Ladies and gentlemen, thank you for patiently waiting. The line for the management is reconnected. Thank you, and over to you. Thank you, Faizan. Good afternoon, everyone. Apologies for the delayed start. Thank you for joining us for the discussion on our results for the year ended March 31, 2022. 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, Neeraj Shah, CFO, Srinivasan Parthasarathy, Chief Actuary, Eswari Murugan, our Appointed Actuary, and Kunal Jain from Investor Relations. As you know, we listed our company in FY 2018, and we thought it would be good for us to share our performance over the past four years. We are proud to share that we have at least doubled our new business premium, renewal premium, protection APE, assets under management, value of new business, and embedded value. Further details can be found on slide 5 of our investor presentation. I will take you through the key highlights of our FY 2022 results and would be happy to take questions post that. We clocked a growth of 16% in individual WRP in FY 2022, with a market share of 14.8% and 9.3% in the private and overall sector respectively. Despite very trying times during the 2-year pandemic, our 2-year CAGR of 17% was almost 2 times industry growth of 9%. Demand remained robust across most channels and segments, and hence we continue to be optimistic about the growth prospects for the life insurance sector in the coming years. We are closely tracking the worrisome geopolitical situation and its potential impact on inflation and consumption trends. In our view, life stage products such as annuity and protection are relatively insulated from such external factors. With the severity of COVID infections having waned, we have returned to normalized mortality experience. However, we remain watchful, and we'll continue to keep an eye on the emerging situation. Moving on to our business update. We continue to maintain a balanced and profitable product mix with non-par savings at 33%, participating products at 30%, ULIPs at 26%, individual protection at 6%, and annuity at 5% based on individual APE. Almost a fifth of our non-par savings business in received premium terms post the launch of Sanchay FMP in the second half of the year consisted of single pay products, and these are relatively simpler to hedge. This gives us the ability to allow for a higher proportion of non-par savings in our business. Overall protection grew by 24% in terms of APE and 47% in terms of new business premium. This was largely led by a 55% growth in credit life new business premium on the back of higher disbursements. On the individual side, demand continues to be healthy in terms of number of applications logged in. However, proportion of policies actually issued still remains a constraining factor at our end on account of tighter sourcing guidelines, lack of a centralized medical database, and underwriting challenges in tier 2, 3 locations. With a combination of data analytics insights into customer profiles and calibrated risk retention, we expect to be able to grow individual protection in FY 2023. Some of the initiatives taken by us in this space include development of an in-house automated underwriting engine, platform for scheduling medicals in real time, facilitating video medicals, and integrating technology to measure heart rate, BMI, and other vitals using video input from the customer's mobile. On the retirement side, our annuity business recorded 24% growth vis-a-vis industry growth of 3%. Annuities now contribute over a fifth of our new business premiums. We have been able to almost double our business in the last three years. We believe that protection and retirement solutions are multi-decade opportunities and will continue to grow faster than other segments. We covered 54 million lives in FY 2022, registering an increase of 36% over FY 2021. We settled close to 3.9 lakh claims during FY 2022. Gross and net claims were at INR 5,804 crore and INR 4,328 crore respectively for FY 2022. The reserves created during the year have been more than adequate to address increased mortality on account of COVID. As on 31 March 2022, we carry reserves of INR 55 crore into FY 2023 as a prudent measure towards COVID. Moving on to key operating and financial metrics. Our renewal premiums recorded a steady growth of 18%, with our 13-month persistency ending at 92%, up from 90% in the previous year, and our 61st-month persistency ending at 58%, up from 53% in the previous year. Further, 13th- and 61st-month persistency for limited and regular paid policies was at 87% and 54% respectively, up from 85% and 49% in the previous year. New business margin for FY 2022 was 27.4% versus 26.1% for FY 2021. On the back of our robust growth and margin expansion, we delivered a value of new business for FY 2022 of INR 2,675 crore, 22% higher than FY 2021. Our value of new business has grown at a 24% CAGR over the past five years and has almost tripled in the last five years. Our embedded value as of March 31, 2022 was INR 30,048 crore. 30,048 crore. We have been able to almost double our embedded value in the last four years. Operating return on embedded value after factoring excess mortality reserve or EMR, which was created during FY 2022, was at 16.6%. Excluding EMR, operating return on embedded value would have been 19% as against 18.5% for FY 2021. Profit after tax for FY 2022 was INR 1,208 crores, a decline of 11% versus FY 2021 due to higher mortality reserve created during the year. Post wave two, our profit after tax in Q3 and Q4 improved steadily, with profit after tax for Q4 registering a 12% year-over-year growth. The board has recommended a dividend of INR 1.70 per share, translating to a payout of 30% of our profit after tax, in line with our dividend payout ratio of FY 2021 and earlier. Solvency as on March 31, 2022 stood at 176%, post a cash payout of INR 726 crore to Exide Industries as part consideration for the acquisition of Exide Life. Excluding impact of this cash payout, solvency ratio would have been 189%. Our board has approved a subdebt raise of INR 350 crore, which should increase solvency by around 600 basis points. In order to further strengthen solvency to fuel growth, we will continue evaluating raising capital through a mix of equity and debt. Next, on channel performance. All channels continued to perform well, with bancassurance growing by 13% this year and 21% based on 2-year CAGR. Proprietary distribution, which includes our agency, direct and online channels, grew by 18% this year and 11% based on 2-year CAGR on individual APE basis. Over the last 5 years, our share of proprietary distribution increased to 33% from 23%. Our agency channel grew by 26%. The channel added more than 40,000 agents in FY 2022, which is the second-highest among private players. Our agency life initiative aimed at capability development continues to see healthy participation. Moreover, we are focused on building a women financial consultant model, which we believe would give us higher activation, retention and productivity. Moving on to product innovation and sustainability. We continue with our efforts to stay relevant to customers' needs, offer new propositions, and provide a seamless and pleasant customer experience. During the year, we launched non-par savings plan Sanchay Fixed Maturity Plan, which now contributes more than 15% of our non-par savings mix. We also rolled out our retirement product, Systematic Retirement Plan, which is a regular pay deferred annuity. Further, we introduced a bundle solution, Click 2 Protect, which combines our Click 2 Protect protection plan and riders to offer cover against the three Ds, death, disease, and disability. On the ESG front, we have signed up for the UN-supported Principles of Responsible Investment, PRI, joining a network of more than 4,800 organizations around the world that have publicly demonstrated their commitment to responsible investment. Now an update on our subsidiaries. Our pension subsidiary, HDFC Pension, ended FY 2022 with an AUM of INR 28,414 crore, an uptick of 73% versus previous year. Additionally, as per National Pension Scheme Fund Performance Report published in March 2022, we continued to rank number one in terms of fund performance across categories. As of March 31, 2022, HDFC Pension had a market share of 37%, retaining its number one position as private pension fund manager in terms of NPS AUM. NPS continues to contribute significantly to our annuity business. Our wholly owned subsidiary, HDFC International Life and Re, generated gross written premiums of $15.64 million, registering 18% year-on-year growth. Our third subsidiary, Exide Life, recorded a healthy growth of 22% based on individual WRP in FY 2022, well above the industry's overall growth of 16%. Its embedded value as of March 31, 2022, was INR 2,910 crore. The merger process has been initiated with NCLT and is expected to be completed in the second half of this financial year. We continue to make progress in being able to seamlessly integrate both the businesses post regulatory approval. We are confident about continued margin expansion on a standalone basis at HDFC Life and Exide Life, and aspire to be margin neutral on a consolidated basis in FY 2023. However, we will prioritize value preservation and investment in expanding the franchise. On the regulatory front, our new IRDAI chairman, Debasish Panda, unveiled his vision of independent India being an insured India as we celebrate Azadi Ka Amrit Mahotsav on our 75 years of independence. He mentioned, A, revamping regulatory framework to align with international benchmarks. B, outcomes and tech-based supervision. C, simplifying regulatory processes. D, moving towards product certification by insurers as the principles laid down by IRDAI. E, supportive of tech-led initiatives. These initiatives would help provide impetus to ease of doing business. Further, the chairman has laid out a roadmap on how insurers would help drive the above with eight thematic groups already having been constituted and having kick-started work. With these path-breaking initiatives, we are very optimistic of the prospects of our sector. To conclude, our objective remains to bring more individuals under the financial safety net by offering multiple innovative solutions, increasing customer connect, and continuing to expand our offline and online distribution. The detailed disclosure on our result is available in our investor presentation. Wishing everyone success as we embark on a new financial year. We're 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 one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Suresh Ganapathy from Macquarie. Please go ahead. Yeah. Hi, Vibha. Congratulations on your good full year performance. Just three quick questions. One is on the 80 basis point change in operating assumptions impacting margin. What exactly is that? Yes. May I go ahead? Suresh Ganapathy, this is basically the sensitivity assumptions that we had at the beginning of the period, given now what we're seeing in the portfolio. That's something that was put through at the beginning of the period, and that's getting reflected both in the embedded value walk as well as in our VNB walk in the investor deck. Sorry, the mortality assumptions you are saying, right? Correct. Yeah. Okay. Now, this is a recurring feature because I don't know, I mean, this can again recur next year. I mean, are you confident that this is done and dusted, or do you feel like this can evolve? Suresh Ganapathy, I mean, the good thing is that it is done upfront, and it's not something that is, you know, left for later. As you see that the mortality experience evolves, this is something that we would continue to, you know, put through in our embedded value to take whatever charge that we need to take. It's something that is not expected to be a routine element. As you know, the protection journey is fairly recent in India, right? Over the last few years, we now slowly started expanding from the top 10 cities and from the salary segment into tier two, tier three and to beyond the salary into self-employed and professionals. As that happens, the mortality experience will evolve. That is something that will, you know, change mortality experience as we go forward, and that will get reflected in new pricing as well. Okay. Two general questions, Vibha. One is on the merger with HDFC Limited and Bank. The merger, how does it change the equation in the sense that do you see more opportunities on anything which you were not doing earlier, you can do it more or any challenges? That's the first general question. The second question is, how do you see LIC's IPO changing the equation? In the sense, have you seen them on the ground getting more aggressive on the non-par segment? Are they launching new products? How the competitive environment will change? You know, any perspective on that would be great. Yeah. Right. Yeah, very valid. On the first one, you know, while HDFC Bank was always part of the group, now, with this merger going through, we will become a subsidiary of HDFC Bank or at least, you know, eventually once regulatory approval. There will be a direct alignment. That is number one. Number two is that cross-sell opportunities that every group is looking at, every major business group is looking at cross-sell opportunities, in a very, structured manner, which has somewhat, probably, you know, the focus has not been there so far because there was enough that was happening in our respective individual companies. That is number two. With the use of digital and with data protection, we will see as to someone who's anyway well-disposed towards buying from HDFC Group of companies that, whatever you need in terms of one-stop shop, you can get it from there. More of that will happen. Was HDFC Limited selling Credit Protect policies of Life in a big way? Yes. Yes, they were. Yeah. Okay. They were selling it, but you know, we would not probably have a lot of upsell or cross-sell to them in terms of other products. There would be a loan taken, there would be a coverage of the loan, and then loan is being paid, cover is closed. These are all affording customers. We are known as a product innovator. For us to keep going back to say, "Have you thought of this?" You know. For example, Deferred Annuity was not known maybe four years ago or non-par was we were the ones who launched non-par the way it is understood as a category today and so on. We'll continue with more. That kind of an upsell, cross-sell, more of that can happen. Product innovation in terms of solutioning, whether it is a combination with HDFC ERGO and us, not that we were not doing it, but a lot more can happen with again, alignment, all of it sitting under HDFC Bank. This is just the beginning, Suresh. We are of course brainstorming with CEOs of respective companies. That's already more than started happening. I think certainly the intention is very clear that how do we leverage the power of the group to be able to give solutions to the customer. Of course, it will be done respectfully in terms of how the customer is looking to be serviced. There's still a lot that can be done within that arena. That is on the first question. If I can move to the second question, Suresh, can I do that? Yeah, please. The LIC. Yeah. On LIC. See, the way I see it is that just from an India Inc. perspective, the largest financial institution not being listed was probably not really comfortable. It's good that they're listing. It is good that there will be a lot more disclosure. Ultimately, the shareholders and your customers, hopefully there's an overlap, and that's all a good thing, I think. Yes, there might be some short-term turbulence in terms of FII, maybe repositioning, reallocation and so on. But I do believe that that's short term. Now, from what I read, it is an INR 21,000 crore outlay as against maybe a 2x of that, again, anecdotally that we read earlier. It's not enormous in the scheme of things, but I think overall the positives are certainly there. I think you also talked about growth and so on. For some reason, I think their growth has lagged overall industry private sector growth. You know, they are akin to a, you know, to the large public sector insurer. I'm sure there's enough. We should focus on expanding the pie rather than just trying to cannibalize from one another. They also operate in a slightly different segment where ATS, their ticket size is about a fourth of our ticket size, so slightly different segments of operation. You know, it is nevertheless, it's. I think there's enough. When you triangulate that with life insurance penetration, pension as a percentage of GDP and so on, I think there's enough for everyone. Any feedback from your agency source on the ground? I mean, from competition standpoint, what they are doing or trying to do? Yeah. Suresh, I have a monthly business review of my zones. Okay? Okay. Zones and regions. Mm-hmm. That's when my day-long meeting starts off with financial consultants that I meet. Mm-hmm. Up till now none of my meetings have they ever cribbed. You know, that so and so is happening on the ground. As you know, this would definitely be on their agenda if it was really consuming them or it was really topical. That's not to say it's not happening. I'm sure it's happening in bits and pieces, but it's not consuming their mind on it. Okay. That's helpful. Thank you. All the best. Sure. Yeah. Thank you so much. Thank you. The next question is from the line of Arav Sangai from VT Capital. Please go ahead. Yeah. Hi. Good evening, ma'am. Hope all well at your end. I have a couple of questions. Yeah, all well. Ma'am, first question is on the growth part. Like, if we see the last couple of months and when the basis started getting high and even the base might remain high for the same couple of months, the growth for the industry as a whole has moderated. Even in a rising interest rate environment and a tough macro situation, how do you see the, you know, narrative changing around some of our savings products, or how do people react to, like historically when we have approached them for these products? Like, how do you see the growth panning out for the industry? Because this is a very big concern among investors right now. You know, I think that concern, I just want to put that concern to perspective because optically it looks like growth has in quarter four for the sector waned somewhat. If you look at the base effect for us, we, for example, grew 40% in quarter four of last year. You know, we were just coming out of one wave of pandemic and so on. If I were to look at on a CAGR basis, if you're looking at the growth of 17% two-year CAGR, I don't think that's a bad growth against a pandemic. Yes, industry growth was 9%, but it's not very bad. Also, if you were to look at standalone quarter four, the two-year CAGR was 23% for us. For the total industry it was 19%. Even for the total industry, you know, very close to 20% kind of a two-year CAGR was not, you'll agree that it's not by any means a tepid growth. But yeah, optically it looks like that because of high growth on a standalone basis, in Q4 of last year. Not really worried. Also if you triangulate that with GDP, say, you know, 8-8.5%, one can quibble. Maybe it is 100 basis points lesser or whatever, but I think you'll agree that it's not unlikely to be Mm-hmm. 4% GDP growth. At 7, 8.5%, we should grow 2x of that. That has been the trend all these years. That's helpful, ma'am. My second question is on expense front. I think one of our other peers also mentioned that they'll be investing a little much more in this year to maybe expand their franchise and all. Is it a trend like, if we are expanding extra, will it affect our VNB margins in the order of our acquisition expenses, you know, increasing? Is there any effect on our margins in the next year? No. Our margins will continue on a standalone basis. It will continue to trend upwards like we have consistently done over the past several years. I along with Exide Life as a combined margin, what we hope to end is to be flat against our FY 2022 margins. That will be a good outcome. On a standalone basis, expansion. See, expenses, unless you know there is something very unusual like an acquisition that is happening, it will be very much part and parcel of what we're doing. Okay. Just one last question, ma'am. Bookkeeping, like since we increased the retention last quarter, will it affect our mortality sensitivity going ahead as the new mix, you know, becomes a bigger proportion of our overall mix, our protection products? I'll hand this over to Srinath. The mortality retention you know should on the new business should be slightly higher, but the EV sensitivity should not really change materially because the retention is applicable only to the new business. Okay. All right, sir. That's it from my end. All the best for the upcoming quarter. Thank you. Thank you. The next question is from the line of Ravi Naredi from Naredi Investment Private Limited. Go ahead. Vibha ma'am, fantastic results. So far growth is there. My point is there, what is the profit from unrealized investment gain as on thirty-first March 2022? This is nothing but the mark to market of our equity. There's also debt component in that, but simply mark to market. As on March 31, whatever is the market rates that is what, and you know the underlying assets under management that will be mark to market. There will be a mirror in the unit-linked book, for example, there will be a mirror entry. If from 100 you go up to, say, 120, you will have a similar movement in reserves, and it will be neutral on profitability or in terms of PAT. Okay. Can you tell in the merged entity of HDFC and HDFC Bank how much equity HDFC Bank may hold in HDFC Life? Whatever is currently 47.6% that HDFC is holding, that is what will go to HDFC Bank and hold the same. They have asked for regulatory approval to take it up to 50%. After merger, how the working of HDFC Bank will enhance our business growth in comparison to HDFC at present? Yeah. Like I mentioned to the earlier question, there will be a complete alignment because of us being a subsidiary of HDFC Bank. And therefore, also paying a lot of attention on how do we give the customer a one-stop shop for all financial services solutions. Right from perhaps opening up a small savings account when he just or she just starts her job, to subsequently giving a mortgage when you get married or want, you know, thereabout in terms of lifestyle, you get your first actions when you're having a kid, health insurance, you know, a top up mortgage, and thereafter some fixed deposits, retirement solutions. Everything mutual funds, in terms of your surplus that you wanna reinvest. You know, all of that, how does one do it in terms of harnessing the power of HDFC Group? A lot more work has commenced on that now. Okay. Thank you very much and all the best. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Deepika Mundra from JPMorgan. Please go ahead. Hi. Good evening, Vibha. Thanks for taking my questions. Firstly, just can you walk us through capital requirements for the business going forward? I mean, savings are already at a fairly balanced mix with protection, expected to go up, like you mentioned, and higher retention. How should we view the solvency requirement for next year? And at what levels would you be comfortable with the solvency? I'll just start off on this question, Dipika, and I will hand over to Neeraj and Srini. We started off with our solvency of 190% as of March 31. There was a cash payout to Exide Life of, and that impacted 13%, the INR 726 crores. We ended at 176% as of March 31. Now we will be raising some debt. We typically have said that we will hover around the 180% in terms of solvency. I just wanted to set context, and over to you. Neeraj, you wanna add? Deepika, I think each of these business segments have their own considerations in terms of capital. As the existing business continues to, you know, become larger and larger, that funds the new business growth as you're aware. That's the reason why, you know, the self-sufficiency in the model is really working that way. As far as protection business is concerned, yes, it will require more capital compared to some of the savings components. As you're aware, you know, even within savings, unit-linked products, for example, apart from the solvency capital, there's also a fair bit of gap between the cost of acquisition and the product charge. That is something which consumes a fair bit of capital as well. Over a period of time, as you're aware that we are expecting to move to a risk-based capital approach, and that will release significant capital for the industry. That's something that we need to keep in mind over the next maybe 3-year period as well. For us, clearly, given where we are as a company and the stand that the promoters have taken, we do not expect capital to be a constraint for growth, whichever way we look at it. On retention, as such, it doesn't really impact so much because the retention really has gone up from INR 20 lakh-INR 40 lakh, and that's only for new business going forward. A large part of the solvency ask will really come from the back book, which is still at the retention levels of the past. That's how we need to look at it. A lot of these things will progress, you know, over a period of time and things will evolve. For us, the bottom line really is that, where there is an opportunity to grow and create value, we will not let capital be a constraint. Okay. That's very clear. If I may just follow up with one more question. I'm not sure if I missed it, but what would be the total back book exposure now to guaranteed products in total? And again, over here, do you have a level in mind in which you're comfortable with? Dipika, if you were to look at our new business product mix across each of the segments, today non-par is about 33% of our total new business. The way to kind of look at it would be in terms of what would this really mean in terms of either in terms of profitability or in terms of risk or in terms of capital requirements. That's how we look at managing product mix going forward. Of course, you know, it all really depends in terms of how the customer demand is really looking at you know in each of these areas. We've launched a product in the last couple of quarters, Sanchay Fixed Maturity Plan. A large part of that product category, as we discussed last time as well, is coming through in shorter premiums, including single premium. The risk management on that is reasonably straightforward as you could expect. From a hedging perspective also, it works fairly well. It helps us actually hedge the business that we've written at the longer end as well. The capacity to write non-par is probably only going to increase from here on, given the way our business has you know created a diversification and also the external support that is available through you know hedging instruments. Thank you so much. Thank you. Thank you. The next question is from the line of Swarnabha Mukherjee from B&K Securities. Please go ahead. Yeah, thank you for the opportunity. Good afternoon, ma'am. So my first question is related to the par products. If you could highlight the, you know, the trend of why the degrowth has been so. Is there a conscious effort to manage the product mix, or, is there some kind of demand softness that you see at the end or some other category might be cannibalizing on this, if you could highlight? No. Hi, this is Suresh here. Just to add, it's not really, you know, that we are trying to push one particular product. I think like we have mentioned in many other earlier forums, the product mix that we have been looking at is in terms of one, what is good for the customer, which value proposition we want to take across. Two, the capability of each of our channels to be able to sell that particular product across onto whichever segment we were looking at. Three, the internal drive to make sure that every channel is profitable as well as make sure that, look, we have a balanced product mix. You know, we really can't look at it in a quarter-on-quarter basis. On an annualized basis, if you really look at it, we have got a very clear balance and very similar to the kind of product mix that we had over last year. Ladies and gentlemen, the line for the management has got disconnected. Request you all to please stay online while we reconnect them. Thank you. Ladies and gentlemen, thank you for patiently waiting. The line for the management has got re-reconnected. Thank you, and over to you, sir. Hi. Sorry, I don't know where I got disconnected, but just to kind of share with you that, look, we are looking at last year there was a higher growth in par, and that was the base of which had come in. Our whole objective is to make sure that we balance between what the customer needs, what has been the base. You would find that typically our two-year CAGR of par has been fairly good. If you were to look at it's almost 44%. Coming up with innovative products also depends on what new products have been launched. When, you know, especially at that time, the new product called Sanchay Par had got launched, we had to kind of ensure that everybody on the field, whether it was the SPs of our partner banks, whether it was the FCs or whether it was our own direct employees, had a much greater focus and attention to launch something in the market and that led to a huge growth. You know, these things tend to normalize over a period of time. Now we are focusing, for instance, on Sanchay FMP, we're focusing on some of those new products. I wouldn't read too much to say, look, par has come down. I think our market share has grown on par. We managed to maintain an overall product wise market share on par, and we will continue to do that. You know, for instance, there was a time we slowed down on term in terms of like taking a calculated approach. Now that we believe things are normalizing, you will find us coming back in terms of term growth. Okay. That's helpful, sir. Then in terms of the margin guidance that was mentioned that it will sequentially improve, are we then looking at individual protection as an incremental lever for margin improvement? Because your other, I think, higher VNB margin kind of products now have quite a sizable base. If we look at the non-par savings or the credit product book, they have grown quite well over the last couple of years and the base is quite high. The incremental VNB growth and VNB margin, where do you expect it to come from? A couple of things here. One is growth itself, because as we continue to do well on growth like we have done, our costs are not going to increase in the same proportion. That becomes an additive point in terms of margin. Second is on non-par itself. In the past we have said that about one third will be around non-par. Now we're getting more nuanced. It's also there in our presentation, wherein the new non-par product, the Sanchay FMP, has a shorter tenure. We are seeing that in a different light than some of the other longer tenure non-par. There really there's no constraint in how much we are gonna sell that. It is as much as we are able to sell it. That also will and should lead to margin expansion. Credit Protect also is continuing to do well. Hopefully, all our partners will continue to do well and we will piggyback on that growth and continuing to give relevant products there. It's a combination of all of these things, wherein we will see that increase. Finally, to your point on retail protection, you know, for the past couple of years, for various reasons, especially pandemic, reinsurers, repricing, you know, all of that meant that we have remained more or less flat. Some quarters we have grown well, but largely we've remained flat. We are targeting at least a comfortable double-digit growth in retail protection, and we are reasonably optimistic of being able to get there. That also will add to accretion of margin. All of this will contribute to it. Ma'am, if I understood you correctly, then for the non-par bit what you mentioned that you actually now intend to sell slightly higher per tenure product for incremental margin. Is that a correct understanding? No. On the other hand, so lower premium tenure, so that hedging becomes easier, either single premium or limited premium. Okay. All right. That's very helpful. One quick bookkeeping question, if I may ask. If you could give the breakup of the operating variance that is there in the EV walk of around INR 150 crore and the reason for the negative economic variance. Yeah. The operating variance is broadly two thirds will typically be positive persistency variance, and about one third is expense variance positive. That's broadly the breakup of the operating variances. Economic variance largely two things. Over the year things have moved in different directions, but overall from the equity perspective it has been positive. Largely on the interest rate side because of the increase of interest rates at the shorter end, higher increase at shorter end but longer end has resulted in a negative variance. That in balance as such for the year it's been fairly flat. The two have in some sense canceled out each other. Different quarters are different. We behave differently, but for the year broadly, this is really the summary. Got it. That's very helpful. Thank you so much, sir. That's all from my side. Thank you. Thanks. Ladies and gentlemen, please limit your questions to one per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Jayant Kharote from Credit Suisse. Please go ahead. Hi. Thank you for the opportunity. I wanted to understand about the guaranteed longer term product. There were some news articles about regulator not being comfortable with some of these products. I think there's an element of bond forward in them. What would be your view and I mean basis that what would be the mix for our hedging and then how much would FRAs be contributing to the overall guaranteed let's say hedging pool? First of all, you know, we did look at that article and we in fact interacted with all the counterparties that we are you know working with. We believe that it's really unfounded in terms of you know what the facts really are. Because if you recollect, RBI allowed the structure of FRAs towards the end of 2019. After doing a lot of you know getting a lot of comfort around the structure and what it really means both in terms of risk as well as in terms of what it means for the counterparties, which is basically the banks. After that the approval was given for this structure. We don't believe there has been any change in that regard. In fact, really, there is a thought of further liberalization on that front. We do not believe there is any issue at hand as far as that is concerned. Having said that, from our perspective, as you know that we had started writing non-par products prior to RBI allowing us to do forward rate agreements. We had this internal hedging capacity which continues to date given the way our CP book has grown. Added to that, there are other instruments as well, and also our new product that we've launched actually help us do this cross hedge internally itself. Our dependence on FRA is probably a lot lower than maybe you know overall at an industry level. We manage dynamically in terms of how which hedging instrument is going to be more effective from multiple fronts at the back end at regular intervals. It is an effective instrument. As we go forward, we believe that with a very forward thinking regulator, we may in fact get ability to actually borrow directly from the market as well. That would further expand the way in which this business can be written. Nothing really of any concern as far as the ability to hedge or in terms of instruments that may be available and options that may be available going forward. As we speak, are you dealing with banks on an FRAs? Yes, absolutely. Okay. Secondly, a couple of quarters back, Mr. Parthasarathy has spoken about the longevity assumptions on the protection side, he mentioned it had come down from around 92 to around 85, 87, if I'm not wrong. If you can update us, where is that number right now and directionally where to be stabilized? These numbers actually are fairly stable. It doesn't change quarter-on-quarter. I think whatever numbers that I talked about was based on a report published by the actuarial profession. It gets updated probably once in three years, four years. You know, there's no more recent update than what I spoke couple of quarters ago with you. Those numbers for us, I mean, I think you spoke about the industry level. For us, at HDFC Life, those numbers would be similar? Yeah. It's very ballpark, yeah. Okay. Thank you. Thank you very much. Yes, sir. Thank you. The next question is from the line of Hitesh Mahida from Edelweiss Securities. Please go ahead. Thank you for giving me the opportunity. I just had a question on economic variance. I just wanted to understand in the last quarter you mentioned that unwind above 8.5% we will be showing or above or below 8.5%, we'll be showing it through investment variance. Is that one of the reasons that economic variance is so low, just INR -50 crore despite rise in yield? Yeah. Hitesh, couple of things, right. The equity movements have canceled out the slope change on account of the interest rate. Yes, I mean, we can't completely take credit for you know taking the unwind rate very close to where we are at the end of the year. Yeah, I mean, there's a fair bit of thought that goes into what is likely to happen, which goes into the unwind rate that's determined at the beginning of the year. It so happens that the economic variance is basically almost zero because the two movements have actually canceled out each other. Both of these things are, I guess, in a way playing a role. The equity and the debt changes kind of canceling out each other and the expected rates being fairly close to what we actually realized. Just one. Do FRAs also have a significant impact on how we look in economic variance? Because some of the peer companies have shown quite a negative impact in economic variance. Just trying to understand that. No, Hitesh. That would not really play a role at all. Okay. Yeah. I mean, if you are completely hedged, this should not really play a role at all, as far as the economic variance is concerned. Economic variance will only be really in terms of the actual movements, which are different from what you anticipated, both on the equity side and on the debt side. Okay. Yes, thank you. That's it from my side. Thank you. The next question is from the line of Nischint Chawathe from Kotak Securities. Please go ahead. Hi. Just one question from my side. What really explains, you know, margin expansion if you look at the business from a fourth quarter basis, which is other than a quarter-on-quarter and a year-on-year basis? Nischint, if you look at Q-on-Q really, I mean, apart from the assumption change on mortality, which we did discuss, large part of it is largely coming through in terms of the product mix shift. We've written more annuities in this period, and the CP business continues to do reasonably well. We managed to reprice a large part of the business over the last 12-18 months, and that is something that has helped us as well. As such, even in terms of the group business composition, margin business is lower this year compared to the same time last year. It's a combination of these two or three facts. On the non-par side, there's been a slight expansion in the quarter from 32%-35%. Each of these three or four things have played a role in the expansion. Has the duration of policies on the non-par also gone up? I'm just sorry, before that, the last bit is also in terms of some sort of leverage that has come through in terms of scale. That also has played a role in the expansion. Not really, Nischint. What's happened is that, if you recollect, we've launched some fixed maturity plan, which basically is a 10-year product, give or take. A large part of that business is single premium, so it's a one-tenth. Some of the business is five-tenth. That in fact has actually on an overall basis would have actually reduced the policy term on non-par. Sure. Thank you. Thank you. The next question is from the line of Prakash Kapadia from Anvil Portfolio Managers. Please go ahead. Thanks. My questions have been answered. Thank you. Thank you. The next question is from the line of Dhaval Gada from DSP Mutual Fund. Please go ahead. Yeah. Thanks for the opportunity. I had two questions. First one was on margins. I understand the guidance of maintaining margin on, you know, merged basis. Just wanted to understand from a medium-term perspective, you know, can the margins move closer to 30%? The context is if you look at the last four years, we've seen a large part of the margin increase being driven by product mix change. You know, this has come despite sort of negative assumption changes which Suresh also alluded earlier. Just, you know, how much more headroom is available to sort of take the margins higher, you know, closer to 30% in the next three to four years, which effectively means W- Well, it should be possible. In all things being equal on regulations, it should be possible, and that's what we will be working towards. It'll kind of stabilize around that, and this is of course with the caveat that we don't drop market share. You know, assuming that we hold our number three position amongst all the listed companies, including LIC. Without dropping that, without dropping our market share, but yeah, we still are gunning for getting close to 30%. Thereafter, if there are no further regulatory relaxations or enablers, then having a compounding story of about 20% year-on-year or close to that in terms of value of new business. Having said that, you know, we're hopeful given the tone set by the new IRDAI chairman about a lot of things on technology, on ecosystems, on use and file, a lot of speed to market, collaboration, perhaps with other regulated entities, pension, general insurer, health insurance, and many, many more. I don't personally think that it's gonna be a status quo. It will be an enabler. But I'm not counting that in because I don't know in what form or shape. So all things being equal, yes, we should be getting towards 30% in the medium term. Perfect. Thanks. Just one final thing, on the, you know, sort of capital, just again. If you look at the free surplus movement, if you could explain that, you know, in the last year, I mean, it's dropped about INR 350 odd crores. Just within the, and related to this is, you know, what will trigger an equity raise? I mean, if you could just help me understand, what will one should look for, in terms of your willingness to go towards an equity raise, that would be helpful. Yeah. While I'll leave the first part of the question to Niraj on the net worth. We will over a period of time, in order whatever needs we need to support growth and opportunities, we will have to have adequate capital. Yes, we will not rule out equity, combination of equity or debt, like I had mentioned in my opening remarks. Go ahead. Just to add to that, you know, we are fairly close to the level that we want to be, like Vibha mentioned. We have 176%. We would like to be in the 180-190 range given what is expected going forward. The distance between where we are and where we need to be is not very high. You know, the number that we're talking about is not gonna be very significant. That is one. On the net worth front, of course, as you're aware that, you know, multiple things have happened on an ongoing basis. Typically, you add your accretion from the back, which is your PAC that comes through. You have any sort of capital movements, largely in terms of dividend payouts in the beginning of the period after the AGM, and any sort of capital that comes through in terms of, you know, the ESOPs that get exercised. Apart from that, largely the big movements are in terms of any sort of NPM movements on the shareholder fronts. In our case, this time the big movement really was in terms of the cash that went out because of the Exide Life acquisition. These are the four or five aspects, which, you know, go into how the net worth has or the free surplus has moved in this period. Thank you, Mr. Gada. We request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Avinash Singh from Emkay Global Financial Services. Please go ahead. Hi. Good evening. A couple of questions. First, if you can just help us understand the supply side and demand side realities on the retail protection. How do you see sort of growth and margin in this thing? That's first. The second one, again, going on the free surplus part. If I recall, your sort of required capital level that you set in your EV around 180%. So I mean, just if you can help me at 176%, sort of how is sort of the free surplus coming in? These are my two questions. Avinash, on your first point, just to understand, you're saying, margins on health, is it? No, no. I was saying that, considering the supply side and demand side changes that has happened over the years, how do you see retail protection shaping out in FY 2023, both from the growth and margin perspective, retail protection? Right. Understand. We are, you know, flat so far because of, like you mentioned, pandemic and reinsurer pricing and all that. We are fairly optimistic of being able to grow double digits. You know, as against last year, industry was also did not grow. We also were flattish. From HDFC Life's point of view, while following and continuing to follow a risk-calibrated approach, we are hoping to grow double digits on individual protection. This is without necessarily keep retaining a lot more on our books, and so on. We have said that we will retain about 40 lakhs on our books. We'll continue with that. Nuanced approach, we hope to grow. That is number one. Credit Protect should continue to grow well. We grew about 55%. We hope to continue to see that traction. We've also repriced quite a few relationships in light of pandemic. That's an ongoing exercise and part and parcel of how we are covering mortality risk. Both these put together, we should grow. We have grown about 26%, but we on an overall protection basis, but we remain fairly optimistic of our ability to continue to grow. Any pricing change in retail protection you are taking in FY 2023 or not? Nothing that is on the cards right now. Okay. My question on the free surplus. Yes, Avinash, on the free surplus, if I understood you're referring to the level of, you know, the solvency. As you're aware, regulatory solvency 150% for the purpose of EV, we basically take 170%. Right now it's something in, yeah, in excess of that. That's- Yeah, that's very clear. I was confused with the 170. Okay. Thanks. Yeah. Yeah. Mr. Singh, does that answer your question? Yes. Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Hi. Thank you for taking my question. Just elaborating on retail production. I think in opening remarks, Vibha, you mentioned about video checks and stuff, right? You're connecting to the customer mobile. If you could elaborate how that can. Just tying it to your original comment that while applications come through, we are still not able to process. Where is that number I recollect some quarters back was like 60%. Just help us understand how de-bottlenecking some of your own processes could help you improve growth specifically related to retail production sales. Right. Here, one is that, looking at it out of every hundred, like we mentioned in the past, we're converting about 61%. We are taking reasonably realistic targets to say instead of 61%, even if I converted say 70% or 75%, that will get me to that answer. That's what we are looking at is that we are trying to solve for the entire process. We've launched MediEasy. This you'll find on slide 21 of our investors PPT. What this does is that it walks our frontline salesperson and step by step, because what we did find is that the rules keep changing because of pandemic, because of reinsurer, because of what we ourselves are looking at in terms of addressing new and emerging risks and so on. All the right reasons. However, the guy on the field is very confused. There is attrition, whether we like it or not. There is people movement. You know, there's a lot of back and forth and the customer gives up or the frontline salesperson gives up or a combination of these aspects. How can we have this iteration wherein the first step is to say, "Okay, we need this document. Okay, if you don't have this document or rather the customer doesn't have this document, then we have a call center which has an assisted call center with chartered accountants to say, okay, instead of this, especially for the non-salary, this should be fine or this proxy can be fine and so on. Because the guy is sitting with the customer and or sitting virtually with the customer and he's able to get that rather than it coming back to central operation going back and forth and so on. Similarly, looking at what other data points were resulting in that same 100 - 61, why has there been a drop off and is there some other ways of getting to the same answer? For example, today we don't have a de-duplication between our credit life database and our individual database. Now, with the use of technology, if we can try and see personas of what is behind this person in terms of both financial risk as well as medical risk. That again could help us address some of that drop off that we are seeing currently. Similarly with reinsurers, we are finding that reinsurers and you know, we've been partnering with reinsurers and that has been well appreciated. In fact, reinsurers have come back to us to say that we are erring a little bit on the side of caution and they are obviously fairly pleased about that and willing to look at certain personas. If you also look at Meditech, for example, a whole host of things, again on slide 21 on the bottom right-hand side, how do we get a proxy for diabetes? How do we get a proxy for any heart related illness without that individual going in for a medical, which obviously under given the pandemic, you know, she is hesitant to do that, and we understand that. For us to be again able to triangulate that with age with various other data points and his or her reticence to go in to get a medical, being able to use Meditech to be able to solve that. Another point, we've just gone live on this wherein underwriting engine, which although we only right now launch for savings, but that is now that has an error rate of 0.001% now. It's a ML, so it's a machine learning tool which is getting even better as we speak. We rolled that out wherein human underwriters are being substituted so that the customer can be given a straight through processing, can be given much better experience and so on. Now, the next phase is to start taking baby steps to look at our term as well. What this will do is that again how do we reduce the drop off rate? Yes, we need to increase the funnel also, admittedly, but that is one part of it. We are saying that people have come in out of my example of 100. People have paid money, filled in their proposal, and we're not able to issue them with a policy and we return their money. Let us focus on the drop off first, and that's what we'll be giving, and have been giving disproportionate management bandwidth to reducing drop off. Thanks. Thanks so much, Vibha. All the best. Thank you. Thank you. The next question is from the line of Sanketh Godha from Spark Capital Advisors. Please go ahead. Thank you. Thank you for the opportunity. Sir, the simple question what I have is that, you gave the means just wanted to understand how much SMP contributes to the total individual APV in total non-par is 33%. So, and just wanted to understand means if the incremental focus is on this particular product from risk management point of view, how much the 33% contribution of non-par can potentially go to say 40, 45 kind of a number. Any number you have in your mind which could be the margin driver going ahead. So that's the first question what I had. The second question- Can I take the first question first, Sanket, and then you can move on to the second question. Sure, sure. Yeah. On the first one, what we're saying is that long tenured policies that we sell, we will have a overall cap, which we've had. Yeah. On shorter tenure we have no cap. Basically you mean to say that if there is a decent demand for single premium SMP plan, then you can even take the total non-par mix even beyond 40, 50 kind of a number if. Yeah, hypothetically, yes. Yes, hypothetically. The margin of single premium SMP will be better than the company average? It'll definitely be better than some of the other segments like PAR and UL, obviously. There could be a substitution for that, and thereby taking it up because of that substitution. Got it. Perfect. The second thing was that, I mean, just from the HDFC Bank merger's perspective. We make an advertisement spend in HDFC Bank as a channel of around INR 800 crore, which we did in nine months FY 2022. Just wondering how this will play out if it becomes a direct BD of HDFC Bank, that given it's a direct subsidiary now, then do we expect these advertisement spends coming off? If it happens, will this be a very big lever for margin expansion? How do we read this to play out? little bit premature, Sanket, because it's just been announced. I think over a period of time we will work very closely with HDFC Bank folks to see how, as a parent subsidiary we can, you know, the dynamic obviously will change. But little bit early in the day. Now, the advertisement is really what happens is there is multi-tie-up, and the reason for the advertising budget is that when people walk into the 6,000 branches, and engage with them virtually and so on, we need to be out there. We need to be able to say, you know, this is Sanchay FMP, this is our retirement, new retirement plan and so on. That visibility has to be there, and that's why the advertising. Now, how things will change down the line, we'll have to see. There will always be some advertising too, because the bank has said there will be multi-tie, and in multi-tie we believe is good for the customer. Yes, there could be. How much of multi-tie is a different story, some level of multi-tie wherein you're giving the customer the, you know, the choice to buy various products. I also personally believe that most banks eventually will open up to multi-tie. Some level of this will be there. We'll have to see in terms of how things pan out. However, what is important is how do we expand the pie rather than just, you know, which costs might not be there and, you know, those type of things. The focus will be on how do we cross-sell, because that just hasn't been done in a systematic manner as of today. Like I mentioned with one of the earlier callers, it has been somewhat in a standalone company view rather than a financial conglomerate. That lens will change. We will look at our balanced product mix. We will look at how can we, like I mentioned earlier, upsell relevant to the customer's needs and that itself will give us a kind of uplift. Got it. Just, can you tell me the current SMP contribution to the total AP if you're okay to disclose that number, exact number? It'll make sense not on AP- Sanket, it has just been launched a few months back. Since launch it's about 15% of the business. Thank you, Mr. Godha. We request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Abhishek Saraf from Jefferies. Please go ahead. Yeah. Hi. Thanks for the opportunity. I just had two quick questions pertaining to Exide Life. Just quick one. If you can just give me some number on what could be the VNB margin post overall if I joined late, probably I might have missed that if you mentioned. Secondly, if you can give some color on the cost savings that we are doing. If any number around rationalization of branches or other number that you can share where you are able to save cost. Then I have one follow-up question after that. No. Hi. This is, sir. You know, on the margins that you're talking about, we are on the low front. We do believe that we should be able to scale this up in the natural course of business once it merges with us. Over a certain 36- to 48-month period, we should be able to, and maybe even lesser than that, we should be able to bring it close to our kind of margins. So that should not really be a problem. On the other piece in terms of how the integration and how we are trying to get value capture and synergies, let me tell you that, look, there are some 23 work streams working on every aspect of the business between both the teams. We are looking at the best practices across both the companies. There is a clear focus in terms of where we'll be able to get wider distribution focus. We are looking at the entire product portfolio between what Exide has and what we have got. Also in terms of how we'll be able to take some of our technology and digital tools across to their set of. Branch rationalization is one of the piece. Obviously, there are a few branches which we look at are close to each other. We are open to look at which of the Exide branches are probably better fit and better catchments, and we'll probably be able to merge. On both sides, we are looking at finally as a merged entity which are the best resources. We do believe that we will get scale for the entity and we'll be able to expand into markets. The good thing, like we mentioned earlier in many forums, was that look, in Exide, a lot of the business that they do is in the South, in some of the tier two, tier three markets, which is clearly expansion for us. We do believe that some of that we'll be able to, you know, scale up, expand our geographic presence. Similarly, based on their agency model, we'll be able to expand it to other parts of the country. Sure. Thanks for that. Did we do any branch rationalization in the last three months, or has that happened? No. No. As of now, we have just looked at. Like we clearly mentioned, like we mentioned that it is going to run as a separate entity subsidiary till we receive the NCLT approvals. As of now, we are just looking at a back-end exercise in terms of what we can do. There are a few branches which we have understood, but we have not done any rationalization as of now. But we do believe we understand which are the markets that we are able to cater to. Our objective, like has been clearly mentioned, is to make sure that we continue to get the upside from the Exide merger over, you know, the short to midterm, and then look at how synergistically we can grow as a merged entity. Thank you, Mr. Saraf. May we request that you return to the question queue for follow-up questions. The next question is from the line of Nidhesh Jain from Investec. Please go ahead. Thanks for the opportunity. Two questions. First, on the reinsurance, are we sensing any change in stance from the reinsurers as of now? Are they becoming more open to doing business the way they were doing pre-COVID, or still they remain as strict as what we have seen last year? Mr. Nidhesh, it's a little bit too early. My personal sense is down the line, I don't know what time frame, I think, depending on wave four and so on. Till that is out of the way, I think there will be some level of concern in their minds. I don't see that happening immediately now. Over a period of time, yes, the high alert situation that we have been in, that should ease off a little bit, but it's still some way away. Sure. What was the conversion rate before COVID, the 50% conversion rate that we have today? Was that before COVID? We used to convert, maybe around out of 100, convert at least 75. Sure. Lastly, on non-par product, in a rising rate environment, in last three years when interest rates have been declining and the demand for non-par products was very, very strong, probably the alternative savings instruments have seen significant decline in the yields that they were offering. In a rising interest environment, how do we see demand for the non-par product? Since we are hedging the bulk of the non-par internally, does it disadvantage us in any way versus FRA hedging, where our peers may be able to offer better IRRs than us? These are two questions on non-par. Nidhesh as far as demand is concerned, we've seen interest rates only increase in this year, right? Both at the shorter end as well as the longer end. While that has happened, the business demand continues. Even as we speak, the demand far exceeds what we are writing as a company as far as this product line is concerned. The key really is not absolute rates, it's a relative proposition to what other instruments are available. You know, I mean, if you were to compare it to you know, shorter term instrument, typically the returns on that are very different from what we are able to offer because a large part of the product is in the you know, at the longer end. Even in, say, fixed maturity plan, the term is 10 years. That is very different from a typical, short-term, fixed income instrument that people buy. Relative to what is available in the market, it continues to be attractive whichever way the interest rate is. That is one. Second, also the tax advantage on top of that is something that definitely is helpful. As far as hedging is concerned, we monitor this fairly closely and it is fairly dynamic. We are fortunate to have this internal capacity which we use, depending on how the external environment is as well. We don't want to be overly dependent on any one instrument, whether it's an external or internal capacity. That's the reason why it's a multi-pronged, you know, hedging strategy at the back end. As far as FRAs are concerned and relative disadvantage to anybody else, I don't believe so because so far, you know, only a yield pickup that we get on account of forward rate agreements because of the way the term structure is in terms of the interest rates. If that changes, that will again, you know, be clearly applicable to everybody. It's not that the terms that we get are any different from anyone else. If there is any advantage to be had out of writing more, hedging more through FRAs, we would take that call without being excessively dependent on that category. Sure. Understood. Thank you. Thank you. The next question is from the line of Mayank Gulgulia from SUD Life. Please go ahead. Yeah. Hi. I have question related to sensitivity analysis. Sorry, I can't hear you very well. Is it better now? Yeah, it is. Okay. I have a question related to sensitivity analysis. Basically impact of equity market return on EV. Equity market downward movement of 10% would have 1.4% negative impact on EV. This 10% is overall return on equity portfolio. This 10% is over and above, like we might have assumed some return from equity, it is over and above that. It's basically a difference between what is expected and what is actually. For example, if you take any of the sensitivities, you have a base which is the expectation. In persistency, mortality or equity return, you have a base. Anything over and above that is what is captured in the sensitivity. If your expected return is say 10% and 10% delta from that means 11% or 9% return. The impact of that is what is captured in the sensitivities. Okay. This 10% is of return expected. Not 10% plus or minus 10%. It is 10% of 10%. You want to say that, Ritu? Yeah. Just to clarify, equity sensitivity implies that the equity values fall on the date of the calculation of the EV. The equity values fall by 10%. What would be the impact on EV? What is captured in the sensitivity? Okay. Let's say, as you like, just to clarify further, the assumption is 10%. If equity market rises by 15% next year, can we say like 5% extra return, so delta of 1.4%, we can divide by two and broadly ballpark number 0.7% positive impact on EV. Is that right way to look at it? Sir, this is instantaneous shock. Whatever the valuation date or whatever the value assets were, if they were to fall instantaneously by 10% on that very day, what is the movement in the EV is what this says. Okay, got it. Like the next question is what is the impact of like, lower reinsurance on our protection business? What kind of margin impact is there on retail protection? Impact, please. Sorry, didn't follow your question. Yeah, impact of lower reinsurance on retail protection. How is it impacting our margins on standalone retail protection business? There is no impact really. As you know, reinsurance cost is basically one of the components of the overall cost and surcharge. We would, if we retain on our books, we will obviously need to capture that surcharge ourselves in addition to everything else. The same would hold for the reinsurers. There isn't much of a gap between what the reinsurers are charging today versus what our assessment of the surcharge would be. That would have been the delta between that would have been higher before the reinsurers increased their prices. We also increased it, thereby nullifying some of the impact. Yeah. Okay. Got it. Thank you. Thanks a lot. Thank you. Thank you. The next question is from the line of Rishi Jhunjhunwala from IIFL. Please go ahead. Yeah, thanks for the opportunity. Just quickly, you know, on the agency work, those slides and the Exide Life getting integrated, can you give some sense in terms of, you know, what are our targets in terms of total agency strength that we want to maintain? What kind of increase we are looking at? Also, just a sense in terms of what are, you know, what is the proportion of active agents and what kind of retention rates have we witnessed since the integration? Sorry, I couldn't catch your second question. I'll ask you to repeat. On your first question in terms of the agency business and what kind of growth we are looking at Exide Life. Very clearly, you know, we have had a very strong growth. Just as we had discussed earlier, we had a fairly decent growth in line and slightly higher than the industry. We do believe that given the brand that they will now benefit from HDFC Life along with the product as well as our ability to invest in branches, infrastructure and many other resources which we have available, we should be able to get a much higher throughput in terms of actually recruiting financial consultants, in terms of activating more consultants, as well as recruiting the right size of kind of products that we'll be able to sell through HDFC Life. In our initial interaction with a lot of the financial consultants, advisors at Exide Life, we have found that they are eagerly looking forward to the kind of products that HDFC Life will be able. We are fairly optimistic in terms of growth that they'll be able to continue in terms of what they have been able to build. They have a very strong franchise. They have a fair amount of financial consultant leaders who've been there with them for a fairly long period of time. We do believe that if our agency business were to grow at a certain pace, the combined entity of the agency business or what Exide Financial Consultants comes in should be able to do that and maybe a little bit higher. That should not be really a problem. There is actually, if you ask me, not just the synergy that we see only in the agency business. I think we are enthusiastic about the growth in all the channels of Exide Life. We do believe that the cooperative bank as well as some of the broking relationships that they have got are fairly incremental and complementary to our business growth. We believe that we should be able to grow that. Also a fairly large customer base on which they have, you know, cross-sell and upsell on their direct business. We believe that we will be able to, with our analytics skills, with our SMPs, along with what they bring in terms of their campaigns, it'll be incremental for us to be able to grow that line of business also. Actually across the direct business, brokering business, bancassurance of those much smaller than us on bancassurance and on the agency business, we shouldn't see any slowdown and which is one of the primary reasons why we said we will work, we'll look at Exide in terms of the company which will come in and add complementary to us. Sorry, on the second question, the sound was not very clear, so I couldn't really hear. Yeah. Yeah, I'll repeat, sir. Thank you. Basically, the question was, you know, how many active agents does Exide have, and what kind of retention rates are we seeing? Exide Life. They have around 40,000 FCUs which are there right now and which is something that and they have a fairly active base which is there. We do believe that we will be able to if we further activate. Their activation is in line with actually the industry activation. It is not that they're off in terms of the number of agents which are active. We haven't lost any major. In fact, if you have looked at the quarter four numbers, they have been absolutely on target in terms of what the agency team has been delivering. Even there we believe that if we are able to look at the number of new financial consultants and agents that they will be able to recruit, that will be in line. In fact, they have been constrained on their growth because of their capital and many other, you know, thresholds that they've not been able to invest in their business. I think a lot of those hindrances will go away once they become part of the HDFC Group. They- All right. Thank you. They've actually shown almost a 22% growth last year, if you were to look at them overall as Exide. Thank you. Thank you. Ladies and gentlemen, we will take last two questions. The next question is from the line of Roshan Chutkey from ICICI Prudential Mutual Fund. Please go ahead. Thanks. My question has been answered. Thank you. The next question is from the line of Sanketh Godha from Spark Capital Advisors. Please go ahead. Sorry, last one from my side. We just wanted to understand our FRA exposure, which was INR 137 at the end of FY 2021. What is the current exposure we have at the end of FY 2022? Given the current solvency calculation regime, if yield curve becomes flatter compared to what it was, then most of the derivative contracts might go out of the money, notional loss. Likely impact of it on the solvency if it plays out. Yeah, I think the FRA exposure is close to about INR 18 thousand-INR 19 thousand. I think it will be there in the annual report in any case. To your second point in terms of the impact of the flattening curve, there are two things here. One is, as of now, you know, the whole flattening thing is something which is a little maybe overplayed. I think, if you look at, the way the interest rates have moved, they've not moved only at the shorter end, they've moved at the longer end as well. The curve continues to be fairly steep even today. Having said that, if there is further flattening that happens, what will happen to start with is that, the spreads that are there currently available, will probably shrink further as they have since the inception of FRAs. When the yield curve starts getting inverted, that's when you're talking about the situation that you just spoke about. Now, if that were to happen, we would do a couple of things. One, as of now, at any point in time, if you have a fairly significant equity portfolio, there are equity FC gains that are sitting in your books for which you don't take solvency credit because of the regulations. A lot of that is used to actually offset any sort of impact of interest rates movement in the, you know, wrong direction from an FRA perspective. That usually covers for most scenarios as far as, you know, impact on solvency is concerned. Beyond FRAs, I mean, we kept reiterating we don't want to be wholly dependent on forward rate agreements either, given, you know, our risk management strategy. That is also something that, you know, allows us to mitigate the impact of any of these situations that could happen. Over a period of time, we are expecting, you know, more, you know, liberalization in the regulatory framework, both in terms of the way solvency is calculated, which currently penalizes you for being economically hedged. On the accounting side, you end up creating that solvency impact. Over time, we expect that to kind of, you know, go away with RBC coming in for sure. Also in terms of if you're allowed to borrow directly, then you know get rid of this problem altogether. If you take a 2-3-year view, then a lot of these developments will happen which will actually, you know, help us you know tide over any of these situations that you're talking about. Got it. The equivalent RBC solvency for 176 currently calculated would be how much if you have internally done the math? We have, Sanket. It'll be fairly significant. I mean, not really, you know, sharing the numbers, but I mean- Okay. Yeah, it'll be fairly significant, sir, Sanket. Okay, perfect. That's it from my side. Thank you. Thank you. The next question is from the line of Anand Bhavnani from White Oak Capital. Please go ahead. Thank you for the opportunity. Just a quick clarification on Exide Life. You made a comment that due to their solvency, they probably have some growth question. In the PPT there, I see that their solvency is 217, which is higher than us. Why would that be a reason for any growth challenges in Exide? Yeah. I think those were constraints on their end have been more in terms of the expense of management, you know, because of which they which goes away once they come in with us. You know, if once they merge with us in terms of their ability to be able to invest further in agency and grow, that is where they have been struggling. I think that is one part which we'll be able to solve with this merger and their agency business will be able to grow and not on solvency. Okay. Our current preferred route of, you know, Tier 2 raising debt, which has improved by 6%, do we anticipate that to be the primary source rather than any equity raise? No, it's a combination of both. Like I mentioned in my earlier comments, it will be both. Right now we are raising Tier 2, but over a period of time, we'll assess the need for capital. It is always possible that we might raise at that point in time. Okay. Any particular variables you kind of use to decide which tool to use, which method to use for addressing solvency? See, with solvency, there is an overall cap based on regulatory formula. What we're doing right now, we raised INR 600 earlier. We are raising further now. You know, as our back book increases, we will be able to raise more. We will look at the overall weighted average cost of capital to see, you know, what works for us. Then, you know, the WACC as well as how much do we need, how soon do we need. A few factors like that we take a call down the line. Yeah. Thank you and all the best. Thank you. Thank you. As there are no further questions, I would now like to hand the conference over to Ms. Vibha Padalkar for closing comments. Thank you, Faizan. We would like to thank all of you for participating in our results call. Further details can be found in our investor presentation on both our book as well as that of the exchanges. Thank you and have a good day. Thank you. Ladies and gentlemen, on behalf of HDFC Life Insurance, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.