Ladies and gentlemen, good day and welcome to the ICICI Prudential Life Insurance Company Limited FY 2024 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anup Bagchi, MD and CEO of ICICI Prudential Life Insurance. Thank you, and over to you, sir.
Thank you, thank you. Good evening and welcome to the results call of ICICI Prudential Life Insurance Company for the financial year 2024. I have several of my senior colleagues with me on this call: Amit Palta, who heads distribution, brand marketing, and products; Dhiren, CFO; Jit, who heads our human resources, customer service, and operations; Deepak Kinger, who handles audit, legal, risk, and compliance; Manish, our CIO; Sourav, appointed actuary; and Dhiren Chatwani, who is our chief investor relations officer. I will take you through the key developments during the quarter before moving on to discuss the company's performance. First development is that in continuation with the efforts to foster a conducive, regulatory environment and enhance ease of doing business, IRDAI notified regulation encompassing pivotal domains such as product, safeguarding policyholders' interests, automated governance, and approval for setting up an electronic insurance marketplace, Bima Sugam.
We believe these regulations are a welcome change which encourages innovation, competition, and sustainable growth in the life insurance industry. I'm also pleased to inform you that the shareholders of the company have approved the appointment of Mr. Naved Masood as an independent director, effective March 7, 2024. Mr. Masood served in the IAS before retiring as Secretary of the Ministry of Corporate Affairs. He has also served as a member on the board of SEBI, where he was actively involved in matters concerning the functioning of listed companies and other SEBI-regulated entities. I'd also like to inform you that our Chairman of the Board of Directors, Mr. Ramachandran, will be retiring effective June 30, 2024, having completed the maximum age limit of 75 years as prescribed by IRDAI regulations. Mr.
Ramachandran has played a pivotal role in fostering the effectiveness of the board of directors by setting high standards of compliance and governance. We would like to express our gratitude to him for providing an overall strategic direction towards the growth and success of the company, and wish him well for the future. Consequent to Mr. Ramachandran's retirement, Mr. Sandeep Batra, a non-executive director of the company, has been appointed as chairman of the board of directors, effective June 30, 2024, subject to regulatory approval. He has been on our company's board since year 2014. Mr. Batra has been with ICICI Group since year 2000 and is currently an executive director on the board of ICICI Bank. We believe our company will gain immensely from his guidance. Innovation has been the core of our business strategy.
We constantly work on offering innovative products and processes across all life stages of our customers. We are the first life insurers in the country to offer an annuity product with 100% refund of premiums and a long-term pension product which provides customers the flexibility of making partial withdrawals. We believe simplification is the key to expanding the market, as in line with our objectives of becoming the most customer and distributor-friendly life insurer. Notably, we are also the first life insurers to pay out commissions on the same day to our distributors. Around 81% of our policies have been issued using digital KYC. 45% of our policies were issued on the same day for savings line of business in quarter four 2024.
Innovative products and processes underscore the company's strategy of providing the right product to the right customer at the right price and through the right channels, in line with our objective of being a customer-centric insurance provider. We have set an unparalleled benchmark by maintaining industry-leading claim settlement ratio at 99.2% for FY 2024, with an average turnaround time of 1.3 days for non-investigative claims. A testimony of our customer-centric efforts is the endorsement of the best life insurance provider in India by Hansa Research for the second consecutive year in a row. We are thankful to our customers for their continued confidence in our innovative products, digital support, easy documentation, and policy issuance time . They have also been conferred awards by various industry platforms. Our complete list of awards won during FY 2024 is presented from slides 61- 63. Now, let me talk about the key performance highlights.
As you can see on slide seven, for the second consecutive quarter in a row, we have delivered a very strong RWRP growth in quarter four 2024, outperforming both the overall industry as well as private life insurers. As can be evidenced in the slide, we started 2024 on a slower note. However, in parallel, we continue with our efforts towards investing in building distribution capacity, especially in proprietary channel, continuous product and process innovation, digitalization, and data analytics here to simplify business operations, and all aimed at enhancing customer experience. In agency over the last two years, we have been scaling up sales frontline managers and providing them with adequate training to enhance productivity. We have also empowered our agents by providing them institutional support complemented by data analytics and digital capabilities. Additionally, we continue our investments in demand generation tools to expand the agent's natural market.
Agency channel recorded AP growth of 15.6% year-on-year in FY 2024. In the direct channels, we invested in our website to improve customer experiences and worked on customer onboarding for a smooth and seamless online journey. We also leveraged data analytics to capitalize on our ability to upsell to our existing customers with alternate propositions best suited to their needs. Direct channel AP grew by 20% year-on-year in FY 2024. Both these channels have delivered around 17% AP growth in FY 2024, surpassing the growth registered by the overall industry and private players. On the product side, our strategy on continuous product innovation with the objective of delivering a superior value proposition to our customers has resulted in strong growth across most product segments. Annuity business AP grew by 88% year-on-year.
Linked business AP grew by 26.1% year-on-year, and retail protection AP grew by 46.6% year-on-year in FY 2024. We believe that annuity and retail protection offer strong growth opportunities and remain key focus areas for our company. At the company level, the overall AP grew by 4.7% year-on-year to INR 90.46 billion in FY 2024. Our continued investments in data science and customer-centric analytics engine have led to improvement in persistency in most growth. 13-month persistency stood at 89%, and 49-month persistency stood at 68.5%. Our cost-to-TWRP ratio for savings line of business stood at 15.8% for FY 2024, as we continue to invest to deliver sustainable growth in the future. For FY 2024, the VNB value of new business was INR 22.27 billion, with an AP of INR 90.46 billion. VNB margin stood at 24.6%.
The decline in VNB margin is primarily on account of shift in underlying product mix towards unit-linked and par from non-par business, decline in group term business, and higher expense ratio for the current year. To summarize, throughout 2024, we worked on various building blocks of business with our efforts pivoted towards balancing growth, risk improvement, and profitability. We currently have the capability to provide the right product to the right customer and deliver it to the right channel. Closing FY 2024 on a strong note, we are confident that the positive momentum built will continue going into FY 2025 as well. We believe with the efforts, investments, and the time we have invested to create a resilient business model, we are poised to continue our journey of sustainable growth into the future.
Thank you, and I'll now hand it over to Amit to take you through the business updates.
Thank you, Anup. Good evening, everyone. I will be talking about performance updates for FY 2024 through the elements of 4P strategy driven by our 4D framework. Let me now highlight the key initiatives implemented under the 4D framework. The first element is data analytics. We have been using customer-centric analytics engine across policy stages, and it has resulted in continuous improvement in persistency ratios. In terms of mitigating fraud and early claims risk, AI and ML-backed model has led to 70% reduction in cases with higher propensity for fraud and early claims for savings policies toward H2 of FY 2024. The details of our extensive deployment of analytics capability are set out in slides 31-34. The second element of the 4D framework is diversified proposition.
As Anup highlighted, during the year, product innovation to meet the evolving needs of the customer has been one of the primary focus areas for us. For example, ICICI Pru GIFT Pro was launched to cater to affluent customers who prefer increased income and lower cover multiples. ICICI Pru Constant Maturity Fund was launched to cater to customers planning to lock in investments at high interest rates. During quarter four of the year, we launched ICICI Pru GPP Flexi with benefit enhancer and ICICI Pru Gold Pension Savings in the pension and annuity segment to address customers' liquidity concerns. ICICI Pru Platinum, launched in the linked segment, provides customers the flexibility to choose level of protection between sum assured, fund value, or combination of both. The third element, digitalization, has been detailed on slides 39- 42.
During FY 2024, we made strong inroads in integrating our digital ecosystem with central agencies to fetch KYC and income estimation details for a simplified digital customer onboarding. The fourth element, that is depth in partnerships, is presented on slide 44. We continue to build capacity and have added nearly 44,000 agents during FY 2024 spread across geographies. Within the bank and non-bank channels, we continue to add new partnerships and increase share of shops in existing partnerships. We now have a total of 44 bank ties with access to more than 21,000 bank branches and more than 1,100 non-bank partnerships with an addition of 204 non-bank partners during FY 2024. Our ICICI Pru Partner Stack, an array of platform capabilities, helps us deliver superior value propositions to our customers in collaboration with our partners. Let me now talk about business performance updates through the elements of our 4P strategy.
Starting with the first P, that is premium growth element, which is mentioned from slide 10- 12. As highlighted by Anup, our persistent efforts to lay the building block for future growth started yielding results in quarter three FY 2024 and is now notably evident in quarter four. Our total AP stood at INR 36.15 billion for quarter four and INR 90.46 billion for FY 2024. Our retail AP grew by 12% year-on-year to INR 32.01 billion for the last quarter. Agency business AP grew by 28.6% year-on-year in quarter four, resulting in 15.6% year-on-year growth for the entire year. Agency business contributed 29.1% to overall AP in FY 2024 as compared to 26.4% in FY 2023. It is in line with our efforts to increase the agency channel mix in the company. Anup has already highlighted our efforts on building distribution capacity in the channel.
On the direct business, investment in our digital platform has started yielding results. We are one of the largest upsell channels in the industry, backed by analytical capability. Our direct business AP grew by 22.2% year-on-year in quarter four, resulting in 20% year-on-year growth for the entire year. Direct business contributed 14.1% to overall AP in the entire year as compared to 12.3% in FY 2023. Together, agency and direct business now contribute 51% of our retail AP mix for the entire year. Given the investments and efforts we have put into our proprietary channel, we believe the strong growth momentum will continue going ahead as well. Bancassurance business grew by 18.8% in quarter four and 2.3% year on year for the entire financial year. Bancassurance business contributed 28.7% to overall AP in FY 2024 as compared to 29.3% last financial year.
Partnership distribution AP declined by 26.1% year-on-year in quarter four and 8.1% decline year-on-year in FY 2024. Partnership distribution business contributed 13% to overall AP in the year. Throughout FY 2023, the partnership distribution channel was more focused on the non-par business. As you know, the non-par product segment has faced challenges during the year. Hence, business from this channel has declined. However, if you look at last three years from FY 2021- FY 2024, it has grown by 26% year-on-year. Therefore, we believe this is transient and expect this channel to grow going ahead given new partnership additions and capability to offer varied product propositions. Group business AP declined by 6.1% year-on-year in quarter four and 8% for FY 2024. Group business contributed 15.1% to overall AP.
The group channel declined on account of group term business while we restricted growth in group credit life and group fund business both in quarter four as well as for the entire financial year. We have a very diversified distribution mix with no single distributor excluding ICICI Bank contributing more than single digit in percentage terms to our overall AP. Hence, volatility in any single channel will not have any significant impact on our top line or bottom line. Along with channel mix, we continue to maintain a well-diversified product mix. FY 2024 witnessed a shift in consumer preference towards unique products on account of market buoyancy. The non-linked savings contribution to overall AP decreased from 37.3%-25.8% in this financial year over last year. Contribution from the linked savings products to overall AP increased from 35.9% in FY 2023 to 43.2% in FY 2024.
Annuity business now contributes to 10.5% of overall AP in FY 2024 with a pinch towards regular premium annuity over single premium annuity in line with the trends that we have seen throughout the year. Protection products contributed 16.9% to overall AP, and group savings products contributed 3.5% to overall AP in FY 2024. Another important focus area for us is protection growth. The overall protection AP stood at INR 15.25 billion for the entire year with contribution from credit life business at 39.4% of the overall protection. Retail protection is at 31.4% of the overall protection, and group term is at 29.2% of the overall protection business for ICICI Prudential. The last three-year trend across the protection AP segment exhibits strong growth in retail protection and credit life business, which is presented on slide 59.
The retail protection business has registered a strong year-on-year growth of 46.6% in FY 2024, and we expect normalized growth going ahead in this segment. Credit life business has also grown by 25.2% year-on-year in FY 2024 in line with strong credit growth in the economy while the group term business has declined in FY 2024. As discussed before, the group term market has become extremely competitive. We understand this segment well and will underwrite business only if it matches our risk-reward expectations. Coming to the third P, which is persistency improvement, our recently developed AI models which forecast persistency behavior of the customer at various stages have helped us to improve the overall persistency levels by taking appropriate interventions. As highlighted by Anup, our persistency ratios have been improving across most cohorts.
Now, moving on to the fourth P, which is productivity enhancement, our total expenses grew by 21.6% year on year for FY 2024. The increase in new business commission is attributed to the redesign of commission structure pursuant to the flexibility provided in IRDAI payment of commission regulations. FY 2024 has been a transition year, and we expect the rates to be more stable in FY 2025. Additionally, we have been investing in capacity creation to support future growth. The investment made, though front-ended, are necessary to deliver long-term growth for the company, and the results are already visible in our H2 FY 2024 performance. Our overall cost to TWRP stood at 24%, and savings lines of business cost to TWRP ratio stood at 15.8% for FY 2024. We monitor cost ratios for the savings line of business separately.
Our objective is to bring efficiency in the savings line of business while we continue to focus on growth in the protection business. Consumer simplicity continues to be at the core of our strategy. We believe that we have the right product through the right channel to the right customer equation, leading to a strong business foundation already. Going into FY 2025, we will capitalize on the same to target untapped markets to expand our customer segments. Having said that, we will continue to invest in organizational capabilities such as people , process, technology, analytics, distribution, and product to ensure we deliver sustainable growth and profitability along with managing risk and prudence. I will now hand it over to Dhiren to talk to you through the financial updates for FY 2024.
Thank you, Amit. Good evening. We regularly monitor our experience in respect of various risks, and the diligent and prudent risk management framework we operate on is reflected in our strong and resilient balance sheet presented in slide 16. Now, let me take you through the financial metrics. As shown in slide 18, our embedded value grew by 18.8% year-on-year from INR 356.34 billion at March 31st, 2023, to INR 423.37 billion at March 31st, 2024. The value of in-force business risk grew by 14.5% year-on-year. Our embedded value operating profit for FY 2024 was INR 50.17 billion. The breakup of EVOP is as follows. Unwind contribution by FY 24 is at 8.6% of opening EV. VNB of INR 22.27 billion is 6.2% of the opening EV. Unwind and VNB together constitute 14.8% of opening EV. Operating assumption change is a small positive of INR
0.7 billion. Percentage variance is a negative INR 0.56 billion, which is largely due to increase in later duration surrenders in the unit-linked portfolio due to equity market buoyancy. Mortality variance is a negative INR 2.88 billion this year. The negative variance is primarily due to an enhanced provision of expected claims incurred but not reported. Without provision for this amount, the variance would have been positive. We have provided for this expected but not reported claims in our financials on a prudent basis. We will be continuously monitoring this variance and currently do not see it impacting the long-term mortality assumption. Consequently, the ROEV for FY 2024 stands at 14.1%. Total economic and investment variance is a positive INR 16.91 billion due to the shift in the yield curve and equity market movement. Our VNB for FY 2024 was 24.6% compared to 32% in FY 2023.
The contribution of FY 2024 VNB from protection products is at 51.4%. Non-linked savings products is at 36.9%, and unit-linked products is at 11.7%. The decline in VNB is primarily on account of shift in product mix, competitive pricing pressures, and increase in expenses. The market buoyancy has led to a growth of unit-linked portfolio, which, as you are aware, has a lower margin profile compared to the company average. Additionally, within the non-linked segment, we have seen a shift in product mix towards participating products. The industry was impacted due to a change in taxation of more than INR 5 lakh non-linked business. During the year, we introduced various innovative product propositions in this segment, and one such example is the launch of the ICICI Pru GIFT Pro product.
However, as also mentioned in our previous earnings call, throughout the year, there has been a competitive pressure on pricing in this segment, which has impacted VNB. The higher expense ratio for the year also had an impact on VNB. As explained earlier, the redesign of the commission structure has led to an increase in commission expenses. We have also continued investment in capacity creation to support future growth, especially in our proprietary channels as well as in information technology and brand awareness. Our expense growth being higher than the top line growth has impacted our cost absorption capacity. So how should one look at this going forward? Here, as we have said before, we will continue to focus on growing the absolute VNB.
We believe that product mix will be guided by customer preferences, and our strategy of providing the right product to the right customer at the right price and through the right channel will help us deliver growth. Given that we have a well-diversified product suite catering to various customer needs, offered through a large number of distribution partners with access to various customer segments, we believe that we'll be able to sustain a balanced product mix. On the expense side, since the impact of the revised commission structure has already been factored in this year, and we have seen better growth outlook from H2 of FY 2024 onwards, we don't expect unit costs to be impacted significantly going forward.
Putting these together with the granular work on customer segment, process, distribution, product, and brand that we will continue with, our endeavor would be to deliver business growth ahead of the industry, and our VNB growth will be in line with our business growth. On slide 21, the sensitive details have been provided. There are no significant changes in the various sensitivities of EV. Overall, sensitivities of both VNB and EV to various factors remain reasonably low, reflecting a stable operating model. Our VNB and EV have been independently reviewed by Milliman Advisors, and their opinion is available in the results pack submitted on the exchanges. Slide 22 exhibits other financial metrics. The company's profit after tax for financial year 2024 stood at INR 8.52 billion, an increase of 5% from FY 2023. Our solvency continues to be strong at 191.8% at March 2024. Assets under management stood at INR
2.9 trillion at March 31st, 2024, a growth of 17.1% from the previous year end. This concludes the financial performance section. Over to you, Jitendra.
Thank you, Dhiren. Good evening. I will be sharing the salient aspects of our ESG journey. As shared in slide 24 of our investor presentation, we continue to retain the highest ranking in the Indian insurance industry, as rated by two leading ESG rating agencies. I'm also delighted to share that during this year, we received the Platinum Award for our ESG Report 2023 at the Vision Awards. This was organized by the League of American Communications Professionals. The other awards won this year for ESG are listed in our awards section. I will now share the highlights under the top five ESG focus areas. On environment, our initiatives are primarily focused on reducing what we consume and recycling what we use wherever possible. We have adopted best-in-class environment-friendly practices for reducing energy consumption, water conservation, and waste management.
In FY 2024, we have taken carbon footprint reduction targets in our sustainability journey based on the science-based target initiatives, what is called the SBTI methodology, and we are looking at an overall reduction over the next few years. As a part of our overall efforts to reduce our carbon footprint, we are also encouraging digital adoption across the customer lifecycle, and our sales health now stands at 92.8% in this year. On responsible investing, we already have a board-approved policy to facilitate ESG integration in our investments. Our investment team continues to factor in ESG risks by taking investment decisions and engage with investing companies based on the ESG score as and when required. As a signatory to the UN Principles for Responsible Investing, we remain committed towards integrating a responsible framework to promote ESG factors in our investing decisions.
Coming to social, on the employee front, we believe that people are key to strategy execution and a source of our competitive advantage. We have 90% of our employees rating us in the top two boxes on various parameters like advocacy, morale, learning and growth, feelings of safety, security, and empowerment. Our ratings for the place to work are best-in-class among Indian peer life insurance companies on a top global workforce platform. On the diversity front, our gender diversity ratio has improved from 37% of women employees in FY 2022 to 29% in FY 2024. We continue to encourage adoption of various enabling initiatives and policies under our D&I framework. For example, programs for new mothers returning to work and mentoring resource group for young women managers.
As a testament to our endeavors, we have been awarded as India's best life insurance company for diversity by Insurance Alert Inc. this year. Coming to customers and community, for the larger community, our aim is to increase financial inclusion through specially designed life insurance products, targeting socially and economically weaker sections, and we have covered 80.4 million lives as of March 31st, 2024. Overall lives covered stood at 96.9 million. Our 13-month persistency ratio of 89% is one of the best in the industry. This year, we settled more than 310,000 retail and group claims to promote digital adoption and deliver seamless service to our customers. We've integrated various ecosystem databases and repositories.
Coming to governance, our board has a majority of independent directors enabling the separation of the board supervisory role from executive management, and our efforts shall always be to ensure that we always adhere to best-in-class governance standards. To summarize, sustainability is intrinsic to our vision of building an enduring institution, and as we strive to serve the long-term and savings and protection needs of our customers, we would like to reaffirm our commitment once again to create a culture that embraces sustainability and goes beyond goals and targets for integrating best-in-class sustainability practices with our business processes. Thank you very much, and we're now happy to take any questions that you may have.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets only 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 Swarnabha Mukherjee from B&K Securities. Please go ahead.
Yeah. Good evening, sirs, and thank you for the opportunity. Three questions from my side. First of all, the VNB margin, so I just wanted to understand, there has been a contraction also sequentially from nine-month level to the full-year number. Now, if I look at how the product mix has played out between the quarters, I think there has been a larger shift towards annuity with every maybe group term life and group protection. Now, I just wanted to understand, is there any other so you have highlighted a few things like shift from non-par to par and lower group term life as one of the factors as a couple of factors. But for example, annuity, so annuity, you have been the recent product which has seen strong scale-up.
Wanted to understand also the margin implications of that because, as I understood, that it had kind of a lower upfront, higher trail kind of a payout model. So just trying to kind of understand how the margins played out like this and how should we think about the number going ahead as we move into FY 2023. That is the first one. In terms of Banca, if you could give us some numbers of how ICICI Bank, what was the premium garnered from ICICI Bank in fourth quarter as well as in FY 2024, and should we expect any growth in the run rate in FY 2025. Given the fact that the Banca channel overall seems to be focused on the non-linked savings parts, would it remain the case in FY 2025 as well, or is there a possibility of diversion towards ULIP?
Thirdly, you mentioned about the redesign of the commission structure. If you could highlight in which channels you are seeing this play out and what is the level of escalation, and could there be further escalation going ahead? Is it because of the competitive intensity or any other reason? Yeah. Those would be my questions.
Hi, Swarnath. This is Dhiren. Thanks so much for those questions. So let me pick up one by one. The first bit on the margin that you spoke of and the fact that we've introduced a new product on the annuity side. So that product has done well. I think something from the fact that we had a PR support on it at the start of the quarter, that pickup was decent. But again, as you also rightly mentioned, this is built with a trade-off commission structure, so it would cater to only these specific sets of distribution partners. Now, when you look at the margin, we've given the margin mix for the full year, how it moves from 32%-24.6%. And you see the expense change that has come through with us is a - 4.1%.
That's been the large shift across from start of the year to end of the year. The business mix, there has obviously been a shift. We spoke of the fact that the interest rate mix between the par, non-par, through the year has happened along with the group term decline. Overall, put together, the business mix has yielded a negative 1.5%, and there's been a - 1.8% primarily due to the yield growth movements. Now, some portion of this also has played out into the quarter four itself. While looking at incremental quarter four margins may not be the right way to look at it, it is more appropriate to look at it from a full-year perspective. Coming to your third question, let me pick that up first. The redesign of the commission structure, I believe, is largely complete.
We don't expect too many changes of this going forward into the coming year. Which channels has it increased? I think largely in non-agency channels, there has been an increase in commission rates, and these are, I believe, our market rates at this point. And no doubt, competitive pressure continues on those segments. The good part for us is when we look at the company in all, the retail business, when you break it down, roughly about half of the business is contributed from agency and direct. ICICI Bank contributes, plus Standard Chartered Bank, all of this contributes roughly in the range of about 70%+. So when you look at the multi-insurer channels, that contribution is actually quite small in relation. So to that extent, whatever disruption may happen, it happens within the multi-insurer space and less to do with our proprietary channels.
Coming to your second question on Banca, and especially when you look at ICICI Bank, we've called that out earlier as well. It's broadly in the 80-100 basis point range in a month. There could be periods when it's slightly higher given that the underlying product mix at ICICI Bank is fundamentally on unit-linked and protection. Unit-linked in this quarter has done well across the board. So to that extent, it is slightly higher than the average rate. ICICI Bank, there is no change in strategy. The numbers continue to be stable, and we'd expect that into the coming year as well. Within non-bank with. Yeah. So within bank, like Dhiren mentioned, ICICI continues its stable growth and protection, which is the chosen area of focus by ICICI. They've done very well at close to around about 45% of growth.
What we have seen in multi-insurer banks as well as non-bank partnerships is where we have seen some kind of a stress on overall top line as well. In fact, in quarter four, almost every distribution channel of ours grew in March over March as well as in quarter four over quarter four, except for multi-insurer non-bank distribution. That is where we saw the maximum stress because this was a channel which was largely focused on non-participating products and hence had to face the maximum brunt of that demand getting compressed through the year. So that business for us on non-bank partnerships is close to about 15% of our total. And adding to it, another 12% of our business that comes from multi-insurer other banks other than ICICI and Standard Chartered, overall business coming outside our proprietary channels is close to 27% of our business.
So this is where the disruption or competitive forces come into play, and you at times have to respond to the changes and look at adding value through various means. And it is not restricted only to commission, but it also pushes you to add value to areas outside pricing as well. But yes, when it comes to disruption, it is limited to only 27% of the business when it comes to impact on the overall commissions.
Understood, sir. So just a follow-up, I had also requested for some kind of guidance on how to look at or try to understand the margin for FY 2025. Some direction in it would be very helpful, sir.
Sure, Swarnath. I covered that earlier in the comments as well, but we are not fixated on margin. We're looking at growing absolute VNB. And given that one of the biggest drags on margin for the year, which has been the expense ratio, I think that's behind us, which has been driven by the commission guideline change. I believe if the product mix stays this way, then it should kind of stay broadly stable at this level. But of course, depending upon where customer demand is, we will be looking to grow those segments. And to that extent, the product mix shifts, you will see a shift in the margin as well. Yeah.
Just to give you some fair idea, if you were to compare this quarter four versus last year's quarter four, actually, non-participating guaranteed products contributed almost 37% of the overall mix last year, which this year, it has come down to 10%, which we believe is going to stay at similar levels even in FY 2025. Second impact was group protection. Group protection was almost half of what we delivered last year. If you look at these two impacts, I think it has already built into the base. This probably will not go further down from where it is currently.
So to that extent, you can expect that the volatility that you saw in the margins on account of good protection, on account of non-participating guaranteed products, which had relatively better margins last year, stabilization of this will probably lead to more stability of margins going forward in FY 2025.
Understood, sir. The exit rate would be a better metric to look at or the full-year run rate in terms of margin?
I think we should look at the full-year rate.
Okay. Understood. Very helpful, sir. Thank you so much and all the best for this financial year. Thank you.
Thank you. A reminder to all the participants, please restrict your questions to two per participant. If you have any follow-up questions, you may rejoin the queue. The next question is from the line of Avinash Singh from Emkay Global Financial Services. Please go ahead.
Yeah. Hi. Thank you. Two questions. The first one was on embedded value. If I see there, of course, I mean, you have a negative balance in terms of mortality, but you said that is kind of for the future expectation in mortality. So then can you explain, I mean, should not it have gone into operating assumption changes rather than variance? Because if you're or if you can break it up into whatever sort of your experience that was in FY 2024 or what is sort of for the future changes. And second one is, again, a bit on VNB. If I were to look, the product you have launched, particularly the 100% return of premium and all, the product is typically designed where, I mean, sticking for the long term or you could have a more trail-based commission.
Additionally, also, you sort of highlight that you have one of the highest sort of distribution where you don't have to compete in open channel. Yet, I mean, the commission rates have gone up so much. So yeah. So in that context, I would like to understand if you have sort of a product proposition is changing more favorable to customers, and yet it requires sort of a higher amount of payouts. So I mean, what's happening there particularly? So these are my two questions.
Thank you. Avinash, on your first question in terms of variance, the reason why we're interested in variance is because we believe it will be short term. If it was permanent, then we would have taken it as part of our operating assumption change. The second question that you've pointed out is on commissions.
We've seen that the commissions have been redesigned, and we have to appreciate that the commissions have to be in line with market. It cannot be out of line with market because otherwise, whatever proprietary distribution that we've built may not stay with us on a sustainable basis towards the long term. We may be able to bear competitive pressures at the margin in terms of where the distribution payouts are, but you cannot be far away from the market.
Yeah. But your product design has changed. I mean, so at the moment, a couple of the products you have launched, that is not really yet available with the market. So if you are I mean, if you are sort of making product design policyholder-friendly, and yet you are matching the sort of the payouts as part of the market interest, then, of course, I mean, the margins will be extremely under pressure.
No, no, you're right. These products are things that we are experimenting with, which will align the distributor incentive along with where the customer output has to be. But again, given the way these products are at this stage, they're quite new to the market. The pickup is small relatively. And so an ICICI has done this only in quarter four. So you've not seen the full playout of this across the year. The pickup, we understand, is also quite limited to those distributors for whom trail commission works. Some of the smaller distributors may not grow up with this trail model because they would have their own working capital challenges.
Just to clarify, after this product launch that you're talking about, both on 100% surrender value as well as trail-based unit-linked product that we launched recently, as a percentage mix, even on a standalone March or a standalone quarter, this mix still remains very small. And the distribution which has picked up this product also is at a very startup stage, very small proportion of our overall distribution has actually adopted this. So anything that you do with that small proportion of entire distribution will not have an impact on the overall distribution cost or top line. That is something which I thought I'd clarify.
So Avinash, just to add to that, this product that we have launched where the commissions are different, it's just that the commissions are different. There's no reason why the margin is low on this. That's something that you should understand as well. Essentially, what we're doing is aligning distributor incentives with the customer's required output.
Okay. I could follow up. The persistency variance, of course, it should be a very, very small number. I mean, again, see in the EV walk, it's a small negative number. But if I see persistence typically for you, it has been generally improving. So I mean, if there is something specific, what sort of a cause is negative variance? Because if I see over the years, generally, in the disclosed cohort at least, persistency has been generally low.
Absolutely. So the early-tier persistency, you've seen that climbed across these years. The 13 month persistency, we're close to 90%. I think pretty much best in class. And we're quite happy to share that a second-tier persistency, which is the 25th month, has come up all the way till 80% against last meeting. The reason why we have this negative variance is because this is later period surrenders in the point of peak market that's created a run-up in terms of outflows. And that has created a little bit of a variance on this front.
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. So see, in the VNB walk, the 14 biggest points, in fact, with respect to assumptions, can be attributed largely to the OpEx, or you have revisited some assumptions with respect to persistency and mortality also, and that is getting reflected in the margin compression. That's my first question. The second question is that, I mean, honestly, ICICI has done well for you because of the new product launch. And honestly, it is one of the largest contributors to you compared to peers, around 10% of the total APE.
So if this product remains a focus area, and I believe this was driven by prop channel and agency channel, then if this product has a margin lower than the company average, which is around 24.5, then if this product does well, are you still confident that the margins, what you are reporting today, are going to hold up for the subsequent years or not? That's the point. And lastly, one, if you can give an exact number of how much ICICI Bank contributed for FY 2024 in APE terms , that will be useful. Those are my questions.
Thanks, Sanketh. So the -4.1% that is due to operating assumption changes is, of course, because of expense ratios. That's a short answer to that. In terms of the product that you mentioned, the ICICI product, which is the GIFT Pro flexible benefit enhancer , again, the margins on this are not low. Please understand that. Just because the commissions have trailed down does not mean that the margins are low on this product.
Yeah. My question was whether the margins are better than the company average or lower than the company average.
Yes, they are.
But they are better than the company average?
Yes, they are better.
Okay. Okay. Fine. And if you can spell out the ICICI Bank number.
Yeah. ICICI Bank contributes very similar number right through the year. They were close to 12%-15% is what they ranged month-on-month. Some months are better. Some months are lower. Eventually, quarter four, because of protection doing very well and it increased demand on unit-linked, it was relatively higher in comparison to what we have seen in ICICI Bank in first nine months.
Okay. So I can work with 13.5 kind of a number for the entire year, right?
Yeah, yeah. You can work on that on the retail side.
As we indicated, we're looking at about INR 8,000 crore a month, broadly where it is at. Like Amit also mentioned, depending upon the quarter or the environment, it can be slightly higher or lower depending upon how unit-linked asks.
Got it. Got it. Yeah. That's it from my side. Thank you very much.
Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.
Yeah. Mostly, my questions have been answered. Just one clarification I wanted on the mortality and morbidity variance of FY 2024. Sorry, maybe I didn't understand. It is the same amount of negative variance that we saw in the COVID year of FY 2021. So probably if you can help me understand which, I mean, where exactly this, I mean, that big an impact comes from. I understand you're saying that it is one of those incurred but not reported claims. But if you can help me understand this a little better?
I say you can't correlate those two periods. Yes, this is an IBNR-related element, and this is largely we've seen come out group credit side.
It's from the group credit business. Okay. Okay. Okay. So is this coming from the group credit business within this year or historical years?
It's over the book. It's not just this year.
Okay. Over the period. Okay.
As we spoke of earlier, we still see positive variances. If it were not for this provision that we held on IBNR.
Got it. Got it. So should we expect our pricing on group credit business to the end customer now to change because of?
No, not at this moment. Not at the moment. We believe this to be transient, and we'll keep assessing this and keep a close watch on where these variances end up. But at this point, no change to price.
Okay. Okay. This is useful. Thank you. Yeah.
Thank you. The next question is from the line of Supratim Datta from Ambit Capital. Please go ahead.
Hi. Thanks a lot for the opportunity. My first question is trying to understand this 4.1% operating assumption change in the margins. What proportion of this would be due to higher commissions versus fixed cost absorption because your growth in cost this year was higher than the AP growth? If you could break that up, that would be very helpful. And that's the first one. Next is this year, the cost growth was higher than your AP growth. Next year, how should we think of it? So what kind of cost investments are you planning? And given that this year we have seen significant investments, could this year slow down next year and hence some bit of leverage flows into the market? That's the second question. And lastly, you have given stock options. Just wanted to understand what are the thresholds for exercising those stock options?
What metrics are these stock options based on, and what you would need to hit for the vesting of those stock options? That would be helpful. Thank you.
So Supratim, the operating assumption change, as we spoke of, is due to expense ratio. Difficult to call out what proportion comes from commission and what proportion comes from OpEx. You've seen the overall cost go up by about 20%, and that has impacted the overall unit cost. One of the things to also note is that we believe that this entire redesign of the commission structure in this transient year, I think, has been largely complete. So going forward, in terms of where the commission rate should be, we believe them to be largely stable depending upon the channel and product. Now, how do we expect the outlook into the coming year?
With these commissions being stable, essentially, all that we'll be able to work with is the operating expenses, which we believe we should be in a position to calibrate based on our growth in a much more considered fashion as compared to the previous year. So effectively, we would not want to lose any operating leverage on this. Any operating leverage that we gain, we'd want to invest that back into the business. We do not want to stop our investments going forward because they are going to be the building blocks of growth into the coming years. With respect to the, you had a question on the stock options?
Yes.
Yeah. So these are grants to employees that we make, employee stock options and employee stock units. We have a scheme approved by the board. So as per the new requirements, we are required to as a secretary, we practice to inform the exchange. So I guess you're referring to that. These are regular grants we've been making for the last few years.
Is there any requirement for the vesting? So you would need to hit a certain threshold or certain group, certain profitability for the vesting, or there is no such threshold for vesting?
There are certain vesting requirements for the employee stock units. It's part of the scheme. ESOP says, "No, you only make money when the stock price is above the grant price." These are granted at the exercise prices at yesterday's market price.
Yeah.
So Supratim, one of the supplementary to the point that you raised on commissions, from our understanding of the market, we believe that our commission levels are actually lower than those of our large peers. That is something that we've understood the way it sets out because it's not just the commission at play. Essentially, the entire package that you provide to the distribution partner, be it in terms of the product, be it in terms of the process, commission is one element of it. You've heard us speak about various enablers that we had launched through the year, things such as same-day commissioning. We've got the entire ICICI Pru Partner Stack, which enables you to provide a full 360 view of the customer to the distribution partner. It also enables us to penetrate the partners' base to a much greater degree with the use of analytics.
The entire picture that we present is that we would like to be the most partnerable life insurer.
Got it. Thank you.
Thank you. The next question is from the line of Ankita Srivastava from ABSLI. Please go ahead.
Thank you for the opportunity, sir. So I wanted to understand what is the new business premium generated in credit life . And if you can let us know the breakup between the other partners and ICICI Bank. That's the question, sir.
Ankita, I didn't get your first question. You wanted the new business premium for
credit life business?
For life business?
Credit life.
Credit life. You've broken down the mix.
Just a second.
Yeah. We'll pull up the number in a minute. Just a second. Yeah. So credit life was INR 602 crore of AP for the year. This is there on slide number P9.
Okay, sir. And also, if you can just throw some light on the partners' breakup from ICICI Bank and the other partners.
So yeah, we discussed that in the context of a previous question. ICICI Bank roughly range about INR 80-100 crores a month through the year. Of course, the number depends upon the current environment. If unit-linked does well, then the number can be north of that. If unit-linked does not do well, it ends up being a little lower. So to that extent, I think it's been fairly stable through the year. But anyway, in the range of 12%-15% of retail AP.
Okay. Thank you, sir.
Thank you. The next question is from the line of Madhukar Ladha from Nuvama Wealth. Please go ahead.
Hi. Great. Thank you for taking my question. So first, on the IBNR provision, so of INR 282 crore, is this coming largely from the credit from the GTI business, or which sort of protection business is contributing, the retail protection, credit life, or the GTI business? That's my first question. Second, on overall retail business growth, so 4Q, we've seen pretty good numbers coming month-on-month. Should we expect sort of similar run rate going into FY 2025, or how should we look at growth in terms of industry or private life insurers, retail premium growth? So in context of the industry, how should we sort of think about your growth? And sorry, in terms of are there any sort of in your operating assumption changes? You mentioned it's largely because of expenses. Are there no other sort of changes of where relating to mortality, morbidity assumption changes?
I just wanted to sort of clarify on that as well.
So going forward on FY 2025 momentum, adjusting for seasonality, I believe that for all the capacity creation that has happened over the entire last financial year, I think the interplay of products, few channels where the investment was done, and the capacity improvement will play out well for us. So we are fairly confident on the momentum that we build going forward into FY 2025 year on year. So exit of this year is on a very different foundation in comparison to where we were last year. This gives us confidence that what you witnessed in Q4 FY is only the big money, and probably from here, we will look good from here. Like I mentioned, for the interventions on product, new interventions, new projects, capacity improvement, which has improved drastically, I think it will play out well for us in FY 2025.
What would be sort of your target with respect to sort of industry growth? You would have some number in mind relative to industry growth, right?
Yeah. Relative to industry, you made my answer very simple. Since you asked me relative to industry, we are intending to do an alpha, right? So what we delivered in quarter four is what we intend to do going forward quarter-over-quarter.
Got it.
So Madhukar, on your other question in terms of where is that IBNR from, it is from the credit life business. And you asked another question on the operating assumption change. It's a bunch of small, small things around persistency around mortality, mobility. So it's too small. Anyway, it's all INR 70 crore at the end of it.
Got it. And one final question on the ICICI Bank channel. So now you have a ULIP product, which has largely trail commissions. You have an annuity product, which is also largely trail commissions. So you seem to be creating a bouquet of products, which probably ICICI Bank would sort of look more favorably towards.
Is there any conversation happening on those lines where the bank may be more amenable to selling these set of newer products, or are you sort of planning towards that over the next six months, eight months, you'll launch more of these products, and these will then be part of the ICICI Bank channel? Is that the thought process?
So choice of products, as a part of our partnership philosophy, we leave it with our partners to decide. They have their own priorities. They may look at few products at various points in time, and they choose to select those products as part of their overall bouquet of services. So I will not comment on what goes on because it's an evolving situation. Every quarter, we take stock as to what we want to do and how we want to progress. Specifically on these trail-based products, we are looking at constantly insights from the customers as to what they are assessing, what they are looking at as alternate options, even outside life insurance business. And hence, we are trying to address the core customer demand or core customer need on investments and building savings over a long period of time.
And to address that core long-term investments or long-term savings is where we have created this product, which is closest to the customer's worldview. And from there, then it is up to the distributor who's closest to that customer to make this product available. That's where the choice of distributor comes in. So we stay true to the customer. We create a proposition which is most meaningful to them. And then we make an offer to our partners to see whoever has access to that customer, they pick it up. That's why in a diverse distribution, not every product will get picked with every distributor. It also depends upon their priorities as to what they want to do and where they see synergy. So that's what my answer is on the products.
For all the new initiatives, new products, new process interventions that we did, not everything was meant for every distribution partner. That's an advantage as well as a consequence of running a very diversified distribution. Our job is to create products. Our job is to understand customers and then make it available. And depending upon partner priorities, they may pick few. They may drop few.
Got it. Thank you and all the best.
Thank you. The next question is from the line of Gaurav Jaiswal from Schonfeld Strategic Advisors. Please go ahead.
Hey, thank you so much for the opportunity. Just want to follow up on the margin again. I want to understand because the first half and the second half margin is quite different. So it advised us to look at the full-year margin. So just want to understand. And I understand the business mix will be volatile quarter to quarter. But if I just look at fourth-quarter margin, and if we assume that business mix doesn't change going forward, how does that margin move up? What are the levers for the margin to move up towards that full-year 2024-25 kind of margin level? As you mentioned, we won't see commission restructuring or payout increase further diluted from here. We won't see operating leverage further diluted from here.
But that doesn't seem to suggest that without business mix change, margin should move up from what we see in the second half or the fourth quarter. I just want to understand that.
Yeah. Thanks for the question. I think the right way to look at margin is to look at it from the full-year perspective. During the years, there are certain assumptions that we take in terms of the unit cost based on the full-year's business delivery. And that gets torn up as we get through to the end of the year. So I think an appropriate way to look at it is to look at the full-year margins. From here on, as we spoke of, margin is not a core KPI for us. We're looking at growth of absolute VNB. However, there can be positives and negatives to the margin. Depending upon the way the product mix evolves, that is one way that we could look at the margin moving up or down. Retail protection growth has done well through the year.
If that continues and we're able to leverage upon that, we should be able to grow margins. The group-term business, which had declined through the year, if it stabilizes, that can become a support. Credit-life growth will also help bolster margins. Of course, there can be a downside in terms of unit-linked going faster. But then, like I said, end of the day, what we're looking for is growth in absolute VNB. If the mix stays the way it is, as I spoke of earlier, with the commission restructuring behind us, we believe we should be able to stay where we are. So expense for unit costs that we had to take on during the year, I think, will be behind us at this point.
Got it. Thank you so much.
Thank you.
Can you get the next call online?
The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah. Hi, everyone. Good evening. So firstly, if I heard it correctly, you mentioned that your commission rates are lower than the larger tiers. Is that correct? And if that's so, do we see any further pressure on commissions coming through because we want to be in sync with the market rates on commissions? Secondly, from a growth perspective for next year, you've mentioned that you have been investing in channels. And particularly, I was just more interested in the non-bank partnerships where you forged a lot many partnerships in last year. Now, if those are to fructify and result into a stronger top-line growth, won't we have a significant leverage coming in from those businesses which could drive up margins? Or do you expect the momentum in these partner tie-ups to continue?
Lastly, from a broader across-pan-India strategy, now with this ticket size of INR 5 lakh plus, we're going INR 5 lakh plus going through a tough time. Do we expect more granular growth, and you would invest into growing a Tier 2, Tier 3? Some numbers on tier-wise breakup and growth. And does the Tier 2, Tier 3 kind of come at a lower margin versus the Tier 1? Those would be my questions. Thanks.
Yeah. Hi. This is Amit. Let me take your question. First of all, you mentioned whether our commission rates are actually lower than some of our peers. We don't believe in speculation, actually. We have visibility to 27% of our business, which we do through multi-insurer. Hence, we have a fair amount of conviction on making the statement that we are definitely not the market leader on this. So our commissions are definitely lower than the peers where we are operating together in some of our multi-insurer partnerships. That is something for sure we can say. Rest, for outside, what happens, we don't speculate. Two, on the new partnerships, you mentioned that we have added some 200-odd partners over the entire year. See, this is a process that we have been following for the last quite a few years.
Some part of our distribution outcome that you saw in FY 2024 also was contributed by partners who were added in FY 2023. FY 2022 also, partners went through the learning curve and started contributing. It happens in cycles. Every partner comes, goes through a learning curve, adds to the operating leverage, and starts giving us the bottom line. This is something which is an ongoing process, not just in non-bank partners, but even in our proprietary distribution. That happens where you build capacity in year one, and it starts playing out over a period of year two, year three. Once the maturity of the distribution happens, both our employees, as well as the advisor, go up the learning curve and start contributing over a period of year two, year three. That is something that we are quite confident.
I think for capacity that we added for the last two years, it has started playing out well because some of the models that we have created on building capability have held us in good stead in H2. It was based on that confidence that we had given the guidance of 10% growth in quarter four. I'm very happy to state that what we invested on capacity turned out, and we managed to double our productivity from quarter three to quarter four by virtue of the leverage that we got through capability models, which started giving us returns going forward. On the last question that you mentioned about 5 lakh plus business becoming a challenge, well, it was a challenge in quarter one, quarter two because there was a period when the alternate solutions were still being explored.
There was a period where demand I will not say got compressed. It got deferred. But however, the buying team market, more than INR 5 lakh business actually came back. So putting together, participating, as well as linked business, more than INR 5 lakh business on a standalone basis in quarter three actually grew over last year. So I don't think that issue remains. The number of options available for an affluent customer who is willing to invest more than 5 lakhs are anyways limited. So in unit-linked product, you still have the best tax solution. So from that perspective, even on pension platform, there are product categories which give the best and the most optimal tax solution on a high-ticket side as well. So I don't think that will get impacted.
It was a large quarter one, quarter two impact was obvious because a lot of the demand in quarter one, quarter two was also pre-poned in the last quarter of last year. So I don't think more than INR 5 lakh is going to be a challenge. At the same time, your point on going retail and granular is, of course, taken. This is something that we will continue to work on. Of all the distributions that we have, whether it is agency or through bank partners or through non-bank partners, we are clearly represented in tier two and tier three markets already. All right? So to that extent, typically, the composition of individual customers that you find in tier two, tier three markets is different. So probably, you will have more mass and more mass and mass affluent in comparison to affluent in a smaller market.
And otherwise, life insurance product, that piece is quite simple. Eventually, it is a life stage of the income that you earn besides what you buy for the goals that you have in life. So from that perspective, product contours don't change from one market to another. It is the composition of customers that change from market to market. I think we are well placed in terms of overall category of products that we have available in our bouquet. And hence, we can cater to tier two, tier three markets, any upsurge in demand that we may witness. And we have distribution partners who are representing these tier two, tier three markets fairly across banks, non-banks, as well as the other agency distribution.
My question was more on if you go granular, have you kind of priced in the mortality or morbidity or persistency, which could be really different between tier two, tier three, and if you have to go down further? The mortality, morbidity, and persistency can be really different. Have you priced it?
In fact, in the opening address, Amit mentioned that we do run an analytics-based propensity to lapse and propensity to logistically invest model on our new business model. So at the time of acquiring a new policy or selling it to a new customer, the policies go through that rigor of identifying as a potential lapse or a claim at an early stage, and we go through an extra due diligence process for that. The reason why our persistency is also improving quarter-on-quarter for the last few quarters now is largely on account of this model that we have deployed. And the early gains are already visible in H2.
So to that extent, I think tier two or a tier three market, while mortality is priced as per the profile of the customers, but from the process that we have put in at the time of onboarding, I think we'll be able to eliminate ourselves from the profiles which are not desired.
Just to add to that, from industry-level studies, we understand that the mortality in the tier two, tier three cities will be higher than that of tier one cities. That is something that we're very cognizant of as we step into those areas. We've also seen some numbers in terms of where the persistencies are. They typically are lower. Those are things that one should take into account, as you mentioned, beyond tier two, tier three.
Got it. That's helpful. Thank you.
Thank you. The next question is from the line of Dipanjan Ghosh from Citi. Please go ahead.
Hi. Good evening. So two questions from my side. First, if I look at your fourth-quarter non-linked savings business, and if I strip off the one-offs and the base, it seems to be down around 25%-30%. While you mentioned that from the third quarter onward, the high-ticket bar and ULIP start to revive on a YOI basis, and assuming trends continue into 4Q, can you give some color on what led to this sort of moderation in the non-linked savings business in fourth quarter except the one-offs? Second, on the 27% of the business, which is non-captive, non-proprietary or multi-channel, as you call it, can you shed some color on what gives you confidence that the commission payouts have stabilized?
Is it like you're seeing trends across other players or other insurers present in those channels, or are their EOM levels kind of all used up such that they cannot really kind of compete more going into the next year? And in line with that, you also mentioned that you have seen counter-share improvement at these multi-channel partners. At least for the top four, five partners in this multi-channel network, could you give some color on the counter-share improvement, if possible?
So Dipanjan, a few points. One, when you look at quarter four product mixes, yes, the non-linked has not done so well. But to some extent, I think annuity has stepped up in that period and supported that. That's something that we have seen in the quarter four. In terms of, sorry, Amit. I missed your second question on this.
Yes. The second question was on the.
Commission rates. On the commission rates, see, these have been broadly stable over the last couple of quarters. We spoke about this at the end of last quarter as well, where we had seen some stabilization come through. But I think as we have now exited quarter four, we are fairly certain that at this point, the commission rates seem to be stable. Of course, it all depends upon how the environment evolves. But by and large, there could be some changes at the margins, but we don't expect any more scale movements from here on.
Sure. If I can just on the counter-share across some of these multi-channel partners, if you can give some color on that from a one-way perspective.
If information was available in the public domain, and I could share with you because this is one number which is informally tracked very closely, all I can say is that for the business growth that we witnessed in multi-insurer distribution, both in banks as well as non-bank partnerships, we have not degrown as much as the overall space. Partner by partner, we have seen our share actually growing up. However, since this number is not publicly available, I can't quote that on this one.
Just one follow-up on the first question. On this product mix, you mentioned that Annuity has picked up, and yeah, you've done well on that. But getting split between, let's say, if you take the guaranteed return, low-ticket or the par low-ticket, has that reported a positive growth, or is that also lagging? Because, I mean, from a medium-term perspective, while the high-ticket you mentioned, you're even assertive on that. But at least on the mass market low-ticket, I'm just taking cues from the last few questions. Is that segment growing? I mean, if you can share some qualitative understanding on that.
So Dipanjan, by and large, if you look at the margins, I think when you look at the rates that are being offered all the way through quarter four, I believe by and large, when people have held them steady, they have been sub-optimal relative to what they were in the previous quarters. I think the other interesting part is that once the year has gotten through, we have seen a correction in rates on the non-par side for most companies in the first 15 days of this month itself. So there will be some stabilization of the margins for non-par. This will happen into the coming year. But actually, when we look at the more than 5 lakh customers, the more affluent customers, I think we have not lost them because we've been tracking that customer segment across all lines of business.
So while those who are not amenable to buy a non-par product have actually switched out and bought a participating as well as a unit-linked product. So to that extent, as Amit also pointed out, through the second half of the year, we've not really lost those affluent customers. The growth in the less than INR 5 lakh ticket size broadly has been more around the participating when you look at the non-linked space. The switch out has happened from non-par into participating at this point.
Got it. Got it. Thank you and all the best.
Thank you. The next question is from the line of Ajog Frederick from Sundaram Mutual Fund. Please go ahead.
Hi there. Thanks for the opportunity. So one question. You mentioned about alpha over industry. So what products are expected to deliver that alpha for us given that protection normalized, and let's assume ULIPs also can normalize in a steady market? Will it be annuity and non-par in 2025?
It's very difficult to analyze which specific product line. As a manufacturer, we will continue to focus on creating multiple options and keep working through research in understanding customers' worldview and trace change in preferences. So we'll keep manufacturing products which we believe are meaningful, which we are picking up as feedback from customers. And then it is up to customers to give us the momentum. So for us to decipher at this point in time which category of product will really drive growth, we are quite capable of creating multiple products across categories, which is making us confident that no matter what the environment would be, I think we have a product for every environment.
At the same time, in every category, whether a customer has a low-risk appetite, medium-risk appetite, or a good-risk appetite, I think we are fairly comfortable in catering to any consumer segment and irrespective of what happens in the market. But to put a finger on one category, it is very difficult at the beginning of the year.
Okay, sir. I mean, I'll flip it. At a channel-wise, which channel can deliver above-average industry growth? I'm assuming you're taking a 15% of industry.
So like I told you, against a 12% retail AP growth that we witnessed in the company, our proprietary distribution grew in excess of 20% in quarter four. So our direct distribution grew at 20% in quarter four. Our agency business grew at 28% in quarter four against the company growth of 10% against the private insurer industry growth of 2%. So obviously, proprietary is where we will look at investing further, and we'll see how it grows.
Sure. Thank you, sir. And I'm assuming industry is expected to grow between 30% and 15%. That's what your ballpark expectation is?
Sorry, Amit. I didn't get that, Raja.
Industry is expected to grow somewhere in the range of 30%-15%. That's what you're assessing at this point in time?
Difficult to put a call on industry, but I think we're fairly clear where we want to be if we can alpha over the market.
Sure, sir. That's it from me. Thanks.
Thank you. The next question is from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
Hi. Am I audible?
Yes, Nishin.
Yeah. Yeah. Thanks for taking my question. I'm looking at I'm looking at slide 19 of your presentation, essentially the EV walk, and trying to understand what are the operating assumption changes that we are making for you.
Nischint, we picked this up earlier as well. There are a variety of small changes that have happened. At the end of it, it's INR 70 crore. It's not really material.
Sure. And just to reclarify on the VNB margin movement, the -1.5% is essentially the business mix, which is probably a shift between ULIP and non-linked. Is that the way to think of it?
Everything put together, we've had a drop in the group term numbers as well. So everything put together is what has contributed to the business mix.
Sure. And 4.1 is purely higher expenses and higher payouts?
Yes. That is the expense ratio. Correct.
What is the economic assumption change negative?
These are yield curve changes. So as we had mentioned in the earlier call, there has been competitive pressure. Most participants have held on to rates through the year. That has led to reduction in spreads on the non-part side, non-part annuity side.
That comes under the economic assumption changes?
That's under economic assumption.
Basically, it's the IRDAI pressure that we're talking about, right? IRDAI putting pressure on it.
Yeah. You got that right.
Okay. And finally, just on this VNB contribution, when we look at when we try to calculate segmented VNB margin, it looks like the heavy lifting of this margin contraction is all in the savings non-linked portion. Protection margins and savings-linked margins have probably held on or maybe even expanded a little bit. So is my reading right, and why is it just reflecting in one segment?
In one segment, which is the non-linked savings, that's, again, the APE mix that you see between par, non-par.
Okay. Got it. And sorry, just one final one. If I look at the channel mix, if we look at bancassurance and try to see the bancassurance mix, I think in last FY 2023/24, ULIP ratio has actually been stable. While for all the other channels or everywhere else in the industry, we have seen ULIP going up. You mentioned that ICICI Bank continues to push ULIP. Does it mean that the other banks have significantly slowed down in ULIPs or probably doubled up on non-linked savings in this year?
Yeah. So let me just do a small correction. Actually, ICICI doesn't push unit-linked products. As per strategy, unit-linked products are available on the shelf. If there was to be a customer demand, they offer unit-linked products. So it's not something which is really pushed. And as far as unit-linked products being sold in other bank partners, you are right. This is not a category of product which is understood well in smaller markets. And a large number of bank partners have presence in smaller markets, semi-urban and rural markets where the preferred choice of product is actually not unit-linked. So that is the reason why when you look at 43 other bank partners apart from ICICI Bank and Standard Chartered, there has been relatively moderate growth on unit-linked business in these partners.
Got it. Thank you very much. Those were my questions. All the best.
Thank you, sir.
Thank you. The next question is from the line of Raghav Garg from JM Financial. Please go ahead.
Sir, I wanted to ask. Hello. Am I audible?
Yes.
Yes. Go ahead, please, Raghav.
Yes. So thanks for the opportunity. I wanted to ask that the margins on the protection business are actually not present in terms of how much the fall has been there in group term. And so what explains that? Have the margins on the individual protection and the credit life contracted in this year over the previous year? Because last year, we were at 72% for the full year. This year, we are at 75%. So it's a bit difficult to break down some of these group businesses because they come in from multiple sources. And by and large, you can look at one average rate for that particular type of business, but it's actually an agglomeration of multiple partners that they tied up with, especially when you look at the credit life side.
So all in all, put together, difficult to put your finger on what has been the big change, but it's been broadly stable across the period. So what we lost in terms of AP, in terms of group term, we've been able to make up on detail to that extent along with credit life. So it's a mix of all. It's hard to put a single answer to it.
And also, the ticket sizes on the protection business have increased. So is it ROP is coming in at maybe lower margins on the individual protection? Is that a good understanding?
No, that's not the right way to look at it. ROP is still about 20% of the mix, roughly about 15%-20% as well still through the year since the time that we started. But again, the way that we're looking at ticket sizes, this could be a function of the underlying policy term that we're selling towards. It could be a function of the customer segment that we're going after. So it's a mix of multiple things that come over there. Beyond that, there's really nothing that has changed across the period in any large degree.
Okay. Thanks. A final question on the ULIP margins themselves. Last year, we saw the margin degrow by around 290 basis points because the product itself had degrown. This year, again, we are above the FY 2022 levels, but still, the margins have not increased meaningfully. Is the term of the product lower now? What explains this flat margins?
To some extent, whatever elongation that we have made in the term, would that be an offset by unit cost changes on the link side as well?
Okay. Okay. Thanks. Thanks a lot for the answers.
Thank you. The next question is from the line of Aditi Joshi from J.P. Morgan. Please go ahead.
Yes. Thank you for allowing my questions. I have a couple of very quick questions. So the first one is, can you please share the mix of the business mix across tier one versus tier two, tier three, and the growth rate differential between these? And the second one is, if you are able to share the growth number in the number of life insured or the number of customers for the full year 2024, that would be helpful. And lastly, on the slide number 21, when you look at the sensitivity analysis, the sensitivity to, let's say, changes in 100 basis points in the reference rate has moved up a lot between 2023 and 2024. So can you please explain why this is so? Yeah. This is all. Thank you.
So we haven't made public the split between tier one, tier two, tier three. I think for us, given that we run a very, very diversified distribution, we are dependent upon our partners to be able to expand into their territories, be they be corporate partners or agency and direct. So we're not looking at expansion on its own. Essentially, we're looking at expansion through our partners. What's within our control, of course, is more around direct where we've got our own offices, and we're expanding within those segments. Agency is another area that we could expand, but then that would be slightly slower to that extent. I don't think looking at tier two, tier three at this point is pertinent. Can you look and let me pick up your third question, which is around sensitivities? Yes, sensitivities have gone up to some extent when you look at VNB.
But if you look at the book, especially on EV, it has not really changed too much. Some of the sensitivities on EVs, which are interest rate-driven, are essentially things that can be reversed by just changing rates to non-par products and annuity products. The one that has, let me say, hurt has been on the expense side, which has impacted the sensitivity from the previous year to this year. But as unit rates become stable into the coming year, I think we'll have less of that impact coming through.
Sorry, just following up on the second question. It was on the growth in the number of customers for the full year 2024. If you are able to share that?
The number of policies RTT has been flattened. It's about the 3% growth when you look at it for the full year. We've got about 587,000 policies that we wrote in the last year versus 571,000 in the previous year.
Okay. But that is the number of policies, right? So the reason I'm asking is just wanting to understand the growth is coming from acquiring new customers or you're selling more policies, let's say, more than two or three policies per customer. That's what I wanted.
So like the previous year, part of this comes in from upsell business, which we are quite strong at. But there's also a large portion of it comes in from new customers today. We haven't split that out in this metric.
Okay. Got it. Thank you.
Thank you. The next question is from the line of Madhukar Ladha from Nuvama Wealth. Please go ahead.
Hi. Good evening. Thank you for taking this follow-up. One thing, if I look at your channel mix, the annuity contribution in the agency channel has done quite well. So we see a very good pickup over there. So I wanted to get a sense, is this because of the new unit-linked product, or is there something else happening over there? And second, just coming back on the higher provisioning, higher IBNR provisioning, I didn't understand what really necessitated this higher provision in credit life. Are we seeing less sort of reported claims, abnormally less reported claims? Or what is happening over there? Why did we suddenly require this higher provisioning?
So to take your first question, Madhukar, yes, you would have seen the annuity grow across agency as well as direct. That's very clearly the new product that we have launched. But again, given that this is built on a trail model, especially when you're looking at intermediaries, this will be picked up only by very few, given that it is a trail-based model and there is limited upfront. So those smaller distributors who may require a higher commission rate just to fund, let's say, a working capital issue will not pick this up. Coming to your second question in terms of IBNR, we've seen some delay in claims that are coming in from the group credit side, which is where we have kept the provision at this point. Like I said, this is temporary. This is the mean delay that we're seeing at this point.
We'll evaluate this as it goes by.
Right. But if there is a delay in claims that you're seeing, then that should be part of your normal provisioning itself, right? And that should then get covered in your normal provisioning. You should not require an additional provisioning, right? I'm sorry. I'm probably dwelling a little bit more into this, so yeah.
No, we normally would keep an IBNR on this just to cover claims that could have been intimated could have occurred but not intimated yet. We've seen this in a part of the portfolio, and we've kept it towards that largely.
Okay. Okay. Thank you.
Thank you. The next question is from the line of Shobhit Sharma from HDFC Securities Limited. Please go ahead.
Hi, sir. Thank you for the opportunity. Sir, since quarter, we have seen the annuity segment ramping up very rapidly, primarily in the agency channel. So what kind of persistencies are we building in since this is a 100% return of premium product? What kind of persistencies are we building in while calculating the margin? That's my first question.
See, if you ask me as a customer, if you were to look at this product, the proposition is not about taking the money back. The proposition was about taking that fear of crisis away. In case customer was not capable for any crisis, not being able to make subsequent premiums, the fear of losing the principal may have prevented certain set of customers from investing in life insurance kind of product. So it was this insight that we were working on. Otherwise, if the customer was to take his money away after two years or after one year, he tends to lose GST and the opportunity loss that he may have if he were to invest it into a fixed deposit also. So I don't think from a customer perspective, we believe that persistency will have no impact of what we have in a regular annuity range of products.
We have not factored anything adverse in the portfolio at this point in time.
Just a quick follow-up on this. We have sold this via agent. We have seen that in the year after five years, we have seen surrenders ramping up rapidly after the end of five years. So how are we preventing this? So we have built in the trail-based payouts, but how are we going to restrict that surrenders going forward after one year or two years down the line?
First of all, surrender as a concept in ULIP is available after five years. On annuity, surrender as a feature doesn't exist. And annuity, the core reason for you to buy annuity is to get income for lifelong. So if you were to take money away after five years, it doesn't help the customer because the gains will be very minimal. And we don't believe customer will get anything by taking the premiums away after five years. So what you see as the behavior of unit-linked business will be very different in comparison to what we envisage in this category of product because the money will not have grown because it's not a market-linked product.
Okay. So second question, since we have revised our unit assumptions, so we have seen this impact on our VNB margins. Does this not have impact on our embedded value? Does it not impact our value of existing business?
No. So this has come through on the new business that we have written, and that is where the VNB is lower.
Okay. So that means there is no impact on the value of in-force policies?
On renewal exemption, there will be a small change, but it is not material at this time.
Okay, sir. Thank you. That's it from us.
Thank you. The next question is from the line of Gaurav Jain from ICICI Prudential Mutual Fund. Please go ahead.
Yeah. Hi. Good evening. Thank you for the opportunity. I just have two questions. One is, in terms of capacity expansion on the proprietary channel, is it fair to assume that we are broadly done there? And if yes, then from here, if the growth is ahead of industry, should we not expect some operating leverage to kick in, which is a follow-up from the previous question also, and should we not expect the operating leverage to kick in and help us improve the VNB margin closer to the other listed peers? That is first. Second, how are you looking at the regulatory landscape for the industry? And this is on the backdrop of a recent media clip which was raising questions on mis-selling, etc., for the industry. Thank you.
On your question on agency scale-up, I think on proprietary channels, both agency as well as proprietary salesforce, we intend to continue investing. Whatever upside that we are seeing by virtue of having invested in building capability, shortening the learning curve, I would like to reinvest the gains from it back into expanding business. We would like to stay put on this course for a longer period to build a franchise for a longer four to five year period and build sustainability and growth. As I mentioned, Gaurav, building sustainability and creating an alpha by virtue of investing in proprietaries are stated objectives. That is something that we want to stay on course.
Second was on the regulatory landscape, sir.
Okay. On what? Gaurav, if your question is around some of those mis-selling complaints, I think we're fairly clear that wherever we find some of these complaints, we would take strict action against those because clearly, that's not in the customer interest. All our distributors, I believe, are on the same page in terms of delivering value to customers. And the idea is to be able to improve persistency year upon year as we have seen us deliver on.
Got it, sir. Thank you and all the best.
Thank you. The next follow-up question is from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
Hi. Thanks for taking my question again. What would be your dividend payout policy from your own? Is it going to be similar to the current levels? How should we think about it?
Our dividend policy is disclosed on the website. It's at 30%. But the board emphasizes dividend ratio for the year based on the market conditions, based on what has been the delivery of tax as well as the solvency expectation into the coming year.
Sure. So otherwise, it should be closer to 30% is what you're saying?
The policy, yeah. The policy is set at 30%. But of course, I'd get this. This is year on year by the board.
Perfect. Thank you very much.
Thank you. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Yeah. Hi. Thanks for the follow-up. Can you just explain a bit, understanding the GAAP profit , not just for the quarter, for the full year, how the backbook surplus development has been and how the new business strain has moved? Because, I mean, so profits are still accounting profits are at a low level and flat YoY. So just if you can help us, how backbook surplus has emerged and the new business strain?
Yeah. So the backbook is definitely throwing up surplus at the same time with the new business strain. I think the challenge with looking at the Ind GAAP is we know that amortization of expenses doesn't really give a true picture of how the profit should emerge. I think let's just move to a IFRS. Hopefully, that comes out soon. We know we're part of phase one. We just await the regulations to be notified. That will give you a better sense of how profit will emerge.
Yeah. Yeah. But I mean, if you can just help, if at all, what is the YoY full year number basis growth in terms of backbook surplus, even if you don't want to quantify the new business strain part, at least how the backbook surplus, I mean, if you can just see the absolute quantum for two years of growth?
It's not out yet. We'll look at discussing that at a separate time, Avinash.
Okay. Thanks.
Thank you. The next question is from the line of Mohit from BOB Capital. Please go ahead.
Yeah. Hi. Thanks for the opportunity. My just one question is in terms of the sensitivity. So I wanted to understand I mean, 10% increase in acquisition expenses results in around 18% decrease in VNB. Now, that number was 12% in financial year 2023. Similarly, the mortality rates as well, I think there's a substantial percentage change in VNB in 2025 as compared to 2023. So if you can just explain why this has increased, it would be helpful.
So Mohit, the first thing is that the way we express our sensitivities is in percentage change in VNB. That may not be the same kind of metric that's used across some other players. So we look at those numbers with that lens on. But when you look at FY 2023- 2024, yes, when you look at the acquisition expenses, it has gone up. That primarily is because of the higher unit cost that we have in this current year. And therefore, that has had an impact onto the transactionality. When you look at mortality morbidity, it has gone up because of the higher share of protection in the new business. Now, again, I'm referring to VNB changes, not the EV changes. The EV changes are broadly steady across the years.
In the VNB, the mix of retail protection is much higher, and that has led to the higher sensitivity.
All right. Thanks. And be sure of the best.
Thank you. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Anup Bagchi for closing comments.
Yeah. Yeah. Thank you for joining, everyone. We just continue on building the foundations for creating a sustainable business. I think a lot of heavy lifting we have taken this year. Next year, we'll continue on the path of just building the current momentum up and creating a sustainable situation. Thank you.
Thank you. On behalf of ICICI Prudential Life Insurance Company Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.