Please find enclosed herewith the Transcript of Earnings Conference Call of Life Insurance Corporation of India with Analyst/Investors held on February 09, 2024.
Ref. No.: LIC/SE/2023-24/192
Date: February 16, 2024
To The Manager Listing Department, BSE Limited, Phiroze Jeejeebhoy Tower, Dalal Street, Mumbai-400001
Scrip Code: 543526
Dear Sir/Madam,
The Manager Listing Department, The National Stock Exchange of India Ltd., Exchange Plaza, 5th Floor, Plot C/1, G Block, Bandra Kurla Complex, Mumbai-400051
Scrip Code: LICI
Sub: Transcript of Earnings Conference Call with the Analyst/Investors
Pursuant to Regulations 30 and 46(2) (oa) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, please find enclosed herewith the Transcript of Earnings Conference Call of Life Insurance Corporation of India (“the Corporation”) with Analyst/Investors held on February 09, 2024.
The said transcript is also available on the website of the Corporation and can be accessed from the link: https://licindia.in/web/guest/call-transcript-of-analysts-/-investors-meet.
Please take the above information on record and arrange for its dissemination.
Yours faithfully,
For Life Insurance Corporation of India
(Anshul Kumar Singh) Company Secretary & Compliance Officer
Encl.: a/a
“Life Insurance Corporation of India
Q3 FY '24 Earnings Conference Call”
February 09, 2024
MANAGEMENT: MR. SIDDHARTHA MOHANTY – CHAIRPERSON – LIFE
INSURANCE CORPORATION OF INDIA MR. M. JAGANNATH – MANAGING DIRECTOR – LIFE INSURANCE CORPORATION OF INDIA MR. TABLESH PANDEY – MANAGING DIRECTOR – LIFE INSURANCE CORPORATION OF INDIA MR. SAT PAL BHANOO – MANAGING DIRECTOR – LIFE INSURANCE CORPORATION OF INDIA MR. R. DORAISWAMY -- MANAGING DIRECTOR – LIFE INSURANCE CORPORATION OF INDIA MR. DINESH PANT – APPOINTED ACTUARY AND EXECUTIVE DIRECTOR, ACTUARIAL TEAM – LIFE INSURANCE CORPORATION OF INDIA MR. K. R. ASHOK – EXECUTIVE DIRECTOR, ACTUARIAL TEAM – LIFE INSURANCE CORPORATION OF INDIA MR. SUNIL AGRAWAL – CHIEF FINANCIAL OFFICER – FINANCE TEAM – LIFE INSURANCE CORPORATION OF INDIA MR. RATNAKAR PATNAIK – EXECUTIVE DIRECTOR, INVESTMENT FRONT OFFICE AND CHIEF INVESTMENT OFFICER – LIFE INSURANCE CORPORATION OF INDIA MR. K. SESHAGIRIDHAR – EXECUTIVE DIRECTOR, INVESTMENT-BACK OFFICE, INVESTMENT TEAM – LIFE INSURANCE CORPORATION OF INDIA MR. R. SUDHAKAR – EXECUTIVE DIRECTOR, MARKETING AND CHIEF MARKETING OFFICER – LIFE INSURANCE CORPORATION OF INDIA
Page 1 of 20
Life Insurance Corporation February 09, 2024
MR. HEMANT BUCH -- EXECUTIVE DIRECTOR BANCASSURANCE – LIFE INSURANCE CORPORATION OF INDIA MS. MANJU BAGGA – EXECUTIVE DIRECTOR, GROUP BUSINESS – LIFE INSURANCE CORPORATION OF INDIA MS. ANJUBALA PURUSHOTTAM -- EXECUTIVE DIRECTOR, CRM/CLAIMS/ANNUITIES – LIFE INSURANCE CORPORATION OF INDIA MS. RACHNA KHARE – EXECUTIVE DIRECTOR – CUSTOMER RELATIONSHIP MANAGEMENT/ POLICY SERVICING – LIFE INSURANCE CORPORATION OF INDIA MR. SANJAY BAJAJ – HEAD INVESTOR RELATIONS – LIFE INSURANCE CORPORATION OF INDIA
Moderator:
Ladies and gentlemen, good day, and welcome to LIC's Q3 FY '24 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 this conference call, please signal an operator by pressing star, then zero on your
touchtone phone. Please note that this conference is being recorded. We have our senior
management of LIC led by Mr. Siddhartha Mohanty, Chairperson on this call. I now hand the
conference over to Mr. Siddhartha Mohanty, Chairperson, LIC. Thank you, and over to you, sir.
Siddhartha Mohanty:
Thank you. Good morning, everyone. I am Siddhartha Mohanty, Chairperson LIC.
On behalf of the senior management team, I warmly welcome you all to the results and
performance update call of Life Insurance Corporation of India for the third quarter and nine-
month period ended December 31st, 2023.The results and a presentation can be accessed on
our website and on websites of both the stock exchanges, BSE and NSE.
Along with me, on this call, I have four Managing Directors, Mr. M. Jagannath, Mr Tablesh
Pandey, Mr. Sat Pal Bhanoo and Mr. R Doraiswamy. Senior officials of the Corporation
present on this call are Mr. Dinesh Pant, Appointed Actuary & Executive Director & Mr K.
R. Ashok, Executive Director from the Actuarial team, Mr. Sunil Agrawal, CFO from the
finance team, Mr. Ratnakar Patnaik, Executive Director (Inv-Front office & CIO) and Mr K.
Seshagiridhar, Executive Director (Investment – Back Office) from the Investment team, Mr.
R. Sudhakar, Executive Director (Marketing & CMO), Mr. Hemant Buch, Executive Director
(MBAC), Ms. Manju Bagga, Executive Director (Pension & Group Schemes), Ms. Anjubala
Purushottam, Executive Director (CRM/Claims/Annuities), Ms. Rachna Khare, Executive
Director (CRM/Policy Servicing) and Mr. Sanjay Bajaj, Head (Investor Relations).
I would like to thank all of you for sparing your valuable time to join this call today and listen
to the LIC team.
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Life Insurance Corporation February 09, 2024
Let me now mention the key business, operational and financial highlights for the first nine
months of the financial year 2023 -24.
Premium Income
For the nine months ended December 31st, 2023 we have reported a Total Premium Income of
INR 3,22,776 crore as compared to the total premium income of INR 3,42,244 crore for the
corresponding nine month period of last year ending December 31st, 2022.
The Individual New Business Premium Income for nine month FY24 is INR 38,679 crore and
for comparable nine month FY23 it was INR 38,828 crore. Renewal Premium Income
(Individual business) for nine month FY24 is INR 1,71,040 crore as compared to INR 1,61,601
crore for nine month FY23. Therefore, for nine month ending December 31st 2023 our Total
Individual Premium Income including renewals is INR 2,09,719 crore as compared to INR
2,00,429 crore for nine month ending December 31st, 2022. As measured by Total Individual
Business Premium, we have grown by 4.64% on Year on Year basis.
The Group Business total premium income for nine month ended December 31st, 2023 is INR
1,13,057 crore comprising of New Business premium of INR 1,08,796 crore. In comparison for
nine months ended December 31st 2022 last year the Group Business total premium income was
INR 1,41,815 crore and comprised of New Business premium of INR 1,37,240 crore. Therefore,
for nine month ended December 31st 2023 the Total Group Premium has declined by 20.28%
as compared to similar period of previous year. Hence our overall premium for nine month ended
December 31st, 2023 has registered a decline of 5.69%.
Our market share by First Year Premium Income is 58.90% (as per IRDAI) for the nine month
period ended December 31st, 2023 as compared to 65.38% for the similar nine month period
ended December 31st 2022.
If we were to split this total market share of 58.90% into segment wise share of individual and
group business we would have a market share of 38.74% in Individual business and 72.24%
in the group business for 9 months ending December 31st 2023. On a comparable basis for
nine months ended December 31st 2022 the respective market shares for Individual and Group
business were 40.93% and 78.65%. Therefore, we continue to retain the leadership position
in both Individual and Group business segments in the Indian Insurance industry. I would also
add that we are conscious about doing profitable business.
Seen on APE basis the break up of business is as follows
Total Annualised Premium Equivalent (APE) for nine month ended December 31st 2023 is
INR 35,790 crore which is comprised of Individual APE of INR 23,503 Crore and Group APE
of INR 12,287 Crore. Therefore, on APE basis, the individual business accounts for 65.67%
and Group business accounts for 34.33%. Further of the Individual APE, the Par business
accounts for INR 20,203 Crore and Non Par amounts to INR 3,299 Crore. As you can see our
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Life Insurance Corporation February 09, 2024
Par share of individual APE is 85.96% and Non Par is 14.04% for nine month FY24. You will
recall that our Non Par share for year ended March 31st 2022 and March 31st 2023 on APE
basis within the overall individual business was 7.12% and 8.89 %, respectively. Further you
will also remember on the last call on November 10th, 2023 we had mentioned about our Non
Par mix to be 10.76% for H1 of FY24. At this point I would like to emphasise that our strategy
of focusing on changing product mix by launching new Non Par products and marketing the
same in a focused manner, to meet our customer needs, is showing results as we had
envisaged. While we have shared Par Non Par mix for the period of 3 month, 6 months and 9
months as a disclosure, you can very well arrive at your own estimates of how the successive
months and quarters are getting better for us on this aspect, since we have been listed.
Profit After Tax
The Profit After Tax (PAT) for the nine months ended December 31st, 2023 was INR 26,913
crore as against INR 22,970 crore for the nine month ended December 31st, 2022. The current
nine month period profit includes the transfer of an amount of INR 21,461 crore (Net of Tax),
pertaining to the accretions on the Available Solvency Margin from Non Par to Shareholders
account. The amount of INR 21,461 crore comprises of INR 7,692 crore for the quarter ended
December 31st ,2023 besides INR 6,277 crore and INR 7,492 crore for the quarter ending
June 30th, 2023 and September 30th, 2023, respectively. At this point I must highlight that
the nine month profit of FY24 is not comparable to the published nine month profit figures of
FY23. Therefore, I will request our CFO, Mr. Sunil Agrawal, to provide details after my
opening remarks and before the start of the Q an A session today.
VNB and VNB Margins
Value of New Business (VNB) is INR 5,938 crore for the nine months ended December 31st
2023 as compared to VNB of INR 5,478 crore for the nine months ended December 31st 2022.
As you can see the VNB has registered an increase of 8.40% on YOY basis. Further, the net
VNB margin for the nine month FY24 is 16.6% as compared to 14.6% for nine month ended
December 31st, 2022. Hence, the VNB margin has expanded by 200 basis points on a year on
year basis. In comparison you will also remember that our VNB margin for first 6 months of
FY 24, ended September 30th, 2023 was 14.6%. Therefore, the nine month ended December
31st, 2023 results also demonstrate the positive impact of changing product mix in Q3 of
FY24 when new products have been launched.
Solvency Ratio
The solvency Ratio as on December 31st, 2023 improved to 1.93 as against 1.85 on December
31st, 2022.
Assets Under Management (AUM)
Assets under Management as on 31st December 2023 grew by 11.98% year on year to INR
49,66,371 crore as compared to INR 44,34,940 crore as on December 31st 2022.
Page 4 of 20
Life Insurance Corporation February 09, 2024
Product Mix and New Product launches
Now I would like to inform about New Product Launches. In line with our strategy of
increasing the proportion of the Non Par business, we launched new Non Par products during
the first nine months of FY 2023-24 to cater to customer requirements, namely LIC’s Dhan
Vriddhi Plan, LIC’s Jeevan Kiran Plan, LIC’s Jeevan Utsav Plan and LIC's Group Post-
Retirement Medical Benefit Plan, respectively.
No. of Policies Sold
During the nine months ended December 31st, 2023, we sold 1.25 crore new policies as
compared to 1.28 crore policies in the nine months ended December 31st 2022 registering a
marginal decline of 2.60 % over the corresponding period of last year.
Agency Workforce
As on December 31st, 2023, the total number of agents was 13.74 lakh as compared to 13.23
lakh agents as on December 31st, 2022. The market share by number of agents as on December
31st, 2023 stands at 49.67% as against 52.30% for December 31st 2022. Therefore, we have a
net addition of approximately 51,000 agents in last one year.
On number of policies sold basis, the agency force sold 1.21 crore policies during the nine
months ended December 31st, 2023 as compared to 1.24 crore policies during the
corresponding period of last year registering decrease of 2.39%. Therefore, more than 96% of
our policies for the first nine months of FY24 were sold by our Agency force. Even on
premium basis, approximately 96% of New Business Premium came from our Agency channel
for nine month FY24.
Contribution by Banca and Alternate Channel (BAC)
During the nine months ended December 31st 2023, other channels (BAC – Banca and
Alternate Channels) collected new business premium aggregating INR 1,423 crore which was
INR 1,355 crore for nine months ended December 31st 2022 registering a growth of 5.02% on
a YOY basis. With this the share of Banca and Alternate Channels has increased to 3.69% for
nine month period ended December 31st, 2023 as compared to 3.50% for similar period last
year.
Our Overall Expense Ratio stands at 15.28% for the nine months ended December 31st 2023,
as compared to 15.26% for the same period of last year. As you can see the increase was very
very marginal 2 bps on year on year basis.
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Life Insurance Corporation February 09, 2024
Persistency
On premium basis, the persistency for 13th, 25th, 37th, 49th and 61st month, for nine month
FY24 stands at 78.00%, 71.92%, 67.28%, 64.92% and 62.40% respectively, as compared to
77.61%, 71.32%, 68.31%, 64.70% and 62.73% respectively for nine month FY23.
On number of policy basis, the persistency for 13th, 25th, 37th, 49th and 61st month, for nine
month FY24 stands at 67.22%, 58.59%, 54.80%, 52.01% and 50.23% ,respectively, as
compared to 64.99%, 59.06%, 55.32%, 52.45% and 51.42%, respectively for nine
monthFY23.
Operational efficiency and Digital Progress
In our digital initiative through the Agent assisted ANANDA app, we have completed 7,84,856
policies through this App during the nine months ended December 31st 2023 as compared to
5,31,792 policies for the comparable period ending December 31st 2022 thereby registering a
growth of 47.59% on YoY basis. I feel very happy to let you know that more and more agents
are adopting to do business on ANANDA.
We had also announced during the last call that we have started a Digital Transformation
Project called DIVE (Digital Innovation and Value Enhancement) and that we have taken on
board a top reputed international consulting firm for the project.
Claims
On the claims front, during nine month FY24, we have processed 1,38,02,767 number of claims
which includes 1,32,04,597 maturity claims. On an amount basis during nine month FY24, the
maturity claims were INR 1,30,222 crore and the death claims were INR 16,288 crores. On a
comparable basis for nine month FY23, the maturity claims were INR 1,13,936 crore and death
claims were INR 17,350 crore. Therefore, the death claims are lower by 6.12 % and the
maturity claims are higher by 14.29 % on a year-on-year basis.
In summary, I would like to make three points
1.
First Our efforts towards changing our product mix are succeeding and we have been
able to increase our Non Par share within the individual business to 14.04% which is significant
increase from 7.12% around the time of our listing.
2.
Secondly, we are able to launch products that are competitive, meet customer
expectations and the needs of various marketing intermediaries and channels.
3.
Finally, our sharp focus on enhancing margins in the business is also yielding results
as is evident in the 200 bps increase in VNB margin to 16.60% on a yoy basis.
Before I close my opening remarks, I would like to share that the Board has approved an Interim
Dividend of Rs. 4/- per share in its meeting held on 8th February 2024.
Page 6 of 20
Life Insurance Corporation February 09, 2024
We are thankful to our customers, shareholders, employees, agents, marketing channels for
their faith and trust in us. We remain committed to maintaining our leadership in the market
while delivering superior value to all our stakeholders.
Thank you very much. Before we open the floor for questions, I would like to invite our CFO,
Mr. Sunil Agarwal to explain the profit numbers especially with respect to the comparable
numbers for similar period last year.
Sunil Agrawal:
Thank you, sir. Good morning, everyone. The profit figures for the quarter are comparable. The
profit figure for the quarter, INR9,444 crores is comparable with the quarterly profit of last year
INR6,334 crores, which is a 49% increase. The profit number for 9-month period ended
December 2023 is not comparable with the 9-month period in the previous year because in the
previous year included an accretion of ASM for the quarter ended 31st March 2022 also, which
amounted to INR4,542 crores. So if we remove that from INR22,969 crores.
The comparable profit for the 9-month period 31st December 2022, is INR18,427 crores, which
is comparable to the profit for 9-month period ended December 31, 2023, which is INR26,913
crores, which is a 46% increase in profits comparable profit. Thank you.
Siddhartha Mohanty:
We now invite questions.
Moderator:
Thank you very much. We will now begin the question-and-answer session. The first question
is from the line of Sujit Jain from Bajaj Allianz. Please go ahead.
Sujit Jain:
Mr. Mohanty and team, our compliments on a great set of numbers. Sir, I wanted to check with
you the sustenance of this VNB margin going into Q4? And what would be the guidance for FY
'25 and over medium term? And if not guidance, in terms of your aspiration, how VNB margins
will pan out next year and in the medium term? let's say, over a period of 3 years?
Siddhartha Mohanty:
Actually, it would not be appropriate to give any specific figures. But as you observe, whatever
commitment we made during listing, we are in line with achieving our commitment from 14.4%
to 16.6% now. And you see the product mix, we are launching high-margin products. And it is
not only for shareholder but first keep in mind customers' interest. So those products get traction
in the market. And in coming days we'll continue this effort and the margin in my sense is it will
definitely improve and it will be competitive in the market in coming days.
Sujit Jain:
Okay. And you have, sir, mentioned in a variety of your interactions in post listing about
improving on 3 vectors. And in the initial commentary, you've given the progress on these 3
vectors as well, which is product mix, channel mix and digital intervention. Specifically on
product mix and channel mix, you've given numbers. But directionally, where do you see LIC
going in FY '25 on these 2 aspects, product mix and channel mix?
Siddhartha Mohanty:
Product mix, channel mix you see already it has -- already shown results. Product mix, new
products we have launched and if you see the share of APE, share of APE has gone up like
substantially, it has gone up and in coming days also new products, which will be launched we
have to take care of customer as well as all other stakeholders. So definitely, this product mix
Page 7 of 20
Life Insurance Corporation February 09, 2024
will help not only margin but fair and good growth will be there. But at the same it’s channel
mix when we say, our alternate channel we are focusing alternate channel banca also. Banca
slight increase is there from 3.5% to 3.7%. So further growth we expect we’ll focus more on
alternate channel in coming days. But more than that, Digital Marketing also we are focusing
where our share is very, very negligible less than 1%. Because we have taken this initiative
project, DIVE (Digital Innovation and Value Enhancement). So coming days customers also
will be happy to contact directly LIC and consider their policy decision, whatever policy they
want to take, they can take. So on these 3 fronts, already work has started and those are showing
results, and it will continue.
Sujit Jain:
But what targets you set for you to eventually say that you kind of met the targets or the
milestones or did not achieve, etc, especially in non-par share, where do you see it going? What
is your target share and the Banca share in the mix and the digital share in the mix.
Siddhartha Mohanty:
See, non-par share, we committed it will be 15% APE share of non-par to total business. And
we have almost reached there today. And my sense is by March, it will further improve, whatever
commitment we will deliver more than our commitment. And so far as banca and alternate
channels, those are growing -- if you observe insurance companies, which are doing well in
banca they are owned by banks.
So they have that advantage. We tie up with many banks and gradually, slowly, it is going up.
And if you see, volume-wise also our position will be, I think, to 6th or 7th the total volume of
a premium in Banca. So that's where progress will be there. But more than that, we will focus
on the technology path, not only for customer acquisition because that is the one area we are
focusing more and more, coming days that will be our focus.
But also all our aspects total servicing everything so that a customer never comes to our office,
sitting at home he can take policy, he can get all services. With this policy he can get his loan,
he can get his claim, he can change the nomination, all -- everything. So that is our objective.
Moderator:
Next question is from the line of Anuj Singla from Bank of America. Please go ahead.
Anuj Singla:
Congratulations on a good set of numbers. Mr. Mohanty, the first question is with regards to the
strong performance in the non-par...
Moderator:
Anuj, sorry to interrupt you. Can you please...
Siddhartha Mohanty:
Speak louder please.
Anuj Singla:
Is it better?
Moderator:
Yes, yes. Thank you.
Anuj Singla:
Yes, sir, my first question is with regards to the non-par mix, so what we have seen is you had
this product Jeevan Utsav, where I think which has done very well. Would it be possible to share
what kind of premium you collected in that product? And the second part is when you look at
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the pipeline for 4Q, do you have any similar product which can support strong growth on the
non-par momentum continuing in the 4Q as well?
Life Insurance Corporation February 09, 2024
Siddhartha Mohanty:
See, we have collected almost more than INR1,000 crores under this product only, Jeevan Utsav.
And if you see, recently, we have launched, of course, this last month, LIC Index Plus then
Jeevan Dhara II, deferred annuity plan also which we have launched. So all these products are
very competitive you compare return and other aspects.
So these are competitive products. And also, we have revised the rates in our annuity products
like Jeevan Akshay-VII and Jeevan Shanti. So these rates have been upward, revision has been
done. And we have also one single premium product. There also, we have enhanced the rate,
return rate Dhan Vriddhi. So all these products will get traction in the market, and we expect a
very high performance during a couple of days left for the year to close.
Anuj Singla:
Okay. Sir, just to circle back on the question which the previous participant also asked. When
you look at the margin outlook, the third quarter which we tend to look at by taking out the 6
months number from the 9 months, is a very strong performance on the VNB margin side. When
we look at the outlook for the next quarter or the next year per se do you think this is sustainable
on that part?
I -- alluded to the non-par savings mix continuing to improve, but it's a very strong performance
in this quarter, and I think driven by this Jeevan Utsav product, so do you think this kind of
margins we can sustain and given the annuity you know repricing which you have done, does it
pose risk to the margins in the next couple of quarters?
Siddhartha Mohanty:
See, if I say, definitely, we are very much positive on this aspect. Particularly if you see Jeevan
Utsav product that has taken care of all segments. That has not only taken care of customers
while giving high and competitive returns but also intermediaries and at this time shareholders.
And Jeevan Dhara II other products also, I am very much confident in coming days we'll sustain
that margin. I would request our Appointed Actuary, Mr. Dinesh he will throw light further.
Dinesh Pant:
Good morning, see we need to appreciate one point that, yes, it is a very conscious strategy that
Corporation has taken about rebalancing. And despite of the fact that last year revision in annuity
rates happened twice but the overall VNB margin, even for the 9-month period has not come
down for us. That has been possible because of the business mix.
While, yes, certain products have given us head start on this thing. What we are looking forward
is not overdependence on any single product. The entire mix of the products is going to sustain
this momentum. But we are largely also looking not only in the context of margins, but also in
context of overall absolute VNB that is important to us. So the entire strategy is going to be very
dynamic in which the growth and reasonable level of margins coupled together would drive
towards the VNB and overall profitability.
Anuj Singla:
Got it. And lastly, sir, on the protection side, the performance, again there is a decline on a Y-o-
Y basis. What steps are we taking in terms of maybe product and distribution to address that?
Page 9 of 20
Dinesh Pant:
Yes. On the protection side also, you would appreciate that the industry overall, and we also had
Life Insurance Corporation February 09, 2024
revised our premium rates in order to make them sustainable and viable. It's very interesting that
even when their number growth is less, actually the margins have improved there and even the
VNB has improved there.
But again, we are looking at it very closely, we are trying to -- in fact to be fair that in our group
side protection also we have done very good. Very good growth has happened and the margins
have also significantly improved, loss ratios have come down there. So again, we are
continuously looking into this segment, and we'll look into which are the elements where we can
look into reviewing the pricing also. In fact, we also look forward to some more variants of term
products to be worked on and considered in the coming quarters.
Moderator:
Next question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Avinash Singh:
Thanks for the opportunity and a good set of performance. A couple of questions. The first one
is more on the margin side. So if I see 2 parts of margin, I mean, the non-par and par, at such a
large scale, par margin Y-o-Y is appearing to be declining slightly. Now what explains that?
Because generally par margins are stable and even interest rates have been broadly stable. So
what explains minor drop in par margin.
And on the non-par side, I mean, including ULIP or 63% kind of a margin with a little help from
protection looks pretty strong. Now that would mean that you know that in terms of your benefit
offering likely would be lower than what your competitors are offering on the non-par savings
and annuity side. So if competition heats up and you were to sort of improve your offerings in
these 2 non-par and annuity.
Do you think that this 63% can come under pressure? Of course, I am cognizant of the fact that
at the overall level your non-pap share will sort of increase, but the non-par margins. So just I
want explanation that what is causing sort of a pressure on par margins? And what sort of you
know margins do you think that can be sustained in this non-par? That's my first question. I will
come with second question later.
K R Ashok:
Yes, this is Ashok. See, if you look at the par margins, yes, they agree that's a small decline in
the par margins but basically what happens is par itself is a big portfolio and the...
Moderator:
Sorry to interrupt you, can you come little closer to the mic?
K R Ashok:
Yes. It is true that the par margins -- am I audible now?
Moderator:
Yes, sir.
K R Ashok:
The par margins are slightly declined. That is basically because this is an inherent business mix
change in the within the par because there are certain products which are having a higher profit
signatures compared to other products.
Page 10 of 20
Life Insurance Corporation February 09, 2024
So normally what happens is in the par portfolio that fluctuation do happen over a period of
time. And it is also aided by the movement in the risk free rates. So putting it all together that -
- the minor decline in the par margins was expected.
Looking at the non-par and annuity, see what happens is the profitability and the competition
are 2 sides of a coin. So if the competition increases automatically the profitability expected to
reduce. But the art is in balancing the two. And I think we have successfully done that in our
recently launched products because we could able to garner a good amount of premium from the
market. And also, we could sustain growth in these margins.
Avinash Singh:
Okay. Just on par, just to confirm, Y-o-Y 9-month margins – or this minor dip, is it not caused
by any sort of a change in operating side, either the expenses or the persistency behavior? Or
some contribution coming out of these two factors as well?
K R Ashok:
Yes. See, there is a little bit, but the contributions are very minor compared to the upside that we
get on the business mix. If you look at the margin walk we have given, the two big impacts, one
is on the business mix, which already shared by our Chairman that there is a good movement in
the Non Par share, including ULIPs that are added to that. And we have repriced annuities twice
during the year, increasing the benefits naturally pushing the margins up.
But the other components are very minor in nature. The major impact or the contributor for the
assumption changes are in RFR change which is pushing it south and there has been some
certain updates in the mortality looking at the recent experience, and which is pushing it slightly
up. So putting it all together, the single one driver is the business that our Chairman pointed out.
Avinash Singh:
Okay, sir. And my second question is, again, more sort of explanation I would require from your
side. If we see the segmental surplus that you gave in your results of the Par surplus that – Par
GAAP accounting surplus has been in the deficit for last few quarters. And also, last year in the
9 months, you were building, I mean, the FFA almost in the tune of roughly INR9,000 crores,
whereas in this 9 months, you have taken out the FFA and INR3,000-odd crores.
So what is sort of explaining this that -- again, I'm not looking just 1 quarter, I'm looking 9
months as a whole. What is explaining this sort of this change in how you are sort of building
FFA versus withdrawing and also the surplus emergence in par that seems to be negative for last
9 months.
Dinesh Pant:
Yes. If I would like to explain that, actually, we would appreciate that general insurance
companies would be building on the FFAs for the purpose either for the purpose of requirement
of solvency or when there's no certainty about certain amount to be distributed at any particular
point of time. You would have seen from the results of the Corporation. Corporation has been
going from strength to strength as far as the solvency is concerned. In fact, some years back, we
stand around 1.6. So today, we are standing at 1.93. So in this year, we had taken calibrated
decision right from the first quarter that in which -- the certain amounts which were sitting in
the FFA be used for the provisions for the liability purposes because that has to be routed through
the revenue account.
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Life Insurance Corporation February 09, 2024
That's why you are seeing deficit. Actually, it's not a deficit. In the balance sheet, it's the entry
fee. It is only adjustment to adjust the FFA. Frankly, going towards the end of the year, FFA
should keep on reducing because one gets more certainty about how the distribution should
happen.
So right now, the strategy is not to go overboard to that FFA, it is not the requirement. And we
expect this deficit, which is seen. Actually it is -- there is no deficit as such, it is only that the
amount which was there in the FFA around INR4,000 crores plus still it is INR1000 crores plus.
So that amount has been adjusted towards making greater provision into actuarial liability side
of it.
And because the entry pass is for the revenue account, therefore, it looks like negative.
Otherwise, there's no negative. The fund is very much in the plus and is very surplus position
itself. So FFA, we do not want to have much, but a certain amount of cushion is required at any
point. That's why FFA is provided here. Otherwise, it's not required for any solvency purpose.
We would like to make actual distribution of whatever surpluses are there in the Par Fund.
Avinash Singh:
Lastly, if I can just speak because you raised the point of solvency and very valid point that at
1.93% you are sort of having very strong solvency. And also to add to that, a very large amount
of unrealized gains that is not right now counting towards your Available Solvency Margin. In
that backdrop, I mean, should we expect the dividend, of course, you have announced INR4 per
share.
Going forward, I mean, Q4 also, the board would likely take up dividend because, I mean, the
amount sort of you realized from your unrealized, that is not any way going to impact your
solvency part because today that is not part of your ASM. So, should we expect again in the next
quarter that the Board will be considering dividend?
Siddhartha Mohanty:
Let us wait for that, at this point, we should not guess anything.
Dinesh Pant: Board has to take overall call, what is the capital requirement of the company, solvency, as well
as the overall interest of all the stakeholders. I think very bold and rightful decision has already
been made by our Board and that would be the course of action in future also in the overall
interest of all the stakeholders.
Moderator:
Next question is from the line of Sanketh Godha from Avendus Park. Please go ahead.
Sanketh Godha:
Sir, if I see your non-par margin in 1H was around 50 percentage, now it is closer to 64
percentage. So I believe it is largely because of Utsav. So what nature -- the whole life nature of
Utsav makes it better margin? And if you keep on introducing whole life products in non-par or
longer tenured plants in non-par, do you expect the 64% margin to hold up going ahead or not?
That's my first question.
Dinesh Pant:
Yes, Sanketh, actually, you would realize and appreciate that business strategy is not there is no
single panacea and it's not that every product just because it is a whole life that is going to serve
the purpose because then it also brings about challenges in terms of reinvestment risk and long
duration risk also.
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Life Insurance Corporation February 09, 2024
So it is -- that's why I'm -- I said earlier also that the larger purpose of introducing products, the
primary purpose to ensure that your product basket is complete, you are able to tap and you
know whatever the overall directions are mentioned reaching every policyholder ensuring for
all policies that the larger purpose that customer-orientated solutions are provided.
So it is not only from the margin point of view that products are introduced. So this product, we
-- it took us a longer time to design, think around so that we give it a holistic approach. And
what we are looking forward is, yes, this is a great product for everybody as Chairman rightly
mentioned earlier also. But what know every product may not necessarily be a right solution.
So what -- it's not -- we have rightly -- we're also using the par side also. We already have Jeevan
Umang, which is also a very like product. And it's a very comprehensive product that one also.
So -- but -- what we are looking forward to is that coming out with a different variety of products.
We have -- in fact, if you look into our recent products, we have introduced short-term --
premium paying term products also.
So what we are looking forward is that product should be, first of all, rightful from the context
of the policyholders. It should be attractive enough for the marketing channel. And then it should
definitely have a value for the shareholders also. So that is what has happened. That's what I was
earlier also saying that the overall strategy is not just in context of products but the strategy
around marketing them and whatever technological support can be provided so that the ultimate
value comes out of that. So that's going to be therefore, all our products in that context are
important for us.
Sanketh Godha:
Got it. But the margin expansion, what you are seeing from 1:9 months is largely attributed to
Utsav and then the nature of the product. That's a fair understanding, right, sir?
Dinesh Pant:
Yes, yes. This is also a product, but there are other products also which are delivering much
higher margin than the overall margin that we are seeing. So at this point of time, we will have
to review our margins also because then in a competitive market, it's a toss-up between what
margins you want to give and what is the business growth? Because market share optimum
market share is also a consideration. So we expect that there is going to be some saturation point.
So we continue to introduce a different variety of products and continue to review our existing
products.
Sanketh Godha:
Got it. And second point, sir, if I look your growth, your par business is struggling a bit to grow
in the 9 months. And whether -- just because company is focusing on non-par whether the focus
on non-par is cannibalizing to par and, therefore, it is not translating into overall company
growth, maybe product mix is good, margins coming from there is good, but the overall growth
is struggling. Just wanted to understand that, is it fair to conclude that the non-par focus has
cannibalized into par or to some extent ULIP also when the market were that great and you're
not going in that piece in that sense?
Siddhartha Mohanty:
The first thing is that when we talk of par and non-par, first focus is customer. So, any product
we design we keep customers in mind and the design so that customer gets best of the product.
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And since there has been directional change and focus is more on non-par at present, some
impact has been there on par, CMO will...
Life Insurance Corporation February 09, 2024
R. Sudhakar:
Sudhakar, CMO. Yes, our Chairperson put it, there will be some impact on the par side also. But
at this time we are focusing that different categories of agents are having their specialization and
they are actually selling their products. That is why par continues to be the large proportion of
business which we are having today. There are very strong plans which are there in par also,
which have actually grown.
At the same time, during the last year, there were also revisions which we have made in the --
some of the plans in the par business, increasing the sum assured and increasing the ticket size
in certain cases. So such increases have impacted a little bit of a number of policies in those
plans, which have been compensated more than in the non-par side through the non-par products,
which have been launched in the recent past.
Sanketh Godha:
Got it, sir. But sir, given this strategy, can we expect a positive growth to happen in FY '24 or
growth to come back in FY '25 in total APE terms or you are okay with not growing as
significantly but mix changing and resulting in the margin?
Dinesh Pant:
Definitely, we would like our growth trajectory to be there. In fact, it is already on track to that
and it will be -- the APE growth will also continue to be our driver. So that's very much on the
focus. And that if you see quarter-to-quarter, that situation has improved. In fact, in the
individual side, it is already -- there is APE growth, which is already there.
So we are looking forward to having rational margins, margin improvement, VNB improvement
as well as the APE growth because without APE growth and the combination of the margin, the
overall VNB won't grow. So that direction is very clear for the Corporation, we have to continue
-- we'll continue...
Sanketh Godha:
Okay, sir. And last one, just on group business on overall basis, it has declined for 9 months.
Just if you can give a little color on the group business, what led to this decline, whether it is
GTL or fund-based business or annuity just -- and your outlook on, say, GTL or annuity, what
is your outlook given it has declined in the current year.
Siddhartha Mohanty:
Actually group business, you see some of the big ticket we could not get in time. So those are
coming. If you see whatever decline was there in Q2 that has been reduced in Q3. And if I tell
today it has further improved. So I'm confident whatever target is there for group business, we
will definitely achieve in the current year because we are getting confidence from our all our
customers, big clients. So they are gradually releasing money.
Sanketh Godha:
Sir, but this pressure is largely in annuity or GTL or it's more in fund-based business that
moderation in the growth in group?
Manju Bagga:
This is Manju looking after this. So there is definitely a reduction in the fund-based business and
that is because fund-based business is a lumpy business, and therefore, some premiums, which
have come last year, definitely, will not be repeated, but we are looking into more funds from
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other sources. And as regards GTL business, it has shown a good growth and annuities are also
continuing to show grow.
Life Insurance Corporation February 09, 2024
Sanketh Godha:
Okay. So sir, the moderation is only because of the fund-based business, the profitable segments
like GTL and annuity have grown in the.
Manju Bagga:
Yes.
Siddhartha Mohanty:
Those are growing.
Moderator:
Next question is from the line of Ajox from Sundaram Mutual Fund. Please go ahead.
Ajox Frederick:
Congrats on a good set of numbers. Sir, if I just back compute the new business from individual
non-par, the new business on the APE side of things, it seems to be a decline Q-on-Q. Is that
what you're getting at?
Siddhartha Mohanty:
See, non-par, you are talking, I'll give you a specific figure for...
Ajox Frederick:
Yes, yes, please, please go ahead. Yes.
Siddhartha Mohanty:
Yes. Non-par APE which -- hello?
Ajox Frederick:
Hello, can you hear me?
Siddhartha Mohanty:
Yes, non-par APE last year Q3 -- up to Q3 9 months of 2022 and 9 months '23, if you compare
earlier, it was INR2,213 crores as against that, currently, it is INR 3,299 crores. So thereby, we
are showing 49% growth in total volume. Under share also -- non-par share also, as I mentioned
earlier, it has moved up to more than 14%.
Ajox Frederick:
Yes, sir. I understand that. I was talking from the new business mix, which you gave at a
proportion. You gave the split of new business mix and coming from the other non-par segment.
Probably I can take it off-line also in case you don't have the numbers available.
But sir, again, the follow-up to Avinash's question, the others. Again, if you split the first half
and 9 months, we see that the new product's margins are phenomenal like versus the industry is.
So you mentioned that there is a case for you to come off and be more competitive. So if that is
the case, how much will you sacrifice on the margins there to gain growth?
Siddhartha Mohanty:
We have to maintain balance because growth is required as well as margin both things…
Dinesh Pant:
Yes, as we explained earlier also, this challenge is always going to be there. And that's what we
have ensured that even in the 9-month period, while we have previously increased our rates.
There has not been any let down on the mix. So in certain products for sure at a certain point of
time when the competition -- no market is without competition.
So there in order to remain competitive we will have the review. But then we continue to
introduce new products also simultaneously. Our ultimate aim, if you look at 16.6%, we have to
move from there upwards on the margin side, that's the direction.
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Life Insurance Corporation February 09, 2024
And on the VNB side, we want to show robust growth also. So that is like a very dynamic
strategy about rebalancing the margin. But very interesting point here to be noted is that when
we are having good margins here, the returns to the policyholders are also very good. And the
products have been so designed in a manner so that it takes care of all the things.
Ajox Frederick:
That's very promising. And sir, just one question. Final question from my side is that
sequentially, 2Q versus 3Q, except this new product, which is propping up margins substantially,
have we gained product level margins sequentially 2Q versus 3Q?
Dinesh Pant:
Product level margins, every product might not have gained, as I was saying. At certain point of
time, certain products would be the leaders in the margin certain others would have to be because
we also have to look at which are the point of competition. And we'll have to review our offerings
there, for example, recently this annuity product we have seen a lot of competition there. So --
then at certain point of time, you have to look into margin versus your growth strategy there. So
the overall mix has to deliver, and that's the strategy.
Ajox Frederick:
Yes. I was talking from 2Q to 3Q perspective, historically, 2Q versus 3Q product level margins
have broadly remained the same, other than this.
Dinesh Pant:
Yes, yes. Under the non-par, we can say they have remained almost the same.
Ajox Frederick:
Sequentially right. Okay.
Dinesh Pant:
Yes under non-par also. Par also when you ask what we need to understand that when new
product offerings are given, that customers can be very common at certain times, they can choose
the new ones. So this small variations in the participating side also need to be seen in that context
also that when the greater offerings which are not earlier there, now when they come, people
with preference they may been shift. It's not necessarily because LIC wants them to take non
participating products, it's a customer choice. So these sort of variations from quarter-to-quarter
over a trajectory of years also can be seen.
Moderator:
Next question is from the line of Aditi Joshi from JP Morgan. Please go ahead.
Aditi Joshi:
So I have a couple of questions. The first one is related to non-par. Just if you are able to provide
some details on it. The first one is, sir, can you please share the duration of these products as in
what is the typical duration as compared to your par products? And the second, can you also
provide split of the type of premiums, which is coming from these non-par as in split between a
single premium versus the regular premium products?
And from a risk management perspective, how do you plan to manage the risk from these
products, especially from a perspective of investment spread management. Again, I just want to
understand your thoughts as in what challenges are you facing? Or if not, is it is that -- is the
asset management assets liability matching comfortable at this point?
Or what challenges you might face in the future? The reason I'm asking that as you shared
previously that the mix because you're trying to limit is around 15%. So I'm just trying to
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Life Insurance Corporation February 09, 2024
understand what is limiting you to this 15% mix because given the margins are pretty much
higher for this product?
And just a related one is that as you increase the share of non-par in a mix, how will it affect the
unwind in your embedded value because the EV mix is largely skewed towards the value in
force. And if you look at the EV movement, a large of it comes from the unwind. So this is the
first question.
Dinesh Pant:
Yes. As far as you're pointing to that, there's nothing limiting us to 15% sort of level. The
appreciable growth I was mentioned earlier from around 8% to 14% has happened, because of
the strategic efforts which have been made towards creating a larger set of products, which
because as you all will appreciate that we are not offering many non-par products because
surplus distribution mechanism being in a different manner.
And now that is being offered. So that there's a natural traction towards that also because larger
offerings are there, and there's a conscious effort also on that side. So there is nothing limiting
that we shall be at 14%. Our aim is to provide products, which are value addition for us and good
offerings to the customer, and they will pick and chose.
And then automatically, we would expect because the people who are interested in guarantees
will move towards non-participating products, people who want discretionary type of benefits
will continue to take and many people will like to take both these type of products also because
they would like guarantee as well as discretionary. So that's the element.
As far as risk management is concerned, we are very cautious about how to ensure, in fact, very
line of business-wise specific calls are taken, you would see that larger distribution equity would
be there in the participating, discretionary. So therefore, annuities are matched by long-dated
papers so that and where the cash flow matching is actually in tune with the investment asset
there. Similarly, for the funds in the non-par side also, the larger proportion -- significant
proportion is towards fixed securities.
And very calibrated approach is taken. The investment market is always full of risk and our job
is to ensure that proper -- due risk management is done. So all the policies are in place, all the
actions are taken. And we try to ensure that ALM matching takes place. But within that,
optimization of returns can be ensured.
So that's a very continuous activity, which is undertaken and which is -- that's why we are taking
line of business-wise as well as product-wise approach on what should be the backing assets
how should their risk and rewards to be decided based on the available opportunities there.
Moderator:
Aditi, sorry, I'll request you to come back for a follow-up question. Participants will be the last
two questions. The next question is from the line of Nischint Chawathe from Kotak Institutional
Equities.
Nischint Chawathe:
I'm looking at your VNB Walk, and this is slide 18. And what it suggests is that the impact of
product benefits over a 9-month period, and I know it's not directly comparable, but it's actually
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down minus 3.6%. And I know we've seen margin expansion, but it's kind of -- I'm just trying
to understand as to why it is negative at this current time?
Life Insurance Corporation February 09, 2024
K R Ashok:
Yes, this is Ashok.
Nischint Chawathe:
Particularly in product mix, yes.
K R Ashok:
Am I audible now?
Nischint Chawathe:
Yes, yes, sir.
K R Ashok:
Yes. See, as I've mentioned earlier, we have repriced annuities twice during the year. That is one
in August and one in February. And that is the main reason why the margin was low -- so actually
contributing to a lower margin for the period.
Nischint Chawathe:
Sure. And if I look at the impact of assumptions, right, this is 0.7% in the 9-month period versus
1.9% and 2% in the previous 2 presentations. So is it something that assumptions have been
downgraded as well for this quarter?
K R Ashok:
See, actually, the major part of the assumption is the RFR change, which -- on which we don't
have any control and it's a market-driven number. And the RFR is actually pushing the margins
by -- in the down side. And the requirements of the VNB calculation required us to update the
latest information into the calculations. And we have updated the mortality element based on the
recent experience in to it. And that is done sometime in June '23. And these 2 are the major
things that impact the assumption.
Nischint Chawathe:
And just one small question is, if I look at the average policy term that has gone up from -- in
the non-par segment has gone up from 16 years to 43 years. What really explains this?
K R Ashok:
Actually, the -- if we look at the current quarter's performance, the current quarter's performance
is riding on the product volumes under non-par and the average term because that being a whole
life policy naturally shifts the average non-par savings term up.
Nischint Chawathe:
But I'm just trying to see -- first half the term was 16, 9 months the term is 43. Probably, it means
that your term for the -- for Utsav that you sold in the quarter would be like 50, 55 and your
average age is something like 32. So is that how one should think of it and that's where it goes
to like 80 plus is the whole life policy.
K R Ashok:
See actually -- since it is whole life, technically it is whole life, so it goes to the end of the...
Nischint Chawathe:
And your assumption would be like 85...
K R Ashok:
And therefore, the projection period will also be till the end of the contract. And that is because
of the huge number of business that is being done there, it takes the average term.
Dinesh Pant:
But this is not the premium paying term it is a policy term.
K R Ashok:
Policy term. 99 minus.
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Life Insurance Corporation February 09, 2024
Dinesh Pant:
Or premium paying term. Generally, these are limited premium paying products.
Moderator:
Next question is from the line of Supratim Datta from Ambit Capital. Please go ahead.
Supratim Datta:
So my question is on the hedging mechanism. So could you let us know now that non-par has
become around 14% of your APE. How are you....
Moderator:
Sorry, to interrupt you. Your audio is not clear.
Supratim Datta:
Can you hear me now?
Moderator:
Clear.
Supratim Datta:
So I wanted to understand the hedging mechanism for your non-par products. How are you
hedging the risk now that it has become a substantial part of the book?
Dinesh Pant:
Yes, there are two, three things to be appreciated that. First of all, as far as non-par annuities are
concerned, there is not a great requirement for hedging there because the cash flow management
as long as you can get adequately matching duration long-term bonds, which are available 40-
year bonds, for example, there has been there. So to that extent, the reinvestment risk gets hedged
because the cash flows coming from the coupons are very well matched to the pay outs.
As far as -- also another point, as of now our portfolio in the non-par segment is not that big as
the portion to overall portfolio. But we already have our derivative policy approved from the
Board and we start to rolling out now onwards so that future cash flows or reinvestment risk can
be taken care out of it.
As for a current amount of volumes are there, they don't pose any threat in that context. But we
are very conscious about it. Therefore, already the derivative policy is in place, and it starts
getting implemented very soon.
Supratim Datta:
And sir, just a follow-up on that. So now that you're rolling out the derivative method of
mechanism. So should that come at a cost.
Moderator:
Supratim, your voice is breaking.
Supratim Datta:
Can you hear me now?
Moderator:
Can you come in a better reception area, please?
Supratim Datta:
Is this better now?
Moderator:
Yes, thank you.
Supratim Datta:
Yes. So I wanted to understand now that you're putting in place this derivative mechanism, how
would that impact margins because this will come at a cost?
Dinesh Pant:
Definitely. That's why we have not gone for it as long as the cash flow. Generally derivative will
be required largely when there are -- cash flows are an issue for an insurance company. More
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Life Insurance Corporation February 09, 2024
pronounced requirement for them. So we want the policy in place and make a selective
utilization of that wherever we need it. Because it's not only about the cost of derivative, but at
times when the interest rates go up. So those -- many challenges are there in that also.
But the option should be available, so that whenever you are taking calls or such instruments are
-- another way of managing that is the duration management. So in case there are challenges,
like, we have introduced long-term products. We also are introducing short duration products
also, for example, we talked about single-premium products. So there, the risk will be lesser
because the matching instruments will be available.
We want to optimize whatever the best option going for the derivative or not going for that. So
that will depend upon the cash flow and the situations at that point of time. It's not that just
because you're derivative policy, you are supposed to hedge everything that you have. So what
is our interest rate view at that point of time in case if the interest rates movements what are we
expecting? So we'll take a call based on that.
Moderator:
As there are no further questions, I will now hand the conference over to Mr. Mohanty for closing
comments.
Siddhartha Mohanty:
Thank you. I hope we have answered all your queries satisfactorily. Please feel free to reach out
to us if you need to understand more. Once again, thanks for your valuable time, we are
committed to living up to the expectation of all our stakeholders. Thank you.
Moderator:
Thank you very much. On behalf of LIC, that concludes this conference. Thank you for joining
us, and you may now disconnect your lines. Thank you.
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