Ladies and gentlemen, good day, and welcome to the SBI Life Insurance Company Q2 FY25 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 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 are happy to welcome you all to the results update call of SBI Life Insurance for half year ended September thirty, twenty twenty-four. We appreciate and thank you wholeheartedly for your time, for analyzing our results and attending our earnings call. Update on our financial results can also be accessed on our website as well as on the websites of both the stock exchanges. Along with me, Mr. Sangramjit Sarangi, President and CFO, Mr. Abhijit Gulanikar, President Business Strategy, Mr. Subhendu Bal, Chief Actuary and Chief Risk Officer, Mr. Prithesh Chaubey, Appointed Actuary, and Ms. Smita Verma, SVP, Finance and Investor Relations, are present here on the call. I am pleased to share that we have seen progress in several key areas as compared to previous corresponding periods, demonstrating the strength and dedication of our teamwork.
We are building a strong base for the year ahead by improving the Banca and agency productivity levels, onboarding new agents, and digital initiatives. This will ensure that in the long run, the company meets its goal. In response to the evolving needs of our customers, we have taken significant steps to enhance our product offerings. Over the past period, we successfully relaunched fifteen existing products, ensuring they align with regulatory requirements, current market trends, and customer expectations. In addition to our relaunch efforts, we introduced nine new products that cater to the emerging needs of our customers: five unit-linked insurance products, two term insurance products, one endowment product, et cetera. Further, in its endeavor to provide retirement solutions to the company, has also launched annuity product. As of today, the company has twenty-four products in its portfolio.
These new offerings reflect our commitment to proactive approach to addressing the changing landscape of customer and regulatory requirements. By leveraging insights from the market research and customer interactions, we developed these products to provide greater flex, flexibility, improved protection, and tailored solutions. While we have experienced slower growth in premium numbers than anticipated due to the high base from last year, we are optimistic that our new product launches and approach in reaching out to the customers will drive growth moving forward. Our focus on adapting to customer needs underscores our dedication to delivering value and security. We believe these initiatives not only strengthen our portfolio, but also reinforce our position as a trusted partner in the insurance industry. Moving forward, we remain committed to continuously assessing and refining our offerings, ensuring that we are well-equipped to meet the dynamic demands of our customers.
We recognize that staying attuned to customer preferences and market trends is essential for our continuous success. Now, let me give you some key highlights for this half year ended September 30th, 2024. New business premium stands at INR 157.3 billion and maintains private market leadership with share of 21.3%. Individual new business premium stands at INR 114.9 billion, with a growth of 13% and private market share of 25.7%. Gross written premium stands at INR 359.9 billion, a growth of 7%. Protection new business premium stands at INR 17.2 billion. Profit after tax stands at INR 10.5 billion, with a strong growth of 38% over corresponding period of last year. Value of new business stands at INR 24.2 billion.
Value of new business margin stands at 26.8% for period ended September 30, 2024. Embedded value stands at INR 660.7 billion, registering a growth of 29% over 512.6 billion in last period. Our assets under management stands at INR 4.39 trillion, with a growth of-
Ladies and gentlemen, the line for the management seems to be disconnected. Please hold while we reconnect.
... Ladies and gentlemen, thank you for patiently holding. The management has reconnected. Please go ahead, sir.
I'm sorry, the call probably dropped, and I was explaining about the solvency ratio. The solvency ratio is at 2.04, as against the regulatory requirement of 1.50. Now, I will update you on each of the key parameters in detail. Individual new business has grown to INR 114.9 billion, with a growth of 13% over last period. Single premium contribution is 33% of individual new business premium. If we exclude the annuity business, single premium contribution is at 17% of individual business. The company's private market share stands at 25.7%, and industry market share stands at 15.5%.
On individual rated new business premium, IRNB, we stand at INR 81.0 billion, with a growth of 15% over last period, and maintain our leadership position with private market share of 22.7% and total market share of 15.4%. The company's two-year CAGR of individual rated new business premium stands at 16%, outpacing the industry CAGR of 14%. This is on backdrop of a consistent growth in performance, which company delivered year on year. We have witnessed some headwinds in group business, particularly with our group savings product, due to unsustainable rates offered by few in the market. Group new business premium stands at INR 42.4 billion, with contribution of 27% in new business premium. Having said that, we have collected total new business premium of INR 157.3 billion.
The company's private market share stands at 21.3%, and total market share stands at 8.3%, on the new business premium parameter. Renewal premium grew by 16% to INR 202.6 billion, which accounts for 56% of the gross written premium. To sum up, gross written premium stands at INR 359.9 billion, with a growth of 7% over corresponding previous period. In terms of APE, premium stands at INR 90.3 billion, registering a growth of 9%. Out of this, individual APE stands at INR 82.6 billion, with a growth of 16%. During the half year ended September 30, 2024, total 9.87 lakh new policies were issued. Number of lives covered during the half year ended September 30, 2024, is 11 million.
The growth in sum assured serves as a positive indicator of consumer confidence and the increasing awareness of the importance of financial protection. This upward trend reflects a shifting mindset among individuals who recognize the need for comprehensive coverage to safeguard their future. Individual new business sum assured registered a growth of 20% over corresponding previous period. Further, as we continue to innovate and customize our offerings to meet evolving needs and demands, we anticipate growth in the upcoming period. This is already evident in our quarterly growth of individual new business sum assured, which stands at 51%. Let me give you details about the product mix. As on September thirtieth, twenty twenty-four, our guaranteed non-par saving products are contributing 19% on individual APE basis.
Individual unit new business premium is at INR 70.4 billion, with a growth of 19% over corresponding last year, and it constitutes 61% of individual new business premium. The growth in ULIP can be attributed to the positive movement in equity markets and evolving customer preferences. This trend is evident across the industry as more customers seek products that blend investment opportunities with protection. Individual protection new business premium is at INR 3.2 billion. Individual protection business for Q2 FY25 has grown 15% on NBP basis as compared to Q1 FY25. Group protection new business premium stands at INR 13.9 billion. Credit Life new business premium has grown by 3% and stands at INR 10.5 billion. Protection business contributes 8% of APE and stands at INR 8 billion.
Retirement plans assist customers in building a substantial corpus of funds to maintain the desired lifestyle and manage expenses in their golden years. Total annuity and pension new business underwritten by the company is INR 32.8 billion. Now moving to update on distribution partners. With the strength of more than 58,000 CIFs, the State Bank of India and RRB's bancassurance business contributes a share of 58% on total APE basis, and on individual APE basis, it stands at INR 50.9 billion with a growth of 7%. SBI branch productivity on individual APE terms stands at INR 4.3 million for the period and registered a growth of 8%.
In the first half of the year, we witnessed slower growth in our bancassurance channel as we are prioritizing on the development of robust digital platforms and advanced data analytics, with a clear goal to reinvigorate the business model and enabling the bancassurance channel to better service specific customer needs, both in person, personal and digital. While this may result in a temporary slowdown, we view the pace as a strategic investment for future. The focus will be on customer-initiated journey on YONO platform of the State Bank of India, with little or no manual intervention. By enhancing these capabilities, we are laying the groundwork for sustainable growth and improved customer engagement in the long run.
With enhanced focus on agency channel and strategic launch of Agency 2.0, we have witnessed improvement in agent activation, agency channel productivity and onboarding of new agents, and better collaboration between agents. Our agent productivity for the period stands at INR 2.6 lakhs on individual NBP terms, registering a growth of 21% over corresponding previous period. Agency registered new business premium growth of 14% over corresponding previous period and contributes 23%. Agency channel individual APE showed a growth of 36% over last period and it stands at INR 27.9 billion. As on September 30, 2024, the total number of agents working for the company stands at 264,058, a growth of 11% over previous period.
During the half year ended, the company added more than 50,000 agents, a fair mix of both urban and rural areas. The share of agency channel in individual rated premium has increased from 29% in previous period to 33% in current period. During the half year ended September 30th, 2024, other channels that comprise of direct channel, corporate agents, brokers, online, web aggregators, et cetera, grew by 28% in terms of individual new business premium. Linked business through other channels registered a growth of 59% on APE basis. We are investing in building our online business channel. Individual rated premium through this channel has grown by 73% for the current period as compared to the previous period. Last year, and protection business through this channel on IRP terms grew by 10% as compared to previous period.
We are focused to strike optimum balance among various distribution channels, and we expect to grow by leveraging these multiple drivers and further strengthen our distribution network. Coming to updates on profitability, the company's profit after tax for the half year ended September thirtieth, 2024, stands at INR 10.5 billion, with a robust growth of 38% as compared to previous period. Our solvency margin remained strong at 204%, as against regulatory requirement of 150%. Value of new business stands at INR 24.2 billion, with a growth of 2%. VNB margin stands at 26.8% for the half year ended September 2024. The shift in VNB is mainly on account of increase in share of ULIP business as compared to previous period.
Embedded value stands at INR 660.7 billion, a growth of 29% over previous period. Embedded value operating profit stands at INR 54.4 billion, and operating return on embedded value is 19.5%. Coming to operational efficiencies, OpEx ratio stands at 5.8%, and total cost ratio stands at 10.6% for the half year ended September thirtieth. With respect to persistency of individual regular premium, thirteenth month persistency stands at 86.4%, an improvement of ninety-eight basis points, and sixty-first month persistency stands at 61.9%, an improvement of four hundred and thirty-eight basis points. As mentioned in my opening remarks, assets under management stands at INR 4.39 trillion as at September thirtieth, having grown at a rate of 27% over corresponding period.
Death claim settlement ratio stands at 99.2%. The company has registered an improvement of 68 basis points over last year. An unwavering commitment to our customer-centric approach remains at the heart of everything we do. Our misselling ratio stands at 0.03%, which is one of the lowest in the industry. Digitization is transforming the life insurance industry, enabling us to deliver enhanced services and a more seamless experience for our customers. As we embrace this digital transformation, we remain committed to innovation and excellence, ensuring that we stay ahead in an increasingly competitive landscape. The company continues efficient usage of technology for simplification of processes, with 99% of individual proposals being submitted digitally. 44% of individual proposals are processed through automated underwriting.
We have aligned our business strategies with IRDAI vision and other regulatory initiatives, emphasizing the importance of customer empowerment in driving growth of the industry. To conclude, by fostering a culture of resilience and continuous improvement, supported by our multi-distribution network and dedicated team, we are confidently positioned for the future. Our commitment to exceptional customer service strengthens client relationships and reinforces our status as a trusted leader in the market. With a focus on long-term, sustainable and profitable growth, we aim to create lasting value for our customers, shareholders, and communities, paving the way for a prosperous future together. 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 a question, may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Good morning, and thanks for the opportunity. Two questions. First one, broadly on the growth outlook. We heard you outlining your priorities. Now, if we see the reality, I mean, even in the first half, 15% retail APE growth has broadly come. The challenges were partly also on the group side and still within retail, within your bank, SBI. And you sort of suggested some kind of strategic safety or take doing within that channel. Now, in this backdrop, I mean, the reality of what is happening in the group saving markets or the pricing pressure on GTI, that all affecting and credit life, depending upon offtake of loans, entirely affecting the group market, yeah, group business. And on the retail side, what you are sort of doing within bank.
So now, how do you see the growth panning out? And also we have this new surrender regulation led to some bit of disruption and also we're in the festive month, so a lot of externalities as well. How do you see sort of a growth panning out in H2? And within bank, I mean, how it will stay at this transition and how long this phase will last? I mean, when can we expect a sort of a growth to ramp up within bank also? So a broader sort of, you know, your commentary around growth. And second, again, related to, you know, the margin. You know, now, ULIP, of course, has grown, and thankfully for you also, non-par has grown, and that is where the margin has come relatively better.
But again, the credit life has been slower, probably group term insurance pricing seeing some pressure, and now you have this surrender regulation. So how do you sort of in this backdrop with changing sort of, you know, your product mix and growth trajectory, how do you see that margin to be playing out? So these are my two questions. Thank you.
Yeah. So, talking of the growth, first, we have grown in the first half on IRNB basis at the rate of 15%. And when you compare our base for the last year and the industry base for the last year, this 15% growth has come on a much higher base. If you look at the two-year CAGR, we are better placed than the industry. Talking of the bank, we are trying to shift the business from to the digital channel, where the customer will be initiating the journey on the YONO platform itself. And that shift is creating this temporary kind of cliff, but we are very sure that this growth will return.
Again, bancassurance, and particularly SBI, is providing, the bulk of the business to the company, and this growth again, is coming on a very high base. So we must be cognizant of that fact. Regarding the future, we are, sure that we will be able to maintain and, maybe improve on this 15% growth. So for the entire year, we look forward to a 15%-17% kind of, growth on IRNB basis. Talking of margin, you have seen that, our margin are the best in the industry.
... and you are already talking about the product mix and that is helping the company. In the recent past, we have launched two new products in the protection segment, which you know offer higher margins, and one of these products is a protection product for HNI individuals. And there the product is very competitive when compared to the industry rates, and we expect good growth and good numbers in that. In the Banca channel also, we have launched a protection product which is based on the data analytics, and it is kind of a pre-approved and auto underwritten kind of product. And in the first month itself, we have seen more than thirty-three thousand policies being sold on the YONO channel, initiated by the customer himself.
So, moving forward, we expect that the protection numbers will be better and they will affect, they will positively affect our margins.
Okay. Thank you.
Thank you. The next question is from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
Yeah, hi. Thanks for taking my question. You know, first of all, you know, if I look at the business trends on a sequential basis, have you seen, you know, margins changing at a product level? Which means that either ULIP margins going up or down on sequential basis or non-par margins going up or down on sequential basis.
See, this is the timing issue, really. So some point in time that when you try to optimize the value both for the customer and, and for the shareholder in terms of the margin, we do try to reflect the reality of the market. So some point in time, if you see the last quarter, we have passed on the interest and we have not repriced passed on, so there was margin coming, pressure coming on the non-par. And last month we have repriced this, our non-par products, I mean, yearly, and hence we'll see some improvement coming on the margin side. So what I'm trying to make is that, in the business, we try to optimize the value for both the customer and shareholder.
In this context, you may see there will be some change in the line of business margin, but not significant on that one.
Sure. So what you're essentially trying to say is that non-par margins were probably, you know, a little lower in second quarter versus first. I think, is that what you're trying to say?
I think the first quarter is slightly lower. Second quarter is higher, and we're expecting that in the Q3 it will be even better from the current level.
Got it. Just another data was, I think, essentially on operating variance and change in assumptions. You know, in EV WOC and VNB WOC, if you could just kind of spell out the components.
See the in first quarter, there is no change in assumption. If you look into the VNB WOC, since we are doing from the last September to this September, there is the impact coming from. This impact is only what assumption we make the change in the in the math. There is no change on other aspects. If come to the EV EV WOC, there is no change in assumption, especially we are looking to be comparing from the March till September. You see where the operating variance coming from. Just to clarify, this operating variance is on account of positive variance coming on account of expenses, mortality, and persistency. There is no offsetting impact from us, or each and every variance is giving a positive contribution to this.
Like we are always mentioning, that we follow a sustainable approach in long term, and always we get a positive variance for all the component on this.
The economic assumption, you know, between debt and equity, it's a fairly large number for you this quarter.
We don't disclose basically, but we see this component of the economic movement in the market. You see the equity has grown up around 13-14% in the period of six months. The bond has gone down by 30 basis points. Most of the contribution is coming mainly on account of the equities, equity side as well.
Sure. And just one last qualitative question is, you know, on the agency business. You know, you reported almost a 25% odd growth on the agency side. So, you know, how should we, you know, how should we kind of think about this going forward, and what gives you confidence on, you know, sustaining such high growth rate?
We are consciously driving our agency business, and as you must have heard in my initial remarks, we started a program called Agency 2.0 at the company level. The focus is on improving not only our physical infrastructure, that is the number of branches, but also the number of active agents, the agent productivity, the agent activity per frontline manager. There are several initiatives we are taking on the agency side to push the agency business further. We are happy to note that the first half-year, our growth on IRNB basis in agency is 33%, which exhibits that our efforts are paying dividends.
We expect to continue this agency enhancement program for the full year and in the medium term also.
... Are you facing any pushback or resistance from agents, you know, as you implement the new, you know, the surrender value guidelines, where you'll probably share some part of the burden with them?
No. So, we have not changed our commission structure at all, unlike many players in the industry, and in fact, on surrender value front, our surrender values earlier also were much better than the industry level, and the new guidelines have affected us as a company in the least, so as such, there is not much effect of surrender value. Our product mix also, if you see, it is very heavily tilted towards ULIP, where again, there is no effect of surrender value.
Got it. Thank you very much, and all the best.
Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.
Thank you for the opportunity. My question is on the protection segment. So, last quarter itself, we had mentioned about launching a new product on the YONO app and an HNI product from August. So in spite of that, the growth is not very strong for the quarter. Is it purely a function of that digital transformation happening in the YONO side? Or if you could give some color on how has the uptick been on that product, given that it's been around for two months to three months at least. And also, on my second question is on the topic of surrender value itself.
So, you'd mentioned last time that if at all there's whatever impact there is from surrender value, maybe up to 50 basis points. So is it fair to say that the 26.8% VNB margin that we are at right now will decline to a 26.3 in the second half? And or keeping everything else constant, that is. So some color on that would be useful. Thank you.
Okay, so since you talked about the protection guidance we gave it last time. Unfortunately, the product that I referred to in the last call were a bit delayed and were launched only in the middle of September. So in fact, the numbers for the September quarter, the effect of the new product launches could not be captured. As I told you that in the last one month, we have sold around 30,000 policies, more than 33,000 policies on the Yono platform, that product I was talking about. So that number will be reflected in the current quarter. So that is what is making us give the guidance of higher protection percentage in the third quarter of the year.
Got it. Got it. Yeah, it's good.
Talking of surrender value, as I already explained, we are, we as a company are the least affected by the surrender guidelines. In line with the IRDAI's prescription, I think we were the first company to start relaunching our products from the middle of September itself, instead of waiting for the quarter end. Because we found that these steps, these guidelines, are in the interest of the customer, and we at SBI Life value the customer centricity as the most. So, the effect of the same on the margin, we don't foresee any effect on the margin of the company, and we continue to stick to, say, 26.26%-27% kind of margin for the full year also.
Sure, sir, and one just follow up on that bit. You spoke about you launched your products in September itself. So, any color you can give us around how has been the uptake of the new surrender value product with the customers? Are customers finding it more attractive? Are distributors finding this one easier to sell because it favors the customers? Something on that line.
When the sales pitch happens, the surrender value is never talked. Let us be honest, you talk to customer that you have to pay premium for seven years, ten years, twelve years. So surrender value is in rare cases, if a customer raises objection, only then surrender value discussion happens. So you would not have any, you know, color from the customer of surrender value as such, honestly. If eventually customer will benefit from the new regulation, there is no doubt about that. But in the sales conversation, surrender is not the topic that is get discussed, when the sales come in.
I got it. Yeah.
If you are launching a new product for a long term, say fifteen, twenty years, you don't tell the customer that you come and get surrendered in the first year itself.
Correct. Correct. Yeah. Okay, that makes sense. Thank you so much.
Thank you. The next question is from the line of Supratim Datta from Ambit Capital. Please go ahead.
Hi, thanks for the opportunity. I have two questions, and both are on the growth side. So I wanted to understand your the strategy that you're taking within the bank channel a bit more. So one, you know, in the previous quarter, you have indicated that, you know, there is a lot of opportunity still to penetrate within the bank branches. Now, I wanted to understand if there is, you know, still so much opportunity within the bank branches, why are you looking at YONO or, you know, the digital platform as a key source of growth going forward? So that's, you know, my one reason why the pivot towards YONO now. And the second one was on the YONO, you know, the self-drive business.
We have seen aggregators also move from a self-drive model to an assisted model for when it comes to growth through digital channels. Now, I wanted to understand that, you know, would you be supporting the YONO channel with your own direct sales team? Or how would you, you know, you know, once it reaches a certain size, how do you plan to, you know, drive growth after that? So those were my two questions. Thank you.
So YONO, the State Bank of India is developing YONO as a marketplace also. I mean, it is already working towards launching YONO two point two with very enhanced features. So our initiation of customer initiated transactions for the insurance on the YONO platform is also a step in that direction only, where we will be offering our products on the YONO marketplace. Having said that, the opportunities you are talking about in the State Bank, you know that our penetration in State Bank account is only around 2% of the actual coverable accounts.
So the opportunities remain huge, and we are developing this YONO channel as an eye on the digital transaction, and digital is the future in coming years, so we want to initiate that journey from the very start itself.
Got it, sir. That's been helpful. Sir, just one last question. So if I look at your product developments that has happened, a lot of the product developments that happened are on the protection side or non-par side or agency side. Now, typically, in the bank, your model is a bit different, wherein you don't have your own people in the branches. So, you know, wanted to understand, would you know, and typically these are products which are more difficult to sell. So how are you, you know, bridging this gap, you know? Are you providing more education to the branch reps, or how are you incentivizing the branch reps to sell these new policies, or, you know, motivating them to sell these new policies, where I understand there is no incentives?
So yes, you are right, that we don't have our employees at the bank who do the sale. The entire Banca sales is being done by what we call certified insurance solicitors, the CIS. For that, they have to pass examination, and then only they are certified as CIS. To these CIS, we provide regular training about our all our products, including all the products that are being newly launched, be it ULIP, be it non-par or par product. As far as the protection product that I was talking about, that is a product which is offered through YONO platform to the preselected customer based on the data analytics. The bank is running a lot of data scrubbing based on the customer balances, customer income level, and his age profile, et cetera.
Based on that, this product is being offered on selective basis to the customers. This product sales are the customer-oriented itself, which are, I will say that this is a three-stage kind of product offered to the selected customers. The leads are going, the offer is going to the YONO customer on his YONO app itself, and they are initiating their journey. The role that the branches will play here is making the customer aware that this product is available on your YONO app itself.
Got it. Got it. And on the motivation front, is there something that you're doing to motivate the branch reps?
No. So, that we have made very clear from the very start, that the individual incentives to motivate staff were stopped by Reserve Bank of India since 2017 itself, and there is no incentive for any of the bank employee to sell the insurance.
Got it, and the last, you know, question. You know, you have this HNI protection product. Just wanted to understand, you know, what is the contribution of that to your overall protection mix, and how are you selling that? Are you clubbing that with your ULIP product or, you know, or how is that being sold? If you could give some color on that product, that would be helpful.
So this product has very recently been launched, and this is again a product with a minimum sum assured of two crore rupees. And to tell you the actual sales experience, the product has been very recently launched, so I will not be able to comment on actual sales experience. Maybe next quarter we can talk about the numbers and everything. But we have trained our agency force as well as the bank's CIS about this product, and we hope to see good numbers. Because this I assure is a very competitive kind of product when compared to the protection plans being offered by other companies.
Got it. And is it being clubbed with the ULIP products or is it being sold separately?
So, I mean, it is not clubbed as such, but yes, the ULIP customers with good premium, it can be a good option. It, I'll not say that it is being clubbed, but it may be offered to those customers also.
Got it. Thank you, sir. Thank you.
Thank you. The next question is from the line of Manas Agarwal from Sanford C. Bernstein. Please go ahead.
Hi, sir. Sorry to harp on this again. Some things are not making sense, so I'll ask it in a different way. Has there been any change in the channel dynamics with SBI? I'll lay the context before you answer. ULIP is doing very well for the market, and you guys are the leader in that. Banca channel is very skewed towards ULIP. 2Q and 3Q is seasonally strong for Banca, for us, historically. So all of that does not tie in with the fact that our growth in the Banca channel is not doing well. Your comment on investing in the digital sales on the Banca side is an incremental effort. I don't understand why that should harm your BAU sales. So is there any change in how SBI is approaching SBI Life sales? That's the question.
So, if you are talking about any harm to our sales, I don't see any harm. We have grown. Only thing is that, growth has come down from, say, 15-18% kind of growth that we had last year to, 9% this year. So, as such, there is no harm. And, you have to mind that, this 9% growth is coming on a very high base. So, the sales are there, and there is no change in dynamics, between SBI Life and SBI. We continue to be the, sole, company being offered by SBI to its customers, and we don't foresee any change in near future in, that dynamics.
Understood. And anything why your BAU sales are-- I mean?
Hello?
Yeah.
Yeah.
Can you come back again? Come back on anything?
On the second part of the question, your investment in digital sales in the Banca channel, why should they affect the BAU sales, is the question.
It is definitely not affecting. The 9% growth is coming on from that channel and those partners only. The digital initiative is very recently launched. What I'm saying is that going forward, the growth from this channel will be in addition to whatever is being sold from the branches and the CIS. But we are investing in that channel, and we expect good numbers going forward.
Understood, sir. Thank you. I'll take this offline.
Thank you. The next question is from the line of Madhukar Ladha from Nuvama Wealth. Please go ahead.
Hi, good evening. I mean, again, on the same point, actually. So, what exactly are you doing in the SBI channel? Because I think you mentioned that you're trying to move that channel into digital. Does that mean that, you know, you are trying to also change the way, you know, a walk-in customer buys insurance from you, and is that what is impacting your sales? So, I think that has not come out clearly as to, you know, how the digital channel is actually impacting your overall sales from the SBI channel. So, maybe if you can elaborate on that a little bit, that would be useful.
Second, you mentioned that your VNB margins will be in the range of 26%-27% for the full year. In the first half, you're already at 26.8%. I understand that there is some negative; there may be some negative impact because of surrender value changes, but that you are yourself also saying that will be minimal. But shouldn't then, with operating leverage, the margin then for the year should be higher than the current number? That's my second question. So, yeah, these would be my two questions right now.
So I think, if you're referring to the operating leverage, we have already accounted for in our assumptions, correct? So what we are saying that currently we hold up the margin of 26.8%, and depending on the how the business will grow over the period, because we have to also optimize the VNB rather than the margin perspective. And in order to optimize the VNB, we need to ensure that there is the appropriate growth in the in APE term is coming out. And in that context, we are saying that our margin might be range between 26 to 27%. This is the lower side that we are looking into.
There is always an upside on the side, and that the long-term guidance, we are always saying that our aim is to maintain the margin of 28%. But I'm saying, since we are sitting today at 26.8%, we have to also optimize the APE growth. In that context, there is possibility the margin will be range bound, nothing else.
Right. Just a follow-up on that. So then, what would be sort of your VNB growth target, like, in terms of optimizing, then, you know, instead of a margin target, maybe it's better to talk in terms of a VNB target for the year?
It will be commensurate to the APE growth. So if APE growth is happening around 15%-16%, you're expecting 15%-17% target, I think, VNB growth will be in range of 12%-15% kind of things.
... Got it, understood. And then on the sales in the SBI channel, but first question there.
Yeah, so I already explained that we, that we are trying to develop this digital channel where the SBI customer is able to initiate the insurance purchase journey on the YONO platform itself. And the role of CIS and the branches will continue, and the customer base of SBI will be a captive kind of base for SBI Life also going forward, too. There is no impact as of now, but in future when we are able to develop this channel fully, there will be a positive impact on the number.
And so at the branch level then, for physical walk-ins or the way the business is happening right now, that has not changed at all. Is that understanding correct?
Yeah, yeah, Madhukar, you're absolutely right. See, SBI, the way the sale has been happening today will continue. The CIS will sell for on behalf of SBI. As MD said, the digital penetration is also another way of looking at the sales, which SBI is looking very strongly, and that is why they have developed the YONO. Now they are venturing into YONO two point O. That will help definitely to penetrate the customer base of digital savvy customers. So it will be a kind of a digital channel within the SBI channel, which we expect that both will flourish, and we expect that the growth is today is a 7% growth on a higher base. We will see how it will develop in the next six months or so.
But this is the missed opportunity in SBI, who are actually tech-savvy, for to buy the insurance products. Many of these tech-savvy customers who are digitally enabled and who are using internet banking and YONO platform, they are not even visiting the branches. So, this will be. That is why we said that it will be having a positive impact once we are able to develop it.
Understood. Got it. And just finally, Sangram, you know, you know, historically, we've sort of done quite well on growth, and despite and year after year, we've done quite well. We know that penetration within SBI also remains low. And then, but you pointed out, you know, a high base, and especially also if we look at the last two months, the VNB, sorry, the APE numbers don't sort of add up or are a little weak, right? So, we do expect that to change. Anything specific that has played out over the last two months that you would like to comment on in the SBI channel?
Madhukar, there is no change at all of the strategy in SBI is concerned. As already said, you know, the last year's base was quite high for us, so we were actually growing at 18%, and second quarter was also significantly higher, almost 30% plus for us, as compared to the industry. So and Banca contributes the maximum for us. So that is the reason the base effect has seen this year. And the initiatives which we have taken now, we think that it will come back to the mainstream. But last year we grew by 12% in SBI, so we expect that similar kind of numbers in this year also.
Understood. Got it. Thank you. All the best.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to one per participant. The next question is from the line of Sanketh Godha from Avendus Spark. Please go ahead.
Yeah, thank you for the opportunity. Sir, again, sorry to ask the question on bank, but just the growth for half is 7% from the bank channel. Do you expect the growth from State Bank of India to be in teens, at least in the current year, given the current growth trajectory, and probably we'll have a little favorable base in fourth quarter. So just wanted to understand how you are looking from a full year perspective, the growth to play out. And accordingly you can also give us a guidance how agency will do going ahead, because that number is pretty strong, 36%. So how you expect this number to play out in numbers?
The second thing is, basically, we just wanted to check whether in non-par products, have you made any IRR change to just accommodate higher surrender value? You said that you did not change any in commissions, but any IRR meaningful change you have made just to accommodate surrender-related impact on the non-par business? Yeah.
I will take the last question first, and then pass on the answer to Smita. I think non-par, we do reprice those products, and as a part of continuous pricing, we pass on the yield reduction to the customer, because yield is going down and we reprice. So all the non-par product has been repriced and launched in month of August. We do ensure the product is in compliance with the regulation in terms of surrender value. So surrender value in our product is in line with regulation. As we keep mentioning earlier as well, that our surrender value, even before regulation, is much higher than our peers.
When we change the product to comply with these things, there is not much impact on the surrender value, except in year one, where we are. Earlier regulations don't allow releases. Most of the impact in our surrender value coming in year one, and it's so to that extent, I can say that the repricing do take care of at most take care of the falling interest rate, and to some extent might be on the surrender value, but not entirely we passing on to the impact of the surrender value to the customer, because it is not beneficial to the purpose of regulation to bring the surrender value. If you're going to reduce this thing, then this means purpose get defeated, so most of the repricing is done on account of falling interest rate.
Some parts here and there might be passed on to the customer on account of surrender value.
Got you, sir. Perfect. On the back.
On the agency, I think, MD already mentioned that we have grown at 33% in first half, and we expect, you know, similar kind of growth, 30% kind of growth, for the second half also, and in Banca, we should expect high single digit or 10% kind of growth in that?
So, we in on IRNB basis in the first half in Banca we have grown by 9%. And you are aware that October, November, December for the Banca channel for SBI Life has always been-
Yeah
very strong, so we have a very high base out there. So, I expect that the growth in the current quarter will also be somewhere around 9% only.
Okay. So basically, sir, the simple point is that 13-odd% in agency and 10% in the Banca is the most likely number to be achieved for the full year?
Yes. Yes, yes, we agree with that.
Okay. Thank you, sir.
Thank you. Next question is from the line of Aditi Joshi, from JP Morgan. Please go ahead.
Yeah, thanks for taking my question, and, good evening. The first question is actually related to the product mix. Just some details will be helpful. I think, firstly, why the annuity product was slightly weaker in the second quarter? And also, can you explain, as in, especially related to the participating products, we saw a very strong growth in the second quarter. So just from a product proposition perspective, what is attractive to the customer, and how are you trying to sell it? Because just very strong growth in that particular segment. And if can, just a related question is that if you are able to provide some mixed outlook for the second half, will be helpful.
Just one clarification is needed, if I can ask that. On the YONO, is it just select products that are giving traction in the YONO, especially only on the protection side? Because as you said that, when the customer walks in, the employees in the banks or the CIS, they ask the customers to check the app and buy the product. Is it my understanding correct? Thanks so much.
So, regarding the YONO product, what I said is that this protection product that we have launched in particular, that is a pre-approved kind of product, and this offer is going to select customers based on our data analytics. The offer is going to YONO apps of these particular customers. In addition to that, the concerned branches are also aware about the offer to these customers, and when these customers visit the branches, the staff makes them aware that this offer is available to you, so they can initiate the journey and complete the purchase.
You will talk about the product, yeah?
Yeah.
So on the annuity side, you know, we had some small degrowth in the current quarter, but I think there will be, we don't expect that to be the guidance for full year. We would expect the annuity growth to come back. That market is large, and we would want to tap that market. On par, I think the base is very small, and on that small base, with some focus, we've had a substantial increase in quarter two. Our new products will be launched after product repricing very soon. One or two are already there. One is already there, and remaining will be launched, you know, very soon. And we would expect par, but par is a small component. Our main growth for traditional, we would expect from protection and focus will also be non-par.
Okay, sure. And, any guidance on how product mix will look like in the second half?
So we will continue to maintain our stand of 60/40, so that is what we are maintaining, and we will continue to do that. So as Abhijit said, so our non-par protection and par will continue to be part of 40, and 60 will be in the unit.
Okay, sure. Got it. Thanks.
Thank you. The next question is from the line of Deepanjan Ghosh from Citi. Please go ahead.
Hi, sir, good evening. Just two questions from my side. First, can you shed some color on your growth across the non-SBI Banca partnerships? And, you know, do you see traction in some of these channels or your market share across those channels? And second, while we have seen improvement in persistency across most of the buckets from 1 H to 2 Q, I just wanted some color on, is it more a function of back book product mix, or are we seeing improvement in persistency across each of the product classes? So if you can give some color on the product level persistency, thanks.
Persistency, I think it's a combination of both. So one is the product mix changes, and another is the one that we are trying to do. We do a lot of investment in terms of the sales registration to ensure that the customer is buying the appropriate product, not-
... pushing any particular product category. We do have taken several initiative at the company level, both from the branches to the corporate level, to ensure that we should have a continuous connect with the customer, try to understand their pain point, and try to address those challenges. I think that's both are helping us to improve the persistency, and there is a kind of improvement, persistency is being observed at most of the cohort at this point in time. And we hope this will be continue in future as well.
So on the non-Banca partnBer, there is mix. In some partners, we have seen strong growth, some partners we have not seen growth. But taken as a group together, we have seen small degrowth in quarter two compared to the previous quarter.
We are working on these partnerships, how to see how we can have growth across all partners and not only select partners.
So just to get some clarification on the second part, is it more of a degrowth at those partners, or is it more of some competitive pressure?
No, we have seen that in some of the partners, the overall business also has gone down. Overall business, not across all partners, all the life insurance players.
Got it. Thank you, and all the best.
Thank you.
Thank you. The next question is from the line of Nidhesh from Investec. Please go ahead.
Thanks for the opportunity. So first, the daunting question: What percentage of the retail protection is ROP for Q2?
Same, same, actually, the 90-10. So at this moment, ROP is 90, and 10% non-ROP.
And, second, sir, on the non-par side, because surrender value, you have not increased, you have not changed the payout or the commission rates. And, what I understand that IRR has also been not changed. So just because surrender value changes, should we expect margins decline? Margins will be absorbed by the company. Margin reduction will be absorbed by the company?
See, so not much, really. I just verified and mentioned that when we reprice those products, we pass on and reflect the increase in all of the yield curve, and also to some extent reflect the surrender value. Objective is not to pass on the entire impact of the surrender value to the customer. This is first point. Second point, we keep mentioning that our surrender value was much higher as compared with our peers in the market earlier as well. And as and when this regulation came and reprice, recompute the surrender value, there is not much impact coming on the surrender value, except in the year one, where surrender was not allowed, and we are offering all policies getting lapsed. So that's the reason there's not much impact coming from.
We have passed on it partially to some extent to the customer, and most of it we absorb. And we try to optimize and this with the other product category, because within the non-par product, we see there are different product policy term, PPT term, ticket size and others will have the different margin. So we try to look into, analyze the aspects that how we can give the better value to the customer, at the same time, maintain this margin at the product level as well.
Okay, sir. Okay, so, on the credit life, in H1, what was the APE this year and last year, if you can get that number?
Credit Life is flat, so last year it was INR 102 crores, and currently also this year, YTD September, INR 104 crores.
Okay, sir. That's it from my side.
Thank you. The next question is from the line of Harshit Toshniwal from Nirmal Bang. Please go ahead.
Hello. Hi, sir. Am I audible?
Yes, sir, please go ahead.
Yes. Sir, just I think, on that, Banca channel part itself, that, clearly that base effect fatigue is something which we saw probably this year in a 10% YY growth. But, I just had two questions. One is that when we see this year, would it be good that at least from, life insurance perspective, SBI Life perspective, that this is a year of reset of the base, but that 15%, the ability of SBI Bank to able to grow a 15%, that still remains, there? Or you think that the base is becoming large incrementally every year, to justify a 10-12% kind of a Banca growth? That's the first question.
And this is the second part is, so insurance as a product, to what we have seen is that needs that physical element of, understanding physical push. So to that extent, do you think that a so high focus on YONO, at least for a product like life insurance, can that lead to the CIS's distraction in terms of the ability to cross-sell their targets? If you can throw some light on that from their KRA perspective, how have things changed versus, a YONO distribution or selling through YONO or selling through a normal Banca channel? Is it same for them, or are they incentivized more if there is a... or basically, is there a KRA difference between the two channels per se?
But I think the first part also, if you can also help that, if this 10% is a one-off as a reset of the base, or the ability of bank to grow at this pace is 10-12% itself.
So I talked about the insurance penetration among the population in general and, State Bank in particular, which is our major partner. So the-
... under insurance or the insurance penetration remains quite low and lot of opportunities, and with the kind of economic growth that the country is seeing and the financial awareness that is improving in the country, I am sure that the opportunities are even better than what were there, say, five years, ten years back. So,
If I may, sir, just put one part itself. Sorry to interrupt, but when we say a product like ULIP, Par, Non- par, I agree that the penetration is low, but these are, in a way, pseudo-financial products cum insurance products, a mix of both of the coverage. Now, in that case, that under-penetration story has been there, but I'm just thinking from the ability of the CIS to be able to do volume. Because to be very fair, we are at volumes which are exceptionally large. Even at Banca channel, the APE numbers of 13-14 thousand crore a year, per year, is something which is very large enough. So just want to understand that from a practical viewpoint, should we have that expectation of the bank to keep running at 15%?
Internally, we should moderate that to a slightly more modest number, which is more sustainable.
Another part I wanted to clarify, you talked about the incentivization of the CIS. So, in response to one earlier question also, I have told that since two thousand and seventeen, there have been no individual incentives to any of the CISs. Whatever sales are being generated, they are sans any incentive to individual employees of the bank. The ability to sell and ability to make customer understand the product of the CISs is in no doubt. These CISs are being trained by us at regular intervals about various products, about various new products, about various opportunities available in the market, and in addition to that, now the bank is also running data analytics on its customer base and giving leads to the branches about the potential customers who can be insured.
So this data analytics will help in identifying the customers in more precise way in the future, and our CIFs and our branch managers will be in a better position to target the customers who need insurance. So going forward, I will insist that the ability to grow at 15% remains intact.
Great. Got it, sir. This is very helpful, because I think that ability is the key thing to understand. Maybe this year could be a one-off and reset of the base. And, sir, on the second part itself, that whether. I understand there is no incentive, but, more from a KRA of the branch manager's perspective, is there some. Because for them to be promoted, for them in normalcy of the business operation, they would be targeting to grow the business by 10% of what it was last year or 15% of what it was last year. Now, in that sense, does YONO as a channel or direct as a channel, do they have any different preferences from top level at SBI?
So YONO as a channel also, the business is attributed to the branch to which the customer belongs to. And, as far as the target is concerned, bank employee or a bank manager has 50-60 lines of businesses to cater to, and cross-selling is a very small part of that. So, it does not materially affect his KRA, but yes, it is a KRA amongst many line of businesses, many lines of parameters that any branch manager has.
Okay, got it. Got it. Perfect, sir. Thanks a lot, and all the best.
Thank you. The next question is from the line of Rishi Jhunjhunwala from IIFL Institutional Equities. Please go ahead.
Yeah, thank you for the opportunity. I mean, most of my questions have been answered. Just one thing, you know, historically, if we see, you know, our business, from a retail premium perspective, used to be equally divided between Q3 and Q4, with probably Q3 being slightly better than Q4 in terms of absolute size. We saw that trend breaking down in the past couple of years, and to some extent, it was also driven by potentially SBI's focus a little bit more around CASA in the last quarter of the year.
Given, you know, our guidance of, you know, 15% kind of a growth on APE for the full year, it requires, you know, that trend to break and go back to a level where Q4 can match Q3 on absolute basis. Just wanted to understand, do we have any kind of visibility there? Is there, you know, a reason why the trends of the past two years may not continue this year?
Q3 has always been stronger than Q4, Q4 as far as SBI Life is concerned, and bancassurance channel, SBI channel is concerned. So, Q3, this year also, I already said that, we have a very high base of last year. The growth was pretty good, so expecting a 9%-10% kind of growth in the Q3 is somewhat reasonable. And, that is what will maintain going forward also.
Right, sir, but just trying to understand that drop in Q4 on a sequential basis was quite stark in the past two years. So are we expecting a similar drop, or do you think that could be better this year?
... You see, we will actually we are evaluating multiple strategies at how we can actually look into the particularly on the January and February, because as you know, the third quarter is used to be a very strong quarter for us. So immediately post that, the Jan, Feb used to be a little slow for us. But this year we are targeting in a different manner because there are a lot of products have been launched, and we want to capitalize, particularly on the protection and non-par. So these two, we plan to run some campaign in SBI Life.
So let's see how it will shape up in this year, because, yes, you are right, we plan to change that cycle for SBI Life, and we are optimistic that this will help in this year to see that the result going forward.
All right. Thank you, sir. All the best.
Thank you.
Thank you. The next question is from the line of Subramanian Iyer from Morgan Stanley. Please go ahead.
Yeah, thanks for the opportunity. So my question was on VNB margin. So, essentially, you are talking about 26-27% margin for the second half. Now, you already have 27% for the first half, and you are targeting a 60/40 mix. It's actually going to be better in terms of margin accretive products in the second half. And plus, you are also talking about a higher protection mix as well. So, is there anything else that is holding you back from guiding for a margin higher than 27%? Because mathematically, the margin has to be higher in the second half, say, assuming the product mix. So, yeah, that's my first question. If you can answer that.
Yeah, I think you're right. So if you look at the mathematical side, I think margin should not be anything less than 27%. And we internally also expecting that margin will be much more than what we have given the guidance. Only the point that is holding up is to ensure the growth, because the VNB growth is more critical for us. And like we always keep mentioning, that margin is a number, it's a number which are always aiming to grow the VNB. In that context, we are thinking that there is a possibility, though we are trying to drive the protection will growth will be there, non-par growth will be there, and all new par will contribute.
But we also need to ensure the growth in APE term, and there is a possibility there is some changes happen over the period on the yearly shift to the yearly or even if slightly it will fall. And then recently we have revised the Par and that point in time to be competitive to the market. If you're holding up our return to the customer, there is certain pressure will come or fall on the margin. In that context, we are saying margin will be 27%, but internally, our long-term guidance and expectation is to our margin will be around 28%. So that's the point I would make it. There's no nothing hidden in between on this side.
Yeah, thanks for that clarification. The other question is the same question unfortunately. I mean, everyone is harping on that. But I will ask you very directly. I mean, this change in the nature of engagement with SBI, has it got to do with basically reducing the involvement of SBI employees? I mean, because we obviously see, keep seeing a lot of media articles about mis-selling and all that. I mean, although I do understand that your mis-selling ratios are best in class, they are the lowest. But is it basically got to do with reducing the involvement of SBI employees in any way? And does it also, I would say, kind of coincides with change of guard at SBI.
So does that have to play a role as well? So yeah, I'm asking it pretty directly.
I don't think what you are saying is correct in any way. I mean, the ability of SBI employees to sell insurance is well established, and it has been growing over the years. In last 10, 15 years, there have been several changes, regulatory changes, stopping, and also incentives, et cetera. But all that, the sales have withstood the test of times and continue to grow. Our effort to digitalize the initiation of insurance purchase journey on digital channel, that is something which we want to take advantage of the digital technology and the tech-savvy customers. We are not undermining the CIS ability to sell, and we don't want to lose that advantage also.
As far as mis-selling is concerned, you already said that our company is having one of the lowest mis-selling ratio at 0.03%. But having said that, even one case of mis-selling is not acceptable to us. And wherever customers are complaining any such thing, we are canceling the policy. And if anything is proved, we are also taking action against employees and all. So that portion is very well taken care of. This initiation on YONO, I will again reiterate that we want customer to initiate journey, and the role of CIFs will be important even in that scenario, because as earlier also somebody was saying that insurance is a product which needs some kind of explaining.
So, the role of CIF and the branch staff will continue to maybe explain the products and guide the customer to initiate the journey on the YONO platform also. So this is one channel which we can use in multiple ways. Customers can initiate on their own, customers can initiate by way of assisted journey from the branch staff and all. So, that is what our stance on developing this product is, and we are very sure that going forward, this will be a very helpful and very potential channel.
Yeah, thanks for that answer. Just clarifying. So in terms of the CIS channel, you will continue basically investing in that and growing that as well? So the investments in that will continue, I mean, is that understanding correct?
Yeah, definitely. Our training programs for the CIS are going on.
And the footprint will increase, basically. I mean, the-
Yes.
Yeah. Okay. Thank you. That's very reassuring. Thank you.
Thank you. Next question is from the line of Raghavesh from JM Financial. Please go ahead.
Sir, I have a question on the Credit Life business. So while the broader market has seen pressure from slowdown in personal loans and MFIs, my understanding-
Sorry, Raghavesh, your voice is a bit feeble. Can you please get a bit closer to your speaker?
Yeah. Is it better now?
Yes, yes, please go ahead.
Yeah. Sorry for this. I have some questions on the Credit Life business. So, I mean, it was flattish for us. The understanding is the broader market, personal loans and MFIs going down. But, SBIL has traditionally had a, I think an 80% share coming from home loans. So why is Credit Life not growing for us?
So Credit Life is flattish with the penetration levels in the bank are slightly lower than what we were expecting. But we expect the penetration levels to come back to the numbers we are expecting. So we expect you know 9%-10% kind of growth in Credit Life for the full year.
What we have seen is that the ticket size of the housing loan in the bank is increasing, and keeping in mind that thing, we are also easing the process of underwriting on the Credit Life business that is supposed to take effect from sometime in this month itself, or maybe in the first week or second week of November. So there, the underwriting process for the higher ticket size will be lower, and we expect that the same will help in improving the coverage ratio.
Okay. And the next remains around 80% is mortgages for us?
Sorry?
80% remains mortgages for us, in terms of the Credit Life business.
Majority is mortgages.
Majority is coming from mortgages, housing loans, yeah.
Okay, thanks.
Thank you. The last question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah, hi. Just wanted to understand, on the HNI protection plan that you have been selling, what is the kind of premium that we've collected is in this quarter or quarters?
So I told you this product was just launched towards the end of the quarter, September.
The numbers are negligible. But we expect this product to catch on and provide good numbers in coming quarters.
The profitability of this product would be similar to the retail protection plan?
Yeah. The profitability is similar to the retail plans and also competitiveness. So both perspectives, because it's a better proposition to the customer and it's a role perspective. We expect this product will have. It's a different segment, I agree, so there's nothing happening from one product to another. We expect this will be more attractive, and it will help us to not only increase our protection pie, but also fulfill the underinsured population, because a lot of people have taken the insurance, but with a lower sum assured, that will help them.
Okay. Last question, how has October been so far? Any trends, the early trends on the new products with respect to growth or product mix?
We will disclose the number by end of the month.
Okay. All right. Thank you.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to Mr. Amit Jhingran, Managing Director and CEO, for closing comments.
Thanks to all the analysts who are present here, and thank you for giving this time and for all your queries. If you have any other questions, you may get in touch with our investor relations team, and we will provide you the requisite clarifications. Thank you.