investor presentation of hdfc life

• HDFC LIFE INSURANCE COMPANY LTD.
• SECTOR : BANKING AND FINANCE
• INDUSTRY : LIFE INSURANCE

HDFC Life Insurance Company Ltd.

NSE: HDFCLIFE | BSE: 540777

/100 Valuation Score : 26 /100 Momentum Score : 53 /100 "> Momentum Trap

634.75 1.40 ( 0.22 %)

26.63% Gain from 52W Low

3.9M NSE+BSE Volume

NSE 01 Apr,2024 03:31 PM (IST)

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Operating Revenue TTM

Below industry Median

Net profit TTM

Net Profit Margin TTM %

Revenue Growth (TTM)

Market Runner Up

Net Profit TTM Growth %

Low in industry

HDFC Life Insurance Company Ltd. investor presentations, annual reports, calls

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HDFC Life Insurance share price

NSE:  HDFCLIFE BSE:  540777 SECTOR:  Insurance   328k    3k    1k

Price Summary

₹  637.85

₹  630

₹  710.6

₹  501.35

Ownership Stable

Valuation fair, efficiency optimal, financials weak, company essentials.

₹ 136789.29 Cr.

₹ 136602.64 Cr.

₹  65.83

₹ 1136.65 Cr.

₹ 950 Cr.

₹  7.05

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• Annual Report 2023 22 Nov 2023
• Annual Report 2022 22 Nov 2023
• Annual Report 2021 29 Jun 2021
• Annual Report 2020 3 Jul 2020
• Annual Report 2019 9 Jan 2020
• Annual Report 2018 9 Jan 2020
• Annual Report 2017 2 Apr 2021

Ratings & Research Reports

• Credit Report By:CRISIL 2 Dec 2020
• Credit Report by:ICRA 18 Jun 2020
• Research Nirmal Bang Institutional 9 Jan 2020
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Company Presentations

• Concall Q3FY24 20 Jan 2024
• Concall Q3FY22 3 Feb 2023
• Concall Q2FY24 21 Oct 2023
• Concall Q1FY24 10 Aug 2023
• Presentation Q1FY24 24 Jul 2023
• Presentation H1FY24. 17 Oct 2023
• Presentation H1FY20 9 Jan 2020
• Presentation 9MFY20 3 Jul 2020
• Presentation 12MFY20 3 Jul 2020

Company News

Hdfc life insurance stock price analysis and quick research report. is hdfc life insurance an attractive stock to invest in.

The insurance industry of India consists of 57 insurance companies. Life insurance companies contribute about 42% and approximately 58% are coming from non-life (general) insurance companies. The insurance industry plays an important role in any country’s economic development. Growth in the insurance industry also increases the risk-taking capacity of the country as more individuals are covered for unforeseen events.

Post Liberation, the insurance sector has recorded significant growth. In the past year, the life insurance industry saw greater growth than it has seen in several decades. Increasing awareness, innovative products, and more distribution channels will create robust demand in the industry. Therefore, the future looks promising for the insurance industry.

Life and Health Insurance covers against loss of life whereas property & casualty insurance covers specific assets against losses.

Here are the few indispensable tools that should be a part of every investor’s research process.

PE ratio : - Price to Earnings' ratio, which indicates for every rupee of earnings how much an investor is willing to pay for a share. A general rule of thumb is that shares trading at a low P/E are undervalued (it depends on other factors too). HDFC Life Insurance has a PE ratio of 90.0699558696238 which is high and comparatively overvalued .

Share Price : - The current share price of HDFC Life Insurance is Rs 634.75 . One can use valuation calculators of ticker to know if HDFC Life Insurance share price is undervalued or overvalued.

Dividend Yield : - It tells us how much dividend we will receive in relation to the price of the stock. The current year dividend for HDFC Life Insurance is Rs 1.9  and the yield is 0.2982 %.

Brief about HDFC Life Insurance

Hdfc life insurance co ltd. financials: check share price, balance sheet, annual report and quarterly results for company analysis.

HDFC Life Insurance Co Ltd. is a leading Indian life insurance company with a strong financial performance and consistent dividend policy. In this article, we will provide a comprehensive analysis of HDFC Life Insurance Co Ltd.'s stock from a long-term investor's perspective. We will cover various topics such as share price, balance sheet, annual report, dividend, quarterly result, stock price, price chart, news, concall, transcripts, investor presentations, promoters, and shareholders.

HDFC Life Insurance Co Ltd. Share Price:

HDFC Life Insurance Co Ltd.'s share price is an important indicator of investor sentiment towards the company. The share price is influenced by various factors such as the company's financial performance, global economic conditions, and market sentiment. Long-term investors can use our pre-built screening tools to analyze HDFC Life Insurance Co Ltd.'s share price and identify any trends or patterns. The company's share price has been relatively stable over the past few years, reflecting the company's strong financial performance and consistent dividend policy.

HDFC Life Insurance Co Ltd. Balance Sheet:

HDFC Life Insurance Co Ltd.'s balance sheet provides crucial information about its financial health. The company's assets include investments, loans, and other assets, while liabilities include policyholder liabilities, borrowings, and other liabilities. Equity includes share capital, reserves, and surplus. Long-term investors can use our pre-built screening tools to analyze HDFC Life Insurance Co Ltd.'s balance sheet and identify any red flags. The company's balance sheet has been strong over the past few years, reflecting the company's ability to generate cash and manage its liabilities.

HDFC Life Insurance Co Ltd. Annual Report:

HDFC Life Insurance Co Ltd. releases an annual report every year, which provides detailed information about the company's financial performance, strategic initiatives, and future plans. The annual report includes a letter from the Chairman, financial statements, and management discussion and analysis. Long-term investors can download HDFC Life Insurance Co Ltd.'s annual report from our website and use it to make informed investment decisions. The annual report provides valuable insights into the company's operations and financial performance.

HDFC Life Insurance Co Ltd. Dividend:

HDFC Life Insurance Co Ltd. pays dividends to its shareholders. The company has a consistent dividend policy and pays dividends regularly. Long-term investors should consider this when evaluating HDFC Life Insurance Co Ltd.'s stock. Our pre-built screening tools can be used to analyze the company's dividend history and identify any trends or patterns.

HDFC Life Insurance Co Ltd. Quarterly Results:

HDFC Life Insurance Co Ltd. releases its quarterly results every three months. The quarterly results provide information about the company's net premium income, earnings, and expenses. Long-term investors can use our pre-built screening tools to analyze HDFC Life Insurance Co Ltd.'s quarterly results and identify any trends or patterns. The quarterly results are an important indicator of the company's financial health and performance.

HDFC Life Insurance Co Ltd. Stock Price:

HDFC Life Insurance Co Ltd.'s stock price is affected by various factors such as the company's financial performance, global economic conditions, and market sentiment . Long-term investors can use our pre-built screening tools to track HDFC Life Insurance Co Ltd.'s stock price and identify potential buying opportunities. The stock price of HDFC Life Insurance Co Ltd. has been relatively stable over the past few years, reflecting the company's strong financial performance and consistent dividend policy.

HDFC Life Insurance Co Ltd. Price Chart:

A price chart provides a visual representation of a company's stock price over a period of time. Long-term investors can use our pre-built screening tools to analyze HDFC Life Insurance Co Ltd.'s price chart and identify any trends or patterns. The price chart shows that the stock price of HDFC Life Insurance Co Ltd. has been relatively stable over the past few years, reflecting the company's strong financial performance and consistent dividend policy.

HDFC Life Insurance Co Ltd. News:

Keeping up to date with the latest news about HDFC Life Insurance Co Ltd. is important for investors. Our website provides the latest news about HDFC Life Insurance Co Ltd. from various sources such as financial news websites and social media. Long-term investors can use this information to make informed investment decisions.

HDFC Life Insurance Co Ltd. Concall:

HDFC Life Insurance Co Ltd. holds conference calls with analysts and investors to discuss its financial performance and future plans. Long-term investors can listen to HDFC Life Insurance Co Ltd.'s concall and use the information provided to make informed investment decisions. Our website provides information about upcoming concalls and links to listen to past concalls.

HDFC Life Insurance Co Ltd. Transcripts:

Transcripts of HDFC Life Insurance Co Ltd.'s concalls are available on our website. Long-term investors can download the transcripts and use them to analyze the company's financial performance and future plans. The transcripts provide valuable insights into the company's operations and financial performance.

HDFC Life Insurance Co Ltd. Investor Presentations:

HDFC Life Insurance Co Ltd. provides investor presentations on its website. These presentations provide information about the company's financial performance, strategic initiatives, and future plans. Long-term investors can download HDFC Life Insurance Co Ltd.'s investor presentations from our website and use them to make informed investment decisions. The investor presentations provide valuable insights into the company's operations and financial performance.

HDFC Life Insurance Co Ltd. Promoters:

Promoters are individuals or entities that have a significant stake in a company. HDFC Life Insurance Co Ltd.'s promoters include HDFC Ltd. and Standard Life (Mauritius Holdings) 2006 Ltd. Long-term investors can use our pre-built screening tools to analyze HDFC Life Insurance Co Ltd.'s promoter holdings and identify any potential conflicts of interest. The promoter holdings of HDFC Life Insurance Co Ltd. are relatively stable, which is a positive sign for long-term investors.

HDFC Life Insurance Co Ltd. Shareholders:

HDFC Life Insurance Co Ltd. has a large number of shareholders, including institutional investors and individual investors. Long-term investors can use our pre-built screening tools to analyze HDFC Life Insurance Co Ltd.'s shareholder base and identify any potential risks or opportunities. The shareholder base of HDFC Life Insurance Co Ltd. is diverse, which is a positive sign for long-term investors.

HDFC Life Insurance Co Ltd. Premium Features:

Our website provides premium features tools such as DCF Analysis, BVPS Analysis, Earnings multiple approach, and DuPont analysis. These tools can help long-term investors make better investment decisions by providing more detailed insights into the company's financial performance and valuation.

HDFC Life Insurance Co Limited ROCE

The Return on Capital Employed (ROCE) is a crucial metric for assessing the profitability and efficiency of a company. It measures how well a company utilizes its capital to generate returns. By analyzing HDFC Life Insurance Co Limited's ROCE, investors can gain insights into the company's ability to generate profits relative to its total capital employed. To access the ROCE data, kindly refer to the above financials table or the ratio section on this page.

HDFC Life Insurance Co Limited EBITDA

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operating performance and profitability. By examining HDFC Life Insurance Co Limited's EBITDA, investors can assess its operating efficiency and compare it with industry peers. To access the EBITDA data, refer to the above financials table or the ratio section on this page.

HDFC Life Insurance Co Limited DPS

DPS represents Dividends Per Share, which measures the dividends distributed by HDFC Life Insurance Co Limited to its shareholders on a per-share basis. Investors often look at DPS to determine the income potential of their investments in the company. The data on DPS can be found in the above financials table or the ratio section on this page.

HDFC Life Insurance Co Limited EPS

EPS, or Earnings Per Share, is a widely used financial metric that shows the company's profitability on a per-share basis. EPS is calculated by dividing the company's net earnings by the total outstanding shares. By examining HDFC Life Insurance Co Limited's EPS, investors can understand the company's profitability trends and compare it with its peers. To access the EPS data, please refer to the above financials table or the ratio section on this page.

Ratio Delete Confirmation

India's HDFC Life posts Q3 profit rise on higher investment income

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Reporting by Nishit Navin in Bengaluru; Editing by Sohini Goswami

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Dow, S&P decline as manufacturing data lifts yields

U.S. stocks mostly edged lower on Monday, dragged down by investor worries over the timing of interest rate cuts by the Federal Reserve after stronger-than-expected manufacturing data pushed Treasury yields higher.

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Categories Latest Earnings Call Transcripts

HDFC Life Insurance Company Ltd (HDFCLIFE) Q2 FY24 Earnings Concall Transcript

HDFC Life Insurance Company Ltd  (NSE:HDFCLIFE) Q2 2024 Earnings Call dated Oct. 13, 2023

Corporate Participants:

Vibha Padalkar — Managing Director and Chief Executive Officer

Niraj Shah — Executive Director and Chief Financial Officer  Suresh Badami — Deputy Managing Director Eshwari Murugan — Appointed Actuary

Avinash Singh — Emkay Global Financial Services Limited — Analyst

Shreya Shivani — CLSA — Analyst

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Nischint Chawathe — Kotak Institutional Equities — Analyst

Swarnabh Mukherjee — B&K Securities — Analyst

Prayesh Jain — Motilal Oswal Financial Services Ltd — Analyst

Madhukar Ladha — Nuvama Wealth Management Ltd. — Analyst

Sanketh Godha — Avendus Spark Institutional Equities — Analyst

Dipanjan Ghosh — Citigroup Global Markets, Inc. — Analyst

Nitin Jain — Fairview Investments Limited — Analyst

Abhishek Agarwal — Naredi Investment — Analyst

Bhuvnesh Garg — Investec Capital Services (India) Private Limited — Analyst

Pallavi Deshpande — Sameeksha Capital — Analyst

Presentation:

Ladies and gentlemen, good day, and welcome to the HDFC Life Insurance Company Limited Results Conference Call. [Operator Instructions] There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]

I now hand the conference over to Ms. Vibha Padalkar, MD and CEO of HDFC Life Insurance Company Limited. Thank you and over to you, ma’am.

Thank you, Dovin. Good afternoon, everyone. Thank you for taking part in this conference call to discuss the business performance for half year ended September 30, 2023. Our results, which includes the investor presentation, press release and regulatory disclosures have already been made available on both our website and the stock exchanges.

Joining me are Suresh Badami, Deputy Managing Director; Niraj Shah, ED and CFO; Eshwari Murugan our Appointed Actuary; and Kunal Jain from Investor Relations.

I will provide an overview of our H1 FY ’24 results and we’ll be happy to address any queries thereafter. Starting with operating performance for the quarter. Despite the recent budget changes that were perceived to be unfavorable for the sector, the life insurance industry has demonstrated remarkable resilience. Insurance companies have successfully harnessed their extensive distribution network, tailored product offerings and favorable regulatory developments to address latent insurance needs of their customers. This has been exhibited by close to double-digit growth in new business premiums and strong growth in policy count for private players.

We affirm our belief in the medium-to-long term growth opportunity for the sector and HDFC Life’s continued ability to navigate through such disruptions, only to emerge stronger. With this as the backdrop, we recorded a healthy growth of 10% in individual WRP versus 8% for overall industry, for the half year ended September 30, 2023. Our H1 FY ’24 market share was 15.7% and 10.3% in the private and overall sector, respectively. We continue to grow faster than the overall industry and be ranked amongst the top three life insurers across individual and group business.

We saw an uptick of 10% in the number of individual policies sold, beating industry growth. This healthy volume growth is in line with our stated objective of broadening our customer base. We have insured more than 3 crore lives across our individual and group businesses, which represents a Y-o-Y growth of 16%. More than two-thirds of the retail customers on-boarded are new to HDFC Life and almost half of these are below the age of 35 years. Growth from Tier 2 and Tier 3 locations has been double that of Tier 1 locations.

Growth in protection was robust at 28% on new business premium. Retail protection registered Y-o-Y growth of 46% in H1 FY ’24. Sum assured recorded healthy growth with retail and overall sum assured growing by 61% and 45%, respectively. We continue to lead in terms of sum assured and our private market share based on overall sum assured stood at 18% for H1 FY ’24. Annuity APE grew by 17% and the segment contributed to 18% of new business premium. Annuity and Protection put together contributed to about 55% of new business premium in H1 FY ’24.

Our average ticket size has stayed intact despite moderation seen in higher-ticket size businesses. Policies of up to INR5 lakh ticket size issued have seen double-digit growth with improvements in average ticket size across various cohorts. While there is degrowth in the above INR5 lakh segment, we are seeing this get progressively better in some channels such as bancassurance. While the gap is wider in channels such as private wealth partners, we expect improved overall traction in this segment in the second half of the fiscal on the back of product launches and both the distributors and customers coming to terms with the new post-tax IRR reality.

Despite the tax impact, the long-term guaranteed savings product proposition remains unique to our industry, and returns offered continue to be best-in-class. Overall product mix remains balanced with non-par savings at 28%, participating products at 30%, ULIP at 28%, Annuity and Protection at 8% and 6%, respectively, based on individual APE.

We introduced two new products in the protection category, namely HDFC Life Sanchay Legacy and Click 2 Protect Elite. HDFC Life Sanchay Legacy is an industry-first whole life return of premium protection plan with increasing life cover and is designed to cater to a middle age and beyond customer segment. Our other term product, C2P Elite, caters to a more affluent customer category. Some of our other product launch in the participating unit linked and pension categories has gained good momentum across all our distribution channels. Further, we have been able to offer higher than the traditional 7x to 10x sum assured multiples on our unit linked products, thereby bundling higher protection cover with our savings proposition.

Moving on to key financial and operating metrics. New business margin for H1 FY ’24 was 26.2% with value of new business of INR1,411 crores, implying a 10% year-on-year growth. The total cost ratio has increased slightly from 10.3% to 19 point — sorry, from 19.3% to 19.7%. The increase in cost ratio is expectedly due to reduced cost absorption from slower growth in specific channels and should normalize as growth rebounds to pretax change levels. We will, however, continue to upfront manpower investments in channels such as HDFC Bank and other key banca partners to capitalize on growth opportunities.

Our embedded value was INR42,908 crores as on September 30, 2023, with an operating return on embedded value of 16.4%. Profit after tax for H1 FY ’24 was INR792 crores, which is a year-on-year increase of 15% with a robust growth of 18% in profit emergence from the back book. Solvency as on September 30, 2023, was 194% after factoring in the dividend payout of INR408 crores in the last quarter. Renewal collections continue to be robust with a year-on-year growth of 14%.

Next, on distribution. We have registered a year-on-year growth of 23% across our bancassurance partners. Our counter share at HDFC Bank channel is progressing well with strong support from our parent channel. We continue to collaborate closely with the bank and invest in the channel. Our credit life partners have also delivered impressive performance with Credit Protect growing by 28% in H1 FY ’24. We are growing well across all our bancassurance collaboration while steadily augmenting our portfolio of partnerships. We’re also pleased to announce our partnership with Airtel Payments Bank, which has over 15 crore customers and are excited about the possibilities arising out of this alliance.

Our agency channel grew in line with company growth. We added more than 37,000 agents in the channel in H1 FY ’24. We have seen some moderation in business from the higher ticket size segment, but expect the channel to be able to recoup the same in H2. Amongst other highlights, we are proud to feature among India’s best workplaces for millennials 2023 by Great Places to Work and to be recognized amongst 100 Best Companies for Women in India 2023 by Avtar. We also ranked amongst Asia’s Best Workplaces 2023 by a Great Place to Work. This is a testimony of our endeavor to create an inclusive culture with the employer of choice and invest for the betterment of our workforce. We are appreciative of the proactive engagement by the Department of Financial Services and IRDAI with life insurers to discuss initiatives for the benefit of overall sector as well as our customers.

Moving on to our subsidiaries. The AUM for pension subsidiary has crossed INR58,000 crores, with a market share of 43% as on 30th September 2023, which is an increase of 370 basis points over September 2022. HDFC International clocked revenues of over $10 million, registering a growth of 50%. The retail insurance business out of Gift City commenced in August with the maiden launch of US dollar Global Education plan.

In conclusion, our focus on improving customer penetration is trending well, and we expect this momentum to continue and be aided by a pickup in the higher ticket segment. We’re also confident of our strong performance in the mortality and longevity space, along with the market share gains in our bancassurance channel in the second half of this year. We remain upbeat on the medium to long-term growth potential of the industry and aspire to repeat our past track record of doubling key metrics every four years. The detailed disclosure on our results is available in our investor presentation.

We are happy to open the floor for questions.

Questions and Answers:

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Avinash Singh from Emkay Global. Please go ahead.

Yes. Thanks for the opportunity. So a couple of questions. The first one a bit on the margin. Of course, one part has understood that the mix in this FY so far has changed in sort of a favor of ULIP and particularly a reduction on non-par savings. But at the same time, we see some kind of increase sales of your retail protection of occupancy [Phonetic] like I think is still doing well, as also there’s a pick up in annuity in the share. So there is some favorable development on the product mix from high-margin product as well. And of course, in your base, there was a kind of a low margin of Exide Life. So net-net, with this favorable factors also playing out, I mean the protection picking up, annuity picking up and to sort of expectation of benefits on Exide Life synergy, there’s been sort of margins are flat. So is this something that due to sort of growth being lower than sort of expenses picking up. So a bit of explanation around what’s happening with the margin and how [Indecipherable] expects for the full year ’24. So that’s the first question.

So Avinash, all what you said is absolutely right. So there are many things going on. We talked about Exide Life starting off with low single-digit margins. We said we will nevertheless move towards subsuming that into our business and reaching margin neutrality. Protection is doing — individual protection is doing exceedingly well. Credit life has always been doing well, and that continues to trend well. So that gives us that margin pickup. Our costs are reasonably under control despite some of the investments that I talked about.

Unit Linked, a little bit of uptick that you see about 28% that we ended, a little bit more than about 25% range that we would like to be in. At the same time, counter share at HDFC Bank has gone up. So all of that, there are pluses and minuses, which sort of even out. And that’s why we have got to a margin neutral or more or less flat, slightly better than quarter one margins but more or less flat is how we see the H1. And that’s what we also — even at the start of the year guided towards. This year is a little bit a mixed year in terms of digesting our tax changes because the — for us to invest in people so that we can grow in terms of number of policies, all of that is panning out.

And so we expect a more or less flattish margin. That would be a good outcome, just given all the things that are going on and the continued degrowth in the above INR5 lakh ticket size. Next year, I think this would be behind us as a sector, and we should continue on the upward trajectory on margins. Anything you want to add, Niraj?

Niraj Shah — Executive Director and Chief Financial Officer

No, so just maybe a couple of things really. I think as we had spoken at the beginning of the period, a large part of our VNB growth will come out of APE growth and a significant part of our APE growth we were expecting out of volumes. That’s exactly happening the way we have thought about it as the year would pan out. So a 10% growth in volumes. And equally important is our average ticket size has been maintained. That was one of the biggest fears going into FY ’24 in terms of what happens because of the higher ticket size business. Like Vibha mentioned, the — greater than INR5 lakh business has come down, but it is still a fairly meaningful contributor.

And a significant part of our position has been maintained because of our expansion into Tier 2, Tier 3 markets. And similarly, in terms of — while we’d like to, on a medium-term basis, grow at 17%, 18%, the current growth is in the 10% range. So that explains the expense, fixed cost absorption gap. Product mix, like you rightly articulated, balances out each other, and there is a mild positive sitting there in terms of higher levels of protection written both on a stand-alone basis and individual group as well as on the savings products.

Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.

Thank you for the opportunity. I have two questions. First is on the non-par savings product. Can you help us understand how many rounds of IRR cuts have you guys taken? I believe that the Gsec yield, which you guys try to map has turned around since the rate cuts that have happened. So any guidance on will the product become even less IRR offering for the customers? Or how do you see this product and the offering to the customers going ahead?

Second is on the protection business. You said that credit life has grown by 28%. Is that new business growth or APE growth? Because the Group Protection APE in 1H has only grown 7%. So has the GTI business contracted a lot? Can you give me some color on that? Thank you.

You want to take the first question?

Yeah. So in terms of the non-par product repricing, I mean, it’s been a continuous ongoing activity for us ever since we launched the product more than four years back. In this period, we have repriced it twice to your specific question. And going forward, also, we will continue to look at the kind of yields we can get on a gross basis and then adjust our IRRs in the marketplace. Of course, we will keep in mind what is happening in the marketplace. We have seen certain players offer IRRs, which we believe are maybe addressing different kind of profitability objectives and risk management objectives that they’re in. We have continued to maintain a fairly balanced approach here. We definitely want whatever growth we can get, but which has to be sensible in terms of risk on our books as well as in terms of profitability. So our repricing will continue, and it will reflect what is happening in overall interest rate environment.

As far as your question on the Group’s fund is concerned, we have — our Credit Life business has grown fairly meaningfully even in this period at about 28-odd percent. And largely, a lot of business has shifted from regular premium to single premium in certain partners, which has resulted in the numbers that you are seeing here. As such, in terms of overall base is nothing really different. Both on the individual side, protection has grown at about 45-plus percent. On the CP side, for this period, it has been at about 28%. It’s largely just a regular premium, single premium change that has happened.

And to add here, Shivani, it has to do with — lesser to do with GPI, which you alluded to, it’s just the credit life. Economics of the credit life policies haven’t changed. It’s just that with a single premium or a regular premium. That’s about it.

Okay, I understood. Thank you so much.

Thank you. We have the next question from the line of Punit Bahlani from Macquarie. Please go ahead.

Hello, Vibha. This is Suresh [Phonetic] here. Am I audible?

Suresh, you are audible, you may proceed.

Yes. You are audible.

Yeah, yeah. So two questions. You said the counter share has gone up. HDFC Bank at last quarter 55% was up to 56%, can you share any numbers, how much it has gone up this quarter?

Go ahead, Suresh.

Suresh Badami — Deputy Managing Director

So we’ve seen a fair amount of traction, which has been happening post the merger, Suresh. And effectively, we have ended quarter one — H1 at a 62% market share. So if you were to look at the 56.5%, which was there at Q1, we’ve been steadily trending upwards right through Q2. And across July, August, September, we have seen a significant. In fact in September, we were higher than 70% share. So we’ve actually ended at 62.2% for the entire H1.

That is fantastic. So can you tell us what have you done? I mean, what has happened to have such a massive pickup? And I mean, how have you gone about doing this?

I think, look, in some sense, it has been a focused effort on both sides. Clearly, we’ve invested in manpower over the last five, six months. There have been a lot of product innovations which have happened. There are some new products which have got launch, which have picked up very massively at HDFC Bank. We have spoke about Sampoorna Jeevan. We have Iindecipherable] Legacy — the Sanchay Legacy product which has got launched. There are a few other products which have got launched, which have had a fair amount of pickup which is happening. There’s been a huge amount of engagement and enrollment between the bank teams across support from TPP. So it’s a factor of everything that we’re building. But typically, you’ll find that our market share has been growing across most of our partnerships and that has also led. And clearly, yes, there is a better alignment, much more engagement at the strategic level with the bank, and that support is coming in for us.

But Suresh, this is not getting reflected in the overall APE numbers, right? So your first half APE has just have gone up 10%. I mean, of course, Vibha has guided for a 15% APE growth excluding the INR1,000 crore one-off business, the ask rate for second half is very, very high, both on growth APE as well as for margins in the APE. We’ll have to deliver 20% on the INR1,000 crore additional business in second half. Is that really achievable? And why this HDFC Bank better traction is not getting reflected in APE growth numbers?

So look, I think what we have to look at it slightly longer term. Quarter-on-quarter, things will vary up and down. We have seen a little bit of a slowdown on some of our other channels like agency and BroCA, which had a higher dependency on the greater than INR5 lakh. Really, our strategy is to ensure that we broad-base our growth on smaller ticket size NOPs, and we have started seeing the traction coming in. That’s a certain bit of base effect which is coming. I mean on the growth, clearly, I mean not to call it further, but I think we will try and see we can grow faster than the industry, which is really what we have been targeting in every year. And I think that plays out for us.

So really, there are sometimes in certain quarters, some products get launched in some quarters some context [Phonetic] and so quarter-on-quarter, it doesn’t look. But as long as our distribution has been growing, our agency, we were read out as part of our earlier note that, look, our agency distribution has grown by almost 30,000 agents. So as we build our distribution across Tier 2, Tier 3, as we add more partners into our fold, the smaller ticket size will come in. And the opportunity is large enough for us to grow on a consistent basis.

And to add here, Suresh, further deconstructing some of the channels that have a lot more wealth customer bias understandably are slower, and we have seen degrowth in those channels wherein the ticket sizes are used to be very high. And those have seen degrowth of about 20-odd percent, right? While in the ticket size less than INR5 lakh has shown a growth of about 18%. So it is all coming out. So some channels have a lot more focused towards higher ticket sizes. Our broking channel is one, wealth channel and so on, agency channel in terms of the top agents. So it’s a mix of that. However, reason why it gives a fair bit of confidence is that when we further deconstruct our numbers, one is the growth, very robust growth, like I said, close to 18%, 19% on above INR5 lakhs.

Second thing is that the Tier 2 and 3 cities also, there, the growth in Tier 2 and 3 is 2x the growth of company — 2x of company level growth. So making inroads. So the channels that have a lot more of distribution reach into Tier 2 and 3 where they are relatively untouched by the tax changes. Now our Tier 2 and 3 is contributing about 60%, 70% of our overall business. So all of that mix and momentum [Phonetic] that is happening, which we said at the beginning of the year when the tax changes happened, wherein growth will be a lot more broad-based across more and more customers. So acquisition of new customers becomes important.

And last point I want to make is that when a further look at our data, two-thirds of our customers are now new to HDFC Life. So we are very happy about that because when you partner with a young life, then over the life cycle of that individual, we are able to do a fair bit of attachment at various significant life stages.

Also, half of these new customers we have acquired are less than 35 years of age. So again, young customers. So this kind of — reason I’m quoting these numbers is, it’s a little bit nuanced in terms of why the overall number is somewhat muted because of some of the other channels being affected. But at the same time, even in those channels, the growth of below INR5 lakhs is in almost touching 20%.

So you’re still confident of maintaining that 15% full year guidance, excluding the INR1,000 crores?

Yeah. So I — just to clarify, I’ve said mid-teens. So yes, mid-teens reasonably confident, yes.

Okay. All the best, Vibha.

Thank you. The next question is from the line of Prakash Kapadia from Anived Portfolio Managers Private Limited. Please go ahead.

Yeah. Thanks for the opportunity. You were talking about HDFC Bank and how we’ve gained more and more traction. And continuing with that discussion in Tier 2 and 3 cities and beyond, the Bank has a fairly large rural presence. And even now they are opening up branches at a good pace. So will that be the driver of volume growth in ’24 and beyond. And what kind of products are these customers looking at if you could give us some sense. That’s the first question.

And secondly, on the GST notice which was received, I think it was INR942 crores last quarter. You paid some amount, I think, INR250 crores in dispute. Any updates on that?

Hi, this is Suresh here. Let me answer the first question. Yeah, you are right. I think HDFC Bank is doing tremendous in terms of their expansion and their branch growth. So now the branch expansion in [Indecipherable] has grown more than 1,000, 1,100 in the last 18 months. So clearly, they’re right. But I mean, just to state, I think our approach to Tier 2, Tier 3 as a distribution strategy has been playing out for many years. It’s along with, of course, H Bank, but we have been growing our agency presence. We took over Exide, which has a significant presence in Tier 2 and Tier 3 and in the South market.

A lot of our other banca partnerships, which we have tied up and if you’ve seen over the last one year, whether it is AU Small Finance Bank and some of our other partners like Ujjivan, Utkarsh, Bandhan, many of them have significant presence in Tier 2, Tier 3. We have not maybe built as much on our direct, but there is a lot of demand which is coming in through our partnerships as well as our agency network in these markets.

So we have seen Tier 2 and Tier 3 growing much faster for us as a basis, almost double of what we have seen in Tier 1. Of course, Tier 1 has had an impact this year because the greater than INR5 lakhs normally concentrates in Tier 1. So the product range remains similar. I think it’s a ticket size what changes. There are certain features, which we are trying to see which are more favorable to some of these Tier 2, Tier 3 markets, and we’ll continue to innovate on that. So actually, the APE growth in Tier 2, Tier 3 has been almost 17% for us in H1. So you will realize that, look, it’s a stated strategy to expand and get into these markets. So I — we don’t see any reason why this segment will not grow for us going forward. Of course, the opportunity in Tier 1 continues to remain, and we will capitalize on that.

Okay. Okay, understood.

Yeah. Just to maybe add a couple of bits on that is in terms of — we found actually a very customer segment being more amenable to buying protection differently from the way they buy in Tier 1. And that’s something that has really done well at scale in HDFC Bank in Tier 2, Tier 3 towns in terms of buying protection behavior being different.

Also, what we’ve seen is that there is more willingness to take slightly longer term policies in these markets, which again is a very good indicator of being able to keep the business longer on our books and get more profitable business out of that category as well. So that is something that is fairly encouraging as well. To your point on GST, no further update. Of course, we’ve seen the show-cause notice, as we had mentioned in our exchange disclosures. We are in the process of responding to that, and we will do that in due course.

Okay. Understood, sir. Thank you.

Thank you. [Operator Instructions] We have the next question from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.

Hi, and thanks for taking my question. The growth in bank, bancassurance seems to be kind of coming up nicely with around 20% or so. And it looks like this is sort of slightly ULIP heavy. But in the other channels, probably ULIP is not picking up as much. So when we are looking at higher growth in other channels in second half, do we kind of envisage ULIP to pick up? Or will it still be sort of non-par heavy? And in that sense, how do you see the product mix for the year revolving?

So let me start. Niraj, you can add on, on the product basis. But we — like you — we have mentioned in earlier section [Phonetic] also is we have always tried to maintain a balanced product mix. And one of the approaches has been to ensure that each of our channel remains profitable. So in some sense, looking at the opportunity, we have tried to ensure that our mix remains in the 25% range for UL and then the rest between par, non-par at 30%-odd.

So in some sense, we have always managed the Unit Linked contribution, which comes in from some of other channels because typically, Unit Linked needs to have a high persistency for it to be profitable. So in agency, we have ensured that Unit Linked is managed well with some of our vintage financial consultant partners who give us very high persistence Unit Linked kind of products.

So you’ll find that agency is one of the few channels — our agency is one of few channels, which are near 90% persistency at an overall level. Now that is because we have tried to maintain a certain Unit Linked to a certain set of partners, plus focus on par and non-par. So while we will look given the market, and there is always an expected volatility in the market given what’s been happening, we will look at Unit Linked opportunity and growth if the markets continue to the way it is.

And in Tier 2 and Tier 3 also, there’s a little bit of UL demand. We’ve seen what’s happened on the MF and SIP space. So we don’t want to lose out on that opportunity. But we will be calibrated in terms of how much UL we allow through some of the other channels. But overall, we’ll maintain the mix across all the channels.

Yeah, and just to add to what Suresh mentioned. I think a lot of times, product mix is also a function of the launches that we have, product launches that we have. So — in this period, what we’ve done is we’ve had two product launches on the protection side. That’s reflecting on the momentum in individual protection growth. Also, we’ve had a launch on the Unit Linked side with a slightly different kind of protection proposition attached to Unit Linked. That has also done very well in the bank channel and some of the other channels as well. In the second half of the year, we expect to launch products in the other categories, which will then reflect in the product mix as we go forward in the second half of the year as well.

So like Suresh mentioned, I think, by and large, we’d like to stay within some sort of one-fourth to one-third for each of the categories, while continuing to grow protection and annuities. It will also be dependent on the product launches that we have in the market. Of course, also in terms of how people respond to the economic environment in terms of volatility in the equity markets can then change things on the Unit Linked front. Similarly in terms of when there is more concern about things like geopolitical environment or in terms of a market perspective that can drive more behavior towards more traditional and conservative products. So that’s something that we see from time to time.

In the first quarter, it appeared that there was some sort of a fatigue in selling non-par post a very strong March. Do you see that kind of probably having a little bit of a tail in the second quarter and kind of business get heating up towards the end of the year? Or is it something that probably is not a concern anymore?

It’s not really a concern, but a couple of things here, Nischint. One is that it has to be priced right. So there’s always a temptation to give very aggressive pricing. I think right pricing is something that we really want to follow. So we keep away from that. So some of that situation does happen in — especially in multi-tier situation.

Second is that versus where fixed deposit rates are, that also in terms of just — you mentioned fatigue after March, more than fatigue, I think it’s a little bit of kicking the can down in terms of taking a decision on non-par policy it is because you say, okay, let me pass my money in a six-month FD or one-year FD and then take a call down the line. Some of that could be happening. Of course, it is due to change as and when rates start falling and transmission happens. So it’s a matter of a cycle rather than anything fundamentally that is different.

And the point three is that there is awareness that there is reinvestment risk in any product other than a non-par product in a long-term non-par product. And that has been very well socialized amongst customers at large. So the proposition as such, nothing at all has changed on it, but some of these more macro forces, plus and minus are at place.

Perfect. Thanks, Vibha. Thanks, Niraj and thanks, Suresh.

Thank you. The next question is from the line of Swarnabh Mukherjee from B&K Securities. Please go ahead.

Yeah. Hi, good afternoon and thank you for the opoortunity. So a couple of questions. First of all, on the growth. So for the slower growth in this first half you alluded towards the fact that in several channels in the base, there would be INR5 lakh plus products last year, which is impacting. So just wanted to understand that as we move into the second half, I guess, what would be the situation in those channels again for the second half of last year?

So would the smaller ticket size driven, we see growth be sufficient to cover up for that and meet the ask rate? So that is what my query is on growth. And secondly, the strong growth in the banca that we have seen, so the — almost 19-odd-percent growth, if you could break it down into what was the growth of the HDFC Bank channel vis-a-vis other bank partners, so we get us a sense what is driving the growth?

So that is one. And secondly, if you could also highlight that in terms of the EV walk that you have given, this quarter, there — I mean, if I strip out second quarter from the numbers that you have given for half year in terms of the EV walk, the economic variance numbers appear to be negative. So what is driving that given the market conditions and how the — those have moved over the last three months? If you can give me some color.

Yeah. I think the H2 growth, we are reasonably confident that we will continue on this trajectory. And what is happening is the ticket sizes have been maintained. So what we had feared is that overall ticket sizes will start falling. That has not happened. So that is one. Second is, like I mentioned to an earlier caller that we are acquiring more and more customers. The number of policies we are acquiring is growing. So both of this together, we should continue in this mid-teens kind of growth. As regards growth is concerned…

Just to follow up, ma’am, on that. So the fact that we have started to see strong growth in the tier 2 or tier 3 markets, now moving into FY ’25, do you think that such a growth rate would be sustainable given that we again now will have a reasonable base of that and also other competitors would also be focusing on that market, given I think similar scenarios you are facing in the tier 1 market. So is that number sustainable as per your view?

Yeah. Absolutely, I think so. And reason is that we ourselves were not very present. If you were to look back three years ago, this was a whitespace for us and for the sector, by and large, private sector, with focus on top 10 cities and so on. So I think Niraj alluded to it earlier, wherein it is not just that we have feet on street now. It’s a whole proposition on what products would work in tier 2 and 3? What measures we would have in place for underwriting? What documents, because increasingly the percentage of non-salaried customers in tier 2 is going to be meaningfully high, so how do we get past the underwriting hurdles? What is the reinsurance arrangements that we suture up because again for the reinsurers, these would be lower-ticket, higher-volume, lighter-touch underwriting, or different level of underwriting kind of a conundrum. So it’s many things like that. And, of course, people training, having products that are simpler in terms of give and get, having local, regional languages in terms of outreach, the advertising and the tonality has to appeal to also tier 2 and 3, so it’s a whole package and that has taken us couple of years ever since we started looking at Exide Life. So that was a turning point and then tax changes happened, so we just accelerated on that.

But I’ll give you another example. We do have a fairly high hurdle rate on persistency and that, to some extent, was limiting our foray into tier 2 and 3 because inherent persistency is generally lower than the top 10 cities. But for us to be comfortable with that as long as the pricing is right and, of course, down the line we will showcase to you how in various buckets we see persistency panning out. Mix impact could impact at a headline level, but within those cohorts you will still see an improvement in persistency. So that sort of thing. So persistency will be different, mortality experience will be different, and how do we price all of that and how do we get increasingly comfortable with that? I think that’s the journey. This is just the tip of the iceberg. And I’m reasonably comfortable and confident that, that journey will continue. We will, of course, piggyback on all our partners. Suresh mentioned this, HDFC Bank, of course, but also many other partners that we have that have been operating in these segments. And we also learn from them. We learn from a lot of our partners that extend credit to tier 2 and 3 customers because they also have to do at least financial underwriting.

So that’s the hat we are donning to help us with the financial underwriting piece. Younger lives, lesser some assured so that we are able to take initial steps into that. As regards your question on embedded value, Eshwari, you want to take that.

Eshwari Murugan — Appointed Actuary

If I understood the question correctly, I think you want to understand the moment in the investment variance that we showed last quarter and this quarter. So I’ll just first explain the investment variance that we had in June, it was around INR810 crores, broadly split between impact of equity of INR500 crores and interest rates of INR300 crores. In Q1, our equity markets had gone up by almost 10%, which was higher than the expected return of around 2.5%. And that gave the equity [Phonetic] side positive variance of INR500 crores. And interest rates at the short end had fallen by around 20 bps. And since our shareholder assets and our risk assets, the value increases when the interest rates goes down, we had a positive variance of around INR300 crores.

Now in the second quarter, our equity markets have performed slightly better than they expected, around 3%, which has only given another INR50 crores increase in the positive variance due to equity. But in interest rates, the cycle has actually reversed. The fall that was there in first quarter reversed out in the second quarter. So they almost nullified the interest rate impact that we have got, which is why on an overall six months basis, most of the investment variance of the INR650 crores is coming from equity.

Understood. And ma’am, the question on the Banca growth…

Sir, please rejoin the question queue.

Yeah. One question is unanswered. Sorry, one question is unanswered.

Yeah, I’ll give a very quick answer. Both HDFC Bank and other banks are very similar in terms of growth.

Understood. Thank you so much and all the best.

Thank you. [Operator Instructions] We have the next question from the line of Prayesh Jain from Motilal Oswal. Please go ahead.

Yeah. Hi, just on this protection bit, what is the share of written-off premium products and is there a change where the share of written-off premium products is increasing? And just secondly, on the VNB margins for the second half, do you think that you will be able to attain the margins which will allow you to have a flattish VNB margin as compared to FY ’23?

So on the second question, yes, while it’s always a challenge just given the changes that have happened, yes, we should be able to end at a flattish margin. We are there at the end of H1 and H2 we should also on a full year basis end very similar margins with mid-teens growth and hence mid-teens VNB growth. Niraj, do you want to give the number on the other one?

Yeah. So on ROP, it’s been steadily going up over the past few quarters as our presence in tier 2, tier 3 markets has been expanding. So currently the number stands close to around 30%-odd. It has been close to 20% in the previous period, so it has moved in that direction.

And that also explains my earlier commentary on tier 2 and 3, because the products that we sell also have to be simple, over the counter, relevant products for that category.

And that is also the reason why possibly the overall protection margin could be weaker than what we had earlier. Is that the right way to think?

No, not really, because the thing is, as we mentioned in the past, the return on premium, margins on that is not very different from the pure term margins. So again, the thing is it’s really how the products are priced. Of course, there are market participants choosing to price their products differently in the market, but as far as we’re concerned there isn’t any significant difference. In fact, return of premium is not margin dilutive at all on protection.

Okay, got that. Thank you.

Thank you. The next question is from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead.

Hi, just on the Banca channel continues to do very well. And I think one of the main reasons that you’ve mentioned is for the other channels, little bit weaker performance. See, if you look at individual APE growth numbers, I think agency, direct, and brokers and others channels, all three have declined on a year-over-year basis and INR5 lakhs plus ticket size business in these channels seems to be the major component is what I get. Are there any other big factors that are playing out over there? And when you gave that number of INR1000 crores, if I remember correctly, this was only the March impact of more than INR5 lakhs policy, right? Or maybe Feb and March. But for the full year what would be the contribution of more than INR5 lakhs policy just to get a sense of what we need to overcome in the second half?

Hi. Let me just quickly answer. Firstly, agency is not degrowing. On an H1 basis, we are growing at almost 10%.

No, I meant on a Q2 basis.

It is at some flat 3% growth, so it’s not really — but like we mentioned earlier, I think agency and broking have been affected a bit from the greater than INR5 lakhs. Broking, we had a significant presence in the wealth segment. Our partnerships at many of the wealth-focused corporate agencies and most of them had worked with us on almost exclusive or high market share basis has had. But we don’t really have a problem. In the sense that somewhere the distribution will attune itself to the less than INR5 lakhs. And agency in some ways takes a little bit more time. It’s more retail, it’s more distribution oriented, so it’ll take some time to grow to the less than INR5 lakhs, and it has been growing fairly well in the less than INR5 lakhs. Of course, the product mix also moving to some of the pension products and some of the other products where the ticket sizes are high. So we don’t really see a challenge in being able to grow agency.

One of the reasons we are focusing heavily in terms of building our financial consultant new base, so almost 30,000 agents who’ve got added, which is significantly high. We are looking at activation, and we do believe that those may not probably be able to catch up in some specific verticals like wealth, which were greater than INR5 lakhs focus, but really the distribution should be able to scale up and build that. And the greater than INR5 lakhs also I think was mentioned earlier, while in some sense there was a little bit of a hiccup in what was pre budget and post budget, the proposition as such is still fairly strong. So I think customers are also coming around to the terms to say, look, if you compare in terms of what is available on the debt mutual fund side, if you’re available on what’s happened on the fixed deposit rates or whatever, the product still remains fairly competitive. So there is no reason why over a period of time, if you were to look at it afresh and you have money in terms of your asset allocation, a certain amount of money will continue to flow into these products while we’ll get the higher ticket size from some of the pension annuity products. So really our focus is to make sure that the NOP growth, the tier 2, tier 3 growth, the less than INR5 lakhs grows, but there’s no reason why the greater than INR5 lakhs should not also pick up towards the end of the year.

Absolutely. And just to add to that and link it back to a couple of things on the call, one is in terms of our H2 strategy on margins, I think that all links back up to how the top line will shape up. If we see more growth than what we are anticipating at this point in time, our first objective will be to ensure that our VNB growth is in line with what we want and the margin is going to be subservient to that. So we clearly are in a position to be able to maintain margins for the rest of the year. But if the growth projections are ahead of where we think at this point in time, we will strive to maintain VNB growth, and we can review our proposition in terms of how we’re looking at the VNB margins.

I’ll just add, given that there was this question, I think, look, frankly, as a product strategy approach, all the products that we are designing, we do believe are products which will probably help us scale up whether it’s in tier 2, tier 3, whether it’s on the par and non-par side. We may believe that, look, non-par is a product which is slightly more price sensitive. Yes, on the IRR, but really from a customer proposition, we need to look at what kind of IRRs, what kind of surrender values, and the way our products are defined is probably best-in-class for the end customer, finally, right? So I think a lot of these considerations which gives us the confidence to say that, look, even with this product proposition that we have got, we probably are best-in-class.

Understood. Just can you quantify or can you clarify the INR1000 crores number, was that only for Feb-March and what would that number be for the entire year last year?

So, yeah, the INR1000 crores number was the post-budget business that we had alluded to, which we said was one-time business.

Which is largely March, by the way, because Feb hardly had moved.

And the overall number for the year on a total APE basis was about 12%-odd. So that is not just INR1000 crores in March, but through the year. And that’s also what I just mentioned, that the 12% equivalent is close to 6%-odd now. So all the conversations that we’ve just had in this, it’s not that the product category has died above INR5 lakhs, it is still very much there. Of course, it will take time to crawl back up to levels that we’ve seen in the past.

Got it. Thank you and all the best.

Thank you. The next question is from the line of Sanketh Godha from Avendus Spark. Please go ahead.

Yeah. Thank you for the opportunity. Vibha, the simple question what I have is that given our Banca contribution has gone — HDFC Bank market share has gone up to 70%-odd percentage, if I do a back calculation, assuming 55% market share what you had last year, I see that Banca as a channel, for all companies…

Sanketh, just to intervene, the share has not gone to 70%. It is 62%-odd.

Sorry, I meant to say exit is at 70%. It is 62.5% for 1H. So if I do the simple math, what I conclude is that HDFC Bank as a channel for all insurance companies put together, the growth has been less than 10 percentage. It’s a rough math, but I’m just wondering that this macro of higher deposits, or HDFC Bank challenged to mobilize more deposit, is having some an impact on their ability to grow third-party products, including insurance. And how do you read it? That’s the only point I just wanted to ask one thing. And second, I have one question on ULIP.

Yeah. So on that, HDFC Bank and the team at all their branches, 7000 plus branches, are very used to selling all kinds of offerings to their customers based on bottoms-up need. Customers also are increasingly aware, at least in the tier 1 and 2 towns, that the concept of reinvestment risk. So it’s not that it’s a switch and someone having disposable income is agnostic. Even if the RM were to pitch an FD, the customers are reasonably aware of reinvestment risks. They might split their disposable income in some ratio between fixed deposits for liquidity and for guarantee over many, many years, decades in fact, to buy a non-par product or a protection product and so on. So that’s why you are seeing that overall growth being there, not only for us but also for the bank as a whole. And we expect that to continue. By the fact that would it be in the range of 20%-plus? I don’t know, but certainly in terms of double digits, that trend should continue.

Got it. Perfect. And second, just wanted to understand from margin point of view, the ULIP remains — because the demand of the product is also there. If ULIP remains at the current level around 25 to 30 percentage of the total APE, which is higher compared to the last year, then the strategy of attaching higher sum assured in ULIPs can improve margins of ULIP by how much percentage? And just wanted to understand, high sum assured as a percentage of whatever ULIP you have sold contributes how much to the total APE mix. That’s point number one.

And second, just on non-par business, given the yield curve is very much flat, is product itself seeing a margin pressure compared to what you have experienced last year? Because IRRs are demanding and the supply side market is not favorable. So the non-par itself is seeing at product level, the margin pressure?

Sanketh, on unit-linked products, significant amount of business is now getting done at higher sum assureds, which is meaningfully more profitable than what we have on a minimum sum assured multiple that we have on unit linked. But, of course, it is still lower than company average. Can we maintain our margins while the unit linked mix continues in the 25%, 30% zone? We can, because we already have. In the first half as well we’ve managed to do that. Large part of the pressure on margins is on account of two things, as we’ve discussed: one is in terms of we’ve capacitized for high-teens growth, which we’ve delivered in the past periods; and the current growth is in the 10% zone. So that is basically the biggest delta in terms of the margin trajectory.

Second bit to some extent is product mix. But as you’ve seen on an overall basis, product mix has balanced out the changes, whether it’s with higher protection, higher annuities, or otherwise. So at a portfolio level, no, we don’t expect to see any challenge in maintaining our margins with the unit linked mix being where it is right now. So that’s where we are. On non-par, really, like we mentioned in the past, our pricing is not really dependent on which way the interest rates are. It is more in terms of our pricing discipline in terms of what we are able to generate. So if you’re talking about on the FRA side, again, it’s a passthrough from our perspective. When we were making a spread, that was being passed on as yields and some of it was being retained. When it is a cost now, that’s also getting factored into our returns to the customer.

Okay. The reason I’m asking is that because the macro is in favor of other products. So to hold up the growth in the non-par, whether we will see a margin pressure in the non-par at the product level because of the spread compression?

No, Sanketh. Honestly, I think different people have taken different calls on how to run non-par business. Even when the environment was different, people were offering 40 basis points higher IRR than we were. Even today they are doing the same. So it’s really a call that management takes in terms of how to price the product. As far as we’re concerned, we try and stay away from that.

Also some more nuances on the pricing of the product, one has to also look at customer centricity in terms of what surrender values one gives. And the devil is in details. One can give much higher IRRs if the surrender value, even after 10 years, is abysmally low, right? So we want to attempt to continue triangulating between various objectives and to also be fair to the customer. And you will see us repricing wherever we have to reprice. And at the same time, not exiting the game, so to speak, we’ll continue to be in there. There is usually some level of — there’s a lag and then other repricing does follow. So I think that will continue. It’s not new. It’s not only for non-par. It also very much applies to protection and some of the other channels. So we’re used to that.

Got it. Sorry, Niraj, if you can…

Sorry, sir, we request you to rejoin the question queue for follow-up questions. We have the next question from the line of Dipanjan Ghosh from Citi. Please go ahead.

Hi, good evening. Just two small questions. One, when you mentioned that your non-par high ticket mix was around 10%, 12% for the first 10 months, can you just give some color on whether it was more front loaded or back ended towards the second half maybe from October to Jan last year? And second, on your broker channels or your non-HDFC Bank channels? Do you see — hello?

Dipanjan, you are not audible at the moment.

Is this better?

Yes. I request you to please repeat the question, sir.

Sure. So, two questions. One, when you say your high-ticket non-par mix is around 12% for the first 10 months, can you just give some color on whether it is more front ended or back ended and give some color on what would be the mix, let’s say, in the first six months versus the last four months? Second, on your non-HDFC Banca channels and your broker channels, is there any payout changes or unit economic changes across product classes that you’re seeing out there?

Yeah. So, no major commercial changes. Very much business as usual. And also non-par, if I were to — I don’t have the numbers absolutely, but it is reasonably flat from memory if I can recall. There was no heavy back-ending or front-ending. It was reasonably flat, except in the month of March.

And just to clarify, this 12% number that we quoted was for all business above INR5 lakhs rupees, not just non-par. So that’s basically what we had called out immediately after the budget when we’d done our call. And, of course, the numbers were different in March.

Sure. Thank you and all the best.

Thank you. The next question is from the line of Nitin Jain [Phonetic] from Fairview Investments Limited [Phonetic]. Please go ahead.

Thank you. My questions have been answered. Thank you.

Thank you. We have the next question from the line of Abhishek Agarwal [Phonetic] from Naredi Investment [Phonetic]. Please go ahead.

Hello. Am I audible?

Yes, you’re audible, sir.

Okay. Thank you for the opportunity. I had only one question. You said in last con-call your focus is on strengthening our partnership with HDFC Bank, enhancing collaboration, and maximizing customer engagement within our group. So is there any improvement or is this same as before you become subsidiary of HDFC Bank?

Hi. Obviously, there’s a lot more synergy in terms of our strategy as well as HDFC Bank. Clearly, we’re working closer in terms of how do we expand the market, get incremental business both for the bank and for us. And we have seen improvement in our market share, and we hope we will be able to sustain this. Of course, a lot of this is based on certain products that we had launched. There was a certain amount of synergy that came in this particular quarter. But really, given the open architecture, our ability to invest in people, look at new innovative products, look at more support, we will see a lot more of that. [Technical Issues].

Hello? Can you give me ballpark number how much improvement in your relation with HDFC Bank after becoming subsidiary?

So we have grown to 62% as our market share is what we have declared. But really, we have to look at it on a long term because from quarter to quarter, depending on either a [Technical Issues] launch or depending on a new product launch or depending on something that we are doing differently on the ground, these things can keep going up and down. But yeah, we have started seeing this up, and at 62%, we have seen almost a 4%, 5% increase in our market share than prior to merger.

Okay, thank you, sir.

Thank you. The next question is from the line of Bhuvnesh Garg from Investec Capital. Please go ahead.

Yeah, hi. Good evening, everyone and thank you for the opportunity. Just on the APE growth. So if I understand, the APE growth by ticket size, so you said that 18% growth in lower ticket size Y-o-Y and 20% decline in high ticket size. Is that correct, sir?

So we grew in the ticket size of INR5 lakhs and above, we grew close to 20% — sorry, less than INR5 lakhs was about 18% to 20% growth and more than INR5 lakhs we had a degrowth.

Okay, fine. So in that case, considering that you said that 12% of your APE was from high-ticket size, so blended growth should have been around 13%, 14%. But we have a blended growth of about 9% in APE. So what’s the disconnect here?

No, I’m not sure about 5% of APE. We said…

9%, so what I’m saying is that considering 12% of your APE comes from high ticket size and if you had 18% growth in low ticket size and 20% decline in high ticket size, basically blended growth should have been 13%, 14% YoY in H1, but we had 9% growth in H1. So just want to understand what’s the disconnect here.

I just think 18% growth was on NOP value wise, yeah, okay.

So the 12% number that we had spoken about was last year. That was our total APE percentage over INR5 lakhs in that period. Right now like I mentioned, that contributes to about 6% of our business. And that’s where on a lower base degrowth is what we’re seeing at greater than INR5 lakhs. On more than 90% plus of our business, which is up to INR5 lakhs, there has been an 18% growth. And the ticket size on that is something which has expanded, which has neutralized the overall impact on ticket size. And we are flat on ticket size. And all the APE growth is — basically the APE growth is similar to volume or NOP growth.

And also the 12% was average over the year, so one quarter if you look at a certain — it will vary by 200 basis points here and there, but it’s more in terms of average over the year.

Okay, fine. Thanks. I’ll take it offline. Just need some more clarification.

Right. Okay.

Thank you. The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead.

Yes, sir. Thank you for taking my questions. Just wanted to understand in terms of the reinsurers for the tier 2 cities growth that you’re seeing, what’s the kind of conversation there that you have to pay?

So when we look at the different segments for writing the business in different product categories, we look at all aspects like the pricing, what is the risk assessment, what is the underwriting we’ll have, and accordingly we have discussions with the reinsurer on the similar aspects, what would be the pricing. And all of that is reflected in the premium to the customer. So, yes, there will be nuances in terms of all these aspects, and that’s always factored in the premium as well as our assumptions and hence the profitability.

My point was that you’re seeing a higher protection growth coming in. So is there any — at the discussion tables, would you be able to get some discounts because of this Just on that part?

[Technical Issues] If you’re going into the tier 2 and we’re writing, say, more business in the self-employed segment, any kind documentation, kind of underwriting would be different, and that would be reflected in the arrangement between the insurer and the reinsurer. So the documents that will be available with the self-employed will be not necessarily same as what will be available with the salaried person.

This will also keep developing as we get in because initially when you get into tier 2, tier 3, or in probably the upper quartile of the customer personas there, so really it depends on what profile and what reinsurer underwriting comfort will come in. But like Eshwari said, if it’s self-employed, we may have a different reinsurance arrangement over a period of time, as well as in salaried, which is the upper quartile, we may probably still continue to manage the same thing. Right now, the reinsurance environment is fairly stable and I’m sure the way we are working closely, all this will pan out over the next few years because it’s really a very large opportunity.

Which time of the year do the discussions usually happen with regard to pricing with the reinsurer?

That’s a regular process. So any product design we do or any pricing we do or any changes that we do, we have a constant dialog with the reinsurer and everything is embedded into all the aspects. So it’s not that one point in time we have a discussion and it’s just that. It keeps evolving, and we also look at the experience of the business that is written along with the reinsurer and tweak things as and when required.

And there were news articles that the reinsurers are looking for a hike and would that be true for the industry, not you in particular?

No, we are not aware of anything. In fact we have had very recent discussions at reinsurance. They’ve said that the experience is in line with what they factored in the latest prices. So we are not expecting any increase in the rate in the near or medium future.

Thank you so much.

Thank you. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead.

Yeah. Thanks for the opportunity. Just quickly again going back to distribution, is there something changed on the direct side? Because you were among the few players who had a very strong presence in offline and online direct, and that channel should not have a large share of INR5 lakhs.

Sorry, Avinash. We’re not able to hear you clearly. If you can maybe start again and we’re not able to hear you clearly.

Yeah, I think it’s better now. My question was more on your direct channel where you have been pretty strong and this channel should not have much of over INR5 lakhs contribution, but that channel has slowed down in the first half. So is there some change of strategy in your direct channel that you are focusing more on HDFC Bank? What has happened to the direct channel because your online, offline both have been very strong in the past?

No, it has been. There are some two, three small things which you need to be — one, of course, is that given technology and a lot of it, there are lower branch walk ins. A lot of our business used to come in from the direct business. And online business also is picking up. The other piece is some of our larger partners like PolicyBazaar, which are coded under direct, are now under the broking code, so it reflects under the broking channel. So that’s the way we have classified it. And one thing I think we need to realize is that a lot of our partners and channels, online is actually becoming more like a horizontal because more and more people are getting tech at websites online. So it’s not just direct, the way we look at it direct-to-customer it’s there, but really the interface with the customer is moving more direct. It’s a little bit of a mapping change in PolicyBazaar case as well as the fact that there has been a little bit of a slowdown in direct. But going forward, we do expect both the online business as well as the branch business to expand. We are expanding in a certain set of branches. We are probably going to add another 75 branches. So we will see expansion even in the direct channel as we go forward.

So one just quick on this, but the PolicyBazaar technically has turned into broker much before. It was already a broker last year. And if you have chosen to change PolicyBazaar from direct to broker this year, then the broking channel adjusted for this year has even declined much sharply. Am I understanding all this correct?

No, I think the channel got remapped in Q3 of — so I think over a period of time it has shifted into our direct channel — into the broker channel.

Yeah. So I’m saying that — you are saying that the H1 last year your PolicyBazaar was not part of broker. This year it’s part of broker. And yet broker channel has declined. So ex PolicyBazaar…

Yes, because look, we had significant partner presence in broking channel. Over the last few years, we’ve built significant presence in the wealth channel. So all the large partners like IIFL, ASK, there were many such wealth partners with us who had done significant business on the greater than INR5 lakhs. There has been a fair amount of degrowth which has happened there. So that is something that we will counter in terms of the retail NOP growth even through broking channels and that should come back. But yes, it’s had an impact for us on the broking channel.

Okay, clear. Thank you.

Thank you Ladies and gentlemen, we will take that as our last question. I would now like to hand the conference over to Ms. Vibha Padalkar for closing comments. Over to you, ma’am.

Thank you, everyone, for participating in today’s call. On behalf of HDFC Life, I wish you all happy festivities. Please feel free to reach out to our IR team in case of any further queries. We look forward to connecting with you again. Good evening.

[Operator Closing Remarks]

Call participants:

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