Ladies and gentlemen, good evening and welcome to the LIC's Q3 FY2025 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. We have senior management of LIC led by Mr. Siddhartha Mohanty, CEO and MD, on this call. I now hand the conference over to Mr. Siddhartha Mohanty, CEO and MD, LIC. Thank you, and over to you, Mr. Mohanty.
Good evening, everyone. I am Siddhartha Mohanty, Chief Executive Officer and Managing Director, LIC. I would like to welcome all of you to the results and performance update call of Life Insurance Corporation of India for the nine-month period ended December 31st, 2024. Our results declared today have been uploaded along with press release and the investor presentation on our website, as well as the websites of both the exchanges, BSE and NSE. Along with me on this call, I have four managing directors: Mr. M. Jagannath, Mr. Tablesh Pandey, Mr. Sat Pal Bhanoo, and Mr. R. Doraiswamy. Senior officials of the corporation present on this call are Mr. Dinesh Pant, Appointed Actuary and Executive Director, and Mr. K. R. Ashok, Executive Director from the Actuarial Team. Mr. Sunil Agrawal, CFO from the Finance Team. Mr. Ratnakar Patnaik, Executive Director, Investment, Front Office and CIO. And Mr. K.
Seshagiridhar, Executive Director, Investment, Back Office from the Investment Team. Mr. R. Sudhakar, Executive Director, Marketing and CMO. Mr. Hemant Buch, Executive Director, MBSE. Ms. Manju Bagga, Executive Director, Pension and Group Schemes. Mr. Sitaraman, Executive Director, CRM, Policy Servicing. And Mr. Sanjay Bajaj, Head, Investor Relations. I would like to start by thanking each and every one of you for taking the time to join us on this investor call despite the late evening hour on a Friday. We appreciate your interest in LIC's performance and your ongoing support. Let me now mention the key business, operational, and financial highlights for the nine-month period ended December 31st, 2024.
Premium income: For the nine months ended December 31st, 2024, we have reported a total premium income of INR 340,563 crore as compared to total premium income of INR 322,776 crore for the nine months ended December 31st, 2023, registering a growth of 5.51% on year-on-year basis. The individual new business premium income for nine months ended December 31st, 2024 was INR 42,441 crore, and for the corresponding nine months of last year, it was INR 38,679 crore, thereby registering a growth of 9.73% on year-on-year basis. Renewal premium income individual business for nine months ended December 31st, 2024 was INR 178,975 crore as compared to INR 171,040 crore for nine months ended December 31st, 2023.
Therefore, for the nine-month period ended December 31st, 2024, our total individual premium income, including renewal, was INR 221,416 crore as compared to INR 209,719 crore for nine-month period ended December 31st, 2023, registering a growth of 5.58% on year-on-year basis. The group business total premium income for nine months ended December 31st, 2024 was INR 119,147 crore, comprising of new business premium of INR 115,576 crore. In comparison, for nine months ended December 31st, 2023, last year, the group business total premium income was INR 113,057 crore and comprised of new business premium of INR 108,796 crore. Therefore, for this nine months ending December 31st, 2024, the total group premium has increased by 5.39% as compared to similar period of previous year.
Market share: Our market share by past year premium income for nine months ended December 31st, 2024 was 57.42% as per IRDAI report, as compared to 58.9% for the similar period ended December 31st, 2023. Once again, we have maintained our dominant position in the Indian life insurance market and continue to be the leader in both individual as well as group business segments. Now, if we bifurcate this overall market share of 57.42% into segment-wise share of individual and group business, we would have a market share of 37.21% in individual business and 71.7% in the group business for the nine months ended December 31st, 2024. On a comparable basis, for the nine months ended December 31st, 2023, the respective market shares for individual and group business were 38.74% and 72.24% respectively.
Breakup of business on APE basis: Total annualized premium equivalent (APE) for nine months ended December 31st, 2024 was INR 37,975 crore, which comprised individual APE of INR 24,611 crore and group APE of INR 13,363 crore. Therefore, on APE basis, the individual business accounts for 64.81% and group business accounts for 35.19%. Further, of the individual APE, the par business accounts for INR 17,799 crore and non-par amounts to INR 6,813 crore. Therefore, our non-par share of individual APE is 27.68% and par is 72.32% for nine months ended December 31st, 2024. As you may recall, for the nine-month period ended December 31st, 2023, our non-par share of total individual business based on APE stood at 14.04%. Since then, our non-par APE has increased substantially from INR 3,299 crore to INR 6,813 crore. This marks a significant year-on-year growth of 106.52% in non-par APE.
As you will observe, we are being extremely consistent in implementing our product mix strategy, which includes shift towards non-par business. Profit after tax: The PAT for the nine months ended December 31st, 2024 was INR 29,138 crore as compared to INR 26,913 crore for nine months ended December 31st, 2023, registering a growth of 8.27% on year-on-year basis. VNB and VNB margin: Net VNB was INR 6,477 crore for the nine months ended December 31st, 2024, as compared to INR 5,938 crore for the nine months ended December 31st, 2023, registering a growth of 9.08% on year-on-year basis. Further, the net VNB margin was 17.1% for the nine months ended December 31st, 2024, as compared to 16.6% for the nine months ended December 31st, 2023, showing improvement by 50 basis points on a year-on-year basis.
Solvency ratio: The solvency ratio as on December 31st, 2024, improved to 2.02, as against 1.93 on December 31st, 2023. Assets under management: The AUM as on December 31st, 2024, was INR 54,77,651 crore, as compared to INR 49,66,371 crore as on December 31st, 2023. Therefore, our AUM has registered a growth of 10.29% on year-on-year basis. Product mix and new product launches: Post the implementation of the IRDAI Insurance Product Regulations 2024, effective from October 1st, 2024, we have launched a comprehensive suite of 38 products as of December 31st, 2024, which includes 24 individual products, eight group products, five individual riders, and one group rider, all of which are fully compliant with the regulatory requirement related to surrender value and the IRDAI Master Circular on Life Insurance Products.
Number of policies sold: During the nine months ended December 31st, 2024, we sold 1,171,050 new policies as compared to 1,255,604 new policies in nine months ended December 31st, 2023, registering decrease of 6.73% over the corresponding period of last year. Agency workforce: As on December 31st, 2024, the total number of agents was 1,419,480 as compared to 1,373,761 as on December 31st, 2023. The market share by number of agents as on December 31st, 2024, stands at 47.4% as against 49.67% for December 31st, 2023. On number of policies sold basis, the agency force sold 1,135,466 policies during the nine months ended December 31st, 2024, as compared to 1,211,643 policies during the corresponding period of last year, registering decrease of 6.27%. Further, approximately 97% of our policies in the nine months ended December 31st, 2024, were sold by our agency force.
Even on premium basis, around 95% of new business premium came from our agency channel in the past nine months of current financial year. Contribution by banker and alternate channel: The banker channel collected new business premium income of INR 1,451.64 crore for the nine months ended December 31st, 2024, and for the corresponding nine months of last year, it was INR 1,106.12 crore, thereby registering a growth of 31.24% on year-on-year basis. Further, the alternate channel collected new business premium of INR 552.31 crore for the nine months ended December 31st, 2024, as compared to INR 422.94 crore for nine months ended December 31st, 2023, registering a growth of 30.59% on year-on-year basis.
Therefore, for the nine months ended December 31st, 2024, total new business premium collected by bancassurance and alternate channel was INR 2,003.95 crore, which was INR 1,529.06 crore for the nine months ended December 31st, 2023, registering a growth of 31.06% on a year-on-year basis. With this, the share of bancassurance and alternate channel by new business premium has increased to 4.73% for the nine months ended December 31st, 2024, as compared to 3.96% for a similar period last year. Further, the bancassurance and alternate channel sold 347,766 policies for the nine months ended December 31st, 2024, as against 436,006 policies for nine months ended December 31st, 2023, registering a decline of 20.24% on year-on-year basis. Our overall expense ratio: For the nine months ended December 31st, 2024, the overall expense ratio was 12.97% as compared to 15.28% for the first nine months of last year.
Therefore, there is a decrease of 231 basis points on year-on-year basis. Persistency: On premium basis, the persistency for 13th, 25th, 37th, 49th, and 61st months up to the quarter ended December 31st, 2024, stands at 76.66%, 71.67%, 67.1%, 63.39%, and 61.84% respectively, as compared to 78%, 71.92%, 67.28%, 64.92%, and 62.4% respectively up to the quarter ended December 31st, 2023. On number of policies basis, the persistency for 13th, 25th, 37th, 49th, and 61st months up to quarter ended December 31st, 2024, stands at 67.47%, 60.1%, 53.84%, 51.17%, and 49.22% respectively, as compared to 67.22%, 58.59%, 54.8%, 52.01%, and 50.23% respectively up to the quarter ended December 31st, 2023. We are committed in our ongoing efforts to keep improving persistency across all cohorts.
Operational efficiency and digital progress: In our digital initiative through the agent-assisted ANANDA app , we have completed 972,504 policies through this app during the nine months ended December 31st, 2024, as compared to 784,856 policies for the period ended December 31st, 2023, thereby registering a growth of 23.91% on year-on-year basis. There was a growth of 27.36% in the number of active agents in ANANDA app for nine months ended December 31st, 2024. DIVE: Digital Innovation and Value Enhancement and Jeevan Samarth Initiatives: Our DIVE and Jeevan Samarth initiatives led by BCG and A.T. Kearney respectively are progressing well. These initiatives are aimed at driving digital transformation, enhancing customer experience, and agency transformation. We are confident that these initiatives will have a significant impact on our business and help us to improve operations.
Claims: On the individual claims front during nine months ended December 31st, 2024, we have processed 1,450,092,285 number of claims, which includes 1,390,070,059 maturity and survival benefit claims. On an amount basis, during the first nine months ended December 31st, 2024, the total maturity claims were INR 1,47,739 crore, and total death claims were INR 17,588 crore. On a comparable basis, for the past nine months of last year ended December 31st, 2023, the maturity claims were INR 1,30,222 crore, and death claims were INR 16,288 crore. Therefore, the death claims are higher by 7.98%, and maturity claims are higher by 13.45% on a year-on-year basis. New marketing initiatives: Empowering Women Through Bima Sakhi Yojana: Bima Sakhi Yojana, or Mahila Career Agent Scheme, was launched by Hon'ble Prime Minister on 9th December 2024, which is a step towards Viksit Bharat through empowerment of women.
LIC is proud to be associated with the nation's progress by including women as partners, by providing them with the opportunity of becoming Bima Sakhi and thus becoming self-reliant. The Bima Sakhi scheme has been received by the nation with great enthusiasm. Till date, more than 125,000 women have been registered as Bima Sakhi, out of which more than 70,000 Bima Sakhis have been appointed. Awards and Accolades: The list of awards won during nine months ended December 31st, 2024, is presented on slide number 61 of the investor presentation, which signifies that LIC is a customer-centric and innovative organization that is committed to excellence in all aspects of its business. It also acknowledges LIC's outstanding performance in the life insurance industry, demonstrating its ability to deliver exceptional results and achieve its goals.
Before I close, I would like to list down significant achievements during the quarter that have registered a growth of 8.27% on a year-on-year basis to INR 29,138 crore. Overall, APE growth is 6.11% on a year-on-year basis. This represents strong underlying secular growth in both individual and group business. Our non-par share of individual APE business has further grown to 27.68% for nine months ended December 31st, 2024, as compared to 14.04% of the same period for the previous year. VNB has also increased by 9.08% on a year-on-year basis for the first nine months of FY20 25. VNB margin has shown a positive bias, with 50 basis points increase to 17.1% for nine months ended December 31st, 2024. AUM has increased by INR 511,280 crore as of December 31st, 2024, registering a growth of 10.29% on a year-on-year basis.
While maintaining growth in all parameters, we have kept a focus on costs, and as you can see, the overall expense ratio is down by 231 basis points to 12.97% for nine months ended December 31st, 2024. Our agency is growing in numbers and now stands at 14.1 lakhs as at the end of December 31st, 2024, increasing by approximately 3.33% year-on-year. Now, I would like to end by stating that our results demonstrate the resilience and adaptability of our organization as we continue to navigate the evolving landscape of the life insurance industry. As we look ahead to the remainder of FY20 25, we are cautiously optimistic about our prospects. We expect the life insurance industry to continue growing, driven by increasing awareness and demand for insurance products. We are well-positioned to leverage this growth with our strong brand, extensive distribution network, and innovative products. So thank you, friends.
Now, we are open to questions.
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 the 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 while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Avinash Singh from Emkay Global Financial Services. Please go ahead.
Yeah, hi. Good evening. Thanks for the opportunity. Two questions. The first one is on margin, and here I am looking at how the margins were at first half, which is how they have gone to nine months.
Now, between first half to nine months, if I were to look, if at all, the bond yields have softened maybe by 10-15 basis points. And you also had this new surrender regulation implementation. Now, in this backdrop, yet the par margin, if I just try to take out Q3, has gone up from, say, 10% in first half to 13% for the quarter, taking the cumulative margin to 10.8%. So there's 13% for par. Similarly, on the non-par also, these are just marginal uptick. Now, this despite the bond yield softening and surrender regulation implementation. So what have been the kind of underlying drivers? I mean, how did you have you kind of a change in a way? You pay out the distribution commissions, or you have dramatically changed the benefits in your products.
What has changed that has kind of driven this margin improvement despite the bond yields going down and this implementation of new surrender regulation? That's question one. And question number two is now on your non-par savings, particularly the non-par saving, not annuity. The non-par saving, the regular non-par guaranteed saving product. Now, that is a reasonably big number, even for your balance sheet or your size. Now, your individual non-par APE is INR 3,100 crore for the nine months, almost like off 120%. Now, can you please help us? How are you now hedging this guaranteed risk? Have you kind of started entering into FRA agreement or something else? Because now these numbers are becoming pretty, pretty big. I mean, until last year, these numbers were kind of manageable in the balance sheet size of yours. But now this is becoming bigger and bigger.
So have you already started kind of entering into FRA agreement and all? How are you hedging this kind of interest-related risk in this guarantee product? Thanks. These are my two questions.
Yeah, good evening. Dinesh Pant. To your first question on margin maintenance, see, there are two or three things which are very critical here that post 1st October 2024, when we had to implement product regulation, as we all know, the surrender values methodology, as well as the payouts, have changed, and that would have had an impact on the viability of the product, of course, on the margins also. So from that point of view, we made some critical changes in our products.
Since you mentioned about participating products, besides the point of ensuring that we should be compliant with the regulations, the ultimate focus was the profitability of the product, as well as the persistency of the products to be ensured going forward. Certain changes were done. We had a revision in premium rates in some of the products, depending upon not all the products, some of the products which are already having good margins. There we did not change. In many of the products, we had a revisit to the premium rates. Second important change that we did was that products which were showing worse, I would say, or reducing impact on the persistency, we revised their minimum ticket sizes because we clearly know that based on the ticket size, the experience of persistency changes.
So that also changed so that the expected behavior post-surrender should not cause the damage. And then thirdly, the age band at which we are going to provide these products was also reviewed. So all these things ensured that the margins, despite the interest rates or RFR changing to the other direction, are protected. And the experience of persistency which comes out of the product is directly linked to the ticket size and the premium also. Besides that, the mode of payments also they controlled in which ways we were seeing that the persistency experience is not good. So all of that ensured that. But beyond that, what we did in the participating, as you would have seen, from around 14.04% or so to 27%+ , this mix of business has also played a very important factor.
It is not that the margin of every line of business or every product within the non-par products would have increased, but it has been a combination of the product mix, means the greater portion of the non-participating business, as we know, the margins in the non-participating products are better, so both these things have overall played a role in participating by revisit to the design of the product, and in overall, when you move from 16.6%- 17.1%, that has been because of the change in proportion of the overall business. So that was the first part. This is the second part of the derivative. I'm happy to share with you that, since we have been telling and sharing this information, that all our policies, arrangements with regard to the derivative readiness were in place, and this month, we have already started the journey of entering into FRA.
We expect to start this in a good manner within this financial year and definitely going forward. So we are already onboarded to the derivative provisioning. And we also look forward to utilizing the new announcements which have come in the RBI policy today on the bond forwards also. So definitely, we are going to utilize these opportunities. And we are ready, and we are started on that side. I hope that answers.
Yeah, thank you a lot for the innovative answers. Just a follow-up on the first part, that if I heard you correctly, because you have kind of pruned your portfolio to sort of in terms of ticket sizes, age band, and all, to sort of have a better persistency experience, that means that you are saying that, I mean, your operating assumption in terms of persistency for the policies sold after 1st October is improved versus what it was earlier. I mean, you are now achieving a better persistency. That's one. The second, again, given that how the numbers are coming, I mean, of course, you are a market leader by a wide margin. But in individual side, you have been losing markets there.
If you were to, or rather, you have cut the policyholder benefit or revised premium rates upward, don't you see that will further kind of continue to affect your market share or growth in retail business?
You rightly mentioned, actually, there are certain aspects which we have to definitely balance in order to ensure that the profitability is maintained. But the appeal to the products is also retained. Beyond that, the third element of distributors' interests. That's another element which I articulated when I was answering the first part of it. The realignment of the commission rates was also done along with those changes. The intent for these changes was definitely not to increase the margins, but to ensure that the margins are not hit, as well as the experience.
Now, currently, when we have calculated these margins, what we have considered is that that's why it's not a huge jump, and another important point is that the premium rates have not been significantly changed. They are very range-bound, and as I said in my first response, not in all products, so wherever the correction was required, there only it was done, so as of now, anybody would know that it's very difficult to predict what would be the experience of surrender, but what was very clear is that the payouts would be higher even at the given rate of surrender or withdrawals happening, so what we are trying to do, we are trying to protect those aspects, realign the commission, realign premium rates.
We are very conscious about this fact that we have to ensure that not only VNB margins are protected, but VNB, as well as value for the customer, is very paramount. Going forward, if these premium rates, since you mentioned about participating products, because just because surrender value provisions have increased does not mean customers will start surrendering policies more now. Only possibly they may feel more safe. They may find more liquidity in these policies, and they may get more attractive towards these policies. Should that be the case, and should that happen, it will actually, going forward in a year or two, we'll get to know the actual behavior. Should it help that continuity of better persistency, possibly there is a scope for review into the bonus rates which will be given.
So our ultimate purpose is that this should be a win-win proposition in which neither the customer should lose out, neither the investors who are invested into the insurance company should lose out. So it's a very, very, very tight but very critical journey that we have undertaken. In that process, we have tried to engage with our distributors also so that there's a proper application. That's why the alignment of the incentives to the distribution force has also been done so that the behavior is driven towards higher persistency, which is definitely higher persistency and continuity means better value for the customer, as well as for the agency force because the longer the policies arise, longer is the payout period for the commissions. So that is the overall strategy in this context.
Okay. Thank you, sir.
Thank you.
Thank you. The next question comes from the line of Supratim Datta from Ambit. Please go ahead.
On the opportunity, my first question is, so since the IPO, we have been talking about initiatives to improve persistency. And I know, again, in this quarter, post-surrender charge regulations, we have made changes to our policies. But when I look at the nine-month data and when I see the persistency has come off or has declined as compared to what was there last year. So just wanted to understand, despite these initiatives, why isn't it really getting reflected in the numbers? I understand that the surrender impact, the changes that you have made, will come in later. But over the last two years also, we have made several changes. Despite that, that is not flowing into an improvement on persistency. Just wanted to hear thoughts on that.
Two, on the hedging mechanism, I understand that you have put in place a hedging mechanism from January onwards. But would that take into consideration, or would that take care of the rate cut that happened today? Or will it have an adverse impact on the policy or the VNB margins of the non-par products which have already been written? So if you could throw some color there, given I understand you did not have external hedging before this. That's why I wanted some color on that. So those are my two questions.
Thank you. Yes. On the first part on the persistency, you're right there that there's a dip in the persistency as observed except for the 25th month where there's still an improvement. But you would have seen that in the past quarter, there has been definite improvement. And we have been very conscious about it.
Therefore, very quick revisit and modification of products that happened. That is what we detected that in some of the products where the lower ticket sizes existed, actually, the persistency experience was significantly different as compared to the overall portfolio. There was some heavy business over there. That is the reason in those products, in this recent revision, we have increased the ticket size to the level where it remains affordable, where it remains available to the customer. The persistency experience can be in line with what we are attempting. As to the second part on hedging, you will appreciate that when we calculate VNB margins, actually, the hedging does not play any significant role. It is basically on the sensitivities around VNB where the hedging comes into play. Going forward, and hedging is actually, we cannot control the market rate.
We have no options there. But the control on the profitability to the value of the product is not just based on hedging. Should we find that the level of available opportunities, even for hedging in the market, are not aligned to the pricing, then there is no option but to look into the pricing itself. So it will be a combination of sustainability of the pricing assumptions coming and backed by the opportunities available in the financial market or derivative market as it be, or otherwise, have a relook or come out with them. Possibly other opportunities could be looking towards such lines of businesses, greater focus during those times of downtime in interest rate scenarios where the sensitivity may not be high. For example, products like ULIP or participating where you can actually utilize more of equity exposure to be able to manage your discretionary benefits.
So it is going to be definitely a dynamic situation, and that we should be working.
Got it. So I just wanted to understand then what would be is there a target proportion that we'd like to hedge, or how are we approaching that? Or we would look at it based on the rates available in the market, based on that, we'll design our hedging strategy every month or every quarter?
We are guided by the regulations in this regard. So entire exposure is available as a cash flow. And the challenge in the hedging strategy is also because it is not only for though it is allowed for the current cash flow, but you have to do business to be returned in future also. So the hedging strategy by itself cannot be the solution for everything.
It will have to be a continuous combination of what is available in the hedging. Again, if you foresee that the interest rates are going to go down, you have to continue to book the derivative, whatever is available, because not again your choice. But then you have to, again, as I was mentioning earlier, look into whether that hedging solution is in sync with your pricing rate. Should it not be the case, the revisit to pricing or restructuring of products will be there. So it is going to be a combination of both the things which we are going to be operating in.
Got it. Thank you. So just one last question. There have been news articles on open architecture in agency. Just wanted your thoughts on that, given agency accounts for around 98% of your new business premiums, individual new business premiums. If open architecture is implemented in agency, then how does that change your current training regimes or how you recruit agents and develop them? If you could throw some light there, that would be very helpful. Thank you.
We have earlier made our position very, very clear. Open architecture to LIC, it is not a good idea because to develop any captive distribution channel, it takes a lot of time, energy, cost, everything. So if you allow suddenly your captive agency channel to work for others. So if you see, overall growth of the industry will also be impacted because if one agent works for all other companies. So companies themselves, they may not be interested to recruit because recruitment and training, it involves a lot of cost. So we have made our position very clear.
And even if it is implemented, we are ready because you see, our agency profession is almost like a full-time job. Agents do not get only commission. They get all other things like gratuity, group insurance. Then advances are there. They are entitled for loans for vehicle, loans for housing. So many benefits they are entitled. So if it comes, then all these things, LIC will have to have a recalibrated approach to enter agency model as it works today.
Got it, sir. That's very helpful. Thank you.
Thank you. The next question comes from the line of Gaurav Jain from ICICI Prudential Mutual Fund. Please go ahead.
Sir, thank you for the opportunity. And congratulations to the team on being able to demonstrate a consistent shift towards a high-margin product. A few questions from my side. One is, sir, in today, the monthly numbers also came out. And there also, we have seen some decline in APE. So what are the steps that we are taking to arrest this APE decline and get back on the individual APE growth trajectory again? That is my first question.
This is Sudhakar ED Marketing. See, the APE is a function of the product mix which is being sold. So after the product revisions which were done in October, it takes some time for the agents to understand the products, understand the differences or the benefits which have been added. So it's only a temporary kind of, I would say, impact. And already, by now, we are back on track on that. And I would just like to add to that, beyond LIC, while in this press release, it is mentioned that we have got certain products.
We have added more products, almost 50 products, including riders by now, which have been there. And we have filed more products also which are subject to consideration. So there's a continuous strategy to add to the product line so that more and more needs for the customers and the distribution and marketing force are met with. So coupled with now better understanding about why these decisions have been taken, better and really supported with wider range of products, more products added now, and more products to be added in this quarter and beyond, some of which are going to be very innovative products also. We expect that the trajectory of growth, which was there earlier, and in fact, even better, will come back soon, very soon.
Got it, sir. Just one more question from my side. I understand we gave, sir, EV on a half-yearly basis. But given equity markets have been volatile, will it be possible to give us some direction on how EV has moved on this December 24th quarter, sir?
Actually, we have not been disclosing the embedded value on a quarterly basis. We have been doing it on a quarterly basis only. And on the frequency, we will have a relook at it. But for the current quarter, we are not disclosing the EV.
Got it, sir. It will be helpful if we consider giving it on a quarterly basis going forward, sir. And you have said that you will be looking at it, and that will be helpful. Thank you, sir. And congratulations once again.
Thank you.
Thank you.
Thank you. The next question comes from the line of Dipanjan Ghosh from Citi. Please go ahead.
Hi, sir. Good evening. Just a few questions from my side. First is, you mentioned on the persistency part and that in the new product regime, given that you have kind of changed some of the cohort selections in terms of ticket size and age, and you expect the surrender incrementally to be better. I just wanted to understand when you're kind of calculating the margin numbers, have you kind of changed any of the assumptions, or are you building better assumptions on these new products that have been launched since October? So that would be my first question. Second question is, you mentioned that you're not giving out the embedded value number for December. But since we get the public disclosures with the lags, can you just mention the balance sheet data for the credit and debit and fair value change account, if that's possible?
And the third question is, when I look at the ticket size of your individual new business, across the board, whether it's non-par, par, we have seen a significant jump compared to historical averages. So is this what you're referring to, the kind of focus on higher ticket cohorts? Those are my three questions.
Yeah, definitely. See, the ticket size for the first part, which you're asking about, whether we have factored in better persistency, not exactly. We are not factoring anything which is overpromising from the current level. Should we do it, we disclose everything. But yes, we continue to keep revisiting our assumption based on the experience and the trends which are available with us. So currently, we have not factored in any better persistency expectation, as I mentioned earlier also. We'll try to see that.
But the impact of and also noting that the reference rates, the risk-free rates have gone down, so these VNB margins have, despite of that, because they were on the lowering direction, so there is actually around 2.1% or so negative impact of that. But the business mix, as I mentioned, added around 2.4%, which is a part of disclosure, and slight addition coming from operating assumptions, which is on counter-cyclicality, actually. Yeah, yeah, and not based on the current assumption. Therefore, what we are thinking and confident about is that with this better re-modification in this product and hoping that and believing that with this ticket size, the actual withdrawal rate should not be higher, but we would like to observe it over a period of time.
So currently, these margins are basically on account of revised premiums which have been there, better ticket size which is there, only factoring to the extent that it will not give us worse experience than currently, not adding any better experience on that count. Factoring in the risk-free rate downside. But also, as I mentioned earlier, largely because of the ability to change the product mix. All this has been added together, and this is the outcome of it. I hope that answers.
Yeah, yeah. And the question on the balance sheet data, if that's possible.
The fair value change account for the policyholders as of 31st December in the balance sheet is INR 7,000,449, and the shareholders is INR 1,387.
Got it, sir. So if I can just squeeze in one small question, and this is not for the quarter, but more for medium term. We have seen the VNB being supported by margin expansion over the last maybe 12- 18 months. Even when the APE has seen some sort of pain or kind of slower momentum sorry, better momentum. Even when APE has been kind of weaker, we have seen VNB margin expansion from, let's say, the IPO time having supported the VNB. Now, you're already operating at a decent non-par mix.
Maybe it goes up another 5%-10%. So once you achieve a steady-state margin, mostly, I think VNB growth naturally becomes a function of the APE. And that has been kind of a little bit lower than the private industry for some time now. So directionally, how should one think of medium-term growth for a company of your size and scale, and obviously keeping in mind the competitive pressure out there?
I take your point, but our view is that from here going forward, there is a scope, and there's a definite, as you have mentioned also. We look forward to the business mix because even when the VNB margin is improving, there are certain aspects within the line of businesses on the segment where revisit is possible and will be done, so based on that, we are looking forward to a consolidation and improvement in VNB margin, so definitely, going forward, it is going to be better than this, so there is an uptick in the VNB margin itself, and I agree that VNB margin alone is not going to be sufficient for the directional change towards VNB, so that is the reason. What we are trying, the consideration is that number of shares should grow, and the ticket size should grow.
So that will lead to better APE, and that sort of communication is there with the distribution channel. Coupled with the improved VNB margins shall lead us to the VNB direction. And what you mentioned is partially true. Over the last many quarters, actually, we have shown significant APE growth. In fact, last quarter was almost September quarter was 24% or so. So our VNB journey, which has been very satisfying, continues on basis of both the APE and VNB margins, not only on VNB margins, along with the focus on the APE. So both these continue to be the focus area.
Got it. Any plans to recoup the group business? I mean, there have been some sort of market share moderation in one or two years.
Group, we are actually very heavy on the funded-bas ed business. But we have recently changed a lot of focus towards the risk portion, OYRGTA team, which are there, ORGTA team. And we are trying to consolidate there. In fact, I think now almost INR 3,000 of premium also. INR 2,000 around of premium is coming from that. And that's a significant thing. And within group also and within funded also, there's a significant portion of annuity also, which can be a good margin business. So within group, it gives us good top lines as well as not in margin terms, but in VNB terms, it's a good contributor. So we continue to remain focused on group also.
Got it, sir. Thank you and all the best.
Thank you, sir.
Thank you. The next question comes from the line of Sanketh Godha from Avendus Spark. Please go ahead.
Yeah, thank you for the opportunity. Sir, your non-par margin, if I see last year, it was 60%. Today, it is 44.3%. So just wanted to understand if hedging is incorporated incrementally, then what likely impact you will see on the margin because of hedging costs incrementally getting incorporated? And second, is it fair to say that 60% drop falling to 60% margin falling to 44% is predominantly because in non-par, ULIP contribution went up, or at the product level, the margins have compressed? So that's my first question, sir. That's the first question.
Actually, the hedging will not have impact on margins, but it will have impact on the sensitivity. And any hedging effect will flow through to the EV. The reason because the hedging is allowed only for the existing business and not for the business that is procured. Coming to the second part on margins, actually, if you look at the walk on margins, there is sort of a balancing type balancing that is happening. One is pushing the margin south due to the fall in the risk-free rate, and that is more than sufficiently balanced by the business mix, greater movement towards non-par products which have higher margins. So actually, going forward, we are focusing on the business mix, which we feel is a driver for the margins.
Sir, my question was more related to only non-par because non-par margin last year, we entered at 60. Today, it is at 44.3. So just wanted to understand this 16% correction in the margin. Is it because of the higher ULIP contribution, or is it because you made product more attractive to the policyholders?
You're right. The combination of the both are same. One is ULIP, definitely, as you know, is not a heavy margin business. As well as some of the non-par products, there also the margin because of the risk-free rate coming down has compressed. So largely because of these two things. And we had seen heavy growth and significant growth in non-par savings in the last year. We have a decent growth this year also. So the combination of those things is largely because significant growth has happened in ULIP business. So that has brought down the margin to that extent, which has been more than compensated by actual growth in the non-par business itself. So that's going to be a strategy. See, we can never focus on margin alone because marketability of the product is also going to be a very critical factor.
So this rebalancing is because the ultimate aim is to get the best outcome. The product of margin and the volume is going to be the concentration. So that is what we have been able to achieve, and that will continue to be the strategy going forward in any competitive market. Got it, sir. Sir, the second thing was that is it fair to tell that your agents focusing more on non-par has indirectly had a negative bearing on the par business, and that segment is seeing struggle to grow, or is struggling to grow rather, at the expense of non-par? So at what time you will see that a par business will pick up, and you will see incremental growth coming in? We cannot exactly say that because of non-par business only. The business impact happens because of many reasons.
As we know, agents getting focused, and there has been a slight dip in the number of agency force also. That's one of the factors as well. But we cannot say because of non-par. It does happen at times that when the agents are focused on a particular line of business to the same place at the same point of time, the other product may not be available. They may go back in the next year and sell them the par policies. We are not pushing any agent to sell par or non-par. The company's drive happens to be that the product sales should always happen from the need point of view for the customer. But we realize that as long as we are producing par products only, and we felt that the bandwidth and the options for the customers have to be increased.
So consciously, up till this point of time, we have introduced non-par products only since IPO. Going forward, we'll continue to try to bring about the mix of both lines of businesses and offer more options to the customers. So yes, that's the point that there is a reduction in par growth. But that could also happen because earlier, the options were only within the par segment. Now, those same customers have options within non-par. So they are favoring selection of non-par products, which offers guarantees to them in this case.
Got it, sir. Sir, on par business, the higher profit sharing which we'll see from the current year is already incorporating our VNB margin?
Yes, yes, yes, yes. For the business which is being done now, that is already being incorporated.
At overall company level, only because of higher profit sharing, how much delta in basis points we have seen in margin expansion because of higher profit sharing coming from par business?
I don't think that's a very significant amount because largely it is coming. Almost one-third or 30% of contribution is coming from the par business only. So largely, that will be a very small amount, not a very significant amount because whatever is coming, only that 5% was or 7.5% was already there. So it's a move from 7.5%- 10% in this particular year. But that's all.
Got it. Got it. And lastly, sir, annuity business break-up, if you can give individual annuity business. Just wanted to understand the product features, how much is deferred, how much is immediate, and how much is regular pay for us in annuity product segment, I think.
Currently, we are declaring on a line of business-wise thing. We are not declaring product-wise because that is something we want to leave to us to decide as and when the requirement is there for the overall business point of view.
But sir, do we have a regular pay deferred annuity plan? No. What is that? Regular pay deferred annuity plan.
We do have. No, we have got a deferred annuity plan, which is up to five years deferment is allowed. Earlier, we had this offering up to 15 years and 12 years. Then in the revised setup of the regulation because of the solvency factor, we had to revisit it. We have got our product, Jeevan Shanti, LIC's Jeevan Shanti, where the deferment period from one year, two years, three years up to five years is available besides our regular immediate annuity plan.
So is it deferred single premium plan, right, sir?
Yes, yes, yes.
Okay. Okay.
We used to have regular premium plan also prior to 1st October 2024. There are certain challenges in that there were challenges. So as of now, we have withdrawn that product, Jeevan Dhara. Now, we are relooking into what form and with what modifications we can bring a similar structure because that has become very popular in a very short period of time. So we are working on that design also.
Okay. Okay. Got it, sir. That's it from my side. Thank you.
Thank you. Thank you.
Thank you. Next question comes from Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
Yeah. Hi. Thanks for taking my question. Again, going ahead with the same aspect of essentially the cost of hedging. And what you mentioned is that it kind of will flow through the EV walk. So can you give any sense in terms of what kind of a quantum or what kind of impact would it have out there?
I'll say it's too early to give an impact. As I've already said, the impact will be visible only in the sensitivity numbers which we will be reporting. And per se, it will not directly impact the VNB margins. And because any hedging effect will flow through into the EV movement. So we have just started. So possibly, we'll be able to, depending upon how the market moves, we'll be able to give an impact. Then we report in the next quarter for the annual reporting. So the other thing is on the individual non-par side, your growth was around high teens level in the third quarter.
We have been growing somewhere in triple digits still like the last quarter. So do we sort of say that this now kind of plateaus out and the gap between non-par and par, maybe as you said, you sort of start pushing for par as well at some point of time, will gradually start reducing? Frankly speaking, in the last quarter of the last year, we introduced a product, our Jeevan Utsav, which took off very significantly. It contributed significantly for a large portion of this quarter. In fact, quarter preceding to this, we had been very busy in ensuring that we are able to seamlessly launch our products and coverages. That has been a very challenging task for us. The time frames were there within which we had to launch all those products.
Now that we are done with them, as I mentioned earlier also, we are focusing on coming out with more variety of the products which are compliant and which cater to different markets. So going forward, I think we are looking forward to adding more products to the available basket so that, and in fact, some of them, as I mentioned, we are going to very lifestyle synchronized products. And as you know, savings products, even now, we have to, if not under File and Use system, still it is under File and Use . So we have filed certain designs, and we are seeking for guidance and approval. Once they come, I think it will add to the bandwidth of available products, and agents will get more opportunities to sell and cross that product to existing and new customers.
So, fair to say that this probably grows at a much faster pace than the par business, but maybe the low-hanging fruit and the triple-digit growth is not something that one may think of. I think, is that a fair reading? I didn't get your question.
No. So, the point I'm trying to say is that on the individual non-par side, fair to say that this probably grows at a much faster pace than the par business. But the low-hanging fruit of low base and triple-digit growth is something which is probably behind us.
So it is never something like low-hanging fruits only. Because when we introduced the product, it was not a low-hanging fruit. A lot of effort had to happen for that thing. And we are still working out many innovative designs. And as I mentioned, we are very occupied with handling what was available at that point of time. We are again back to our, what I should say, the business for trying to innovate. And I'm very sure that we can launch more blockbuster products in the times to come. And it may not always definitely be 100% growth, may not be possible, and as you read there. But still a very decent growth. I still feel while we can see the mix has changed, but we see a lot of opportunity to growth in non-par segment as well as par segment. And we'll continue to work towards that.
Sure. And just one final very broad question was on the Insurance Act. What are your expectations actually from the government?
I think what we expect from the government, we would like to share it with the government only and not to the media. And we are very thankful and confident the government is, see, the government and the entire infrastructure is working towards ensuring insurance for all. And that is a proper alignment there. We will, as and when we get an opportunity, we communicate with them. And those things will be taken care of.
Perfect. Perfect. Thank you very much and all the best.
Thank you. Thank you.
Thank you. The next question comes from Mohit Mangal from Centrum . Please go ahead.
Yeah. Thanks for the opportunity. So my first question is that in terms of the number of policies sold by banks and alternate channels have declined around 20% Y-O-Y. So what could be the reason for that?
This is a hidden good year. In fact, we have done well, and we continue to do well on the premium side, but up to Q2, we were recently impacted flattish in terms of number of sales, particularly Q3, once the product line changed in the ticket group. It took some time for the participants to adjust to the new environment, so we have taken a bit of a beating in Q3, and the numbers have come down sharply, as you can see. Towards the end of quarter three, there was an uptick for the month of December. It was good, and I think the uptick continues thereafter as well, so hopefully, we should continue to do well in Q4 as well and close the year, in fact, on a regular basis.
Particularly, the number came under pressure from the MFI side, with a lot of stress there in the MFI sector and participant institutional agencies on the micro side. There has been, in fact, some sort of issues which has led to this kind of sharp kind of decline in the number of sales. But then, in fact, a lot of retail work has been done. We are quite hopeful and confident that by the time we close the year, we should come up with a reasonable number and maybe, in fact, managing a slender growth also, if possible. But keeping fingers crossed right now.
Understood. Understood. One more thing was in terms of the bancassurance. I mean, we saw that the individual APE source to the bancassurance has grown by around 30%-31%. And we have good 90-95 bancassurance partners. So just wanted to know, since top three or top five do have a dominant share, or is it kind of evenly distributed among the bancassurance partnership?
90-95, of course, is in fact a number-wise, in fact, it looks quite big because there are multiple kinds of small cooperatives and regional rural banks also who figure into this list of participants. But if you look at the overall list, in fact, some major public sector banks and a few private sector banks, these are the ones which are, in fact, the dominant partners here. From those top three, in fact, sizable weightage. But at the same time, we are systematically responding to footprints by involving, in fact, other partners as well. And it is likely to be, in fact, a more holistic kind of an approach. But only for the year, but going forward as well.
Understood. So my last question is towards the commission ratio. I mean, we have seen kind of a decline. And I just wanted to know, I mean, is it kind of a sustainable, or do you think the commission ratios will come back to normal considering that we are hoping for a higher growth kind of thing over the next few quarters? So how do you see this commission ratio spanning out over the next 3- 4 quarters?
So one thing I would like to clarify that while we would like the commissions to be reasonable in the interest of the policyholder, we are not happy that the commission payouts are less. It is only largely a function of the business mix. In a business mix, because you would already know that a lot of single premium business is heavy in case of our business.
So then, the commission rates are lower, lower as compared to, but it is low in the sense of percentages. But in terms of volume, overall single premium, they are significantly high. And we will, but then another interesting thing to be seen is possibly then commission rate would look lower, but because we have now backloaded those commission rates, so renewal commission rates going forward will be slightly higher than what we are paying now. So it will balance out. We do not want to underpay commissions. We want to pay a right sort of commission. And so we will be very happy to increase the commission payout with the proportion increase in business.
Understood. Thanks, and wish you all the best. Thank you.
Thank you.
Thank you. Ladies and gentlemen, we would take that as our last question for today. I now hand the conference over to Mr. Mohanty for closing comments.
So thank you, friends, for your active participation and engaging discussion. We appreciate your ongoing support and look forward to continuing to work together to drive growth and success for all our stakeholders. Thank you. All the best.
Thank you. On behalf of LIC, that concludes this conference. Thank you for joining us. You may now disconnect your lines.