FY26 closed at 24.7% VNB margin / +10.9% VNB.

How has customer behavior changed post the start of Middle East war? Are you seeing demand for non-par or ULIP changes? On margin, despite higher group funds, why sequential rise in margins? On IND-AS, will you share IND-AS accounts next quarter and how does it compare with CSM in force and impact capital?

On IND-AS: technically, we should be live with IND-AS, but as approved by the Board, we will be seeking forbearance for a year. Some decisions around inputs for computing CSM still await clarity from the joint expert group, and this is too short a time for us to transition given we go live with results by the first 15 days of the quarter. In terms of capital position, the regulator still wants us to use the erstwhile solvency formulas; until RBC is implemented, we will continue with our current solvency basis at 227%. On margin: support has largely come in by the growth in protection that you can see for the current quarter, in addition to improvements to profitability across all other savings lines of business. On upcoming trends, a little too early to call. I do believe that the war in West Asia has, to some extent, impacted new business sales in the month of March.

Has the impact been more on ULIP or has it been across the board a slowdown in demand in late March?

It's been across the board, except for protection.

On the EV walk - is the operating assumption change only persistency, or also mortality/expense? On RoEV at 11.9% - even with zero assumption change/variance, RoEV would still be near 12.9%; what is our genuinely steady-state RoEV?

On operating assumption changes, it's primarily on account of unavailability of input tax credit and some updates to persistency. This conversation started in September as to the impact of the unavailability of input tax credit due to GST reforms, and that has been the bigger component. On RoEV, without the assumption changes and variance, we are in the 13% range. On a longer-term basis, we should still be at the 13% to 14% range, depending on how the yield curve shapes up and how we are able to grow VNB. As IND-AS is live this year and we get forbearance, going forward looking at returns on earnings will become much easier when you look at IND-AS numbers. The RoEV will have less significance going forward.

With IND-AS, it does not impact the RoEV whatsoever, but probably we'll not be looking at the RoEV going ahead?

My sense is most commentators and analysts would end up looking at ROEs because then that would be at least comparable to how the rest of the market is, outside of insurance. Comparison becomes much easier then. For want of any other metric, we are in this RoEV world at this point.

There is no impact whatsoever of IFRS on the EV walk, right? Nothing from even a risk-based solvency gets changed in this metric?

No. Risk-based solvency only determines your capital position.

On protection, premium growth exceeds sum assured growth - is it return of premium products? On EV - mortality variance in FY2024, assumption change in FY2025, persistency impact in FY2026 - constantly negative for three fiscals - how should we think about this and can we expect more positive variances? Could you split economic assumption change between equity and debt?

On protection sum assured growth, that's been at about 48% year-on-year, the growth on retail protection has been higher at about 60% year-on-year. The retail new business sum assured actually consists of both protection and savings, so you will have to offset the two together. The retail sum assured is not purely protection, because by the fundamental construct of products in India, savings products provide 10x cover for most. On embedded value and assumptions, we run a very diversified portfolio and our approach is to understand whether differences between assumption and resulting experience are temporary or permanent. The way you look at the businesses is to group them into cohorts; as cohorts gain meaningful size and separation, you see assumption changes. If I had a homogeneous portfolio, then ideally you should not see any assumption changes at all. Given the underlying diversity, there have been points in time when we had positive assumption changes as well. On economic assumption change split - it's largely debt. Almost all of it.

Till FY2024 we were giving VNB breakup among segments. Can you give that for FY2026 and FY2025? Persistency decline in 13th month cohort - does it have large part of annuity or across segments? When persistency is worse than expected, does it benefit VNB?

We aligned with the market on this front Umang. (on the VNB breakup question) A large part driven by the annuity product. There are, of course, some product channel cohorts that have not performed at par. On worse-than-expected persistency - it doesn't benefit. The way we look at our assumption setting is that we evaluate at the end of the year, we take a view as to which of these are permanent impairments in that sense. For those, we take an assumption change. Those that we believe are temporary, we allow that to run through the variance.

What happened to the negotiations with distributors on commissions? Should we expect that they are mostly done, and will all channels especially agency do better in FY2027?

The negotiations and conversations with distributors, be it agency or otherwise, is always on. We look to offer remuneration that is appropriate and in line with the product and the pricing that we have built that is accretive to both. So at all points in time, this is a continuous conversation. There is never a start or a stop to this. It will continue and will keep going forward as well. So it is a continuous exercise as we bring out new products and new propositions. We will continue to work with that distribution to see how we could deliver these products to the relevant customer base in an efficient format. Agreements have been reached with all our distribution. We are where we are and you are seeing the 24.7% VNB margin.

Uptick in margin in Q4 to around 25.2%, can we attribute it to favorable yield curve in March? In VNB walk, 250 bps addition to margin from economic variance is largely because of yield curve benefit?

When you look at the yield curve, especially in the perspective of non-par products and which also includes protection, one has to look at what the pricing is and what the yield curve is and what is the expected margin one wants out of it. As yield curve moves, depending upon your underlying costs and this year there has been an impact of GST, pricing swings. So, if we have got a benefit of the yield curve, we didn't change the pricing.

You did not change the IRR of the end consumer despite the benefit and because of that the GST impact got negated?

Yes. If you look at the VNB walk, what we have called out is the movement from 22.8% to 24.7%. Here the product repricing that we have done is all sitting as part of the new business profile. And all the yield curve changes are now part of the economic assumption change. So, if I'm making any pricing changes, they sit as part of new products that have come on board.

You got double benefit - product mix changed and positive economic variance - but GST impact was -3.9% in VNB. So product mix moved favorably and you took economic variance benefit to largely negate the impact of assumption changes which might be related to GST?

You take everything together, Sanketh. One, we have been working very hard at cost efficiencies across the years. The benefit of cost efficiency is something that we have taken on board as we've got our pricing. Because I'm getting cost efficiency, I can continue to hold the price as it is. Now this is ceteris paribus. Some of my cost efficiency was negated due to the GST impact. So technically, I should have changed my pricing. But then I also had the improving yield curve, which allowed me to hold on to prices at that point. Actually, if you look at the entire period, there have been very marginal price changes, that too in certain cohorts, and not across the board. One did not expect en masse price changes to happen and that has not happened.

If yield curve becomes steeper to fillip growth, will you pass on some benefit to consumers? Given we did single premium annuity, will you go back to deferred annuity in a different format to fillip back growth?

Let me give you an answer hypothetically, if the yield curve moves downwards, I will reprice. On regular pay annuity - we do have regular pay annuities and we continue to sell those as well. Yes, it's a little more towards single pay, but we've built our regular pay annuity business as well and we'll continue to sell that.

Given 6 months since GST impact, has industry started repricing individual protection to the extent of input credit not available? Given strong Q3 and Q4 growth turning down slightly, is the GST impact normalising?

You saw the 60% year-on-year growth in retail protection in the fourth quarter. We have been working at this granular level to make sure that protection growth continues. On pricing, I believe by and large, the industry has not taken step changes. You might have one or two players who have taken some minor increases in prices, en masse price changes to a degree of 1% to 3% across the board. We have stayed away from doing en masse price changes, we have taken cohorts and worked at those cohorts where we need to make updates to pricing. That has been our perspective on how we could manage this entire transition of GST. And you have seen the numbers come through in terms of 60% year-on-year growth.

EV split between VIF and networth in March 2025 is different from last year's presentation - is there a change in methodology? Why has agency declined again in Q4 on a lower base? Why has Direct channel lagged this year? How are you planning to add agents/offices to deliver growth in FY2027?

You can refer to Slide 63. We've called that out and given you a walk from FY2022 to FY2026. The key change is that the shareholder share of the MTM that's on the assets and derivatives of the policyholder funds, that's been reclassified to VIF from ANW. That has absolutely no impact on the EV, just a reclassification within VIF and ANW. And this is consistent with how the market is looking at it. On agency in Q4 - large part due to higher base of annuity in previous year. Again, if you look at longer time frame, we still have a fairly decent growth on agency. At the shorter term, it has been a bit of a challenge. We are looking at working granularly at agency, looking at micro segments, building efficiency. On Direct - there was a base effect as well. Growth centers on our data-driven expansion, especially with the micro-market led branch strategy, again using technology, analytics as productivity levers.

MTM being classified in VIF?

Yes, the MTM on assets and derivatives of the policyholders has been classified in the VIF.

On slide 64, the EV walk - under persistency and other variance, the ₹ 2.64 billion - how much is pertinent to VNB returning to FY2026? Is this all back book?

Almost none. Gao. Yes (this is all back book).

Retail business growth over last 2-3 years has not been strong - what are the key challenges? Is cost optimisation initiative impacting our growth trajectory? How do you internally plan growth and can we grow in line with private players? Why has agency channel share been coming down - are larger agents moving to competition?

From a growth perspective, it might be useful to look at a slightly longer period and do a CAGR of growth and take volatility and base effects into consideration. I don't think that cost optimisation comes in the way of growth at all. In our industry, we run largely two kinds of businesses, protection-led businesses which are risk-based, and savings-oriented business which essentially either get priced-off the equity return or get priced-off G-sec. In both cases, what we can give to the customer is less the margins and less the opex & commission cost. So one has to keep working on cost structure on both fixed cost and on optimising commission costs and distribution costs at least in areas where it is not adding value. There are pockets in large distributions where you will see larger payouts and it is not giving commensurate margins. There are base effects, and if you look at 2 years, 3 years CAGR, even if you look at 2 years CAGR, we are slightly behind, but we do have to catch up. Our focus, like we have always said is absolute VNB. In absolute VNB, there are other levers in addition to the APE. We don't see cost optimisation comes in the way of growth at all.

On the agency channel, how we plan to revive that channel?

Agency channels, we have had some large base effect two years back. And if you look at CAGR of few years, it is running at 12%, 13%. And as the base effect goes, I think it will come back. And we are also certainly looking at micro market-led agency. So hopefully, it will come back sooner than we think.

Could you just explain the change again?

This is the mark-to-market on the assets and derivatives of the policyholder funds. That is the component that has been reclassified. It's just the mark-to-market on assets and derivatives.

On persistency - you'll be working through these products and cohorts incrementally throughout the year and going ahead?

That's right. It's a continuous exercise. Like as Anup also pointed out, there are always going to be some segments that are not up to par. The point is you try to fix it because you start with the underlying proposition that is being provided to customers and the sales process. If it doesn't work, then you stop selling.

On retail protection - growth with GST tailwinds - is this natural offtake or did you tailor products or invest more in the segment? How long can this continue?

Yes, we have done that through the year by providing newer and newer propositions along the way. But one of the biggest tailwinds we have got as an industry has been the GST reform, and that is felt most in retail protection because that's where you see the 18% go off. To the customer, you're seeing this improved benefit come through immediately. In fact, this is not just for new customers. It's also available for existing customers because as they pay the renewal, the renewals are much cheaper. It has actually helped create positive word of mouth on retail protection. Selling protection has to become one of the cores of what this industry does. The retail sum assured growth for the industry actually was 2.5 times post the reform than what it was pre-reforms. Everyone has latched on to this particular move.

Prudential is setting up a Health business - is there a partnership or any synergies between you and Prudential or is it run completely separately?

No, I believe that's a separate company.