Ladies and gentlemen, good day and welcome to SBI Life Insurance Company Limited Q1 FY 2022 earnings conference call. As a reminder, all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mahesh Kumar Sharma, MD & CEO, SBI Life Insurance. Thank you, and over to you, sir.
Thank you very much, Neeraj. Good evening, everyone. I'll be heartily welcome you all to the results update call of SBI Life Insurance for the quarter ending June 30, 2021. Hope you are all taking due care of yourself and your family members. Along with me on this call, I have Sangramjit Sarangi, President and CFO. Anand Pejawar , President, Operations, IT and IB. Abhijit Gulanikar, President, Business Strategy. Subhendu Kumar Bal, Chief Actuary and CRO. Prithesh Chaubey, Appointed Actuary, and Smita Verma, SVP, Finance and Investor Relations.
Update on our financial results can be accessed on our website as well as on the websites of both the stock exchanges. Before I brief you all on performance highlights, let me acknowledge the efforts taken by all our employees, distribution partners, and business associates who have worked tirelessly to provide continuous support to our customers.
Thanks to their efforts, we have delivered a satisfying performance in these unprecedented conditions. Let me give you some key highlights for the first quarter of FY 2022. Individual new business premium stands at INR 18.4 billion, a growth of 37%. Renewal premium stands at INR 50.3 billion, a growth of 10%. Gross written premium stands at INR 83.8 billion. Individual protection new business premium grew by 75% over the quarter ended June 30, 2020, to INR 1.3 billion.
Annuity business witnessed 36% growth and stands at INR 6.5 billion. Profit after tax stands at INR 2.2 billion. On actual tax rate basis, value of new business is INR 3.4 billion, registering a strong growth of 45% over the quarter ended June 30, 2020, and value of new business margin is at 21.2% with an improvement of 250 basis points. Assets under management grew by 32% to INR 2.3 trillion.
We will update you on each of these elements in details. Let me start with premium. Individual business has always been a focus area for the company. Individual new business premium has grown to INR 18.4 billion, a growth of 37%. Single premium contribution is 27% of the individual new business premium. Individual rated new business premium stands at INR 13.9 billion, leading to a private market leadership with share of 18.9%. We collected new business premium of INR 33.4 billion and private market share of 19.5%.
Group new business premium stands at INR 15.1 billion. Credit Life business has grown by 56% and stands at INR 2.4 billion. Fund management business is at INR 7.9 billion. The renewal premium grew by 10% to INR 50.3 billion, which accounts for 60% of the gross written premium. Our gross written premium stands at INR 83.8 billion, a growth of 10%.
Total APE stands at INR 16.2 billion, registering a growth of 37%. Out of this, individual APE stands at INR 13.9 billion, a growth of 36%. During the period, total INR 2.6 lakh individual policies were issued, and it registered a growth of 35%. Let me give you details about the product mix. Individual protection is at INR 1.3 billion, registering a growth of 75%. Group protection stands at INR 3 billion.
On APE basis, protection contributes 13% of new business and has registered a growth of 37%. Annuity business is at INR 6.5 billion, a growth of 26%, and contributes 19% of new business premium. Individual ULIP business is at INR 12.4 billion, which constitutes 58% of individual new business premium and has shown a growth of 59%. Guaranteed non-PAR savings product is contributing 6% of individual new business. Something about our distribution partners.
Bancassurance business marks a share of 58% and grew by 30% in individual new business premium. Individual APE stands at INR 8.7 billion, a growth of 34%. Instant protection policy issuance through YONO app of SBI has covered more than 51,000 lives. Agency, another strong channel, registered growth of 36% and contributes 32% in individual business premium. Individual APE stands at INR 4.6 billion, a growth of 36%.
During the quarter, other channels, direct corporate agents, brokers, online and web aggregators grew by 132% in terms of individual new business premium and 79% in individual APE. Protection new business premium through other channels registered a growth of 7%. New partnerships like Indian Bank, UCO Bank, South Indian Bank, Yes Bank registered growth of 86%.
We are confident that all these partnerships will start contributing significantly in the coming period. On update on profitability during the quarter, COVID claims net of reinsurance paid as well as outstanding stands at INR 5.7 billion, covering various lines of businesses. The company has made additional reserve amounting to INR 4.4 billion for COVID-19 pandemic over and above policy liabilities.
Our mortality assumptions are well within our estimates. The company's profit after tax for the quarter ended June 30th, 2021 stands at INR 2.2 billion. Our solvency remains strong at 215% as on June 30th, 2021. As mentioned in my opening remarks, value of new business is INR 3.4 billion on actual tax rate basis, a growth of 45%, and on effective tax rate basis, it is INR 3.9 billion, a growth of 52%.
VNB margin is at 21.2% on actual tax rate basis and improvement of 250 basis points, and on effective tax rate basis stands at 24.1%, an improvement of 400 basis points. Coming to operational efficiency, cost efficiencies we maintain with total cost ratio at 10.5% and OPEX ratio of 7.2% for the quarter ended June 30, 2021. Our 13-month persistency ratio has improved to 88.4% as compared to corresponding previous quarter.
On regular premium basis, 13-month persistency stands at 85.9% versus 82.6% in the corresponding previous quarter. As mentioned in my opening remarks, AUM having crossed INR 2.3 trillion on June 30, 2021, has a growth of 32% as compared to June 30, 2020. The company continues efficient use of technology for simplification of processes, with 99% of individual proposals being submitted digitally. 45% of individual proposals are processed through automated underwriting.
Customer satisfaction is a key focus area. Our grievances with respect to unfair trade practices stands at 0.08%, one of the lowest in the industry. Our rapid adoption of online capabilities paved an increase in business activity. Automation and digitalization have significantly enhanced customer experience and uninterrupted services during the times of the pandemic.
To summarize, we will continue to focus on protection and other lines of profitable business. Efforts are on to enhance our vibrant distribution network to penetrate our reach. We will continue to maintain sustainable and consistent product mix, improve customer satisfaction, and provide value to all our stakeholders. Thank you very much, and we are now happy to take any questions that you may have.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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 will wait for a moment while the question queue assembles. Participants, you may press star and one to ask the question. The first question is from the line of AJ Frederick from BNK Securities. Please go ahead.
Thanks for the opportunity, sir. Sir, again, this question is on COVID. You have an additional reserve of INR 4.4. What is the total reserve, sir, including the business as usual debts and excluding COVID that you're holding?
Prithesh.
Anything out of the reserves we made in March, were we able to carry it forward, those for the question of COVID?
The COVID reserve, let me tell you, as on March 2021, we had INR 183 crores COVID reserves. As of June 2021, we have INR 445 crores COVID reserves.
Our total reserve for this quarter one FY 2022, which includes my all lines of businesses, amounting INR 9,930 crores. Which takes care of PAR, non-PAR, and ULIP all together.
Okay. INR 900 all together. Sir, second question is on group protection split. If you can give us group term Credit Life this quarter versus last quarter.
Group term Credit Life. One second.
What is your thought process behind group term? Yeah. Sure, sir.
Credit Life, this quarter we have done, as far as my NBP is concerned, INR 240 crores. As far as NBAPE is concerned, that is INR 24 crores. It's a growth of 56% quarter-on-quarter.
Okay. This is year-on-year growth, right?
Yeah.
Quarter.
Yeah.
Okay.
Quarter one 2022 versus quarter one of 2021.
Okay.
GTL specifically we don't have. GTL and NBP taken together , we have done almost kind of INR 500 crores.
Do you have separate numbers for me?
At this moment, I don't have separate numbers.
Okay. No worries. I'll take it with you. What is your thought process on GTL? Some of the peers have diverging views. What is your view with respect to GTL?
GTI, we will evaluate and continue with GTI. It will depend a lot on what kind of business we are looking at and also the reinsurance and the whole thing put together. We are evaluating on a case-to-case basis, and we will take good business.
All right. Sir, final question on the non-PAR piece where both agency and bancassurance are slow down during the quarter. What's happening out there on the non-PAR side?
Basically, what is happening is that in the first quarter, we saw good traction on ULIP, possibly because the markets are on a rebound and doing very well. I think that was one of the reasons we saw good traction in this ULIP business. Going forward, we have targeted for good growth in non-PAR and we are also coming out with slightly revised pricing on our non-PAR offerings. I think that will also help us to get more non-PAR business.
All right, sir. Sir, I'll join back in the queue. Thank you for your answers.
Yeah, thanks. Thank you very much.
Thank you. The next question is from the line of Madhukar Ladda from Elara Capital. Please go ahead.
Good afternoon, sir. Thank you for taking my question. First, on this COVID provisions and reserves. What is the closing outstanding provision at the end of 1Q?
Yeah. That is INR 445 crores.
In the beginning of the year, we had INR 180 crore approximately.
INR 183 crores.
Yeah, INR 1.83. Benefits paid are at INR 5.7 billion.
Yeah. Correct.
Okay. What would be the hit in this quarter's P&L?
Well, our reserves are enough to take care of the change situation also. Having said that, we have made prudent provisions going forward because you don't know really how things are going to pan out in the future. Our hope is that with the vaccination rollout and almost 24% people already being vaccinated and the numbers coming down, we are hopeful that this will tide over. Knowing that there are a lot of imponderables, we have actually set aside a larger number as COVID reserve.
Sure. Sir, can you give us some idea in terms of severity? In FY 2021, what was the severity on a per claim basis and how did it trend in 1Q?
See, really last year was not a time to actually look at it because there was a total lockdown kind of situation and claims really were not coming in. As a result, the claims were much lower and all. It's a totally different situation then and now. Really can't compare those two things.
Sir, what I meant was if we take the full year number, full year FY 2021 number versus 1Q FY 2022 number.
Yeah. The numbers, if you look at our position, it cannot be very different from what is happening in the country. If you look at what is happening in the country, last year the numbers sort of grew till, let's say, October or something and then started coming down. It was a very gradual kind of increase and a gradual kind of decrease. Now we have seen from, say, March, April, May, we have seen a sudden spike. Those two are not really comparable and this is not in anybody's experience. Really speaking, we take it as it comes and we make conservative estimates.
Right. I just did some calculations. If INR 257 are the additional reserves and then INR 570 crores is the net claims, so then the total hit in the P&L for this quarter is INR 827 crores. Would that be correct?
Claims you have to look at in a different kind of way. There are COVID claims, there are other claims. We look at all claims as one thing because a claim is a claim. A person dies of COVID, heart attack or whatever, we have to pay. Okay.
You mentioned in the PPT COVID-19 claims net of reinsurance of INR 570 crores.
Yeah. This is those deaths which are marked as death due to COVID in the death certificate. Okay? I think what I'll do is I'll ask one of my colleagues to clarify. Okay?
Thank you, sir. Just to explain to you. When you look into any impact of death, you look into the overall claims, correct? For the quarter, our overall claims is well within the provision that we made for as on 31st March. If you remember, in the 31st March, we have strengthened our mortality assumptions. On top of what we had, additional provision on INR 183 crore. If you look into this quarter performance, our actual claims are within that provision. As a company, we wanted to be prudent on the side. Despite our claim is within that limit, we make additional provisions and increase INR 183 crore to INR 445 crore as on 30th June.
Understood. Can you verify on the INR 827 crores, which I just said, INR 570 crores of COVID claims plus INR 257 crores of additional reserves.
That's what I would like to say. It is not a direct hit on P&L or anything. Okay. The INR 570 crores, even though it has come from COVID, we look at overall mortality.
Yeah. Just to add that what the way we are calculating doesn't make sense, because when you're looking to the impact, you would see the overall claim rather than looking one part of the claim. COVID claim is a part of overall claims. When you look into the impact, you look into total claims, and what we have provided for, any differential is impact will come on the P&L. To that perspective, we are saying that our actual claim for the Q1 is well within the provision we made for as on 31st March. As a prudent, we have increased this COVID provision from INR 183 to INR 445 crores.
Okay. I'll come back in the queue. Thank you.
Yeah, please. Thank you very much.
Thank you.
Participant GMFS Karan want to ask the question. The next question is from the line of Ritesh Uppal from IDBI Capital Markets. Please go ahead.
Yeah. Hi, sir. Am I audible?
Yeah. Go ahead, Ritesh.
Okay. Yeah. Thanks for taking my question. My question is on the individual protection. We've seen a good growth and peers have reported a slight slowdown in this segment. Any color on what helped us during this quarter and how is the outlook for individual protection going ahead? Are we still going to be aggressive in this segment, and how are we looking at underwriting right now for this particular segment? That's my first question.
Yeah. Individual protection, if you see, we have been actively growing this for the last three or four years. We've been focusing on this segment, and we feel that this is a way to increase the penetration of insurance in the country and also to get more and more customers, more and more coverage across. We have products in protection which offer cover from, say, INR 5 lakhs cover to, say, INR 50 lakhs, INR 1 crore or even above that. There are various segments. We are growing in all these segments. That is the truth. Going forward, we would very much like to grow this segment, at least for now.
Also any breakup between how much is the ROP versus your term, like, for individual protection for this quarter?
Yeah.
Similar percentage. Similar like past.
Yeah. About 85/15 kind of thing.
Correct. Just to reiterate the individual protection, we do think that with appropriate repricing of the product and tactically enhanced underwriting to protect the risk that we are currently doing, we do think there is scope to grow this segment.
Okay. Any kind of numbers, like, for a growth rate target that we would look at-
No.
... in individual protection.
We generally don't look at any particular. We have our internal target, but those are only, that will depend a lot on the circumstances and the situation outside, demand from customers, acceptance of products, et cetera. I wouldn't like to give any numbers, but you can say that we expect a steady growth in this business.
Okay. Sir, my next question is in terms of the distribution. How much is our penetration within the SBI channel itself, if you could give some ballpark number as to how much it is, and what are our plans to increase customer acquisition purely from the SBI customer base? Also, how are we going about that?
See, basically, this whole strategy we've been doing, we've been increasing this business. We've been growing both the SBI business and the agency business, and now we have other channels which are also growing very well. SBI business, we will look to continue the strong growth that we have, and maybe if we don't have the limitations of the previous year, then maybe the growth can be even more. We are also looking to grow the other channels at a good rate.
Okay. Also, within SBI, how much penetration, if you could share a number based on their customer base, how much would be our share?
Tell you, we have not penetrated very large base of SBI, and there is still scope to increase. What we do track is what is the penetration base. For customers below age 55, what percentage of savings account we have penetrated. Similarly, for pension product, we track for people above 50 also what we have penetrated. We will actively try to increase that penetration from current level. The public figure that we do disclose is per branch productivity, and that per branch productivity from INR 34 lakhs will go up substantially in the current year.
Okay. Well done. Thank you. I'll rejoin in the queue. Thank you.
Yeah, thank you.
Thank you. Next question is from the line of Jayant Kharote from Credit Suisse. Please go ahead.
Yes.
Am I audible?
Yeah. Jayant, go ahead.
Yeah. Actually, I wanted to know what is the number for our IBNR reserve as of March and as of now actually?
Sorry, can you repeat the question?
The IBNR reserve numbers incurred but not .
See, IBNR is a part of our actuarial liability, and we generally don't call out what is our IBNR or not because it's a part of actuarial liability and we hold up there. It is a significant amount reflecting your number of claims reported, the delay pattern, and other parts.
Okay. Thank you. Sir, on the protection side.
Jayant, sorry to interrupt you. May I request you to talk over the handset?
Yeah. Hello, am I audible?
Yes, go ahead.
Yeah. Actually, sir, secondly, on the reinsurance side, have you had any communication with the reinsurers on the rates and what is your outlook on the premiums? Some of the peers are indicating that the rates might go through another round of hike. What is your comment on that?
Reinsurer, we keep talking to them, for each product, for each new launch, for each thing we have a meeting with the reinsurers. We keep talking to the reinsurers. There is nothing new to we talking on a daily basis, we are following up with them for various things. While reinsurers may hike rates based on pools, but at a company level, 80%-90% of the hike burden usually depends on the company's specific factors such as concentration, divergence in experience, et cetera.
Okay. To that extent, SBI Life is relatively insulated from reinsurer hikes, given that we have low dependence on reinsurance, risk-based pricing. We are very sustainably priced in most of our products. Different protection products. Like I said, I already told you that we have different protection products with different sums assured. All that lends us to a very diverse kind of a protection basket. Really speaking, at this point of time, we are the ones who are not very worried about reinsurance itself per se. If it affects the industry, it also affects us to some extent. We are relatively protected.
Okay. Sir, just only following up. Some of the peers have also hinted that they'll be tightening the standards when it comes to writing for protection.
See, we never loosened our standards. There is no question of tightening. All those people who probably tried to cut prices, tried to gain market share by unethical practices of wrongly pricing, of increasing penetration by, I mean, increasing protection business by undercutting, and also by taking very optimistic assumptions on mortality, et cetera.
They are having to look at all these things. All those people who loosened their standards will have to tighten it. We are very sustainable. We are very boring as a company in that matter. We are very conservative. We are stable, steady, and there is no way we are going to come down from our high standards just because somebody else is undercutting or something. We lose market share sometimes, we gain market share sometimes, but not because we wanted to gain or lose at the cost of ethical principles and strong insurance principles.
Thank you, sir. Just slightly previous. Has your mortality experience or mortality facing for that matter, has that undergone change after onboarding protection business in last two years? This question, COVID.
In March, we did change our mortality assumptions. March, we have changed our mortality assumptions. Like Prithesh has already told you, that those were enough to take care of our claims for the quarter.
No, sir. Actually, I was referring to pre-COVID, that is FY 2020, March 2020.
Yeah. Every year we change our assumptions looking at the circumstances. COVID itself is one of the factors, because a pandemic or some sudden catastrophe cannot be the reason for changing assumptions, mortality assumptions going forward. It has to have a more stable basis. This will be one of the factors which has been taken into account, but definitely not based only on that. Prithesh, would you like to add something on this?
Thank you, sir. Just to what sir has mentioned that each year as a part of our annual exercise, we revisit our assumptions. We consider our past experience. We also look into our emerging trend. Accordingly, we set our long-term mortality assumption. If you remember in the March, despite our actual claim was well within our expected assumption, that is what we set in March 2020.
Despite that, as a company we wanted to adopt a prudent approach. Hence we went back and we revised our mortality assumption upward as on 31st March, 2021. We continue. If you exclude the COVID, we don't see any adverse impact or worsening trend in our claim experience. It's very stable. In fact we see early sign of improvement on that side. If you exclude the COVID.
Great. Thank you very much, sir.
You are welcome. Thanks for the call.
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah. Thank you for taking my question and good evening to all the participants.
Good evening, Shyam.
Yeah. Sir, first question on the persistency, especially on the linked book. Just noticed the surrender ratio that you put on Slide 11 has gone up in Q1. Why it's like that? Just want to understand how the ULIP book is behaving. Are you seeing more surrenders now that markets have started rallying? How should one look at the overall persistency for your annual book?
The persistency will go up. We are making efforts to improve our persistency. Persistency, as you know, is a factor of right selling and also on follow-up on renewals. That is happening already. Obviously, when the markets are buoyant and people who have policies which can be surrendered or can be encashed upon, some of them will do that. That trend we do see now in the increased surrender. It is also true that people then realize that continuing with this will also be a good thing. We have enough people who continue with the schemes.
Sir, if I look at the fifth year persistency for your overall company, it's about 61%. Where will the ULIP say will be? It will be lower, right?
Yeah. ULIP would be lower. Like you say, rightly, it is a function of the product itself.
Sir, it is similar, sir. ULIP for persistency is good persistency. It is very close to company average. In fact, marginally better, sir-
Correct.
... than company average.
Sorry. Sir, it seems to be contrary to some of the peers. What are we doing different, just in terms of keeping policies even beyond the fifth year? There are two things. The differentiator between us and the industry is that, first is our ticket size. Second one is our spread across geography, third is our fund performance of the ULIP.
The strategy which we have been following consistently about retention of the policyholders' renewal. That has been working very well for us. That is what we have seen for last five years. We have been consistently performing as far as our persistency is concerned, and specifically for ULIP, which in fact in case of any eventualities in the market or in the economy, it has been consistent.
Got it, sir. Very helpful. Second question is on, you mentioned in the start that non-PAR you have done some revised pricing. Can you just walk us through how that is going to help the non-PAR growth for the remainder of the year?
The whole idea is that non-PAR, we keep repricing, because it depends on the market circumstances. When we see that there could be a hardening of yield, then we take a look at that because that is what the market expects, a higher return. Non-PAR, we would keep aligning it with the realities.
Sir, does that make it a less profitable kind of business?
No, we don't.
You talked about repricing not being there from a reinsurance perspective. How should one look at even the non-PAR product?
What I would like to say is that this non-PAR product, the pricing is always sustainable. Like I said, it is not with an intention to grab market share or anything. We will do business only which is profitable to the company and which is beneficial to the customer. That is the true fact, and this will have sufficient margin for the company after the change also.
Just to add what sir is saying that as a company, we follow very active pricing mechanism where we keep particularly for this guaranteed products, be it the annuity, be it the savings, and we align our pricing along with the interest rates. The moment we are saying that we are repricing this product, this is reflecting the upward yield.
You see there is an increase in yield, we want to pass on to the benefit to the customer. At the same time, we wanted to enhance or protect our margin. There's no question of compromising repricing on account of compromising margin. We'll continue do this activity regularly, and we'll ensure that our margin gets protected, if not enhanced.
Got it, sir. I missed the data point that was mentioned in the start about guaranteed as a percentage of the book. There was some data point that was given. Any help?
Correct. Non-PAR book is at the moment 7%, and balance sheet value will be significantly less because that book has started much later than our other book. It is only 3% in individual business, non-PAR savings.
Got it, sir. Thank you. Last data point. COVID claims net of reinsurance is INR 5.7 billion. What was the gross amount? Has the retention ratio relative to the past, has it changed?
Sorry, can you please repeat?
Sir, the COVID claims net of reinsurance was INR 570 crores.
Correct.
I just want to know what the gross amount was.
Okay.
Has the retention respective to reinsurers, has it changed?
Correct. The overall COVID gross claim was INR 713 crores.
Yeah.
Net off was INR 572 crores.
Got it. If I just do the ratio, it seems to be we are north of 70% looks like, right? Has that changed over time was the question I had.
No. You say there are no changes as far the reinsurance proportion is concerned. It really reflects the business. Protection will have the higher proportion coming from the reinsurance profit. Saving might be lesser coming from. Thirdly, it will also depend on the average ticket size. It's a reflection. We can confirm that there is no change in the reinsurance as it is concerned.
Got it, sir. Thank you and all the best.
Thank you.
Thank you very much.
Thank you. The next question is from the line of Abhishek Saraf from Jefferies India. Please go ahead.
Yeah, hi. Thanks for taking my question. Good afternoon to everybody.
Good afternoon.
A few follow-on questions. Most of my questions have been touched upon by earlier participants. Just looking at COVID claims plus reserving for this quarter, it comes to roughly around INR 1,000 odd crores. If I see the net COVID claims, what we had in FY 2021, I believe that was around INR 350 odd crores. Right, sir? Am I right on that number?
Yeah. INR 320 was the net COVID claims last year.
That's fine. Thank you for correcting me on that.
Sorry, am I right?
What number you're saying, INR 1,000 crore? How are you arriving that number?
No. I was asking about the net COVID claims last year.
Last year, full year.
Yeah, last year full year was INR 320 crores net of claims, sorry.
INR 320 crores net COVID claim. Yeah, go ahead. What was your question?
The multiple of the claims that we had last year and the claims plus reserving for this quarter, it's around 3x of last year's claim. That somehow means is a bit different from what our other peers have seen, where at least in the range of 4.5x-5 x of the provisions plus expenses that our peers have seen. Do you think that these reserving and all will be sufficient?
I don't know where you are getting your figures from because the calculation doesn't seem to be right. What is happening is that we have already said that we have increased our mortality assumptions the last year around, okay, in March. We have said that our claims have been taken care of largely by our increased assumptions. Now can you ask the question? I didn't understand.
What I was trying to understand is the quantity of claim for the multiple of claims that we could see this year versus last year. Last year, as you said, that was INR 320 crores, and right now, based on claims that we have it was.
Abhishek , just to add two points on this. One is that when you look into the claim provisions, sir, you look into not only the COVID-19 experience, you also look into the overall claim experience. As a company, we first look into the overall claim experience, and accordingly, we make a provision on that. This is first part. Second part is that if we compare the last year claim experience versus this year claim experience for COVID-19, I'm not very sure how we'll link into.
If you look into the wave one, it is longer but the curve is flat. If you look into the second wave, it is steeper, but if you see the decline, it's a sharp decline. This is coming from. Difficult to correlate on that part. Third point, normally as a company, we don't comment on the work of others. I would like to add one point that if your overall mortality assumptions is well prudent, you may not need to make significant additional provisions. If you're not having too strong on that side and you get significant hit on the actual experience, there is a reason for revisit your assumptions.
As far as us is concerned, like we mentioned in the March, despite our actual claim experience is closer to the estimate, we have strengthened our mortality assumption in March. On top of we made the additional provision. If you look into the Q1, our actual claim total, including COVID claims, are well within the provision we made for the claims. Despite we are not very sure how the COVID will behave, we normally wanted to take a prudent approach. We have increased the provision from INR 183 crore to INR 445 crores. This is the mission we wanted to make to you.
Just one follow-up on this small one. This INR 245 crores will be mostly IBNR or you have also provided for something which has not yet and could materialize in future as well?
Abhishek, this is not totally IBNR. See, IBNR always be the part of our actuarial liability. That is significant amount we keep on overall claim notification basis. That's IBNR. You have to make provision for the future. This is the additional provision we are making on top our actuarial provision we made on the dates for the. Okay.
Okay. I'll tell you. One last bit on our non-PAR savings side. Obviously this has seen a decline this first quarter. Is it mostly related to pricing part or are we seeing some happening in the market that we are probably going for this quarter?
What I said about this was that, we have seen a lot of traction in ULIPs in the first quarter. Going forward, we will definitely see increase in non-PAR savings sales.
As you're saying that when pricing comes through, so you can-
That will definitely be one of the factors. Yes, definitely.
Just lastly, on the protection bit, may I know how the different channels have behaved in terms of driving protection, individual protection of 76% growth? Is it largely coming from?
No, it is across the board if you see. We have banca, the growth is 55%, agency it is 57%.
Other channel would have grown much, much faster that way, right? Because overall individual protection has grown by 76%, and when we say that the banca and agency have grown at around 50%.
Individual, I'll just check my figures. One second. Sangram, can you pull out individual channel-wise?
Yeah. Overall, for the other channels, the protection has grown by 73%. Correct.
Okay. Thanks a lot.
Thank you.
Thank you. The next question is from the line of Nidhesh Jain from Investec. Please go ahead.
Thanks for the opportunity, sir. Firstly, the increase in margins on effective tax rate and the other margin that we report is quite different on a YoY basis. Why on the effective tax rate margin increase is higher than the normal margin that you report?
That is basically a function of calculation. It is just a function of calculation. What we do is our reporting is done on the actual tax rate basis, and then considering the product mix, there will be a difference in the tax rates applicable, and therefore, this will change. There is no direct correlation. It will actually be a function of what is the final product mix that has been achieved.
Sure. Secondly, when we are seeing mortality experiences in line with assumptions, are we talking about non-COVID mortality experience or mortality experience including COVID?
No, we have said already that claim experience is claim experience. Death claims are death claims. COVID or non-COVID, they are deaths. What we do is when we make the assumption, we make the assumption for death only. We don't make the assumption for COVID death, road accident death or something like that. We make an assumption for deaths, and then we provide for that. COVID would be one of the factors which will be in our mind when we are actually making the assumptions. Because we know that there is COVID will be one of the factors which we will take into account.
Does that mean that the mortality variance will not be negative when we look at the full year EVOC? At that time, the mortality variance for us will not be negative?
Yes. What we are expecting that if our current experience will continue, there would not be any negative mortality variance by end of the year.
Sure. That's quite useful. Lastly, how do we think about the SBI Bank channel? Please correct my understanding. I think the decent portion of our sales from SBI Bank is from branch walk-ins. Slowly, I believe that branch walk-ins will reduce as the economy moves more towards digitization and over a period of time, not probably in one year, but over next five year, 10 years, the branch walk-ins that we are seeing today will continue to reduce. In that light, how do we plan to change our selling strategy for life insurance products, specifically-
So we have already-
... SBI Bank.
We have already been doing that. If you see last year when there was this pandemic and there was hardly any walk-ins. The number of walk-ins throughout the year was much lesser than what was there earlier. We have still managed a net growth in business. Going forward, We have been developing strategies to market to customers, to have contact with customers, have relations programs with customers over various online means. We have been doing very successfully. We don't think that we see a challenge out there. It is a great opportunity. We will probably be able to get more people now that we are targeting people who are not walking in. It would mean a lot of growth.
Sure. In terms of penetration, we have reached almost all the viable branches that we plan to reach or there is more scope.
There is always scope. The number of people selling, the number of customers sold to, the number of branches from which we are selling. Now activation last year end was around 85% of the branches had sold policies, approximately. Please correct me if I'm wrong. The idea is to get to 100%. We want to come to a status where all the branches are selling policies to their customers and ideally to all their eligible customers. That will take some time. We see some growth going forward, a lot of growth over a number of years.
Sure. Can you share the quantum of premium that we originated from the c hannel last year?
Quantum of premium, we have that. One second.
I mean, AP terms or NBP terms, whichever suits you.
Yeah, we will just give it to you.
INR 30 crore was for the whole financial or FY 2021?
Is it NBP or AP?
NBP.
Okay. Thank you.
Thank you very much. A request to all the participants. Please restrict to one question per participant. If time permits, please come back in the question queue for a follow-up question. The next question is on the line of Manish Shukla from Citigroup. Please go ahead.
Good evening, and thank you for the opportunity.
Good evening.
What was total death claim in the first quarter? Total death claims.
Just a minute.
Value and number, ideally, if you can give both.
Total number of claims were 28,000+, and amount wise it was around, we have disclosed, it is net of reinsurance is INR 1,350 crores.
INR 1,350 crores. Of the INR 1,350 crores, COVID was 570.
Manish, it is 1315.
Sorry, 1,315. Of 1,315, COVID was 570. Is that right?
Yeah.
What would the same number be for full year FY 2021? If you have it.
As on June 2020?
No, full year 2021.
Full year 2021 will be around INR 3,000 crores, death claim.
Total death claims. Okay.
Yeah.
Number of claims would be?
Around INR 68,130.
Okay. Right. Thank you. That's very clear. The other question which I had is on the incremental individual protection that you are selling, how does the mix fare between metro and non-metro or let's say Tier 1 and non-Tier 1? Approximate split, if you can give us.
It spread well across the country. Say roughly about 50%-55% coming from Tier 1 cities and metros, and the remaining coming from other places in India.
Abhijit, how would this have changed over the last two or three years in terms of mix?
No, there has not been significant change in that. It's roughly similar proportion.
Thank you. Okay, last question really, what is the average ticket size for ULIP and non-PAR savings of individual business? How do the two compare? If you don't want to give absolute, how do the two compare?
The average ticket size for ULIP is around INR 1 lakh, touching INR 1 lakh, and for non-PAR, it's around INR 52,000-INR 60,000.
Okay. Now-
I would request to come back in the question queue for a follow-up question. Participants are requested to restrict to one question per participant.
One question per participant.
The next question is from the line of Nishant Khalde from Kotak Securities. Please go ahead.
Yeah, thanks. Just continuing from the previous conversation. What you said was that in this quarter, the total gross claim was around INR 1,350 crores. The total number of cases were around 8,956. Last year for the full year, you had-
No, no. INR 28,000.
Total number of claims were 28,756, amounting INR 1,315 crores net of reinsurance.
Okay. Got it. That's it from my side. Thank you.
Thank you. The next question is from line of Sanketh Godha from Spark Capital Advisors. Please go ahead.
Yeah, thanks for the opportunity. Sir, my question is on the claims again, with respect to COVID-19. If you are saying that INR 570 crore, what we have paid with respect to COVID-19 is already part of your conservative mortality assumption. The hit on the EV walk should be the difference between INR 445 and INR 183 crore on the EV walk.
Gross of tax is INR 262 crore and net of tax it should be closer to INR 229 crore. That's the way I should be looking at the kind of mortality pricing assumption, because INR 570 is already part of your mortality assumption. Is my understanding right, sir?
I think difficult to comment on that part. I think what I can say that when you look into, you look into the overall claims. Expected claims based on the assumption that we set on 21st March 2021. Against that there is total claims. This COVID claim of INR 570 crore net of the reinsurance is a part of that, agree. Once you look into the overall expected claim to the actual total claim, delta, if that will be negative, then we'll have the impact on the operating variance on the mortality.
Precisely, that is the question, that INR 570 crores is any negative deviation you have, what you expected in first quarter and you had a negative deviation significantly away from, because you paid additional claims of INR 570 crores COVID. The deviation is positive or delta from what you are assuming for the quarter.
No. What we're saying that, for the quarter, if you consider the total claims, including the COVID, is well within that we expected for the quarter.
Sir, it is simple. I think that any additional provisioning which you have made is likely because that is over and above what you have assumed. It'll likely hit on the EV, right then, sir?
Yes. That will have impact. Yes. That will have the impact.
Okay. Sir. Perfect. I just wanted to understand this INR 442 crores of provisioning what is sitting on the balance sheet or INR 445 crores. Does it provide only for the claims which are reported, which have already happened in the quarter one? You have even provided for likely claims coming in subsequent quarters, either for [inaudible] or any other claims which are going to come in next six and six, nine months because of COVID-19?
No. This is additional claims towards the COVID. I mentioned earlier as well, IBNR that you're referring to, that has not been intimated, is a part of our external liability and that we always keep. When we said the IBNR, we look into the overall claims. This provision is on top of the overall claim that we're holding.
Got it. Understood, sir. Finally, just again harping on the non-PAR business part. Entire industry did that business very aggressively in the current quarter. Every player has reported a very strong growth. Due to some reason, that number is very weak for us, despite there is a strong demand for that kind of a product. Just failing to understand, is it because our slots are not in place or participating divisions have got exhausted and therefore we are restricted to grow that piece? Is reason something else in that sense?
No, we don't have any such constraints. Like I said, we have seen a lot of demand for ULIP products, maybe as a factor of the markets doing very well, and I think that is the major difference. As I said, we are also repricing going forward. Our targets are to actually grow the book in non-PAR, by the year end.
Giving all those things together, I will not compare myself with any other peers in the market, because they have their own policies and practices to do whatever they do. From our side, our action plan is very clear that we will probably end up with a good non-PAR percentage at the end of the year. Abhijit, would you like to add something?
Yes, sir. Just to compare. Last year, quarter one was higher than our average non-PAR book. Year end, we ended up non-PAR being 9% of our individual APE. Currently, it is just above 7%. We do think that with the repricing and the other strategies we will have into play, that our non-PAR book will be a double-digit number in the current year by year end. It will go definitely above 9%, which we had last year. Exact number is something which will evolve.
Got it, sir. Perfect. Thanks.
Thank you. The next question is on the line of Deepika Mundra from JPMorgan Chase. Please go ahead.
Good evening, sir. Can you hear me?
Yeah.
Yes, ma'am. We can.
Okay, thanks. Sir, firstly, just one question on the renewal premium growth. It seems that last two quarters, renewal premium growth has slowed down. I understand some of your single premium businesses are, but still it seems like a quite a shift in last two quarters. Could you talk, what is driving that and expected impact on cost ratio?
Deepika, your audio is breaking in between. May I request you to repeat your question once again?
Yeah. I'll just repeat again. Basically, renewal premium growth has slowed last couple of quarters. I just want to understand what is driving that and what will be the expected impact on cost ratios because of the same. Secondly, more in the banker channel and agency channel, we've seen better protection numbers. Can you talk us through the incentive structure in both these channels to grow the protection?
Yeah. Abhijit Gulanikar, can you please answer?
Sir, second part, we will not want to make any comment on the incentive structure. As we said, that there are strategies in place to promote the right lines of business within our company. There is something which we already have in place. We don't have any specific comment. Second, the way to look at renewal is to look at persistency number.
In certain cases, when the business growth had slowed down a little especially last couple years, that is why you are seeing renewal percentage go down slightly. Persistency has kept on increasing. There is no challenge as far as renewal is concerned.
Just to add, renewals are being growing for us for last few years at double-digit rate, which is beyond 20%. At this moment also, it is double-digit growth. Growth, I think we should set aside. Rather, you should see what is my renewal bucket. As Abhijit said, our persistency is a reflection of our renewal premium collection, and it is going in line as per our expectation, and we believe that it will continue also.
Okay, sir. Just that this quarter the renewal premium growth is about 10%, which is why I was asking what has driven the change. Last question, sir, on the assumption change is driven mostly-
No, I can't hear you. I can't hear you.
Hello?
Yeah, now I can hear you.
Sorry. In the VNB walk, the assumption change is driven through mortality, - 1%.
Yes. Just to say this, we have not made any change in assumption as on 30th June. Assumption change has been done in the 31st March. That is reflected in the VNB walk, and this is mainly on account of mortality that we explained in the March.
Okay, sir. Thank you.
Thank you.
Thank you. The next question is on the line of Neeraj Toshniwal from UBS Securities. Please go ahead.
Hello, sir. When you say we have not taken any additional reserving in terms of taking the hit from the assumptions, this additional INR 2.5 billion is the pass-through from P&L and sitting in the EV. That is the only net additional impact we have from the COVID, is that right? [inaudible]
I didn't get your question. Could you please repeat?
The additional hit of INR 2.5 billion, the difference between 4.45 and 1.83, that is the only pass-through we have from P&L on the additional basis because we are already prudent in terms of reserving. That is what he meant when you have not touched upon any change in assumptions.
You could possibly say that. I don't know. Prithesh, please elaborate.
Yes. You're right. The incremental reserve that we provided for, along with the claim that we have paid, we will route it through the P&L. Revenue performance.
Any cover we might need to provide for in the subsequent quarter, do we think that this will suffice given both the mortality assumptions, what is sitting in the book plus that extra reserving we have or what's your thoughts on that?
Yeah, I think Prithesh has already answered this in response to a question earlier. If everything goes according to how it is panning out now, and there is no sudden spike, or there is no third wave hitting us, and there is no sudden spike in deaths or something, then we will end up within our, whatever we have reserved.
Okay. Between this 28, 7 56, any change in trends you are seeing between individual and group in terms of the death claims in earlier quarters and what would that be, if at all we have that handy?
I think it should be about the same, but can somebody check the sheet? It's the same actually. We do not have that separately. We do not do this way individual and group to that line. Overall claim experience-wise, we do just make the provision.
Correct. Got it. On reinsurance price hike in terms of group term and Credit Life, first we have got the increase from reinsurers like peers, and if at all, have we passed on the price increase to maintain the margins?
If you see that as of now, our reinsurance is what we had. March we get some hike in the individual side that we accounted in the March thing. Individual side, we don't see any challenge on the reinsurance side. Coming back to the group that you are particularly looking for. As of now, though, we have not seen, but looking at the overall claim experience for the current year in the group, there is a possibility that reinsurer may come back and hike the scheme.
Only one submission I will make, particularly for the GTL product that you're referring to, is that it is a price on case to case basis and yearly basis, and whenever any new scheme comes or any existing comes for renewal, we look into the experience, consider the reinsurance support at that point in time, and accordingly, we price on that. Our individual rate, that should not have impact on the margin per se.
Because we account appropriately, we price, we go to the customer would like, and we do. Like our MD sir has already mentioned that we wanted to do a profitable business without compromising any of the standard. Credit life is a long term. As of now, we have not seen. There might be possibility, very difficult to comment on behalf of the reinsurer.
As of now, we are holding up our reinsurance rates. As Sangramjit mentioned, that our average ticket size is lower than the market as compared to the other peers. Even that will happen, the impact will be not significant in our book as compared to others.
Got it. This is interesting. Thank you so much.
Thanks.
Thank you. The next question is from the line of Shashank Jain from Reliance Nippon Life. Please go ahead.
Hi, sir. Sir, you mentioned that your net claims for the quarter is INR 135 crore. Can you please state the number of gross claims?
One second. 1,576. INR 1,576 crores. Yeah.
Okay. What's the embedded value for June?
We don't calculate the embedded value in June. We calculate the embedded value only in March.
Okay. Thank you.
Thank you. The next question is from the line of Prateek Poddar from Nippon India Mutual Fund. Please go ahead.
Yeah. Hi, sir. Just one small clarification, this INR 440 crores is for wave three, four, five, if at all they happen. Is that a fair understanding?
See, I don't think there is any question about all these assumptions of various waves and all. What happens is, because we saw this pandemic. Before this pandemic, we didn't have a significant pandemic reserve. We used to have some small amount as a reserve. Last year was the first time that we actually saw there was this pandemic, and we had to make these additional reserves.
These additional reserves are a matter of abundant prudence. Abundant prudence, and it really is more psychological than anything else because when you ask me whether I pay it out of reserve, out of my profit, or I pay it out of anything, it is all the same. The net result is the same. What we do is, because we are reserving and because we are in an uncertain situation, we are making an extra reserve, additional reserve.
That is only for surprises. That surprise can be in the form of the third wave, fourth wave, fifth wave, whatever you want to call it. It can be any of those things. Really speaking, we can't predict the waves or anything. Because the COVID epidemic is still playing out, we have made this prudent reserve.
Great. This is the surprise. Thanks.
Yes. Thanks.
Thank you. The next question is from the line of Manish Shukla from Citigroup. Please go ahead.
Yeah. Thank you for giving me opportunity again. The question which I was trying to ask earlier is how do the ticket sizes for ULIP and non-PAR savings for individual business compare?
Yeah. It is INR 160,000 is what I think Sangramjit said. Sangramjit, go ahead.
Yeah. Mahesh, specific for ULIP and this non-PAR product, it is kind of similar number, around INR 116-INR 120,000.
Oh, okay. Sounds good. Because I was going back to the point of interchangeability of the two. Is the customer segment who's buying the two products largely the same? Because I would have thought that a ULIP customer would have slightly more risk appetite because there is some equity component, whereas non-PAR customer would want an assured return. Interchangeability of the product for the customer is something which I was trying to understand.
The same customers, they will change. I mean, for example, when they look at the pandemic kind of situation, the customer's appetite can also change. Abhijit, would you like to add on this?
Broadly it is affluent customer, but now we also have a new non-PAR product, which we will start pushing from this quarter. You would see ticket sizes as a portfolio may come down. Because there is current product where minimum ticket size for both ULIP and non-PAR is roughly INR 60,000. Going forward, we will have a product where minimum ticket size is INR 12,000 for non-PAR. You might see some change there, but current portfolio is individual customers risk appetite or part of the portfolio in his overall portfolio.
Okay, got it.
Customer segment.
Right. Incrementally, when after adjusting the repricing of the non-PAR product and the new pricing that you're coming, ticket prices would go down. How does the profitability per se for you of the non-PAR product, I mean, in terms of VNB margin?
Profitable margin will be intact. Our objective is to, because yield has gone up, we wanted to pass on the benefit to customer and that will give a better value in terms of the through VNB. We'll ensure that our margin will get intact, if not enhanced.
Okay. Thank you. That was my question. Thank you.
Thank you, Manish.
Thank you.
Thank you.
The next question is from the line of Mitesh Gohil from Ambit Capital. Please go ahead. Mitesh Gohil , you are requested to unmute your line from your end and go ahead with your questions.
Hello. Hello, sir. Am I audible?
Yeah. Go ahead.
My question has been answered. Just out of one data keeping question. The annuity for the quarter is INR 0.7 billion APE. I just wanted to know the breakup between individual and group annuity.
The individual annuity is around INR 224 crores and g roup annuity is INR 425 crores.
Okay, sir. Thanks, sir.
NBP terms.
On APE basis?
One tenth.
One tenth.
Okay, I'll check it. Got it. Thank you so much, sir.
Thank you. The next question is from the line of Mayank from Star Union Dai-ichi. Please go ahead.
Yeah. Hi, sir. Just wanted to confirm, for COVID claim, which we had INR 570 crore in net of RI in current in this quarter, we have not utilized our existing COVID reserve of INR 183 crore, which we made in last quarter, meaning existing mortality assumption that have taken care for INR 570 crore of claim. Is that right?
Yeah.
Mayank, just to tell you, when you do the provision, you do the provision as on balance sheet date. Balance sheet date is 30th June. As on 30th June, we kept the provision towards COVID is INR 445 crore. Other things doesn't matter, really, what we are carrying forward and all, because your liability will release and accordingly, you pay the claims.
Yeah. Difference being like if we have not touched INR 183 crores, then impact on AV walk would be lower, and if we have utilized that, then impact on AV could be higher. We were looking from that perspective.
Just to explain, we don't look into the piecemeal manners. If you look into this, we have to look into how much overall claims and how much we have paid for. That's the way we are looking into, not looking into the COVID is one subset of the overall claim. When looking the WAC and our overall claim experience, we are looking in totality rather than going and looking the COVID. COVID is just emerging.
We don't have any understanding how COVID will behave. Who know that 1 infection will go to the four infection per day. That's the reason we are not looking specific to the COVID. We are looking overall. To be prudent, we wanted to keep additional buffer like we mentioned. March it was INR 183 crore. Today it is INR 445 crores.
Okay, got it. Thank you.
Thank you. Ladies and gentlemen, we will take the last question from the line of Manish Gupta from Solidus Advisors. Please go ahead.
Sir, just wanted to check, would it be fair to assume that our mortality assumptions in our VNB margins are more conservative than our peers?
Once the event has happened, you can say so many things. What we would like to just say is that whatever we had reserved has served its purpose. Our reserving has been correct. That's what I would like to put it at. Prithesh, would you like to add something?
Yes, sir. Just to aid what sir is saying that we don't say that we are keeping prudent assumption or liberal assumptions. What we say that, and that we clarified in beginning the call as well, we set our assumption which is sustainable in long term. That's the reason assumption is neither prudent nor neither weak. In our view, as of now, it is long-term sustainable assumption that we are playing with.
Sir, if I may just ask a follow-on question. If one has to understand what the mortality assumptions of different companies are, where can one find this data? Is this data in the public domain?
No. It's not in the public domain. Public domain, you can see the industry data. You can go and see the Institute of Actuaries of India, if you want, we can help on that side. Institute of Actuaries of India publish the standard mortality table that reflect the country insured mortality. There's nothing available on the things. It's difficult to compare things because it will depend on the mix of the product, whether saying protection, you are selling ULIP, you are selling saving, you are selling PAR.
Then again, you look into which area you are selling. Then again, look into what ticket size you are selling, what is your customer segment, other parts. That's the reason it is extremely difficult to compare one company mortality assumption with the other company, because it reflect their own portfolio experience.
Right. Thank you very much.
Thank you.
Thank you very much. I now hand the conference over to Mr. Mahesh Kumar Sharma for closing comments.
Thank you very much, Nira, and thank you very much to all the participants in this call for asking very relevant questions and keeping us on our toes. We propose to continue with our sustainable policies and our growth and hope to see you again with a very strong performance going forward. Thank you very much. Stay safe. Get vaccinated. Good night.
Thank you very much.