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Life Insurance Corporation Of India
Earnings Call Analysis
Q1-2025 Analysis
Life Insurance Corporation Of India
LIC reported a significant increase in total premium income for the quarter ended June 30, 2024, reaching INR 1,13,770 crores, up 15.66% from INR 98,363 crores in the same quarter of the previous year. This growth was driven by both individual and group business segments.
The individual new business premium income rose by 13.67% to INR 11,892 crores. Renewal premium income for the individual business also grew, reaching INR 55,300 crores compared to INR 52,311 crores in the previous year. As a result, the total individual premium income amounted to INR 67,192 crores.
Group business total premium income saw a substantial increase of 30.7%, reaching INR 46,578 crores. This includes new business premium of INR 45,575 crores, indicating robust growth in this segment.
LIC maintained a strong market share at 64.02% for the quarter. The individual business held a 39.27% market share, while the group business dominated with a 76.59% share. LIC is strategically focusing on increasing its market share and optimizing its product mix by emphasizing non-participating business.
Profit after tax (PAT) for the quarter grew by 9.6% to INR 1,461 crores. The gross margin (G&P) registered an increase of 23.6% year-on-year. The G&P margin improved by 23 basis points to 13.9%. Notably, the solvency ratio also improved to 1.99 from 1.8 in the previous year.
LIC's assets under management (AUM) increased by 13.22% year-on-year, reaching INR 5,787 crores as of June 30, 2024. This growth demonstrates the company's strong asset management capabilities and investment strategy.
LIC is focusing on enhancing its product portfolio, particularly in the non-participating segment. The individual non-participating annualized premium equivalent (APE) increased by 155.63% year-on-year. LIC has introduced new products and modified existing ones to meet market demand and improve profitability.
During the quarter, LIC sold 35,65,519 new policies, marking a growth of 10.86% over the previous year. The agency workforce also expanded to 14,24,847 agents. However, the number of policies sold through bancassurance and alternate channels saw a decline of 11.39%.
LIC's overall expense ratio for the quarter improved, decreasing by 98 basis points to 11.87%. This indicates better expense management and operational efficiency.
LIC continues to advance its digital initiatives. During the quarter, 2,49,643 policies were processed through the ANANDA app, reflecting a growth of 12.66% year-on-year. On the claims front, LIC processed 40,54,52 claims, including maturity and death claims, which saw year-on-year increases of 21.1% and 6.2% respectively.
LIC is implementing strategic projects like Jeevan Kiran to transform its agent business and make it future-ready. With a strong focus on digital transformation and product innovation, LIC aims to sustain its growth trajectory and improve profitability. The management remains confident about achieving all-round growth and meeting strategic objectives moving forward.
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Ladies and gentlemen, good day, and welcome to the LIC's Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Siddharta Mohanty, CEO and MD, LIC. Thank you, and over to you, sir.
Good morning, everyone. I am Siddharta Mohanty, CEO and MD, LIC. On behalf of the senior management team, I warmly welcome you all to the results and performance update call of Life Insurance Corporation of India for first quarter ended June 30, 2024. The results and the presentation can be accessed on our website and on websites of both the stock exchanges, BSE and MSC.
Along with me on this call, I have Managing Director, Mr. Sat Bhanoo; and Mr. Doraiswamy with me. Senior officials of the corporation present from this call are Mr. Dinesh Pant, Appointed Actuary and Executive Director; and Mr. KR Ashok, Executive Director from the Actuarial team; Mr. R. Sudhakar, Executive Director, Marketing and the CMO; and Mr. Hemant Gooch, Executive Director, Bancassurance from our marketing team; with Ratnakar Patnaik, Executive Director, investment front office under CIO; and Mr. Ke Girl, Executive Director of Investment back office from the investment team; Mrs. Manju Bagga, Executive Director of Tensen and Group ski; Mr. Rachana Khare, Executive Director, CRN Policy Servicing; the CB Ramana, additional Executive Directors, CRM Policy Servicing; Mr. Sanjay Bajaj, Head, Investor Relations; and Mr. Sunil Agrawal, Chief Finance and Accounts.
I would like to thank all of you for sparing your valuable time to join this call today, and listen to the LIC team. Let me now mention the key business, operational and financial highlights for the quarter ended June 30, 2024.
Premium income for the quarter ended June 30, 2024, we have reported a total premium income of INR 1 lakh 13,770 crores as compared to total premium income of INR 98,363 crores for the quarter ending June 30, 2023, registering a growth of 15.66% on year-on-year basis.
The individual new business premium income for quarter ended June 30, 2024, is INR 11,892 crores. And for the corresponding quarter of last year, it was INR 10,462 crores. It can be seen that we have grown by 13.67% in individual new weakness premium income on year-on-year basis.
Renewal premium income individual business for quarter ended June 30, 2024 is INR 55,300 crores as compared to INR 52,311 crores for the quarter ended June 30, 2023. Therefore, for the quarter ended June 30, 2024, our total individual premium income, including renewals is INR 67,192 crores as compared to INR 62,773 crores for the quarter ended June 30, 2023.
The growth business total premium income for quarter ended June 30 is INR 46,578 crores, comprising new business premium of an INR 45,575 crores comparison for quarter ended June 30 last year. The group business total premium income was INR 35,590 crores and comprised new business premium of INR 34,398 crores. Therefore, for quarter ended June 30, 2024, the total group premium was increased by 30.7% as compared to a similar period of previous year.
Our market share by last year premium income is 64.02% as per IND figures for the quarter ended June 30, 2024, as compared to over 2% for the similar period ended June 30, 2024. If we were to split this total market share of 64.2% into segment-wise, there of individual and group business. We would have a market share of 39.27% in individual business and 76.59% in the group business for the quarter ended June 30, 2024.
On a comparable basis, for the quarter, we ended June 30, 2023, the respective market shares for individual and group business were 40.84% and 72.5%. At this stage, I would like to mention that for full year ended March 31, 2024, our overall market share was 68.87%. Therefore, you can appreciate that we are making capital side in beginning market share now.
In on APE basis, the backup of business is as follows: total annualized premium equivalent HP per quarter ended June 30, 2024 is INR 11,560 crores. So is comprised individual APE of INR 6,747 crores and a group up INR 4,813 crores. Therefore, on a basis, the individual business accounts for 58.37%, and the group business accounts for 41.3%.
Further, of the individual, the power business accounts for INR 5,132 crores and the nonpar amounts to INR 1,615 crores. As you can see, our noncore share of individual APE is 23.49% and the prior is 76% for quarter ended June 30, 2024.
You will remember that our non-par share for quarter ended June 30, 2023, on AP basis within the overall individual witness at 10.22%. Thus, our individual non-par EPSA has increased from INR 608 crores to INR 1,615 crores and from 10.2% to 23.9% as a result of our intense focus on non-par business. There is growth of 155.63% in individual non-par APE on year-on-year basis impact that the momentum we built on non-par products is continue.
Profit after tax. PAT for the quarter ended at '24 was INR 1,461 crores as compared to INR 9, crores for the quarter ended June 30, 2023, an increase of 9.6%. PMV under E&P margin is INR 1,610 crores for the quarter ended June 30, 2024, as compared to INR 1,202 crores for the quarter ended June 30, 2023.
It can be seen that the G&P has registered an increase up 23.6% on year-on-year basis. Further delayed E&P margin for the quarter ended June 30, 2024 is 13.9% as compared to 13.7% for the quarter ended June 30, 2023, showing improvement by 23 basis points on a year-on-year basis.
Solvency ratio. Solvency ratio as of June 30, 2024 1.99 as against 1.8 on June 30, 2023. Assets under management. AUM, June 30, 2024, INR 5,787 crores as compared to INR 40 lakh 11,066.52 crores as on June 30, 2023. Therefore, our AUM has shown a growth of 13.22% on year-on-year basis.
Product mix. We'll continue to focus on our strategy of increasing the proportion of the non-par business. We have modified 2 products, namely Eli And lies new Giansante, and we reintroduced during April, June 2024 quarter. While we are discussing the Q1 activities here, I am sure all of you have seen the recent product launch announcements from LIC during this week itself. We shall explain more about these launches during our subsequent result calls.
Number of policies sold. During the quarter ended June 30, 2024, we sold 35 lakhs, 65,519 new policies as compared to 32 lakhs 16,301 new policies in the quarter ended June 30, 2023, registering a growth of 10.86% over the corresponding period of last year.
Agency workforce. As on June 30, 2024, the total number of agents was 14 lakh, 24,847 as compared to 13 lakhs 43,440 as June 30, 2024. The market share of number of patients are on June 30, 2023 -- June 30, 2024 stands at 48.64% as against the 50.9% for June 30, 2023. As already informed to you earlier, FY '24 analyst call on May 28, 2024, we have started working on a project to transform our agent business to make it future ready and to be the best in class always.
The project is called Jeevan Kiran, and we have onboarded a global farm Acanto lead this project. On number of policies sold basis, the agency force sold 34 lakhs 9,809 policies during the quarter ended June 30, 2024, as compared to 31 lakhs 19,611 policies during the corresponding period of last year, registering an increase of 11.2%.
It can be seen that approximately 97% of our policies in the quarter ended June 30, 2024, were sold by our agency force. Even on a premium basis, approximately 96% of new business premiums came from our agency channel in this past quarter of current financial year.
Contribution by Banca and alternate channel. During the quarter ended June 30, 2024. Banca and alternate channel premium aggregating over [ INR 1.27 crores 5.36 crore ] June 2023, registering a growth of 22.7% on a year-on-year basis. With this, the share of Banca and alternate channel by new business premium has increased to 3.46% for the quarter ended June 30, 2024, as compared to 3.22% for similar period last year.
Further, Banca and alternate channels sold 55,795 policies for the quarter ended June 30, 2024, as against 62,097 policies for the quarter ended June 30, 2023, registering decline of 11.39% on a year-on-year basis. If we look at the contribution of purely Banca channel, approximately 70% of business to Banca and alternate channel.
Our overall expense ratio for the quarter ended June 30, 2024 was 11.87% as compared to 12.85% for the first quarter of last year. As you can see, there is a decrease of 98 basis points on year-on-year basis.
Consistency. On a premium basis, the persistency for 49 and 6 past months. After the quarter ended June 30, 2024, stands at 78.23%, 72.16%, 67.53%, 66.97% and 61.62%, respectively, as compared to 78.37%, 72.11%, 70.5%, 64.54% and 62.73% respectively, up to the quarter ended June 30, 2023. On a number of policies basis, the persistency for 13, 25339 and 61st month. Up to the quarter ended June 30, 2024, stands at 67.81%, 59.73%, 54.08% and 49.39%, respectively. As compared to 66.15%, 59.28%, 57.72%, 52.04% and 50.79%, respectively, up to the quarter ended June 30, 2023.
Therefore, consistency has improved for 25 and 49 months on a premium basis and a number of policy basis, it has improved for 3 and 9 months year-on-year.
Operational efficiency and the digital progress. In our digital initiatives through the agent-assisted ANANDA app, we have completed 2 lakh 49,643 policies through this app during the quarter ended June 30, 2024, as compared to 2 lakh 22,167 policies for the corresponding period of previous year, thereby registering a growth of 12.66% on year-on-year basis.
There is a growth of 88% in the number of active agents and for the quarter ended 30 June 2024. Further, I'm happy to answer that has also been inspected with Banca.
Claims. The claims front during the quarter ended June 30, 2024, we have processed a 40 lakhs 54,52 number of claims, which included 38 lakh 68,253 maturity to survival benefit claims. On an amount basis, during first quarter ended June 30, 2024, total nativity claims were INR 41,854 crores and the total debt claims were INR 5,457 crores. On a comparable basis, for first quarter of last year ended June 30, 2023, the maturity claims were 34,611 crores and the death claims were INR 5,147 crores. Therefore, death claims are higher by 6.2% and maturity claims are higher by 21.1% on a year-on-year basis.
Awards and accolades. The list of awards owned during Q1 FY '25 is presented on Slide 58 of the agents, which indicates that our customer-centric efforts have been recognized by various industry platforms. Overall, I believe this has been a quarter where we have fired on all cylinders and delivered growth across parameters, and I believe we are on track to meet our objective.
Before I close my opening remarks, I would like to list down significant achievements during the quarter. There has been a sharp increase in our Q1 FY '25 market share to 64.02% from 58.87% for full year ended March 31, 2024. Also, past quarter of FY '24, we had a market share of 61.42%.
Second, our overall APE growth is 21.28% on a year-on-year basis. This represents a strong underlying growth in both individual and the group business. Our non-par share of individual business has further grown to 23.94% for Q1 FY '25 as compared to 10.22% of the same quarter previous year.
VNB has also increased by 23.66% on a year-on-year basis for this quarter. VNB margin has shown a positive basis with 45 20 basis point increase to 13.9% for Q1 FY 2025. While maintaining growth in all parameters, we have yet the focus on costs. And as you can see, the overall expense ratio is down by 98 basis points to 11.87% in Q1 FY '25.
Our agency is growing in the numbers and now stands at 14.25 lakh as at end of Q1 FY '25, increasing by approximately 6 point year-on-year. Now I would like to end by at Eli is progressing on stated objective of gaining market share after having focused on last year on consolidating changes in product mix, general mix and the margin improvement.
We are committed to further optimizing our product and the improvement of margins. With the digital transformation exercise, we intend to create a seamless expense for our customers and partners. We can our customers, shareholders, the partner, the employees, who's continuous support allows us to create a superior sustainable value as we move to next stage of our journey.
I now request the operator of this call to open the floor for question-and-answer session. Thank you.
[Operator Instructions] The first question is from the line of Avinash Singh from Emkay Global.
A couple of questions. The first one is around this new surrender regulation, I mean. So what really this increases the payout to the lapse. Now if I were to look at LIC's premium process has been dropped at 13 months or nearly 20%, 22%. Now in today's context, those lapsing policyholder will be getting 0. Now going forward from October, they will have to be paid depending upon the formula self-rated number. Now that means that, okay, you will have to sort of compensate to gross policyholder why sort of cutting benefits on the processed policyholder, tweaking your commission structure or taking a hit to the margins.
So can you just elaborate and help, I mean, what would be the strategy how to compensate for the sort of at least this 13 months extra period that comes under the new regulation. So how that will happen? That's my question number one.
Second question is on the margin front. If I look, I can understand that, okay, the margin on the non-file individual side could be an outcome of increased benefit payout due to maybe competition increase in guarantee increasing annuity rates. And also on the group side, it could be a mix of factors including how the component is changing between group saving, annuity and maybe return. That is right.
But a big puzzle, okay, how is that margin if we sort of staff drop on participating side, particularly because now even in the profit sharing and all nearly 19, 10 and all. So what is driving this point of a margin drop in the past saving side? Because you're still too big. So what is happening here on the individual participating side that is driving your margins so low?
[Technical Difficulty]
Ladies and gentlemen, we have lost the connection for the management line. Please stay connected while we reconnect them back.
Ladies and gentlemen, the management line has been reconnected back with us. Mr. Avinash, please go ahead.
So I get the 2 questions. The first one was on how are you sort of going to respond to this new cylinder resolution when you will have to sort of at least if I look like the 20%, 22% of the lapse and premium and the 13th month. Today, you are -- I mean based on regulation, you are not paying anything now going forward.
And of course, I mean this surrender money was anyway going to largely to the power pool. So going forward, I mean, the impact has to be felt by the position policyholder, the distributor in terms of commission twisting and also some better the margin. So how are you sort of foreseeing the impact of now the new surrender and with the line policyholder being paid is going to play out across the 3 stakeholders. So that was my question number one.
And second was that, okay, on the margin. I understand that on the group side, there are so many things that play out in the kind of annuity rates you offer even within group, the kind of product changes that happened. So that margin change while you understood still on the non-par side, I mean, because of the change in guarantees and maybe having lower margins, those partly understood.
But at your scale, and other thing, I mean, what is driving down this par margin volume? I mean, that's a material drop and you have a bigger scale. And I mean -- so I mean, what is happening on the individual power line margin?
Yes. I will repeat what I had mentioned earlier. As far as -- so as far as the surrender value portion is current spend, we are appreciate that, yes. At the same time the focus is now about how to set the right balance for the pro exiting policy during the term of it and for the company quality orders. That's why we would all appreciate that has been a very long in the mine within the industry and also with the currently better and what is the right approach here.
We appreciate the regulations, which we spend of the principals, which are laid down there. And we also know the master titles has just come about. As we intend to implement those few factors we need to consider is that, first of all, as far as the 40-year literation is considered the requirement to pay in the oral policies only applicable when they turn in the 5 years.
For the policies beyond the 5-year term, the requirement is that first year, full year premiums should have been paid. So when we consider sentiment persistency, the number which comes in the numerator is not inclusive of -- inclusion all policies which have actually paid for the full year, there will be policies, which have made on per month, which are paid for a quarter or half year and may still not be visible for central fact.
So to that extent, the impact gets mitigated in registration but that's not our aim. What we are looking forward is a distribution company. We continue to intend to provide the services in the management policies continue to remain persistent and not first year, secondary area.
There's one of the distill engage industries as engaging, how to assure smooth implementation and orderly implementation so that we can strike the right balance for the continuing for holders and all the stakeholders vis-a-vis and the people who are currently their policies for whatever reason during the term of the policy.
And yes, as you rightly mentioned, there could be many alternates to whatever is the final form of implementation, which we will consider different solutions, including the review on 16 sites, the motor payment, the structure, the design, which can also include a review of the cost, including distribution cost, but we try to strike a balance.
We have to be cognizant about the interest of all the people who are involved, including our distributors, and we try to do the manner so that any adverse impact has been investments when possible.
We continue to see more clarity and more ways for effective implementation for the relations also so that will be our approach when we consider these things.
Second aspect of you talk about on the VNB margins, as you rightly mentioned, VNB margin is dependent on the business mix of the company. It also depends upon the marketing strategy of the company -- overall company because VNB margin is really significant part from shareholder reporting point of view. But more significant as a value because there's a value which is coming, which is, therefore, the combination of the business mix and the margins there.
So sometimes, we do take strategic decisions to bring down the margin so that the VNB growth can happen, which we have seen, actually, that's one of the reasons that if you see in the first quarter, we have been able to achieve good not only APE growth, but also VNB growth of something 94 points, which was just around 5% in the last year because we took a calculated decision in which the benefits for the adjusted.
It's specific to the par segment, which we're talking about. Par is also big, has going to bring bandwidth of product, large number of products. Within them, the margins are different and significant. So there also business mix is one of the things, which drives the value of VNB margin within it.
But another important component is the risk-free rate or the discounting rates that are used for the valuation of VNB margins and Bass. And we have seen the outward trend in the RFR during this period, which has also significantly impacted the VNB margins in the participating line of business, specifically which. I hope that answers your query.
So quick follow-up on the calendar aviation. -- now will it be possible because you have a large agency distribution there the first year commission, will it remain viable to not have a clawback or a trail-based commission for the policies that if likely lab stay in 13 months specific.
So I mean, under the new current lender regulation, will it remain viable that you still have the usual payout structure that you are doing today, if the policy was to last, say, in 13 months after paying 1 year premium?
Regulation. And if we read the regulations, clearly, I don't think we are sure we have got challenges. The bigger challenge is possibly is from some provision in the draft circular, but not draft circular but master circular. So regulation are consistent with the pricing rate. So that's not a big point.
It would be possible. This one is full of possibilities. Many solutions are possible. Clawback is one of them, but it's not a necessary provision. We'll try to see ultimately the final shape in which we have to work out. We are in constant interaction within our teams, marketing teams, whenever product review or product design has to be considered. We have to consider all the aspects.
So everything is possible. Clawback is an option but not an necessary option. At this stage, will not like to preempt and say this is going to be -- everything is possible, like we review all the ticket sizes possible. But I think action has got an implication. So we have to see what is the best possible combination of decisions that we have to take in product review.
Our product reviews anyway is a very regular year for us and it's a continuous requirement for us. Whether product regulations are there or they are not changed, still review will always be there be from the persistent to consider these aspects. So yes, this is an option but not a necessary action that is envisaged by.
And sir, one data question, if you can help. I would believe, around INR 14 lakh crores would be your equity investment. How that is spread across your par and non-par book? And what means the fair value gain sitting in these 2 books?
See, not talking about specific numbers, but as a conscious decision for the participating business, we consider that no distribution benefits. We would always be happy to have an equity backing ratio of around 15% to 25% in that way, really around 20% plus going forward.
As far as noncore business is considered, I'm talking about the business, which is for the consideration of policy of these liabilities, largely because the guarantees are involved and the guarantees being involved, there is the requirement of asset liability matching to that extent.
So a very small portion of equity backing is there. But in our ASM fund has got a substantial amount of equity backing. So this is a mix in which we consider the nature of the business, the requirement of maximizing and or rather optimizing the benefits for that class and also ensuring ALM in that context. So that is -- in principle that is our full strength.
The next question is from the line of Suresh Ganapathy from Macquarie Capital.
So I had a question on your, again, margins. So what do you -- I mean, pad that we are giving increased benefit payout- to the customer and it's a strategic decision that we have taken, perhaps that's what is causing a reduction in good par and non-par margins that you're talking about. And also, we are looking at the calendar are regulation. So how do you look at the full year margins? You were around 16% to 17% for FY '24. I know there is a complex product mix aspect also. Would that also be considering that do you think you can maintain margins on a full year basis?
And also carrying on Avinash's question on the equity book allocated. I mean, you're saying that the guaranteed products are non-par as a higher, what we call government securities. But when I look at the part of your IPO document, you have allocated a massive INR 5 trillion to your non-par book equity.
Now at the time of IPO out of INR 9.8 trillion. I think right now, out of INR 14 trillion, it looks like even almost 50%, 60% of the book would be allocated to non-par if I look at your IPO document on an outstanding basis. Can you please provide a clarity on that?
Yes, to the second part of the question, I think please note what I mentioned. I clearly mentioned that further participating business, this is the equity backing ratio. When you're talking about non-par books including the effects allocated to ASM available solvency margin fund, which is in non-par fund.
So where the allocation is there, but the accretion from that fund is to share shareholder side. Allocation we see on the books at performance. And that's why that when you're talking about or equally backing ratio, that is in the context of the liabilities, which are in the nonparticipating contracts. So that is slate, yes.
And the first question?
And the first question was a forward surrender value?
Overall margin outlook, sir. How we look at the full year margin outlook versus last year.
I'm aware that some people have given their estimates on this thing. -- but like not like to get example, let me say, -- for example, even a athena certainly when we have to go up, the actual out comes from the difference on the customer area. Doesn't necessarily mean that the current factors should go up and desisalso go up. It may happen. It will not happen.
For example, strategically an insurance company may come up with the products, with the hard side with the center we less or with the different duration or the customers. So I personally feel it will be sort of the speculating without -- because the customers here for this type of surrender factor is not available with us as at this point of time.
And that will evolve. And I'm saying that there will be some continuous thinking about balancing the benefits for the continuing policy holders vis-a-vis the EBITDA and policy holder we still are saying that something from here onwards, we may change here because the regulation allows for provisions for that thing.
So if we consider the products as of today. And then they continue to with the case, then the initial values have sent that. But we always appreciate that if these center values have to be done or increased under values have to come into play, and this will be a record, we review and redesign of its products so that value can be protected.
Now that may have an impact on the business volumes, that may not have an impact on the business volumes, that they create high accessibility of products or less debt on the tanker. So it's not something which is very static. And on those days, it can be projected, but is an impact. We are confident that insurance companies together already will work out the way and the revenue in which the growth of the business will continue, and the profitability and the margins and to all the stakeholders will also continue to make reasonably good and fair. So we will continue to strive in that direction.
Okay. And just one final question on your strategy. I know it's a bit complicated, but the point here is you are bringing down your power margin non-par margins more so on the non-par margins I was looking 1Q FY '23 was 72%, 1Q '24 is 33,3% and 1Q, '25 39.8%. So you have consistently brought down the margins by a massive 30 percentage points over the course of last 2 years just to push up the nonpar growth.
So I mean, how long can this continue? I mean the point here is you really want to prioritize growth over margin. How do you find the right balance, especially when you are also going to see a regulatory change because it looks like growth is coming at the expense of margins.
Yes, it's a very good question, that I question also. But if you would see that when we have drawn down margins in some other products, we have also introduced products with higher margins in between. Now we -- during this period, it's not that we have been continuously bringing down on margins. For example, for the annuities, while in the last quarter of the previous financial year, we did bring down our margins and increase annuity. We have reviewed and revised our rates in the current quarter.
So it has to be attuned to, as we said, our larger focus is to ensure that our VNB growth VNB by amount that is actual profit numbers are sustainable and upward looking. And that all of us, all anybody who in the sense and appreciate the insurance business, it is going to be a combination of the APE growth.
We gather significant high margins and stay with it with them, but the business volume may not come about there. So it doesn't result to any VNB assets. So therefore, it is going to end. And so what we are trying to do is, as on the competitive lines of business, wherever we have to -- we have no option, but we have to make our products as competitive as anybody else is giving.
So when we give it, we are saining out other products and some of them have been drops for us, introduce them through better benefits, through products which are value proposition for the customers, they are good for the shareholder, and they are good for even our internal stakeholders. So those type of products also get reduced.
We continue to rebalance that. It actually is something, which should be noted that despite of the challenges on the VNB front for the industry itself and large of it is also coming from the discount effects that we talked about. For ICs, the quarter-to-quarter VNB margin is better than the last first part of the last year. And we have seen our trajectory changes from first quarter towards the fourth quarter, and that is what directionally where we are expecting and vesting for.
The next question is from the line of Supratim Datta from AMBIT Capital.
First question is on your hedging strategy. So last quarter, you had indicated that you are working towards putting a hedging strategy for your no -- just wanted an update on that, where has that progressed? And how far are you towards putting up our hedging strategy for your non-ARPU. That would be the first one.
The second one was on the BMD work. There has been a 230 basis point impact due to change in assumptions. Just wanted to understand what's contributing to that? What has moved so if you could help with that. Is that something that less.
And lastly, the last quarter, you had mentioned that you were working towards, you can do composite license and -- what opportunities that could true up. If you could give us an update on what's happening with composite license, how work have been done in the last 3 months to take -- make use of it benefits of local.
I would answer the last question first regarding composite. Actually, we know that there will be some amendments, so that composite licenses coming. For that, we have already given statement. We are now exploring all possibilities to have some stake in some stand-alone health and students opening. So that because internally, we amend is not a internal health insurance vertical.
So better to have in some companies. So that acts going on. I think this year something will materialize.
Regarding our rating strategy, we have our derivative policy in place. We have taken approval, and to asking on that any further.
Yes. In fact, yes, we have our having a strategy in place at the board investment policy, we have already tied up with banks on that thing. And as our non-par portfolio increases, we have actually started to work upon that already. Besides that, in fact, I'm also aware that within the industry, there is also a fall whether the direct participation of insurance companies into this segment would also be transitioned, which is a very good idea being thought about and thought stage.
So we'll remain mutant to utilization of these strategies for the business.
As regards the assumption impact of assumptions on BNP. The major impact comes from the barn RFR. And there's a minor -- there actually additions to option in the way of better improvement in mortalities, which we have observed interest of term and group business that has been updated because as per the standards, we'd like to factor in whatever the permission we have to a basis.
And then we have also observed on that there is an improvement in the -- we draw assumption in the case of group that is towards the betterment. So these 3 are the most prominent assumptions that we have made. And the major the colon, which has impacted the margins are negative.
Got it. On the mortality experience for insurance, what is that contributed to have you looked into that, that could be one follow-up. On the composite license, thanks a lot for the clarification. I just wanted to understand that we were looking on taking a stake in 1 of the Southeast all the fares are privately held.
So are you looking at acquiring something? Or would it be a strategic stake? What are your thoughts on that? If you could give us some clarity, that would be helpful.
Actually, at this stage, we are exploring all possibilities, which will be in the best interest of LIC, all stakeholders that we are excluding and overutilize will also be able to know that.
So your first question was not very there is some.
Yes, sir, you had said that on a policy from insurance, which is one of the contributors to the adverse assumption change?
No, no, no. Actually, in case of term and group, only impact a negative impact is the fall in RF. The other contributions are positive.
The next question is from the line of Nischint Chawathe from Kotak Institutional Equities.
Again, going back to the same -- the margin change in the book. So what I understand is that the change that we can see on the par side was not because of benefit enhancements. So I think in your BNP back, you have sort of like two reasons for change in margins. One is impact of product benefits and the other is impact of assumptions. And I think what you seem to be now saying is that the par book is affected purely by impact of assumptions, is it?
See, that is impact on our book. One is as in the par book, which each has a different profit signature. And there the business of mix within the par group is also impacting to some extent the margins of par. And the most important contribution to the movement in policy observing the moment in the par books once again, see, cartoons of different products, which are different profit signatures and the business mix also contributes to the moment that we observe in the par business. And more importantly in the intersect of our business, the impact of par all is performed.
Okay. So because if I look at it, now this year onwards, you have almost 10% sort of economic share, shareholders have almost 10% economic share in the par book. And if we had kind of sustained it at 5%, what we added in IP probably margins would have been around 4%. So does RFR have so much of an impact, I think it's what my question is. And kind of coming back to the broader question on margins.
I understand that at this stage, it's a little challenging to sort of give an outlook on margins. Obviously, a product mix shift is definitely helping you. But at the product level for par or nonpar, is there a particular threshold margin below which you would probably not want to go and then say, or probably on this registered basis, it doesn't make sense.
And you would then say that look, beyond this, all of it is something that we'll pass on to our -- either our customers or distributors. So if you could give us something in your mind saying that we can't go below a particular percentage, whether it's a 5% or 7% or whatever. And beyond that, we will pass on.
See, I'm just using on that issue. Yes. It's very good for the business as far as IFRS very significant aspect. But we also need to appreciate that nature of products, which are in partial participating are differentiated, but at times, very similar also. And we limiting there to be products, again, within the parent move book side and my first month and the reading margins within the products will have significantly changed.
So if we have a product, which becomes a very blockbuster or very attractive and taken with open arms in the non-par side, and you've got a similar product in nonfunded book size, and there is going to be a trade-off. And so for a short period of time, that will impact.
So the business mix is down to change when you are taking a strategy towards a tab -- and that is something possibly which can't insisting on a quarter-to-quarter basis, which has to be allowed to set it down over a period of time. And we see. As far as your point about benchmarking were referencing, I think I indicated in my earlier response also.
What we are looking for a very growth, sustainable growth in the -- so we are I think we had work on our overall strategy of business mix, our business volumes and get margin. As a reference point, definitely another indication, which we have seen some of our results in the past that we have always referenced and benchmark to the corresponding period of the previous period and try to go upwards from there.
So the strategy is to gradually move upwards in this business margin overall last -- in the first year, it was around 15.2%. We moved to 16.8% at the end of the year. And that is the direction in which we are moving towards possibly 20% plus in near to middle term.
And of course, during that period, because the numbers on the margins only come after the quarter is lower for the period is over. So to what extent that strategy of mix and will the margin change or sacrifice or, in fact, not allowing it to be sacrificed at 15% and then the quarter and recalibrated for the next quarter.
But the direction is that we are going consistently towards upward trajectory that to be in line with the industry. We have seen in the industry also. There are some -- there have been achievements of high 20s or and they have settled down at comes down. So there will be always a shift in the -- what is the industry level and margin, but we confident that over some period of time, our business mix average is changing and stem sharply actually in the right direction will be expended benchmark industrials.
Got it. Just one small question and maybe this is probably a suggestion is that if you could break up your equity book between basically your investment book between equity and debt. And again, that breaking up into par and non-par because I believe last year you had made some transfers for equity from the non-par.
The equity share in the par book has gone up. So when we try to kind of collaborate the market value of enticing investment, it just helps us to understand how the allocations are happening. So maybe if you could either share a number or maybe subsequently kind of put it in your quarterly presentations.
Sure. Sure.
The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services.
Sorry to have on this meeting again. So on the par side, have we moved from 7.5% sharing to 10% sharing. And you've been alluding to the fact that the mix has been adverse in the par side, which has kind of dented the margins. Could you give some more granularity as to what is the kind of mix that is impacting whether it's the tenure of the products or it's the different nature of the product that's kind of impacting this? That would be my first question. I'll ask the questions later.
See, if we look at the par products, there are different types of products, which cater to different customers. And we have observed that the customer the product the customer provide is the distribution of term assert distribution of the ticket size has changed, and that is the contribution started with that to be impact on the margins.
Then we have moved to 10%, right?
Yes, in spite of me because the RF impact as we have -- the RF impact is more or ability to long term and therefore the impact on interest rates.
Yes. The other question is you alluded to on the surrender charges, you have mentioned that more than -- if the remint pay for more than 1 year, then only then the surrender charges impact will not be there in the first year. Could you give some persistency color on that particular cohort where the premium has been paid for more than 1 year, what is the kind of persistency for you guys in the 13 months for that kind of a cohort?
I think we will appreciate one thing that by overall analyst is that yearly policies tend to lapse the lease, the highest persistency for a patient happens in the policies where the ticket size is more and the more diet has been the trend. So but again, we can't speculate based on that because if the benefits change people will tend to change their -- the preference is also customer change.
That's whatever indicating that how it pans out, how the customer build winter because the endless customers will never lose some part of this investment, not that you're gaining out of it. So it does not necessarily mean it will translate into higher cylinders.
So far the actors will have to be considered. If we can tailor our products to make them more interest in distributor behavior and all those things can be linked together insurance companies can cross out the line. But yes, it has got an impact. It has gone to financial impact on the way we have the products right now. It's a challenging inverse that we have take care of.
But we cannot say for the year thing we hardly have any product with less than 50x is available. So that's not good to impact. That's why the for sure is something. That's because one is going to pay tender values. We are not going to discuss people for taking clearly more. That's a for sure.
We have worked out and we have discussed our dosing and we'll look into our product design accordingly, and engage in the discussions wherever they are required and to find the right way for pet. SP1 Got that.
And secondly, there has been a recent post towards lips, how do you see that kind of scaling up? And if I -- whether I heard it correctly that your medium-term target for VNB margins is 20%
[Audio Gap]
But we are also hopefully our big margin is coming from saving products. So that continues to be our paid book. The growth in saving nonpar is even much higher than the unit-led 134% in this quarter, where we are almost a 600% growth in our nonpARPU savings, representing it overall around 160% plus growth in our nonpar non-linked products. So that's the direction we are headed.
The next question is from the line of Sanketh Godha Goa from Avendus Spark.
My question is on the surrender rules are implemented on the current product structure if you don't do any pricing, what is the likely impact on the margins? Like this how much you need to just to protect the margin is the reason I'm asking that question. you mean what is the likely impact on the margin? That's my first question.
The second thing is that your drop of rates assumed to be 20, 22 percentage at the 3 months. You also said that there are some policies, which are quarterly, and they are part of the 22% rate. So if you can break out -- break up the premium of 20, 22 percentage, which is dropping off. How much is less than 1 year premium -- I mean the paying term is quarterly or high frequency compared to annual? That's my second question.
And lastly, somewhere the par business seems to be starting to grow. Anything to read between how -- is it because you help increase focus on long pars actually the timed or you think someday this business will come back in and contribute. Sir, those are my questions.
Yes. See, first of all, I just said I would not like to tune any day. We are still fairly optimistic, its that something better will come about. So I don't see any reason to assess. In fact, we have assessed, but it's not about VNB margin at here. The center value is not an issue only VNB margins per se.
It is about the best value provision from the customer. That's how we look into it. And I said earlier also, yes, let's be very clear about it. Margin is something, which can any product design product, it can have margin. So there cannot be the ultimate focus. The focus is that how did margin leads into the business growth and industry growth and for us as the company grows, so to as the Navy is achieved.
So at point of time, the 30% or 25% of but is not that significant. But what is the ultimate value, which are coming in terms of the business growth and the margins. That's going to be the consideration. And there is a direction in the end.
Yes. See, again, we need to appreciate something that it has been a big portion of it to move away, not actually move it, but to rather think it's not that we are moving away from participating business. And we are in at a point of time, they will decide what type of product they want to do. So that's a function of their needs.
For example, let's talk about Uli. Uli is if it's driven by mass sentiment and what market understanding customers have. So it is not necessary. It should have company's pushing at times, it is sought by the customer, that's why is. Same customers suppose come out with the new products. As a strategy, we find that we have got good number in a number of products in participating.
And in place to grow, we can come out with more guaranteed type of products, which customer needs -- so it's not only from business ratio or a margin point of view. We continue the value proposition, good for the customer point of view and for the insurer also that's why we come out with more offerings.
So it is possible that time -- and the customer -- the customer would have a budget of its own and that how curtain a particular year. So possibly, if the other spend on larger investment is our largest suprising was nonpar product, the same customer at that point of time may not be able to afford or buy a similar part of this. So if the functions all the outcomes cannot be seen in a short period of time.
So it's not that we want to reduce par business and grow into nonpar business. Estimate is that we want to offer all the product solutions to the customer and tell them the value of the guarantees as well as the choices for the discretion, and they are doing it.
As a corporation in transmission, we have realized that we have been in par business for long, and there was an effect of saturation in that market. We do not see substantial growth at this point of time at business, but we still expect and we are working towards reasonable growth in business also. In fact, in the recent quarter, we are seeing uptick in our participate sales also in the volume as compared to other taxes, which were there in the previous year.
So as a company, the direction from CMD is continuously that what we have to offer at value provision for the customer, and that is what is happening. The great growth per is coming in the non-par segment is the outcome of the number of products, which have been appreciated by the market that we have been able to offer.
An area which has been largely untapped from the point of the distributor, the policy holders, which have been there. So that is happening. And possibly there is a dent as an outcome of that in the participating business. It's not a conscious strategy to reduce par business. We want to improve our book size on both the sides.
But we realize exceptional growth can come from on at this point of time as compared to the pipe.
Got it. Sir, the second question, which I asked basically out of the 20%, 22% drop off, which we experienced after 12 months or 16 months. How much is less than 1-year premium paying plan because naturally, it will not be part of your calendar rules. So you'll benefit out of it. So just wondering whether we can assume it is less than 50% as of the drop of what you experienced in 13 months.
See, what will happen while I don't see -- as I was explaining earlier, I won't see much par plus in examining the current portfolio. If that is something to be done, we will read the number of products to ensure that they are in line with what we want them to, right? So I'm not bound by offering the same thing, which I'm offering currently.
So I have to first decide if this is a direction, these are the decisions which are going to make. And we will make decisions in a way to protect them. Of course, that can have business implications because I suppose we increase the ticket size or retail decision. And that can help persistency and then we have to see whether it has got -- it will be really better outcomes or that will change. That's an area which we -- we'll appreciate that this long discussion and protection discussion has happened on this concert, whether it is immediate thing is good or it is to be a gradual approach, which will work out, but we have to comply with whatever is the expectations that as.
We only have the right to discuss and present our case before then and ultimate will lose, what is required and comply with those things and take a design review to ensure that customers continue to rate and the possible distributors continue to get benefits, which are as best as possible.
And shareholders' interests who are involved into the business are also fully protected in plan with expectations that we create for.
The next question is from the line of Gaurav Jain from ICICI Prudential.
There's 2 questions from my side. One is on the new launches or so the so product that we launched has really helped us ramp up a AP side of it. So are there any new launches that you are working on, either on the non-par or anything on the annuity or, say, protection will it? So if you can help us understand what kind of new launches are you thinking on?
And second is on the distribution side. So if there are any steps. I can see there is some increase in the bank IAP and the direct AP also. So if you can help us understand what are the strategies that we are taking on the distribution side to increase more mix coming from these other channels also?
You say recently, we have launched 2 very innovative term product, Ubara the bar credit light was. And already we are getting very good response, getting traction in this market. And in coming days also, we'll be launching some more products depending upon whatever back we get from our customers as well as from our inforce. It's a continuous process as our appended actually told, I'm not depending upon market need and other things also. In all those things. So keeping those things in mind, we will be continuously launching innovative products. So that is one thing.
Second question was marketing strategy. You see, our banca has improved. Focus will be on alternate channel and digital marketing also without compromising agency channel. Agency channel will grow, but the share of other channel we plan systematically, it has to grow up. And already back soon in last quarter, Q1, they have soon, we are more focusing on alternate channel apart from bank.
Alternate means broker IMF corporate agents, those will be focused area in the current year.
The next question is from the line of Dipanjan Ghosh from Citi Group.
Just one question from my side. When I look at your persistency ratio trajectory between Q1 of last year, Q1 of this year and the decline in some of the buckets especially the early ones. I wanted to understand if you can give broad color on the project categories which have witnessed a decline? Or is it across the board that you have witnessed a deteriorating persistency trend.
Also, if you can break it up between the customer cohort in terms of high ticket versus low ticket? Yes, that would be my question.
That answer as well as there's a 3-month persistencies come concerned. I think on the quality basis, it has improved as compared to the last year on a premium basis is there. But the changes are very small. The difference is because we have taken certain decisions in the previous years, in which we have reviewed various the products where the persistency experience was not good, particularly on the micro side. So possibly, there is a shift from growth businesses to some of the entries businesses.
But as far as quality is considered in the policy that 13-month persistency is actually by policy business grew. So from 66.15% to 67.81%. So that's the case. And these are the cohorts, which are over previous period of time. Another reported aspect of persistency, which needs to be noted is that for the corporation, we have a very, very different role from any other possibly because of the 6-year decades.
And we have always been trying to balance between ensuring just a number of persistency and also making our availability. This insurance for all concepts, reaching every nook and corner. So persistency can be possibly significantly improved in the ticket sizes are increased.
But then there's a deprevation to the last segment of society, which can afford lesser amounts, so they have to be given smaller ticket side also. But by the nature, and we have seen that in the lower ticket size, the persistency experience is less because of the affordability issue.
So in case 1 percentage is lapsing, that's one way of looking at it in that segment. But a certain segment, which can afford and continue with that policy. If we do not provide them those ticket sizes, then officially, we can never benefit from the benefit of the insurance.
So there is some call, which is very critical and important for us. And these persistency ratios, again, line by our business-wise are different. We also show very high persistency in term business and all those things, but this is largely coming from small ticket size force contribution.
And we continue to review. We have reviewed a lot of products in their direction, but that has also impacted business volumes also. So we have to look into that aspect and the persistency, we are closely monitoring, doing all the efforts in that direction. And in fact, trying to incentivize the behavior of distribution also as well as doing the product designs, we have tried certain experiments.
At times it takes a little time for them to get implemented because the numbers other than 13 months are the ones, which have done in the previous period. Another important aspect is that this way of persistency calculation as seen from public disclosures and some of the companies may not be including micro business into it.
We do include micro business into our persistency calculation. That made a small impact, but never that has got an impact. So we have, therefore, had to review our myConnections products. That's what we'll continue to do. We realize the importance of persistency, and that remains a focal area for the participation.
Sir, just a follow-up, sir, would you like to give some color between Unit power and non-par savings in terms of how the purchase of the trends have been? I mean, excluding the ticket size and the customer got in terms of the product category, which class has the pressure?
Overall, the experience if I would say by non-par savings would be the best persistency to us. In that also, the term business will be the best persistency followed by nonpar saving products. Of course, the annuities give good persistency there also. Then they come -- the participating business has got lesser percentage mainly because of the ticket sizes, again, being less available in various products there historically also.
And units also show lesser persistency. But within units, some of the product session -- the new products have shown very good persistency. The old product that we had the persistence -- so ULIP also, the trend is different across different products. So that's why we are having a close look into which products to continue, which products in our redesign and wish to break out.
But would it be fair to assume that on a Y-o-Y basis, par has witnessed some pressure on the smart far has -- in the 3-month par has witnessed some decline in trajectory?
You are talking in context or persistently?
Yes, yes.
Yes, some of the products within the park, which have got lower ticket size, their persistency seems to have did. Therefore, we'll have to review those projects.
Ladies and gentlemen, that was the last question for today's conference call. I would like to hand the conference over to Mr. Mohanty for their closing comments.
So thank you for recently listening and our very, very thoughtful questions, and we hope that we have been able to answer all your queries to your satisfaction. Given the momentum in our business and rollout of various strategic initiatives, we are hopeful and confident that we'll be able to demonstrate all-round growth and the improvement in parameters as we move forward.
Thank you very much, and have a good day. Thank you.
On behalf of LIC, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
Thank you, everybody.