Ladies and gentlemen, good day and welcome to the ICICI Prudential Life Insurance Company Limited 9M FY 2026 earnings conference call. As a reminder, all participant lines will remain 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 the operator by pressing star, then zero on your touch-tone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Anup Bagchi, MD and CEO of ICICI Prudential Life Insurance Company Limited, for opening remarks. Thank you, and over to you, sir.
Thank you. Good afternoon and welcome to the results call of ICICI Prudential Life Insurance Company for the nine months ended December 31st, 2025. I have several of my senior colleagues with me on this call: Amit Palta, Chief Product and Distribution Officer; Dhiren Salian, CFO; Chief of Service Delivery; Manish Kumar, Chief Investment Officer; Souvik, Appointed Actuary ; and Dhiraj, Chief Investor Relations Officer. Let me start by talking about some of the key developments during the quarter. We are proud to celebrate 25 years of service to our customers, trusted by over 20 crore Indians . We have carried the responsibility and pride in protecting families and supporting them in their long-term savings goals. We extend our deepest gratitude to all our stakeholders whose trust and partnership have shaped this journey. The President of India has approved amendments to the Insurance Act through the Sabka Bima Sabki Raksha Act 2025.
This is a move towards achieving insurance for all by 2047. Raising the FDI limit from 74% to 100% is expected to attract long-term capital to the insurance sector. The act also enhances ease of doing business, prioritizes policyholder protection, and positions India for accelerated growth and development. Now, let me talk about Q3 FY 2026 business overview. In Q3, the life insurance sector saw a surge in demand following the recent GST reforms, strong GDP growth, low inflation, and stable equity markets. Collectively, these factors have provided a conducive environment for the industry. The key highlights of our business performance are as follows: Q3 2026, the retail APE grew by 9.9% year-on-year on a base of 20.8% growth in the previous year Q3. Retail number of policies grew by 11.7% year-on-year. The recent GST reforms partly aided the strong performance of our retail protection segment.
In Q3 2026, this segment registered a 40.8% year-on-year growth. Consequently, the retail Sum Assured witnessed robust 51.6% year-on-year growth during the quarter. Overall APE grew by 3.6% year-on-year in Q3 FY 2026. Nine-month retail and overall APE stood at similar levels to previous year. VNB for Q3 2026 stood at INR 6.15 billion. The nine-month 2026 VNB stood at INR 16.64 billion with a margin of 24.4%. cost-to-premium ratio for nine-month 2026 reduced from 19.3% from previous year's ratio of 19.8%. This includes the impact of withdrawal of input tax credit. As you are aware, over the past two years, we have undertaken several optimization initiatives to make our cost structures leaner and better aligned to our product base, and we'll continue to work on the same.
Our 13-month persistency stood at 84.4%, and claim settlement ratio stood at 99.3% with an average turnaround time of 1.1 days for non-investigated individual death claims. To summarize, we are committed to deliver sustainable VNB growth through a balanced focus on business growth, profitability, and risk management. This approach ensures we remain resilient and ready to scale emerging opportunities regardless of the ever-changing external landscape. Thank you, and I'll now hand it over to Amit to take you through the business updates.
Thank you, Anup. Good afternoon, everyone. Let me start with the business overview. As mentioned by Anup, Q3 FY 2026 retail APE grew by 9.9%. Consequently, the two-year retail APE CAGR for Q3 stood at 15.2%. The retail savings and protection segment both registered growth in quarter three of this financial year. Linked business also grew by 8.3% year-on-year, driven by renewed customer confidence as equity markets returned to growth after quarter two. Within linked business, we continue to focus on products which are not only aimed at wealth creation but also offer goal protection, high sum assured, and comprehensive benefit for nominees. This approach helps us cater to wider needs of customers apart from wealth creation. Non-linked savings business grew by 15.2% year-on-year, primarily led by non-participating products as customers locked in guaranteed yields in the declining interest rate environment.
annuity business declined by 16.4% in Q3 on the back of 50% growth in previous year's same period. Within the annuity business, single premium continues to perform well as it offers attractive rates compared to other investment alternatives. We expect this segment to return to growth as the baseline normalizes in the coming quarters. Long-term life insurance savings product represents a steady growth opportunity, and we capitalize on this through continuous innovation and expansion of our product portfolio. Recently, we introduced three products designed for long-term wealth creation: ICICI Pru Wealth Forever, a legacy plan that helps build long-term corpus. ICICI Pru SmartKid 360, a plan to secure a child's future milestones. And third, ICICI Pru Wealth Elite Pro, a unit offering which incentivizes customers to stay invested for long-term wealth creation. Our core focus area, the retail protection segment, continues to grow, registering 40.8% year-on-year growth.
With only 13% of the addressable population currently being covered, we believe this segment offers a strong multi-decade opportunity for growth. Group protection, which includes credit life and group term business, grew by 6.2% year-on-year. In credit life business, MFI segment has started showing signs of revival with growth in quarter three. We expect the momentum to continue as industry stabilizes. Group term business has grown, and we expect this segment to continue to grow over long term as we remain focused on selecting businesses which meet our defined risk-reward expectations. Group funds business declined by 43.5% year-on-year in quarter three on a high base of 348.3% growth in the previous year. This business is typically lumpy in nature. Moving on to the channel-wise growth and contribution, agency channel grew by 0.8% and direct channel grew by 1.1% in quarter three, and together, these channels contribute 52% to retail AP.
This performance is on the back of high growth delivered in previous year, where agency channel grew by 26% and direct channel grew by 23.1% in quarter three last year. Over the period, these channels, that is, agency and direct, have demonstrated their ability to deliver continuous growth across various business cycles with five-year CAGR of approximately 14% in nine-month FY 2026. Given the current macroeconomic environment favoring both market link and traditional products, we believe these channels are well placed to capture the growth opportunities. On bancassurance channel, we grew by 10.5% year-on-year and contributed 26.7% to AP in Q3. Partnership distribution channel grew by 51.6% year-on-year in quarter three on a base of 7.1% year-on-year growth in the previous year Q3. The channel contributed 13.5% to AP mix in quarter three. Group business declined by 20.1% year-on-year in quarter three on a high base of group fund business last year.
The channel contributed 16.2% to AP mix in quarter three. Our distribution reach is provided on slide 23. We continue to strengthen and deepen our distribution network and have added more than 46,000 agents, 140 partnerships, and three bank tie-ups in nine-month FY 2026. Today, we have the strength of INR 2.35+ lakh advisors, 51 bank partnerships with access to more than 24,500 bank branches, and 1,400+ non-bank partnerships. To summarize, we will continue to offer the right product to the right customer and deliver it through the right channel. By leveraging our strong brand, continuous product innovation, and well-diversified distribution, we are confident in our ability to deliver sustainable business growth. We finished Q3 on a positive trajectory and expect the momentum to continue in Q4. I will now hand it over to Dhiren to talk to you through the financial update.
Thank you, Amit. Good afternoon, everyone.
Now, let me take you through the financial metrics. Our VNB for quarter three FY 2026 stood at INR 6.15 billion. The VNB for nine months financial year 2026 was INR 16.64 billion, with the VNB margin at 24.4%. As you are aware, effective September 22nd, 2025, the input tax credit on individual business is no longer available. Despite this, we have maintained nine-month margins at levels similar to that of H1. This movement in margin is primarily due to higher retail protection mix, improvement in product-level profitability through increasing sum assured multiples, longer tenure policies, and increasing right attachment, and a favorable movement in the yield curve during quarter three. The above movement has helped us cushion the impact of an increase in expenses due to the unavailability of input tax credit and therefore maintain healthy profitability. On the efficiency front, we continue to optimize expenses and improve productivity.
As you can see, cost-to-premium ratio has reduced by 50 basis points to 19.3 in nine months financial year 2026. This includes an increase in Q3 expenses resulting from the unavailability of input tax credit. The reduction in cost is a result of our endeavor over the past two years to continuously align our cost structure with that of the product mix that's demanded by the customer. Notably, the cost-to-premium ratio for our savings line of business has also reduced by 90 basis points to 12.7 in nine months financial 2026. Our 13-month persistency stood at 84.4%. We have observed some challenges in specific channel and product pockets, where persistency ratios are lower than the initial assumptions. To address this, corrective actions have been initiated aimed at improving these levels, and that's being monitored closely.
Coming to the other financial metrics, the company's PAT grew by 19.6% year-on-year to INR 3.9 billion in Q3 financial year 2026 and 23.5% year-on-year to INR 9.92 billion in nine months of this fiscal, primarily driven by higher investment income from shareholder funds. Our solvency ratio stood at 214.8% at December 31st, 2025. During the quarter, the company had called back INR 12 billion that had been previously raised in November 2020. Subsequently, the company raised fresh subordinated debt to replace the amount called back. Our assets under management grew by 6.5% year-on-year to INR 3.31 trillion at December 31st, 2025. Thank you, and we are now happy to take any questions that you may have.
Thank you. Ladies and gentlemen, we will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Shreya Shivani from Nomura. Please go ahead.
Yeah, hi. Thank you for the opportunity and congratulations on a good set of numbers. I have three questions. My first question is on the VNB margins of 3Q. While you have explained what has driven the almost flat margins, I wanted to understand if the new labor laws' impact of those have been priced into this quarter's financials in terms of the margins. If not, will it come in the next quarter? If you can help us explain how much would that impact be, whether how much of it is recurring and so on and so forth, some details around that would be useful. My second question is on the persistency bucket.
While you've spoken about the 13-month persistency, I also want to understand what's going on with the 61st month because over the years, the persistency trend in this bucket has gone up to as high as 66% probably in the FY 2024 numbers, and now it is in a different trajectory. Before that, it was as low as 56%-57%. So if you can help us understand the wide movement and what is causing this amount of wide movement over here. My third question is RBI FSR spoke about the distribution reforms, product innovation that they look forward to in the insurance sector. If you can help us understand what kind of reforms should we expect from the industry, what could be the timelines, and so on and so forth. Thank you.
Hi, Shreya. Dhiren here. Let me take your questions one by one. To address the first point that you raised in terms of the impact of the labor law, yes, we have taken the impact. We have put as part of our disclosures as well. The charge that we are taking is to the tune of INR 11 crores, and that's all that we have at this point. So the question, of course, next question would be that why we're so small in relative to the overall liabilities that we hold. Quite frankly, the way that we had set out our internal policies pretty much offset whatever was required by the new labor code. So the delta of INR 11 crores is what we have taken at this point. There's nothing residual for the future from this particular pool.
Coming to your second question on persistency 61st month, over the years, a couple of changes have happened in terms of the way 61st month has to be measured, and that's also stemming from the product regulations. Unit-linked does have an element where earlier they would get foreclosed at the end of 61st month. Now, the new set of regulations that have happened over the last, actually since 2019, these require the policies to remain active, and the foreclosure dates have been pushed back. What that does is that it depresses the persistency at this point. However, given the fact that these are going, the ULIPs continue to stay with us, we continue to fend off that. There is a similar regulatory change that happened some time back for traditional book as well, which therefore elongates the foreclosures.
Coming to your third point, I think frankly, in terms of innovation, you're seeing us do quite a bit. Innovation is not just centered around products. Amit gave you a brief of some of the products that we have recently launched, but innovation also works around in terms of process, efficiency, and cost because all of these go back to be able to deliver value to customers. Frankly, there are two businesses that we run: savings and protection. In the savings business, continuous innovation to be able to drive better cost ratios is where we give better value back to customers. That is something that we will continue to keep pushing. And in terms of claims ratios for protection, that's something that we monitor very, very closely.
Just to follow up on that, distribution reforms is not, I mean, any I understand the product process innovation bit, but do we have anything, any inkling on the distribution reforms?
Not at this point, Shreya. I think we will await any input from the regulator or the committees that they've set out.
Okay. All right. And just one follow-up on the persistency bit. The traditional book of foreclosures getting elongated, that happened when? I understand new policies were changed in 2019.
Yeah, that's also the same 2019 period.
Okay. All of this is in 2019. So basically, the new regulation allowed the account to remain active, is it? Or how?
Yeah.
Yeah. Okay.
Yeah, that's right. That's right. It stays with the company for longer, gives additional time for the customer to revive the policy.
Got it. Got it. Understood. This is useful. Thank you and all the best.
Thanks.
Thank you. We take the next question from the line of Swarnabh Mukherjee from B&K Securities. Please go ahead.
Hi, sir. Thank you for the opportunity and congrats on a good set of numbers. Three questions from my side. First of all, on the channel strategy. So I take the point that you mentioned that channels like bank had a high base previously. So now, I think we are sitting on the inflection point. So as we move on, what are the on-ground trends we are seeing in terms of these channels? What kind of products we are selling and how are the optics looking vis-à-vis, say, the base in the previous year for fourth quarter? Although I understand these are early days, but some comments related to that would give us some better understanding about how we should think about growth as we move ahead.
In terms of the partnership distribution channel, just wanted to understand that what kind of products were sold through this channel and is there any impact of any product launch, etc., that was there in this particular quarter. On the GST side, are our negotiations largely done and the impact absorbed or should we expect another quarter for that to happen? Once everything is absorbed, then the margin run rate that we are seeing currently, do we expect it to increase in the coming year just purely on the basis of that? Last one, I think wanted to understand that all these changes in operating parameters like, say, cost ratios or persistency, have we already based the changes in our VNB calculation? Yeah, that would be all from my side.
Thanks, Swarnabh. Let me address a couple of questions before I hand over to Amit. One is in terms of the negotiations that we have on GST with distribution. See, frankly, again, we're reiterating what we had said the last time around. We strongly believe that these reforms, they will help usher in growth, and we expect them to be value-accretive for all our stakeholders, customers, distributors, as well as the company. And you've seen the increase in business that has happened in the current quarter post the reforms that had been announced. Now, everyone has benefited. Customers have seen the value of zero GST. We have seen the benefit of volumes, and we have also distributors have also seen the benefit of these volumes come through. Now, we've got multiple types of partners. My approach is very different with each of these partners.
Given that this diversification exists, I guess closing some of these commercials may take time over the period, but we're progressively addressing each of these, and we'll work towards a win-win proposition for us as well as our distributors on this. The fundamental point is it's not the margin, it's growing the absolute business and therefore the absolute VNB, and from a partner perspective, growing their earnings as well. So that's the process that we have adopted, and we continue to make headway at it. Anything else that comes through the coming quarter, we will keep you updated on that front. Coming to your question on cost ratios, again, we have a view of where we'll end up for the year in terms of our cost ratio. Does it take into account all of the savings that we have got over the past few quarters? To some degree, yes.
But of course, it depends on how we do well in the coming quarter, and we will anyway update all of these cost ratios at the end of the year. At this point, it is looking positive, so we are very clearly working to ensure that we do not have any surprises on the cost front at all.
Amit this side. On channels front, you spoke about high base of last year. So let me just define what contributed to high base last year. One was, of course, the markets were very favorable. They were bull. Second, we had the right products to capitalize on the positivity that existed in the market. We introduced new products as well with the unit-linked platform, which supported our growth on the unit-linked side. And third is the annuity business that we experimented with a new product, which got us the upside last year. So last year, we had a very strong growth in first three quarters, which was largely driven through our proprietary channels, which is agency and direct.
So over years, we have drawn confidence from the fact that whenever there has been a change in the macro environment, our direct channels, our proprietary channels have been able to align to the shift in the customer demand or any change in the macro environment. So this is something that we witnessed even in H1 as well. So while there was a decline, there was a stress because of high base, but progressively, we have seen our decline coming down from quarter one to quarter two, and eventually, we turned the corner in quarter three by turning positive. So two years, CAGR gives us comfort that on a little longish basis, we have the ability through our proprietary channels to start growing every time there is a shift in the environment.
These are the things in between, like I mentioned, even in my opening note as well, looking at where the current environment is, which actually is quite a dual opportunity because the economy has started doing well. Markets are much better than what it was in H1 of the year. So quarter three is looking good, and we have supported it with new product productions as well. So we are quite prepared in terms of availability of products, which are most opportune, most appropriate at this point in time because the opportunity doesn't even exist, doesn't just exist in unit linked products, but it also exists on the guaranteed platform products.
So hence, we have seen an uptake on both sides in quarter three, which gives us the confidence that with these new introductions that we have done, which I spoke in the opening note as well, we are fairly placed in or carrying on with the momentum in quarter four as well in our direct channels. Your second question was on partnership distribution. See, partnership distribution, of course, it has a lot of almost 1,400 partners we have, and they all follow very different models. So there is no one model that suffices all 1,400 partners. So different partners have different primary businesses. Somebody is in general insurance, somebody is in broking distribution, somebody is in equity distribution. So the fabric of our partners in the entire partnership distribution space actually varies quite a lot. And hence, it's very difficult to single out and say one product strategy works across.
So different cohorts of partners respond differently to different economic environment. So we have seen the current environment is quite favorable when it comes to guaranteed products, and that is where we have seen maximum momentum.
Right, sir. That's very helpful. Just one bookkeeping question. In the non-linked part, if you could give us the split between PAR and non-PAR, that would be very helpful.
Swarnabh, they're roughly at about 60/40 right now, PAR to non-PAR.
Okay. Thank you. Very helpful. That's all from my side. Thank you so much and all the best.
Thanks.
Thank you. We take the next question from the line of Kushagra Goel from CLSA. Please go ahead.
Sure. Hi. Thank you for taking my question and congrats on a good set of numbers. Just first question was on the regulatory front. I know you said that there is no update on the distribution reforms, but in general, just wanted to understand, are we expecting any other types of reforms to come in over, let's say, next three to six months period? So anything that is in the works, if you could give some more color. And second was on the Bank side. So one, just a bookkeeping question, if you could give the AP mix for ICICI Bank and the other banks. And just wanted to understand this quarter, did we see higher growth on the other bank side or how was it on the Bank channel?
Kushagra, bancassurance to non-ICICI Bank roughly is half-half in that range. ICICI Bank is steady, as in you see the composition of ICICI Bank business is unit linked and protection. Protection has done very well in this quarter, as has every other channel. So they've been able to partake in the growth and do well as well. Unit linked is dependent upon how the general market environment is. So to that extent, otherwise, generally broadly in the range of INR 100 crore-INR 120 crore is typically one to two per month. Coming to your first question in terms of distribution reform, I think I've answered that. There's nothing more that I can add at this point that's in the public domain.
So any other reforms or anything else which is in the works that can come up in the space? Anything that you have heard?
No. No. I think we'll wait for the committee to come up with their recommendations.
Got it. Thank you. That's all. Thank you. We take the next question from the line of [Madhukar] from JP Morgan. Please go ahead.
Thank you for the question and congratulations on a good set of numbers. So first, see, protection has done very, very well for us, 40% year-over-year growth that we're seeing, and that's in retail protection. So my question is a lot of it is driven by bancassurance demand, I'm guessing, and obviously the GST reduction factor. So how should we think about it in the coming quarters? What should be sort of more if you could help us understand what sort of growth can we see in protection? And second, also on an overall basis, individual AP growth this year has been slightly muted. And 3Q, of course, you've seen an improvement, but going into 4Q, how should you look at individual AP growth?
How much do you think we can, on an overall basis, we should be sort of penciling in for AP growth over the next couple of years? Individual AP growth.
Yeah. Question. So on your comment on protection, well, as you know, that once the GST waiver was announced on 22nd of September, we did see demand for consumers picking up, and that was as simple as 18% cheaper product. So if you ask me, that is something which has really triggered demand across channels that we have witnessed and in the industry. And I don't really believe that for a country where penetration is only 13% to the addressable market, where still there is a long way to go, there could be anything which is pent up. So it's just the cost economics.
Suddenly, an 18% cheaper product is now available, which is pushing customers to think again and get the purchase decision be taken faster. The organizations and us as well, we are making access of these products more and more easy for the customers, getting processes streamlined and making it available to our customers. Last year also, if you look at quarter three, we had actually grown by 40%. It is quite a sustained effort that is required in protection. There is a lot of infrastructure that is required to be built to do protection business at large, right? This is something that where we are investing over a very long period of time. Just that GST waiver has given fillip to the kind of growth that we have witnessed in the last three months.
If you ask me, the outlook for the future again looks very, very good on protection. Eventually, it is protection that really differentiates this industry from any other industry in BFSI. So from that perspective, it's a great move by the government. Consumer demand exists, and we'll keep investing in our processes and systems and our practices to ensure that experiences are good while onboarding our customers and demand keeps picking up from current levels. So I expect this momentum to continue. On APE growth, you spoke about relatively unmuted growth in the first half and turning positive in quarter three.
I had explained as an answer to the previous question that we did have a large base in the last year, which was driven by a positive market environment, unit linked products, new product launches that we did on unit linked platform, and the experiment that we did with one of our products in the annuity category. All that led to a very large base. So the way to look at our overall nine-month performance is on a two-year CAGR basis, where we look quite in line with the industry, right? So to that extent, you can say two-year RWRP CAGR, if it is 13.8% for the industry, 13.8% for us, for industry, it is what, 13.3%. But good part is that quarter three onwards, it will start getting normalized.
For the momentum that now we have seen turning positive in quarter three, hopefully, it will only get better in quarter four.
Got it. Understood. And just one follow-up question on repricing. Any thoughts on protection repricing anytime soon?
So [Madhukar], on-month repricing is not something that one should expect, quite frankly.
Got it.
So at all points in time, we keep assessing, and this is business as usual for us. We keep assessing segments. We keep assessing the process. We keep assessing the pricing. And wherever there are micro-adjustments, we keep doing that along the way. This is in the quarter, previous quarters as well, and that's something that we will continue to do. So in a nutshell, there is no secular price increase that has happened. This is, I'm referring to the price hikes that we had seen back in 2020 and 2022. Nothing of that sort has happened.
It's not happened, but given that you are obviously absorbing some bit of the GST bill, any chance of you taking a price hike in protection in the near term?
Madhukar, the objective is to be able to grow absolute VNB. As I explained earlier, if you're able to get demand by way of this reform, then everyone is happier along with it, customers, distributors as well as us. So it is the objective of growing absolute VNB, which helps us in this endeavor.
Understood, sir. Congratulations on all this.
Again, I think maybe I should draw your attention to the protection number. 40% retail protection growth in the quarter is quite strong.
Yep. Yep. Yep. Yes, sir. Absolutely.
Thank you. We take the next question from the line of Umang Shah from Banyan Tree Advisors PMS. Please go ahead.
Hi sir. Thank you for taking the question. Am I audible?
Yes, Umang. Go ahead, please.
Yeah. Thank you. Sir, first question was, what was the rationale of transferring the pension management subsidiary to ICICI Bank?
You want to complete the questions? I can take them.
Okay. Sure. So this was the first question. Second question was, in partnership distribution, how much revenue or how much premium would be coming from online aggregators? That was the second question. And third was, do we continue selling zero surrender products or have we discontinued them altogether? Just these three questions.
Sure. In terms of the zero surrender product, it's still on our shelf, but we don't have so much of volumes at this point. In terms of partnership distribution and specifically looking at web aggregator, let me just remind you, we have a very diversified distribution. Our largest channel is ICICI Bank as a single entity. And most distribution doesn't really cross the 4%, 5% mark at all as a single distribution entity. So I will not call that web aggregator in specific, but you get the sense that we are extremely diversified in that sense. Coming to the question on PFM, there is a little bit of synergy that can happen with the PFM being integrated as a direct subsidiary of the bank. And this is in line with the strategy that the bank has put out.
To that extent, we were looking at the value that was done to an independent valuer. That's the value that we have transferred the PFM to the bank at.
Okay. Okay. Considering that it's a long-term product, we would have thought that life insurance company and pension fund management will be better, will have a better synergy of such. Anyway, just one more question.
Yeah. No. Yeah. Umang, good question. The point is, the entire pension is broken up into two parts, the accumulation and the de-accumulation phase. So the accumulation phase, typically on the NPS, is done by the PFM entity. But it's the de-accumulation phase, which is the annuity phase, where only we can participate in. So to the extent that the PFM grows, whether it's a direct subsidiary or it is a sister concern, as long as we get the annuity, I think we should be able to reap benefits of that. So that doesn't change our strategy in that perspective.
Right. Got it. Sir, on partnership distribution, the growth in that channel was even higher than any of the products that were growing. If you could just highlight which products did PD do really well in, that would be great.
Very simple to explain here. This is Amit. See, partnership distribution, like I explained, for direct distribution, we were supported by very strong growth in annuity and unit linked business last year. Partnership distribution is not much into linked business. So they had relatively a subdued base of last year. So on that subdued base, they have grown quite phenomenally. And this year's environment, which is more on guaranteed platform, favorable on guaranteed platform, partnership distribution partners have actually done well, right?
Okay. Okay. Sure, sir. Thank you so much.
Thanks, Umang.
Thank you. We take the next question from the line of Sanketh Godha from Avendus Spark. Please go ahead.
Thank you for the opportunity. Dhiren, I had one question on the margin. See, 24.5%, if you can give a broader waterfall, the 24.5% in 1H falling to marginally 24.4%, how much was dragged by GST and how much it was pulled up by either product-level margins or product mix? If you can give a broader color there, it gives an understanding how it plays out and how do you see it to play out from a full-year perspective, the margins in that sense. So that's my first question. And the second question is cost-cutting exercise, which you alluded to, supported the margins, and it has been only a focus area for them. That exercise is broadly done, or you still believe there are efficiencies to play out further and which can contribute incrementally more to the margins? These are the two questions on the margin.
And I have one more question on growth. Maybe if you answer these two, then maybe I will ask later.
So Sanketh, I've not given a walkthrough, but when you look at the breakup, as I mentioned earlier, there are these elements that are offsetting the GST cost. One is the fact that the higher protection mix, which is the entire product mix shift, that has contributed towards an uptick. You can see that in quarter three, retail protection is at 8.2% versus 7.2% that you've seen in H1. There is an improvement in the product profitability, where we had spoken about increasing sum assured, policy tenures, rider attachment. That has contributed quite well. And of course, some degree of movement in the yield curve. Now, these are the counterbalancing elements. I'm not getting into the breakup of it, but these have counteracted each other, and we are broadly flattish from H1 to nine months.
In terms of your question on cost, I think the right phrasing that we should use is actually waste cutting. It's not cost cutting. Clearly, we are not cutting into any of the muscle. What we are assessing at every point in time is what can be a better reallocation of our resources to be able to deliver sustainable growth, so very clearly, identification of waste across the organization, across departments, across processes, and across systems, that's something that we have started a few quarters back, and we will continue to do it at this point, but having said that, obviously, the bigger chunks of cutting have already happened. We will continue to keep working and cutting further in terms of all of these waste, but of course, the big jumps that you had seen in terms of cost ratio drops, that may not be as large going forward.
Understood. And margin trajectory, with this level of product mix and product-level margin sustained, then this 24.5 kind of a margin should hold up for next two years, whether this year and the next year annuitization?
Yeah. Largely, it is going to be product mix that kind of dictates where the final margin lands at. And to be able to deliver on VNB, it's growth in the premium, which is AP, and to whatever extent the mix shifts, then that should add to VNB growth.
Understood. And.
That formula continues.
Understood, and thanks for that, and the second question is naturally what on growth, which you probably alluded at. See, two-year CAGR is 13%.14% growth. Maybe she rightly said the higher base had an implication on the current nine-month growth. Then is it fair to say that now, given the distribution how broadly settled, whether it's ICICI Bank or others, we will be in a position to deliver a growth of 13%, 14%, assuming that is the industry growth going ahead for us? Is it fair number to believe that now the recent base can give us a growth of 13%, 14% going ahead too?
That exactly is the endeavor, Sanketh, and after having turned our quarter three positive, going through the high base challenge of last year, we are fairly confident about building it up from here.
Got it. And lastly, on group protection, which was 5%-6% growth in nine months or the third quarter, if you can give it color, whether it's largely credit life-led slowdown or it's a combination of both, credit life and retail slowdown?
So in the nine months, we do have an impact of slower growth, rather decline that we have seen in the MFI business of credit life. So the good part that we're starting to see now is that MFI has now started to turn around. I wouldn't say it's out of the woods yet, but very clearly, we've started to see a turnaround coming through in quarter three. So again, this is in line with the commentary that you're also hearing generally around MFI credit, the core business of credit. So as that business starts to build up, we should be a natural beneficiary of that.
Understood. Yeah. Thanks, Dhiren. This answers most of my questions. Thank you.
Thank you. We take the next question from the line of [Nitesh] from Investec. Please go ahead.
Thanks for the opportunity. First question is on GST impact. So have we passed on that impact to the distributor, or we intend to pass it on in coming quarters, and what will be the strategy there?
So Nitesh, I covered this earlier as well. Again, GST reforms, they should help usher in growth. They're again value-accretive for all our shareholders, stakeholders, customers, distributors, company. See, post the change in reform, we've seen growth come through. That's again, to our sense, it's a demand that's been built up. That's quite positive. So we are able to add VNB. At the same time, partners' earnings are also coming through. Now, given the diversity of partnerships that we have, some of these conversations take longer to conclude. We are working towards this, and the idea is to be able to bring a win-win proposition for everyone.
Sure. Sure. Secondly, so this quarter, we also got benefit of yield curve being in our favor, which also helped our margins. How do you see that playing out over medium term, whether you will pass on that benefit to the customer or you will be able to retain that? Because then that will have an implication on the future margins.
Yeah. You're right, [Nitesh]. But the final changes in pricing, or if there are any changes in pricing, will be a function of how the yield curve moves, what the market dynamics are, what our distributor conversations are, as well as growth. So it's a multifactor equation. I can't simply pick up one thing that will determine whether price will move positively or negatively.
Last question is on persistency. There has been a sharp drop in 13-month persistency, which you have explained. How do you see the trend in FY 2027? Should we again go back to 88%-89% persistency on 13-month basis, or this 85% is the new normal? How do you see the impact of lower persistency in our operating variances for the full year?
So you're right. We've seen some challenges in specific channel product cohorts, and we're working at this. As we fix those particular poles, we should see persistency rise. That's the endeavor. We should hit 85% and above as we go through into the later part of, call it the mid part of next year. How much more can we get through to the 87%-88%? I think we'll have to wait and watch how that shapes up, how the underlying business shapes up. How we take a look at that in terms of our EV, I think we'll do the final assessment as we go through to the end of the quarter, and then we'll bring that to the market.
Sure. Thanks, Dhiren. Thanks.
Thank you. We take the next question from the line of Prayesh Jain from Motilal Oswal Financial Services Limited. Please go ahead.
Yeah. Hi. Just firstly, on the growth front, while Amit mentioned that we are looking at a good two-year staggered, but if I actually look at the trends, even in FY 2024, it was a kind of a low base where ICICI Bank was possibly going at a declining, and from that base in FY 2025, we saw most quarters very strong growth, obviously because of product innovations and product launches that we had done, then again, on that high base, we've seen a low growth in this discussion so far, so it's been up and down, so do you think that we are now in a position that we can be a more consistent growth company from an all-product perspective or from a channel perspective now that all these corrections have been done? We should be a more stable growth company?
Okay. I'll take this, Amit aside. So you spoke about FY 2024 challenges because of decline in our primary channel and subsequently product launches and innovation. See, one big learning from last year, after having witnessed growth in the first nine months, when the demand was very strong on unit-linked products, we took a strategic call to align our cost structure to ensure that we don't create a bias, artificial bias in selecting products which gives margin, and we called out absolute VNB as an objective, but to follow that strategy, it is very important that you take those hard calls, cut the waste, relook at the structure, work on every area of cost rationalization so that you are aligned as an organization to the demand based on the macro environment.
Having done that hard work, now created products across category, not creating biases on what we believe is right for us internally, but going truly with the consumer demand, I think we are fairly well placed with our current cost structure as well as the availability of products that we have created. If you ask me, on growth perspective, we are very confident in aligning to any change in the macro environment that may happen in times to come. This situation is very different from where we were two years back when there were issues about concentration of business with one of the large partners, which is now fairly diversified. Even on products, we are fairly diversified and have availability of products to take care of any change in the environment.
So from a degree of confidence, I can say now things look much better because at cost structures that we have currently, we can take care of the volatility much better.
That's helpful. Dhiren, you mentioned that the product mix in the non-linked part is 60/40 between par and non-par, but I think in the Q2 call you mentioned, it was 50/50. So has the par share gone up?
Sorry. Yeah. It's 60/40, roughly in that range.
Okay. Okay. Because in the previous call, you had mentioned the mix is 50/50, so that's the reason I'm asking, and the third question is, the solvency increases because of what, in spite of we seeing such a strong growth in protection?
Solvency increases largely because of addition in PAT. There's not too much of movement. Whatever that we needed to in terms of required solvency, that was added up.
Okay. All right. That's all from my side. Thank you.
Nothing unusual there, Prayesh.
Okay. All right. Thank you so much.
Thank you. We take the next question from the line of [Harshil] from Asian Market Securities. Please go ahead.
Hi, sir. Thank you for the opportunity. Two sets of questions. The first is in terms of annuity books. If you can help us explain how is the surrender experience tracking versus assumptions, whether any impact on EV from annuity surrenders has been recognized or is expected going forward. That was the first question. And secondly, in terms of commission costs, we have seen a sharp increase in the single-pay commissions. So can you help us understand the key drivers behind the same?
So in terms of the final quantification of whatever hit that we have, if any onto EV, we'll bring that at the end of the year. Yes, in the RP annuity book, the persistency is lower than what we had initially set out. In terms of single premium overall, you will see in the commission growth. That's also because the growth that we have seen in parts of the credit-life business.
Sure, sir. Thank you. And others.
Thanks.
Thank you. We take the next question from the line of Dipanjan Ghosh from Citigroup. Please go ahead.
Hi. Good evening, sir. Just a few questions from my side. First, if I look at your protection business, it seems that after some time, your non-ROP business has grown at a very, very significant pace. So just wanted to get some sense of this demand growth that we have seen, let's say, post GST rate cuts and its linkage to pure term. Did you see some linkage out there? And secondly, is the non-ROP product significantly higher on the margin profile, which kind of benefited during the quarter? Second, on the credit life mix, I think this question has been kind of asked by previous participants, but just wanted to kind of extend the discussion.
In terms of your mix between MFI and non-MFI, how much that will be, let's say, for the nine months so that we can gauge what can be the growth in case microfinance were to improve in FY 2027? And the last question is on the non-banca banker channels. Do you see any sort of competitive pressure rising, or do you kind of hold on to the market shares that you would have, let's say, seen over the past half or nine months, or rather in case they have increased from the previous levels?
Dipanjan, bulk of our retail protection business is actually non-ROP. ROP is a very small component of that. That's roughly in the range of about 10%. That's never been the big mainstay. Most of our retail protection has been pure term without ROP. And that's seen a big spike over this last few quarters also. We've not broken up the split between MFI and non-MFI within the credit life, but it's fair to say that MFI is fairly significant within our portfolio. Coming to the third question that you had in terms of non-ICICI Bank multi-insurers, I think we've been holding our market share in all of these shops. Competition, of course, is intense in all of these shops, but we've been holding our market share here. Amit, you want to add anything?
Yeah. So most of our bancassurance partnerships outside ICICI are multi-insurance, with the exception of one multinational bank that we have. And there, the competitive pressures are always there. So we play by the year. The only guardrail threshold that we keep in mind is risk-reward ratio as well as the quality. And based on that, we play out and see how it goes. But yes, competition is very active. But most of the shops, we have been able to hold on to our share or even better than. So that's something which is only on the improving side.
Got it. Got it. Thank you and all the best.
Thanks, Dipanjan.
Thank you. We take the next question from the line of Vinod Rajamani from Nirmal Bang. Please go ahead.
Yeah. Thank you for the opportunity. I had two questions. One is on this unit portfolio. What is the proportion of, say, these hybrid units, say, the units on the similar lines of, say, Protect N G ain and so on, where you offer a higher sum assured? So just what the proportion of the entire unit view is. Secondly, on riders, what is the attachment rate? Is the attachment rate on, are you attaching only on, say, the new products, new sales, or on the existing portfolio as well? And what kind of attachment rates are you seeing? So these are the two questions I had.
Now, Vinod, we haven't called out the share of higher sum assured units, but it's safe to say that we started to pick up materially over this current fiscal. In terms of riders, these are onto new products, new sales only. It's a little difficult to go back to existing customers and then look at an upsell of a rider on an existing plan. So it's easier done with a new sale, primarily because the amount of premium that we are taking is quite small. So going back to existing customers, using our distribution force is not as cost-effective.
Fair point. Just on this follow-up to this hybrid unit question, do you see any issue in terms of, say, a substitution effect in the sense that if you're selling these high sum assured units, you could be kind of some customers who would have wanted to buy, say, a large term policy, they might just end up finally buying hybrid units which have higher sum assured. So is there some substitution effect that is possibly playing there? Also, is the substitution effect also playing to some extent on the non-PAR to kind of on hybrid units? So the customer profile is different, but is the agency force trying to kind of sell these hybrid units as a substitute for non-PAR? Is that happening?
Yeah. So let me answer this, Amit on the side. The profile of the customer that we are intending to penetrate through our high sum assured unit are those mass affluent and affluent customers who have dual objective of wealth creation and protection, right? So to that extent, even somebody who does purchase a pure protection doesn't stop planning for wealth creation. So to that extent, he does plan wealth creation as well. So these are typically mass affluent and affluent customers who tend to take these products. But you're right, for somebody who intends to go for a very high cover, he has a choice of going with his affordability and seeing what he can spare for pure protection and can choose a cheaper product, right?
So to that extent, I don't see this coming as a replacement for pure protection because the affordability and what you get as premium is very, very different in these two categories of products, right? So they are not a similar premium-sized product giving similar kind of cover and one giving wealth creation, other than not giving wealth creation. So it's very different from an affordability perspective by customer cycles. And we have not witnessed, to be very honest, giving you a direct answer, we have not witnessed any replacement of pure protection with high sum assured unit.
Because, Vinod, a pure protection plan at one level gives you 400+ times the premium in terms of cover, whereas these products give you anywhere between 40- 100 in terms of the coverage to the premium. So clearly, different areas, different objectives that we're trying to meet with this. And despite this, you're seeing a 40% growth in retail protection in quarter three.
Yeah. No, the only reason why I brought this up is because none of your.
Vinod, I do apologize to interrupt you there. Your audio is not coming in clear.
Yeah. Yeah. No, the only reason I brought this up is none of your similar-sized peers have launched this high sum assured units. So that was the reason. That's it. So that was, that's why I was wondering if there's some substitution effect at play.
Let us clarify. This product is being offered through a little differently, but mostly it is available across quite a few organizations now. We are not the only one.
Okay. Thank you.
Thanks.
Thank you. We take the next question from the line of Shobhit Sharma from HDFC Securities Limited. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. So I have a question on your growth. So how should we think about your growth on the individual business side for the next two, three years? Why I'm asking this question is if I look at your five years IRNB CAGR, it's actually less than one-third of the CAGR of the private players. And it is now almost two years from the time we have rejigged our margin profile and the constant changes we have made to our product portfolio. So that's first. Secondly, onto the product strategy, if I look at it. So two years, we have thought about no-cost units. We have pushed for that. We launched annuity product with 100% return of premium on surrender. Now we have launched a new product on the unit side with return of premium allocation charges.
And we have slowed down on the annuity product. So just wanted to understand our thought process on that and what kind of new product should we expect in the upcoming quarters now. Yeah. Thank you.
Okay. I'll take this, Amit, this side. So you spoke about, see, there is always a context, and the power of context cannot be taken away. That has been the journey that we have traversed over a period of last four to five years. We focused on things which we prioritized at a given point in time and looked at protecting our margins, diversifying our channel mix, diversifying end products at a time when there was a shift in strategic priorities with a primary bank partnership. We are very happy to say that the guidance that we had given of doubling our FY 2019 VNB by FY 2023 VNB still was achieved. We doubled that VNB, though the path we chose was through channel diversification, new partnerships, and product diversification. The path was different from the growth objective that we would have probably otherwise followed.
Subsequent to that, there have been some changes in the environment to which we have aligned whenever the opportunity has been favorable. And when it has been challenged, like the way it was challenged last year with a very high base and we capitalizing on that base of unit-linked opportunity, market positive, and annuity as an experiment that we did in light of the fact that surrender guidelines were six months down the line going to become a new norm. And we thought it was a good experiment to do with our affluent customers with our select channels. And it did work for a short while. And it gave us a good growth last year. So there is a context to what you witnessed over a period of last so many years. And today, which is most important, is the context where we are today.
Where we are on our product strategy is that in terms of availability of products right across categories, we have one category of products, whether it is unit-linked, market-linked, PAR guarantee, full guarantee, annuity, nearing retirement-age customers, younger customers, protection, return of premium, exit as a special feature for our customers, exclusive products for self-employed. So virtually, from benefit perspective and from category choice perspective, we have almost our basket being full. And we have already articulated that we will not follow an internal expectation on which product need to deliver how much. We have allowed customer demand to dictate what is purchased in the market. And we have aligned our cost structures now to deliver that objective of being true to consumer demand.
So, from that perspective, like I mentioned again, the context that we have witnessed in most recent times, which is quarter three, I think, coming out of a challenging base in H1 and getting into a positive growth in quarter three, gives us fair confidence that with all the availability of products we have and for the dual opportunity that we see both from the market perspective as well as on guaranteed product platform and with this support that we see on protection business with consumer demand increasing, I think we are in a fairly decent spot in terms of delivering a stable growth going forward.
Yeah. Just to follow up on this, Amit, which channel do you think would be key in driving the overall growth for yourself?
See, all channels are dear to us. There is no channel that we can really articulate, as Dhiren mentioned in his answer to a previous question, that no channel apart from ICICI delivers more than 6%-7% of our overall portfolio. So I don't have the luxury of focusing only on one channel, right? Because apart from ICICI, almost every channel is 5%-6% contribution to overall. So from that perspective, our effort is to look at cohorts of our distribution, which is multi-insurance, partnership distribution as one cohort, direct distribution, which is both online as well as offline as one cohort, agency as third cohort, and bancassurance, ICICI and non-ICICI bank partnerships as other cohorts. And we would like to invest in all, depending upon the strategic priorities chosen by our partners.
We'll keep aligning ourselves and keep making the products available, make processes efficient, and keep cost under control and deliver growth in a balanced manner.
Our approach on the product strategy, what kind of new products should we expect in the upcoming quarters now?
I mentioned three products we have launched very recently. One on a unit-link platform and second on a legacy platform and third on a children platform. So that is one effort that we'll keep making. So I can't really say how many and when, but we'll keep working across categories and see and align our effort to the natural demand that we will witness based on the environmental factors.
Okay. And Dhiren, just one question to you. So should we expect our VNB growth to outpace our APE growth? Because we'll now see benefit of the cost savings, the efficiency in the cost. So should we expect that to happen now?
No, I'm not giving guidance on this. The fundamental that we are looking at is growing VNB. As we bring some stability to the business, you will see that APE will be the lead to getting growth in VNB.
Okay. Thank you. Thank you and all the best.
Thanks.
Thank you. We take the next question from the line of Nischint Chawathe from Kotak Securities. Please go ahead.
Hi. I have a simple question. When you say that your conversations with distributors are going on with respect to the GST input tax credit deficit, what do you really mean? Does it mean that next quarter, supposing you kind of get into more favorable conversation, then some of the ITC provision that you have made this quarter kind of reverses, or what happens to the business that has been done till date?
Nischint, it's not about ITC provisions. The input tax credit is no longer available, and that is the cost that we have taken on the P&L as well as VNB. Now, as our conversations with distributors come to a close, if there is an element in terms of cutting commission, then we will get that implemented in the coming periods. If that is effective first October, then it will be effective since then as well. But overall, these conversations, yeah.
No, no. So when you say that there is going to be maybe some revision in commissions from October 1, then you obviously made some assumptions on commissions for the business in the last three months, right? So that kind of completely gets reset in the fourth quarter. Is that how we should think about it?
No. No, that it doesn't. That doesn't, so commissions will anyway be applicable going forward, and what we are looking at doing is optimizing along with commission everything else that we have within our capabilities, technology, operations to be able to give better value in terms of operating leverage.
Okay. So basically, what you're trying to say is that whatever is the conversation that happens will be for prospective business and not really for retrospective business. Is that how we should think about it?
Yes.
Got it. Got it. Thank you very much. That was my question.
Thank you. We take the next question from the line of [Mohit] from Centrum Broking. Please go ahead.
Yeah. Yeah. Good evening and thanks for the opportunity. So I have two questions. My first question, I was looking at your bancassurance where we have around 51 banca partnerships. One year before, we had around 46. Despite adding new banks, their share in the protection and annuity has declined from 13% to 11%. So how should we interpret this kind of decline, basically?
So Mohit, the banks that we've added are actually quite small. Yes, the count has gone up from about 47 to now 51. But the banks that we've added are actually quite small. So they would not have materially moved the mix at this point.
Okay, so is there any concentration risk within this, within the banca business?
No, not really. Like I mentioned earlier, the largest single distributor is ICICI Bank, which is roughly about 15%, beyond which everyone is at best in the 5% range, and most others are quite small.
Understood. That's helpful. My second question is towards the retail protection. So I think, is it safe to say that your return of premium demand is going down and basically the focus is on selling pure-term policies?
Mohit, again, I answered this in another context. Bulk of our business has always been a pure term. The return of premium has been quite small in the range of 10%-15%. At this point, it was 10%. And that's what it is. At this stage, we are seeing that the bigger demand is visible in the pure protection plan. And very clearly, the impact of 0% GST is most felt on that plan.
Understood. And just to confirm, basically, we are not repricing any of the retail protection policies, right?
No, there is no en masse repricing that is planned.
Understood. Thanks, and wish you all the best.
Thanks.
Thank you. We take the next question from the line of [Raghvesh] from JM Financial. Please go ahead.
Hi. Congratulations on strong results. Now, I just have one question that you've mentioned persistency has been bad in some buckets. Now, we will decide on the operating variance at the end of 4 Q. But whatever the impact is there on the new business that should be visible in the VNB, that has been taken already, or will that also be reassessed at the end of 4 Q? Yeah, that's it.
So [Raghvesh], if there's an assumption update that we need to do that will impact VNB, assumption updates can be either directions. Generally, when I look at assumption updates, these will be in the context of persistency, mortality, and expense ratios. And these are elements that we look at in terms of whether these are permanent. Whatever is permanent gets passed through as an assumption update. Whatever is temporary goes through as variance. This exercise will be done in the last quarter, and we will take all of those updates at the March end financials.
Okay. So essentially, there can be an update on the VNB margins as well?
No, not really. Not so much on the VNB.
Okay. Okay. Thanks. Got it.
Thank you. Ladies and gentlemen, are there any further questions from the participants? I now hand the conference over to Mr. Anup Bagchi for his closing comments.
Thank you very much for joining. Have a good day. Thank you.
Thank you. On behalf of ICICI Prudential Life Insurance Company Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your line.