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Edited Transcript of ICIR.NS earnings conference call or presentation 21-Jul-20 9:00am GMT

Q1 2021 ICICI Prudential Life Insurance Company Ltd Earnings Call

MUMBAI Jul 21, 2020 (Thomson StreetEvents) -- Edited Transcript of ICICI Prudential Life Insurance Company Ltd earnings conference call or presentation Tuesday, July 21, 2020 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Narayanan Srinivasa Kannan

ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director

* Satyan Jambunathan

ICICI Prudential Life Insurance Company Limited - CFO

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Conference Call Participants

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* Ajox Frederick H.

Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst

* Ansuman Deb

ICICI Securities Limited, Research Division - Aviation Analyst

* Harshit Toshniwal

Jefferies LLC, Research Division - Equity Analyst

* Harshit Toshniwal

PremjiInvest - Investment Analyst

* Jayant Kharote

Crédit Suisse AG, Research Division - Research Analyst

* Madhukar Ladha

HDFC Securities Limited, Research Division - Research Analyst

* Manish B. Shukla

Citigroup Inc., Research Division - Director & Lead Analyst

* Mayank Bukrediwala

* Neeraj Toshniwal

* Prakash Kapadia

Anived Portfolio Managers Pvt. Ltd - Principal Officer

* Prakhar Sharma

Jefferies LLC, Research Division - Equity Analyst

* Prateek Poddar

Nippon Life India Asset Management Limited - Research Analyst - Investment Equity

* Sanketh Godha

Spark Capital Advisors (India) Private Limited, Research Division - VP

* Saurabh Dhole

Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst

* Suresh Ganapathy

Macquarie Research - Head of Financial Research

* Udit Kariwala

AMBIT Capital Private Limited, Research Division - Research Analyst

* Vinod Rajamani

HSBC, Research Division - Asia Insurance Analyst

* Yash Sidana

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the ICICI Prudential Life Insurance Company Limited Q1 FY 2021 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Mr. N.S. Kannan, MD and CEO of ICICI Prudential Life Insurance. Thank you, and over to you, sir.

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [2]

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Yes. Thank you very much. Good afternoon, and welcome to the results call of ICICI Prudential Life Insurance Company for the quarter ended June 30 of financial year 2021. At the outset, my apologies for this delayed start by 15 minutes. Board meeting ended a little late, so that's why we had to postpone the call by 15 minutes, sorry about that.

I have several of my senior colleagues with me on the call: Satyan Jambunathan, our Chief Financial Officer; we have [Jeet], who heads Human Resources, Customer Service as well as Operations; we have Amit Palta, who heads Distribution, Brand and Marketing as well as Products; we have Deepak Kinger, who is responsible for Audit, Legal Risk and Compliance Functions; we have Manish Kumar, who is our Chief Investment Officer, he manages investments; and Asha Murali, Appointed Actuary is also on the call. I also have on the call Dhiren and Mukesh from the Investor Relations team.

So to start in the context of COVID-19, if you recall, I had detailed our risk management approach during the last results call. I would now like to provide a brief update on our continuing response to the COVID-19 pandemic, which even now has an impact on how we operate.

So if you look at our presentation, Slide 3, on risk management, the capital markets have been quite volatile during the quarter and are expected to be so until we get full clarity on the economic impact of the pandemic.

With the extension of lockdowns in most parts of the country, some sectors could see significant impact on business, resulting in increased credit risk. So again to reiterate what I mentioned last time, our approach to market risk has been one of not taking on a risk that we believe we cannot manage.

Of our total liabilities, nonpar guaranteed return products comprise only 0.4%, and these are invested with minimal ALM mismatches. We continue to closely monitor our liquidity and ALM positions, and we have no issues whatsoever to report.

On the credit risk side, only 0.9% of our fixed income portfolio is invested in bonds rated below AA. We have also at our past results highlighted that we have no exposure to any of the defaults that have happened over the recent past, and I'm happy to say that, that continues into this quarter as well.

Moving on to insurance risks. I would like to talk about mortality first. The spread of COVID-19 and the resultant deaths is still increasing. Out of about 27,000 reported deaths in the country till yesterday, we have received claim from 69 lives within our portfolio. While our mortality experience continues to be better than our assumptions, we have been closely watching the developments and their impact on insured life mortality.

Further, as of June 30, 2020, we continue to hold additional reserves towards possible COVID-19 claims, this we had mentioned at the last call as well.

The other key risk is persistency. There have been concerns on the persistency experience given the uncertain economic environment for the quarter, while we have seen some deferral of renewal payment, the persistency movement has been in a narrow range, which we are very happy about.

Moving on to the expense risk. We are monitoring our expense ratios closely while continuing with investments in the areas of competitive advantage, such as information technology and digitalization. The key imperative for us will be to manage the costs in line with our business growth. So to summarize, from a risk management perspective, our clear approach continues to be to maintain the resilience of our balance sheet by offering suitable products and deploying appropriate risk management practices.

Our solvency ratio stands at 205.1% as of June 30, well above the regulatory requirement of 150%. Further, as I have mentioned in the last quarter as well, we are permitted to raise Tier 2 capital of up to INR 12 billion under the regulation, and we have not utilized any of it so far.

I will now move on to other developments during the quarter. On the distribution front, we are happy to announce our partnership with the IDFC First Bank. The entire suite of protection and savings products will be made available to customers of IDFC First Bank. The bank with its pan-India presence caters to the banking needs of over 9 million urban and rural customers. These customers can now leverage the bank's network to conveniently purchase life insurance products and provide financial security to their families from us.

I would like to inform our shareholders that the company's 20th Annual General Meeting, AGM, is scheduled to be convened on Friday, August 7, 2020, at 3:30 p.m. IST through video conference and other audio-visual means where shareholders can attend the meeting without being present in-person at a common venue. Kindly note that the remote e-voting for resolutions to be passed at the AGM commences on Monday, August 3, 2020, at 9:00 a.m. IST and ends on Thursday, August 6, 2020, at 5:00 p.m. IST.

We would request shareholders to exercise their right to vote on the agenda items. We have now moved our annual report to adhere to the integrated reporting framework. The annual report now covers a much wider representation of the business in addition to the financial aspects. So with this introduction on what really happened during the quarter, fresh developments, I will now move on to our performance for the quarter.

Our 4P strategic elements, that is premium growth, protection business growth, persistency improvement and productivity improvement, continue to guide us towards our objective of growing the absolute value of new business, while ensuring that our customer is at the core of everything we do.

I will talk through our performance on the 4Ps through Slides 6 to 9 of our presentation and then conclude with a commentary on the VNB for the quarter.

Coming to the first P of our strategic elements, which is premium growth. For Q1 of fiscal 2021, our annualized premium equivalent, APE, was INR 8.23 billion and the new business premium was about INR 15 billion. Given the lockdown and social distancing norms, coupled with the uncertain environment, the linked business was significantly challenged. However, through our focus on diversifying the product mix over the last couple of years, other product segments, and in particular, the nonlinked savings business continued to grow during the quarter.

While we began the quarter with a significant decline in April, in the months of May and June, we saw healthy sequential growth, with June being almost double of April. As we go into the next quarter, it would be important for us to carry this momentum forward. The new business premium decline for the quarter was lower at about 33% compared to the same period last year on the back of growth in annuities and some of the group business segments. In fact, in terms of total business sum assured, we were the market leader for the quarter. The sum assured decline is far less than the top line decline for us during the quarter on a year-on-year basis. The year-on-year progression of our new business sum assured, clearly indicates our continued shift in the product mix towards the production segment.

Moving on to the second P of protection business growth. Despite the lockdown and the continued reluctance of customers to undergo medical test, we ended the quarter flattish with an APE of INR 2.14 billion.

Within this, in line with the retail disbursement by financial institutions, the credit life segment saw significant challenges with a decline of about 72% as compared to the same period last year. The protection business accounted for 26% of the overall APE resulting in a margin expansion for the quarter.

Within the protection business, retail protection continues to dominate the mix. You will recall that at the last earning call, we had highlighted developments in reinsurance rates. We had mentioned that we had filed for a new product, incorporating the reinsurance rate changes with an objective of protecting our margins. We have now launched the revised product in the first week of July.

For Q1, however, we were still operating with the old product, resulting in lower margins for the segment for the quarter. This was a transition phase, and we expect to return to normal margins like we mentioned last year -- in the last earning call, for the category going forward from here on.

On the third P of persistency presented in Slide 8, as mentioned earlier, despite having a significant period of discontinuity in the market, our persistency ratios were range bound. Our 13th- and 49th-month persistency measures as measured for retail, excluding single premium, stood at 81.8% and 63.9%, respectively. It would be worth mentioning that within this, the persistency of protection business has improved meaningfully.

On the other hand, the last quarter saw a significant drop in surrenders, which is positive for VNB as well as embedded value. It may also be noted that during this quarter, keeping in mind the difficult environment, we had offered an extension of grace period for policyholders to pay their due premiums without affecting their life cover. This extension resulted in some delays in premium payments. When we analyze the persistency for the previous year, and this year, at the end of the grace period, we find that persistency for both periods is very similar.

This gives us a comfort that while there have been some short-term delays, persistency will revert to normal level as we go through the balance of this year.

On the fourth P of productivity improvement presented in Slide 9, our cost to total weighted received premium, TWRP, ratio was 14.8% for the quarter as compared to 17% for the same period last year.

For the savings business, the ratio was 8.8% as compared to 11.3% for the same period last year. This significant reduction in cost ratios is primarily on account of higher share of renewal premium within the total premium. As you know, the maintenance cost of an insurance contract is significantly lower compared to the acquisition cost. As mentioned earlier, a key imperative for us this year will be to manage cost dynamically, in line with the emerging new business growth.

To summarize, the development of VNB for the quarter, therefore, has been influenced by the following 3 factors: one, a shift in product mix towards higher-margin products, resulting in an improvement in margins; two, transition in the protection product portfolio, resulting in the segment profitability being temporarily suboptimal; and three, a decline in the new business APE for the unit-linked business, resulting in a lower absolute VNB for that business.

As a consequence, our VNB for the quarter was INR 2.01 billion as compared to INR 3.09 billion for the same period last year. Our VNB margin for the quarter stood at 24.4% as compared to 21% for the first quarter of last financial year.

This expansion in VNB margin is primarily driven by the increase in protection and nonlinked savings mix for the quarter. I would like to mention that we continue to hold on to our objective of doubling our financial year 2019 VNB over 3 to 4 years, that hasn't changed.

Way forward, before I conclude, I would like to briefly cover our approach to the new normal in the context of contactless sales and service. I would also like to spend some time to highlight the significant opportunity that exists in the protection space.

The current COVID-19 situation is testing every organization's capability to quickly adapt to the changing customer attitude and behavior. It's also pushing the organizations to identify newer and better ways of reaching out to customers, distributors and employees to help and support them in day-to-day business activities. Over the last few years, we have made significant investment in the digital space and built an end-to-end digital platform. Not only we were an early adopter of digital technologies, but we continue to enhance our capabilities, including process reengineering to give our customers a superior experience.

These steps, we think, are standing us in good stead, especially when it comes to addressing the challenges posted by the current environment. As I mentioned, distributors are facing challenges in terms of their inability to have face-to-face meeting with customers. Therefore, our first priority was to move from physical handshake to virtual handshake. We leveraged our existing digital capabilities and integrated all our onboarding digital enablers together on a single collaboration platform, bridging the physical and digital divide completely.

The entire onboarding journey can be completed smoothly on this collaboration platform, as highlighted on Slide 14 of our presentation. This includes the ability to connect with the customer and share the screens synchronously, tools to conduct customer suitability analysis for a need-based product, product details and generation of premium quote, flexibility to add financial consultant or an expert on the same call, prepopulated form for an existing policyholder. And once the application form is submitted online, the customer can review the form details and provide digital consent.

During the quarter, 97% of our policies were logged on, on the online platform. Customer can also update KYC documents digitally and through WhatsApp. During the quarter, 95% of the documents were submitted on the online platform. For premium payment, customer can use multiple online payment options and can also activate auto debit for the future premiums.

During the quarter, for 78% of the new business premium, online payment options were availed by the customers. With the completion of the underwriting process, policy is issued and e-welcome kit is e-mailed to the customer. On the customer service architecture, you can refer to Slide 15. Our digital platform empowers customers to carry out almost every service transaction from the convenience of their homes. Our customers can pay their policy renewal premiums, generate tax certificates, policy statements, activate auto debit mandates, switch funds and can carry out many more such service transactions through our digital platform.

During the quarter, 93% of service requests were completed through self-help modules. Similarly, the customer can also use our new-edge technology option such as WhatsApp and can perform almost all service transactions through our mobile app. During the quarter, about 400,000 transactions took place through WhatsApp and about 92,000 customers downloaded the mobile app. Customers can also interact 24/7 with our chatbot LiGo to add -- to get their queries addressed. During the quarter, about 138,000 interactions took place with our LiGo chatbot.

To summarize our digital capabilities, we believe we have built a truly world-class technology platform to support our customers, distributors and employees to be able to carry out all functions. This positions us very well to continue sourcing business even as the COVID-19 abates.

So moving on to the next slide, Slide #16. On Slide #16, we have categorized all our concerns, which I mentioned to you about, be it the customers' concerns, employees' concerns as well as the distributors' concerns in terms of how our platform service has been able to address each of the concerns of our customers. I mentioned at my opening remarks that I will talk about the protection opportunity. If you look at our Slides 17 and 18 of our presentation, we have talked about what is the kind of protection opportunity we are looking at. As you all know, India is an underpenetrated country when it comes to protection products. While the overall protect sum assured as a percentage of GDP may be higher, what we thought we should be looking at is the sum assured as a percentage of GDP only in respect of the nonsavings products, that has been detailed in the Slide 17 of our presentation.

If you look at that slide, we find that when we backout the protection element of the savings products, we find that the penetration of sum assured as a percentage of GDP is only 19%, which gives a long leeway in terms of the potential growth of the protection business in the country.

If you look at the right side of the chart, retail protection policies still constitutes less than 10% of the policies sold annually by the industry. This is also substantiated by various studies on protection coverage in India, including the one done by Swiss Re in 2015, estimating a huge protection gap of 92% for India.

The other relevant metric is the sum assured to GDP, which I talked about. So alternative way to look at protection penetration is the coverage of the addressable population, which is calculated as the stock of retail protection policies against the number of individuals earning an income of at least INR 250,000 per annum. Based on our estimates, the coverage is just about 10%, as I said. We also collaborated our estimated size of addressable population segment which is about 57 million with a few other data points such as the number of nontransport cars in India, which itself is about 40 million.

Also, a report in March 2019 by Goldman Sachs had estimated this number to be about 68 million. Hence, with the sum assured to GDP ratio of just about 19%, as shown in Slide 17, at about 10% coverage of addressable population segment, the protection market in India is significantly underpenetrated.

We have given a couple of scenarios of protection growth rates and even with these growth rates, and these are mentioned on Slide 18, even with these growth rates, the projected sum assured to GDP ratio as of financial year 2035, that is 15 years hence for India, is still below the current sum assured to GDP ratio of many of the other countries. This demonstrates that the protection opportunity in India exists not just for few years, but for next couple of decades and even thereafter.

With these concluding remarks on the protection opportunity, I now hand over Satyan -- hand over the call to Satyan to talk through some of the details of our performance. Thank you very much.

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [3]

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Thank you, Kannan. Our primary focus continues to be to grow the absolute value of new business through the 4P strategy of premium growth, protection business growth, persistency improvement and productivity improvement. On the first element of premium growth, we continue to work on diversifying our product mix through a combination of distribution buildup and product propositions.

As you can see on Slide 23, while APE declined by 44% during the quarter, except the linked segment, other segments had steady growth. Nonlinked savings business grew 14% year-on-year, and the protection business was flattish. With this, the share of nonlinked products has further increased to 50% of the new business APE in Q1 FY 2021 as compared to 32% in fiscal 2020. As you know, nonlinked savings and protection segments are the more profitable segments.

Moving on to Slide 24 on distribution. For the agency channel, our focus has been to get more of our agents digitally active. For Q1 FY 2021, active adviser count was almost 90% of the count that we had in Q1 of last year. We added new agents despite challenges with respect to the licensing examination.

With ICICI Bank, we continue to increase the share of protection and annuity business. On partnership distribution, we added 7 partners during the quarter, including the one with IDFC First Bank that Kannan mentioned earlier.

Through direct channel, we further diversified our product mix with an increased share of nonlinked savings and protection. As a result, we continue to have a well-diversified distribution mix with distribution channels other than ICICI Bank contributing about 65% of our Q1 FY 2021 APE.

The retail business continued to anchor our new business, contributing about 85% of the APE. The second element of protection growth on Slide 27. As highlighted by Kannan in earlier slides, protection segment continues to be significantly underpenetrated. Given the pandemic, not only are we seeing a surge in product inquiries, but also a significant growth in direct purchases on our website. While there have been challenges to conduct medical tests, we see this demand as a significant opportunity as we revert to normalcy. With an APE of INR 2.14 billion for Q1 FY 2021, the protection business contributed about 26% of the APE as compared to 15% for FY '20.

The third element of persistency on Slide 29. We have always held that we believe that the core factor that drives persistency is the sales process, while other factors can impact at the margin. Our persistency experience during the quarter augments this belief as ratios remain range bound despite significant challenges in the environment. In fact, 61st month persistency improved further. We do expect the persistency ratios to revert to normal levels as we go through the year. In fact, on the 13th month persistency that we have reported at 18.8% (sic) [81.8%], given that it is a developing cohort, as we speak, this has, in fact, improved to over 82%.

The fourth element of productivity on Slide 31. To manage costs in line with the business growth, we have already cut down the discretionary expenses and are also renegotiating our office rentals. As we go forward into the year, while we will get saves on optimal deployment of manpower, we are seeking to improve manpower efficiencies by realigning span using training and coaching to achieve a greater degree of digital adoption and thus, higher productivity. We are also working on making our costs more variable.

As Kannan described, our cost to TWRP ratio for savings business was lower at 8.8% compared to 11.3% for the same period last year, primarily on account of the renewal premium component. The outcome of our focus on these 4Ps, as you may see on Slide 32, has resulted in our value of new business of INR 2.01 billion, with a margin of 24.4% in Q1 FY '21.

On the other financial metrics, our profit after tax for Q1 FY '21 was INR 2.88 billion, and the solvency ratio continues to be strong at 205%. Our AUM was more than INR 1.7 trillion at June 30, 2020, a growth of 11.1% from March 2020, driven by also a recovery of equity prices. The recovery of equity prices through positive investment variance should also enhance our embedded value as we progress through the year.

To summarize, we monitor ourselves on the 4P framework of premium growth, protection business growth, persistency improvement and productivity improvement to improve expense ratios. Our performance on these dimensions is what we expect to feed into our VNB growth over time.

Thank you. And we are now happy to take any questions that you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Suresh Ganapathy from Macquarie.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [2]

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Just 1 quick -- 2 quick questions. One is this persistency of 81.8%. So this is after taking into account the grace period, right?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [3]

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Yes, Suresh. This is as at the 30th of June, all grace period had normalized. So this is really the true underlying and has got no distortion of grace period.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [4]

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Okay. So -- okay. So then there has actually been a decline from the 12-month number of 82.5%, right?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [5]

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That is correct. But like I said, this is a...

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [6]

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12-month number of 83%, sorry. So -- but this is lower than the -- sorry, sorry. So just to understand, 81.8% is a fully normalized number, right? There is no one-off here?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [7]

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That is correct.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [8]

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Okay. So if that is the case, this is lower than your 82.5% that you factor in while calculating your EV, right? So as of now, there could be an adverse operating variance if I were to really calculate today, maybe it normalizes 12 months down the line, but would it -- can we assume that there will -- there would have been an adverse variance, persistency variance?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [9]

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No, Suresh. Because when we do the persistency assumption, there is also an expectation of some revival over the balance period. And therefore, to that extent, we would allow for that in the EV development. So like I said, even as we speak today, 3 weeks into the month, the same 81.8% is sitting at 82.2%. So this is something which naturally develops over a period of time. And even at these levels at this point, when we go through this year, it will settle at above 82.5% for sure.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [10]

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Okay. Fine. So yes, I mean, that obviously depends upon what the state of markets are, right, Satyan? We -- can we be so sure that you will really cross 82.5%?

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [11]

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Yes. Suresh, just to -- this is Kannan here. I just -- so I had a couple of points. So one is, regarding your first question on whether the bases are true then both the bases are correct because whatever the grace period issue has been there, it would have got evened out by June. Because if you remember, we had only grace period extension for April and May, and there's no extension subsequently. So Satyan mentioned, what you're comparing is the comparables. There's no change in terms of the denominator or numerator between what you are comparing for the last period and the current period.

Now the only difference is that the cohort development is happening even as we speak, which normally would have got trailed off by now because of the grace period, that's the point which Satyan was mentioning, that already, we have seen a 40 basis point impact. If you look at the last year at the same time, whether 40 basis points would have happened between the end of the quarter and the results? It wouldn't have happened.

So the grace period has started pushing it out. The good news is that June, when we look at the collection, we are almost at the same basis points we collected at the last year. We have started exceeding it somewhat. And within that collection actually year-on-year we had a meaningful increase in the persistency. So on that basis, if you put the development of the cohort, the protection increase in persistency, we don't see any reason there will be any negative areas. So that's the point I want to mention.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [12]

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Okay. And any idea, can you share how much would be the increase in protection prices effective July with respect to the new products?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [13]

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So depending on the term, sum assured and the various combinations, increases are in the range of about 10% to 25% over the old prices.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [14]

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Okay. Fine. Across the product ranges, right?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [15]

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That is correct. That is correct. So between 10% to 25% is the broad change in prices from the old pricing before 31st of March.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [16]

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Sure. And last question, VNB is down 33% this quarter, I know you guys have always maintained that 3 to 4 years doubling of VNB CAGR. I mean -- and of course, the path is not going to be linear. Based on the analysis that you have done, you still are very confident that you can sustain this? I mean you can achieve your 20% to 25% CAGR over the next 3 years? Because the -- remember Kannan and Satyan the ask rate is going to be very high next year. So therefore -- or next 2 years to meet your targets.

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [17]

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Absolutely. So ask rate is going to be high for the balance of 9 months this year also as well as the subsequent 2-year period. We are quite confident of that because in the short term, we are seeing a lot of momentum in the protection product. Even as we speak, after the introduction of the product in the first week of July, the sales year-on-year are doing quite well. So short-term product mix will lead to a margin expansion. And when the whole country returns to normalcy, over a medium-term period, the growth -- the top line growth will come back. Because of those 2 levers, we do -- as of now, we are very confident of doubling our financial year 2019 VNB in 3 to 4 years' time as we have articulated.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [18]

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And COVID-19 would not give you an adverse experience? That's what...

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [19]

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No. Of course, as we -- I mentioned on the call, it's a developing sort of a scenario. But given that the overall our assumptions versus reality, there is a cushion there as well as the fact that we had increased the reserving for COVID, there is no problem we are expecting at all.

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Operator [20]

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The next question is from the line of Harshit Toshniwal from PremjiInvest.

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Harshit Toshniwal, Jefferies LLC, Research Division - Equity Analyst [21]

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Congratulations for the decent results. Satyan, 2 questions. One, when I look at the protection, so we had a price hike in the very -- maybe we launched a different product, which was, say, 10%, 15% higher than pre-March price. And that was largely what we sold in Q1. Despite that, your -- you say that the margins were weaker than normal in this quarter. And secondly, when we look at the protection growth for the industry, I think retail protection breakup is something which you have not given in Q1, how the growth has been in the retail protection? If you can throw some light on that.

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [22]

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So Harshit, just to answer your question on the transition period, you're right. During the transition period in the first quarter, we used an interim solution. It wasn't a different product. The old product that we had, had a set of prices for a medical process and a set of prices for a nonmedical process. So what we did was we moved -- because of the lockdown, we could not conduct medical testing. And all process was nonmedical, we moved to the nonmedical price.

Eventually, the final price change is what we have implemented from the first week of July. In fact, if we had not migrated to the nonmedical, then the margins would have been even more adversely affected. So the quarter was a bit of cushioning of a price which was somewhere intermediate, which is now getting normalized from the first week of July onwards.

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Harshit Toshniwal, Jefferies LLC, Research Division - Equity Analyst [23]

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So basically...

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [24]

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The second question...

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Harshit Toshniwal, Jefferies LLC, Research Division - Equity Analyst [25]

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Yes. It's fair to say that the price...

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [26]

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So the second question on the retail protection mix, we usually give the mix -- the split in the protection portfolio at the end of the year, and I would expect to do that this year as well.

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Harshit Toshniwal, Jefferies LLC, Research Division - Equity Analyst [27]

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Agreed, sir. Sir, the only thing is that we know that for you, a large part of protection comes from retail vis-à-vis the industry and despite that -- and we had the protection rate hike, even though it was nonmedical, but on a Y-o-Y terms, we had that slight advantage. Despite that a flat protection growth you would say that the retail protection market share for us is similar to industry or as what it was in the majority of the FY '20?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [28]

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Yes. So like we said before, it still dominates the mix for us. We have always been a more retail protection-oriented company. In fact, like Kannan described, credit life during the quarter was very significantly affected with a decline of 72%.

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Harshit Toshniwal, Jefferies LLC, Research Division - Equity Analyst [29]

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Right. Right. Okay. Okay. Got it. And lastly, Satyan, on the expense side, so how have we dealt with the expense amortization for the year? Is it that we are going to do it over the period? And have we adjusted -- how much growth decline have we adjust -- factored in?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [30]

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So as we normally do, our expense is based on a full year estimate of costs, which is given for a particular top line, we haven't disclosed what is the top line that we have taken. But there is not a very aggressive top line that we have taken to estimate the expense ratios.

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Operator [31]

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The next question is from the line of Ansuman Deb from ICICI Securities.

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Ansuman Deb, ICICI Securities Limited, Research Division - Aviation Analyst [32]

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My question -- first question is on the segmental surplus, so we have a negative surplus in the par life category. Could you give some color on that?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [33]

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So the par life, the bonus is something which is only declared at the end of the year. And therefore, the 3 quarters in between are actually interim liability computation. You cannot take the quarterly number as a representative, it will get adjusted at the end of the year.

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Ansuman Deb, ICICI Securities Limited, Research Division - Aviation Analyst [34]

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Right, sir. Got it. And sir, another question is on the protection pricing that we have taken. So is there -- so this is beyond the reinsurance-driven price hike and would have an element of margin that we are kind of expecting from this product, right?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [35]

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No. We said this in April, we said it again. The objective of the price increase was just to neutralize the reinsurance price change and maintain neutrality of margins, not increase margins.

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Operator [36]

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The next question is from the line of Ajox Frederick from B&K Securities.

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Ajox Frederick H., Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [37]

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Sir, my question is regarding the nonpar product, which we launched recently, ASIP. How has been the traction of that? And has the bank started pushing that product strongly in recent times? And number two is, do we have a target mix in mind for nonpar products, guaranteed products?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [38]

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So Prakash (sic) [Ajox] from a nonpar guaranteed -- sorry, just nonpar guaranteed return products, we have never been a very big participant. We still continue to be the same way. Our focus where we offer it is still to do it for a shorter tenor of up to 15 years and that's the same approach that we have taken into this quarter as well. This product is predominantly sold through the nonbank channels and not through the bank channels.

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [39]

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Ajox, Kannan here. Just to add to that, in the bank, the focus in this product grouping would be on annuities. So the bank is selling annuities and protection as key products where we have seen significant momentum during the first quarter compared to last year, first quarter.

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Ajox Frederick H., Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [40]

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Okay. Okay, sir. Okay. And again, to again, harp on the protection price hike. Sir, are we expecting one more round after this July 1 thing is done?

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [41]

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No. We are not expecting anything as of now. But as Satyan mentioned, this is only to pass on the reinsurance increases and to the earlier question also, we clarified that our endeavor is that through this product, we will maintain the protection margin like we had last year. And the first quarter margin was a bit suboptimal though we tried some solutions, the margin turned out to be suboptimal. But our endeavor is just to pass on. And the increase, as Satyan mentioned, has been between 10% and 25% depending on which point you look at. And the endeavor is just to pass on and maintain our margins as we had last year.

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Ajox Frederick H., Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [42]

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But you are not looking for one more round. This is the final hike then for -- with respect to reinsurance, so completely this will pass on?

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [43]

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As of now, we're not -- no, as of now, we are not looking at any further hikes.

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Ajox Frederick H., Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [44]

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Okay. Sir, just a final question on the structure...

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [45]

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Sorry, sorry, Ajox, just so that we are clear. This product that we launched in the first week of July is the new approved product that we had filed in the last quarter. So this is really the final one.

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Ajox Frederick H., Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [46]

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This is the final. Okay, sir. Perfect. And sir, like -- I mean, some of the banca guys have been conveying that for a customer who asks a high commericial product, the customer is being sold a bundled product with critical illness or a heart and cancer. So is that a tactical move to make sure that bundled products are being sold so that the profitability is up for Q1? Or your thoughts on that, sir. Or is it just specific strategy?

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [47]

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So -- yes. If I look at probably ICICI Bank as a barometer of what you're saying, the way bank looks at this, we -- what we call an all-in-one product, which includes the critical illness cover, which you talked about, they see it as a huge customer benefit and a proposition to add a term and health together because one part of the product mitigates the risk of the customer dying and the other one mitigates the risk of customer continuing to live, but not a very healthy life where he has to look for hospital expenses. So they see it as a very powerful proposition.

From our perspective, it makes a lot of sense, as you rightly said, increases the margin for us. So I think that this is a nice way of both objectives of the distributor and ultimately, the customer as well as the manufacturer coming together. So it is not a tactical move. In fact, we would like to build on our success of Q1 and increase the attachment of such critical illness on the -- based on cover plan.

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Ajox Frederick H., Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [48]

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Sir but will you not be facing pressure on the demand, sir? Already the price hike has happened, then the -- you're almost among the top expensive players in term. And if bundling is happening...

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [49]

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I think -- no. I think the product features are so powerful that it is selling quite well. It is not that we are pushing that product, we are making it available and making sales teams aware of such a product's existence, and it is selling thereafter automatically.

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Operator [50]

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(Operator Instructions) We take the next question from the line of Prakash Kapadia from Anived Portfolio Managers.

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Prakash Kapadia, Anived Portfolio Managers Pvt. Ltd - Principal Officer [51]

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Yes. I had 2 questions. On the protection side, you guys mentioned about the challenges which we are facing due to the medical test not being conducted. So what is our stance? Are we letting go of big-ticket policies and concentrating more on small ticket or risk mitigating? And do you think that will continue in the near term?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [52]

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So Prakash, if I may take that. There are a combination of approaches that we are seeing applying on the ground. One, in certain places, we are seeing medical testing opening up, facilities are opening. So some proportion of people that are applying, we are able to get them to undergo medical testing.

The second part of it, if there is a reluctance in the mind of the customer to go out and get a medical test done, for those people, our pitch is now around saying that, look, if you want to take cover immediately, take it up to a limit. When the environment opens and you can get yourself tested, then you can add on to the insurance cover by purchasing another policy, and we will help you with that. So it's a combination of both of these because realistically, from a risk management point of view, beyond the sum assured, I cannot underwrite cover without a proper medical examination.

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Prakash Kapadia, Anived Portfolio Managers Pvt. Ltd - Principal Officer [53]

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Understood. And Satyan, on the OpEx side, you did mention about some of the levers for cost reduction. So if you could quantify rentals you did mention, anything on employees, how much of our employee cost would we pay? How much would be variable? And the rental impact we would be seeing next quarter onwards, and how much can cost be controlled?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [54]

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See, all said and done, rental or even overall rent cost to us is not a very big component. So what we will get in absolute phase out of that will be smaller. On the people side, given the current context, we have not actually done any manpower action so far given the difficulties in the environment.

What we are starting to see now is natural attrition is picking up. And in a way, we are carrying more costs that we -- than we can afford in the early part of the year because we do not want to precipitate any manpower action, especially since, as an organization, we depend so much on people and the way people are managed. That is something that we had even spoken in April. Our idea there is that as we go through the year, some of the optimization on manpower will emerge.

Our first port of call right now is to manage discretionary, generally, sales-related expenses. For example, advertising costs or business meeting costs, these are things which, even in the current environment, are seeing a very, very sharp decline.

On the manpower side, the only thing that we are doing right now is that we have frozen wage increases. And therefore, to that extent, with some natural attrition happening through the year, overall wage costs would be expected to come down in a meaningful fashion compared to last year.

But like I said, in the short term, we will end up carrying more costs than we can afford because we do not want to precipitate any people action given that we are a people business.

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [55]

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And Prakash, only other thing I want to add, Kannan here, is there are some deployment opportunities also. If I broadly look at the numbers, employee numbers should be about 14,000 as of June. And as Satyan mentioned, in the immediate near term, some of the attrition we will not replace. So it is expected to slightly trend down in terms of total manpower. And the redeployment opportunity I talked about is, from the perspective of new distribution getting added like IDFC First Bank I talked about, there's a great opportunity to redeploy some of the people and some other nonbanca channels into IDFC First. So those kind of redeployments, man control, wage freeze, so those are the things we have done.

And we think that the total number of people also will trend down in the short term as attrition picks up.

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Operator [56]

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The next question is from the line of [Aarav Sanghai] from VT Capital.

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Unidentified Analyst, [57]

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So I have a couple of questions. My first question, we show that we have -- like we (inaudible) for a couple of years that we are focusing on protection, but that hadn't given -- if you look at your June month, we have significantly underperformed the private industry as well because of our dependence on maybe -- on ULIP. So even if we are focusing on protection, what are the other areas that, like, we might see growth from? Because if I do some calculation, protection might be very margin accretive, but it requires a lot of capital. So what might be the other areas of growth?

My second question would be that as -- so just answer that first, I'll then get on the second question.

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [58]

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So just to answer your question on the levers of growth, protection is very important because from a margin and VNB point of view, it contributes disproportionately. Also something which is growing well for us is non-linked savings. The participating business, a little bit of guaranteed return products that we do has also been growing. And we spoke about how that has grown at 14% in the last quarter. Between these 2, if you noticed for last year, they actually contributed 74% of the company's VNB. And if I look at the top line performance, while unit-linked did decline, the non-linked business, we now grew at about 13%, and that is the segment which contributes almost 75% of the VNB. So in the near term, we think that is going to be a very important lever of growth in VNB. But as we go beyond this year, I would expect to see some growth come back on to unit-linked, and that should also help us from a VNB point of view.

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Unidentified Analyst, [59]

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Right. So sir, my second question is regarding this protection only. So if we look at our companies, mostly situated in the areas that have been most affected by COVID, if I'm right, the regions of Maharashtra, Karnataka and Tamil Nadu, et cetera. So given that our VNB is now getting more dependent on protection, what are the new risk management strategies that we are following specifically in the protection segment? Maybe not doing business in some areas or something, if you could give some color on that?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [60]

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See, first of all, if I look at mortality outcome out of 1 and you see the death rates and possible impact on mortality, we do not see that as being significant. What we, however, have to do at the time of selling a policy or onboarding the risk, is to make sure that the customer is not already suffering from it. And this is something that we have built processes to do to have this conversation with prospective customers in a remote fashion without having to go there. With that, we don't think we need to restrict business just because of where COVID-19 is prevalent, in which part of the country.

You spoke about possible concentration in geographies where there is more COVID-19, but in spite of that, you will see our protection APE was flat for the quarter. So in fact, that is indicative to us of a much stronger underlying demand. With even some practical constraints to fulfill, we are still able to grow that business.

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Unidentified Analyst, [61]

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Right, sir. So that is helpful. Just one clarification here, I remember we have launched the Precious Life product last year for already suffering health patients. So how is that product gaining traction under this environment?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [62]

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So it's a bit of a niche product in any case. And therefore, to that extent, it will have its own slow development. It's not the mainstream product that we sell, but it's coming along.

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Operator [63]

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The next question is from the line of Yash Sidana from Genesis.

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Yash Sidana, [64]

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Most of my questions have been answered, but couple of minor questions. One on the protection opportunity. You've compared India to the other countries. Now obviously, you've spoken about India's retail protection sum assured, what about the other countries? Don't they have savings-linked protection component? I mean is it a like-for-like comparison? That's my first question.

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [65]

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There will be some of that. But if you look at many of the other markets, their protection component is far, far, far higher than what it is in India.

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Yash Sidana, [66]

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Got it. Got it. And secondly, I mean, you've done a fantastic job on costs, and you spoke a bit about it. If you can -- if there is more to it on how have -- like what are some of the tangible -- tangibly explainable areas where we sort of cut costs? And what part of it is sustainable, structural?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [67]

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So like I said, a little bit flat. The biggest immediate opportunity that we executed in the first quarter was discretionary business development expenses. Typically, these discretionary business development expenses centers around advertising. Distributor meets any rewards or recognition forums that you might launch for distributors. Now given that the overall top line itself has not been strong, many of these we chose not to execute in this period. And that is what we saw as an immediate benefit, but even then if you see overall cost, the reduction in overall cost is not as sharp as the drop in the top line. That is something that we are conscious of, and that is what I mentioned a little earlier, that in the short term, we are carrying more costs that we can afford. It is through the year that we will have to normalize it.

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Yash Sidana, [68]

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Right. So whatever has happened in Q1, some of it is just a function of sales volume being down and the fact that there isn't a lot of opportunity out in the market. But what was built in Q4, was that sustainable? Because I think Q4 was the one where you really started to sort of reap the benefit of productivity.

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [69]

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Yes. So exactly the same approach we had in Q4 as well. Even in Q4, we attacked a lot of the discretionary expenses because in Jan-Feb itself, we saw some of our sharper declines from the unit-linked segment to start. March, of course, it accelerated a bit more. But in the quarter itself, you would have seen some of those expenses have gone down sharply. So this quarter has actually been a continuation of the same initiatives on discretionary distribution-related expenditures.

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Operator [70]

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The next question is from the line of Shreya Shivani from CLSA India Private Limited.

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Unidentified Analyst, [71]

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Adarsh here. Question again on cost spread. So obviously, you've addressed some part of that. I just wanted to put it differently and check, right, that -- 2 questions here. One is ULIP is down and given the market, it may remain like that for some time. And while the contribution of ULIP is not very large in the VNB, if I just go back to last year, its ability to take cost is pretty high, right? So it took about INR 1,000 crores, INR 1,100 crores of cost last year in FY '20. So in that sense, over a full year basis and not just one quarter, I wanted to have an opinion of: one, the ULIP volume both in context of market and also in context of what the main distributor is doing, that's ICICI Bank? And 2, whether the burden of cost if ULIP is down so much, then what can pick it up, if at all?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [72]

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Sure, Adarsh. So just to quickly address the cost thing, yes, any savings business does provide some absorbency of cost. But relatively within savings business, the non-linked savings products offer a greater ability to absorb cost and that is a segment which has got -- at least in the first quarter itself, we have seen a growth of about 14% come through. If that momentum continues through the year, and as the protection growth also starts to kick in, overall as a business, our affordability on cost will start to improve. Having said that, there will be an impact of unit-linked, which will have to be mitigated through a reduction in absolute costs. So that is something which will happen. Even for the first quarter, I don't know whether you've had a chance to see the final numbers, our total costs are down about 21% versus same period last year. It's not going to be one or the other, it's really going to be a combination of a product mix migration with some segments growing better and a reduction in cost to mitigate any possible effect of lack of growth on one segment of the business.

Now within that, from a distribution channel point of view, in the first quarter, if we saw the unit-linked business, across all channels, we saw a similar kind of a decline. Second quarter, we'll have to wait and see whether the channels recover in a different fashion. But at least for the first quarter, unit-linked decline was fairly similar across all of our channels.

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Unidentified Analyst, [73]

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I got it. I could see the cost drop, which was pretty sharp. Now just wanted understand is, what we've seen a many times, it's like -- because you have COVID, you didn't spend a lot and some of the ULIP may come back, but you still need to cut costs when you go back to normal business practices. So I'm just trying to understand how comfortable would you be on a full year basis on the cost metric?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [74]

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So what we have now assumed in the VNB that we have put out, we believe that is practical.

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Unidentified Analyst, [75]

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Got it. Got it. No, this is good. This is good. And the second, very mathematical question I had was, most of all are taking a hike in term life business, right, 10% to 25%. When you look at the product, right, do you look at VNB absolute, like this sum assured makes so much money? Or we still go back to saying -- meeting same VNB margin, right? So what I'm saying is, if you sold a INR 15,000 APE product or say a INR 20,000 APE product, assuming you are making 20,000 VNB there, now the price is higher, would you make 20,000 APE on that or -- sorry, the VNB goes up now on the same sum assured. How should one look at it?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [76]

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So VNB will go up a little. The overall average price increase will actually settle somewhere in between depending on where we do more business. But VNB will go up a little because we have done this pricing to neutralize on margin.

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Unidentified Analyst, [77]

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So absolute VNB to sum assured actually goes up on the pricing side.

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [78]

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A little bit. Slightly. Slightly. Yes.

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Operator [79]

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The next question is from the line of from Saurabh Dhole from Trivantage Capital.

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Saurabh Dhole, Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst [80]

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I have 2 questions, pretty basic ones on persistency. On Slide #29, you've aggregated excluding single premium and including single premium persistency. So I just had a small doubt as to why would you -- why would these numbers be different when the single premium product is just a onetime payout to you?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [81]

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So the trick here is that when we say single premium, a single premium product is deemed to be 100% persistency because all due premiums have been paid.

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Saurabh Dhole, Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst [82]

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Right.

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [83]

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But in reality, a more relevant segment of the business where one needs to measure persistency is regular pay. We have always focused on regular pay as the persistency measure. We also show single premium because some of the other market participants tend not to differentiate between the 2. In our mind, the most appropriate way of measuring persistency is regular pay.

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [84]

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Yes. I would say that we should go by the left side of that slide -- chart, which excludes single premium, that is the appropriate measure. We are forced to do the retail excluding single premium,because of the comparability with certain external disclosures of other companies. Otherwise, one should look at the -- assumptions and everything what we do internally also is based on retail, excluding single premium.

And mathematically, this number, the one with retail excluding single premium, can always get disrupted, depending on how much of single premium you do in a particular time because that gets added both the numerator and denominator being a 100% persistent product in that sense. So it's like 1when M by N is less than 1, M by X plus N by X is less than -- greater than M by X, that kind of a situation. So it is more like a mathematically, it gets bloated out. Otherwise, I would go by the left side of the chart.

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Saurabh Dhole, Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst [85]

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Okay. So internally also you're going by the left-hand side of...

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [86]

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Yes. Yes. Because the single premium, adding in the numerator and denominator showing an absolutely higher number, it doesn't make any sense.

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Saurabh Dhole, Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst [87]

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Correct, correct. And, sir, the second question is on Slide #67, where you've shown persistency ratios across the channels. On the direct channel, I see that it has one of the lowest persistency ratio. So intuitively, it would seem to me that direct channel customers should be the most resilient, right? So why would the persistency ratio be the lowest here?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [88]

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So you should look at this in conjunction with the product mix and the product category based persistency. You will see the chart just above where you see that the unit-linked persistency is a little lower than the other categories. Over the years, our direct sales has been more focused on unit-linked business than the other segments. So structurally, it tends to follow the unit-linked category persistency closer. Direct here is not customer coming to our website and buying. This is our sales employees who are executing upsell campaigns that are run centrally. And therefore, it is really a product proposition that is prepackaged that they are taking as a pitch.

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Saurabh Dhole, Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst [89]

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So in short, you're saying that the direct channel is more ULIP-heavy?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [90]

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Yes. At this point of time, but that is changing over time.

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [91]

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See, most channels have been like that, actually in the past. So to that extent, there was a little bit of a skew in direct channel, which we have been correcting. So it's completely a function of the product mix in a particular channel. Otherwise, we don't have any concerns regarding the differential persistency development too much across channels. It's more of a function of a product mix. And we do that disclosure annually.

And if you can see last year, disclosures, as an example, if we look at a direct channel, it is about 67% ULIP last year as against looking at the agency, which was a 50% ULIP channel. So this kind of wide variation in the product mix can cause variation in development of persistency.

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Operator [92]

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(Operator Instructions) The next question is from the line of [Ritesh Uppal] from Dolat Capital.

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Unidentified Analyst, [93]

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Am I audible?

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [94]

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Yes.

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Unidentified Analyst, [95]

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Okay. So my question pertains to the protection business. So during the last quarter, obviously, the first 2 months given the scenario in lockdown and we had a significant spike in protection demand, but there was an inability to conduct medicals. So just wanted to understand how much of this demand is still not yet addressed in terms of conducting medicals or translating that into APE. So -- and is the traction on that also consistent? And -- or are we seeing that more as like a onetime effect? So that's my first question.

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [96]

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So structurally, one of the things that we have been trying to do is where we are unable to execute medicals, we don't even encourage those sums assured. So early part we did see that. Our concern is that if we don't complete the issuance quickly, we may even get customer dependence. So increasingly, we are just going with saying that for now, take a cover up to the limit that I can underwrite you and afterwards, we can top-up your cover. So there is always some pipeline which will be there. But our focus is to continue to get in fresh log-ins to make sure that the momentum continues.

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Unidentified Analyst, [97]

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Okay. Understood. So basically, going forward, the customer would have the opportunity or option to increase the sum assured as and when things become better. But for now, we're just writing as much?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [98]

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That's the idea.

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Unidentified Analyst, [99]

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Okay. Perfect. Second question is with respect to ULIP margins. Would we see some amount of challenge there given both a fall in persistency and APE, so would the margins on the ULIP business also would have -- they would have suffered for us?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [100]

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No, they won't. Because persistency, again, is still better than assumptions in aggregate. Like I said, even if at this point of time, the reading is 81.8%, assumptions are set based on what they develop to. Second, from a cost perspective, you will see that overall, also, we have had a reduction in costs, absolute costs. And that will also help the unit-linked business. So I don't think the unit-linked margin has worsened in any way at this point of time. But really, the key will be looking at it at the end of the year, where the ultimate cost ratio is settled. And at that time, again, I think we will be in a position to highlight the category-wise margins for the market.

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Unidentified Analyst, [101]

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Okay. In terms of persistency, if we include the moratorium period of 2 months, and we view the persistency as a 13-month versus, say, 15 or 16th-month persistency. So would that metric -- on that sense would there -- would we still see a decline in persistency or would we...

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [102]

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No. Not at all. Not at all. Actually, with just a 1 month of extra moratorium -- so 13th in the old world is actually comparable to a 14th in the new world, and we are seeing no deterioration over there.

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Unidentified Analyst, [103]

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Okay. So in that sense, overall, it's better to sort of compare a 14th month versus the 13th month just for this particular year then?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [104]

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Correct. And that's how internally we look at it. And that's what we mentioned earlier on in Kannan's section, where we said that we analyze allowing for the 2 different lags, persistency is similar.

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Unidentified Analyst, [105]

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Okay. Okay.

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [106]

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I'm not seeing a decline, but reality is that there is that 1 month or 2 months of delay compared to what we would have otherwise got it in the last year. That is what shows up in the reported number because in the reported number, I don't take any credit for this.

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Unidentified Analyst, [107]

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Yes. Yes. Yes. Okay. And last question is with respect to Slide 25, where the mix from the banca channel has -- we see a decline. So just understandably mainly because of the ULIP-heavy sale that was being done through the banca channel. So in terms of the APE that is now reported here in the banca channel, could you highlight how much of it is in specific from ICICI Bank? And how much is the protection APE from the banca channel for the quarter?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [108]

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So of this number, almost 95% will be ICICI Bank -- 95%-plus will be ICICI Bank in bancassurance. Channel wise, specifically, product mix, we have not disclosed at this stage. We tend to do that once a year.

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Operator [109]

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The next question is from the line of Jayant Kharote from Crédit Suisse.

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Jayant Kharote, Crédit Suisse AG, Research Division - Research Analyst [110]

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All my questions have been answered, sir. Thank you.

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Operator [111]

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The next question is from the line of Sanketh Godha from Spark Capital.

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Sanketh Godha, Spark Capital Advisors (India) Private Limited, Research Division - VP [112]

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Just want to confirm again on the protection price hike. So in the quarter 1, we introduced the older product, where the price hike -- effective price hike because of the older product was in the range of 15% to 20% and with refiling of the product, we are seeing the same price hike of 15% to 20% or 10% to 15% -- 10% to 20% in rest of the 9 months. Is my understanding right?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [113]

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10% to 25% in the new product. Earlier product was a little lesser depending on the options that were being offered.

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Sanketh Godha, Spark Capital Advisors (India) Private Limited, Research Division - VP [114]

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But we had a price -- I mean, effective price hike in Q1, right?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [115]

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Yes, yes. But it was not the entire price hike required to pass on the reinsurance changes. That has only got affected from July.

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Sanketh Godha, Spark Capital Advisors (India) Private Limited, Research Division - VP [116]

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So sir, in that sense, our projection margin in 1Q would be relatively lower compared to what we might have made in FY '20 full year around 5%?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [117]

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That is correct. It would have -- it was lesser.

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Sanketh Godha, Spark Capital Advisors (India) Private Limited, Research Division - VP [118]

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Okay. And finally, just if you can break up that non-linked business into par, non-par and annuity because you used to disclose it in the past, so I just wanted to understand that non-linked part where exactly the growth has come of 14%?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [119]

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So we've not disclosed that in this disclosure. We'll see going forward whether we can disclose that. See, structurally, to us, it is not as if these are completely different types of products. From a customer behavior point of view, they tend to be fairly close. Sometimes one substitutes for the other. And therefore, we have always looked at it as one category. I can tell you this, that the non-par guaranteed return product that we were offering before, it's the same one that we are offering now up to a tenor of 15 years. And based on the yields that we are getting from underlying investments, our strategy on the guaranteed return product has not changed from what it was in the last year.

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Operator [120]

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The next question is from the line of Madhukar Ladha from HDFC Securities.

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Madhukar Ladha, HDFC Securities Limited, Research Division - Research Analyst [121]

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Can you quantify how much is the margin impact had you not worked on the lower margin in 1Q? Will that be possible for you to give us?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [122]

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We have not made that public, Madhukar.

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Madhukar Ladha, HDFC Securities Limited, Research Division - Research Analyst [123]

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Okay. And I'm sorry, I joined a little late. Did you give a margin walk? So are there any assumption changes? Obviously, one part of the mix...

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [124]

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There are no assumption changes. As we normally do every year, the expense in the VNB is based on a projected full year, and that's what we have done. Otherwise, there are no other assumption changes, except yield curve at the current yield curve.

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Madhukar Ladha, HDFC Securities Limited, Research Division - Research Analyst [125]

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Right. I mean the mix would have benefited the margin, but not to the extent because of the pricing being a little low?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [126]

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That is correct.

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Madhukar Ladha, HDFC Securities Limited, Research Division - Research Analyst [127]

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Sir, secondly, I did not understand was that you mentioned that we used the nonmedical pricing in 1Q, so wouldn't that pricing actually be higher than the medical-based pricing and shouldn't that have actually helped you even more?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [128]

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Yes, it did. It did. Without that, the impacts on margin could have been far worse.

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Operator [129]

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The next question is from Vinod Rajamani from HSBC.

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Vinod Rajamani, HSBC, Research Division - Asia Insurance Analyst [130]

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So one trend we've seen in this first quarter is the emergence of these, say, these broker channels, especially online brokers and so on. On your partnership distribution, there's not been a much -- there's not been a big impact in terms of the APE growth. Any steps you're taking on this specific channel, essentially because of the lockdown, the number of, say, the bank sales and the agency sales would have got hampered? So maybe this channel has probably done better than other channel peers. So any views on that?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [131]

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I think, Vinod, this is very hard to generalize in that fashion because in a partnership distribution world, that is contract with the bank, a bank tends to be far more active on technology as far as its own customers are concerned, whereas different partnerships might have a very different maturity with respect to technology. On the other hand, you also have a situation where, at least on the primary banks that we operate in, we are the only manufacturer, whereas in some of the partnerships, you might end up having multiple manufacturers present there. The third dimension that comes in is that a partnership, for them, income from insurance distribution could actually be a very large portion. And therefore, there's a very strong desire on their part to sell more optimally and efficiently in spite of the environment. So you actually have a lot of different dynamics which operates. So it's very hard to actually compare directly between 2 channels and say, this is how the outcome would be expected to be.

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Vinod Rajamani, HSBC, Research Division - Asia Insurance Analyst [132]

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Okay. And on the bank channel, any metrics that you're tracking in terms of what the, say, the cross-selling ratio is and so on? Any color you can give on how it's -- how it's played out, say, in the month of April, May and June?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [133]

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In short term, cross-sell ratios don't really change. The fundamental point also remains that our penetration in a bank partners. Customer base is so small at this point of time, that multiple product selling is not really where we are. The first priority is still to get the bank customers to buy their first term life product.

In a way, one loose measure of cross-sell can be, how much of the term insurance sales that the bank also incorporate a critical illness.

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Vinod Rajamani, HSBC, Research Division - Asia Insurance Analyst [134]

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Yes. So any color you can throw on that, how many, say, bank customers you're able to attach a critical illness product to?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [135]

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So of the term life that we sell there, roughly 25% to 30% of the sales, we are able to attach a critical illness.

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Vinod Rajamani, HSBC, Research Division - Asia Insurance Analyst [136]

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Okay. And in this lockdown, have you seen any change in that ratio?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [137]

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No. This is actually a new focus area. Earlier, it was the plain vanilla term which used to get sold.

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Operator [138]

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The next question is from the line of Mayank Bukrediwala from Franklin Templeton.

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Mayank Bukrediwala, [139]

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I just had 2 questions. The first one was related to bancassurance. So last quarter, Satyan, you had indicated that ICICI in the digital stack had downgraded ULIPs and upgraded protection, I just wanted to understand what's been the mathematical or the quantitative impact of that? So if you could quantify how much has the ULIP mix reduced in the banca channel?

And the second question is that, of your total protection policies, what is the proportion of the Five Pay structure in this Q1 versus what it used to be earlier?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [140]

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So one, Mayank, it's very hard to actually start quantifying the impact of the digital stack. But clearly, we are seeing a far larger throughput on the bank's own app coming mainly from the salaried segment. So there is some movement that we are seeing there. But I think it is too early to start calling the outcome of that. As far as the Five Pay is concerned, Five Pay is not a very large portion of the new business that we do.

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Mayank Bukrediwala, [141]

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In this quarter or even earlier?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [142]

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Earlier, it was a little bit more. In this quarter, it's a little lesser. It's actually less than 10% to 15% of our protection -- retail protection APE coming from Five Pay.

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Mayank Bukrediwala, [143]

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For Q1 you are saying?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [144]

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Yes.

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Mayank Bukrediwala, [145]

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Got it. And just on the first question, maybe you could just give me the mix as to what percentage of the banca premium was ULIP this particular quarter?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [146]

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So we have not disclosed that product mix at a channel level at this stage, Mayank. We'll probably consider that as we go through the year.

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Operator [147]

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(Operator Instructions) The next question is from the line of Manish Shukla from Citigroup.

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Manish B. Shukla, Citigroup Inc., Research Division - Director & Lead Analyst [148]

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So could you share the annuity APE number?

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Operator [149]

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Mr. Manish Shukla, we can't hear you.

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Manish B. Shukla, Citigroup Inc., Research Division - Director & Lead Analyst [150]

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Hello? Can you hear me?

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Operator [151]

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Mr. Manish Shukla...

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Manish B. Shukla, Citigroup Inc., Research Division - Director & Lead Analyst [152]

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Hello? Can you hear me?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [153]

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Yes, better.

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Manish B. Shukla, Citigroup Inc., Research Division - Director & Lead Analyst [154]

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Yes, sorry. Sorry for that. But could you share the annuity APE number?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [155]

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We've not given a breakup of the annuity separately, Manish. But the annuity business has seen growth in the first quarter over same period last year.

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Manish B. Shukla, Citigroup Inc., Research Division - Director & Lead Analyst [156]

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Yes. So continuing with an earlier question, I do appreciate that internally you'd look at linked and non-linked as 2 separate product categories, but within non-linked, par, non-par have different financial implications. So for us, as analysts and investors, it would make a big difference if you continue giving that disclosure going ahead, especially because non-linked is now almost 25% of the mix. So having that breakup will be very helpful. And the next question is on ULIP and retail in general, which we -- even if you look at the June 2020 numbers for you based on our IRDAI monthly data, but decline in RWRP is more than 40%. This is despite June '19 or being a very high base. So just trying to understand because my sense was, given the customer segment that you target, that segment should be more remunerable for digital channels for sales.

So why ULIP or retail in general is seeing such a large decline?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [157]

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ULIP has actually been affected because of a combination of factors. One, the overall sentiment with respect to the capital markets is not improved in a meaningful fashion. We are seeing this flow through to other market-linked products in the financial services space. Second, from the customer segment, that typically buys unit-linked. And these are large premium sizes. We used to historically have average premiums of over 200,000 on that. That customer segment in an environment like this, where there could be uncertainty around earnings, does not want to commit significantly to a long-term on a fresh contract. These are reasons why we have seen that segment being much more impacted than other segments. And that's also visible in the final outcome of the segment-wise growth. Unit-linked for the quarter declined 66%, the non-linked savings actually grew at 14%. So the behavior of the various customer categories that are buying these products are clearly different.

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Operator [158]

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The next question is from the line of Udit Kariwala from AMBIT Capital.

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Udit Kariwala, AMBIT Capital Private Limited, Research Division - Research Analyst [159]

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Hello? Am I audible?

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Operator [160]

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Yes, sir. If you could speak a little louder?

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Udit Kariwala, AMBIT Capital Private Limited, Research Division - Research Analyst [161]

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Yes. My question was that you mentioned that the ULIP margins have been intact and also the cost -- if we see the numbers, the cost has kind of been in control and the ratio has improved. And Protection for you, the last quarter contributed around 60% to the overall VNB. So considering these 3 facts, what is the sensitivity to the reinsurance? Because that is the only lever, which has led to the decline -- a sharper decline in VNB, if I do the math. So some color around that would be useful because if the sensitivity is so high, then on a longer-term basis, how should we look at it? That's my question.

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [162]

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So longer-term basis, ULIP has already been normalized because all sales from July first week onwards are on the fully passed on price. The quarter was really about a transition because we had to get the new product and the prices approved by the regulator. And that's why it is suboptimal profitability. At this point of time, I'm not able to give you a color on what is the specific impact of this. But given the seasonality of the insurance business, and that 9 months of the year are still left for us in a full year scheme of things, the final margin outcome on retail protection will be driven more by what we end up doing in the next 9 months than really by what happened in the last quarter.

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Udit Kariwala, AMBIT Capital Private Limited, Research Division - Research Analyst [163]

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Okay. Yes, but the whole thing was that the sensitivity looks very high, right? Otherwise, it should -- mathematically, it shouldn't have dropped -- the VNB shouldn't have dropped so much. That's the only point, I was trying to...

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [164]

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All of the protection business will be highly sensitive to mortality experience and reinsurance space. That's a natural pricing approach.

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Operator [165]

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The next question is from the line of Prakhar Sharma from Jefferies.

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Prakhar Sharma, Jefferies LLC, Research Division - Equity Analyst [166]

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Am I audible?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [167]

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Yes.

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [168]

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Yes, Prakash.

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Prakhar Sharma, Jefferies LLC, Research Division - Equity Analyst [169]

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This is Prakhar here. Most of my questions have been answered in some form. Just one bit on our reinsurance, the protection reinsurance. So I wanted to understand, means after this price hike, so are we seeing that the participation -- I mean, a greater number of reinsurance players are willing to now participate in India's protection market? Or is it still like there are still few players only who are there?

And secondly, if I can just understand what percentage of proportion of our protection business would we be reinsuring?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [170]

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So the same reinsurers continue to operate. It's not like it's brought in more people. It's the big 3 or 4 European, North American reinsurers that are operating the market that continue to operate.

What was your second question?

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Prakhar Sharma, Jefferies LLC, Research Division - Equity Analyst [171]

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In the -- so what proportion of our protection would be in reinsurance?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [172]

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Overall for the protection business, we retain 50% and we retain -- we reinsure 50% on average at an aggregate portfolio level.

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Prakhar Sharma, Jefferies LLC, Research Division - Equity Analyst [173]

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Okay. And after this price changes, so -- and I believe that as we expand the market also, probably our customer base will also shift. And -- so would that kind of impact our mortality assumption, maybe not now, maybe 1 year down the line as we grow our market base? And are we factoring that in the pricing as well?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [174]

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So what is factored in the pricing is the expected mortality of the target market that we are selling to. And as long as we stay in that target market, the experience should be in line with what we priced for.

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Prakhar Sharma, Jefferies LLC, Research Division - Equity Analyst [175]

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Okay. And currently, we -- at our base, we don't see -- foresee need to move out of our target market as such at current levels, right?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [176]

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No. We don't.

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Operator [177]

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The next question is from the line of Neeraj Toshniwal from UBS.

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Neeraj Toshniwal, [178]

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Sir, I just wanted to understand your view on the persistency going ahead, which we I think savings persistency is until 82.5% and protection was an acute. So how you are finding it to be right now in terms of assumption in terms of savings persistency particularly?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [179]

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So we still see the persistency experience being in line with the assumptions. We are not seeing anything adverse emerge at this stage.

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Neeraj Toshniwal, [180]

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But this wouldn't include June data, right, in June FY '21, so what have been the things that are picking up with the grace period over?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [181]

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Sorry, I didn't get what -- I didn't get the question.

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Neeraj Toshniwal, [182]

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So I think this is just two months FY '21, April and May. June -- but it doesn't have the June data. So what things are picking up with the grace period getting over now in the June month?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [183]

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So what we have already reported for June is after the grace period getting over. So like we were discussing in earlier questions, that if I were to compare like-to-like, last year at the end of grace period and this year at the end of the new grace period, actually persistency is the same or better.

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Neeraj Toshniwal, [184]

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Okay. Got it. So any -- so what is the assumption that -- I mean, we are sticking to 82.5%. So basically, you're saying, in your overall assumptions, will be up?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [185]

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That is correct. We don't see the need to change the assumption at this point of time.

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Operator [186]

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The next question is from the line of Shreya Shivani from CLSA. Shreya's line seems to be on hold. We'll move to the next question. The next question is from [Aarav Sanghai] from VT Capital.

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Unidentified Analyst, [187]

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I just had one more question. So sir, historically, you had a high base of customers from the high ticket sizes as is evident by ULIP which you service. So I'm just wondering since you have mentioned that these customers are very sensitive to equity markets, we still don't know how such -- like what percent that the equity market you had. So what exactly are we doing to make this set of people less sensitive? Because these set of peoples have a high share of, like, wallet share, which we can tap into. What are we cross-selling to them? Or what we are doing to make sure that our ULIPs become less sensitive to equity markets for them?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [188]

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So couple of things. The first thing that we have been articulating this now for almost 1.5 years is while we have historically had a strength in the affluent customer base, we've also wanted to systematically widen our customer composition. Part of that widening of the customer composition happens through a mix of new channels that we work with and the non-linked and the protection product categories that we are offering. What we are seeing, even as we speak, is that a customer composition is getting far more broad-based than it used to be 2 years back. So that derisking is something which is progressing quite well.

Within the unit-linked customer base or people who would have a greater orientation to buy unit-linked, there are a few things that we are working on. One, we are encouraging our entire distribution to focus more on a goal-based approach as opposed to an investment return-oriented approach. Because at the end of the day, the insurance savings product, even a unit-linked, has no liquidity for the customer in the first 5 years. And therefore, if a customer tries to exercise a short-term market view, this is not really the product for them to do it with.

And the entire distribution orientation, therefore, we are trying to move more and more towards the goal because in the longer term, which need not focus so much on short-term volatility.

The second thing that we are focusing on is asset allocation. Clearly, during this period, fixed income has done very well. In fact, if I take a 5-year period, fixed income has outperformed the equities by a long shot. And that is something that we are also, in our conversations with distribution and customers, encouraging more of, which is to say that the power of the product is not about one asset class, it is about flexibly allocating your savings to multiple asset classes. And if you need to, changing the -- having the flexibility to change it over a period of time. And that is the second proposition that we are driving to keep the interest alive in the natural unit-linked customer base.

There's still a bit of a -- some of these things are easier said than done. And that's the reason why you don't see all of that positive impact come through in the numbers. But as we continue to work on these pictures and these approaches, we think through the year, we will start seeing some turnaround happen there.

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Operator [189]

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We take the last question from the line of Sanketh Godha from Spark Capital.

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Sanketh Godha, Spark Capital Advisors (India) Private Limited, Research Division - VP [190]

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Just one more thing. I wanted to check on protection business. When we sold lower sum assured policies because of not able to do medicals, it means that invariably a lower sum assured policy will have a lower margin compared to higher sum assured? And as we start the -- as the higher sum assured kicks in, in subsequent quarters, the margins in the protection business should normalize going ahead, is that a fair understanding?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [191]

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So first of all, Sanketh, lower sum assured need not mean lower margins.

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Sanketh Godha, Spark Capital Advisors (India) Private Limited, Research Division - VP [192]

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Okay. Okay. Okay, fair enough.

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [193]

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It's really about the right price for the right segment. In any case, I think as the testing opens up and the opportunity comes back to be able to sell larger sums assured, it will help us get more coverage with the same individuals and therefore get more out of the business. It's less about margins, more about business potential.

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Sanketh Godha, Spark Capital Advisors (India) Private Limited, Research Division - VP [194]

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Okay. Got it. And finally, just on the non-linked side, whether can I safely or fairly assume that long-term Lakshya, which is a par product versus (inaudible) versus annuity, the margins of all 3 products will be broadly similar to each other? Or there is a huge difference between these -- within the buckets -- within these products which sit in non-linked?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [195]

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There will be a difference, Sanketh. The non-par will be the highest margin followed by annuity, followed by par products.

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Operator [196]

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We'll take that as the last question. We have one last question in queue. The last question is from the line of Prateek Poddar from Nippon India Mutual Fund.

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Prateek Poddar, Nippon Life India Asset Management Limited - Research Analyst - Investment Equity [197]

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Satyan, I just got a bit confused. Where have we seen a margin compression this quarter? Is it the savings line business -- line of business or is it the protection line of business?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [198]

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Protection line of business. Like I said, with the reinsurance price changes being effective early April, the fully passed on new customer prices being effective July. There was a timing lag in the product offering that we had during the quarter. This meant that for the quarter, the margins were lower. And this is exactly what would be the situation for every other insurance -- insurer, and for as long as they do not move to a full revised price.

We chose to actually do the transition far more quickly than anybody else in the market. I still see some of the others that's not having fully reflected the change in rates in the pricing. So we -- at least, I would think that we are back to normal far quicker as far as profitability is concerned than anyone else in the market.

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Prateek Poddar, Nippon Life India Asset Management Limited - Research Analyst - Investment Equity [199]

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Okay. And sir, just despite the volume decline, which we have seen in the savings line of business, the margins have held pretty stable, right? It would be -- is it like -- is it similar to what it was in full year of FY '20 or around those because of the cost cutting which we have done? Is that the way to think about it?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [200]

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Yes, savings business at a category level, the margins would have been similar to what we had for last year.

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Prateek Poddar, Nippon Life India Asset Management Limited - Research Analyst - Investment Equity [201]

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Okay. Okay. So despite the volume decline, right, we've seen?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [202]

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That is correct. That is correct.

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Prateek Poddar, Nippon Life India Asset Management Limited - Research Analyst - Investment Equity [203]

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So sir, then just an extension of this question, once we see -- so for this FY '21, given that the product mix will further change, and you are also looking at cost, is it fair to say that savings business margins ideally would start going up now from here on? And then you would also have a -- the tailwind from the protection line of business where now you've passed on the -- all reinsurance cost?

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Satyan Jambunathan, ICICI Prudential Life Insurance Company Limited - CFO [204]

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So between the 2, Prateek, I actually think that the protection margin impact will be more material in the overall scheme of things.

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Operator [205]

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That was the last question in queue. I would now like to hand the conference back to the management team for closing comments.

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Narayanan Srinivasa Kannan, ICICI Prudential Life Insurance Company Limited - CEO, MD & Whole-Time Director [206]

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Thank you. I once again thank everyone of you for joining the call and asking several questions and have good discussions. And I believe that we have answered all the questions in the queue. But if there are any residual questions, please feel free to ask any of us offline. Thank you. Have a good evening. Bye.

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Operator [207]

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Thank you very much. On behalf of ICICI Prudential Life Insurance Company Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.