Life Insurance Corporation Of India

NSE:LICI

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to LIC's FY '23 Earnings Conference Call. We have the senior management of LIC led by Mr. Siddhartha Mohanty, Chairperson on this call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Siddhartha Mohanty, Chairperson, LIC. Thank you. And over to you, Mr. Mohanty.

[Siddhartha Mohanty, executive]

Good morning, everyone. I am Siddhartha Mohanty, Chairperson, LIC. This is my first analyst call after assuming charge as LIC Chairperson. Starting today, I look forward to interacting with all of you on a more regular basis. On behalf of the senior management team, I warmly welcome you all to the results and performance update call of Life Insurance Corporation of India for the 12-month period ended 31st March 2023. The results and the presentation can be accessed on our website and on websites of both stock exchanges BSE and NSE.

Along with me, I have Managing Directors Madam Mini Ipe; Mr. M. Jagannath and Mr. Tablesh Pandey. Senior officials of the corporation present on this call are Mr. Dinesh Pant, Appointed Actuary & Executive Director, from actuarial team; Mr. Sunil Agrawal, CFO, from the Finance Team; Mr. Ratnakar Patnaik, Executive Director, Investment Front Office & Chief Investment Officer; Mr. [indiscernible], Executive Director of Investment-Back Office. From Investment Team, Mr. R. Sudhakar, Executive Director of Marketing and the CMO; Mr. Hemant Buch, Executive Director Banca; Ms. Rachna Khare, Executive Director, CRM Policy Servicing; Mr. Thiruvenkatachari, Additional Executive Director, CRM claims; Mr. Aditya Gupta, Executive Director [CP]; Madam [indiscernible], Executive Director of [indiscernible]; and Mr. Sanjay Bajaj, Head Investor Relations.

Now moving to the key business, operational and financial highlights for the financial year 2022, '23. Premium income -- for the year ended 31st March 2023, we have reported a total premium income of INR 4, 74,005 crores, showing a growth of 10.9% over the total premium income of INR 4, 27,419 crores for the last year ending 31st March 2022.

The individual new business premium income for FY '23 was INR 58,757 crores. And for FY '22, it was INR 54,960 crores, representing a growth of 6.91%. Renewal premium income individual business for FY '23 was INR 2,34,006 crores as compared to INR 2,21,661 crores for FY '22. The group business total premium income for FY '23 was INR 1,81,242 crores , comprising new business premium of INR 1,73,258 crores. In comparison, for FY '22, group business total premium income was INR 1,50,798 crores and comprised new business premium of INR 1,43,939 crores. Therefore, as you can see, the group new business premium had a growth of 20.37% during the year.

Our market share while last year premium income for full year ending 31st March 2023 is 62.58% as compared to 63.25% for the year ended 31st March 2022. Further, our market share was 40.58% in individual business and 76.65% in group business for the year ending March 2023. On a comparable basis, for the year ended 31st March, '22, the respective market share for individual and group business were 43.77% and 76.16%, respectively. Therefore, we continue to be market leaders, both in individual and large group segments.

Seen on APE basis, the backup of business is as follows: total annualized premium equivalent for the year ended 31st March 2023 is INR 56,682 crores, which is comprised of individual APE of INR 38,667 crores and a group APE of INR 18,015 crores. Therefore, on APE basis, the individual business accounts for 68.22% and the group business accounts for 31.78%. Further, individual APE, the par business accounts for INR 35,231 crores and non-par amounts to INR 3,436 crores. As you can see, our non-par share of individual APE is 8.89% and a par is 91.11% for FY '23.

You will recall that our non-par share for year ended 31st March '22 on APE basis was in the overall individual business was 7.12. However, for 9 months ending 31st December '22, the comparable non-par was 9.45%, which was 56 bps higher than full year non-par APE share at 8.89%. We believe this marginal date of 12-months period versus 9 months period is very specific to the customer demand characteristics during the last quarter of FY 2023. Our intent none the less remains to stay on course of continuously and a consistently building up our non-par business without ignoring the par business.

Profit after-tax. The profit after tax for the year ended 31st March 2023 is INR 36,397.4 crores as against INR 4,043.12 crores for the last financial year FY '22 ending March 31, 2022. Further, I would like to explain that the current year profit has increased due to transfer of an amount of INR 27,240.75 crore, net of tax, pertaining to the accretion and the available solvency margin from non-par fund to shareholder account.

VNB and VNB margins. Gross value of new business at INR 11,553 crores for the year ended March 31st 2023 grew by 16.46% over the previous year when it was INR 9,920 crores for the year ended 31st March 2022. Also, the net VNB margin for the FY '23 is 16.2% as compared to 15.1% for full year ended March 31st, 2022, representing 110 basis points improvement.

Indian remittant revenue. The IV of the corporation has been determined as 5,82,243 crores as of March 31st, 2023 as compared to 5,41,492 crores as at 31st March 2022. Therefore, the IV has grown by 7.53% on a year-on-year basis.

Assets under management. Assets under management as on 31st March 2023 grew by 7.65% year-on-year to INR 43,97,205 crores as compared to INR 40,84,833 crores as on 31st March 2022.

New product launches. Now I would like to inform you about new product launches. In line with our strategy of imitating the proportion of non-par business, we launched 7 new non-par products during FY 2023 to cater to customer requirements, namely LIC's Bima Ratna, LIC's Dhun Sanchay, LIC's new Pension Plus, LIC's Dhan Varsha, LIC's new [ take return ], LIC's new Jeevan Amar, and LIC's Jeevan Azad.

Number of policies sold. During the year ended 31st March 2023, we sold 2.04 crores new policies as compared to 2.17 crore new policies in the previous year ended 31st March 2022. As you can observe, while the individual new business premium increased by 6.91% during the year, number of policies declined by 5.93%. A part of this decline was also expected by us due to our management decisions on altering the structure of strong products where volumes may have been high historically but were accompanied by lower persistency high number of policies.

Agency workforce. As on 31st March 2023 total number of agents was 13,47,325 as compared to 13,26,432 as on 31st March 2022. Market share by number of agents as on March 31st, 2023 is at 61.26% as against the 64.3% for March 2022. On number of policies sold basis, agents sold 1 lakh 97,000 -- 1 crore 97 lakhs 18,314 policies during the year ended 31st March 2023 as compared to 2 crore 6 lakhs 43,241 policies during the corresponding period of the last year, registering a decrease of 4.18%. Therefore, you can see that more than 96% of our policies for FY '23 were sold by our agency force. Even on a premium basis, a little over 96% of NBP came from our agency channel for FY '23.

During the year ended March 31, 2023, other channels, [indiscernible], they contributed 1.52% by number of policies and a 3.44% by new business premium. For the year ended 31st March 2022, Banca and alternate channel contributed 1.28 by number of policies and 2.92 by new business premium. This year, we collected a premium of INR 2,020 crores via this channel as against INR of 1,600 crores, registering a growth of 26.25% over last year. We'll continue to be ambitious within this space, and we'll develop further plans and the strategy to increase the share of Banca and alternate channels within our mix over a period of time.

Our management expense ratio stands at 15.53% for the year ended 31st March 2023 as compared to 14.50% for the last year. The increase was 103 basis points on year-over-year.

Persistency. On premium basis, persistency for 13th, 25th, 37th, 49th and 61st month for FY '23 stands at 77.09%, 69.93%, 70.05%, 63.53% and 61.8%, respectively, as compared to 75.59%, 73.47%, 66.58%, 63.85% And 61%, respectively, for FY '22. On a number of policies basis, the persistency for 13th, 25th, 37th, 49th and 61st month for FY '23 stand at 64.28%, 56.97%, 56.9%, 51.05% and 49.86%, respectively, as compared to 63.45%, 60.70%, 54.09%, 51.92%, 49.86%, respectively, for FY '22.

Operational efficiency and digital. In our digital initiative through the agent assisted Ananda app, we will have completed 8 lakh 11,278 policies through this up during the year ended 31st March '23 as compared to 2 lakh 74,444 policies for the period ending 31st March 2022, thereby registering a growth of 195.61% on year-on-year basis.

Claims. On the claims front, during FY '23, we have processed 2 crore 21 lakh 17,029 number of claims, which includes 2 crore 12 lakhs 8,453 maturity claims. On an amount basis, during the FY '23, the maturity claims were INR 1, 85,044 crores and the death claims were INR 43,426 crores. On a comparable basis, for FY '22, the maturity claims were INR 2, 5,527 crores and a death claims INR 35,720 crores. Therefore, debt claims are lower by 34.43% and maturity claims are lesser by 9.97% on the year-on-year basis.

With this, I come to end of our detailed business parameters description for the year ended 31st March 2023. Now let us proceed to ask these question-and-answer system now. Thank you very much.

[Operator]

[Operator Instructions] The first question is from the line of [ Nisham ] from Growth Capital Advisors.

[Unknown Analyst]

Sir, I first wanted to inquire about the IRDA monthly reported numbers on the first year premium. Could you have seen a decline month-on-month in the last quarter for LIC? has the, mutual itself the year-on-year decline has been as high as 60%. So what is the management doing on that front to curb this decline of first year premium that we are seeing continuously for the last 3 months now?

[Siddhartha Mohanty, executive]

It is actually, if you see for the total year, there was growth, but towards the last. There were some depletion because of various factors. So many -- so they're taxes on front and other things. And the group business, particularly actually which constituted a substantial portion of our total premium income for 9 months. Actually, last quarter, there was a some set back. So that's why, total premium income for that quarter was -- saw some negative trend negative. That's the main reason.

[Unknown Analyst]

All right. Second question was on the conservative dividend policy that you adopted this year, I understand that there has been a significant rise in the shareholders will come as in the -- shareholder account fund this year. We do obviously asset from distributing the entire profit to non-par shareholder -- of non-par policy to the shareholders account. But still the dividend distributed this year has been quite conservative. I wanted to understand that in your presentation you have reported the yield on shareholders account as about 6.5%. Now that is not a very attractive yield compared to what is available to shareholders in terms of fixed deposits and other fixed income products that are there. So why not distribute a larger portion of the shareholder -- shareholder and let them allocate that capital for themselves because they are earning a better yield in the market right now.

[Siddhartha Mohanty, executive]

Yes. Actually, I think if you look from the plain number point of view, dividend distribution, it has doubled -- exactly doubled as compared to last year. And you would see that even dividend paid on per share, if you compare with any other company, it would still be a very, very strong number. As far as dividend distribution policy of the -- any insurance company or for any business is there. I'm not very sure that shareholders do look for dividend results. But ultimately, they're looking for the value of the business. We see a lot of scope for growth because, as you are aware, that the corporation is looking into turning around to the side of the non-par business and capital requirements are root there.

Ultimately, the value will be created from the shareholder by maximization of the value that is there. Distributing higher amounts would be a situation possibly where you do not see application of that money turning into better yields on that. So for the corporation, we see that it is the high type, and we are looking for growth opportunities. And in fact, we are very comfortable and confident for growth. So that capital, which is there, which will help us better the support for the capital for the future growth of business. And that would be the better strategy for realization of aggregates better use for the shareholder value creation, it will be better rather than distribution. But even from a plain number figure, it has a significant increase from INR 1.5 per square to INR 3 per square recommended as at this stage, subject to the shareholders, is a very good number.

[Operator]

Next question is from the line of Avinash Singh from Emkay Global.

[Avinash Singh, analyst]

Two questions. The first one is more on your operating variances in EV, watt at a rising out] of persistency. So if I see the persistency movement, our 25th month had shown a material decline, while other cohorts have seen improvement. Now net-net impact, that's a big positive number from the persistency.Can you help sort of a break it that, okay, how much sort of it has benefited from the improvement in cohort? Or is at -- has it benefited some bit from this 25-month dip in persistency? So that's question one.

And the second question, if you can help us understand your note [62-a] account where, I mean, you have explained some close to INR 7,500 crores of redemption in the tax liability because of its fund bifurcation. So how is that working? Because I mean, in the par side, even if bifurcated, I mean, the policyholder surplus, we -- also tax. So how is this sort of a tax benefit thats -- or reduction of tax liability of INR 7,500 crores emerging? Thats the -- to your account. So these are my 2 questions.

[Siddhartha Mohanty, executive]

Responding to your part of it, I think when we are looking to persistence in numbers, we'll have to appreciate the fact that persistency numbers as I reported for 13th month, 25th, and respectively. do not necessarily reflect the overall experience -- exposure of the company because what comes in the IV work or IV unfolding is not just a 13th month or 25th month, or irrespective of the overall experience of the entire portfolio. Even if we look into the first 3 points, which are normally covered [ 13% to 60% ], at least 3 points, it is better than last year. So even from the average point of view, we can find it out that it is helping us because persistency has improved about almost 2% to 3% in this area.

This persistency does not necessarily reflect the current business. It reflects over to the past years, right? And the greater focus is on how to build from here. I can just indicate to you that, overall, in the IV, as it has grown from the last year to the current year, persistency has been a positive source of surplus or atleast I can say, a contributor to that thinking overall basis.

[Unknown Executive]

Coming to your question on Note #6 on taxation. The bifurcation we were having a unified fund and the distribution of surplus in the ratio of 95:5. And therefore the tax was paid on the entire INR 100 of surplus that was generated post bifurcation and in line with the tax laws, and the review of the tax laws that we conducted, the cost or bonus pertaining to the policyholders of participating segment can be considered as a tax deduction and therefore, the tax liability on that has been reduced to the extend of 7,185 crores as reported in Note #6 .

[Operator]

Next question is from the line of [ Arjun from Aventus Spark ].

[Unknown Analyst]

First question is, within the overall EV. What will be the overall mark-to-market component that is hitting in the overall EV?

Second question, in 9-month or '23, we had disclosed net VNB margin product-wise. This time, you have disclosed on the gross VNB margin product-wise. So if you can give the net VNB margin for FY '23 product wise, that will be great.

And then third would be, there is an additional provision made for -- because of wage revision. What would be the impact on EV because of this additional wage costs that we are taking up? So this would be the 3 questions.

[Siddhartha Mohanty, executive]

Yes. See, as a policy, when LIC has gone public and declared our embedded value, we have considered -- we have new -- all of us are aware that we did fund bifurcation. And we are not aggregating what portion is the MTM portion of it because it is all considered as part of the value in-force business. That is the treatment we have been doing all along. So from the sensitivities, we can understand what results we get, but this number is again changeable. So we are not looking into that as a separate component of MTM or other parts of it. This is being considered not as a part of adjusted network, but as a part of the -- growth of business because we believe that this amount has actually come and emerged out of our fast business and the trade damage, which was there out of it. So it has been allocated that way.

So we are not considering an LTM gain basis. But yes, we can -- yes, note this one that whatever embedded value growth itself [ 7.5% ] has come about, it has been on top of it, despite not so favorable conditions coming from MTM side. And -- but we are very confident that going forward, this should be a positive contributor. And in fact, it will only be -- it can be seen as a positive from the future point of view. So that was the first point.

And about net margins in VNB, line of business-wise, we have been disclosing and informing about the margins on gross basis only. But at the competency level, for the corporation, we do indicate net margins. So net margins in the individual side and group side have got to be aligned as we are aware that then the benefits and increased net margins do come back. The overall strategy of the corporation is to systematically lower net by our business margin. But overall, ultimate goal of the corporation is to add on to VNB value by amount. So that is what can we see in that has grown [ almost 20% ]. So that's the way forward.

And as a base revision, it's actually what happens every 5 years, there is a base revision for the employees. In the past, we have been having a method of this that -- whatever the cost comes as a prudent ensure that we tend to provide for it. We do not wait for the last moment. And -- but this year, because of the format and the clarity that we have to follow the accounting standard properly, the entire amount of this towards future provisioning has been expensed on the revenue account. So that has been the case.

As far as EV is concerned, it will not have a significant effect because of our large portion of the business in the participating side and the impact of operating expenses on that side comes to the extent of 10% on this and as we amortize the costs over the future years. So it will -- certainly does not have significant impact on this. And that is already factored -- all this actually expenses estimated from the past and expect it to happen in the future in form of wage inflations are all reflected in the intial year and our outcomes are in line with our assumptions which are being used for the purpose of EV termination.

[Unknown Analyst]

Just one last strategic question with respect to non-par business and annuity business, whether any improvements from the bank our channel contributions that you have seen. And also your overall strategy going ahead in annuity and non-par business, if you can broadly talk of it.

[R. Sudhakar, executive]

I'm Sudhakar, Executive Director Marketing. On the annuity side, we have made some improvements in the yields in the recent past in the last quarter. So we -- going forward, we see that the annuity side will be growing. We are also training more agents into the annuity products. So I'm looking forward to higher annuities. And the same goes for non-par products also. We are actually calculating what is the percentage of agents who are selling that and giving trading inputs in such a manner and activate -- in activating those agents in this particular product. That's why you would have also seen that the non-par savings as well as non-par protection has also grown, as compared to the previously. So this will only accelerate -- our plan is to accelerate this during the course of the year. As for the by in, I will request Mr [indiscernible] to answer this.

[Unknown Executive]

As numbers you would have seen FY '23 aerial decent growth in terms of [Deca] contribution from premium side, it was around 26%. And we are definitely not only open, but confident that the journey has just taken off in terms of our growth story at banca. And [ money Internet to usage] our wide network of partnerships across the belt. Both PSVs and otherwise. And more also, outside that, the other alternates also invest in leverage where we have seen the good traction coming in, in FY '23, and we will take forth in FY '24. So journey continues. And as we move forward, I think you will see more impressive numbers, both in terms of sort and growth coming from bank.

[R. Sudhakar, executive]

Actually, just to supplement what my colleagues have already informed, the corporation has had a very clear-cut strategy. As Chairperson has already briefed in the starting points outself, that we do not want to attain our growth in par business, but we want to accelerate exponentially in the non-par business. If we see, even in the current year period, the growth rate in the non-par segment is almost 33% to 35%, which is significantly above 12% a year. I'm talking in terms of APE. So clear cut and within that, the profitable lines of business, particularly like saving products have grown by very, very significant numbers.

The annuity, you all know is a very competitive market. We have taken very calibrated steps because what we are at the end of it -- do not want to lose our period on the VNB value for the shareholders. So we have also revised our rate, but we have not gone to the top end of it. And we expect with interest rates settling down, in fact, there will be possibly there'll be some correction. And then the volumes in the annuity segment, we are therefore expecting to grow significantly this year as compared to the last year. So overall metric is panning out in the way in which corporations inclined for.

[Operator]

Next question is from the line of Shyam Srinivasan from Goldman Sachs.

[Shyam Srinivasan, analyst]

Sir, I just want to understand some kind of a guidance or an outlook for fiscal '24, how you are looking at either premium growth or top line growth, APE growth, whichever metric you're looking at. And also taking continuing from the previous participant's question on non-par, specifically, right? Like you mentioned, we have seen good 35% growth, can we see this particular part continue to grow? What are some of the learnings we have had since we have adopted this strategy for increasing our non-par? So what are some of those learnings, which we can further enhance going forward?

[Siddhartha Mohanty, executive]

So if you see, last year, 2022, we have already shown some results and whatever commitment we made in the initial period of roads before going to market. I think we are fulfilling that commitment. In line with that, we are fulfilling our commitment. As discussed, there is focus on non-par. Non-par share is gradually growing, but we are not sacrificing our par strength. Because agents who are selling par, they are selling par, but some new agents, new breed up fortunately, youngsters. We are training them, so they are also selling non-par production. And non-par mix will be gradually more in our total product basket. And we have introduced new products, as I told earlier, and the continuous training program is there for non-par product. And not only non-par as a line of business, but within non-par, which are the products which are giving high margin. That also we are focusing, as appointed actually told, this in guaranteed savings, then thereafter annuity, then the term health is all those things, we are training our people and current year whatever growth we have already shown, I am confident we will show more growth on this segment. Margin will definitely grow as you people analyse because whatever commitment now, we are at 16.2% VNB margin and very fast year of listing itself in. So this year, definitely, it will also improve.

So everything is in place and constructly efforts are being taken. In addition to that, I'll add some digital initiative also we are taking digital transformation, total, not only customer onboarding, completion of policy, but all other operations, also digital intervention will be there in the current year. For this year, this is a second year of our listing, whatever launch -- we launch first year, second is definitely -- a better result will be there.

[Shyam Srinivasan, analyst]

Sir, I'm trying to rush my memory on the road shows. But there was also a commitment to stabilize market share losses, right? And then at some point of time, I know this year, it didn't happen. But do you think when we look ahead, there is a point in time where non-par clearly is growing faster, but par is growing slower. So how -- when is the tipping point you think where -- is it 12 months, 18 months down the line, 24 months where you think we will be able to get that market share stabilized?

[Siddhartha Mohanty, executive]

Yes. So when you say market share, my understanding is a profitable market share, not market share per se. So that we have already demonstrated and there will be growth in profitable market share. It will not be only a simple number market share, a big figure. OpEx, for OpEx, that is okay. That's also we aspire not that we'll compromise on that, but also focus -- more focus will be on profitable growth in market share.

[Shyam Srinivasan, analyst]

Understood, sir. Just looking at Slide 36, I know you break up your non-par and par business, specifically the non-par business, on new business premiums. I think we have been requesting this to be given in APE terms. But if you could also call out what's happening on some of the subsegments like term insurance. You talked about tech term, but I just want to understand at least some numbers from -- maybe we can get this off-line, from Mr. Sanjay, later, but that will be helpful to have what's happening on the subsegments of non-par -- not only non-par savings but other non-par.

[Siddhartha Mohanty, executive]

Yes, that, we'll share. Within non-par, all product line as I told, guarantors have seen, then annuity, then term, the med health, the new lift all those figures will be here.

[Shyam Srinivasan, analyst]

Got it. Sir, last question, sir, for me, and I can go back in the queue. When I look at the fourth quarter margins implied, net margins I'm talking about, you talked about 16.2% for the full year. Fourth quarter coming at about 19%. I'm obviously implying these numbers using quarterly APE and quarterly VNB that have derived from 9 months minus or about fiscal '23. So what's driving that? When I look at gross margins, the way you really now disclosed, there is 38% gross NBM margins for the group. So what is this product that you are writing? Is it seasonal fourth quarter, You think that we can sustain some of these margins that we are reporting on the group side?

[Siddhartha Mohanty, executive]

The -- in group side, you are right here, you've observed that -- the profitability of the group side as we may see for the year full year ended March '23 has even become a significant contributor. And going forward, we -- this is some unique strength of LIC the group side, which will continue to contribute more. In fact, if you look into the overall group side, both of the elements have contributed to overall VNB. The robust growth in APE terms of APE as well as growth in terms of VNB. Now APE growth of almost, I think, 22% or so has been there. But VNB has also grown attributed by various factors.

As we'll appreciate that one, the persistency experience since -- it's now 2 years when we first started to break for IPO now. We have done a review of our experience analysis of the business, and the persistency experience seems to be very good continuity and retention of policy orders. In certain lines of business, we have realigned as per the requirement of [ ILM ] tables which have been reviewed, which also show greater longevity for the portfolio. Beyond that, we have seen robust growth in APE [ for steel ] in most of the [ scales ] of group business. The loss ratios post COVID rate has come down in our group -- insurance production business side. And all these metrics persistently already talked -- all this combination gives us greater confidence about better experience to emerge and possibly even still stronger numbers can come from this side going forward, both in terms of this contributions coming in form of APE as well as in form of margins coming in.

[Operator]

Next question is from the line of Deepika Mundra from JPMorgan.

[Deepika Mundra, analyst]

Just on the embedded value change, we see that there is a significant movement in the sensitivity on the tax rate, which has come down from 24-odd percent to 11%. So what is the key driver of that?

Secondly, on the operating assumption change, what is our main assumption that has been changed resulting in the positive variance of about [ 20 billion ] plus in the EV.

And lastly, on the persistency improvement, how much more do you think there is to go in terms of further true-ups that could continue to drive the EV upwards? That's it.

[Sunil Agrawal, executive]

Yes, as far as sensitivity tests are there. This year, this sensitivity is showing impacts of rate increase to 25% only. So that's a different class. I think we had shown sensitivity at 34%. Deepika, there is a review on the spectration approach of the cooperation also. So since IPO and as CFO was also explaining to you earlier. However, frankly speaking, taxation rate is basically just a -- an indicator number. He gave the number [CHY] this much. Practically speaking, it will remain what is actually as per the law. So that appears to be very sensitive numbers, but that does not come into play into reality that is -- just an indicator number.

[Deepika Mundra, analyst]

Okay. And can you talk about the operating assumption change as well as various persistency assumptions and how much scope is there for further true-up on persistency to be -- to drive operating variance in the future? .

[Unknown Executive]

As I was explaining to you, overall persistency effect, we have seen that in both the individual side as well as group side, the persistency improvement is there to be seen. That is the contributor for VNB margins and VNB group in this side. The corporation's focus continues to remain on a business, which is strong and persistent. And in fact, if we look even in the period 61st month persistency, we are almost near to the top, right? And that shows another contractual long term. So it means that is a unique strength for the corporation for the longer period. But we are working around different strategies for ensuring the quality of business, what the Chairperson was mentioning at the start of the speech. That's not only, we have launched new products with higher ticket size now.

But we have also reviewed actually almost 8 products in last year. And the underlying reason for them was the persistency as well as the profitability within those products. So I'm sure as a result, for those changes and modification start unfolding going forward, in the next 13 month persistency and then next to, for sure, the 25th month persistency and thereafter when it will be seen], they will continue to be significant and good contributors to the overall -- yes, in fact, we are taking many steps in this direction to ensure the persistency becomes the focus of not only corporation, but intermediary is also everybody.

So the commission structures have also been aligned in a manner that they drive the behavior, which drives for longer-term persistent policies. So all those measures through operations in which the great base focus is in the revival of the policies, bringing old and -- policies into the books, sensitizing employees as well as the intermediary and incentivizing the behavior all across which is towards persistency. We are very confident sure and focused that, that will be a contributor to overall embedded value going forward.

[Deepika Mundra, analyst]

Okay. Sir, just 2 more questions, if I may. One is on the economic variant, which is a negative INR 17,000 crores in the EV, could you highlight what is the contribution of the fall that we had seen in the Adani Group stock valuation in that economic variance because if I remember correctly, it was about close to 30 -- 40 -- almost INR 40,000 crores versus your purchase price. So is that fully reflected in the economic variance?

And secondly, on the unwind rate, which has increased from 4.8% odd in F '22 to 7.7% in FY '23. What are the -- what are the -- what is the key reason for such a sharp increase in the unwind rate?

[Unknown Executive]

See, as far as stocks are concerned, we would not like to comment on it because as the question b is for the look into the entire portfolio in totality. We would see even when you start the topic, what can go down and go up. We have to see the overall impact on the portfolio. I guess, overall, that economic variance of what you are saying a negative entry is there because not any specific topic, but overall impact, of the market, which is not only confined to equities but the [indiscernible] or interest rates, as we are aware, when they go up, the NPL loss would come into play when the interest rate will go down. This will give us the positive flip. But this individual item is not just to be seen in isolation. It should also be seen in conjunction with the unwind that is coming from RFR and variances in operating. Overall, that will be something around INR 30,000 crores plus. So this is, in a way, on the higher side, this is a factor which is possibly when the market takes up than what will be a positive contributor going forward.

[Deepika Mundra, analyst]

Okay. So movement in RFR was plus 30,000 in the economic variance, is it?

[Unknown Executive]

The movement in RFE was around 20,000 plus, and then there is a unwind which also happens beyond on the actual experience which comes. So it was different. On one side, in the free security side, when you will have your actuary terms are better. The unwind in the form of RFR and on top of that actual experience. On the other side, as operating variance, economic variances, they will treat your NPL. So it's a balancing effect which has to be considered. So both all the variances have to be considered together.

[Deepika Mundra, analyst]

Okay. And sir, last, could you comment on the unwind rate increase?

[Unknown Executive]

Unwind rate increase is there for you to see, around 12% or so, right? So that is coming through, as I was explaining through RFR contribution. Because RFR, for the larger part of the [indiscernible], if you would see except, I think, between [ 4 to 20th ] year, RFR had been on the higher side as compared to the previous year. So that's a positive contributor. And then our returns have been much better than RFR. So that has also been contributor for this thing. And then this -- NTM has been the negative contributor. But we have got some other operating assumptions have contributed positively towards making this IV move by [ 7.5% ] from the past of [ 540 125 ] we can do that.

[Operator]

Next question is from the line of Anuj Singla from Bank of America.

[Anuj Singla, analyst]

Mr. Mohanty talked about some alteration of the structure of some products which have led to the growth slowdown in the second half of the year. Can you elaborate on that? What were these changes?

[Siddhartha Mohanty, executive]

No. We talked about the [NGS ] business was not there in last quarter. So that's why premium was a duplicative. Individual-wise, there is growth. Individual premiums sought good growth during last quarter, particularly in March.

[Unknown Executive]

In addition to that, actually, what have been talked about it that previous growth business has grown, but certain products, in order to remain competitive in the market, like annuities, in particular, right, we have to remain competitive in the market. We realized the starting very high VNB margin. But as we combat in the market, we had to improve benefits. Improvement in benefits was result into reduction in the VNB margin. That corporation strategy, the Chairperson was talking about this, on the balance of the achieving growth in VNB, we have to ensure that the growth in APE is more than the reduction in any VNB. So that ultimate delivery in form of VNB value keeps on growing up. So that the strategy -- a very conscious strategy. We have taken a very calibrated approach. Actually, we are not being driven by just competitive reasons. We have taken a very balanced view that -- so that when VNB reduction happens because of increase, it should be balanced out by APE growth. And that is what is coming in the outcomes when we see the VNB growing from 15.1 to 16.2. That's what...

[Anuj Singla, analyst]

But this repricing, if I understood correctly, this happened in the Jan to March quarter, right? The full impact of that will be visible only in FY '24?

[Unknown Executive]

Right. It happened in the previous quarter also. There were 2 revisions of annuity in the last year.

[Anuj Singla, analyst]

Okay. So I think this will, again, maybe coincide with my second question. So when I look at the VNB margin for our -- the non-par, it has declined significantly, the gross VNB margin, which you declared in the presentation, in FY '23 versus FY '22. Is this the prime reason for that?

[Unknown Executive]

Yes, one of the reasons would be there that will be margins on decrease, but there as now we've -- so that's one of the contributors. You're right. As you know, in the individual side, because when the benefits will increase, VNB margins will come down. But still, on the specific segments, in which we want to focus, like saving, in fact, in certain lines, VNB margins have improved also. At times by increasing benefits also, it can be balanced by different other factors when the margins can still [indiscernible]. So we are still at good VNB margin levels in annuities, in selling side as well as in [indiscernible] side, which is also seen uptick, because the focus at certain lines of business is increasing the ticket size of the [policies ] also. So if the ticket size also improves, that also helps VNB margin. So it's a combination of different factors that will go so that overall direction of VNB growth is achieved and maintained.

[Anuj Singla, analyst]

Okay. Got it. So given this background, then how do we look at the growth trajectory? So obviously, we are prioritizing growth over profitability, at this point, it looks like that for FY '24. How does the growth and the profitability outlook look versus FY '22 -- FY '23?

[Unknown Executive]

I told the profitable growth, not the growth of our profitability. So profitable growth is our objective. So accordingly, we plan all product lines, which are giving good margin, those are to be promoted. And par, we'll never compromise on par because that is our strength. Agents are selling it. So it will be a mixed strategy. So that ultimately, at the end of the year, we create value for all our stakeholders. That is the objective.

[Anuj Singla, analyst]

Okay. Any numbers you are targeting, sir, in terms of growth and on the VNB margins versus the base of FY '23?

[Sunil Agrawal, executive]

So only thing which you can say is we are looking FY -- FY '23. And it should be better than what we have done in the past, but that is what we will always aspire for. How better? We'll share with you when it comes.

[Anuj Singla, analyst]

Got it. And lastly, sir, can you quantify maybe on what you're seeing on the ground, the impact of the recent tax changes on the higher ticket size? What kind of impact do you see in the next year and maybe in the month of April, if you can just give your thoughts on that.

[Unknown Executive]

I can only give you a small analysis of the business which we did last year and what we feel is the impact. In number of policies, it is 0.04%. And in the total premium, if you look at those who are paid -- who are those customers who are paying more than that, increases about 3.5%. And by tweaking our product customers and marketing strategy, this impact in the next year, we can easily make up through other products and other lines of business.

[Anuj Singla, analyst]

And what will be the impact for VNB for last year, for the same ticket size? You mentioned 3.5% in terms of...

[Unknown Executive]

So that will be ultimately -- most of this large market size policies for us has been in the participating business, so that will not have a significant impact. But again, we need to appreciate that the insurance industry, this is not the first challenge which has come before it. Sometimes challenges become the opportunities. As a corporation, we are looking for this as an opportunity through variation in our marketing strategy as well as product-specific features also will try to ensure to come in the way so that we can convert this challenge into opportunity and still deliver for whatever customers are expecting. We do not expect it to be any significant adversarial thing, but rather we will look price and look at it as a positive thing, through which we can expand more and reach out to a greater number of people as well as try to deliver products which can address the concerns and needs of these customers.

[Anuj Singla, analyst]

Got it. Sir, just last one, one clarification. You mentioned that some of the products, which had lower persistency, you discontinued that. Did that -- did I hear that right?

[Unknown Executive]

So, as of now, what we have done is we have modified those products. We have end them because we see as far as design issues were there, we still believe that they are very good to cater to the needs of the segment. What we have done is modified the feature or the pricing or the -- actually at minimum level -- or minimum ticket size levels, they were giving low margins. So we have tried to adapt in a manner so that we continue to deliver those needs which are being addressed by this product and not done away with them. At some places we have done a very few products also. But lastly, what we are trying to do, we have tried to modify these products and make them viable and happening. And in some places, where we found like in health products, it was not viable. We have come out with the new productions.

[Anuj Singla, analyst]

And you mentioned this number is 9.

[Unknown Executive]

8 products were modified last year.

[Operator]

And the next question is from [ Ryan Spadina from Ambit Capital ].

[Unknown Analyst]

Yes. So I'll start with on the group side. So Just wanted to understand what is the split between the group fund and the group protection business. Also, on the group side, the margin between 9-month FY '22 and full year FY '23 has moved by around 500 basis points. So just wanted to understand what's happening in the quarter, which pushed the margins up. That would be my first question.

[Siddhartha Mohanty, executive]

See, the significant portion of the group business is in the [indiscernible] scheme. So less than I would guess, less than 10% would be the par execution for the product side, around 7.3% by APE would be there -- 7% to 8% would be by APE in the production side. And that gives a lot of scope for us to grow there.

As far as that volume side, you mentioned about the change in VNB that's what I already talked about it. The combination of various factors, including better persistency in the fees and adjustment to the new mortality table, better experience analysis, the age profiling of the customers, including the fund schemes, which are expected to last year. Increase -- improvement in the ticket size means the APE per scheme, APE per member, all these have contributed to us. On top of that, also the RFR, which is used for valuation. All those things have contributed. And we have announced the value there in a manner, which is based on our net for this segment.

[Unknown Analyst]

Got it. Got it. So you expect that the group par business gross margins to hold at 22% leverage or expand from here. That would be the right assumption?

[Siddhartha Mohanty, executive]

Yes, yes.

[Unknown Analyst]

Okay. Just on the VNB walk, you have mentioned that there has been a 90 basis point impact from -- impact of product benefits. Just wanted to understand whats that?

[Unknown Executive]

That is actually what we are talking about, 90 basis points is what we discussed just now was when the benefits have been changed and you see rates have been revised, right? So that has reduced the VNB margins in this product. So this is the overall impact of change in product benefits, product benefits overall for the corporation, brought down the VNB margins, not necessarily the VNB, to that extent, but VNB margins that sent up this amount, which is shown in the -- VNB walk. Group employment in benefits resulting into reduction in margins.

[Unknown Analyst]

Got it. And so that brings me to my next question. So do you see -- think that there is scope to grow the APE further by reducing the margin more on the non-par side, because you are -- on the gross margin side, you are sitting at around 70%. So there could be scope -- still reduced. Overall, you'll still have a higher margin. So is that something that you will still consider in FY '24.

[Unknown Executive]

Yes. We have to remain open and we are open to that thing. But our overall focus is that the reduction in VNB margin should get compensated by increase in APE growth. That may not necessarily happen all the time because, at times, it takes a little time for that to happen. Suppose, we immediately reduce margins. And from the next, we expecting that APE growth will come about it, and that way things don't pan out in that manner. So sometimes we'll have to be patient with it. And we'll have to test it. But ultimately, as we are also concerned about profitable market share, which we've talked about, that strategy will continue to be there. So we are taking a very calibrated strategy there that to what level we bring down the VNB margins without compromising on the ultimate down of VNB. So that strategy will always be there. In a competitive scenario.

[Unknown Analyst]

Got it. Got it. And last question from my side is the EV walk, so [indiscernible] experience variance expenses there is a negative entry of around INR 1,000 crores. So just wanted to understand what is contributing to the negative impact given you have been talking about putting in place various initiatives to improve efficiency, cost efficiencies.

[Unknown Executive]

That's only what factors have been invented. Actually there is prudent side of it. So inflation, we have taken the prudent side of -- based on the past experience, one element of that is the inflation side of it. Going forward, I think it will also be a contributor, hopefully, in this side. But also, this factor, which we are talking about, nonoperative variances, also includes the outcomes of EV, right? The sale option in guarantee. So that is dependent upon the market scenarios which are there. So that is also a contributor to that. So these things will continue, are showing a slight negative on that thing, which is in the respective lines.

[Sunil Agrawal, executive]

As we talking about the expenses on the top side of our INR 1,000 crores or so, that is largely on account of onetime expenses we have increased earlier on account of wage revisions. Wage revisions related provisions, not wage revisions actually.

[Operator]

[Operator Instructions] The next question is from the line of [ Akshay Tiwari ] from [indiscernible] Limited.

[Unknown Analyst]

In this quarter around -- we saw a depth in the single premium growth, which is -- which quite contrary to what we saw for other life insurance companies. So just wanted to understand what is the reason for decline in single premium income? And also with regards to bancassurance, any major partnerships have we taken with any major banks as such?

[Sunil Agrawal, executive]

So in this quarter, especially in the month of March, the focus was more on the [indiscernible] customers who are wanting to avail the contender benefit. So more or less that the core agency force, when it moves, it moves as [indiscernible]. So overall, I would say, [indiscernible] chart is one where there are significant growth, which is a single pad. And the other part is, I think, on the basis of the group like where as the overall total premiums would have come in the quarter of March.

[Unknown Executive]

Yes. Coming on to the banca side, some initiations were missed during the Q4 and particular towards March. In Q4, [indiscernible] agreement with any of the partners. But in the current quarter, we are already kind of gone, and we are hoping 3 or more partnerships to be signed. And carefully and gradually, in fact, we lookout for a little bit more number of partnerships, but we already have sufficient partnership because we are not in a position to [ deleverage ] the strength fully. So it's a combination of infact the 2 strategies. One is carefully partnering with new players for the -- looking out for new partnerships. But at the same time, the vast of network which is really available to us, leverage them -- carefully gradually and to the fullest of capacity to fuel growth. So we are definitely looking out for opportunities. We have signed up this one. So more are in pipeline and maybe others who will be materialized in -- towards infact Q1 end or maybe beginning of Q2. So, we will continue on that strategy, but then the more focus on the [indiscernible] existing network, which is [indiscernible].

[Unknown Analyst]

Okay. So are we doing something with regards to the direct channel, as direct channel has more margins. So any steps taken towards increasing direct channel in the distribution mix?

[Unknown Executive]

Actually, digital, we have our digital marketing channel. And this year, some big intervention will be there for promoting digital marketing. Though now, share of digital marketing is very, very minimal, negligible, below 1%. But the current year, through some intervention, there will be some uptick from this channel.

[Operator]

Next question is from the line of [ Ajox Frederick from Sundram ] Mutual Fund.

[Unknown Analyst]

I have 2 questions. One is on the health side. What is the persistency of health business on the number of policy calls?

[Unknown Executive]

Yes, roughly, the health business persistency was lower than the our usual business. That was a cause of concern. So in the current year, [indiscernible] we are currently offering 2 products in health, One is fixed benefit and other is products. So what we have done is we have modified these 2 products again. And now we are expecting the persistency to be much better than average on this because we have changed and modified these products.

[Unknown Analyst]

All right, sir. I mean, by modification, you have reduced the premium or...

[Unknown Executive]

Yes. So we are -- what we are trying to see that at the lower ticket size, that's the general experience. The persistency rates are lower as this commission is higher. So we are trying to address wherever based on the persistency experience, whichever the pain point, we have tried to address those places, so that we can get a better persistency within those products. So typically, either [indiscernible] has been increased and slight increasing premium could be possible, but that we should be still be affordable to everybody, and largely, fine-tuning the places from wherever or sometimes it can be to move pertain more supplement to give you worse experience of persistency. So whichever on the pain point there, so we'll try to modify that.

[Unknown Analyst]

And sir, one more question on the productivity of new agents, particularly 18 to 30. I think overall, your agents are doing roughly 13 to 14 policies a year. So what is the productivity of new agents? I'm trying to understand how fast they can get.

[Unknown Executive]

The new agent productivity will be on the lower side when you look at the average because we have the productivity of current 16, what you see is, thanks to also our club member agents whose productivity is in the range of 30 plus. So we have about 2 lakh club member agents. Who're professionals or even -- overall persistency is better than 85% on the whole portfolio. So they bring the maximum number of policies per area. For the new agents' productivity, maybe lesser than that. But as and when they become senior, as they get -- they become more experienced, then the productivity will increase.

[Operator]

Ladies and gentlemen, due to time constraint, we'll take that as the last question. Please note the management will answer the questions later for each participants who has joined the queue.

With this, I now hand the conference over to Mr. Siddhartha Mohanty for closing comments.

[Siddhartha Mohanty, executive]

So I would thank all our friends from analyst and the investor community who'll learn alot about -- how you see the business. As we take steps into the early part of FY '24, I would like to reiterate that as LIC, we have committed to create superior value proposition for all our stakeholders. I am sure you will appreciate that despite being a large player, we could achieve FY PI growth of 16.67% for FY '23. Now it is incumbent upon us as management to keep refining our product and channel mix, including use of cutting-edge technology and digital intervention, so that we can accelerate the pace of our directional momentum.

We'll keep coming back to you with updates in future at regular interval. Thank you very much.

[Operator]

Thank you very much. On behalf of LIC, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.