Ladies and gentlemen, good day, and welcome to HDFC Life Insurance H1 FY 2022 earnings conference call. As a reminder, all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then 0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Vibha Padalkar, MD and CEO, HDFC Life. Thank you. Over to you, ma'am. Thank you. Good afternoon, everyone. Thank you for joining us for the discussion on our results for the half year ending September 30th, 2021. Our results, including the investor presentation, press release, and regulatory disclosures, are already available on our website as well as that of the stock exchanges. I have with me Suresh Badami, Executive Director; Niraj Shah, CFO; Srinivasan Parthasarathy, Chief Actuary; Eshwari Murugan, our Appointed Actuary, and Kunal Jain from Investor Relations. I will run through the key highlights of our H1 FY 2022 results and would be happy to take questions post that. With the vaccination program going well, approximately 70% of the adult population has received at least one jab, and we are hopeful that the intensity of any subsequent COVID wave will be muted. In addition, the recent macroeconomic data augurs well for the economy and is indicative of swifter recovery trends. Consumer sentiment remains buoyant. We are optimistic about sustained increase in business in the coming few months. Moving on to our business update. The second wave of COVID has largely receded. We settled around 200,000 claims in H1. Gross and net claims amounted to INR 3,640 crore and INR 2,466 crore respectively. While individual claims tapered off, group claim intimations were high in quarter two, FY 2022, both on expected lines. The overall experience has been well within our projections. Excess mortality reserve, or EMR, of INR 700 crore as on June 30th, 2021, has been sufficient to cover claims received to date. We have created an additional EMR of INR 60 crore in quarter two. With this, we carry unutilized reserves of INR 204 crore into H2. We continue to remain watchful and are monitoring claims trends as well as adequacy of reserves at regular intervals. Our business performance delivered a strong growth of 22%, resulting in a private market share of 16.2% in terms of individual WRP in H1 FY 2022. On a two-year CAGR basis, our growth was 12% compared to industry growth of 5%. The product mix was balanced with non-par savings at 32%, participating products at 30%, and ULIPs at 26% on APE basis. Our annuity business recorded a healthy growth of 47% vis-à-vis H1 FY 2021, with annuities contributing about 24% of our new business premium. On the protection front, the Credit Protect business registered a growth of 108% versus H1 FY 2021 on the back of normalization of disbursements by lenders. The absolute APE for individual protection was in line with H1 FY 2021 levels, which had grown by 38% last year. Protection APE, including group, recorded year-on-year increase of 41% for H1 and comprises 21% of our new business premium. We remain confident about the medium to long-term growth prospects of protection in India and will continue to scale this business in a calibrated manner. We are also happy to announce that our subsidiary, HDFC Pension, has crossed the milestone of INR 20,000 crore AUM, registering 97% growth year-on-year. The pace of growth has accelerated significantly. It took us seven years to achieve the first INR 10,000 crore mark and only 14 months for the next INR 10,000 crore. HDFC Pension is also the number 1 private pension fund manager in terms of NPS AUM, with a market share of 36% as on 30th of September 2021. Moving on to key operating and financial metrics. Our overall persistency showed an improving trend on the back of strong growth of 18% in renewal premiums. The 13th and 61st month persistency was 91% and 56% respectively versus 88% and 53% in H1 FY 2021. The 13th and 61st month persistency for limited and regular pay policies, calculated as per IRDAI's recent circular, which excludes single premium and fully paid policies, was 86% and 52%, respectively, versus 82% and 47% in H1 FY 2021. New business margin expanded by 130 basis points to 26.4% for H1 FY 2022 versus 25.1% in H1 FY 2021. Value of new business was INR 1,086 crores, an increase of 30% over last year. The sustained increase in value of new business has been driven by growth across channels and a balanced product portfolio. The operating return on embedded value before and after factoring in EMR was 18.4% and 16.1%, respectively, against 17.6% in H1 FY 2021. Solvency remains healthy at 190% post-payout of dividend. Our profit after tax was INR 577 crores for H1, which is 26% lower than H1 FY 2021. The decline in profit after tax is primarily on the back of higher claims reserving warranted by the second wave of the pandemic. Next on channel performance. All channels recorded healthy growth. The bancassurance channel recorded a growth of 20% based on individual APE. HDFC Bank continues to add meaningfully to our top line whilst maintaining focus on a balanced product mix. We're also seeing good momentum in many of our new partnerships like Bandhan Bank, IDFC FIRST, ICICI Securities, Yes Bank, to name a few. We aim to expand our reach to a wider customer base through these partners. After a short period of disruption in quarter 1 last year, our agency channel saw rapid adoption of technology and has recorded a strong growth of 27% on individual APE. The channel has licensed 18,388 agents in H1 FY 2022 versus 9,164 in H1 FY 2021. Our Agency Life program, which is aimed at capability building and productivity improvement, has seen encouraging participation with 90% of our branches and 96% of our financial consultant base in Agency Life locations covered under this program. There has been a 21% increase in Agency Life unique FC participation, and agent productivity has grown by 25% year-on-year. Our direct channel has registered a robust growth of 19% on individual APE basis. On the product front, we are pleased to announce the launch of our new non-par guaranteed savings product, Sanchay Fixed Maturity Plan. This plan offers complete flexibility in terms of age coverage, premium payment and policy terms, age agnostic returns, and has industry-first liquidity features. It can cater to multiple financial goal horizons and offers lucrative IRRs across variants. Moving on to our tech initiatives. Digital remains a key pillar of our growth story. We continue to collaborate with startups through our Futurance program. Through this program, we have been able to enhance our process efficiency, reduce non-value adding activities, increase sales productivity amongst others, thus helping reshape our core business. We continue to deploy data analytics across our value chain. We have introduced an automated underwriting engine, which has helped us reduce manual interventions and increase objectivity in decision-making. We've also partnered with Insurance Information Bureau of India, IIB, to tap into and analyze their customers' data repository for better decision-making and mitigate fraud. We continue to take meaningful strides on all the five pillars of our ESG strategy: ethical conduct, responsible investing, diversity, equity, and inclusion, holistic living, and sustainable operations. We've shared our approach and progress in our investor presentation. Our thought process and initiatives have been articulated in our ESG report. These initiatives have enabled us to be rated triple B by MSCI, which is the highest amongst the ratings currently assigned to Indian life insurance. Next is an update of the Exide Life acquisition. We have received shareholder approval for the issuance of equity shares to Exide Industries in the AGM on 29th September 2021. This issuance is subject to receipt of final approval from IRDAI and CCI. We have filed an requisite application with both authorities and are engaging with them as necessary. To conclude, we believe that the current environment is conducive for a robust growth of the life insurance sector as there is an increased awareness about life insurance as a financial protection tool. We remain focused on achieving sustainable new business growth and maintaining an upward trajectory on new business margins while adhering to a clearly articulated risk management approach. The detailed disclosure on our results is available in our investor presentation. We wish everyone good health and safety. We are happy to take questions now. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Suresh Ganapathy from Macquarie. Please go ahead. Yeah. Hi, Vibha. Firstly on this elephant in the room, which is reinsurance hike. What you are hearing from your reinsurance partner, what they are planning to do, and, of course, your competitors or peers are telling that there are negotiations which are going on. I also want to know what is the thought process behind these reinsurance companies to hike rates. Because as COVID structurally altered the mortality that they have to go ahead and take this one pandemic event to permanently hiking reinsurance rates. I just wanted a complete picture on what you are going to do. Yeah. Hi, Suresh. Yes, we have also received intimation that they intend to increase rates. We are in discussions and negotiations with them, and that should get concluded in a quarter or so. To your point about why are they doing this and they did this once earlier at the start of the pandemic. At that time, it was nothing to do with the pandemic, but it was just the timing seemed like that. The way I see this is, I don't think it is only on the back of COVID per se. I think there are two, three things happening here. The expansion and the fact that everyone now is focused on term and protection, which you'll admit that five years ago nobody was talking about except maybe one or two players like us. That just means that we are moving away from the top 10 cities to more and more into smaller towns, different risk profiles, different human life value profiles, and so on. That will see the mortality trend will be quite different from a very small microcosm of metros, salaried employees, and the like that are perhaps buying term through online, and that was the genesis. I would hazard a guess that rather than just saying that the reinsurers are increasing rates, I think that hypothetically, if we were retaining all the risk on our books as insurers, and supposing there were no reinsurer in the picture, even then, I would hazard a guess that we would want to increase rates to some extent if we really wanted to expand the pie. In terms of long COVID, I think they are being watchful that we hear of a whole host of fallouts health-wise of people who've suffered due to COVID, especially those who have been hospitalized. It's too early to say whether mortality will get impacted or not. That's a space that they are watching. I think it's more in terms of developing nation, everyone wants to increase protection. Information asymmetry is very high compared to other developing nations in Asia. All of that as a melting pot has resulted in this is how I see. Overall pricing also, we should admit, is on the relatively low side. India is still one of the lowest in the world. This is something that was somehow, to some extent, not something that could be sustainable on a large scale going forward. Sorry, Vibha, I have 2 follow-up questions because this is very essential for all of us to understand. If this is the case for upstream, Vibha, this is going to be an annual recurring feature. Every time they will see the mortality experience is not good, again, they will go ahead and hike rates 1 year down the line. Where does this stop? I just don't know how the mathematical calculation works here. These guys will keep on telling us, penetrating into lower markets, and they will hike reinsurance rates. Secondly, what is going to be your strategy? Do you think you can keep your margins protected by passing it on fully to the customers without jeopardizing growth? How are you guys looking at it? The sensitivity is huge. You don't hike rates by 5%, your margins will drop by 50%. It's a very tricky situation, right? Yeah. Over here it will depend segment to segment. Right now it looks like we're talking at a 20,000 feet that all of India is being increased. What they will do perhaps is ask us to tighten underwriting standards in certain segments, whether it is financial underwriting or health underwriting or a combination of that, so that they are eventually able to segregate the good lives, if you like, from the subprime lives, for want of a better terminology. The ideal thing, I think we are barking up the wrong tree. I think that we need to move towards risk-based pricing as far as term is concerned. Wherein there could be somebody who has recovered from a very significant illness, doesn't mean that person should just not be able to buy term. We should be able to price appropriately. Same thing in terms of there could be someone who has sporadic levels of income. That again doesn't mean that we're unable to price it because we only know how to price a salaried employee. Very akin to what is happening on the credit side. It started off with giving loans to salaried employees, but now you see a whole host of things happening on the small finance banks and MFIs and also some of the NBFCs. The granular pricing starts becoming increasingly important. I think we are just focused on reinsurer, but I think it's broader, even allowing us to price differently. Okay. Any response? Pardon? Sorry, I missed that. I said your response to that. Will you hike rates or what are you planning to do? Yeah. Right. Like we did last time when a similar kind of situation happened, we said that we will use a risk-based pricing because we work in a multi-tier environment. We need to be competitive. At the same time, we need to protect margins. Also, there are several levers for us that deliver margins, and this is one of them. Credit Protect delivers almost the same level of margin. And right now we are only talking about individual term. Margins will not be impacted, Suresh. There would be some lever or the other or a combination which would ensure that the upward trajectory on margins, like we've demonstrated every year for the past seven years, will continue as is. Okay. Thanks, Vibha. Thank you. Thank you. The next question is from the line of Aarav Sangai from VT Capital. Please go ahead. Hi, ma'am. Hope all good with you. I have two questions. My first question is on the demand side of protection. We have been hearing that the industry took a hike last year. I just wanted to understand how is the demand on ground, because we know that the supply has been constrained. In the number of requests that you have been getting, even after a price hike, how has the demand situation panned out on ground? Actually, if you were to look at quarter-on-quarter, while as a percentage it might have looked like we are slightly lower, in rupee terms we are actually higher, about 10% higher quarter 2 versus quarter 1 on individual term. That's your answer to demand, wherein demand is increasing, and presumably your question is only to do with individual retail protection, right? Right. Yeah. That demand has shown an increase. We don't drive protection as a percentage because really whatever is topical for that quarter will sell. There will be some segments that do well in a particular quarter because of a combination of events, including macro things that are a little bit outside our control. What we do drive is that each one of the segments should grow, and that's exactly what we are seeing. Okay. Ma'am, on the protection part, you all have mentioned in your disclosure that on the group side, we have seen more claims in Q2 compared to, say, Q1. Are we anticipating some hiking on the group side as well? We haven't heard yet on the group side. I think right now what we are doing is that to tighten underwriting things like having a COVID questionnaire, ensuring that we have our member information forms, those sorts of things. The use of analytics to try and see whether there is any early warning indicators on any of the policies so that we don't have to later on either decline a claim or have that under a bit of a question mark. That's what's happening right now. We retain more, so there's this overall reinsurer dependency to some extent is a lot less over there. Not on the horizon as of now. Ma'am, with this price hike coming in, what has your experience been in the past one year as to the elasticity of demand? In all my talks, I'm not able to understand how we can pass on 10%-15% of hike, you just answered that we are going more towards a risk-based pricing. If we go more granular, it means that insurance might become unaffordable for some people, they might just altogether choose not to get insured. I am not able to understand the elasticity of demand in the coming one or two years for the protection. I think we are quite some distance away from reaching a point wherein it is inelastic. Wherein it is that elastic. Right now we are in an inelastic zone and will continue to remain that, in my opinion, for quite some time. Term insurance is not an IRR kind of a game or something that you will defer. It has a very deep-seated underlying thought process wherein the realization that you need to cover your loved ones, and price is not necessarily something that will stop people from doing that. In fact, I feel the reverse will be true, wherein when people realize that they can get a 200 to 400x cover and the prices are only probably going to go up, there will be additional demand. That's my view over the next year or so, rather than people not buying it. At least over the next 2, 3 years, I don't see demand being an issue at all. Right. Understood. Just one last question, ma'am. On this Sanchay Fixed Maturity Plan that you'll have launched, are the margins there similar to our other non-par, or is it a little lesser? I think the liquidity features there are more enhanced. No, they're very similar. Great. Okay. Thank you so much, ma'am. All the best. We have some options in that, right from single premium to very bespoke terms of both PPT premium payment term and policy term. We expect also in terms of the reception to be very good and margins continuing to be in the similar zone. Okay. Thank you so much, ma'am. All the best. Thank you. Thank you. The next question is from the line of Prakash Kapadia from Anived Portfolio Managers. Please go ahead. Yeah. Thanks for the opportunity. I had 2 questions. If I look at the current rate of unwind, it's trending slightly lower than last year or so. Should it be in this range in the near term? Srini, you want to take that question on unwind? Yeah. Unwind is around 8.6% annualized. I don't know where you're looking at unwind. In our walk, you can see that unwind is a fairly fixed rate of 8.6% on annual basis. Okay. This was based on last year's EV and current H1, whatever unwind we've seen. I was calculating that and trying annualizing that, so I was getting a slightly lower rate. The unwind is ₹316 crores, I think, for first half, and that translates 8.6% per annum based on the opening EV. It was the same percentage for the first quarter as well. Okay. Given where interest rates are, we don't expect a major change in that. Unwind doesn't change because it's the expected return as at the start of the year. Any operating variance, any change with either the investment returns or equity markets will be reflected in the investment variance, and any operating changes will be reflected in operating variance. Unwind doesn't change as a rate. Secondly, any claims which are pending, I think Vibha mentioned in the opening remark, on the group side still claims are on the higher side individual. Any major backlog in terms of claims to be processed and the reserves should be enough for any further claims, if any, or any scenario which is not as per our expectations in the coming months. Just to clarify, whatever claims we have received have already been booked and accounted for. Despite that, we have excess to which we have added INR 60 crores and hence we're carrying forward INR 204 crores. The INR 204 crores are more in terms of just giving us comfort that if there are any deaths that have happened but not been reported because group business does have a longer reporting cycle than individual business. Also the sum assured tends to be typically lesser than in individual term, so people probably don't report it immediately. It is more to cover that. It is as a comfort rather than wherein deaths have happened and we haven't accounted for it. Okay. That's helpful. Lastly, given the low base of ULIP and what we are seeing in markets, do we expect ULIP to have a positive momentum for the year-end given that Q3 and Q4 typically would see higher demand? Are we seeing that. ULIP have a very close correlation to equity markets and time and again, we have seen these cycles. As a philosophy, you'll see in our case, quarter one and quarter two ULIPs as a percentage of total is very similar. We have stayed away from swaying with the market because that goes against the grain of balanced product mix. Also in the past, we have seen wherein people do enter markets at a high and then are somewhat disappointed leading to surrenders and so on. To your question, we will see as long as equity markets stay elevated, it's very possible to see that demand and for that same demand to possibly turn if we start entering into a bearish phase. Fine. Understood. Thank you. All the best. Thank you. Thank you. The next question is from the line of Sanketh Godha from Spark Capital. Please go ahead. Yeah, thanks for the opportunity. Just a data keeping question to start with. Can you give us the COVID claims paid in first half or in second quarter and if possible breaking down into group and individual? Because I think we paid around INR 245 crores net at last quarter Q1, so a single number, what was the number in Q2 or how much? Yeah. I can give you. Q1 and Q2 is what you're looking for? Yeah. Even one is fine, ma'am. We can see how Q1 numbers with us. Yeah. YTD, in terms of COVID claims, the number of claims is 11,114 total, of which individual was 7,300 approximately, and group was about 3,800. In rupees? In rupees for H1 COVID claims. The excess mortality claims was INR 2,466, of which individual was INR 976 and group was INR 1,490. This INR 2,466 is total claim, right? I'm just looking at the COVID claim, pure COVID claim, how much we have paid. Offset and COVID claims was INR 462 and for individual and group was INR 124, adding up to INR 2,466. Okay, perfect. The second question which I had was that, honestly, you said that you launched a new Sanchay Plus product. Given our Sanchay Plus was doing very good already and there is a naturally high demand for that particular product, the logic of introducing a new plan, maybe you are seeing that there are additional features. Is it really to cater to new customer segments which are probably not catered by Sanchay Plus, and that's why this product has been launched and don't you think that it will cannibalize into the Sanchay Plus or it will add to the market basically? Srinivasan Parthasarathy, you want to answer that? Yeah. That new product, it's a lump sum product. Sanchay Plus is an income paying product, this is called fixed maturity plan. You also have a single premium option in it. If people are looking to park a one-off money in a bond-like structure, so they can park it here and minimum term is 5 years and they can take their returns on a tax-free basis. This provides a different market from a single premium perspective where the IRRs are very competitive compared to alternative instruments available elsewhere. That is a new market for this. The lump sum, yes partly it was already there in our old Sanchay, but Sanchay Plus that you talked about is an income product. Got it. Does it change our strategy of capping the total non-par contribution to 30 odd% if the demand is there this particular product? Just wondering whether it will cannibalize into the other product or not. That strategy of capping non-par to 30% is more from a interest risk management perspective. If you sell this product in more towards, say, single premium, where the interest rate risk virtually can be very easily managed without the use of derivatives or other strategies we have talked about in the past. Right. This doesn't have [asset] interest rate. Fair point, sir. Got it, sir. Finally, just one small observation. Given the first time we have disclosed persistency excluding single premium, the ULIP persistency at 78% page seems to be relatively very weak compared to what others have reported on ULIP persistency. Just wanted to understand at 78% persistency, ULIP actually makes even a single-digit VNB margin for us or not? We just wanted to understand and more importantly, why it is so relatively less weaker for us compared to what maybe the largest player in the industry reports maybe 83%, 84% kind of number. Here, at least I'm not aware of people having reported at a segment level. Nevertheless, even before our disclosures show that ULIP has a lower level of persistency. Main reason there is an inherent structure of ULIP. After 5 years, there is no downside to someone surrendering his policy or exiting it. Not just that, even if one were to stop paying halfway through, there is a very attractive level of return that one gets through the discontinued policy fund which is almost competitive to most or even better than some of the debt products that are today available. That needs to be fixed, and that's something that is critical to increasing the persistency on ULIP. Yes. Got it. That's why about 1/4 of our business is ULIP. That's why we want to keep it that way because until the contours or the structural aspect of ULIP is addressed, exit barriers are relatively low. We don't really have a lot of 5-pay ULIP products which the industry is moving towards. If you have a 5-pay, then you're in a way saying that that's all you need to pay. That again is not in line with long-term nature of- Yeah corpus to insurance. Got it. Finally, if I can squeeze one last one. Just wanted to understand because one of the best way to negotiate or overcome the reinsurance problem is selling lot of ROP. We introduced ROP plan in the fourth quarter of last year. Just wanted to understand the trajectory, how it is growing and what is the contribution of the total ROP plan and that can be used as a tool to overcome the reinsurance challenge, what industry as a whole is facing because I believe retention will be much higher in ROP compared to a pure term plan. That's the wrong end of the stick, I feel that to try and address that problem. We do believe that ROP is more for someone who's really fussed about leaving a corpus for his nominees and there is both savings and term. It's not the purest form of insurance. We want to be able to offer all sorts of insurance, and it's really up to the prospective policyholders on what is suitable to them. ROP also tends to have a lower sum assured, more like 200x rather than 400x, because also the premium is more expensive, is costlier. Don't really want to try and fix one issue by something else like that. We need to figure out in terms of how overall we can address that issue as well as through pricing, as well as some of the other levers that we have to make good the drop in NBM which we have demonstrated time and again and a combination of these factors. Srini, you want to add anything here on ROP? By the way, today it is about 17%-18% of our overall. Yeah. Correct. It's gone up from the low sort of teens to 17, 18%. Broadly, I agree with what Vibha said. See, the fundamental issue is not about reinsurance. The reinsurance are increasing prices because the experience warrants that. See, for the pre-COVID levels the inherent longevity assumption assumed in the prices were that the population or the cohort to which this caters to, this product and the market caters to, the longevity was 93 years. With the reprice that took place last year, it had come down a little bit to say late 80s, so 87, 88 years. The average population longevity, as you all know, is close to 70 years. Right. You can say that the insurance population may be slightly healthier, maybe 75, 80 years. Still, even after this the reprice that we saw last year, it is still for the population it caters to, it is quite low. The prices are fairly low even now. Which is why reinsurers are hardening the prices. It is not that reinsurers are wanting to harden because of COVID or to boost their profits. It's because the underlying mortality experience sort of warrants that kind of a price. Got it, sir. Yeah. Thanks. That's it from my side. Thank you. Before we take the next question, a reminder to the participants, please limit your questions, two per participant. Should you have any follow-up, may we request you to rejoin the queue. The next question is from the line of Deepika Mundra from JP Morgan. Please go ahead. Hi, Vibha. Just two questions. Firstly, with any impact on the Credit Protect segment in terms of pricing over the last year, and has that impacted attachments at all, or do you see that segment to be relatively not impacted despite rising pricing? It has been fairly stable and largely business as usual on Credit Protect. It is just that in some situations wherein we have had quite terrible mortality experience for various reasons, we have had to go back to our partners to either tighten some of the underwriting requirements or look at segmentation, look at analytics, those kind of conversations. But we do retain more on the Credit Protect business and reinsured lesser. This year has been a phase of growth as far as Credit Protect is concerned. Okay. Just secondly, on the Sanchay FMP product, what are the type of IRRs that you're seeing versus Sanchay Plus offering product? Srinivasan Parthasarathy, do you want to answer that? If I look at the single premium IRRs, which varies by age, and for, say, 5-year term to 10-year term varies from 4.8%, 4.9% to about 6.5%, 5.7%. Depending on the age and the total term one takes. Versus Sanchay Plus? Sanchay Plus is not a comparative product. Sanchay Plus is an income product, which offers income for a very long term, 30 year, 40 year, or some of the options even offer income for the entire life. There, the IRRs will be, again, varies by age, but it can be starting from, say, 5.5 to it can go up to 6.1 also in some cases. That's an income product, a different market. Here you should be more comparing with short-term deposits. Got it. Just a follow-up to that with the hardening of yields of late, is the profitability of these products improving on the margin? I know your VNB sensitivity shows otherwise, but intuitively, shouldn't the profitability improve? Yeah. If the price to the customer is the same and you're earning more, yes, your profitability should increase. Yes. Okay. Got it. Thank you so much. Thank you. Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead. Hi. This is Adarsh. Question on this supply side tightening. Since last year, a lot of these price hikes have also come with more quantitative tightening of what the insurers will write and what the insurance companies themselves would have done. Just talk about what happened in the last 12 months, and whether in this round you expect the terms also to be further tightened, or we are just looking at a price hike. Shri, do you want to take that? Yeah. The underwriting terms are not going to be tightened, at least for our company. It really depends on the experience of different companies. I know from the market sources that some companies are asked to change their underwriting norms as well as changing the price. For our company, there are no changes to underwriting norms. Got it. Could you talk about what were the changes we would have had to do in the last 10 months? We brought in some video call for PCVC and some surcharge which certain types of relaxed underwriting was allowed, and some geographies where we've seen some adverse experience. All those things and also the minimum income levels for which you can give a little bit lenient underwriting. All these are the sort of areas where correcting some changes. Income levels, adverse locations, there is education level as well and some surcharge. These are the broad parameters based on which the underwriting terms have changed for the last 12 months. Perfect. Thanks. My last question is, as we got into second round COVID the last 12 months, I believe there were some self-imposed restrictions or also self-imposed breaks on issuing policies, which are not linked to reinsurance demanding something. Given the trajectory of COVID, will the industry and HDFC Life relax those so we should get to better growth in protection, or how do you look at that? Adarsh, couldn't hear you very well, but what I gather you're asking is the outlook for protection, individual protection? Yeah, I was asking this in the context of as we were in the second round of COVID, there were some self-imposed restrictions or breaks that companies put on themselves on what they wanted to underwrite as well. As the COVID trajectory goes away, at least that part can easily be relaxed by companies themselves. I am just trying to understand. I mean, to some extent, yes. At least the COVID related, wherein if somebody had recovered from COVID, we would ask them to wait for some time or undergo some further tests and so on. That hopefully will recede. It'll go back to largely business as usual, unless long COVID starts rearing its head. That's an unknown unknown. We know that especially people who have been hospitalized and were critical when they were suffering from COVID, there are some lingering other health issues that are manifesting in different manners. Whether mortality experience is going to deteriorate, that's a space we'll watch, but I don't think we'll know very much about it in terms of trends, at least for another couple of years. We'll be watchful, but yes, it should get better on from where we are today. That's it. Good luck. Thanks. Sure. Thank you. Thank you. The next question is from the line of Madhukar Ladha from Elara Capital. Please go ahead. Hi. Good evening. Thank you for taking my question. First thing, just a data keeping question. This time, I don't think you've given the net fund flow, net investment income and market movement, the change in AUM disclosure. The rates are pretty low. Even in the new product, we are offering 4.8% to 5.6% sort of a range in the Sanchay FMP plan. I wonder what can be the offtake or how much can we actually sell in this low rate environment. Individual protection rates are again going to go higher. What are your thoughts on the product mix going into FY 2023, the balance half of FY 2022 and FY 2023? Markets have done well. They've stabilized now at a pretty high level. The interest is much higher. Do we again see the share of ULIP increasing in the overall mix and the traditional products actually coming down a bit? What sort of an impact could that have on the margins? Any sort of comments on that would be appreciated. Right. On your first question on analysis of assets under management. H1 AUM went up by about INR 17,372 crores and within that, market movements were INR 8,141 and net investment income was INR 8,871. Net fund inflow was INR 360. Right. To your question about how unit-linked and vis-à-vis traditional products, there is a close correlation, as you know, between equity markets and the pull of the market for unit-linked products. Not surprisingly, that's what we're seeing right now given the overheated nature of equity markets. From our point of view, we want to stay focused on balanced product mix as well as what is suitable to a particular channel. That's why you'll see that quarter one, our ULIPs was 27% and quarter two was actually 26%. We haven't allowed that to go up to what is 40-odd% that you're typically seeing in the industry, and staying very much true to our balanced product mix philosophy. Even in our agency channel, typically you'll find amongst several leading players wherein unit-linked sold through agency channel is anything between 50%-70% or 75%. That's not the case with us, wherein typically it is less than 20%. To summarize, what you see happening overall is slightly different to how we have driven our product strategy. Got it. Ma'am, just to follow up on the net fund flow number. At INR 360 crores, that would mean that only about INR 460 crores have come in in 2Q. That number seems a little bit lower. Any particular reason for this? Largely it was all the claims payoffs, all of that resulted in an exit. We did see a large chunk of claims, all the conversations we've been having. We did see that both in individual claim, group claims, some level of surrenders also because while overall it is within our assumptions. In first quarter, we hardly saw any surrenders because of the impact of wave 2. That picked up. On a YTD basis, it's very much in sync, just if you were to look at quarter 2, that surrender did pick up quite substantially. Again, unit-linked surrenders, which are a function of markets. The combination of these aspects is what resulted in that lower number. Any particular product which is sort of responsible? ULIP would it be? Yeah, largely ULIPs. In fact, the persistency on our trad book is pretty good, largely on ULIPs. As you know, ULIPs, even after you discontinue, you do earn a fairly handsome return. Right. It's no longer a deterrent. People want to encash and so on. Understood, ma'am. Thank you. All the best. Thank you. Thanks, Avinash. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead. Yeah. Hi. Good afternoon. Two questions. The first one, on expense. Whichever way we look, the product mix is broadly stable, the distribution remains stable, but there's hardly any sort of a benefit of operating leverage now coming from it. We are gaining a scale, but cost is something where that has also been one of the factors that is keeping earnings sort of earnings being restrained higher. At certain point, one would expect that cost to flatten a bit, and that should provide some operating leverage and leverage. Going ahead, if not for cost, product mix you can sort of think moderately because you have certain preferred mix. If cost is not going to provide operating leverage, then I need sort of what would help in terms of your margin trajectory. That's for second one, because there has been a lot of talk around mortality experience. If we go back couple of years back when particularly interest rates were broadly stable, can you just sort of give an idea that your mortality experience on the retail protection side in terms of how sort of different they were from that standard that IALM mortality table that was published? Typically, if I'm not wrong, the private life insurance retail protection mortality experience is very different than that whole India mortality, that curve. If you can just provide some color around that. Avinash, on your first question in terms of the kind of role that expense and operating leverage can play in terms of our margin development. A couple of things. One is in terms of, if you were to look at it from a two-year kind of perspective, the rate at which the costs have grown is less than half at which the revenues are growing. That basically does tell you that if you take out anomaly of what we saw last year because of a very different year in terms of deferral of expenses, no hiring, cuts in bonuses and so on and so forth. When you take all that away and you go back to a normalized kind of a comparison, you find that that is starting to come through at scale. In terms of how our margins have also developed over on a sequential as well as on a quarter and half-yearly basis as well. There is a significant impact of volumes that's coming in, which is actually again, in some sense, the operating leverage that's coming through where costs are not growing linearly in line with volumes. It's already something that we are seeing, and we've mentioned in the past as well from time to time, the margin expansion is going to be a combination of product mix as it evolves towards protection and annuities and more longer-term products, and benefits of scale as they come from time to time. There could be some sort of variations within quarters and within years, depending on the kind of volume impact that we see as well. Yeah, I just want to add to that. Avinash, if you remember last year, H1 of last year would not have had any salary increase and bonus and so on because of going through COVID. In fact, beyond a certain grade, we skipped an entire year. Even below a certain grade, it was only for half year, which is the second half of the year. Like for like, I think it was long overdue in terms of back to normalcy and so on. The comparison with one year prior is what we believe is the correct comparison. H1 FY 2021, like Niraj said, was 14%, H1 this year is 12%. Okay. This ad and marketing expenditure, it's a combination of two things, of course. One, your advertisement and one is in a way advertisement via your distribution partners. Is there some sort of a breakup between what share is through the distribution partner or marketing ad via them and the other via your electronic or TV or print media? Today we are in a increasingly connected world. I might be having my ad on one of our bank partners and several bank partners' ATMs, for example, while you're waiting to withdraw cash. Who's to say that ad is less effective than if I had a hoarding outside an airport? Digital marketing, for example, that I might do on a partner or some allied partners who has a large customer base on their platform. That's why this kind of simplistic classification, I think, we don't track ad spend in that manner. Okay. Now if some color on that mortality experiences prior, 2 years back on the retail side and how they were different from that standard is, yeah? Srinivasan Parthasarathy, you want to take that question? Yeah. This is broadly in line with whatever we assumed in the prices. It does vary quite a bit between savings and protection book, and depending on whether medical has been done or whether it went through non-medical. Largely, at least pre-COVID, it was within our expectations. Yeah. My question was more on that. Okay. Typically, your expectation pre-COVID, was like your insured pool mortality experience or assumptions materially different from what is that India population mortality, IALM table suggest? Was there a huge difference in terms of your risk pool, or was it like some color of that? Was it closer or was it having a very sort of a different mortality profile? Yes, it would be. Generally insured. Population always has a favorable mortality or lighter mortality compared to the population mortality. Within that also, within insured lives, the private players' mortality will be much lighter than the overall mortality for the industry. Even within the private sector, you will have, say, HDFC and similar types of profiles will be even more lighter. I wouldn't want to give you an exact number, but it's certainly much lighter than the population mortality. Yeah. Within that also, I would expect your retail mortality experience will be far lighter than your credit life sales portfolio. Yes, that's right. Thanks. Thank you. The next question is from the line of Arjun from Spark Capital. Please go ahead. Hello. Thanks for the opportunity. I'd like to know what% of term insurance comes from web aggregators. As the IRDAI tightened the underwriting norms, what would be your approach towards this channel? Can the price mix impact be mitigated to some extent by changing the channel mix or from where the term insurance is sourced? Would you be shifting your focus to other channels, if so? That's the first question. Yeah. I'll follow the second question afterwards here. Yeah. Less than a fourth comes from the aggregation. Less than 4% of the term insurance comes from the aggregator, is it? One-fourth. One-fourth. Okay. Got you. Yeah. Between one-fifth and one-fourth. Okay. If I can add on the other part. The term pricing is fixed based on what we have filed with the regulator. We do, of course, look at the pricing, how it will impact across channels. We can't change the pricing across channels and then change it across because there's a very marginal difference between the online pricing as well as the offline pricing. What we'd normally do is we try and maintain that balanced product mix what Mr. Niraj was talking about by ensuring that a certain channel focuses on term or we push a certain particular product based on what the customer requires and where the demand is. Across products, there is a balanced product mix. Across channels also, we try and make sure that all our products are present in the right volumes. Okay. Yeah. Thanks. The second question is within annuity, what percentage would be coming from HDFC's pension fund? I believe when the NPS matures, the customer can opt also to other life insurers. What percentage would be from HDFC pension fund that flows to HDFC Life, any sense over there? Also, what would be the mandatory annuity part that is coming in? In terms of annuities, the sources of business have been evolving over a period of time. A lot of initial amount of business came from the compulsory annuitization. Over a period of time, more and more business started coming from the group side where we have tie-ups with various corporates, public sector as well as private sector. In the last year and a half, ever since the NPS book has been opened up, especially for the government sector, that's where more and more businesses started coming from the annuity side. It's a bit difficult to talk about NPS annuity as a% in the current scheme of things, but it is becoming a more and more meaningful source. Anywhere between 15%-20% of the business over a period of time we can expect to come from this pool. Niraj, if I can add. I think, in H1, Niraj is right. There are a few channels from where we get. One is the vesting base, one is the open market, one is the group and the NPS. NPS in H1 was almost 17% of our business. We expect this to grow. In fact, we saw a fairly solid growth of almost 300% plus or 320% in terms of the NPS annuity in terms of how we were growing. Clearly, the investment that we made in the NPS, the pension company and the AUM that we are now developing NPS will lead to a significant annuity pool for us. Yes, the customer can choose, but frankly, in many of these cases, HDFC Life is a strong brand. Our pension fund has been performing best-in-class, and it's a known brand. We do find that we will gain significant market share on the overall annuity choice by the customer. Thank you. Thanks a lot for that. Yeah. Thank you. The next question is from the line of Vineet Mehta from Sameeksha Capital. Please go ahead. Yeah. Hi. Thanks for the opportunity. My question was regarding that we had an EMR of around INR 700 crores at the end of quarter 1. If I back calculate the claims, COVID claims in Q2, it's somewhere around INR 1,500 crores. Is our experience worse than what we estimated at the start of Q1? Yes. What we did mention at the beginning, really, overall claims have been in line with what we've expected for H1. At the end of quarter one, we had made a provision of INR 700 crores, as we had mentioned, split between individual and group. We had mentioned that on the individual side, we have a lot more visibility with, at that point in time itself, claims had started tapering off, and we saw a lot more pronounced effect of that in quarter two as anticipated. On the group side, we had said that it's still early days. The trends are yet to emerge. We had created a provision at a high level for group claims, which we anticipated would get re-elevated in Q2. That's exactly what happened. At an overall level, like we mentioned, even at the end of the quarter, we carried a surplus reserve of INR 144 crore at the end of Q2, and to which we supplemented that by another INR 60 crore to take care of any more delayed reporting situation that we may have on the group side. Today, we carry a number of more than INR 200 crore into H2, which we believe would be sufficient to cover any sort of elevated claims that would come through on the group side. Okay. Thank you. Thank you. The next question is from the line of Dhaval Acharya from Kotak Life. Please go ahead. Hi. Thank you so much for giving me this opportunity. My question is along diversified distribution. While we are constantly building our proprietary workforce and partnership business, if you can give some color and future insights to how emerging ecosystems are likely to come into play as far as life insurance distribution is concerned. Suresh, you want to take that? Yeah. Look, it is a growing segment. Firstly, emerging ecosystems help us reach out from a technology, ease of convenience, prepaid, multiple ways to wider markets, which probably traditional markets may not allow us to. For instance, what we did in terms of the bundle product with Airtel helped us to reach through the prepaid platform for a very large set of customers. Now, where the emerging ecosystems, and one of the reasons why we are investing in emerging ecosystems is that, look, it allows us to build small ticket, it allows us to build flexible products, it allows us to build pre-approved products. On tech platform, we're able to reach out to customers who are anyway onto a certain platform for one of their needs. There are multiple verticals within the emerging ecosystems, whether it's telecom, whether it is in terms of health platforms or whether it's All these platforms which are available, and we do believe over a period of time, all of them will have a reach out to the customer. We continue to invest in these. We are trying to make the journeys as easy as possible. What we really see in the future is an ecosystem building, right. When some of these ecosystems build, then you'll have certain trigger points where you'll be able to grow. We have similarly like this, we've tied up with Paytm, we have a tie-up with [Stitz] Capital, we have a tie-up with Fisdom. We do believe over a period of time, it may not be immediately in terms of percentage contribution, but may be significant contributors to the overall insurance. We have started seeing that in general insurance. You will find that maybe over a period of time, even life insurance, especially when the customer comes in for a second purchase, these ecosystems will pick up. All right, sir. Thank you so much. Yeah. Thank you. The next question is from the line of Ashwin Agarwal from Akash Ganga Investments. Please go ahead. Hello. Yeah, go on, Ashwin. Hi. Yeah. Sorry, my answer has been answered. The question has been answered. Thank you. Thank you. The next question is from the line of Gaurav from BNP Paribas. Please go ahead. Hi. Most of my questions have been answered. Just one question. Even though the share of protection has decreased by spot on quarter based on my calculation, still margins have increased by say, 50 basis points. Can you please explain what has led to this margin increase? Yeah. When we say protection, I think you're only looking at individual protection. Our group protection has increased by more 100%. Credit Protect has grown by 108%, so that is a big contributor to margin expansion. Okay. Actually, yeah, that answered my question. Thank you. Thank you. As there are no further questions, I now hand the conference over to Ms. Vibha Padalkar for closing comments. Over to you, ma'am. Thank you, everyone, for participating in the results call. Stay safe. Good evening. Thank you. Ladies and gentlemen, on behalf of HDFC Life, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.