Three questions. First, you guided 25% growth at agency. For FY '25 productivity growth at agency was around 15%, mainly from incremental agency. So how would 25% break up between new agent additions vs productivity improvement? How much scope to improve productivity? Second, are you also focusing on improving product mix at agency counter to improve margin at agent base? Third, on contribution of parent bank - while you gave APE mix, can you give color on contribution of parent bank to overall VNB?
So, on the agency front, the growth will come from increasing agents and increasing productivity both. And 65% -35% kind of product mix broadly is also target for agency. Agency might be slightly lower ULIP than the company average. On the banca side, I mean, we don't divulge the VoNB margin channel-wise or that way. But of course, in the banca partner, parent bank, the growth is coming from higher activity and better productivity per branch. We have g rown by 8% in parent bank, and that is the dominant banca partner for the bank, almost more than 90% business is coming from parent bank itself. So the guidance that we are giving for the current year, the same stands for the parent bank also.
On non SBI Banca partners - how much of these 14,000 branches actively selling products? What products do they sell? What are growth rates?
So non -bank partner, the experience is different from partner to partner. Obviously, the activation growth ratios are much lesser than activation ratios that we see in SBI. But the endeavor is to see that in every branch, we are able to sell at least few products. But as of now, that is not the situation. So broadly speaking, 30% of the product portfolio is ULIP, 70% is non-ULIP as far as non-SBI banks are concerned.
On growth outlook - with this base and base turning favorable on retail side, thrust on non-banca and banca base turning reasonable, but noise around banca - how do you see growth next year? Also on agency - Q4 growth was very muted at 4% versus 28% in 9 months, what happened? And there has been a large amount of deletion in agency, no net addition this year - is this strategic removal of inactive agents?
So talking of the growth first of the Q4, you would have noticed that the overall industry growth in Q4 has been sluggish. And our company, although agency channel was somewhat affected, but there were other reasons also for the agency slower growth. Our focus on agency channel during the quarter was making more agents active by way of our traditional and protection product. So while the overall agency growth was only around 4%, but there was substantial growth in contribution of non-ULIP products from the agency channel. So that number is reflecting in our overall product mix also. Talking of overall growth, we delivered on individual IRP basis, 12% growth and going forward, we expect that we will continue to grow at around 13% to 14%, which will be slightly above the industry growth that is being ex pected today at around 12%. So this growth we are expecting from our continued focus on agency channel, where we are again opening more branches, having addition of more agents and increasing agent productivity as well as their activation. So that growth from agency channel, we are again expecting at around 25% on this strong base. On the banca side, we have grown by around 8% during the year. And we expect that going forward, we will be growing at around 10% or in low double digits in the banca channel. Overall, the growth expectation of 13% to 14%, we are standing by. As far as the number of agents you talked about, so you rightly picked that despite a gross addition of around 97,000 agents, our net addition was slightly negative, marginally negative. That was rightly on account of de -weeding of inactive agents. So we stuck to our minimum business guarantee from agents and all those agents who are not contributing substantially to the company, to the business were removed.
In group protect business, what has driven such high growth this quarter?
Grown very strongly in quarter 4 for us in group protect business. And there has been some other GTI deals, employer-employee kind also, which have come. So the big degrowth has happened in fund business, but the protection business has done well in quarter 4.
Credit protect is up around 10%, right?
That is for the year. For the quarter, it is higher. MD sir told for the year figure. Quarter figure, if I remember number right, is 20%.
In the VNB walk, what is the change in operating assumption? In the 9-month walk, the number was higher and it's now gone down in this quarter.
So if you look at the 9 months, that comparison was the last year March. And when it come to this year, it is last March to this March. And the assumption we take mainly on account of the mortality and persistency because you've seen this as a c ompany, we use the sustainable assumption for future. And continuously, we are making operating surpluses on both account on mortality as well as persistency. So some part of that we capitalized as that reflected in this assumption change. No, actually, if I understand correctly, last year, we made assumption change and the VNB walk is around 1% impact. That is from last March '23 to '24. And when we are reporting the 9-month number, that keep reflecting. And if I compare the March '24 assumption to March '25 assumption, its impact is only 20 basis points that's reflected in this one. And that is mainly on account of some refinement and some capitalization on account of mortality and persistency.
In EV walk, we have an operating variance of around INR 750 odd crores. And the assumption change of INR220 crores. Could you give a breakup of that?
So if you look into this INR727 crores operating variance, INR277 crores is coming on account of persistency, INR423 crores on account of mortality, INR17 crores is coming from approximately on expenses. So you see this mortality has significant INR423 crores, persistency also, because we've seen significant improvement in long-term persistency. And we're looking to long-term persistency 61st month and onwards that we have turned out to be positive that we capitalized in some of the assumption that also reflect in the EV because the EV walk is bigger, the impact we might be seeing in the EV walk is higher than what we're looking into the VNB walk.
There was a very smart product mix change this quarter, which supported margins. How do you see the product mix in this financial year?
Going forward, what we are looking for is a 65%-35%kind of product mix. I mean 65% of ULIP and 35% of our traditional policies that include participating, nonparticipating and protection products. So there, we're expecting a 5% tilt towards traditional products from ULIP during the year. This year, it was 70%. So this is FY '25, Nischint, it is 70%-30%. So we are expecting that it will go towards 65%-35% in FY '26. Quarter 4 will be less than that. Right. You are talking on the APE basis, I was talking on the IRP basis basically. So that is the difference.
On the P&L, net commissions and rewards as a percentage of total premiums is slightly up between FY '24 and '25 - are you paying more to agents or has T&Cs changed with banca channels? Second on possible regulation on banca channel - any advanced talks with regulator or government entity?
So the thing is that this talk on banca channel, I have been listening from either the journalists or the analysts, but not from any of the IRDA authority or from the government authorities. So you are aware that the IRDA's process is very consultative. And till date, they have not floated any paper or any draft guidelines regarding any restrictions on banca channel or anything. So this has been going on for more than 9 months, almost a year now. But as of now, there are no formal discussions or formal guidelines or even formal draft guidelines for these restrictions or anything. So that is our stand. We have, of course, always weaned with the regulator on any front, and we will keep discussing. And if anything comes, we will adjust the company's stance with that. And with reference to the net commission, which you have seen there is a little increase on that part is due to the product mix change during the last 2 quarters, quarter 3 and quarter 4. So it is basically the traditional movement has started for us in the last 2 quarters. That is the reason the net commission has gone up. And overall, opex and the total cost ratio, if you see it is under the control in a single digit, and we are quite comfortable on that.
On VNB margins during the quarter, are we also seeing some improvement in margins at product level with respect to protection or with respect to ULIP where attachment could have gone up? Also could you give the mix in individual protection between return of premium and the normal?
So there will be slightly improvement because there are 2 reasons mainly movement happened on account of product mix. But within the product, if you look into that, we have launched high sum assured protection product 6 months back. We also launched several riders and rider attachment also coming from. So when the rider attached with the product, the in-built margin is going up. We have launched children product where we also make some of the in-built protections. So that protection is also in-built protection also helping the enhancing the margin. So you can say the inherent margin enhancement is also, to some extent, reflected in this quarterly margin.
While you gave guidance on growth and product mix, is it fair to expect VNB margin for full year FY '26 to be closer to fourth quarter average? Also, in spite of fact that product mix will have such a large share towards non-linked products with higher margins, why should margins be stable?
So, in our last analyst call, we had given a guidance of around 28% margi n. And I'm happy to note that our overall margin was in the same range. So barring spikes or dips from quarter -to-quarter, we expect to maintain the margin of around 27%-28% for the full year. Partially, it will also be shift towards par and par and ULIPs have similar margins. There could be some uptick. But broadly, I think MD has guided what is the broad margin. Around 28% of margin. Yes.
On bancassurance channel - productivity growth has been around 8%-9% for the year and premium growth in similar range. So no incremental branch contributing? Or how should we read this? Only gains coming from productivity and lot of scope to penetrate SBI Bank?
So all SBI branches are authorized to sell our banca products. So any increase in number of branches by the bank will automatically increase the number of branches authorized to sell insurance for us also. The increase, of course, is coming from the per branch productivity, and that is what we are focusing upon also. You are rightly saying that banca is one channel which has a lot of opportunities, and we will continue to harness these opportunities in the best possible way with our parent bank and other banca partners also.
Can you give the credit life APE for the year or quarter?
Credit Life APE is around INR250 crores for the financial year FY '25. INR250 crores, he said. This is full year.
When you say 13%, 14% growth, is that on total APE or individual APE alone? And taking the 500 bps product mix improvement into consideration, back-of-envelope math suggests 8%-9% growth in ULIPs. This quarter you saw decline. What gives confidence ULIP growth will come back? Second, on non-par - in FY '23 when you launched Smart Platina, we saw a surge in non-par then it fizzled out. Why will it be different this time and product mix shift more permanent?
See, the first one is about the growth that is related to individual APE and that we are expected to grow between around 14%. And the product mix switch, which will happen, why we are confident is that we have already seen this during the last quarter, which is fourth quarter of FY '25. And that precisely also shown a positive side of the agency because agency, which has been doing for the last 3 quarters, that is first 9 months, and they have shifted significantly towards the product mix, which is non-par protection, non-par Smart Platina, which is guaranteed as well as the par. That is a big boost to us that we are very optimistic that it will help us in the agency side. And with this product mix, the banca, as already said, the banca also is being moving towards that. So overall, we believe that, that will help us to achieve our product mix along with the growth. This product mix shift is not based on any single product like the last time. It is more broad -based. As I told in my opening remarks, we have launched 4 products, which cater to different market segments, including guaranteed returns and there are children plan also, and we are seeing good numbers across the products.
On agency commissions versus peers - it seems your agency commission costs are significantly lower than peers even adjusting for ULIP mix. What is allowing you to operate at such low commission? Why isn't there a risk?
So, what happens as agency, we have been consistent investors for many, many years and have had a steady focus on agency for last at least 15 years plus and never wavered even in 2012, '13 when the whole agency was going down for the industry. So, to that extent, agents appreciate the steadfastness of SBI Life focus on agency in spite being a banca dominant insurance company. Second, we are present across all tiers of the market, not only in Tier 1 and in metros but also in smaller towns. So to that extent, our SBI brand plus the way we have managed agency has helped us keep agency cost in control for last many years. It's not a new thing. This is a phenomenon which you would see for last 8, 10 years at least that the agency cost for SBI Life is significantly lower than the agency cost for anybody else in the industry.
On channel margins - between banca and agency, which is margin accretive? Given agency growing faster than banca, would there be any impact on margin in FY '26? Second, on group protection - Credit Life and Group Term Life both done well; peers have been highlighting pricing pressure. How are pricings? Has GTL margin profile deteriorated last year? Third, the drop in ULIP this quarter - is this conscious strategy or lack of demand? How easy/difficult to reorient product mix in agency channel?
So if you talk of the cost structure in reply to the previous question, we said that we continue to have a low-cost structure even in the agency channel and the agency channel costs are lowest in the industry, the kind of commission we pay. O f course, the total cost structure, if you look at, then agency channel is slightly costly because of the physical infrastructure that we have to create and maintain by opening more number of branches. So that way, there is a slightly higher cost in agenc y channel compared to the banca channel. The cost of commission for both the channels is almost similar. As far as drop in ULIPs in the last quarter, you are saying, for last 1 year, we have been trying to change this product mix, and we have been working. You have rightly identified that it is slightly difficult to change the orientation of the agents or the partners in selling the product mix. But these are efforts of 1 year, which have started fructifying this. Of course, this also might have helped by the volatility in the market. Demand might have gone down. But the good thing is that even in the current month, we are seeing the similar trend as of now in the first 22, 23 days of this month. So this is a conscious strategy also. You will see that we launched new products also during this period in the non-ULIP segment. So this has been in works, and we have been making efforts because this is margin accretive for the company and a good value proposition for the agents and partners also. On the GTI, overall, if you see the group protection, the Credit Life has been good for us and which is very consistent. For the last 2 quarters, quarter 3 and quarter 4, we have been seeing good traction in the Credit Life. So we ended with around 12% growth in our C redit Life. And as far as the GTI is concerned, so it is doing good. And as a policy, we don't get into the business where we have a negative VoNB. And that has also grown this year around 5%. So our conscious call is that the negative VoNB business, we generally avoid and we go for a good client, good business as far as the GTI is concerned. So overall, this portfolio has given a better result as compared to what others are doing.
On credit life mix between different categories - home loans, personal loans etc - which is dominant? MFI part is under stress, comments?
See, majorly, our credit life portfolio is from the home loan customers that we cover as far under the credit life portfolio.
On individual protection, we're seeing some weakness this year. Can you help understand what's happening? Also, persistency improved across most buckets, but in 49th month there is still some decline - some understanding on that?
See, as far as the protection on the individual side is concerned, we have started seeing good numbers in the last quarter because we have launched some new products in the last 6 months, and we just started now seeing the traction. So, we are very optimistic that this will give us a good number in the FY '26. As far as this persistency is concerned, the 49th -month persistency is generally call it as a COVID cohort. So there, we have seen some of the geographies where the persistency is getting hit. And this is also we have taken a lot of measures, and we have got some positive result on that. So we have launched revival campaigns, and we have got actually control of this particular situation. And we don't see much dent on this going forward. But overall experience is good for us as far as the persistency across cohorts are concerned.
Contribution of pure term has improved in entire protection - what is the mix between ROP and pure term and how much delta contributed to margin? Second, on rider attachment - in total savings business, how much business has rider attachment or sum assured more than INR10 lakhs?
No, so rider attachment for ULIP policies came only in late quarter 4. So you would see some impact on that. On traditional policies, it came a little earlier. So there is impact of that. And yes, pure protection proportion has improved this year, both on high term INR2 crore plus product that we have launched also on the eShield Insta that is available on ULIP. Yes. So just to give you the proportion of the business has tilted from 90% -10% to 80%-20%, so which is a very positive for us.
On solvency ratio - we have seen 8 percentage point decline QoQ, whereas interest rates have gone down so you could have gains on bond valuation. Equity markets were broadly flat QoQ. So apart from macro being flat or favorable, what caused that decline?
So first thing we value the assets for solvency purpose, asset is not valued at market value, asset is valued at book value. So with the market movement, be equity, there's no impact on the asset side. If you see the fall on this solvency is business as usual. So we make the dividend pay-outs. So that has some dent coming on that basis. Subsequently, this quarter, we have retained protection and non -par and solvency requirement in the protection and non -par is higher than unit -linked product. That's the reason required solvency margin has gone up. And as a result, you might see some fall in solvency margin. But still, if you see compared with the last year to this year, last March to this March, it is stable at the same level.
On guidance - given higher base in agency and lower base in banca, you are guiding still lower growth from banca and higher from agency. How confident on 25% growth on high base in agency? Is 10% the new normal for banca or can we see improvement?
See, as far as agency growth is concerned, we are very, very clear about the trajectory which we are focusing for SBI Life as far as our next 2 to 3 years are concerned. This year, we have delivered with a base of 17% growth in FY '24. Now we have delivered 23%. And the kind of investments as we have been making in the agency channel and which is very consistent and our productivity per agent is also quite encouraging. And our number of addition of agents are also quite good. We are expanding our reach across Tier 2, Tier 3 cities also through our branch. Last year, we opened 70 branches. This year, we are planning to open around another 87 branches. So all taken into account, we are very confident and optimistic that the agency can grow around this rate. As far as banca is concerned, I think that, as already said, we are in the range of around 9%, 10%, which we are aspiring for the banca channel to grow. So overall, taken into account, it will be approximately around 14%, 15% growth, which we are looking for FY '26.
On VNB margin - given mix is improving, why are we guiding for higher faster growth in VNB compared to what we are guiding currently?
There are 2 aspects to look at it. One is that is growth, then corresponding to that, the product mix. But at the same time, we are also, as I said earli er, we are expanding our reach through opening of branches. We are putting a lot of investment in our infrastructure. That is like our IT cost plus our number of employees. We have already crossed 26,000 employees. And this year also, we are going to add another 1000-500 employees. So if you see all together, there will be a contrast from the product mix growth vis-a-vis the expense. So in that, the situation, the range which we are guiding is around 28%, which is, I think, quite good as far as the current product mix, which we are proposing for FY '26. And also, as I said, some of the mix is going through ULIP to par. And not everything is going to non-par.
On product mix - you said you want to continue increasing non-par savings mix. We are in middle of rate cut cycle and product offering becomes less lucrative. How will we ensure mix stays at top? What would be impact of margins due to rate cuts? Second - significant reversal in rewards section in commission cost similar to last year Q4 - is there something else to read into this?
See, on non-par product perspective, as question, we're looking to first thing that we are looking to increase the mix of the non -par, including protection. So it's not only our non -par saving, is non-par and protection and annuity as well. So all together clubbing a bucket, we think improvement will happen on side. So, this is the part. As far as rate cut is concerned, as we keep mentioning that we keep doing the active pricing both annuity and non-par guarantee product. And interest rate as much possible, we try to pass on to as quickly as possible, pass on to the customer. So from th at perspective, rate cut will not have any adverse impact to our margin as per non-par saving is concerned. Now reflecting into rate cut will have less attractive, slightly passive but at the same time, we have to look into other financial instrument available in the market, be in the fixed deposit other part. And you might notice the equity market is also slightly volatile. So that will also make this non-par product more attractive. Most important point that I would like to mention here in non -par saving is as a company, we are giving non-par saving, people give a guarantee. So even slightly lower guarantee, but longer-term guarantee continue to be attractive. And hence, we expect that we're able to drive this product mix that we are aiming for. The second one, I think you were referring about the expense provision. So that is generally part and parcel of our overall mix and the partners. So we generally do that. And by end of the year, whatever is not done, we reverse that.
In notes to accounts, there is mention of change in expense allocation methodology resulting in INR48 crores increase in policy liabilities. Is that set off against assumption change you've made? Can you explain what this is regarding? Second, on COVID cohort - is that any particular type of policy or specific product because of which this is what we've been observing? Or is it because of that time frame?
Regarding persistency, its across cohort and it is also similar for all the channels, including agency as well as other banca partners and banca. So we don't have any differential experience we have seen in this particular cohort. And as far as the expense allocation methodology, which we have changed, this is basically we do once in 3 years to 5 years as far as our expense methodology assumption change based on the feedback experiences and with the guidance. That is what we have done. In fact, we have done it in the month of second quarter itself and this is just a disclosure. So, there is not much on this , it is just a change between the existing assumption to new assumption. So whatever has the change, we have disclosed that. Just to supplement on this side, we do this time, motion study things, try to refine these things. And you see the year -on-year, the time is spent and time, motion, there was some refinement happened. So we just incorporate those refinements in our expense allocation policy. And as a result, there is some expenses shift happen from the different LOB. And when we also look into this each year, we look into our split of expenses, both in acquisition and maintenance perspective and really reflect in our calculation of VoNB. So there is a slight movement happened from unit-linked to non-par. And that resulted to slightly increase in non - par unit expense in the future. And that's a result, you see some increase in liability coming from in non-par segment. No, no. It's not variance in perspective because we already explained that if you look at the operating profit, we see there is expense profit coming from. So if there is an expense profit coming from, there is a positive variance, that's not adverse. What we said just realignment to reflect the current time, motion activity and that's reflected in the unit cost and that's why we incorporated in a very scientific way we do and that's reflected in our increase in liability in that perspective. Th ere's no additional provisions that have been made that you might be referring to.