Just to clarify once more that you said maybe next quarter, 20, 30 basis points kind of impact coming due to the GST impact. And given that group fund management business is relatively lumpy, so maybe only be there next quarter. And if our product mix remains steady, then would it be correct to assume that maybe next quarter, we'll be able to even build up on the margin profile that we have reported this quarter?
So, our guidance for the margin remains what we had given earlier in the range of 26% to 28%. And we are kind of happy that we are sticking to that range despite the headwinds. Going forward also, our guidance and our expectation remains the same of around wh at we guided earlier. Hypothetical. Let's see how going forward, right?
You mentioned your growth on the online business, both in terms of IRP and also in terms of protection. And those are quite strong numbers. So, I just wanted to get some sense of the strategic change on the online side and what is really driving this growth? Second question is on the non-SBI banca. Could you give some colour on your counter share in those channels or the overall growth trajectory or the product mix that you are targeting in those non-SBI banca channels? And third, you have touched upon this, but just wanted to kind of dig a little bit deep in terms of what norms were there till August, which got tweaked in September because of which you are seeing incremental growth picking up at agency and banca.
Okay. So that is -- we keep tweaking our contest from time to time on what works, what does not work. So we can't provide any picture on details of what we tweaked in September. But be assured that we do watch very carefully how distributors and sales force respond to the schemes and the products we have and then try to meet , their expectations from time to time. As far as the online business is concerned, it is coming almost solely from our own website and not from any partner. And we have been working on our side for quite some time. You will further see improvement in the tech that we are providing back -end tech, also the products that are getting offered. The new products, Smart Shield Plus and Smart Shield Premier have been e xtremely well taken in online channel because it is extremely competitive. So we will continue to see improvement in online as a combination of the product offering and the tech support. There is still a long way to go. We are not market leaders there like we are in our other businesses. So our -- we would have a long way to go there. As far as other banks are concerned, non -SBI Bank, the ULIP share there is much lower than our main channels, agency and banca, less than 25%. And we will continue to grow at this 15% kind of growth rate that we have seen in the first half, maybe slightly higher but I wouldn't want to say anything around same numbers, 15 percentage growth in non -SBI channels -- non-SBI partners.
Is the company targeting higher growth in the protection sales over the coming period? If so, what is the management expectation for the mix of the protection business contribution over next 12 to 24 months? Secondly, given this focus, should we expect potentially the milder near-term earnings growth potential as a greater portion of the profit may be deferred and recognized over the longer period if the protection book starts growing larger?
So, as we discussed in last conference calls also and as has been the company's guidance, protection is one of the focus areas for the company. And we have been consistently introducing new product lines in protection segment for both agency and banca channel as well as also on YONO channel for the digital customers of our partner bank. Our expectation of protection growth has met with success and the growth in the protection segment has been higher compared to the overall growth of the company. That is the result of our products that we have introduced, which are very competitive as far as the price point is concerned. And with the recent GST reduction, the most benefited segment will also be the protection segment. So, we expect that going forward, the growth in protection segment will be even higher. It also gels with the increasing financial awareness amongst the young population of India. The company expects to increase its protection share to above 10% of APE, and it is in line with our H1 growth. See, as you know, the protection business is a high -margin business. So, if protection business keep growing, unwinding will happen. And I think protection is a long -term business. So, unwinding for the protection will be gradual in nature, and it will unwind over the longer period. Only one thing we have to keep in mind that protection business is increasing in proportion. And we think that trend will continue a little. To that extent, the premium growth as a proportion of share will not be in line with sum assured growth, which will be much higher than premium growth.
You said you expect individual protection to be more than 10% of individual APE. Can you give some timeline as to when do you expect this to happen?
Actually, it is not of the individual business. It is on the overall APE basis. We expect it to be more than 10%. Sorry for the slip. Protection business to be more than total more than 10% of APE, not the individual protection. Sorry for the slip.
If you could sort of help us clarify the GST impact. So you have said that it's 70 to 80 bps on the first half, right, but that would have happened only on the September sales? So, if I try and calculate the annualized gross number, that's coming to be quite high. So, if you could like call out what would be the gross impact of this GST change on VNB margins, that would be quite helpful?
So if you see, we have clarified this total GST impact is 80 basis points for the H1. Out of that, the business written on 22nd and onwards has impact of only 20 basis points. So this 9 days business constitute around 11%, 11.5% precisely. So, if you extrapolate the impact for the margin, it will be 1.74%. And given you see the profile in the business is more than 100 basis points. And given that our protection sales is increasing, we have been launching the protections, and we are also in the -- about to launch the protection rider and current protection rider attachment is more than 38%. So, we're expecting this uplift in the profile and product mix in H2 will be more than sufficient to absorb this GST impact of 1.74%. And hence, in H2, our impact will be maybe able to maintain similar level of margin. Otherwise, might be 20 to 30 basis point impact might be happened, not more than that.
Are you negotiating with your distributors about this impact? Or as you said, like the product mix shift will help you absorb it, so you won't be changing any distributor commissions or anything of that sort?
No. As of now, we are not considering any changes in the distribution commission and company will be utilizing other levers on operational side and the product mix side to manage this impact.
The 20-basis point margin impact is for last 9 days or 11% of first half individual business. Does that mean that 60 basis point impact is coming from that 89% of the business that you wrote where you had to kind of adjust your maintenance expense assumptions? And on ULIP, if you are not going to touch that and also, if you are not going to touch your product construct in ULIP, I mean, your reduction in yield, does that mean -- I mean, at the product level, ULIP is going to see some softer margins?
On the first question, we'll again reiterate that total GST impact is 80 basis points. And why we classified 0.2 separately is the input credit available for the business written prior to the 22nd October and after the 22nd October is different because in 22nd onwards, you will not get the input credit for all premium, including the first year premium, whereas in the business written prior to 22 nd, right from the 1st of April, we'll have the input credit available for the first premium, but the input credit will not be available for renewal premium. So that's the impact clarified. Second question on ULIP, we don't expect there will be compression on the ULIP margin. In fact, we expect the ULIP margin slightly go up given the product that we launched has a longer premium paying term. And secondly, we have also introduced the rider at taching to those products. So, if I look into the totality of the ULIP business, along with the protection rider attached to the ULIP business, we are expecting there will be some uptick in the ULIP margin itself. Another part is you are saying that the ULIP business, you see the impact also not there on the charges. So, you get the secondary order benefit from the removal of GST that also will help to compensate the impact of the GST in ULIP business.
On non-par, just wanted to understand that in this category, we have seen strong growth. What is the headroom for growth in this product? And given the third quarter, normally, we see an uptick on the ULIP side, this year, would we be able to replace with non-par in terms of the mix going forward? And given that you mentioned that you have passed on the benefits of the yield curve movement to customers, then how should we think about the margin in this product? Second is on the group savings side. So is this group fund management product or is also group annuity classified in this?
If you look at the growth of our various lines of businesses, the entire growth is coming from the non-par and par segment. In the non -par segment, all 3 segments, annuities, protection as well as the guaranteed return lines are showing strong growth and s o is the protection growth. We also introduced new par products during the first half year and in the last month of September also. And in both these products, we have seen strong growth coming in. You are right about the third quarter having a ULIP strong quarter. But in the first 23 days, what we have seen is that we are maintaining the trend of the month of September specifically, and the growth is coming from the non-par and par segment. ULIP, we are maintaining at the same level. Our ask from our distributor is to not to deny ULIP sales, not to deny ULIP product to our customers, but at the same time, the focus for growth should be on the non-par and par products, which are margin accretive for the company also. So we see good grow th coming in, and we expect that this trend will continue in the third and fourth quarter also. And group fund is a lumpy business, so you don't expect such kind of growth to come forward. We get some couple of big clients and then in certain quarters, we will show large growth. I would not read too much into growth of group fund business.... Other question that passing on the benefit to the customer yield curve movement that already baked in. So what we do that we keep monitoring the interest rate movement, and we keep repricing those products to pass on the benefit to that. So our endeavour is to maintain the margins at the current level. So in case yield curve movement move down, we will go and reprice the product. As of now, the benefits of yield curve -- giving the party benefits, we have just passed on to the customers. So, we don't expect any dent, or any reflection will come on the because of the repricing. We have been keep doing the repricing and the repricing has done both the way, depending on the which direction yield curve is moving up.
If the product mix, what you have done after September 22 remains broadly the same, then the impact you are expecting to be on the full year margin is 174 basis points. That's the right understanding, sir, right?
Yes. So, what we're saying that the product mix will remain there. We'll continue to get on the profile mix, and that will more or less offset the impact on GST. So, in H2, particularly, if we are able to maintain this product mix, we are able to deliver the margin that we have reported for the September.
On growth. See, a large part of your growth in the current half came from the other channels, while your banca and agency still seems to be lower compared to your own standard 7% growth, 2% growth seems to be very muted on individuality. So, any colour you want to give why these channels are still struggling when we can expect this growth to come back in December?
So our dominant channel are banca and agency channel. We keep reviewing our business strategies, our distribution strategies in line with the growth. And when we saw that up to the month of August, the expectations were not being met, we tweaked certain no rms, and that has resulted in a very positive environment in the month of September. If you look at the individual September month numbers, the growth was around 15%. And we are happy that the same trend is continuing in the month of October also. So I think that both the channels agency as well as banca are back on track since the month of September. And on the same basis, we are expecting that we will be able to meet the guidance that we had provided for originally.
So, the conclude is that in second half, banca and agency can grow mid-teens or teens at least in that sense?
Definitely, definitely, yes.
In ULIP, you alluded to the point that higher riders, maybe longer plans will improve the margins for the negation of the GST impact. So just want to understand at the current juncture, how much of the total ULIP, what we sell have attachments of riders, percentage terms, if you can quantify? And how much you can take it to basically?
So, for products which are eligible, around 40% products, we have rider attachment in the first half, 37% or 38% precisely, yes. Yes. Twofold policy. That is the area which we have not yet explored. So, we are attaching only to new business now, and we are working on how we can attach to renewals also.
Impact of GST, when you said in the press release immediately after the GST announcement, it was 20 bps. Now it seems to be around 47 bps. So, any reason for the difference between 20 and 47 bps?
See, when we make the release, that is given by the end of year impact so EV year-end. And we what we reported today as on date. We have not built up any efficiency that we're looking into. So by March end, we expect there will be efficiency will come on side. And at the same time, EV growth will also be there. And that as a result, we are able to reach the impact what we have initially estimated, so be closer to the estimate number. As of now we have reported, not building up any efficiency for the future.
First question again is on the GST impact. I'm not able to understand why in VoNB box the impact is 80 basis points, while you are saying that the recurring impact is only 20 basis points. So, what is leading to this 60-basis point impact that we have seen in H1 because of GST change?
As I explained earlier as well, there is a difference in the availability of input credit from GST. So while the business written prior to the 22nd of October, they have availed the GST input credit for the first year premium, but the same input credit is no longer available for the renewal premium. Whereas in the business written 22nd and onward, the GST impact will not be available for the premium. So even for the business written prior to 22nd October, there will be impact on the GST. That's the reason you see the number that reported is 0.8.
What is the APE growth guidance for the full year?
APE growth, as we have mentioned, it will be in the around 13% to 14%. And we are talking about individual APE for the overall for FY '26.
If you can break up the group protection APE in Credit Life APE and Non-credit Life APE for the quarter?
Credit Life has grown by about 25% remaining is Non-credit Life.
On the GST. So, what I understand is if we don't do anything, then there is about 174 basis impact point on the margins, which you are saying is that currently, the new business mix profile, if that sustains, then it will completely offset this negative impact. Is that understanding correct?
Yes, to some extent, you're right. So what you're saying that 1.74% is if you would be doing the product mix that we had done the last year. You have seen that there is accretive coming on the margin on account of the profile change. Second point is 1.74% is the margin for the new business and second half is approximately, right, 58% kind of business. So even if we've not done anything, the margin impact will not be 1.74%. It will be around 1% kind of things which is 60%. And then the new business profile upgrade, we'll able to offset this. So we are quite optimistic on that basis. The work that we have done and the channel -- distribution channel is doing that in terms of getting the better profile product mix and within the product mix also is the better profile rider that will be to offset that.
If I look at the EV walk from March '25 until now, there are certain operating experience variances and economic assumption changes. So, we've not made any assumption changes, right? It's only sort of operating experience variance.
Yes. So you're right. So we have not made any changes in the assumption. So assumption remains the same. Only this is economic assumption is just a matter of the movement in the yield curve that we have taken. And other aspect will come on the operating variance that we're getting.
On the growth side. Our pillars of growth have always been banca and agency, but growth in first half and even last year was weaker in these channels. So what should we expect going forward?
So yes, first half growth, if you look at the consolidated half year numbers, that is lower at 7% on individual rated premium basis. But when we look at the number of stand -alone month September, the growth is around 15%. What happened that when we saw that the kind of growth that was happening till the month of August, we tweaked certain schemes, and we reengaged with our distributors and all. So the month of September provided a growth of around 15% in the IRP basis. And we are seeing that the same kind of trend is continuing in the month of October also. So we, as of now, are sticking to our guidance for the full year that was provided at arou nd 13% to 14%. And we are optimistic that we will be able to meet this growth by the end of the financial year.
What is the mix of non-SBI banca within the overall individual business, APE?
I think 3%? Yes. 3%. I'll double check the number, but it is small.
I had a question on this par construct specifically. If you're saying that you're not going to tinker with, say, the commission payouts and so on, and you're trying to also increase, trying to attach more riders and also increasing tenor and so on. But given the issues with the participating product construct, will it be fair to say that a lot of the costs of this GST and so on will be borne by the end consumer in the sense that the returns might be below what it was, say, before this input tax credit was allowed.
So not really. As you keep saying that we have been the fair to the customer. And in case of non-par product where we would have been infrared our margin, we have passed on the benefit to the customer. So there is no question for charging this passing on -- borne by the policyholder. What we say that we try to grow the participating business and our business composition you might be seeing is not 3% to 4%. We do have the existing book on that perspective. And when we price -- and we do the supportable bonus because if I compare to us t o the other player, our commission rate and expenses were much lower. And that will help us to absorb this impact and that will not have adverse impact on the participating business. Our participating fund is significant and they're also giving a very handsome return. If you look into the bonuses that we give to the customer , we have -- last 3 years, we keep increasing the bonuses, and we have always declared the bonus what we have illustrated even more than that. So that perspective will continue to ensure that what bonuses we have illustrated despite, as a company, we are able to deliver that. So no point we are trying to pass on the expenses to the end consumer for par. And to be noted, our par business is only 3% to 4%, so not as significant that we are going to use the participating business to our expenses.
I was just looking at the impact on EV because of the GST change and likewise on the margins. And I understand that you shared a part of the margin impact basically happening to the renewal business. But if I try to really do the ratios, the way it works out to be is that the impact on EV is around 40-odd basis points, 40, 45. But if I pick up the renewal business for the -- basically, it works out to something like around 67, 70 basis points. So first of all, is my math accurate? And why would there be distraction?
See Nischint, I think it is not appropriate to compare the impact of EV to the new business, correct? Because EV has the existing book that have a different mix, and there is a significant profit coming from. Whereas if you look into the EV renewal -- new businesses that written there, the -- all the -- is a longer product because we're selling non-par and the longer tenure as compared to existing one. So that's the reason you might see the impact for the unavailability of input credit for renewal premium has higher impact. But I will suggest not to -- there is no way link between the VoNB impact as compared to the EV impact.
My first question is on the expense ratio side. This is the non-commission expenses. That seems to be slightly higher this year versus trends in the previous year. Any colours on what is adding to this? My second question is on the other channel, which has been doing well for us. Now I understand you mentioned that the non-SBI bank is about 3% of the mix. So, 14 minus 3%, what is the split of the remaining 11%? How much would be our website, how much would be brokers? Can you give us in descending order, what is the product which gets hit the most because of the GST cut and which one would be the least impacted for SBI Life?
See, as far as the expense ratio is concerned, I think it is normal, which is planned accordingly in sync with the business growth, which we have aspired for FY '26. So, there is no such kind of variances as we planned. As far as the non -SBI to SBI, as already mentioned that we have got almost around 3% business, and the rest is coming from group business. So that is the reason the overall number which we see that is, as a total business, including the non-SBI. And the last one, product -wise, the GST impact, I don't think so there is any such kind of bifurcations are warranted. So, what we have done is, overall, we have calculated and given as per the requirement on the VoNB, and the margins are concerned. The increase in expenses, you can also attribute to our planned expansion of our branches that we had guided for. We have opened 44 new branches, and there is increase in employee count by more than 3,500 during first half year. So that is coming in as increase in operating expenses.
My question on the non-SBI banks was basically the channel mix, 14% is other channels. In that 3% I get is non-SBI banks, what is the other 11%, split between brokers and our own website?
See, it is all group business. So, our internal, what we do is showed it as a direct business.