Ladies and gentlemen, good day and welcome to the SBI Life Insurance Q4 FY 2021 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and 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 and CEO, SBI Life Insurance Company. Thank you, and over to you, sir.
Thank you very much. Good afternoon, everyone. We heartily welcome you all to the results update call of SBI Life Insurance for the year ended March 31, 2021. Hope you are all taking due care of yourself and of your family members. Along with me, I have Sangramjit Sarangi, President and CFO, Anand Pejawar, President of IT and IB, Abhijit Gulanikar, President Business Strategy, Subhendu Kumar Bal, Chief Actuary and CRO, Prithesh Chaubey, Appointed Actuary, and Smita Verma, Senior Vice President, 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 the performance highlights, let me acknowledge the efforts taken out by all our employees, distribution partners, and other business associates who have worked tirelessly to provide continuous support to our customers.
Thanks to their efforts, we have delivered a strong performance in these unprecedented conditions. The key highlights of this financial year are new business premium registered a growth of 24% and stands at INR 206.2 billion. Renewal premium has shown a growth of 23% and stands at INR 296.3 billion. Gross written premium crossed INR 500 billion mark with a strong growth of 24%. Protection new business premium is at INR 24.6 billion, registering 18% YOY growth.
Individual protection new business premium grew by 40% to INR 7.4 billion. Annuity business witnessed 169% growth and stands at INR 30.2 billion. Profit after tax stands at INR 14.6 billion. On actual tax rate basis, value of new business is INR 23.3 billion, a growth of 16% YOY, and VNB margin is 20.4% with an improvement of 170 basis points over last year. The Indian Embedded Value stands at INR 333.9 billion, a growth of 27% on actual tax rate basis.
Assets under management grew by 38% to INR 2.2 trillion. Now, we would update you on each of these elements in detail. The premium business picked up well in the second half of the year, and the company delivered strong growth of 32% in total new business premium and 30% in individual new business premium. Last quarter of the year, that is January to March FY 2021, the company grew by 63% in total NBP and 53% in individual business. Maintaining private market leadership position in new business premium, we collected new business premium of INR 206.2 billion and private market share of 21.9% and improvement of 140 basis points over last year. Individual business has always been a focus area of the company. Individual new business premium has grown to INR 124.9 billion, a growth of 11%. Single premium contribution is 20% of individual new business premium.
Individual rated new business premium stands at INR 102.2 billion, leading to a private market leadership with share of 22.6%. Group new business premium marked a YOY growth of 52% and stands at INR 81.3 billion, with private market share of 22.1%. The renewal premium grew by 23% to INR 296.3 billion, which accounts for 59% of the gross written premium. Our gross written premium stands at INR 502.5 billion, a growth of 24%. Annualized premium equivalent, APE, stands at INR 114.48 billion. During the period, a total of 16.6 lakh individual new policies were issued, registering a growth of 7% over the previous year. Coming to the product mix, non-par new business premium is INR 110.7 billion, with a share of 54% in new business premium. Individual protection is at INR 7.4 billion, registering a growth of 40%. Group protection stands at INR 17.2 billion.
On APE basis, protection contributes 10% of new business and has registered a growth of 26%. Annuity business is at INR 30.2 billion, a growth of 169%, and contributes 15% of new business premium. ULIP momentum has picked well quarter two onwards, and individual ULIP business constitutes 68% of individual new business premium. Guaranteed non-par savings product is contributing 8% of the individual new business and just 5% of total new business collected.
Traditional savings business, including group savings, accounts for 47% of the new business premium in this year, registering a growth of 49%. We will continue to grow all profitable lines of business. Now I come to distribution partners. Aarav Sanghai business marked a share of 55% in individual new business premium. Total number of CIFS stands at 50,240 as on March 31, 2021. Instant protection policy insurance through YONO app of SBI has covered more than INR 6.3 lakh lives.
Agency channel, another strong channel, contributes 28% in individual business premium. Our total number of agents stands at 170,096 as on March 31, 2021. During the year, other channels, direct corporate agents, brokers, online and web aggregators, grew by 107% in terms of individual new business premium. Protection new business premium through other channels registered growth of 57%. Coming to the company's profitability, the company's profit after tax for the year ended March 31, 2021, stands at INR 14.6 billion as compared to INR 14.2 billion in the previous year ended March 31, 2020, registering a growth of 2%. Our solvency remains strong at 215% as on March 31, 2021. As mentioned in my opening remarks, value of new business is INR 23.3 billion on actual tax rate basis, and on effective tax rate basis, it is INR 26.6 billion.
VNB margin is at 20.4% on actual tax rate basis, an improvement of 170 basis points, and on effective tax rate basis stands at 23.2%, an improvement of 250 basis points. Embedded value stands at INR 364 billion on effective tax rate basis, a growth of 32%, and on actual tax rate basis is INR 333.9 billion with a growth of 27% over last year. Embedded value operating profit stands at INR 50.2 billion and operating return on embedded value is 19.1%. Coming to operational efficiency, cost efficiencies continue to improve with our opEX ratio reducing from 5.9% in the year ended March 31, 2020, to 4.8% in the year ended March 31, 2021. Our 13th-month persistency ratio is at 87.9% as compared to 86.1% last year, and 61st-month persistency is at 61.6% compared to 59.9% in the corresponding period last year.
On regular premium basis, 13-month persistency stands at 85.4% vis-à-vis 83.7% in the previous year. As mentioned in my opening remarks, assets under management have crossed INR 2.2 trillion and stands at INR 2,208.7 billion as on March 31, 2021, growth of 38% as compared to March 31, 2020. The company continues efficient use of technology for simplification of processes with 99% of the individual processes being submitted digitally. 41% 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 0.06%, one of the lowest in the industry. Our rapid adoption of new online capabilities has helped to maintain business activity. We introduced remote sales completion for all distribution channels and launched online services for customers. We moved our agency recruitment, onboarding, and training online.
Automation and digitalization have significantly enhanced customer experience, and straight-through processing is now used for close to 1/3 of the business. Resurgence of COVID-19 pandemic has led to more reliance on digitalization and automation. We continue to focus on strengthening of our digital services and automation for providing uninterrupted services to our valued customers during these challenging times. Our continuous effort is on value enhancement for all our stakeholders by maintaining sustainable and consistent product mix, increasing the market share of protection business along with other profitable line of business, enhance distribution network and the capability to reach out to customers in an efficient manner and for improving customer satisfaction. Thank you very much. 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. The first question is from the line of Aarav Sanghai from Eternity Capital. Please go ahead.
Yeah. Hi, sir. Hope all good at your end, and thanks for the opportunity to let me ask questions. I have three questions. My first question is on the VNB margin. If I look at the VNB margin walk, there seems to be a negative variant in the margin, in the change in margin. I wanted to understand, even though persistency and cost ratio has improved dramatically, so is this margin negative only because of the change in mortality assumption, or is there anything else in the margin change? My second question is on the margin difference between statutory tax rate and the effective tax rate. That seems to have gone up a lot in this quarter. Any color on that?
Last question is on the growth outlook for the next year, that given ULIPs are coming back a lot, how are we thinking about restricting ULIPs in our mix? Again, our margins might be affected. Those are the three questions.
On the VNB margin, the negative variance on operating assumptions is only on account of mortality, change in mortality. That is the first one. The second is on effective and actual tax rate basis. There is a difference and the actual tax rate is at 14.5%. The effective tax rate is calculated taking into account all the other things, like the dividend tax and various things like that. It actually comes out to that. It's an actual calculation. If you see that there is a difference, it is higher than what it used to be, say, last year. That is how it is. It is an actual figure. If you look at the growth outlook for ULIP, we see that there was a lot of talk about ULIPs not being in demand.
The last year, the first quarter, there was a visible lack of demand there. After that it has picked up, and I think we are almost where we were the year before that or even years before that. I think that there is a real need for the customers for this product. This is a very important component of people's savings and the life insurance that goes along with it is, I think, a very good product for people. People who are not really keen on going directly into the equity market but would like to have some kind of a protection along with this investment. That demand has not faded away. In fact, we find that the demand is as robust as before. We have absolutely no plans of withdrawing this product or pushing people away from the product or anything.
Having said that, we offer a huge bouquet of products to our customer, and we generally go by what the customer demands.
Thank you. We would request the current participant to please come back in the question queue for any follow-up questions. The next question is from the line of Deepika Mundra from JP Morgan. Please go ahead.
Hi, sir. I hope everyone is doing well. Just two questions from my side. Firstly, on the new bank partnerships, they seem to be doing pretty well. I just wanted to get an understanding as to what is the activation level of the 12,000-order branches that you all have added. In the sense as to how many of these would already be contributing to business. Secondly, if I'm not mistaken, I think the group protection volume is marginally down. Could you talk a little bit about that? Thank you.
Just to take the question, Deepika. At the moment, of course, it varies from partner to partner. There is a long way to go in activation of those branches. We are where we were with SBI many years ago. There is a significant roadmap ahead, even though, as you said, we have done well with other banks.
Grown by 40%. Group protection has actually grown. One second.
65%.
Yeah. Group protection has grown by 65%. I don't know which figures you are looking at. Are you on the line?
Deepika, do you have more questions?
Sir, I was mentioning for the quarter, I think there is some just slowdown in group protection.
Yeah. For the quarter, yeah.
Deepika, actually, we have maintained our numbers according to the projected for this financial year, quarter-on-quarter. The major part of the group protection has been done in the first three quarters. The last quarter also, we grew by 16%. As far as the overall year-on-year basis is concerned, 65% growth. That we maintained. Individual protection also we grew by 40%. On quarter-on-quarter basis also, 49%. That as per the plan, it has been maintained.
Okay, sir. Thank you.
Thank you. The next question is from the line of Peter Fredrick from B&K Securities. Please go ahead.
Sir, thank you for giving me the opportunity. Sir, again, just to continue on the group protection piece. I am looking at the APE numbers and of course, versus peers who have done really well and for you.
We were not able to do that much well on group side. Of course, on the retail side, we're doing very well. I have two questions. One is, in future, so where do we stand with respect to group protection? Number two was, on retail protection, are we being slightly more aggressive in current uncertain times? Those are my two questions on protection.
I'll take your second question first. On protection, we are not taking an aggressive line or anything. We are going by the customer demand. Wherever we see, and as you can very well know, that last year there has been a focus on protection. Protection was in slightly higher demand, and we have catered to the requirements of the customers. Protection has been sold more last year as a result of customer demand, I should say. I think earlier also I've said, we do not push any products to any customer. We have a big range of products to suit each and every customer, and we offer these products, and we sell whatever products the customer chooses. Coming to the first part. Sangram, carry on.
Just to give you the bifurcation between the group protection. We have got two lines. One is credit life and second one is other than credit life. Credit life grew in the Quarter Four by 27% and YOY by 2%.
On APE, right?
This is on APE basis.
APE. Okay.
Group protection other than credit life, on quarter-on-quarter, fourth quarter, it grew by 16%. On the YOY it is 65% on NBP basis. On APE basis, in fact, on YOY it is 8% growth.
Okay, sir. That was very helpful, sir. If I can just nudge in one more question on that effective tax rate again. We saw our effective tax rate margins going up by 60 basis points if I see only 4Q versus 4Q. Whereas the mix is not very much different. Of course, non-par has gone up, but protection has come down versus 4Q last year. How should I read this, sir? Last quarter we had 21.1%, this time it's 27.7% on effective tax rate margins.
Basically, we generally declare our VNB and everything on actual tax rate basis. What we have done is we have calculated this on effective tax rate basis, as is being done by everybody else in the industry. Just to give a comparison, every time there is this question of why our margins are much lower. That is why we calculated it on the same terms that the rest of the industry is calculating. That is how it comes to this much.
Usually when the dividend is not paid, that time the effective tax rate should worsen, right? Get closer to the actual tax rate. Can you just give me, of course, if you can, on last year's basis, what was the effective tax rate and FY 2021, what was the effective tax rate?
See, simple terms. What we have done this time is that the effective tax rate calculation, we brought it in line with the industry practice and the whole assumptions and the methodology, what is being used by the industry, we have applied that in our calculation, and this is the derivative of this outcome. We will continue to do that. As Riya said, we will continue to declare both actual tax basis as well as effective tax rate basis, so that at least you will get a clear picture and a comparison with the peer group also.
All right, sir. That's it from me, sir. I'll join back. Thank you.
Thank you very much.
Thank you. The next question is from the line of Madhukar Ladha from Elara Capital. Please go ahead.
Hello, everyone. Congratulations on a good set of numbers. My first question is, our protection share and non-par share, actually more non-par share is much lower than some of the other competitors in the industry. Any sort of steps that you are taking to increase non-par in the mix. That is actually value or margin accretive, right? How do we see this mix moving into FY 2022, FY 2023? That's number one. Number two, so what is your view on any protection rate hike? Also, remember that your new product approval was due in the last quarter of FY 2021. Has that come through? What sort of price hikes, if any, have you done or are expected to do now?
Yeah. As far as non-par is concerned, if you see, we have grown non-par at about 50% last year.
Yeah.
Again, let me come back to the statement I keep repeating. We don't push any product down the throat of any customer. We sell only products which are demanded by customers. We have all the products, and therefore there is no way we are holding back on a product or pushing a product. What we do have is part of your second question, where we can price and reprice. Sometimes when we find that a product is selling more because we could likely make a loss or something, then we would reprice the product. That I'll answer on the protection side, what you ask me. If you ask me, I do not push non-par products, nor do I withdraw any product or keep it from my customers. Having said that, we have a bouquet of 38 products covering virtually every requirement by anybody.
We have a very strong non-par individual product called Smart Platina Assure. That was very much in demand in last year, and we have been able to sell that in large numbers. We do not propose to push this product any further or anything like that, nor do we propose to withdraw it or anything. Coming to protection rate hike, yes. We have actually repriced one product and we are launching it today.
Launched.
It has been launched today. There's been a hike in one of our products, Smart Shield. The product that you are talking about, which we were supposed to launch, we already have a product in that area. We had to delay that because we had a lot of statutory products which we launched in the meantime. We came out with, last year if you ask, the IRDAI-mandated products, we brought out Corona Rakshak, then we got Saral Jeevan Bima, Saral Bima, and we have filed for the pension product. Apart from that, we also had the repricing of the Smart Platina, we also launched Poorna Suraksha. That is a health cum critical illness cum life cover. That was what we were busy with. As a result of this, we had to reprioritize.
This year, definitely in the first quarter, we are likely to come up with the product that we were talking about earlier also. That also is likely to come. In the meantime, we already have protection products in the market, which have strong uptake, as you can see.
What is the price hike that you have taken on Smart Shield? Do you expect another round of reinsurance rate hikes?
Reinsurers, I don't know what they will do, and it will depend a lot on the experience and what their own experience and their experience with us. It'll depend a lot on that. I will not crystal ball gaze on that. What I can say is that.
What is the price hike in our product?
Yeah. No, no. Smart Shield, if you ask me, it is age-wise and tenure-wise, there is a chart. If you ask me on an average, around 10%, let's say.
That's it?
Yeah.
Okay. I'll come back in with you. Thank you.
Yeah, sure. Thank you so much.
Thank you. The next question is from the line of Ansuman Deb from ICICI Securities. Please go ahead.
Yeah, hi. Thanks for the opportunity, sir. My question was regarding our 61st month persistency on the regular premium side. It has declined, I think. If you could give some reasons for that. Second question was on protection. Do you believe the new product which you are talking about can drive some new volumes in FY 2022? Do you believe it will not be any special kind of a volume trigger?
Yeah. The new product, definitely, we expect that some volumes will go up. Because what we are bringing out will be complementing our suite of products.
It will be a pure term product, right? It will not be an ROP, but a pure term product, right?
Yeah, it will be a pure term product. Absolutely. This is something which we, like I said, we already have a lot of protection products, and even pure protection products we already have. This will complement that suite overall.
Okay.
Okay? As far as the 61st month persistency, Sangram, can you just highlight that?
Generally, the regular premium-paying products, there are a few products got matured after the fifth year. That is the reason the bucket as far as the regular premium is concerned, that also got a little hit. There is a small dip in the regular premium business. If you see overall, all premium taken together, there is a growth and which is beyond now, 61.6%, which is one of the best in the industry.
Right. One last question, sir. Regarding the increase in the margin that we have seen on Q4, we had some positive operating assumptions which were supposed to unwind this quarter. Has it contributed to this kind of a higher increase in Q4?
No, that's not so. If you see, this margin growth is mainly on account of the active management of the products, balance product, both for the protection side as well as non-par side. We have been doing this active repricing and other things and optimizing. Even now, within the same proportion, margin has been increased. Margin contribution is mainly on account of the product mix.
Right. We would have started some assumptions on this when we started this year. Because of COVID, we would have made some assumptions and throughout the year, the experience would have been positive or some contribution would have come from there.
We have revisited those assumptions and partially we have managed that. COVID is still around and we as SBI Life wanted to be prudent on that side. We are carrying some part of that.
Got it. Any mortality reserves that you have additionally made?
Yes.
Yeah.
Being prudent, we did two aspects. One aspect is that we have given shock for the mortality for the next year, given uncertainty, though our COVID claim is very comfortable and we're within that. On top of, we have also made additional provision of INR 183 crore for the COVID as on 31st March 2021.
INR 183 crore, right sir?
INR 183.
Yeah, INR 183.
INR 183 crore.
Okay, sir. Thank you. That will be all.
Thank you.
Thank you.
The next question is from the line of Adarsh Parasrampuria from CLSA. Please go ahead.
Hi, sir. Congratulations in strong numbers. Sir, I've just looked through your operating variances where the last two years it's been a very big positive. Especially if I try and look at the breakup, it comes more on the persistency side, right? INR 240 crore last year, INR 320 crore this year. There is another one. Two questions there is one, given that our persistency have continued to improve on a headline basis when we can talk about product-wise, do you feel the need to now tinker with it and make it a part of margin? It's been a very strong persistency variances for two years now. Two, on the other variances, what's the INR 280 crore of other variances if you can talk about.
Just to see that when we set the assumptions for future, we not only look into the current experience, we look into long-term emerging experience. Partially, you need to look into. Second part is though persistency is very sound and you see the COVID scenario, we just want to maintain that. We want to be extra cautious on that side. You see this positive variance will keep coming next year as well. Once we see this experience is very credible, we will go and update our persistency assumption for margin as well as embedded value.
Sir, the reason I'm asking is that we had equally difficult last year, right, in terms of business being difficult in the first year and having a lot of logistical issues there. In spite of that, we've got whatever variances. You are saying that maybe this year as well, we look into it and second half there could be a possibility of getting some of this in the margin.
Yeah.
Not necessarily in the second half or anything, but then yeah.
As and when situation emerge, we'll do that.
Yeah. We'll definitely look at the situation on an ongoing basis.
Got it, sir. Sir, second question is on the margins, right? You are at, let's say the comparable margins is 23% versus peers. Can you just talk a little bit about Earlier you used to do it, some of your peers do it. Give a breakdown between protection and savings. Given that the savings business, you are still unit-heavy versus a lot of the peers more non-par saving, how much headroom we have there and how much of a margin lever that can be. Your margins now are relatively more comparable to peers, and your non-par mix is quite low. In that sense, that could end up being a kicker over the next couple of years.
We've had this relatively similar mix over the years. If you see our margins, we have been improving steadily on our margins. Every quarter, every year, our margins are getting better and better. We are doing it on a sustainable basis. Like Prithesh has already said, the pricing, repricing, being dynamic about the whole thing, not trying to push any particular product, giving what the customer chooses. That kind of strategy has worked for us very well. We do not think that we need to actually go all out to sell some particular product which has a higher margin or something. The other question of your margin breakup comes up.
We wouldn't like to actually commit on figures because even if you ask me the protection products that we have, so suppose I have four pure protection products, the margins will all be different for them. I can only say that the protection products margins are going to be higher and the unit products, as you all know, the margins are going to be lower and the traditional products are somewhere in between. That's the whole thing. Again, let me emphasize, we are not looking to push any particular product to push up our margins. We successfully sell more to more customers, and that gives us our edge and our profits and our growth. I do not think that you tamper with the winning team.
Just to add to what our MD said. See, you should look at what is our VNB growth and the EV growth.
Okay.
With whatever strategies we have adopted, and this year, we've also faced a little bit challenge on the volume because of the industry circumstances. We've still managed to grow VNB very healthily. That fact that we have reasonable margin even in the low margin products, helps us meet customer demand and show sustainable but strong increase in VNB year-on-year.
Got it. Just a related question. When IPO happened, or just couple of years after that, we had a steady margin improvement story, then protection came in and now non-Par savings and margins improved from that 17%, 18% number to 23%. Any sense and direction given that we still have some low-hanging fruit, if I can so call it on the non-Par side. Any sense on what one should expect from here on? The improvement in the last two years have been very strong.
We will continue. It may sound very boring. The whole of last year, I kept saying this, and we will continue to sell products that the customer wants. As Abhijit has said very clearly, you can see from our VNB growth, you can see from our EV growth that our strategy has been working very well for our company. We are number one in a raft of parameters that you see across the industry. I think we don't tamper with that winning formula, keeping the customer at the center, selling products that he wants, and then only adjusting things which go probably not in our control.
Got it. Very useful. Thanks a lot.
Yeah. Thank you.
Thank you. The next question is from the line of Hitesh Gulati from Haitong Securities. Please go ahead.
Yeah. Thank you, sir, for giving me the opportunity, and congratulations on a very good set of numbers. My first question is, what is the new business strain for the year?
New business, we have done a lot of new business, so there is strain, but I don't think we want to quantify that right now.
Okay. Sir, what is the quantum of mortality claims due to COVID that we have paid both on a gross and net basis?
Yeah. If you ask me, the total claims that we have paid is INR 320 crores. This is the net claim, net of reinsurance. Yeah. That's it.
Sir, what would be the number of claims that this 320 amounting for?
INR 5,000.
Yeah, INR 5,000 something.
5076.
I can give you the exact number if you want. 5076. Yeah.
Okay. Sir, just one last question. Your operating assumption change is - INR 80 crore. This is obviously including that INR 183 crore of mortality. There is a positive also of INR 100. What is that amounting to?
No, sir. Hitesh, this INR 183 crore is on top of the additional provision we made on COVID. Assumption change is mainly as I mentioned earlier as well, we wanted to be more prudent on site. Though our COVID claim is well within that, we increase our mortality assumption, also give the mortality shocks for the next one year. In case situation will worsen, we will be much in a stronger position.
Okay. Thank you, sir. That's it from my side.
Yeah. Thank you.
Thank you, sir.
Thank you. The next question is from the line of Harshit Toshniwal from Primji I nvest. Please go ahead.
Yeah. Hi. Thank you for the opportunity. Am I audible, sir?
Very much so. Go ahead.
Thank you. Two questions, sir. On the mortality piece, I think clearly demand is there from customer end, that is not questionable. When we talk to peers, the common concern is that right now it is a critical time, and that's why they are precautious in terms of selling a lot of protection policies. More from the risk perspective rather than ability or demand perspective, do you think that being aggressive on term protection right now makes sense given the risk that the early mortality claims can be very high if things don't go our way? Second one, I think in the last question, you mentioned that we had INR 320 crore of claims. That is for the full year. Just want to know that what is the absolute amount of gross and net claims for the full year?
320 looks very low versus many of the peers.
No, INR 320 is the net COVID claims that we have for the year. That's all.
Overall mortality claims. If I just say COVID, non-COVID altogether for the whole year, how much would be the claim, sir?
Total death claim was around INR 3,017 crores.
Okay.
It has grown.
Yeah. INR 3,013 crores.
Yeah. INR 3,013 crores.
Yeah.
It has grown by around 70%.
70%?
74%.
Yeah.
Over there, just want to understand, sir, that obviously of that INR 3,000 crore, maybe INR 320 was because of COVID, but the non-COVID YOY increase in claims, that also appears to be very high. Even if I strip that 10%, then also we have 50%-60% YOY growth in the mortality claim versus this is a much lower term protection growth YOY. Just want to understand that.
One of the things is that we have been growing in number of policies sold. Over the last few years, every year we have been growing the number of policies that we are selling. The claims will naturally grow to that extent. That is the first thing. Secondly, there has been a slight increase in the number of claims in the last one year, apart from COVID. This could be related to the pandemic, it may not be related, we do not know. There has been an increase in the number of claims there. Having said that, our estimation of the claims and the assumptions that we had made last year, I think that has come out very close to our actual experience.
I think to answer your question, even though there has been a spike in the number of claims, this is something which we had estimated.
Just one additional data point, if I can ask. Instead of INR 3,200 crore claim which we have paid, what was our initial assumption?
No. See, Harshit, this is the total claim paid, okay? What we mentioned that, and you can see our disclosure as well, our mortality variance is hardly negative. It is INR 20 crores.
Okay
assumptions are closer to the number. That's why our MD has also explained to you.
Sure. The INR 180 crore, where has that got accounted for? I just missed in the last question.
It's a provision. Provisions we made there. It's a provision. We have made a provision of that.
In the EV, I'm just trying to understand that where will that reflect or it will not reflect right now?
It is a part of the statutory liability. Okay?
Right.
It is part of the liability. It will reflect to some extent in the VIFs and ANW, both the sides. Secondly, as already mentioned, we have also given the SOC in our assumption for one more year. If you consider both the aspects, I think our assumption is well within the quite prudent in the current scenario as well. We expect that we'll get a positive variance next year as well on mortality.
Sure. Basically it's implied in the VNB only. There is no separate. It's there in the VNB calculation itself.
Yeah.
It's the simpler way to call.
Sure.
Perfect. Okay. Great. Thanks a lot. One more question if I may ask or I will give it to the queue. In the April month, how has the initial trends been? Because of COVID, do you think that impact on us will be very much similar to last year when there was maybe sometime around May and June where there was a partial lockdown? Do you think that we are right now well-equipped digitally and within the bank that our growth won't be impacted that much because of April month? Thank you.
No. I would hate to try to be an astrologer. I will not try to crystal ball gaze. I will leave it at saying that we are looking at the situation, and we will take our business targets looking at what we know right now. If you look at both the sides, there have been some lockdowns now, and there is a vaccine out there, and there is a huge program of vaccination going on. Putting all those things together, we will take our own call on this. I wouldn't like to forecast anything at all right now. Thank you very much.
Thank you. The next question is from the line of Abhishek Saraf from Jefferies. Please go ahead.
Yes, sir. Thanks a lot for the opportunity. Most of my questions have been answered. I just wanted to know your view on the non-par savings product now that we have grown it very fast, and of course, the yield covers helped us to write a lot of this product. Going forward, do you see similar kind of pace continuing in the next year? In this regard, I also wanted to understand that in the VNB margin, we have taken the negative economic assumption effect, and that seems to be primarily on account of change in risk-free rate. Are we assuming higher rates here? What would that imply for the yield curve and our growth in non-par savings for the guarantee product? Thanks.
Basically, non-par, we don't look to push the product or to withdraw the product. Like I said, this has become a very old statement of mine. We don't push any product to the customer. We have all the products and wherever the customer demands. Like last year, you will know that guaranteed products was part of the flavor of the season during the earlier days of the pandemic. I think a lot of non-par guaranteed product got sold at that point of time, and that if it plays itself again, we are ready for that. We are okay with selling more of that product also because finally, it is a question of what the customer is looking for at that point of time. That is how we will look at.
Like you said rightly, the change in the economic assumption is because of the risk-free rate change. That's all.
Okay. Thanks a lot for that. Just if you can dwell a bit on, sorry for belaboring on this. What I'm trying to understand is that obviously at the lower rates, there will be demand for the non-par savings. If we are assuming that the yield curve could probably flatten, would that make writing guaranteed products profitable for us or will that lower the margin? That's what just I wanted to understand. Maybe you can continue with the growth, could the margins on non-par savings come down with the contraction in yield curve?
Abhishek, just to give the brief to you. See, this is entirely the yield curve impact for economic assumption, nothing else. Negative economic assumption doesn't mean that margin is negative or is lower. What we do that we effectively monitor our margins, and some point in time, we're not going to keep daily basis the changing of pricing. The priority is there. If you look into despite this 1% impact on the margin, our margin has significantly grown over the year. This really indicates that the non-par product that we are selling today has a very significant margin, and if margin will continue to be there, we will continue to sell this product. As our MD also mentioned several times that we don't push any specific product. It's depending on the customer choice.
What we do just to lock in our margin and enhance the margin, we continuously monitor the premium rates and try to reprice those products effectively so that our margin gets impacted.
Thank you. The next question is from the line of Sanketh Godha from PAR Capital. Please go ahead.
Yeah, thanks for the opportunity. Sir, this question was asked on the operating variance number of INR 380 crores, others coming from. Just wanted to know the number looks to be little higher in the current year, but what contributes to the INR 380 crores? That's my first question. Second question is that COVID results, we've made a provisioning of around INR 70 crores last year. INR 183 is an outstanding number. It's an incremental provisioning of INR 110 crores. Therefore, it has been rooted through Embedded Value. That's my second question. Third one is if you can give EV breakup into ANW and VIF, it will be useful.
Sanket, I will take the last question one. First is that we normally don't disclose this bifurcation of ANW and VIF. We can say that our EV has grown 27%. It shall indicate that how we are performing.
What is COVID?
COVID reserve. Last year, COVID reserve was INR 60 crores.
70.
INR 70 crore as on.
December.
December.
Yes.
This is the additional provision we have made as on date. When we make the provision, we look into the as on valuation date. INR 183 crore is the provision made as on 31st March 2021. This is second. Third point you're looking for the operating, third question on the other operating variance. This is mainly on the CRAR and then some tax provision other part. There's some smaller things you know. If you look into our EV size, this amount is not significant.
Have you changed your capital charge assumption from 5% to 4%, and therefore you are seeing that operating variance under others to come at be higher? If you have answer that.
No, we have not changed anything.
Okay. Basically, to clarify that balance sheet number. 183 is the slower number of the current year, right? It is total provisioning what you made for COVID is around INR 250 odd crores. That's the way I should look it or 183-
No. Last time's provision is gone. That goes away with the new P&L and the new balance sheet. The old provisions disappear because it doesn't matter whether you call it, whether you paid it out of the provision or you paid it out of your P&L and kept that provision into this provision. It doesn't really matter. That is up to you, but then finally the accounting is the same. Right now, the COVID reserve that is made is INR 183 crores.
Liability is around balance sheet, I agree. It's as on balance sheet.
Got it. Sir, the operating assumption change of INR 80 crore in the EV Walk is with respect to what then? INR 80 crore what you have made in operating assumption change, it is largely to factor in this additional provisions what you have made.
No. That is a separate mortality. There's a change in our mortality assumptions. What we have done is we have taken a higher mortality assumption for the year going ahead. We have said that there will be more claims, death claims, to the extent of INR 80 crores. That has already been factored into the VNB movement. Then we have an extra provision of INR 183 crores, just in case we fall short and there are more claims than our enhanced assumptions. We want to be safe, because this is a year where last year we made a provision of INR 70 crores and it turned out pretty much okay. We just thought that we will enhance that assumption by that amount and slightly more to account for the enhancement in business also.
Later we also kept the COVID reserve, because the COVID reserve is something which really works psychologically also very well.
Got it, sir. Sir, my next question is on annuity business. We have done a phenomenal job in the current year. We have done around INR 3,000 crore of business in annuity compared to INR 100 crore last year. Sir, just wanted to understand, this business is largely driven by individual annuity? If you can give the breakup into individual and group annuity. That's one point. How do you see this growth panning out going ahead? Is it largely coming from our old superannuation fund or your NPS, which is from a sister concern, is also driving this growth of annuity business? How do you foresee the growth going ahead?
It's part everything. We have amounts coming in from customers, then we have it from individual also. I would say it's about a 50/50 kind of thing from individuals and from corporate business and also NPS. It's all together, it is INR 3,000. That growth, it is a reflection of the demand for partly it is a reflection on the increased demand for annuity products, I should say. There is definitely a trend towards more people picking up annuity.
Thank you. The next question is from the line of Jayanth K from Credit Suisse. Please go ahead.
Congratulations on the good set of numbers. I wanted to ask on the hike that was taken 10%. Does this protect our margins? I mean, of the total hike that came up from the reinsurers, were we able to pass through the hike entirely? Second question is, can you just tell the protection share in VNB this year?
The reinsurance rate had nothing to do with that 10%. There is no correlation between that. There were some, the whole thing. Along with the reinsurance rates, we decided to reprice the product. In that repricing, the final result would be on an average 10% across that particular product. It has got nothing to do with the exact hike in the reinsurance rates, et cetera. We wouldn't like to go into that because each product has got a different negotiation going with the reinsurer and there are different assumptions. Even for us with the same reinsurers, we would have different reinsurance rates for different products depending on the constituents of who are taking those products. There's no direct correlation.
Okay. Sir, if I may just add on to that. For example, this year, our mortality claims are almost 60% higher. I'm guessing some of that would be because we've written a lot of protection business in the last couple of years. Does this mean that this has not been accounted for in the last round of reinsurance rate hikes and going ahead, we should expect a sharper hike?
I don't know. We didn't do any such. I mean, we haven't seen any such correlation. It is not related to the protection business or anything. Like I said, there has been growth in business over the last few years also. Claims have gone up. Also the mortality, I think across the board, people would have felt more death claims last year than in a normal year. I think that is just that. I don't think we have seen any such correlation.
Thank you, sir. Just the protection share in VNB this year.
The protection share in?
VNB.
No, I can't really. We wouldn't like to state any numbers over there.
Thank you.
Thank you. The next question is from the line of Santanu Sengupta from Goldman Sachs. Please go ahead.
Hi. Thank you for taking my question. Just first one on the bancassurance. I think for the quarter on an APE basis, we started seeing good growth. I think at the start of your comments, you also talked about other channels including direct other banks and stuff growing. Just wanted to know the sustainability of this. Just from the backdrop of systemic liquidity, do you think these channels can actually grow through next year? I think that's the question.
Yeah. The channels will grow over the next year. If you see, we have a very good partnership going with SBI. That's the first one that we had. If you see the way the activity levels in SBI have grown. And the amount of business that is being done through SBI. That gives us an indication of the kind of potential that all these other banks hold. That would be definitely growing, going forward.
Sir, just in terms of penetration of just, say, the SBI, is there some metric that you would like to share in terms of, have you reached 10% of the bank customers? Is there something that we can look to, say, and this is part of the ecosystem that we can hope to achieve, say, over a year?
No, we don't look at it that way. What we do look at is how we can have products which will be in demand by the customers, how we can help the bank to service those customers, sell to those customers first, and then service those customers with those products. Whatever is a very good mix for the customer, the bank, and our company, that kind of thing we do. It has been growing over the years. If you see, the absolute numbers have been growing steadily. A blip here and there because of COVID. We still were able to grow, but then it was not a spectacular number in terms of what we could probably do in a normal year. We still managed to grow very well. That is the kind of thing that we would like to continue with.
It's a winning formula, and we would like to go with that.
Got it, sir. My last question is on the OpEx ratio. Actually, you called it out at about 4.8 to 10. Is there any physical floors to this number in terms of can this go further lower or you think we kind of reached some kind of a bottom there?
Probably. I don't know, because I don't think we've seen this kind of number in any other company anywhere else. Maybe we are somewhere near the floor, but I really don't know. We will continue to optimize costs. We will try to build in efficiencies, and if it goes further down, then well, we'll know that the floor is not yet reached. What you're saying is true. It is a very low number, and we don't really want to push it by bringing down costs just like that, just to achieve a different kind of number or something. We will definitely look to optimize our costs and try to see where we can bring in more efficiencies.
Got it, sir. Thank you, and all the best.
Thank you. The next question is from the line of Nischint Chawathe from Kotak Securities Limited. Please go ahead.
Yeah, hi. Most of my questions have been answered. I was just wondering, this INR 182 crores, the reserve that you have created, I was just wondering if I can see that number anywhere in the EV Work or in your financials.
It is there in the financials. One second.
Nischint, it is there in the financials as a disclosure.
As a part of the reserve no.
It is part of the liability, and it is specifically disclosed also part of the financials as a note to accounts.
Sure. The other thing was the mortality, the negative variance on mortality morbidity of INR 20 crores. That is purely what? That is because of COVID, or is that the adverse experience of last year?
You see, this is mainly on account of the COVID.
If COVID would not been there, we would have been seeing the very positive mortality variance as well.
Incrementally, given the fact that you have kind of created more reserves now, you would probably say that, maybe you'll probably be more comfortable at these levels, is that what one can be? Do you see more changes happening during the course of the year?
No. Like we mentioned that we have made the additional provision for the COVID. In addition to that, we have also taken the prudent assumption for the mortality in our assumption. We are very comfortable on this side.
One last question was there was a change in unwinding rate, and this was reflecting lower interest rates or what is the reason?
Yes. It is totally on account of reflecting the current interest rate.
Last year you had not changed the rate, and I think the argument that you had given last time around was that you would make the adjustment to the economic assumption change line item. Maybe I can sort of maybe read that maybe a change in the thought process at this point of time. Is that the way we can read it? Your unwinding rate for the previous three years has been consistent at 8.5%.
See, some point in time, you have to keep revisiting your economic unwinding rate in view of the economic environment. That's why we say that this is more appropriate to revise. That's why we revised this.
Thank you. The next question is from the line of Manish Shukla from Citigroup. Please go ahead.
Yeah. Good evening, and thank you for the opportunity. For the individual protection business, could you give the ticket size in terms of sum assured per policy for FY 2021, FY 2022, and FY 2020? Incomes data.
We'll give you later as far as the summary is concerned. Average ticket size is in the range of around INR 22,000-INR 25,000.
What would that have been in FY 2020?
That I will come back to you.
Okay. All right. The second question is, what was the share of ROP in individual protection for FY 2021 and FY 2020?
Both for last year and this year it is the same range, so around 84%-85% ROP. Non-ROP is around 15%-16%.
Okay, understood. Last question in terms of channel mix. When you show banca, that is only SBI, right?
Yeah.
All other banks are part of others?
Yeah.
The new bank partnerships that you are entering into, I'm assuming you would be selling the entire suite of products across all banks, including credit protect and everything, right?
Yeah, that is the general idea. It depends also on the bank and their comfort with various products. It will depend a lot on what we agree with the bank to sell.
Okay, understood. Those were my questions. Thank you very much.
Yeah. Thank you.
Thank you. The next question is from the line of Sonal Minhas from Prescient Capital. Please go ahead.
Hi there. This is Sonal. Am I audible?
Yes, sir. We can hear you.
Go ahead.
Yeah. Okay. Sir, just one question on the new business. I just want to understand the sustainability of these margins with an outlook of next one to two years. We've seen a significant bump in this year. Just wanted to understand how does this add up and is there a guidance you would want to give for the next one or two years out outlook on this? That's about it.
Yeah. I said earlier also, if you look at the trend in the last four or five years, quarter-on-quarter, year-on-year, we have been improving our VNB margin. We are very happy doing that. If you ask me what it will be going ahead, we'll keep doing the things right. We will try to do the same things better and better. Like we said, repricing when there is an issue somewhere or trying to have more products where there is a demand. That kind of thing we'll continue to do. We are very hopeful and the history will bear me out that we have been able to steadily increase VNB and the VNB margin. We hope that it will continue.
Okay. Sir, just asking more from a boundary analysis condition that if you see a significant pillar for a growth in the unit business going further. Just asking, this is a significant bump in this particular year-over-year. Otherwise, I think it's been growing by a lesser amount. That's why I was concerned about the sustainability of the numbers. I understand there is a quarter-over-quarter increase in the VNB margin, but this year it's a little higher. That's why I was curious to know this.
Yeah. If you look at the actual tax rate basis now, it is a very steady kind of a curve.
It is a slightly higher number this year, definitely.
We've had a very good performance this year. If you look at it's not very significantly different. If you look at the effective tax rate basis, probably there is a huge bump. That, as Sangra has already explained, is because now this was probably the first time that we calculated on the effective tax rate basis the way it is being done by the peers. That was probably the reason why it looks slightly different.
Okay. I think earlier it used to be like apples to oranges comparison. That's the reason.
Yeah. We had this unfair comparison for a long time, and that is why we decided to provide that comparison. We still report on an actual tax rate basis.
Okay. All right. Sir, just understanding from an internal control perspective, we see that the return on equity and the matrices actually been dipping year-on-year. Just want to understand from a sustainability part, again, the same bit that over the course of next two, three years as the margins improve, the VNB margins, do you see the business actually recovering its return on equity as we see the contribution to the shareholder is actually growing over the course of next two, three years?
We will not be focusing on growing the shareholder's value or something. It will grow as a result of the increase in business that we are doing.
Okay.
Like I said, stable, sustainable policies, stable, sustainable pricing will always win the day any day.
Thank you. We take the last question from the line of Harshit Toshniwal from Premji Invest. Please go ahead.
Yeah, just one last thing, sir. You said that you have changed the methodology for the effective tax rate versus what it used to be earlier to make it in line with others. Can you throw some light on what that changes are? I think finally, great set of numbers. It has to grow. I think this has been one of the best quarters we've had. Thank you.
We can provide you the calculation offline. We can send it across to you. We've noted down.
Okay, sure. Just want to understand that broadly, theoretically, what has changed. Anyways, I'll take it offline. Thank you.
Yeah. Thank you very much.
Thank you. That was the last question. I would now like to hand the conference over to Mr. Mahesh Kumar Sharma for closing comments.
Thank you very much. We really appreciate your time and your patience in going through all our financials and all the questions that you ask, which make us want to work harder and do better, and all the pointers that we get on where we can do things better. Thanks a lot, and we hope that all of you will be safe and sound with this pandemic going. Please wear your masks and sanitize yourself, hands, washing hands and keeping social distance. Thanks a lot for attending our call. Good night.
Thank you.
Thank you. On behalf of SBI Life Insurance Company, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.