and customers coming to terms with the new post-tax IRR reality. Despite the tax impact, the long-term guaranteed savings product proposition remains unique to our industry, and returns offered continue to be best in class. Overall product mix remains balanced, with non-par savings at 28%, participating products at 30%, ULIP at 28%, annuity and protection at 8% and 6%, respectively, based on individual APE. We introduced two new products in the protection category, namely HDFC Life Sanchay Legacy and Click 2 Protect Elite.
HDFC Life Sanchay Legacy is an industry-first whole life return of premium protection plan with increasing life cover and is designed to cater to a middle age and beyond customer segment. Our other term product, C2P Elite, caters to a more affluent customer category. Some of our other product launch in the participating unit link and pension categories have gained good momentum across all our distribution channels. Further, we have been able to offer higher than the traditional 7-10x sum assured multiples on our unit link products, thereby bundling higher protection cover with our savings proposition. Moving on to key financial and operating metrics.
New business margin for H1 FY 2024 was 26.2%, with value of new business of INR 1,411 crore, implying a 10% year-on-year growth. The total cost ratio has increased slightly from 19.3% to 19.7%. The increase in cost ratio is expectedly due to reduced cost absorption from slow growth in specific channels, and should normalize as growth rebounds to pre-tax change levels. We will, however, continue to upfront manpower investments in channels such as HDFC Bank and other key banca partners to capitalize on growth opportunities. Our embedded value was INR 42,908 crore as on September 30, 2023, with an operating return on embedded value of 16.4%.
Profit after tax for H1 FY 2024 was INR 792 crore, which is a year-on-year increase of 15%, with a robust growth of 18% in profit emergence from the back book. Solvency as on September 30, 2023 was 194%, after factoring in the dividend payout of INR 408 crore in the last quarter. Renewal collections continue to be robust, with a year-on-year growth of 14%. Next, on distribution. We have registered a year-on-year growth of 23% across our bank assurance partners. Our counter share at HDFC Bank channel is progressing well, with strong support from our parent channel. We continue to collaborate closely with the bank and invest in the channel. Our credit life partners have also delivered impressive performance, with credit protect growing by 28% in H1 FY 2024.
We are growing well across all our bancassurance collaborations, while steadily augmenting our portfolio of partnerships. We are also pleased to announce our partnership with Airtel Payments Bank, which has over 15 crore customers and are excited about the possibilities arising out of this alliance. Our agency channel grew in line with company growth. We added more than 37,000 agents in the channel in H1 FY 2024. We have seen some moderation in business from the higher ticket size segment, but expect the channel to be able to recoup the same in H2. Among other highlights, we are proud to feature among India's best workplaces for millennials 2023 by Great Place to Work, and to be recognized among 100 Best Companies for Women in India, 2023 by Avtar. We also ranked among Asia's Best Workplaces 2023 by Great Place to Work.
This is a testimony of our endeavor to create an in-inclusive culture, be the employer of choice, and invest for the betterment of our workforce. We are appreciative of the proactive engagement by the Department of Financial Services and IRDAI with life insurers, to discuss initiatives for the benefit of overall sector as well as our customers. Moving on to our subsidiaries, the AUA for pension subsidy has crossed INR 58,000 crore, with a market share of 43% as on 30th September 2023, which is an increase of 370 basis points over September 2022. HDFC International clocked revenues of over $10 million, registering a growth of 50%. Their retail insurance business out of GIFT City commenced in August, with the maiden launch of US dollar global education plan.
In conclusion, our focus on improving customer penetration is trending well, and we expect this momentum to continue and be aided by a pickup in the higher ticket segment. We are also confident of a strong performance in the mortality and longevity space, along with the market share gains in our bancassurance channel in the second half of this year. We remain upbeat on the medium to long-term growth potential of the industry, and aspire to repeat our past track record of doubling key metrics every four years. The detailed disclosure on our results is available in our investor presentation. We are happy to open the floor for questions now.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Yeah, thanks for the opportunity. So, couple of questions. The first one, a bit on the margin. Of course, one part that's understood that, the mix in this FY so far has changed in sort of a favor of ULIPs, and particularly a reduction in non-par savings. But at the same time, we see, you know, some kind of, you know, increased, you know, sales of your, retail protection. And at the same time, credit life, I think, is still doing well. And also there is a pickup in annuity in this year. So there is some favorable development on the product mix, for high margin growth as well. And of course, in your base, there was a kind of a low margin, of SBI Life.
Net-net, with this favorable factor also playing out, I mean, with the protection picking up, and annuity picking up, and to sort of, I mean, expectation of benefits from Exide Li fe synergy, it feels sort of margins are flat. Is this something that, you know, a growth being lower, than sort of the expenses ticking up? A bit of, you know, explanation around what's happening in the margin, and how shall one read or expect, for the full year, 2024. That's the first question.
... So Avinash, all what you said is absolutely right. So there are many things going on. We talked about Exide Life starting off with low single-digit margins. We said we will nevertheless move towards subsuming that into our business and reaching margin neutrality. Protection is doing, individual protection is doing exceedingly well. Credit life has always been doing well, and that continues to trend well. So that gives us that margin kicker. Our costs are reasonably under control, despite some of the investments that I talked about. Unit linked, little bit of uptick, that you see about 28% that we ended, little bit more than about 25% range that we've that we would like to be in. At the same time, counter share at HDFC Bank has gone up.
So all of that, there are pluses and minuses which sort of even out, and that's why we have got to a margin neutral or more or less flat, slightly better than quarter one margins, but more or less flat is how we see the H1. And that's what we also, even at the start of the year, guided towards. This year is, you know, a little bit, you know, a mixed year in terms of, digesting our tax changes because, you know, for us to invest in people so that we can grow in terms of number of policies, you know, all of that is panning out. And so we expect a, more or less flattish, margin.
That would be a good outcome, just given all the things that are going on, and the continued degrowth in the above INR 5 lakh ticket size. Next year, I think this would be behind us as a sector, and we should continue on the upward trajectory on margins. Anything you want to add, Niraj?
So just maybe a couple of things, really. I think, as we'd spoken at the beginning of the period, a large part of our VNB growth will come out of APE growth, and a significant part of our APE growth we were expecting out of volumes. That's exactly happening the way we are, you know, have thought about it as the year would pan out. So a 10% growth in volumes, and equally important is our average ticket size has been maintained. That was one of the biggest, you know, fears going into FY 2024 in terms of what happens because of the higher ticket size business. Like Vibha mentioned, the greater than INR 5 lakh business has come down, but it is still a fairly meaningful contributor.
A significant part of our position has been maintained because of our expansion into Tier 2, Tier 3 markets. Similarly, in terms of while we'd like to, on a medium-term basis, grow at 17%-18%, the current growth is in the 10% range. That explains the expense, fixed cost absorption gap. Product mix, like you rightly articulated, balances out each other, and there is a mild positive sitting there in terms of higher levels of protection written both on a standalone basis and individual group, as well as on, you know, the savings products.
Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.
Thank you for the opportunity. I have two questions. First is on the non-par savings product. Can you help us understand how many rounds of IRR cuts have you guys taken? I believe that the G-Sec yield, which you guys try to map, has turned around since the rate cuts that have happened. Any guidance on will the product become even lesser IRR offering for the customers? Or, how do you see this product and the offering to the customers going ahead? Second is on the protection business. You said that credit life has grown by 28%. Is that new business growth or APE growth? Because the group protection APE in 1H has only grown 7%. Has the GTI business contracted a lot? Can you give me some color on that?
Thank you.
You want to take the first question?
Yeah. So, in terms of the non-par product repricing, I mean, it's been a, you know, a continuous ongoing activity for us ever since we launched the product more than four years back. In this period, we've repriced it twice, to your specific question. And, going forward, also, we will continue to look at the kind of, you know, yields we can get on a gross basis and then, you know, adjust our IRRs in the marketplace. Of course, we will keep in mind what is happening in the marketplace. We have seen certain players offer IRRs, which we believe are, you know, you know, maybe addressing different kind of profitability objectives and risk management objectives at their end.
We have continued to, you know, maintain a fairly balanced approach here. We definitely want whatever growth we can get, but which has to be, you know, sensible in terms of risk on our books, as well as in terms of profitability. So our repricing will continue, and it will reflect what is happening in the overall interest rate environment. As far as your question on the group fund is concerned, we have our credit life business has grown fairly meaningfully even in this period at about 28 -odd%. And largely, a lot of business has shifted from regular premium to single premium in certain partners, which has resulted in, you know, the numbers that you are seeing here. As such, in terms of overall basis, nothing really different.
Both, on the individual side, protection has grown at about 45%+. On the CP side, for this period, it has been at about 28%. It's largely just regular premium, single premium change that has happened.
To add here, Shivani, it is to do with lesser to do with GTI, which you alluded to. It's just as credit life. Economics of the credit life policies haven't changed. It's just that, you know, whether a single premium or a regular premium, that's about it.
... Okay, I understood. Thank you so much.
Sure, thank you.
Thank you. We have the next question from the line of Puneet Gulati from Macquarie. Please go ahead.
Hello, Vibha. This is Suresh here. Am I audible?
Suresh, you are audible.
Yeah, hi.
You may proceed.
Yeah, yeah. Sorry. Yeah, yeah. So, so two questions. You said the counter share has gone up, HDFC Bank at last quarter, 55 was up to 56. Can you share any number, how much it has gone up this quarter?
Go ahead, please.
So, hi. So, you know, we, we've seen a fair amount of traction which has been happening post the merger, Suresh. And, effectively, we have ended quarter one, H1 at a 62% market share. So if you were to look at the 56.5, which were there at Q1, you know, we've been steadily trending efforts right through H2, Q2, and across July, August, September, we have seen a significant impact. In September, we were higher than 70% share. So we've actually ended at 62.2 for the entire H1.
That is fantastic. Can you tell us, what have you done? I mean, what has happened to have such a massive pickup and, you know, I mean, how have you gone about doing this?
Oh, I think, look, in some sense, it has been a focused effort on both sides. Clearly, we've invested in manpower over the last five, six months. There have been a lot of product innovations which have happened. There are some new products which have got launched, which have picked up very massively at HDFC Bank. We were spoke about, you know, some point G1, we have two sim, you know, legacy, recently a legacy product which has got launched. There are a few other products which have got launched, which have had a fair amount of pickup, which is happening. There's been a huge amount of engagement and involvement between the bank teams across support from TPP.
So it's a factor of everything that we've been doing, but you know, typically, we find that our market share has been growing across most of our partnerships, and that has also led. And clearly, yes, there is a better alignment, much more engagement at the strategic level with the bank, and that support is coming in for us.
But you know, Suresh, this is not getting reflected in the overall AP numbers, right? So first half, AP has just gone, gone up 10%. I mean, and of course, Vibha has guided for a 15% AP growth including, excluding the INR 1,000 crore one-off business. The ask rate for second half is very, very high, both on growth AP, across, of course, margins leading to AP. You'll have to deliver 20% on the INR 1,000 crore adjusted business in second half. Is that really achievable? And why this HDFC Bank better traction is not getting reflected in AP growth numbers?
I think we have to look at it slightly longer term. Quarter -on -quarter, things will vary up and down. We have seen a little bit of a slowdown on some of our other channels, like agency and ROCA, which had a higher dependency on the greater than INR 5 lakh. Really, our strategy is to ensure that we broad base our growth on smaller ticket size NOPs, and we have started seeing the traction coming in. That's a certain bit of base effect which is coming. I mean, on the growth, you know, clearly, I mean, not to push further, but I think we will try and see if we can grow faster than industry, which is really what we have been targeting in every year. I think that plays out for us.
So really, you know, there are some times in certain quarters, some products get launched in some quarters, some quarters end. So quarter-on-quarter, it doesn't do. But as long as our distribution has been growing, you know, our agency, we were read out as part of our earlier notes that, look, you know, our agency distribution has grown to almost 30,000 agents. So, you know, as we build our distribution across Tier 2, Tier 3, as we add more partners into our fold, the smaller ticket size will come in, and the opportunity is large enough for us to grow on a consistent basis.
To add here, Suresh, further deconstructing some of our channels that have a lot more wealth customer buyers, understandably are slower, and we have seen degrowth in those channels, wherein the ticket is very high. Those have seen degrowth of about 20% odd, right? While in the ticket size less than INR 5 lakh has shown a growth of above 18%. It is all coming out. Some channels have a lot more focus towards ticket sizes. Broking channel is one wealth channel and so on. Agency channel in terms of the top agents. It's a mix of that. However, the reason why-
Yeah.
It gives a fair bit of confidence that when we further deconstruct our numbers, one is the growth, very robust growth, like I said, close to 80, 18%-19% on above INR 5 lakhs. Second thing is that the Tier 2 and 3 cities also, there the growth in Tier 2 and 3 is 2x the growth of the company, 2x of company-level growth. So making inroads. So the channels that have a lot more of distribution reach into Tier 2 and 3, there they are relatively untouched by the tax changes. Now, our Tier 2 and 3 is contributing about 60%-70% of our, you know, overall business.
So all of that mix and month-on-month that is happening, which we said at the beginning of the year, when the tax changes happened, wherein growth will be a lot more broad-based across more and more customers. So acquisition of new customers becomes important. And last point I want to make is that when I further look at our data, two-thirds of our customers are now new to HDFC Life, so we are very, very happy about that, because when you, when you partner with a young life, then over the life cycle of that individual, we are able to do a fair bit of attachment at various significant life stages. Also, half of these new customers we have acquired are less than 35 years of age, so again, young customers.
So the reason I'm quoting these numbers is, it's a little bit nuanced in terms of why the overall number is somewhat muted because of some of the other channels being affected. But at the same time, even in those channels, the growth of below INR 5 lakhs is in, almost touching 20%.
You are still confident of maintaining the 15%, full year guidance, including the INR 1,000 crore?
Yes. So I just to clarify, I said mid-teen. So yes, mid-teens, reasonably confident, yes.
Okay, all the best with that.
Thank you.
Thank you. The next question is from the line of Prakash Kapadia from Anived Portfolio Managers Pvt Ltd . Please go ahead.
Yeah, thanks for the opportunity. You know, you were talking about HDFC Bank and you know, how we've gained more and more traction and continuing, you know, with that, discussion in Tier 2 and Tier 3 cities and beyond, you know, the bank has a fairly large rural presence, and, you know, even now they are opening up branches at a good pace. So will that be the, you know, driver of volume growth in 2024 and beyond? And, you know, what kind of products are, you know, these customers looking at? If you could give us some sense, that's the first question. And, secondly, you know, on the GST notice, which was received, I think it was INR 942 crore last quarter. You've paid some amount, I think INR 250 crore in dispute. Any updates on that?
So hi, this is Suresh here. Let me answer the first question. Yeah, you are right. I think HDFC Bank is doing tremendous in terms of their expansion and their branch growth. So, you know, now the branch expansion in rural has grown more than 1,100 in the last 18 months. So clearly they are growing. But, I mean, just to state, I think our approach to Tier 2, Tier 3 as a distribution strategy has been playing out for many years. It's along with, of course, HDFC Bank, but we have been growing our agency presence. We took over Exide, which has a significant presence in Tier 2 and Tier 3 and in the south markets.
A lot of our other banker partnerships, which we have tied up, and you have seen over the last 1 year, whether it is, you know, AU Small Finance Bank and some of our other partners like, Ujjivan, Utkarsh, Bandhan, many of them have significant presence in Tier 2, Tier 3. We have not maybe built as much on our direct, but there is a lot of demand which is coming in through our partnerships as well as our agency network in these markets. So we have seen Tier 2 and Tier 3 growing much faster for us as a basis, almost double of what we have seen in Tier 1. Of course, Tier 1 has had an impact this year because the greater than INR 5 lakhs normally concentrates in Tier 1. So the product range remains similar. I think it's a ticket size, which changes.
There are certain features which we are trying to see, which are more favorable to some of these Tier 2, Tier 3 markets, and we'll continue to innovate on that. So actually, you know, APE growth in Tier 2, Tier 3 has been almost 17% for us in H1. So you, you will realize that, look, it's a stated strategy to expand and dis-- and get into these markets. So we don't see any reason why this segment will not grow for us going forward. Of course, the opportunity in Tier 1 continues to remain, and we will capitalize on that.
Okay. Okay.
Yeah, just to maybe add a couple of bits on that, is in terms of, we found actually, you know, very, that customer segment being more amenable to buying protection differently from the way they buy in Tier 1. And that's something that has really done well at scale in HDFC Bank, in Tier 2, Tier 3 towns in terms of, buying protection behavior being different. Also, what we've seen is that, there is a, you know, more willingness to take slightly longer term policies in these markets, which again, is a very, you know, good indicator of, being able to keep the business longer on our books and, you know, get, a more profitable business out of that, category as well. So that, that is something that is fairly encouraging as well.
To your point on GST, no further updates. Of course, you've seen the show cause notice, as we had mentioned in our exchange disclosures. We are in the process of responding to that, and we will do that in due course.
Okay. Understood, sir. Thank you.
Thank you.
Thank you. Ladies and gentlemen, we request you to please restrict your questions to two per participant. We have the next question from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
Hi, and thanks for taking my question. You know, the growth in bancassurance seems to be kind of, you know, coming up nicely with around 20% or so. And, you know, it looks like this is sort of slightly ULIP heavy, but, you know, in the other channels, probably ULIP is not picking up as much. So when we are looking at, you know, higher growth in other channels in second half, do we, do, do we kind of envisage ULIP to pick up, or will this still be sort of, non-par heavy? And, in that sense, how do you see the product mix for the year evolving?
So, let me start, Niraj, you can add on, on the product, basis. But, you know, we, we like you, we have mentioned in earlier, sessions also, is we have always tried to maintain a balanced product mix, and, and one of the approaches has been to ensure that each of our channel remains profitable. So in some sense, looking at the opportunity, we have tried to ensure that our mix remains in the 25% range for UL, and then the rest between par, non-par and 30% odd. So in, in some sense, we have always managed the unit link contribution which comes in from some of our other channels, because typically, unit link needs to have a high persistency for it to be profitable.
So when agency, we have ensured that unit link is managed well with some of our vintage financial consultant partners, who give us a very high persistency on unit link kind of products. So you'll find that agency is one of the few channels, our agency is one of the few channels which are near 90% persistency at an overall level. Now, that is because we have tried to maintain a certain unit link to certain set of partners, plus focus on par and non-par. So while we will look given the market and, you know, there is always an expected volatility in the market given what's been happening, we will look at unit link opportunity and growth, if the markets continue to the way it is. And in Tier 2 and Tier 3 also, there's a little bit of UL demand.
We have seen what's happened on the MF and SIPs space, so we don't want to lose out on that opportunity, but we will be calibrated in terms of how much UL we allow through some of the other channels. But overall, we'll maintain the mix across all our channels.
Just to add to what Suresh mentioned, I think, a lot of times, product mix is also a function of, the launches that we have, product launches that we have. So, you know, in this period, what we've done is we've had two product launches on the protection side. That's reflecting on the momentum in, individual protection growth. Also, we've had a launch on the unit link side with a slightly different kind of, protection proposition attached to unit link. That has also done very well, in, you know, the bank channel and some of the other channels as well.
In the second half of the year, we expect to launch products in the other categories, which will then, you know, reflect in the product mix as we go forward in the second half of the year as well. So like, like Suresh mentioned, I think by and large, we'd like to stay within some sort of, you know, one-fourth to one-third for each of the categories, while continuing to grow protection and annuities. It will also be dependent on, of course, also in terms of how people respond to the economic environment in terms of volatility in the equity markets can then change things on the unit link. Similarly, in terms of there is more concern about or perspective that can be towards more traditional and products.
That's something that we see from time to time.
You know, in the first quarter, we, you know, it appeared that there was some sort of a, you know, strong, you know, that probably the second quarter, then, you know, kind of business, again, heating up towards the end of the year? Or is it something that probably is not a concern anymore?
It's not really a concern, but couple of things you have mentioned. One is that, you know, for it has to be priced right. So there's always a tendency to be very aggressive pricing. I think that is something that, we really want to follow. So we keep away from that. So some of that situation does happen, especially in multi-tie situations. Second is that, versus where fixed deposit rates are, that also in terms of just, you mentioned fatigue, fatigue after March.
More than fatigue, I think it's a little bit of kicking the can down in terms of taking a decision on non-par policy, because you say, "Okay, let me park my money in a six-month FT or a one-year FT, and then take a call up the line." Some of that could be happening. Of course, it is due to change. Rates start falling and transmissions. It's a matter of, rather than anything fundamentally, that is different. Point three is that there is awareness that there is reinvestment risk in any product other than a non-par, on a long-term non-par product. That has been very well socialized among customers at large. The proposition as such, nothing at all has changed on our macro forces, plus and minus are at play.
Perfect. Thanks. Thanks, Vibha. Thanks, Niraj, and thanks, Suresh.
Thank you.
Thank you.
The next question is from the line of Swarnabh Mukherjee from B&K Securities. Please go ahead.
Yeah. Hi, good afternoon, and thank you for the opportunity. A couple of questions. First of all, on the growth, for the slower growth in this first half, you alluded towards the fact that in several channels in the base, there would be INR 5 lakh+ products last year, which is impacting. Just wanted to understand that as we move into the second half, I guess that would be the situation in those channels again for the second half of last year. Would the smaller ticket size driven APE growth be sufficient to cover up for that and meet the ask rate? That is what my query is on growth.
Secondly, the strong growth in the bancassurance that we have seen, so, the almost 19% odd growth, if you could break it down into, you know, what is the growth at the HDFC Bank channel, vis-a-vis, you know, other bank partners to get us a sense, you know, what is driving the growth? So that is one. And secondly, if you could also highlight that in terms of the EV work that you have given, this quarter there, I mean, if I strip out second quarter from the numbers that you have given for half year, in terms of the EV work, the, the economic numbers, appear to be negative. So what is driving that, given, you know, the market conditions and how the inputs have moved over the past, few months, if you could please?
... Yeah, I think the H2 growth, we are reasonably confident that we will continue on this trajectory. And what is heartening is the ticket sizes have been maintained. So what we had feared is that overall ticket sizes will start falling, that has not happened. So that is one. Second is, like I mentioned to an earlier caller, that we are acquiring more and more customers, so number of policies we are acquiring is growing. So both of this together, we are, you know, we should continue in this mid-teens kind of a growth. As regards growth-
Just a follow-up, ma'am, on that. So the fact that we have kind of started to see strong growth in the Tier 2 or Tier 3 markets, now on moving into FY 2025, do you think that such a growth rate would be sustainable, given that we again now will have a reasonable base of that, and also other competitors would also be focusing on that market, given I think similar scenarios you are facing in the Tier 1 market? So, is that number sustainable, as per your view?
Yeah. Absolutely, I think so. I think the reason is that we ourselves were not very present. If you were to look back three years ago, this was a white space for us, because—and for the sector, by and large, private sector, which focused on top 10 cities and so on. I think Niraj alluded to it earlier, wherein it is not just that we want to—that we have feet on street now, and it's a whole proposition on what kind of products would work in Tier 2 and 3, what kind of measures we would have in place for underwriting, what kind of documents, because increasingly the percentage of non-salaried customers in Tier 2 is going to be meaningfully high, so how do we get past the underwriting hurdles? What is the reinsurance arrangements that we suture up?
Because again, for the reinsurers, these would be lower ticket, higher volume, lighter touch underwriting or different level of underwriting kind of a conundrum. So it's many things like that. And of course, people training, having products that are simpler in terms of give and get, having one, you know, local regional languages in terms of outreach. The advertising and the tonality has to appeal to also Tier 2 and 3. You know, so it's a whole, a whole package, and that has taken us couple of years ever since we started looking at Exide Life. So that was a turning point, and then tax changes happened, so we just accelerated on that. But I'll give you another example.
For, you know, we do have a fairly high hurdle rate on persistency, and that to some extent was limiting our foray into Tier 2 and 3, because inherent persistency is generally lower than the top 10 cities. But for us to be comfortable with that, as long as the pricing is right, and of course, down the line, we will showcase to you how in various buckets we see persistency at panning out. Mix impact could impact at a headline level, but within those cohorts, you will still see an improvement in persistency. So that sort of thing. So persistency will be different, mortality experience will be different, and how do we price all of that, and how do we get increasingly comfortable with that? I think that's the journey.
This is just the tip of the iceberg, and I'm reasonably comfortable and confident that the journey will continue. We will of course piggyback on all our partners. Suresh mentioned this, HDFC Bank, of course, but also many other partners that we have that have been operating in these segments, and we also learn from them. We learn from a lot of our partners that extend credit to Tier 2 and 3 customers, because they also have to do at least financial underwriting. So that's the hat we are donning to help us with the financial underwriting fees. Younger lives, lesser sum assured, so that we are able to, you know, take initial steps into that. As regards your question on embedded value, Eshwari, you want to take that?
If I, if I understood the question correctly, I think you want to understand the movement in the investment variance that we showed last quarter and this quarter. So just first explain the investment variance that we had in June, it was around INR 810 crore, broadly split between impact of equity of INR 500 crore and interest rates of INR 300 crore. In Q1, our equity markets had gone up by almost 10%, which was higher than the expected return of around 2.5%, and that gave the inside a positive variance of INR 500 crore. And interest rates at the short end had fallen by around twenty basis points, and since the shareholder assets and our risk assets, the value increases as the interest rates goes down, we had a positive variance of around INR 300 crore.
Now, in the quarter, second quarter, our equity markets have performed a little tightly better than they expected, around 3%, which has only given us another INR 50 crore increase in the positive variance with equity. But in interest rates, the cycle is actually reversed. The it has the rise, the fall that was there in the first quarter and reversed out in the second quarter. So they almost nullified the interest rate impact that we have got, which is why on an over six months basis, the most of this investment variance of INR 650 crore is coming from equities.
Understood. Understood. And, ma'am, the question on the bancassurance growth.
Please rejoin the question.
Yeah, one question is unanswered. Sorry, one question is unanswered.
Yeah, very quick answer. Both HDFC Bank and other banks are very similar in terms of growth.
Understood. Understood. Thank you so much, and all the best. See you.
Thank you. Ladies and gentlemen, we request you to please limit your questions to one question per participant, so that management may be able to address questions from all participants in the queue... We have the next question from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah. Hi, Vibha. Just on this protection bit, you know, what is the share of return of premium products? And is there a change where, you know, the share of return of premium products is increasing? And then secondly, on the VNB margins for the second half, do you think that you will be able to attain the margins which will be which will allow you to have a flattish VNB margin as compared to FY 2023?
So on the second question, yes. We should, you know, while it's always a challenge, just given the kind of changes that have happened, yes, we should be able to end at a flattish margin. We are there at the end of H1 and H2, we should also on a full year basis, end a very, very similar kind of margins with mid-teens growth and hence mid-teens VNB growth. Niraj, do you want to give the number on that one?
Yeah. So on RoP, it's been, you know, steadily going up over the past few quarters as our presence in Tier 2, Tier 3 markets has been expanding. So currently the number stands close to around 30-odd%. It has been close to 20% in the previous period, so it has moved in that direction.
That also kind of explains my earlier commentary on Tier 2 and 3, because the products that we sell also have to be simple, over-the-counter, relevant products for that category.
And that is also the reason why, you know, possibly the overall protection margin could be weaker than what we had earlier. Is that the-
No, not really, because the thing is, as we mentioned in the past, the return of premium margins on that is not very different from the pure term margins. So again, the thing is, it's really how the products are priced. As, of course, there are market participants choosing to price their products differently in the market. But as far as we're concerned, there isn't any significant difference. In fact, non-return of premium is not margin dilutive at all on protection.
Okay. Got that. Thank you.
Thank you. The next question is from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Hi. Just on the, you know, the banker channel continues to do very well, and I think one of the main reasons that you've mentioned is, for the other channels, a little bit weaker performance. If you look at individual APE growth numbers, I think agency, direct and brokers and other channels, all three have declined on a year-over-year basis. INR 5 lakh plus ticket size business in these channels seems to be the major component, is what I get. Are there any other sort of big factors that are playing out there? When you gave that number of INR 1,000 crore, if I remember correctly, this was only the March impact of more than INR 5 lakh policy, right?
Or maybe 7 March. But for the full year, what would be the contribution, you know, of more than INR 5 lakh policy, just to kind of get a sense of what we need to overcome in the second half.
So let me just quickly, so firstly, you know, agency is not doing good. On an H1 basis, we are growing at almost 10%.
No, I meant on a 2Q basis, Q2 basis. Q2 basis.
Q2 basis, it is at some flat 3% growth, so it's not really. But you're, you know, like we mentioned earlier, I think agency and broking have been affected a bit from the greater than INR 5 lakh. Broking, you know, we had a significant presence in the wealth segment. Our partnerships at many of the wealth-focused, corporate agencies, you know, and, and most of them had worked with us on almost exclusive or high market share basis, has had. But, you know, we don't really have a problem in the sense that, you know, somewhere the distribution will attune itself to the less than INR 5 lakh. And agency, in some ways takes a little bit more time. It's more retail, it's more distribution-oriented, so it will take some time to grow to the less than INR 5 lakh.
It has been growing fairly well in the less than INR 5 lakh. Of course, the product mix also moving to some of the pension products and some of the other products where the ticket charges are high. So we don't really see a challenge in being able to grow agency. And one of the reasons we are focusing heavily in terms of building our financial consultant new base, so almost 30,000 agents who got added, which is significantly high. We are looking at activation, and we do believe that those may not probably be able to catch up in some specific verticals like wealth, which were greater than INR 5 lakh focused, but really, the distribution should be able to scale up and build that.
And the greater than INR 5 lakh also, I think was mentioned earlier, while in some sense there was a little bit of a hiccup in what was pre-budget and post-budget, the proposition as such is still fairly strong. So, you know, I think customers are also coming to... around to the terms to say, look, if you compare in terms of what is available on the debt mutual fund side, if you're available on what's happened on the fixed deposit rates or whatever, the product still remains fairly competitive. So there is no reason why over a period of time, if you were to look at it afresh and you have money in terms of your asset allocation, a certain amount of money will continue to flow into these products, while we get the higher ticket size from some of the pension annuity products.
Really, our focus is to make sure that the NOP growth, the Tier 2, Tier 3 growth, the less than INR 5 lakh grows, so there's no reason why the greater than INR 5 lakh should not also pick up towards the end of the year.
... Yeah, absolutely. And just to add to that and link it back to, you know, a couple of things on the call. One is in terms of our H2, you know, strategy on margins. I think that all links back up to how the top line will shape up. If we see more growth than what we are anticipating at this point in time, our first objective will be to ensure that our VNB growth is in line with what we want, and the margin is going to be subservient to that.
So we clearly are in a position to be able to maintain margins for the rest of the year, but if the growth projections are ahead of where we think at this point in time, we will strive to maintain VNB growth and we can review our proposition in terms of how we're looking at the VNB margins.
No, I just add, you know, given that there was this question. I think, look, frankly, as a product strategy approach, all the products that we are designing, you know, we do believe are products which will probably help us scale up, whether it's in Tier 2, Tier 3, whether it's on the Par and non-par side. You know, we may believe that, look, non-par is a product which is slightly more price sensitive, yes, from the IRR, but really from a customer proposition, we need to look at what kind of IRRs, what kind of surrender values. And the way our products are defined is probably best in class for the end customer finally, right?
So I think a lot of these considerations, which gives us the confidence to say that, look, even with this product proposition that we have got, we probably are best in class.
Mm-hmm. Understood. Just, can you quantify or can you clarify, like, you know, the INR 1,000 crore number, was that only for February-March or, and what would that number be for the entire year, last year?
So, yeah, the INR 1,000 crore number was the post-budget business that we had alluded to, which we said was a one-time business.
Which is largely March, by the way, because Feb hardly had moved.
Right. Right.
The overall number for the year on a total AP basis was about 12 -odd %. So that is not just INR 1,000 crore in March, but through the year. And that's also what I just mentioned, that the 12% equivalent is close to 6 -odd % now. So, you know, all the conversations that we just had in this, that it's not that the product category has died above INR 5 lakh. It is still very much there. Of course, it will take time to crawl back up to levels that we've seen in the past.
Got it. Thank you, and all the best.
Thank you. The next question is from the line of Sanketh Godha from Avendus Spark . Please go ahead.
Yeah, thank you. Thank you for the opportunity. Vibha, the simple question what I have is that, given our banker contribution has gone, HDFC Bank market share has gone up to 70-odd%, if I do a back calculation, assuming 55% market share, what you had last year, I see that banca as a channel, means with respect for all companies-
Just to, Sanketh, just to intervene, the share has not gone to 70%. It is 62 -odd %.
Oh, yeah, sorry. Sorry, I mean to say HDFC is at 70. It is 62.5 for 1H. So if I do the simple math, what I conclude is that bank, HDFC Bank as a channel for all insurance companies put together, the growth has been like less than 10%. It's a rough math, but I'm just wondering that this macro of a higher deposits or HDFC Bank challenge to deposit-mobilize more deposits, is having some kind of an impact on their ability to grow third-party products, including insurance? And how do you read it? That's the only point I just wanted to ask one thing. And second, I have one question on ULIP.
Before you... Yeah, so on that, HDFC Bank and the team, at all their branches, 7,000+ branches, are very used to selling all kinds of offerings to their customers based on bottoms-up needs. Customers also are, increasingly aware, at least in the Tier 1 and 2, towns, that, the concept of reinvestment risk. So it's not that it's a switch and, someone having disposable income is agnostic. Even if the RM were to, pitch an FP, the customers are reasonably aware of reinvestment risks. They might split their, their disposable income in some ratio between fixed deposits for liquidity and for guarantee over many, many years, decades, in fact, to buy a non-par kind of a product or a protection product and so on.
That's why you're seeing that overall growth being there, not only for us, but also for the bank as a whole. We expect that to continue. It is pol-- I, I, by the fact that, would it be in the range of 20+%? I don't know. Certainly in terms of double digits, that trend should continue.
Got it. Got it. Perfect. Just wanted to understand from, from margin point of view, if the ULIP remains, because the demand of the product is also there. If the ULIP remains at the current level, around 25%-30% of the total APE, which is higher compared to last year, this strategy of attaching higher sum assured in ULIPs can improve margins of ULIP by how much percentage? I just wanted to understand how sum assured as a percentage of the, whatever ULIP you have sold, it contributes how much to the total APE mix. That's point number one.
And second, just on non-par business, given the ULIP is very much flat, is each product itself seeing margin pressure compared to what you have experienced last year? Because IRRs are demanding and the supply side market is not favorable. So the non-par itself is seeing product level margin pressure. At product level, the margin pressure.
Yeah, so Sanketh, on ULIP products, yeah, significant amount of business is now getting done at higher sum assureds, which is meaningfully more profitable than what we have on a minimum sum assured multiple that we have on Unit Link. But of course it is still lower than company average. Can we maintain our margins while the Unit Link mix continues at, in the 25%-30% zone? We can, because we already have. In the first half as well, we managed to do that. Large part of the pressure on margins is on account of two things, as we discussed. One is in terms of we capacitize for the high teens growth, which we've delivered in the past periods, and the current growth is in the 10% zone.
So that is larger—that is basically the biggest delta in terms of the margin trajectory. Second bit, to some extent is product mix, but as you've seen on an overall basis, product mix has balanced out, you know, the changes-
Yeah.
... whether it is with higher protection, higher annuities, or otherwise. So, at a portfolio level, no, we don't expect to see any challenge in maintaining our margins with the Unit Link mix being where it is right now. So that's, that's where we are. On non-par, really, it's, it's, we've like we mentioned in the past, our pricing is not really dependent on which way the interest rates are. It is more in terms of our pricing discipline, in terms of what we are able to generate. So, I mean, if you're talking about on the FRA side, again, it's a pass-through from our perspective.
When we were making a spread that was being passed on as yields and some of it was being retained, when it is a cost now, that's also getting factored into our returns to the customer.
Oh, okay. No, no, the reason I'm asking is that because the macro is in favor of other products. So to hold up the growth in the non-par, whether we will see a margin pressure in the non-par at the product level because of the spread compression.
No, Sanketh, honestly, I think, different people have taken different calls on how to run non-par business. Even when the environment was different, people were offering 40 basis points higher IRR than we were. Even today, they are doing the same. So, it's really a call that management takes in terms of how to, you know, price the product. As far as we're concerned, we try and stay away from that.
Also, you know, some more nuances on the pricing of the product. One has to also look at customer centricity in terms of what kind of surrender values one gives.
Yeah.
Devil is in details. One can give much higher IRRs if the surrender value, even after 10 years-
Yeah
It is relatively low. Right. So, so we want to attempt to continue triangulating between various objectives and to also be fair to the customer. And you will see us repricing wherever we have to reprice. You know, and at the same time, you know, not exiting the game, so to speak, we will, we'll continue to be in there. There is usually some level of... There's a lag, and then other repricing does follow. So I think that will continue. It's not new. It's not only for non-par, it also very much applies to protection, and some of the other channels. So, we're used to that.
Got it.
Sorry.
Sorry, if you, Niraj, if you can-
Rejoin the question queue for follow-up questions. We have the next question from the line of Dipanjan Ghosh from Citi. Please go ahead.
Hi, good evening. Just two small questions. One, you know, when you mentioned that your non-par high ticket mix was around 10, 12%, for the first 10 months, can you just give some color on whether it was more front-loaded or back-ended, towards the second half, maybe from October to January, last year? And second, you know, on your broker channels or on your non-HDFC Bank channels, do you see... Hello?
Dipanjan, you are not audible at the moment.
Am I? Is this better?
Yes.
Yeah, hi.
Please repeat the question, sir.
Sure. So, two questions. One, when you say your high-ticket non-par mix is around, 12% for the first 10 months, can you just give some color on whether it is more front-ended or back-ended? You know, and give some color on what would be the mix, let's say, between in the first six months versus the last four months. Second, you know, on your, non-HDFC Bank, banker channels and your broker channels, is there any, payout changes or unit economic changes across product classes, that you're seeing out there?
Yeah. So no, no major commercial changes. Very much, business as usual. And also non-par, if I were to, I don't have the numbers exactly, but it is reasonably flat. From memory, if I can recall, there was no heavy back-ending or front-ending. It was reasonably flat, except in the month of March.
Just to clarify, this 12% number that we quoted was for all business above INR 5 lakh, not just non-par. That's basically, you know, what we had called out immediately after the budget when we'd done a call. Of course, the numbers were different in March.
Sure. Thank you, and all the best.
Thank you.
Thank you. The next question is from the line of Nitin Jain from Fairview Investments Ltd. Please go ahead.
Thank you. My questions have been answered. Thank you.
Thank you. We have the next question from the line of Abhishek Agarwal from Naredi Investment. Please go ahead.
Hello, am I audible?
Yes, you are audible, sir.
Oh, okay. Okay. Thank you for the opportunity. I had only one question. You said in last quarter, your focus is on strengthening our partnership with HDFC Bank, enhancing collaboration and maximizing, maximizing customer engagement within our group. So has there any improvement or is the same as before become subsidiary of HDFC Bank?
... Yeah, hi. You, you know, obviously, there's a lot more synergy in terms of our strategy as well as HDFC Bank. Clearly, you know, we're working closer in terms of how do we expand the market, get incremental business, both for the bank and for us. We, we have seen improvement in our market share, and we hope we will be able to sustain this. Of course, a lot of this is based on certain products that we had launched. There was a certain amount of synergy that came in in this particular quarter. But really, you know, given the open architecture, our ability to invest in people, look at new innovative products, look at more support, I think we will see a lot more, you know, we have seen signs of it, hopefully the trend too.
Okay. Hello. You give me, yeah, hi, yeah. You give me ballpark number, how much improvement in, in your relation with HDFC Bank after becoming subsidiary?
So we have grown to 62% as our market share is what we have declared. But, you know, really, we, we have to look at it on a long term, because it from quarter to quarter, depending on either a contest launch or depending on a new product launch or depending on a new, you know, something that we are doing differently on the ground, these things can keep going up and down. But yeah, we have started seeing this up, and at 62%, we have seen almost a 4%-5% increase in our market share than prior to merger.
Okay. Thank you, sir.
Thank you. The next question is from the line of Bhuvnesh Garg from Investec Capital. Please go ahead.
Yeah, hi. Good evening, everyone, and thank you for the opportunity. Just on the APE growth, so if I understand the APE growth by ticket size, so you said that 18% growth in lower ticket size YoY, and 20% decline in high ticket size. Is that correct, sir?
We grew in the ticket size of INR 5 lakh and above, we grew close to 20%. Less than INR 5 lakh was about 18%-20% growth, and more than INR 5 lakh, we had a degrowth.
Okay, fine. So in that case, considering that you said that 12% of your A, APE was from ticket, high ticket size, so blended growth should have been around 13%-14%. But we have a blended growth of about 9% in APE. So what's the disconnect here?
No, I'm not sure about 5% of APE. He said-
9%.
Huh?
Sorry, sorry.
Okay.
What I'm saying is that, considering 12% of your APE comes from high ticket size, and if you had 18% growth in low ticket size and 12%-20% decline in high ticket size, basically, blended growth should have been 13%-14% YoY in H1, but we had 9% growth in H1. We just want to understand what's the disconnect here.
No, I think 18% growth was on NOP or the value-wise, yeah. Okay.
So the 12% number that we had spoken about was last year. That was the total APE percentage over INR 5 lakh in that period. Right now, like I mentioned, that contributes to about 6% of our business. And that's where, on a lower base, degrowth is what we're seeing at greater than INR 5 lakh. On more than 90%+ of our business, which is less up to INR 5 lakh, there has been an 18% growth. And the ticket size on that is something which has expanded, which has neutralized the overall impact on ticket size. And we are flat on ticket size and the growth, all the APE growth is sim- basically, the APE growth is similar to volume or NOP growth.
And also, the 12% was average over the year, so it kind of one quarter, if you look at a, you know, a certain part, it will vary by, you know, 200 basis points here and there, but, it's more in terms of average over the year.
Okay, okay. Fine, ma'am, fine. Thanks. I'll, I'll, I'll take it offline. Just more some-
Right.
Need some more... Thank you.
Thank you. The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead.
Hi, yes, sir. Thank you for taking my question. Just wanted to understand, in terms of the reinsurers for, you know, the Tier 2 cities growth that you're seeing, what's the kind of conversation there and that you know you have to face?
So when we look at the different segments for writing the business in different different product categories, we look at all aspects like the pricing, what is the risk assessment, what is the underwriting it has, and accordingly, we have discussions with the reinsurer on the similar aspect, what would be the pricing, and all that is reflected in the premium to the customer. So yes, there will be nuances in terms of all these aspects, and that's always factored in the premium as well as our assumptions and hence the profitability.
My point was, we're seeing a higher protection growth coming in. So is there any, you know, kind of, at the discussion table, we'll be able to get some, you know, discounts or others, just, on that part? And I,
... If you are going into the Tier 2 and we're writing, say, more business in the self-employed segment, then the kind of documentation or the kind of underwriting would be different, and that would be reflected in the arrangement between the insurer and the reinsurer. So the document that will be available with the self-employed will be not necessarily same as what would be available with the salaried person.
... So this, this will also keep developing as we get in, because initially when you get into Tier 2, Tier 3, you are in probably the upper quartile of the customer personas there. So really, it depends on what kind of profile and what reinsurer underwriting comfort will come in. But like Eshwari said, if it's self-employed, we may have a different kind of reinsurance arrangement over a period of time, as well as in salary, which is the upper quartile, we may probably still continue to manage the same thing. Right now, the reinsurance environment is fairly stable, and I'm sure the way we are working closely, all this will pan out over the next few years, because it's really a very large opportunity.
Sorry? Of the time of the year, do the discussions really usually happen with regard to pricing with the reinsurers? That's a regular process, so any product design we do or any pricing we do or any changes that we do, we have a constant dialogue with the reinsurer, and everything is embedded into all the aspects. So it's not at one point in time we have a discussion and it's just that. It keeps evolving, and we also look at the experience of the business that is returned along with the reinsurer, and tweak things as and when required. Mm-hmm. And there were news articles that the reinsurers are looking for a hike and would that be true for the industry, not you in particular? We are not aware of anything.
In fact, we have had very recent discussions with the insurer, and they said that their experience is in line with what they factored in the latest prices. So we are not expecting any increase in the rates in the near or middle future. Thank you so much.
Thank you. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Yeah. Thanks for the continuation. Just quickly again, going back to distribution. Is there something changed on the direct side? Because you were among the few players who had sort of a very strong, you know, presence in offline and online direct, but and, that channel should not have any, a large share of, you know, INR 5 lakh.
Avinash, sorry, not able to hear you clearly. If you can maybe start again and, we're not able to hear you clearly.
Yeah. I think it's better now. My question was more on, you know, your direct channel, where you have been pretty strong, and this channel should not have much of, you know, if ever, INR 5 lakh contribution. That channel has slowed down in the first half. Is there some change of a strategy in your, you know, direct channel that, I mean, you are focusing more on, you know, HDFC Bank or sta- I mean, what has happened to your direct channel? Because your online, offline, both have been very strong in the past.
You know, it has been. There are some two, three small things which you need to be... One, of course, is that given technology and a lot of it, there are lower branch walk-ins. A lot of our business used to come in from the direct business. And online business also is, you know, picking up, say. The other piece is some of our larger partners, like Policybazaar, which are quoted under direct, are now under the broking code, so it reflects under the broking channel. So that's the way we have kind of classified it. And the other one thing I think we need to realize is that a lot of our partners and channels, online is actually becoming more like a horizontal, because more and more people are getting tech at websites online.
So, you know, it's not just direct, the way we look at it, direct to customer is there. But really, the interface with the customer is moving more direct. It's a little bit of a mapping change in Policybazaar case, as well as the fact that there's been a little bit of a slowdown in direct. But, you know, going forward, we do expect both the online business as well as the branch business to expand. We are expanding a certain set of branches. We are probably going to add another 75 branches. So we will see expansion even in the direct channel as we go forward.
So one just quick on this. But the Policybazaar, I mean, technically has turned into broker much before. I mean, it was already a broker last year. And if you have chosen to change sort of from Policybazaar from, you know, direct to broker this year, then the broking channel, adjusted for this year, has even declined much sharply. So am I understanding all this correct?
No, I think the channel got remapped in Q3 of. So, I think over a period of time, it has shifted into our direct channel.
Broker channel.
Into the broker channel.
Yeah. So yes, I'm saying that you are saying in H1 last year, your Policybazaar is part of, not part of broker. This year, it's part of broker, and yet broker channel has declined. So I mean, ex Policybazaar.
Yes, yes, because look, we had significant partner presence in broking channel. Over the last few years, we've built significant presence in the wealth channel. So all the large customer, large partners like IIFL, ASK, there are many such wealth partners with us who had done significant business on the greater than INR 5 lakh. There has been a fair amount of de-growth which has happened there. So that is something that we will counter in terms of the retail AOV growth, even through broking channels, and that should come back. But yes, it's had an impact for us on the broking channel.
Okay. Clear. Thank you. Thank you.
Thank you. Ladies and gentlemen, we will take that as our last question. I would now like to hand the conference over to Ms. Vibha Padalkar for closing comments. Over to you, ma'am.
Thank you everyone for participating in today's call. On behalf of HDFC Life, I wish you all happy festivities. Please feel free to reach out to our IR team in case of any further queries. We look forward to connecting with you again. Good evening.
Thank you. On behalf of HDFC Life Insurance Co Ltd, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.