Ladies and gentlemen, good day, and welcome to the Q3 FY 2024 earnings conference call of SBI Life Insurance Company Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Jhingran, Managing Director and CEO. Thank you, and over to you, sir.
Good evening, everyone. We welcome you all to the results update call of SBI Life Insurance Company Limited for period ended December 31, 2023. We appreciate and thank you wholeheartedly for your time here. Update on our financial results can be accessed on our website as well as the websites of both the stock exchanges. Along with me, present here today are Mr. S. Veeraraghavan, Deputy CEO, Shri Sangramjit Sarangi, President and CFO, Shri Ravi Krishnamurthy, President, Operations and IT, Shri Abhijit Gulanikar, President, Business Strategy, Shri Subhendu Bal, Chief Actuary and Chief Risk Officer, Shri Pritesh Chaubey, Appointed Actuary, and, Ms. Smita Verma , Senior Vice President, Finance and Investor Relations.
With respect to our performance for the period ended December 31, 2023, our comprehensive product suite, aligned with customers' needs, coupled with our continued focus on business growth, maintaining a best-in-class total cost ratio and persistency level, led to a decent performance on an exceptionally high base of last year's period. During this year-to-date, we have strengthened our market position and invested in capacity building for the employees and distributors with respect to handling the emerging needs of the customer and to support long-term growth. Now, let me give brief highlights of our performance for the period ended December 31. Our new business premium registered a growth of 21% over previous period, and it stands at INR 260 billion and maintain private market leadership with a share of 25.3%.
Individual new business premium now stands at INR 177.6 billion, with a strong growth of 17% and a private market share of 29.1%. Gross retained premium stands at INR 561.9 billion, with a growth of 19%. Protection new business premium grew by 17% to INR 29.7 billion. Profit after tax stands at INR 10.8 billion, with 15% growth over corresponding period last year. Value of new business stands at INR 40.4 billion, registering a growth of 11% over last period. VONB margin stands at 28.1% for period ended December thirty-first. Asset under management grew by 24% to INR 3,714.1 billion.
Robust solvency ratio of 2.09, as against the regulatory requirement of 1.50. We provide comprehensive insurance, catering to customers' unique needs and aspirations. In addition, we enhance their customer experience through personalized and innovative solutions, and this has been acknowledged by prestigious awards and accolades. During the year, the company had bagged Quality Award in Service Industry, Indian Merchants' Chamber, Ramkrishna Bajaj National Quality Award 2022, and became eligible for Global Performance Excellence Award. We are happy to announce that the company was awarded as World Class in Service category at 23rd Global Performance Excellence Award 2023, held in November 2023. These awards demonstrate our commitment to achieve excellence across all spheres of its activities and operations.
Last week, we launched two new return of premium products, Saral Swadhan Supreme and SBI Life Smart Swadhan Supreme, which offer higher sum assured as compared to previous versions at affordable pricing. As we move forward, we aim to deliver strong performance and drive positive impact. We will now update you on each of the key elements in detail. Let me start with the premium. Individual new business premium has grown to INR 177.6 billion, with a year-on-year growth of 17%. Single premium contribution is 31% of the individual NBP, which is mainly attributed to growth in our individual annuity products. The company gained in private market share by 184 basis points to 29.1% and industry market share by 173 basis points to 17.8%.
On individual rated new business premium, we stand at INR 127.9 billion, with a growth of 15% over previous period, and maintaining our leadership position with private market share of 26.5%, with a gain of 80 basis points. At industry level, we gained 115 basis points, with a market share of 17.9%. Also, group new business premium stands at INR 82.4 billion, with a share of 32% in new business premium and growth of 31% over previous period. Having said that, we have collected total new business premium of INR 260 billion, registering private market share of 25.3%, with a gain of 219 basis points.
At industry level, also we gained 240 basis points, and market share stands at 10.4%. Renewal premium grew by 17% to INR 301.9 billion, which accounts for 54% of the gross written premium. To sum up, the gross written premium stands at INR 561.9 billion, with a YOY growth of 19%. In terms of APE, premium stands at INR 143.9 billion, registering a growth of 17%. Out of this, individual APE stands at INR 129.1 billion, with growth of 15%. During the period ended December 31, 2023, total 16.42 lakh new policies were issued.
Since 2010, the company has maintained its leadership position amongst private markets in number of policies issued and consistently delivered YOY growth over the years. This reflects the clear goal of the company to increase the penetration and achieve holistic growth. The company is aligned with regulators' vision, and we'll continue to focus on various reforms enabling deeper penetration of life insurer industry. Number of lives covered during the period ended December 31, 2023, is 25.8 million, registering a growth of 104% over corresponding last period. Total new business sum assured registered a growth of 32% over corresponding last period, as compared to growth of 29% at industry level. Let me give you details of our product mix.
As on December 2023, our guaranteed non-par saving products are contributing 14% of individual new business, and on individual APE basis, it contributes 19%. Individual ULIP new business premium is at INR 101.7 billion, which now constitutes 57% of individual new business premium. Growth in ULIP is attributed to positive movement in equity markets. Individual protection new business premium is at INR 6.7 billion. Group protection stands at INR 23.1 billion, with growth of 25%. Credit Life new business premium has grown by 11% and stands at INR 16 billion. On APE basis, protection contributes 11% of new business and registered growth of 24%. Annuity business is at INR 44.4 billion and contributes 17% of new business premium. Under annuity, the company is offering immediate as well as deferred annuity options.
Individual annuity business is growing at 35% over last period, and this is mainly due to new business contribution of smart annuity plans of INR 38.7 billion. Total annuity and pension new business underwritten by the company is INR 67.9 billion, registering growth of 12% over same period. Moving to update on distribution partners. With a strength of more than 59,000 CIFs, State Bank of India and RRBs, bancassurance business contributes share of 67% and grew by 13% in individual new business premium. On individual APEs basis, it stands at INR 89.6 billion with growth of 15%. Agency channel registered new business premium growth of 21% and contributes 18% in new business premium.
Agency channel individual APE showed a growth of 14% over same period last year, and it stands at INR 33.7 billion. As on December 31, the total number of agents stands at 243,590, with a growth of 26% over previous period. During the period ended, the company added net 24,860 agents. During the period ended December 31, other channel, that is direct corporate agents, brokers, online and web aggregators, grew by 55% in terms of individual NBP and 20% in individual APE. Linked business through other channel registered growth of 45% on APE basis. Coming to profitability, the company's profit after tax for the period ended December 31, 2023, stands at INR 10.8 billion, with 15% YOY growth.
Our solvency ratio remains strong at 209% as on December 31. The value of new business stands at INR 40.4 billion, with growth of 11% as against INR 36.3 billion in last period. VONB margin is at 28.1% for the period ended December 31, 2023. The shift in VONB is mainly on account of increase in share of unit business as compared to previous year. Operational efficiency ratios say that the OpEx ratio stands at 5.1% for the period ended December 31. Our total cost ratio stands at only 9.9% for the same period. With respect to persistency, our individual regular premium and limited premium paying policy, 13th month persistency stands at 85.3%.
The company has registered improvement in 61-month persistency also, by 449 basis points, respectively. As mentioned in my opening remarks, asset under management stands at INR 3.71 trillion as on December 31, having a growth of 24% compared to December 31, 2022. That claim settlement ratio now stands at 98.8%. The company has registered an improvement of 148 basis points over last period in claim settlement ratio. We are committed to deliver need-based solution that addresses the ever-evolving customer needs based on customer profile, life stage, and goal prioritization. The company continues efficient usage of technology for simplification of processes, with 99% of the individual proposals being submitted digitally. 47% of individual proposals are processed through automated underwriting.
Before I conclude, I would like to clearly state that the company's aspiration to expand its distribution reach, branch network, product suite, investment in digital technology, bringing larger customers in ambit of insurance coverage, and improving customer experience, remains unchanged, and our endeavor is to continue delivering better than industry growth. Our company is well positioned to capitalize the growth opportunities offered in the dynamic insurance landscape. Thank you all, and now we are happy to take any questions that you may have.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may please press star and one on your touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Yeah. Hi. Good evening, sir. Good set of numbers, particularly on the margins, in the backdrop of how the product mixture changed and everything. A couple of questions here. First one on agency channel. I'm cognizant of the fact that quarter three is typically a more Banca-dominated. However, on a year-on-year basis, the seasonality is added, but somehow agency channel growth seems to have slowed down meaningfully in quarter three. So what is sort of happening there, and how sort of you are trying to improve in the next quarter and going forward on the agency channel? So that is question one. Second piece is more on the costs. Of course, your costs are by far better in the industry and among the peer set.
However, I mean, if we were to look at the numbers, there seems to be certain increase happening. I mean, of course, in the total premium ratio, it will not reflect, but in the absolute basis, the costs, I mean, commission and rewards, as well as the OpEx, seems to be increasing. So I mean, what is sort of a leading? Is it a sort of a headcount increase or certain commission reward structure sort of being changed across partners? So what is sort of leading, and where should one see it going forward? So these are my two questions. Thank you.
So agency channel growth you are talking about, we have grown in the nine-month period by 15%. And if you look at the overall growth, that is also around 15%. Our Banca channel growth is also on the same numbers, almost. So I don't see any slowdown in the agency. Rather, agency is more of a focus area to strengthen our distribution total mix. So that continues to be a focus area. As far as increasing the expenses you are talking about, there is no such perceptible increase. There is only minor tweaking in commission here and there, but there is no major change in our stance on commission payment also. So the overall OpEx ratio, marginal bits here and there, otherwise we are almost at the same ratio.
Okay, sir. Actually, yeah, so in agency, actually, I was referring, in the first half, the agency channel was growing at close to 20-odd% in a retail APE, individual APE terms. That 20% has gone to 15%, whereas banca is more or less like maintaining at 15% and others are kind of maintaining in and around 20%. That's why what I was referring that in the first half, it was like 20%, now in the nine months, it's 15%. So basically, the quarter gone by has been a material sort of a slowdown.
You, you yourself acknowledge that quarter three usually is more, more of the banca-focused, and agency comes back strongly in Q4. So, that is what we are expecting in the current year also. And, we are expecting good numbers, good, same growth numbers in Q4 of this year.
Okay, sir. Okay. Okay, thank you.
Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.
Thank you for the opportunity, and congratulations on a good set of numbers. Sir, I have two questions over here. So we've seen many players are now refocusing or pivoting their business model to enter into the Tier 2, 3, 4 cities, right? So clearly the competition in these geographies are set to rise. So in the backdrop of this, knowing that next year onwards, many more private players who were more metro city focused are going to be in your geographies, what gives us an edge in, competition, versus these players? What would be our guidance for next year or at least for the medium term, if you can help us understand that, it'll be useful. Sir, second is on the surrender value regulation.
While we understand that things are currently under discussion, but what is your view on how things are moving? What will be the timelines, and what could be the impact on your overall margins, with the way the regulation comes in? Thank you. These are my two questions.
This Tier 3, Tier 4 cities you are talking about, almost 39% of our business is from rural and semi-urban areas. You are aware that our main Banca partner , SBI, has the largest presence in the rural and semi-urban areas, Tier 3, Tier 4 or even Tier 5, Tier 6 kind of cities, also cities or towns or villages, whatever you say. We don't see much challenge on this front, although the other players are moving to that market. It will take them a while to match our strength, and in the meantime, we are also strengthening our network in those towns and cities and villages by employing more agents and ensuring better coverage by our existing and the branches that we are going to open.
So sure. So does that also mean that you will also expand your presence in SBI branches, and sir, any guidance for growth for next year?
There is no question of expanding our SBI branches, because we are present in all branches of SBI. All SBI branches are authorized to sell insurance business, and that is what they are doing also currently. Of course, we will make maybe more and more branches active.
Sure, sir. I had a question on Surrender Value regulation also.
Would you like to answer that, uncertain ?
See, surrender value regulation as this, currently it is in the draft stage, so we have given our representation in both ways. One is, to the regulator, as well as to the Life Insurance Council. But we don't see any much, big impact to SBI Life, per se, because, it all depends on, what kind of product mix and what kind of, product feature we have already built in, in our system. So we will wait that in which after it will come finally from the regulator. But at this moment, we are, not having any concern as far as this regulation is concerned.
Sir, any timelines on that?
We are awaiting the final guidelines from the regulator that are still under work, and the discussions are going on in that direction. But I'm sure that the regulator will take a very balanced view of people who are cashing out in the short term and the long-term persistency of that. That is the stated goal of the insurance products. That is the long-term investment and risk protection.
Sure, okay. Thank you so much. These answer, these answer my questions. Thank you.
Thank you.
Thank you.
The next question is from the line of Swarna Mukherjee from B&K Securities. Please go ahead.
Yeah, good afternoon, sir. Thank you for the opportunity, and congrats on a good set of numbers. Firstly, as a follow-up on previous participant's question, I just wanted to understand from you why agency Q4 generally would be a larger quarter, and Q3 would be relatively tepid, because if I understand correctly, in Q3, particularly in December, it is the MDRT period, and agents would also try to focus on increasing volume. So is there any, you know, difference how, you know, the focus would be on banca versus agency in the third quarter? ... from your distribution point of view? So that is the first question. Secondly, sir, I had questions on the protection segment.
So first of all, in group protection, if you could delineate, you know, the growth, which has come this time, from which segment it has come, credit life or term life, what are the trends you are seeing in, in those areas? And in retail protection, given that you have mentioned that you have introduced ROP product and, that we are at peak quarter now, going ahead, do we expect growth coming back to this segment, on the retail protection side? And, also, just couple of confirmations that I wanted to take was, one is on, persistency. So if I just look at, 3Q persistency versus 2Q persistency reported, it was, the numbers in that case look a slight dip.
Is there anything to read into that, apart from the fact that maybe, you know, in all third quarters, there is a higher mix of ULIP that hits the persistency number? Anything else to read into that? And on the change, the changes in assumptions that we see in the VNB walk, is there anything additional you have done, or is this, you know, what we had done at the end of 31st March, that is what is visible? That would be my questions.
Abhijit here. So I'll take on the channel. As of now, I don't see we would read too much into a quarter-on-quarter channel numbers. There could be some fluctuations here and there. Like, Mr. Jhingran already explained, that the focus remains strongly both on agency and Banca channel, and we don't see any meaningful difference in the expected growth rate from the current levels for both channels for the financial year. That was your first question. On the second, on protection, yes, we would expect some growth coming from individual protection in quarter four. That is our endeavor, that we will try and grow the flattish growth we have seen in individual protection to take it higher, because this year growth has come primarily from ULIPs.
We would also want to work on individual protection to increase our individual protection share.
Right, sir. On group protection, if you could, you must spell out which are the segments, I mean, which segment is driving the growth?
It's Group Term mainly at the moment. So both are growing, but Group Term is growing faster in this year so far.
Okay. Sir, one of your peers who report, they have highlighted that there is a price correction in Group Term. So in your case, is this more volume-led? And if so, where, I mean, which, I mean, where the volume is coming from, if you could please comment.
No comments on that. No comments on that.
Okay. And on the persistency and the economic assumption changes, if you could highlight.
So, assumption, just to clarify that we have not make any changes in assumption this time. The assumption remain unchanged, and the the assumption impact that you are looking into is the same assumption that we make at year-end. As a process, we do the review the assumption once a year, so we'll do in the March. As of now, we've not changed that. Second part on the persistency, I think, persistency is good. I think, there is nothing specific to read into numbers, and quarter-to-quarter will be 10 basis points. We get even better than the other one. And even look into the other than 36-month persistency, all persistency has improved, over the periods.
Okay, sir. Got it. Thank you. Thank you so much for your answers.
Thank you. The next question is from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Hi. Congratulations on a good set of numbers. So, you know, most of my questions got answered, but I want to understand, first, at the product level, are we seeing any changes in margins? Because, you know, some of the competition in life insurance is talking about that. Second, within channels, and especially, my understanding is also that within the agency channel, there has been some increase in commission payouts. So, has there been any increase in competitive intensity to acquire business, that also probably may have impacted your growth in Q3? So, I wanted to understand if any of these things are playing out, and how do you see that?
And, lastly, obviously, again, we see that the proportion of ULIPs has gone up. And I know that you constantly, you know, talk about, you know, giving what the customer wants or selling what the customer really wants to sell. So, but, you know, again, in terms of our margins, that will keep our margins subdued. So I know that I'm probably asking this question again, but, any sense on how our product mix could shape up over the next 2-3 years? That will also be helpful. Thanks.
As product level margins are concerned, there is no perceptible change, or we have not noticed any perceptible change. We are more or less in the same range. And agency channel, we have not made any changes in the commission structure, other than minor tweaking that I already answered to one of the previous analyst, and we, you know, are confirming that again, that there has not been any major changes in our commission structure. As far as,
So is that,
Yeah.
So, is that sort of resulting in some sort of loss in our share in that channel and resulting in a little lower growth?
No, we continue to be number one in agency channel, also in the private industry. And our growth rate is also comparable. I mean, some of the smaller players may be having a smaller base or may be having larger percentage-wise increase, but overall, our growth trend in agency is as per our earlier guidance. When you were talking about the customer preference and ULIP share and all, so while we honor the customer's preference of ULIP and we do not stop anybody from buying or from to our agents stopping our agents from selling any particular product, but in the, for the benefit of the entire insurance industry, our focus on other insurance products, the protection products, will continue, and we will continue to work to improve the protection business in our overall business treasury also.
Right. Got it. That's all from my side. All the best.
Thank you. The next question is from the line of Nischint Chawathe from Kotak. Please go ahead.
Hi. Thanks for taking my question. You know, going back to the surrender, you know, charges, proposed-
Sir, your audio is not clear. May we request to kindly use your handset, please?
Sure. Is this better?
Yes, sir. Please continue. Thank you.
Thanks. You know, going back to the surrender charges proposed regulation, you know, surrender charges do have a, you know, kind of a contribution to the overall VNB, and I guess that's obviously a big point of discussion in the industry. So, you know, why do you think that this kind of does not really have an impact on SBI Life?
Before we comment on the draft regulation coming from regulator, I think it is... We'll wait, what shape it will come, but ultimately it is in the best interest of the industry itself, both for the customer, insurer, and distributor as well. Like, one point we would like to always mention that our objective when we price a product is to ensure that we offer the long-term sustainable rate and fair to return to the customer. And in this process, we also ensure equity between the surrendering policyholder and continuing policyholder. So to that aspect, there will be - we are not saying there will be no impact. I think there will be, there will be some impact, but not to that extent that our peers might have.
The reason being, if you see that, in our process, we, our return that we offer the customer is not entirely backed by the surrender value, surrender penalty and other parts. So if you see our return to the, even the non-par savings product, is not too aggressive as compared to others. And in that process, a reason being that we assume very sustainable persistency and that perspective, with objective improvement in the persistency from the current level, given that persistency has been continuously improving. To that extent, those some condition will come into the picture, we can't say that there are no conditions coming through, but in our case, that will be on the lower order, first thing. Second part would be, if you look to the current product mix, our non-par contribution is much lower as compared to others.
We continue to sell the unit linked dominated, and ULIP. You see the surrender charges is much lower than. So from that perspective, we conclude all the things. I think we don't expect there will be significant or material impact in our margin. I think even the regulation will come, appropriately, we'll price those products. And objective would be to again bring the balance between the customer return and our margin.
Sure. And, what would be average ticket price in the Non-Par product? Or if you could give the average ticket price across Par and Non-Par and ULIPs.
It's 90,
Around 90,000.
90,000 approximately.
This is in the non-par?
Yes.
On ULIPs?
It's more than 100,000.
Okay, and Par would be?
Par will be slightly lower side. Par depend on, again, product, because some par has higher things, so but would be slightly lower from the non-par.
Sure. Just one small question. If I look at slide 14, you know, surrender ratio has gone up in the last 9 months. How should we really read that?
See, Nischint, the surrender value has two aspect to it. One is that it depends on the market, because it is predominantly ULIP products and those products which have already 5-year premium paying term, and the policyholder has the option to surrender. At this moment, when the returns are good, market is good, so it has the implication into the surrender ratio to the agent.
Sure. Got it. Great. Thank you very much. Those are my questions. All the best.
Thanks, Nishchan.
Thank you. Thank you. The next question is from the line of Dipanjan Ghosh from Citi. Please go ahead.
Hi, good evening, sir. Three questions from my side. Firstly, if you can, you know, kind of mention the product pipeline for the next three months and maybe for next half year? Second, you know, when you say that your agency payout has been freed here and there, can you give some color on that? Is it like more product mix been changed, or you have been your payouts to operational performance of products, or is it just payouts have changed with those targets? And lastly, you know, you've added a lot of agents over the last few years and again, market share in that. But can you give some color on how the vintage-wise agent productivity would have changed, historically versus, let's say, the last one or two years, and currently?
So in terms of, vintage-wise, there is a marginal improvement in agent productivity, over a period of time. I would not want to comment on vintage-wise agency productivity. That is what we would want to say as far as agency is concerned. On the product margin, I think Prithesh can give. On the product side, we are looking for the products and pipeline, so basically, as you know, we always endeavor to offer a complete through the, to the customer. So recently we have launched this, TROP product. We were working on some of the savings product in non-par segment. We're also working on, one product in, in, par.
Some of the banks we have, you know, keep saying we are also looking to the either sales perspective to long-term pure term product as well. So it's depending on the need, will come. We also evaluating bringing some novel feature in our different LT product as well. So it will be difficult to comment on the overall year for the two longer perspective. Currently, 3-6 months, so this is the target we are seeing.
Amit, sir, on the agency payouts perspective too, is it like factors that are linked to mix change or operational performance or something?
No, there is nothing specific, like that for our agency channel. So what we have been doing, we are continuously been focusing on our agency, as Abhijit said, on the productivity as well as the activity levels, and we'll continue to focus on the recruitment also, and training.
Got it, sir. If I can just squeeze in one small question. Your non-SBI, non-agency channel growth has been quite strong YOY, YTD. So is it that you're gaining some higher volume from the PSB banks , or is it from a new broker or corporate agency partnerships where you're gaining ground or share or higher volume? Can you give some color on that? Thank you.
No, that is predominantly our on our own website, where the volume has gone up as compared to last year. So that has reflected in that overall number for that particular channel.
Got it. Thank you and all the best.
Thank you. The next question is from the line of Rishi Jhunjhunwala from IIFL Securities. Please go ahead.
Yeah, thanks for the opportunity. Couple of questions. So firstly, you know, are there any considerations or pressure in terms of, you know, increasing payouts for your banca and agency channel? And, you know, one of the reasons I'm saying is because, you know, some of your larger peers, peers have increased commission payouts by 2-3x over the year, especially on the traditional plan. So, you know, any, any discussions around that for us as well?
So, you have seen our commission payout numbers for the quarter for the last half year also, and I think the last half year results post that also, the same questions were asked to us. And we had confirmed that at the present time, we are not going into any commission enhancement for our partners as of now. We have, we continue to be the lowest cost player in the industry, and our cost of acquisition, we don't want to increase as of now. And since this strategy is giving us comfortable growth numbers as of now, we will stick to the present structure only for the time being.
Okay, sir. Secondly, just in terms of, you know, the margin mix, that has changed over the last twelve months or so, you have indicated 200 basis points decline has come from the business mix and profile. If you really look at AP mix change, it's predominantly a 4%-5% shift from non-par to ULIPs, which... So just wanted to understand, I mean, is it primarily to do with just shift or, you know, at a product level also there might have been some compression on the portfolio side?
It is mainly on the shift on account of the product mix, because the Non-Par has a 5% shift from Non-Par to-
ULIP.
ULIP, and there is no compression on the margin. In fact, if you see this, within the VNB, with the non-par, we have seen some enhancement in the margin and the persistency. So we, as we always mention, that we reprice actively and try to maintain the margin and customer. So that perspective, the shift is coming only on account of the product mix.
Understood. Okay. Thank you. All the best.
Thank you.
Thank you. The next question is from the line of Sanket Godha from Avendus Spark. Please go ahead.
Yeah, thank you for the opportunity. Sir, if I see the numbers, your first year commission ratio in nine months is around 14%. Last year, it was around 12.4. And if I look at the product mix, naturally, the product mix has moved in the favor of ULIPs, and ULIPs typically have lower commissions compared to non-par or par in, and even protection investment.
... So just wanted to understand what led to this increase in commission ratio in first year. And again, maybe we are harping on the same point, but whether the payouts to the channels have marginally gone up, that's point number one. And related question is, if you report VNB margin based on last year cost, if the commission payouts have gone up, the current year cost structure will be different compared to the last year. So when you will revisit your assumptions in fourth quarter, is there a probability of negative impact coming in because of the higher expense towards first year business on the margin?
Similarly, I just wanted to understand, given the surrender rates have gone up, last year it was benign at 4.3, today it is at 6.1. You might have reported last year margin based on surrender rate of 4.3, today it is 6.1. So if you bake in 6.1, whether it will have a negative impact on the margin. So just wanted to understand this part very clearly, why the payouts have gone up in first year, and second, any implication on the margins, given the payouts have gone up and surrender rates have gone up.
So one by one. I think if you look into the commission has gone up, despite the... This is mainly a function of the product, and within the product, what PPT have been sold. Despite you see the non-par proportionally come down, there is a shift from the shorter pay to the longer pay. And like we mentioned September as well, we have some of the products that are offering 6 pay, that have more shifted into 7 pay and 10 pay. And, in general, the longer term has a higher commission, so that's reflecting in that perspective. So this is one part. So-
So, sir, if I understood you right, what you're trying to say is that you are selling more long-term plans compared to what you sold last year. Given the long-term plans have higher payouts, that resulted in increase in the commission ratio, right?
Yes.
Sanket, just add one thing here, that in this quarter, our non-par also has shown a growth. As you said, the PPTs have been actually, you know, based on that, the commissions have been fixed, so that is the reason for this quarter, the overall commission ratio has gone up.
Yes, sir, I was referring to nine-month to nine-month number, nothing to do with the third quarter. So, I was just referring nine-month to nine-month, 12.4 going to 14. So, that was the point.
So, Sanket, Sanket, so, my response was on the year basis, year-on-year basis. So if you look into the last nine months to this nine months, there is a shift of coming to the longer pay, so that explains that.
Mm-hmm.
Second part on question on the assumed expenses, I think all the way, except the renewal expenses that we are looking into might be, but all actual expenses you consider while completing the VNB. So there is no possibility that we'll get any hit on account of the year-end. So that's out of the question. Third, respond to the third question on the persistency. Like, we always mention that we, while setting the assumption, we take a longer-term view and not frequently changing. So even last year, we see the persistency has significantly improved over the previous year. We have not changed the assumption to that extent. So even fluctuation will keep coming, but when we set the assumption, that will reflect the long-term trend.
Long-term means not ensuring experience looking to last three years, five years and other aspects. So that perspective, just some change here and there in surrender ratio will not happen. I think other aspect is that we, this fluctuation also, consider in the projection. So some of the cases in particularly surrender coming on the ULIP products, where the locking, after locking period, we, we see some spike in the surrender. That already accounted for, so that perspective, we don't see much, any follow impact that we may expect in the, year-end agency review process.
The reason I'm asking this question, sir, is that in the last three years, this number hovered around 4%. Suddenly, this jumped to 6.1, the surrender rate. That is happening after five-year locking. So given your long-term trend is around 4, now it is 6. So just wondering whether it will have an implication or not.
Sanket, the way to look at it is actually the persistency ratio into it. This surrender will have multiple generations of policies built into it. Somebody which is 10-year-old could also get surrendered right now. So you see what is our persistency rates at 60+ months is also showing improvement, and our longer term also, though we don't disclose it, are showing improvement. So to that extent, and as we said, we are conservatively budgeting while doing VNB, so we don't see any major concern on 31 March arising from the surrender rate.
Oh, perfect, sir. So, the second, one more question I had about was, again, on the productivity. And if I look at Banca channel productivity, it seems to have just grown by 6%, in the current nine months, compared to, compared to last three years. Means last year, in nine months, it was around, INR 6 million. Today, it is INR 6.6 million. So, anything to read there, sir, is it that, there is something kind of flattening in the Banca channel, the expected, or productivity levels actually can go meaningfully higher from, the current levels.
So you are looking productivity in what way? Per branch, or how do you want to look at it?
Yeah, the way you disclose it in the PPT, sir. The PPT number says that branch productivity is INR 66 lakhs. That number was INR 62 lakhs last nine months, FY 2023. So I was coming from that perspective.
You see, our penetration in the Banca channel, in State Bank customers group is less than 2%.
Mm-hmm.
So, there is a huge opportunity out there, and there are huge opportunities to grow, which will affect the branch productivity also. So, there is immense opportunity and we are ready to tap that. We don't see any challenge on the branch productivity growth front.
Okay, sir. And lastly, just wanted to understand whether you will ever pursue an inorganic growth opportunity or you are happy with the channels which give you the growth, because there was an article few days back in the paper that probably there is an inorganic opportunity you are scouting for. So just want clarity from you from a strategy point of view, whether you are okay for inorganic part of growing the company or you think that your own channels will give you the growth, no need to chase for inorganic part?
No comments on that as of now.
Okay, sir. That's it from my side. Thank you.
Thank you. The next question is from the line of Neeraj Toshniwal from UBS, India. Please go ahead.
Hi, sir. Just wanted to understand in terms of product mix, you obviously have moved much higher on the unit, but our margins have actually been kind of quite sustained. And we are seeing the margins have been quite similar. So just there's some disconnect. Just wanted to understand how the margin movement has, you know, supported the outcome what we are seeing currently.
So, there are two parts of this. One is that when you shift coming from the product mix from the Non-Par to unit, there is a downward impact coming on the margin. At the same time, the within the Non-Par, within the protection, within the units, the within the particular line, there is a margin enhancement coming from. So it is, it is, if you remember the last time also, September, we mentioned that we have revisited, I think three times per Annuity, twice on the Non-Par products, I think, and we reprice other protection product as well. Objective is to realign and maintain the margin.
Like I mentioned in an earlier response to the earlier question as well, that while product mix bring down my margin, then within the LOB, particularly for longer term policies having higher margins, that gives some compensation of those calls. That's the reason you're seeing very few coming to, say, the margin fall on account of product mix might be looking lower as per your estimate.
There has been some enhancement on the product level margins, which I think, in the initial comment, got missed out probably. Are you understanding that right?
No, you, you are understanding correct. There is a margin enhancement within the product and within the particular profile, because depending on the, within the policy term, what kind of combination you are selling, what kind of business patterns, so the margin will vary in that as well. So you get some of the offset that compensate the fall in the margin on account of higher units.
But then harping on the last question again, on because of the increasing costs and increasing surrenders, and since the assumptions are not being changed, since last year, do we maintain the guidance range of between Uncertain, or do we see that we could be little off to that? Because there could be some impact with the change in, you know, recent higher cost, what we are seeing currently, or this is already baked in. Because as we are saying, we look at the longer term trend more rather than, you know, the short-term volatility. So how should one think about the overall VNB margin?
Also, if you can give some guidance in terms of next year growth and, channel-wise, which channel will be the most, you know, attractive for us, given the current changes and the mis-selling news which is coming from the bankers and BCs, if you can also throw some light on that.
So, as you see, there are no such cost pressures seen in our results for the first nine months. And we stick to our guidance of, say, 20, around 28% of VNB margin in the coming quarter, this quarter also. So, we don't see any perceptible change. Some bits here and there, depending on the product mix, of course, we do not deny that, but 28% is something that we are sticking to.
The growth guidance for next year in terms of APE?
Pardon? I didn't get you.
APE growth guidance for next year.
So next year we are growing at around 15%, and next year is still a quarter away. We will be finalizing our numbers shortly, and but seeing the industry trend and all and our past trend, we continue to stick to around the same number in the coming years.
And just
I'm sorry to interrupt, sir. I would request you to kindly rejoin the queue for follow-up questions, please.
Okay.
There are several others waiting for their turn. Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, please limit your questions to one per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah. Hi, good evening, and congrats on good set of numbers. Just a couple of questions. Firstly, the new product that you mentioned in the opening remarks, you mentioned that the sum assured is higher and the pricing is lower. So do we assume that the margins on this product would be lower? And that, so, you know, how do we look at that? And secondly, there is a lot of talk about growth in deposits... that, you know, some of the banks are that would be looking at. So do you think that, you know, the life insurance segment growth in the, growth in the Banca channel could be at some risk in possibly next year or in the next couple of quarters? And those were my questions.
The product, what is mentioned in the two products that we launched is the TROP category. You see that as a company we sell around 86% TROP.
Mm.
This part has been covered the minimum premium size of INR 20-INR 25 lakhs, with average will be approximately INR 25 lakhs. So when we saying the premium rate is lower, this is not the lower price that way. What we think that when you compare the product, our existing term product, which has been allowed to sell at 5 lakhs and above, we launched a high sum assured product, customer profile is much better. To that perspective, we have again re-emphasize our segment approach for segmented pricing, and we price those products. So to that perspective, this product is competitively priced with adequate margin.
So we expect that one side, this product will be able to attract the better profile in the book, also help with the high ticket side, will help in the growth of the protection business. At the same time, it is competitive and it will margin accretive to the company. And, you know, actually mentioned the protection product has a higher margin, and sale will help us to further enhance this margin. So as far as deposit growth you're talking about, if you look at the industry level also, the total new business of the life insurance industry is a fraction of the ASCB deposit growth. So, two as such are not very comparable.
In addition to that, the regulators within the government's target for increasing insurance penetration, I don't see a very perceptible or meaningful negative effect on the industry numbers in the coming quarter or the year also.
Okay, thank you.
Thank you. The next question is from the line of Supratim Datta from Ambit Capital. Please go ahead.
Thanks a lot for the opportunity. My first question is on a recent article in the newspaper which talked about how SBI has stopped promotion in its circles till thirty-first March. Just wanted to understand how does this impact our growth in the fourth quarter? And two, wanted to understand, you know, what kind of sales practices, changes in sales practices you will have to bring about to address some of the recurring concerns around, you know, mis-selling, which keeps coming up. I understand that your ratios are low, but you know, these are concerns which keep coming up. So from a sales practice perspective, what are the changes that you are trying to bring about to address this?
If you look at the newspaper reports and compare it with the numbers being reported by us or by regulator also regarding mis-selling, you will see that SBI Life is the lowest, having the lowest number of complaints, and mis-selling complaints are only at around 0.03%. So that is almost negligible. Having said that, compare it with the opportunities available in the Banca channel. I'm sure that the growth rate that we have registered in the nine months will continue in this quarter also. The first 20 days, we are not seeing any perceptible change in the sales that are being made in banker or agency channel.
Just, you know, so, you know, thanks for the answer. Just wanted to understand that, you know, if, you know, the current set of awards or, you know, remuneration for the agents or bank reps cannot continue, then how do you go on rewarding them, how, you know, for the sales?
I will clarify here again that the individual level, CIF level or branch manager level awards in the Banca channel have been stopped by State Bank of India since 2017, and this is not something that has come up now. There was no blip even at that time. The bank has not been giving any individual awards to its employees, nor the insurance company is giving any direct benefit to any of the bank employees.
Got it. Understood. That's very clear. Thank you.
Thank you. The next question is from the line of Ashish Agarwal from BNP Paribas. Please go ahead.
Yeah.
Hi, sir, thanks for the opportunity. I just wanted to catch up on the growth guidance that you gave for FY 2024, on the APE part.
See, as we have already mentioned, so we just wanted to reiterate that, we will continue to see the same kind of growth which we have seen in the current fiscal, and, it will be a range amount. As, Mr. Jhingran said, it will be in the range of around the APE basis is around 18%. And, we will focus on the product mix, as we have always been, very clear on that. So overall, we expect that, next FY 2025 will be, a similar kind of growth for SBI Life.
... Okay. Thank you, sir. Okay.
Thank you. The next question is from the line of Shobhit Sharma from HDFC Securities Limited. Please go ahead.
Yeah, hi, sir. Thank you for the opportunity. So I have few questions. So firstly, around the cost structure. So if I look at our expenses of management other than the renewal commission to the APE ratio, it has moved up from 35% last year nine months period to 37% this year, despite a huge deterioration in our product mix. If you can help us understand that, what is playing over there? Another thing is that you mentioned that despite the equity market being performing, we see higher ULIP, higher surrender towards the ULIP side. So how much of business are we able to channelize back in the form of new business, sir? Means is the churning in the new business in the ULIP surrender helping us in fueling our growth?
Also, we understand that due to IRDAI regulations, we can now attach some of the rider along with the ULIP products. Are we doing that? And what is that percentage, if you can understand as an attachment? Thank you.
See, as far as the cost structure for the company is concerned, there is no change during the last quarter or we say this nine months to nine months. Whatever numbers you are mentioning, it is predominantly due to the normal business expenditure, which has gone up, which we have appropriately taken into account. Like, for example, like some infrastructure costs and the cost towards the digital adoption and related to our employees are concerned. So the employee strength also have gone up, the branches of new branches have gone up, and our digital adoption also has gone up. So predominantly, the increase of around 1%-2% is immaterial as far as the overall expense structure of the company is concerned.
As far as this high ULIP surrenders you are mentioning about, that I think it is a factor of the market and the plus the product feature. So as we already mentioned that, if the product feature allows you to post seven years of PPT, you can surrender. And based on the market scenario today, and you know that the best time to capitalize that opportunity, some of the investors are, or the customers have done it. So that is the reflection which is being shown here. But we don't see any concern per se at that point of view. So we will continue to focus because our revival campaign, as well as our surrender prevention measures, which we have been taking, that has also given us some good results.
And we able to convert some of the surrenders also either by restricting them or by converting into the new business. So that has also given us good number for us.
Any number around this new business churn we are getting? And also, sir-
There is no churning per se. What I meant to say is that the product feature allows you to surrender after seven years, so then the customers get convinced to putting money into the other products of the company.
Yeah. So, is there, what kind of amount of business, let's say the surrender is INR 100 crore, so how much of percentage are we able to get back in the form of new business? 5%? Specific number on that.
We're not tracking that.
Not tracking that.
That kind of number.
Okay. And sir, last question is on, strategy towards the individual retail protection. We are seeing that on quarter-on-quarter basis, we have been slowing down Q1, Q2, Q3. So what's the strategy going forward? What are we doing to bring it back on track?
So, as we said, this quarter, our focus on protection, increasing protection in the business mix is always there, and this quarter we are taking some concrete steps. We are also introducing some products which can be easily sold online also and on the digital channel of SBI also. So, that particularly, we expect good numbers in the current quarter.
Okay, sir. And, yeah, the attachment ratio in case of ULIP for attaching the rider, any numbers around it?
No, no. We don't have any specific number for that.
Okay. So you also mentioned that the costs have increased because of shift towards the longer pay. Can you give some numbers around it, whether it towards the 10 PPT or the 5 PPT, how it has moved in percentage terms?
No, we don't exercise any number, but basically, longer term product offer better return because, and good for us as well, because we are getting the instrument to lock in for longer term. We offer better return to the longer term customer, and the customer, hence customer opt on that perspective. So there is nothing specific or nothing. We give the full bouquet of the, within the product, i.e., 7 Pay to 7 to 10 Pay, and to looking into particular non-par product and customer looking to. We don't track those shift moving from. But we do see attraction coming from the longer term product, on account, definitely on account of the better customer return to the on the PPT.
Okay. Thank you. Thank you.
Thank you. The next question is from the line of Mohit from BOB Capital. Please go ahead.
Yeah, yeah. Thanks for the opportunity. So first in the non-par, wanting to understand, you know, what the IRR that you provide, and have we repriced the products, you know, over the last nine months? So that's point number one. Point number two, while we understand that retail protection, you are introducing new products and other things, you know, to increase the growth, but just wanted to understand, is there any scope to reprice the existing product line? So those were my two questions.
I think, again, the non-par, when you price a product, try to optimize this, value for that. So as you mentioned earlier, as well, the non-par product we have repriced twice as price, depending on the interest rate movement perspective. And there is a both the side movement happen. Some of the product we have, IRR has increased, some of the, product IRR has gone down. So there is always, opportunity to reprice it. Looking to your second question, for all other product, we continuous reviewing our product portfolio-
Both, customer view, value perspective, shareholder perspective, and distribution perspective, particular demand and other perspective. And when required, we do that. I think strength of the IRD and that perspective will allow us to reprice the product in several events. And as a result, we have been very active on that perspective, and as and when required, we do reprice those products. So there is always the opportunity to revisit and reprice the products.
Right. So that helps.
Guaranteed products.
Understood. Sir, just wanted to understand, what was the IRR earlier and what it is now? If you can just throw some color, that would be more helpful.
So not much, much impact. I will not give any specific number because very difficult to even tracking that, because even the non-par product, we have, repriced, three times already. So version one, version two, and version three. These are reflection. Just to, clarify that regulator allow us to reprice the, change them interest rate movement . As and when interest rate movement happen, and we are able to lock in, in the better, return instrument, we increase the IRR. As and when it go down, we also protect the shareholder value, value perspective, we reduce the IRR perspective.
All right. Just wanted to confirm, you have repriced this product three times over the last nine months. Is that right?
Yeah.
Okay, thanks. Thanks, and wish you all the best.
Thank you. Thank you. The next question is from the line of Aditi Joshi from JP Morgan. Please go ahead.
Yeah, thank you for the opportunity. Most of my questions were answered, but just one quick one again. Sir, can you please elaborate the reasons why we saw a good pickup in the Non-Par business, as you mentioned earlier? And also, can you also help explain the reasons behind the weakness in the Participating products, please? Yeah, that's it. Thank you.
So, as we mentioned, the focus was on the product mix, and which we have been ventured into this in the last two years. And, this year, in the third quarter particularly, we have seen, a good traction in the ULIP plus the Non-Par. And as already mentioned by Mr. Jhingran, we will be focusing on the product mix in this last quarter also. And our focus is that, definitely on the Non-Par segment. Within Non-Par, it will be Non-Par savings and protection. So this is our, focus area for the company on this particular FY 2024 and going forward also into FY 2025.
Thank you.
Can you hear us?
Yes, sir, you're audible. Mr. Joshi, any further questions?
This is it from me. Thank you very much.
Okay. Thank you, ma'am. The next question is from the line of Sahej Mittal from 3P Investment Managers. Please go ahead.
Hi, good evening, and thanks for the opportunity. Sir, just one data keeping question. What would be your lapse rate for non-par guaranteed policies for 13th, 25th, and 37 months?
We don't disclose the LOB level percentage. The comparative percentage, we already disclosed on that. There's no specific differential in the percentage. Percentage, they are more or less similar to the particularly initial year, more or less similar to the unit and other. So cumulative percentage and non-par percentage are more or less similar for the initial year. Later year, you can say the percentage is much better in non-par because usually the surrender, there's no surrender charge and people, fund will go up and people see the value and they in non-par proceed with that. Whereas in non-par products, you see the much better value coming in the maturity, so you customer will keep stick to the those policies.
Got you. Got it. Thanks. Thanks, and all the best.
Thank you. Ladies and gentlemen, we will take that as the last question for today. I would now request Mr. Amit Jhingran for, to give us the closing remarks. Over to you, sir.
Okay, so, thanks a lot to all of you for taking out time this evening and being with us. I hope all your queries and curiosities have been satisfied by my team here. For any other clarification, you may get in touch with our investor relations team. Thanks a lot. God bless you all!
Thank you, members of the management. Ladies and gentlemen, on behalf of SBI Life Insurance Company Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.