Ladies and gentlemen, good day. Welcome to Q3 and nine months FY 2023 earnings conference call of HDFC Life Insurance Company Limited. As a reminder, all participant lines will be in the listen-only mode. 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 zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Vibha Padalkar, MD and CEO of HDFC Life Insurance. Thank you. Over to you, ma'am. Thank you, Rutuja. Good afternoon, everyone. Thank you for joining us for the discussion on our results for the nine months ended December 31st, 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, Deputy Managing Director, Niraj Shah, CFO, Eshwari Murugan, our Appointed Actuary, and Kunal Jain from Investor Relations. I will take you through the key highlights of our nine months FY 2023 results and would be happy to take questions post that. As you're aware, we have completed the merger of our subsidiary, Exide Life, in October 2022. We will be reporting only the merged numbers as our businesses are now fully enmeshed. The previous year numbers hence might not be strictly comparable. While globally headwinds persist from an economic perspective, India appears to be relatively better positioned. Insurance as a sector continues to be a beneficiary of a relatively robust economy, stable savings trends, and favorable regulatory regime. Against this backdrop, we continue to maintain a steady growth trajectory. In Q3, we grew by 17% in terms of individual WRP, which is ahead of industry growth. On a year-to-date basis, we grew by 13%, leading to a market share of 15.8% amongst private insurers. Despite intense competition, we have consistently been ranked amongst the top three life insurers across individual and group businesses. Our product mix remains balanced with non-par savings at 39%, participating products at 29%, ULIPs at 21%, individual protection at 4%, and annuity at 6% based on individual APE. Within the non-par segment, our shorter tenure product, Sanchay FMP, continues to do well and now forms about a sixth of this segment. HDFC Life remains enthused over the protection opportunity in India while balancing it with good risk management in a holistic and calibrated manner. We maintain market leadership in credit life by delivering strong growth of 52% across nearly 300 partnerships. Growth in retail protection remained tepid on a YOY basis, we saw sequential growth of 13% in quarter three. Online search trends indicate that we continue to be amongst the top searched companies in our peer set. There has been normalization of searches for term as a category to pre-pandemic levels. We have taken several initiatives to improve customer convenience, such as development of an in-house automated underwriting engine, mobile cardiac assessment, and MedTech solutions to measure heart rate, BMI, and other vitals using video inputs from the customer's mobile devices. Through a combination of data analytics, insights into customer profiles, and calibrated risk retention, overall protection APE grew by over 20% in nine months FY 2023, and we expect individual protection to continue picking up in the coming quarters. On the retirement front, we have steadily gained market share in the annuity business. Our annuity business in nine months FY 2023 grew by 22% on received premium basis compared to a 1% growth for the industry. APE growth is much higher at 68% due to a pickup in our regular premium annuity product, Systematic Retirement Plan. Moving on to key financial and operating metrics. We are on track to deliver margin neutrality for the combined entity for the year, having delivered a new business margin of 26.5%, similar to that in nine months FY 2022. The value of new business is INR 2,163 crores, implying a year-on-year growth of 22%. Our embedded value stood at INR 37,702 crores as on December 31, 2022, with an operating return on embedded value of 17.5% for nine months FY 2023. Profit after tax for nine months FY 2023 stood at INR 1,001 crore, a robust year-on-year increase of 18%. The profit emergence continues to be aided by strong growth of 30% in back book surplus. Our solvency ratio was 209% as on December 31st, 2022. Renewal collection trends continue to be healthy on the back of improving persistency. Our 13th and 61st-month persistency for limited and regular pay policies stood at 87% and 52% respectively. Next on channel performance. Our bank assurance channel grew by 18% in nine months FY 2023 based on individual APE. We have started seeing the positive impact of a closer collaboration with HDFC Bank as the merger process progresses ahead steadily. We continue to see strong growth momentum across other valued relationships with us either increasing or holding our counter shares. Our distribution network has been growing with time as we build newer long-lasting partnerships. This quarter we are pleased to announce our corporate agency partnership with AU Small Finance Bank. We believe AU Small Finance Bank, with its vast presence and a customer base of more than 3 million customers-Will further strengthen our efforts and contribute significantly towards financially securing a large number of individuals. We look forward to creating new milestones as we walk ahead together in this journey. We continue to grow well across the board. Our large channels other than HDFC Bank recorded growth of over 20% on a year-to-date basis. We would like to take this opportunity to thank all our corporate agents and bank assurance partners for their continued support. Our agency channel clocked more than 2x company level growth in individual APE in the nine months FY 2023. The share of the channel has increased from 14% to almost 18% in the merged entity. We continue to focus on improving activation and productivity across our base of financial consultants. We expect growth in this channel to be driven by deeper geographic and customer penetration. We are happy to share that the post-merger integration and synergy realization from the combined business is progressing as per plan. This has been demonstrated by achievement of margin neutrality during this period. The newly added distribution partners now have access to HDFC Life's products and digital capabilities. Our subsidiary, HDFC Pension Management Company's AUM doubled in less than 17 months to reach the INR 40,000 crore milestone on January 2nd, 2023. For nine months FY 2023, HDFC Pension has a market share of 40%, up from 37% last year, with AUM growing by 63%. We are pleased to announce that our subsidiary, HDFC International, has been granted the certificate of registration to set up a branch in GIFT City by the relevant regulator. The branch will commence business with an operation on receiving other statutory licenses and approvals. Onto the tech front. We have initiated a technology transformation exercise with the objective of building intelligent systems and platforms for insurance reimagination, christened INSPIRE, to aid scale up our business. A new age enterprise and data architecture will be built to enhance our go-to-market capabilities and also improve the overall customer experience going forward. Moving on to regulations. There are many regulatory changes proposed by IRDAI that are aimed at increasing insurance penetration and facilitating sustainable growth of the industry and ease of doing business. We welcome the relaxations provided by our regulator with respect to allowing certain categories of products to be launched through the use-and-file approach, relaxation in solvency requirement for ULIP, dematerialization of insurance policies, and allowing insurance companies to raise alternative investments like subordinated debt and preference shares without seeking prior approval of the regulator. The IRDAI is also examining implementation of risk-based solvency approach. We believe that this will benefit the sector by not just freeing up excess capital deployed, but also ensure capital required is in line with the risk on the balance sheet. We also welcome the changes recommended by Ministry of Finance, including composite license and permission to distribute other financial services products. We believe that such changes can further the overall development of the sector. To conclude, we remain enthused with the growth potential of the sector and are committed to increasing insurance penetration in a meaningful way. The detailed disclosure on our results is available on our investor presentation. 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 one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets. There are more than 20 parties in the conference. 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 Capital. Please go ahead. Yeah. Hi, Vibha Padalkar. two, three questions I had. First, you know, all the guaranteed return policies that you have been selling, can you let me know as a% of policyholders AUM, what would be the outstanding number? Yes. Do you want to take this? Yeah. Hi, Suresh. Yeah, hi. This would be about, again, about 15 odd% of number at overall level. Overall AUM, policyholder AUM you mean to say? Yeah. That's about INR 240,000 crore, right? The total amount would be around in the 12%-14% range. I don't know if that's the way you wanna really look at it because, you know, I mean, the context in which I'm asking this question is one of your competitors obviously is at 3%, but the number is hugely different and five times the number that you're talking about. I know of course that, you know, I mean, things could change, but you're pretty confident about the fact that the interest rate risk is reasonably managed here, right? Yeah. Suresh, honestly, you know, the way to look at it is in terms of the scale at which you're operating when you started this segment, and also are we managing the risk in the particular. In fact, we don't even look at it in the manner that, you know, in terms of total AUM, what is the kind of number that this is. We basically look at it in terms of the various categories and how are we managing the risk on each of the categories. Are we comfortable with the level at which we are operating? Answer is yes, because we are using the required hedging mechanisms to manage the risk in that and managing the spreads by being fairly disciplined with the market in terms of repricing. All the fundamentals there are, you know, in place from that perspective. You know, it really depends on. You know, at what point in time we started the business and we've not been sure how, you know, some of the folks are tracking it. A lot of it is also to do with the annuity business with a single premium, which is part of this. The risk management is very, very different. On the group side also there will be certain products. All of this is, you know, it forms part of that base. I think it's better to kind of look at it in isolation in terms of each of the categories and how the risk is being managed there. Okay. Another point to add here, Suresh, is that if you look at slide 23 of our investor presentation, we've given sensitivity to interest rate changes. Also, for quite some time, ever since we launched this category, we've been giving sensitivity of just this category to interest rate changes as well. That is really what is important as against, you know, what is it as a overall. The overall is relevant if it is entirely unhedged or largely unhedged position. Okay. Okay. How much would I mean, of course, anecdotal evidence has revealed Sanchay Plus has done very well this quarter? As a proportion of overall premiums, how much would be Sanchay Plus AP, individual AP, if you can give that number? Overall, Sanchay Plus and Sanchay FMP is about 38% for the period. Sanchay, as Vibha mentioned, Sanchay FMP is about one-sixth of that, overall. About Sanchay Plus would be about early thirties. The rest of would be Sanchay FMP. For the third quarter, you mean to say? I'm sorry? For the third quarter. No, I'm talking about for the period. For the period nine months. Nine. Okay. Also within Sanchay Plus, there are shorter end variants, there are longer end variants and so on. Of course, the 1/6 of the business is Sanchay FMP, also the balance also is various tenors. 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. Two questions. First, on the margin side. If I look at the product mix, the product mix have remained fairly, you know, the quality of the mix has not kind of significantly changed. I think the share of higher margin products look fairly steady in the mix. In fact, in certain cases like non-par or individual protection, it has gone up quite a bit. Margins look fairly, you know, fairly stable. It has not gone up to that extent in any way, you know, the way the mix have panned out. Just wanted to know, is there a factor of also, you know, how the channel mix has played out in this? Because I see that the broker channel has done quite well. How could the cost structure be in that and whether it is impacting the overall margin profile or not? Yes. Yeah. Just one addendum to that question was that given that, for nine months we are at 26.5%, I think, in terms of VNB margin, and for full year our guidance was a flattish structure of 27.4% odd. Last year Q4 we had a very spectacular performance in terms of margin. Are we kind of confident of repeating that again this time or, would we be kind of bringing the guidance down? First question would be that. I think just to answer your last point, yes, we are reasonably confident of margin neutrality on a full year basis versus last year. Just to clarify, this will be at a overall consolidated level. Niraj, you want to take the question on the water front? The margin expansion that you see and you're referring to is a function of a couple of things. On the product mix side, you've seen that unit link mix for the period has dipped significantly from 26% last year to 21%. That has been replaced largely by the non-par business from the individual side. There's a significant shift in the annuity business as you can see, right? Between both individual and group annuity. The mix was about 5%-6% last year. It's moved to 8%, and that's a very significant shift. In the other group businesses, the fund business which is a low margin business, has dipped significantly and the credit life business has grown at over 50% for the nine-month period, right? There's a significant, you know, upgrade really in terms of the product mix that has happened. Apart from, you know, the usual elements around on the expense side. If you see a negative there, that is in terms of a function of a couple of things. One is in terms of it is reflecting the overall business now including Exide Life, which was operating at a certain scale. As Vibha did mention that all of this gets subsumed in the margin neutrality objective that we have for the entity here. Sure. I mean, if you are even, comparing nine months to nine months, the thing what I wanted to ask was that, I mean, I see that the product mix has evolved to be, you know, a higher mix of, better margin products. Despite that, the margin hasn't, you know, doesn't look like it has gone up that much. That's what my query was that then is it a function of cost only or anything else to look into that? See the number that we're talking about, 26.5 for the period nine months is including Exide Life, right? Mm-hmm. In the previous period for the six months we had reported standalone margins for Exide Life and for HDFC Life. The Exide Life numbers, if you remember, were in single digits. That obviously will have an impact in terms of the overall number, and that's the reason why we talked about margin neutrality in the first place when we announced our transaction. Soon after that we basically said the first objective is to obviously preserve the business. To achieve margin neutrality, which we have achieved in this period. In fact, just to add there, we said margin neutrality will take about a year, and we have managed to advance it by about nine months. Actually the if hypothetically if you were to deconstruct before and after of the merger, then HDFC Life's margin, you're right to say that has gone up. And then offset by Exide Life's margins. Even there, synergy extractions are happening as we speak, and that's why we have been able to deliver margin neutrality sooner than what we had thought it would be possible. Mm-hmm. Mm-hmm. Mm-hmm. Great. Great. That helps. Also if you could, you know, give some comments on two product segments. One is individual protection and other, I think group annuity. On the growth on these both two categories, if you could share some comments on, you know, say for example, individual protection, what kind of products and what kind of channels we are tapping in? Or is it ROP or pure term in group annuity? Have we got a sizable tender recently which has helped the book? Some comments on that. Yeah, sure. See individual protection continues to trend upwards. Sequentially we've grown about 13%. NOPs also continue to move upwards. You know, there is a both in ticket size also called to make a difference as well as, you know, all the headwinds that you talked about in the past about medicals and so on. That if you have 10 minutes with a prospective customer, what are you likely to sell, and the surety of being able to convert, and so on. You know, while there is a need-based assessment, at the same time, reality is that protection customer would have to be a little bit more patient and go through hoops, especially, they are likely of an older age. You're seeing all of that, but what we are fairly happy about now is that the reinsurer arrangement is now again back in the spirit of partnership. There is learning from both ends. Some of the things that perhaps were difficult for us to reinsure now there are conversations that are happening. In that sense, in terms of supply side stability, that's that has happened. Second is we have raised INR 2,000 crore of capital. We are with the use of analytics, we are seeing other certain lives wherein we can take that on our books. Thirdly, what we are seeing is that in terms of digital, in terms of improving our journeys as well as through our partnerships, can we, and product innovation, how do we continue to make inroads into protection? Suresh you wanna add anything on this? Just to add, I think you've covered it, but we did launch C2P Super as a product this year. It has got us good traction across a lot of our partners. We have obviously, you know, based on. Hello. Am I audible? A lot of analysis in terms of the risk and analytics and which segment we want to play in. We are slowly increasing our focus in terms of growing the retail protection. Of course, having mentioned that, we continue to ensure that on an overall basis we are agnostic to both the credit life protection as well as this, which has grown for us at 52%, which allows us to play very sensibly in terms of the overall risk that we are taking on the retail protection. There has been a little bit of a neutral response on the customer sentiment and, you know, the overall demands are low in the market. Having said that, our search for HDFC Life remains one of the top most searched names, in terms of, Google searches. We do have a brand presence. Our product has had a great presence across some of our key web aggregator platforms as well as our channel partners. We have received fairly good response, and we believe in quarter from fourth we'll continue to show the sequential progress which is there. Similarly, on group annuity, I think we have a very, very strong presence. We have a large market share which happen on that, and that segment has grown significantly by almost 50%+ in terms of growth. So, you know, that remains, like we had mentioned earlier, a key focus area for us. 56% actually is the growth that we have seen over last year. That's the kind of number that we believe we'll continue to focus on. There again, we see a large opportunity. In fact, it's not just on group annuity. We are looking at seeing how we can scale up even the open market opportunity on the annuity business. The overall opportunity also remains fairly large for us. I think a combination of product features, we are looking at some of the products which can get launched in this. Even in the term product, I think we are now looking at how do we look at products which can probably cater to the higher ticket sizes and look at how we price. You know, if you looked at over the last few quarters, we have priced our term product very sensibly as compared to, you know, what is the kind of risk that we want to take. We will continue doing that over the next two quarters. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. The next question is from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead. Hi. good afternoon, and congratulations on a good set of numbers. First, you know, I remember there's been some commentary around, you know, high competitive intensity, and there has been some share loss in the HDFC Bank channel as well as a result of that. Can you update us, you know, on that part of the business? How is that moving? Are we gaining share again there? Second, there's a negative variations due to low fixed cost absorption, of about INR 150 crores. Is it more to do with Exide Life? You know, can you explain why this has arisen and, yeah, and how do we see this moving? Finally, looking at business from the agency channel, QOQ, there seems to be some drop over there. What is exactly happening? I thought that, you know, third quarter would be even stronger, and now we've got more Exide Life agents also. If you could update us on, you know, how that integration has progressed, how many of the agents have we able to retain and, yeah, some color around that. Yeah. Madhukar, I'll start off with HDFC Bank, hand over the fixed cost question to Niraj and then agency channel to Suresh. On the HDFC Bank, we are working very closely together, right from senior leadership to, you know, all the way down at folks at their branches, and you will start seeing uplift. We already started seeing that in some of the branches at some of the geographies where we were live. Also, you know, what is noteworthy is that top line is also a function of what kind of risks one is willing to take on one's balance sheet, what kind of risks one reinsures and retains, and at what margins. So HBank certainly understands those nuances. What I can say is that there is a concerted focus on on how the counter share can certainly move upwards and stabilize. You'll see more of that happening. As a culmination of the merger starts, date of culmination starts coming closer, you'll certainly start seeing more of that. What is noteworthy is that even ex HDFC Bank, we have grown about 2.5x market growth. That is really what is important and this is nothing new because this is one of our stated objectives of having a balanced distribution mix, and that has stood us in good stead. Whether winning new partnerships like AU Small Finance Banks, last quarter we won India Post Payments Bank and so on. We'll continue to do that. While I will, you know, Suresh will handle this later, but just top of the mind, recall agency channel was actually gone up in share from 14%- 18%. I'm not very sure, and maybe we can take it offline as to where you're getting the numbers from. I'll hand it over to Niraj on the fixed cost absorption question. I'm calculating quarter-over-quarter, Q3 over Q2 of FY 2023. If I sort of back calculate, if I subtract the numbers, then that's what I'm getting. Maybe, you know, yeah, we can also take it offline. Because our quarter three growth over quarter two has been higher in agency. I'm not sure which number you're referring to, effectively, we'll ask the IR team to give you back the specific numbers. The growth has been stronger in Q3 in agency. In fact, we've had a very good quarter three in agency. Like Vibha mentioned, that the proprietary channel growth, you know, and other than agency bank also has shown tremendous growth for us. Okay. Got it. INR 150 crores. Yeah. Yeah. In terms of cost absorption, you're right. Basically what you see here is a combination of two things. One is, of course, the difference in the operating expense ratio of Exide Life and HDFC Life. That is something that is definitely some, you know, what you see here as a significant component of this, the expense impact. The second bit is reflecting the market realities of increasing cost of acquisition in the open architecture environment. That is both in terms of individual business as well as, you know, the high growth groups credit life business as well. It's a combination of both of these. As we discussed, the first objective was from the Exide Life integration was to absorb the business appropriately and then get to margin neutrality. We've done that. Obviously, as we do this, we continue to focus on synergy realization in terms of infrastructure, in terms of any all other expenses, as well as in terms of how to effectively deploy the, you know, manpower that we have from there. All of these things are something that you will see, you know, regular updates from our end. Largely, it will get reflected in terms of how the margin expansion starts to happen once the consolidation is done. Thanks. I'll come back in the queue. Sure. Thanks, sir. The next question is from the line of Ansuman Deb from ICICI Securities. Please go ahead. Yeah. Hi. Thanks for the opportunity. My question is regarding, if I look at a quarter-on-quarter VNB margin, and if I assume, let's say Exide Life is 8% margin, I know is an assumption, apart from the standalone margin and the Exide Life margin, is there a negative additional to that because of the acquisition? Otherwise it looks like the standalone margin could have been lower on a quarter-on-quarter basis if I assume a 8% margin for Exide Life. No, I think, you know, 8% margin, you know, it is now very difficult because as you know, we've moved towards seasonality and especially for smaller companies, quarter three is a very big quarter. So that assumption itself perhaps is, you know, not quite right. Also if you look at the combined number of branches and so on, that kind of an easing off of those, some of that infrastructure has already started happening. Yeah. If you want to add anything. Just to add, the combined margin for H1 was 26.4%, so it's 26.2% in H1 and now it is 26.5%. All the components of the margin on a margin basis have increased in this quarter. Understood. No, I was just saying because it was, I think quarter two standalone would have been somewhere in the range of 28%. It might have been because of the seasonality that you are referring. It looks like there has been like if I assume the margin obviously is as an assumption. If you recollect in H1 we had reported, 26.2% on a combined basis versus 26.4% H1 last year on a standalone basis. There was a 20 basis points gap, which we said we will attempt to bridge over the rest of the year and in nine months we've done that with 26.5% versus 26.5% last year. Understood. Okay. The second question that I have is on you mentioned about the composite license. I remember one of our annual reports also we mentioned about how we were eager to exploit that opportunity. Any thoughts on the opportunity to sell health insurance? This is no, you know, no surprise because HDFC Life has been spearheading this opportunity not really, you know, to redistribute the pie with standalone health insurers or, you know, the general health insurers, general insurers. It is more in terms of how do we expand the pie with keeping customer in center rather than asking the customer to go to different types of insurers for a fulfilling different sorts of covers that they need. That was the intention. We've been at it at least for the last three years. Then a committee was formed, as you would recall, and I was part of this committee. A report was submitted over 18 months ago. Thereafter, there was, you know, eight committees were formed under the new IRDAI chairman of which development and penetration committee was chaired by HDFC Life. In that report we did put the suggestion of composite license as a suggestion of being allowed health indemnity from a product innovation and increasing insurance penetration as an objective. We remain committed on that, and I'm sure all my peers will also be. It's more in the spirit of, you know, joining hands to see how can we deliver more insurance to people, and that is the need of the hour. Thanks a lot. I will get back in the queue. Sure. Thank you. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead. Yes. Good afternoon. A couple of questions. First, I mean, on sort of distributions. We see a kind of, you know, a direct sphere being reducing. Of course, some part of it could be explained by Exide merger that would have brought lower direct. Is it also to do something with a kind of a, you know, a struggle on retail protection overall and also unique sales interpreter? I would assume these two products to be kind of a higher selling. That's number one. Second, on this back book surplus generation, yeah, I mean, versus INR 23 billion last year, INR 30 billion looks a good number. We also need to see in the context that, okay, your last year, INR 23 billion would have a, you know, a material impact from a COVID delta wave. If, I mean, we were to see kind of, you know, the COVID loss or COVID death claims FPL, then surplus, that would surplus generation growth looks a bit muted. Any sort of clarity on that? Yeah, two questions. Thanks. Yeah. Suresh can take direct. Yeah. Hi. You know, two, three things on direct. I think one of course, there has been a little bit of a slowdown due to lower branch walk-ins and online business, also has been low traffic. I think primarily we have been focusing on the quality of business in direct. two, three things have happened. One, we have tried to see which segment and what ticket size we want to play to make sure that the consistency as well as the product mix improves in direct. That has kind of ensured that we bring the margins up in direct and led to a lower number of NOPs and growth. It has been kind of a stated strategy by us. Second, of course, is the fact that look as and how we are looking at the Exide merger, we are trying to kind of look at, you know, in terms of the overall consolidation of the structures between both of them. As that happens, the pickup in terms of numbers over the next two, three quarters will start showing again. Some of it also has been a realignment. You know, some of these partners like Policybazaar and all that have moved in from online direct kind of a web aggregator model to a broking kind of a channel. That's how we are defining it. Overall, you know, given the expanding customer base, we are looking at a direct growth. You know, as we expand our branch network, the bigger advantage is with Exide we're getting a significant number of new branches, especially in South in tier two, tier three. We should be able to get what we call the branch channel to activate all over again in terms of growth. Really the flattening has been more in terms of quality of business and us exiting a smaller ticket size on the direct business over the last two, three quarters. Quickly on this, on branch thing, you are not looking to close down any sort of rationalized branches that you have acquired from Exide? No, no. there is obviously a lot of synergy that we will be able to create in terms of looking at how do we map the two sets of branches. We have gone through a very detailed exercise as part of our integration work streams, where we have seen which are the, uh, branches. For instance, HLIC has 383 branches and HLIC had 204. Combined we will have 584. We had 587 on the day of the merger. We will merge and close maybe around 140 of these branches. The idea is not that we will shut down, we would look at how we can expand because the customer segment that we are able to service, as well as the employees who we need to place out of the existing branches has been completely mapped out. We have looked at the infrastructure which is available as a combined entity. Where we believe that the HLI branches are better, our teams are moving in there. Where we believe the HLI branches are better, we are moving there. We believe where the both the branches need an upgrade, we have kind of looked at a new location and made sure that we are servicing the customers both from IRDA perspective as well as our overall perspective. We so then look at newer locations that we can expand on. There is clearly a cost synergy that we can get out, but that gives us the ability to invest in further branches in other towns that we want to get into. Okay, thanks. My question on the back book surplus, Nimisha. On the back book surplus, while yes, for the YTD it looks like 30% is a lower number, but if you look at the quarter, the E&S surplus there, last two, three didn't have any COVID impact. The growth is around 18%. That is a steady state growth that we expect on the E&S surplus around the range of 18%-20% without any one-offs that may come through. That is in line with what we expect the VIF to emerge, given the profile of products that we have been writing the last four-five years. Okay. Okay. Okay. 18%-20% kind of back book surplus typically grows for us. If you look at FY 2022, which is pre-COVID. Sorry, with COVID, and if you look at FY 2021, the E&S surplus we generated in the nine months is very close to that. Obviously the full year is going much higher than that. Okay. Okay. You know, a new business estimate of course will be a function of from which kind of products we are taking growth. Okay, thanks. Mr. Avinash, does that answer your question? Yeah. That's it. Thanks. Thank you. The next question is from the line of Nilesh from Investec. Please go ahead. Thanks for the opportunity. Firstly on protection, how are the trends in pure protection ex of ROP? What are the growth trends, and if you can share what is the share of ROP in the pure retail protection? It's about, in the region of 20%, Nilesh, and doing well. Again, we're not going overboard on it. We've been selling it for quite some time now, and we'll continue to do that wherever the customer preference is for ROP. In pure protection ex of ROP also we are seeing the growth. You mentioned 13% sequential growth including ROP. Excluding ROP, what could be the growth of pure Q? Yes. We don't necessarily track it that way, Nilesh, because with a multiple of 150 on ROP, that also is pure protection the way we see it. Whether it's limited pay, regular pay or ROP, overall this is the sequential growth that we're speaking about. We are kind of seeing that across the segments. It's not that, so our ROP proportion has been in the 15%-20% range for the past two-three quarters. It's not that, you know, segment has exploded in any big way. It is definitely becoming more meaningful, but in a gradual manner. This whole sequential growth that we're seeing is something that we are seeing across each of the categories. Sure. Sure. Thanks, Niraj. Secondly, what is our share, how much of our APE is coming from HDFC Bank for nine months and third quarter? About 45%-47% is coming from HDFC Bank. In individual business. Okay. Thank you. Thank you. That's it from my side. Thank you. The next question is from the line of Sanketh Godha from Spark Capital. Please go ahead. Thank you for the opportunity. Nima, you said in the call that we are closely collaborating with HDFC Bank. In that context, just wanted to understand that last year we paid around INR 1,130 crore as an advertisement spend at HDFC Bank branches or ATMs. Do we see this number to grow at a rate which is substantially lower or in line with APE growth, which was not the case for four-five years? Just wanted to understand that could be potentially a lever for margin expansion going ahead. That, when you say closer collaboration, is this market share or costs or what exactly you mean to say in that sense? See, right now, given that the merger is yet to be consummated, it is still in terms of working together but not into deep strategic level conversations when they become our parent and sit at the board level, strategize with us and so on, right? Those are conversations perhaps for another day. Right now it is more in terms of how does our counter share stabilize? Because ultimately when you're competing with unlisted players, there is like I said, you know, top line is often a function of how much risk one is willing to underwrite, how much how strong are one's underwriting practices and what is it at what cost, right? So some of that calibration is what I was referring to. Other things in terms of, what is the cost of business and so on, I think the very fact that no insurer today that holds more than 50%, no bank that holds more than 50% has even, you know, does not have open architecture at all, forget about even commercials. Right. I think those sorts of things are more strategic level discussions which will follow. Yeah. Some of these costs will also be based on how HDFC Bank expands. Their number of branches is going to increase by almost 700. We would want to make sure the visibility of our products is across all these branches. You know, some of them will grow in tandem and also it is a product which is fairly competitive, and we need to ensure visibility across all the branches. Got it. Have you seen the counter market share at the counter increase in since the announcement of merger has happened? We are beginning to see in a lot of geographies. Oh, okay. Okay. Fair point. Second question is more on data keeping. The economic variance number of INR 1,160 odd crores. Can you break it down into how much was driven by debt and is there any impact of equity on the term 160 outcomes? Okay. Eshwari This is mainly coming from the increase in the yield curve at the short end. If you see the yield curve from one year to five year has increased in the range of 1%- 2.5%. Average about 1.6%. If you look at our sensitivity for 1% increase in interest rate, the EV falls by around 2%. Yeah. Because average of 1.6%, the EV has fallen by around 3% odd, which is about INR 1,030 crores. The balance is from the equity volatility because of the lower equity returns during the nine months. We have some negative impact of INR 125 crores. These are two broad reasons for the negative investment belief. Sure. Why I was asking this question is that, we said in the call, at the start of the call, start of this year that we are baking in lower unwind rates, because we expect the equity returns to be lower. Do we see a positive surprise there, any possibility or it will remain the level what it is, expected today? It's expected to remain at the current level because it's a lot of volatility. It's only in Q3 we've seen a small upside, but again, we see some stress. Got it. Perfect. Last one from my side. If you really do you want to disclose the hedge coverage ratio which you might be calculating internally based on what are the instruments you have internally like TRS or TCDs and internal cash flows from the other products? If you want to put a number against the hedge coverage ratio against the likely cash flows you should get in the guarantee products, any number you want to suggest how is our hedge coverage ratio? Sanket a couple of things here. One is basically two kinds of guarantee products. One is the single premium guarantee products which are basically duration matched through just matching. Yeah. Asset and liability duration. On the regular premium products, we said, it's basically cash flow matching using three large areas. One is internal cash flows from lower duration liability products. Second is FRAs. Third is partly paid bonds and then some sort of GSEC stripping. Right. These are three or four components that we use. We don't necessarily want to talk about, each of the numbers because it's dynamic at the back end. We do. Mm-hmm. calls based on how the interest rates are moving, how the FRA spreads are moving in the market. This multi-prong strategy helps us do that from time to time. Through a combination of each of these, we want to stay as cash flow, as closely cash flow matched as possible. Okay. Perfect. Thanks. That's it from my side. Thank you. Thank you. The next question is from the line of Nitin Jain from an Individual Investor. Please go ahead. Hello, am I audible? Yes. Yeah. Hi, Nitin. Yeah, hi. Thank you for the opportunity. My question is, you mentioned that company has achieved margin neutrality in the nine months FY 2023. Will this continue going for the full year? Because for FY 2022, the VNB margins were north of 27%. Can we expect to maintain margin neutrality for the full year as well? Based on trends that we're seeing right now, don't see any significant threats, all things being equal on the economic front. Right. This will be on a consolidated basis, right? Yes. Okay. Just a follow-up to that. Although the pre-merger numbers are not disclosed in the press release, will it be possible to share the VNB margins pre-merger? No. That's the point that I made in my comments that actually it's not that we have it and we are not disclosing it. Everything is completely enmeshed. It's not, for example, that they had a broking business or they had some other business and we didn't have it. Whatever they had, we had. All management teams are now all, you know, the hierarchy has been collapsed, locations have been collapsed. Like we, like Niraj mentioned, branch rationalization has happened. Even internally now we call it Bangalore office and Mumbai office. There isn't even. And there are people movements completely fungible. Even at senior executive management team, we have representation, you know, and so on. We just don't track that anymore. Okay. Just in terms of qualitative comment, have you seen an increase in the pre-merger VNB margins QOQ? Definitely, yes. Absolutely. That's why our earlier estimates were either it would take earliest 12 months and maybe a little bit more for us to get there. We've been able to deliver this in a much earlier, you know, almost three quarters earlier. Okay. Okay. Perfect. Thank you so much. Yeah. Thank you. Thank you. Ladies and gentlemen, please limit your questions to one per participant. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead. Thank you for taking my question. Good evening. Just first one on composite licenses. Going back, which are the areas that you think you will show more priorities on? Is it like basic insurance? Could there be organic or inorganic options that you will look at? Also M&A. I just wanted to get a sense, do you think this opens up M&A, not only for you, maybe for the industry as well? Yeah, I think all, various permutations will emerge, but I'm also of the belief that it's not gonna happen overnight. Reason I'm saying it is look at FDI today, right? People are allowed to invest up to 74%, and we are far away from that. Just because there's an enabling provision, some of these things are group level decisions. There are capital allocations. There are multiple companies in the group. You know, there are different valuations, costs, tax, because taxation, aspects are very different. You know, and the horizon is very different for a life company versus general company. The way we look at it is that let us see in terms of what are the contours of eventual regulations, and then we will see. Of course, we have done some homework, but it's not slam dunk. Also we don't have to be a manufacturer in every case. In some cases, we might just be a distributor. In some things we might be, you know, have this as a rider. You know, so there are various aspects. Even today, we work, we have a combined product with HDFC ERGO, and that's doing well, which effectively we are able to distribute health protection cover for our customers. You know, and so on. So various models will emerge. Actually, speaking with the regulator, that's also their intention. Wherein what I understand is that you don't have to be a full bells and whistles insurer. You could be a specialized insurer only doing crop or only doing rural or only doing disability and so on, which might require lesser capital than the onerous capital requirements of a life insurer. We'll have to see. Apart from composite, we are also enthused, and this is also there in the development and penetration committee report that why not allow insurers to also distribute other products, each other's products, which are, first of all, anyway, governed by our common regulator. Secondly, if banks can distribute, life insurance and general insurance, why can't we mobilize some of those other financial services products and be a distributor, especially in our branches, our feet on street, our direct channel, our online channel, and so on. We would be equally enthused with it from that way to come through. Got it. Quickly fleeting my second question. Deposit rates have seen a very sharp jump as banks have fallen over each other to raise rates. Despite that, I think non-par savings, even for the quarter Q3 has been strong. Are you seeing any early signs that, you know, as rates go up, that you're seeing pressure on your guaranteed income products? Have you responded by raising our own rates? Just dynamics around this and maybe the path forward for these two classes. Thank you. I'll start off, Suresh, you can add. As we mentioned last quarter, when there was a lot of questions in terms of what's gonna happen because deposit mobilization, and we put the numbers into perspective, wherein it is less than 2% in terms of new mobilization and about 0.2%, 0.3% if you include the back book of banks. That is number one. Number two is that these non-par Sanchay Plus category products, which now has in a way been born, has caught the imagination of people and how they're able to do asset allocation in terms of their savings from. Some portion might be for liquidity purposes in bank fixed deposit. At the same time, this is a lifelong guarantee or some other forms of longer term guarantee, which also they want. It's not really fungible as such, and that's exactly why, like we said, and that's what panned out, not only for us, but for the sector also. No real big ticket impact or dent because of this drive towards deposit mobilization. Yeah. No, I mean, I think Vibha covered it, but you know, frankly, this segment on the non-par side has almost grown by some 60, 67% for the industry. you know, it's really created a segment by itself, and it's a question of asset allocation to this. In fact, you know, we are fairly agile in terms of our pricing. It need not necessarily be that we need to increase. Right now, we have actually brought a little bit of a reduction to maintain profitability of this particular segment. We do believe over a period of time, we will probably see the industry following this. it's not that we need to compete with deposits. I think this has a space for itself, and we will do it with an independent pricing to make sure that this segment remains profitable for us. Thank you. All the best. Thank you. Thank you. Participants are requested to please limit their questions to one per participant. The next question is from the line of Supratim Datta from Ambit Capital. Please go ahead. Thanks for the opportunity. I'll just continue from the last participant. Typically, you know, with the yield curve flattening, the profitability of guaranteed products reduce. Just wanted to understand that, you know, what needs to be the spread between the short-term and long-term yields for this product to remain viable? Yeah. I think that's one factor, I guess, which you can't control in terms of the slope of the yield curve. What you have to do is, you know, some of what Suresh mentioned and what we've been talking about in terms of being disciplined in terms of pricing. Whether it's annuity product or it's regular premium guaranteed products, you largely, first of all, ensure that your risk management is appropriate in terms of matching your cash flows especially for the regular premium products and duration match for the single premium products. That's something that's top priority. You figure out what kind of, you know, credit risk that you're willing to take to try and get the yield pick up. Within tolerance, you do that to try and get the maximum yield that you can out of the assets that match the liability. You figure out what's the kind of, you know, competitive landscape that is around to be able to, you know, not not be the highest rate, but at least be in the vicinity. Of course, you have your, you know, margin sort of profile in mind. All of these things are something that need to be considered to be able to manage the profitability. irrespective of which way when we had launched the product, we had a fairly steep yield curve, as you know, about 3.5 years back, and today we have a flattish yield curve. We've been able to manage our spreads broadly given the pricing discipline that we followed in terms of both the annuity as well as the non-par savings product. Okay. Sorry to interrupt you, Mr. Datta. May we request you to please rejoin the queue. We have participants waiting for the call. Okay. Thank you. The next question is from the line of Abhishek Singhal from Narayani Investments. Please go ahead. Good evening. Thanks for taking my question. Has the company got permission to do health and business? If you have got it, should you do some business now and health insurance plan will be on a third party? Second and last question, more aggressively IDFC FIRST Bank is opening its branches. The more it is not affecting the premium. When will the effect on the insurance premium start? On the first part, like I mentioned to one of the earlier callers, that right now the extant regulation do not permit us to seek or file any license for or to do some health indemnity. We will have to wait, based on what the Ministry of Finance and whether that is able to, you know, in what form or shape do we see final light of day on composite health and so on. We'll have to wait for some time. What I did allude to earlier was that we continue to remain interested in, being able to incorporate some of these things that we are not allowed to do today into having features within our product so that we can have product innovation, and not have these artificial constructs as to where does a life company start, where does a general company start, where does a standalone health, where is pension, and so on. Because we have to keep customer in center of what we do and ease of giving solutions to some of the risks being faced by the common person. I think that is really what all of us should be focused on. So we'll wait and see and we hopefully have some clarity towards the end of this financial year. On your second point on HDFC Bank opening up new branches, while they are opening and we are certainly there in the new branches. You know, new branches do take some time because they're fledgling branches often start with, you know, very small area. It is stabilizing in terms of their banking activities, and it takes a good two- three years before it starts focusing on distributing third-party products. We are there in most of the branches. You will start seeing some of the upticks, like I mentioned to you as, you know, over the next six and to 12 months in terms of closer working with the bank and their stabilizing. Okay. Thank you so much. Thank you. Thank you. The next question is from the line of Atul Mehra from Motilal Oswal Asset Management. Please go ahead. Yeah. Hi, good evening, and thanks for the opportunity. In terms of the composite license, as and when hypothetically it goes through, is would there be merit in one mega organization of HDFC, both the health insurance, B2B, the general insurance business and the life insurance business coming together? Do you see like the two companies coming together then and creating one large insurance for all the needs? Do you see merit in that or you believe both would perhaps do better individually? Thank you. We've, you know, we have this model across the world and even where there are where this is a possibility, both models exist. There are some groups that have composite, some groups that are that are bespoke only for one or the other. There are merits and pros and cons in both. I mean obviously the merits would be that you would require lesser overheads. You would probably be able to have better end-to-end view of your customer. Your customer doesn't have to go elsewhere for their insurance needs, upsell, cross-sell, you know, all of those things. Some of the negatives could be that these are very different perhaps products, especially when you're looking at crop and motor and P&C. There could be different capital requirements, investment horizon, outlook could be very different, taxation could be different and so on. These are, really, for shareholders to take a view on, and more a strategy level call rather than a company operating level call. Got it. Thank you very much. All the best. Thank you. No, thank you. Thank you. you. The next question is from the line of Bhavya Sanghvi from Fortress Group. Please go ahead. Hello. Thanks for taking my question. My question has been answered. I'd just like to get some data points for bookkeeping. Could you just give us the data for HDFC Bank's counter share within individual business over the past two years, like FY 2021 and 2022 year ends on channel mix? See, we are not giving specifics of because counter share and so on is also because at the same time, if you were to look at counter share or value of new business, it's a very different outcome. If you look at counter share of what is the risk on the balance sheet, these are very different outcomes and so on. I think what is important is that our growth in the, say, in this quarter three, for example, has been faster than industry level growth, regardless of any counter shares or regardless of any of the other dynamics of open architecture that we drive in and ability to attract new partners. Just refocusing on this one relationship of any kind has been our core stated strategy, and that has stood us in good stead time and again. Got it. Thank you. Thank you. Thank you. The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead. Yeah. Thank you for taking my question. So I think, in the previous answer you alluded to this, the fixed cost absorption being actually a split between a higher cost of acquisition and the Exide Life business. If you could just give us a, you know, a sense of how much should we take it as the split. Just also on this cost of customer acquisition again, that which channel would that be that you're seeing this? Yeah. You could take it as broadly, you know, half and half. Directionally you could take it as that. We did mention to you in terms of our plans to get the synergy realization out of the combined business now. That is something that I mean, it's already started delivering on that. Margin neutrality is the first proof of that. We'll see expansion as we go forward. As far as cost of acquisition going up, that's something that is happening across the board, largely in the corporate distribution with open architecture. That's something that we've been in all our relationships, that's something that we are seeing across the board in terms of increasing cost of acquisition, in terms of partners as well as in terms of give the expansion, putting in more manpower. We acquiring new distribution with, you know, companies such as India Post Payments Bank last quarter and more recently AU Small Finance Bank. We've scaled up our partnerships with Yes Bank, IDFC, Saraswat, as well as Bandhan Bank in a very big way. All of that requires a fair bit of investment and that is something that we would expect to continue. Of course, we will try and get synergies out of any fixed cost absorption that will come out of our proprietary distribution. That's the reason why we want to continue growing that to get more fixed cost leverage. As far as corporate distribution is concerned, we do see this investment continuing as we go forward. Our margin realization, VNB growth as well as cash generation through PAC is something that would happen after absorbing all of that. The fixed cost absorption side, is that over, or we see more impact of that in the fourth quarter? No. That's something that is baked in. We will obviously keep chipping away at that as we go forward. Mm-hmm. Thank you so much. Yeah. Thank you. The next question is from the line of Neeraj Toshniwal from UBS India. Please go ahead. Hello. Hi. Wanted some sense on life beyond FY 2020 post margin neutrality. How do we see APE, VNB and kind of growth we are taking in after? We are seeing some green shoots in terms of HDFC Bank coming back, agency productivity improving, mix improving, protection probably coming back. Just wanted your sense how we are factoring in what kind of growth we can give. Hi. We should grow. We should be back on track to grow faster than this industry. You know, all our channels should do well. We've demonstrated, to then my comments about banks, all our other bank insurance partnerships doing very well and agency being 2x our company level growth. We expect that trend to continue and also the distribution synergies to kick in with the merger, especially in some of the geographies which were not wherein we were not really focused on. That should come through. Also, in terms of profitability, we should continue to inch upwards and deliver about VNB in the range of about 18%-20% growth. Okay. Anything on persistency, given we have been delivering improvement on persistency for quite some time, do you deliver still available or any area probably we are lagging and is it on actuals in EV right now or we have some existing capacity bandwidth available? How would you think about it? Right now we're tracking well. What is also noteworthy I think is, you know, when we talked about margin neutrality, we have also reached close to neutrality on 13-month persistency despite, as you know, Exide Life being much lower. As we write new business of, you know, emanating out of distribution strength of Exide Life, we will put in a lot of rigor, and you'll start seeing that new business delivering fairly decent levels of 13-month inching upwards to ours. Having said that, I think, you know, we are very enthused to be present meaningfully in the non-Tier 1 segment. The way we are gonna be looking from next year onwards is obviously we don't want to dilute the high quality business that we have built in the Tier 1 segment. That is something we'll be monitoring separately. At the same time in terms of mix, we will see some level of different level of persistencies in tier two and three because that is really the nature of that geography. As you see with the persistency of mortality, there will be a haircut to what you see in tier 1 outcomes. You'll see some of that, and that's how we are building our projections going forward. If you were to look at it, I just mentioned that we have tied up with AU Small Finance Bank, India Post Payments Bank, and all of this is with a purpose. Apart from being great partners and franchises, but also, you know, those are the places that interest us and you will see more penetration into those geographies. There will be a mixed impact in a nutshell. Got it. This is very helpful. Last question, in terms of VNB triangulation, if we compare the standalone margin growth last quarter and the control, there have been two insights in terms of both the product mix and the fixed cost mix. We have talked about product mix also, I think we have done well. How fast we can ramp up or have you categorized these two, which will ramp up faster in terms of movement, given mix is improving? Any roadmap to that? It'll have to be, it'll have to be a bit of both really. No, no real, you know, clarity in terms of how much will be contributed by each of these. It could depend. It would really depend in terms of what period of the year we're talking about. Both of these will be equally important as we go forward. One, I mean, you know, VNB growth is going to be a function of three things. It's going to be a function of the growth. We've already articulated our aspiration to grow faster than the sector. Inching up margins that will come out of some of these shifts. As I mean, from a medium-to-long-term perspective, we know that protection will become a larger part of the business. Annuity is already scaling up, will continue to do so as we go forward as well. Product mix shifts over a period of time will continue to be meaningful. As we expand our proprietary distribution, operating leverage is also something that will be very meaningful as we go forward, apart from the shorter-term synergy realization from the combined business. Got it. Thank you so much. This is very helpful. All the best. Thank you. Thank you. The next question is from the line of Amit Jain from Axis Capital. Please go ahead. Yeah. Hi. Thanks for taking my question. Just wanted to check that in terms of HDFC Bank, so do you see any particular product segment which is selling higher or it is like sort of uniform? How does that compare to other banker partners? Thank you. There has been a little bit of a focus across most of our banker partners on the non-par segment that has grown, you know, even if you were to look at it, that segment has grown in banks from almost 30% in FY 2021 to 38%, which is reflecting in our number also. It is also the in the whole segment for industry has grown to 67% is our estimate in terms of what kind of numbers we're looking at. There has been a growth on the annuity business also. You know, these are actually favors of the year in terms of how the product is positioned. We will probably see some focus coming back in terms of retail term over the next one year. Clearly, you know, we have always managed to maintain a balanced product mix. It's just that when we are slightly wary of in terms of that it shouldn't go beyond a certain percentage. I think we mentioned in earlier calls also, we want to ensure that each of our channels is profitable and we make sure that the product mix is appropriate to the channel to make sure that the channel by itself remains profitable. Depending on, you know, how we want to push at HDFC Bank or agency channel or other banker partners, we kind of maintain this mix across each of these channels. Sure. Thank you. That was helpful. Thank you. The next question is from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead. Hi. Good evening. Thank you for taking my question again. You know, you mentioned in your opening remarks about approvals that you applied for opening the branch at GIFT City. Can you talk a little bit more about what sort of business would you look to build from there? You know, this is in the initial stages. We have opened a branch of our HDFC Life and Re subsidiary out of IFSC at GIFT City. We have a distinct advantage in terms of being able to operate as a branch and in some sense a lead into the market. We are evaluating our product strategy. We are looking at dollar-denominated products, whether it's in terms of health, whether it's in terms of education or whether it's in terms of annuity. We have certain frameworks in mind. We are still waiting for the overall guidelines to emerge from the regulator there. Once the guidelines have fallen into place, we will confirm which products we would want to launch. We are in some sense ready with our business plan and operating plan. Clearly these are different segments, different markets. It will be a huge opportunity for the NRI customers who can look at these products coming out of a brand like HDFC in India, and also an opportunity for the Indians to be able to take dollar-denominated products for, you know, coverage of health and some of these education-based kind of products. There are initial thoughts and concepts. Some of them we have firmed up, but we are waiting for the overall clearances to come in and we should be quick to launch on this. What's the sort of expected timeline? Can you, who is exactly the regulator in IFSC for insurance and, you know, what would be the timeline for something like this? Timelines in some of this is not very easy to predict as such. The IFSC is regulated by IFSCA, which is the GIFT City unified regulator, which is there in place. We also have DFSA who manages our overall regulations for the subsidiary out of the Dubai subsidiary. We have recently got a certificate of registration which has been set up by the IFSCA. The IFSCA branch will be an IIO setup, and this came in November. Some of the other regulations are expected to come in. We will obviously wait for the product guidelines in terms of who will approve these products. Clearly, you know, this will have to be first cleared by the IFSCA here in India, in terms of what kind of products will be allowed for us to sell. Got it. I'll connect with you more offline on this. Thank you. Sure. Yeah. Thank you. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead. Yeah. Hi. One question because of this kind of a routine, I mean, the budget is around the corner. I mean, there have been a lot of noise on both the ends. If at all, I mean, you know, life insurance or maturity proceeds, if they are to be brought under the ambit of tax system, or if then do you see that the products like the non-par guaranteed or, you know, products will remain viable to be sold profitably? Avinash, here, since it's hypothetical, and also given the need for actually having more tax benefits than lesser, just given that our insurance penetration has gone down, than moving steadily upwards. Hypothetically, if you were to say you're referring to 10(10D), or if that were to go away, I still think that that category has been born. Why is that category born? People are saying that, you know, if I were to retire in the next 10 years or thereabout, I don't know what are going to be the interest rates and what am I gonna earn at that point in time. It could be low single digits. I want to remove this volatility from having a worrisome retirement time. I want certainty and which is exactly our campaign, which says my first salary after retirement. That has caught the fancy of people to say that there is this particular aspect will be completely non-negotiable regardless of any macro events, any other economic events and so on. It is lesser to do with tax. Yes, one has to be competitive on IRR. With that is something we have to see. But this birth in category is not a tax-led demand, but more in terms of having certainty of cash flows when one is in the retirement phase or later on in life. Yes. I understand what I said. That's a question. I mean, on the annuity side, anyway, annuities are taxable, so I understand that part. I was sort of a bit on this non-par guarantee like a Sanchay Plus or of a Four Ps where of course you know, that maturity proceeding tax-free that particularly for the affluent class who are in the higher tax bracket makes a lot of sense. Fine. I mean, of course it's hypothetical and I do agree with you that definitely it affects just the taxes. Yeah. Thanks. Thank you. Thank you. The next question is from the line of Samyak Shah from Sameeksha Capital. Please go ahead. Yes, thanks for giving this opportunity. You mentioned that the insurance are very comfortable- Talk to you, Mr. Shah, but we are unable to hear you. Your voice is echoing. Hello. Am I audible now? You're not clearly audible, sir. Hello. Is it fine now? Is it better? Management, shall we continue with the question? Yeah. We'll try and take this question. Go ahead. Please go ahead, sir. Yes. Do you expect any reduction in reinsurance premiums or can they be flat going ahead? I'll start off and Neil you can add. There are different ways of us getting a better arrangement from reinsurance. Price is one. Like I alluded to earlier in one of the questions that we are beginning to see a lot more reasonable and collaborative approach, quite rightly, by reinsurers now that COVID fears have receded. So that in a way helps us write more business and defray some of our costs. We're seeing that. Hypothetically, can it happen? Niraj, you want to take this question? I'm sorry. Just to be clear, was the question in terms of rates coming down or... Yeah. Okay. I mean, see directionally the way we are going is we are looking at increasing penetration, expanding into tier two, tier three, expanding beyond covering just the salaried high income individuals, right? When we are directionally moving that way you can expect the risk profile, the consequent underwriting process that Vibha spoke about as well as pricing to need to reflect that to be able to build a sustainable business. You know, pricing should be appropriate. We have no real, you know, preference for which way they would go. We would want it to be appropriate in terms of offering meaningful cover. At the same time business being profitable with risk being appropriately priced. If there is expansion that's going to happen in higher risk segments, pricing should reflect that. You know, any business that is done without keeping that in mind, we believe will not be sustainable. Even today we are seeing different practices in the marketplace in terms of pricing as well as in terms of underwriting. I guess, for a product which typically has a term of 20- 40 years, it's only appropriate that pricing takes that into account. Pricing is one factor. It's important, but not the only one. There are also avenues which, you know. Are important in terms of being able to assess the profile of an individual, being able to use data more effectively, being able to use underwriting models more effectively to be able to, you know, improve the customer acquisition process. A lot of these things we believe will be enablers as we go forward with more and more data, not just on demographics in terms of income, but also in terms of health over a period of time based on customer consent should be available. That should make a process a lot more efficient and pricing finer based on customer segments that we are gonna be offering. Thank you. Ladies and gentlemen, this will be the last question for today, which is from the line of Dipanjan Ghosh from Citigroup. Please go ahead. Hi. good evening. hope I'm audible. Yes, please go ahead. Yeah. Just a few questions. One is on the annuity segment. We've seen the market leader take multiple price hikes on few products. In that context, from a medium-term perspective, how sensitive is this segment to pricing? I mean, how do you see the margins in that segment shape up? Second, on the nonpar side, it seems that there has been marginal increase in tenure and also a bit of increase in the regular pay variance. From a sequential perspective, has that had some impact on margins? Lastly, a data keeping question, if you can break your operating variance YTD. On your first point on annuity pricing, we keep calibrating it. At the same time, you know, like with everything else, it is never only the price. It's a whole host of things. There is a lot of engagement on the ground. There are engagements at various levels with corporates, with that's about on the group side, on the retail business, with nodal officers, with many aspects. Yes, price is important, like even in retail business, but I would say that it is one of the levers that is there. We stay away from taking really aggressive calls. That is, it is very tempting to go down that path. If you're not able to really earn that spread, then we really question as to why are we doing this, because that way we could do many other things. We could be very aggressive on protection. We could be very, you know. Why only in annuity business, right? It's always a balance in terms of either mortality or financial risk management. At the same time, you have to stay in the game, and with a healthy dose of strong partnerships and building bottoms-up economics. You wanna add anything, Suresh, on annuity? No, I think, you know, Dipanjan, right in terms that we have been calibrating, like we mentioned, we see a huge opportunity on the OMO segment. We try and look at the group annuity based on relationships as well as in the process and how we've been able to work with a lot of large corporates in terms of being able to get this business. The brand helps us get a clear leverage in terms of the pricing. I think it is important because a lot of people who would want to invest would want to stay with HDFC over a large, longer period of time. We remain competitive. We have a very large trained workforce on the ground who's able to explain the benefits. We are trying to build an ecosystem around what kind of a platform we'll be able to offer, you know, the customers in this particular segment. It is a very, very large opportunity, and I think in some sense, we are happy if more and more people come in because, look, it'll only expand the pie on this particular segment. We are focused. I think we are very clear, and it's always good to stay within the limits or tolerance in terms of what kind of the overall business is there. We keep coming in and out of this segment because we're fairly well diversified. For instance, on group term, we have been quiet for quite some time. We feel that, look, we can probably play larger on the group term now that things have stabilized. These are some of the plays that we have between the term and annuity kind of a business. I think on the next one, on nonpar tenure you had. You wanna take that one? You're saying that it is more on the... Yes. My question was, I mean, it seems that there has been some increase in customer demand towards longer tenure regular pay variant as a whole for the industry and to some extent maybe for HDFC Life also. From that perspective, is it, has that had any benefit on the margin? This entire return guaranteed segment over the last 3.5, four years, we've actually seen a fairly broad spectrum of customer demand. It has been at the longer end for sure. It also has now with some, say, fixed maturity plan that we've launched a few quarters back. It's at the shorter end as well. Folks who are preferring to pay maybe one premium or maybe five premiums and have a 10-year horizon instead of a 20-year horizon. That's also a fairly meaningful segment, and for business, we had mentioned about 1/6 of our nonpar business is coming from there. Also within at the longer end also there are, you know, preferences for either taking bullet payments or lump sum payments or some preference for taking income over a extended period of time. There are multiple such, you know, options that exist, and there is preference around that. As far as margin delivery is concerned, again, it's a function of managing the spreads. Of course, longer-term products will be more profitable compared to shorter-term products. Even within shorter-term products, we had mentioned that it is with pricing discipline, we can manage, you know, fairly respectable margins out of that as well. Sure. Lastly, if you can quantify the operating variance breakup, year to date. It's mostly persistency variance. Mortality is a small positive and expense is moderately positive. Most of the operating variance is coming from better persistency. Sure. Thank you, and all the best. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mrs. Vibha Padalka r for closing comments. Thank you, Rutuja. We would like to thank you all for attending the call. Have a great weekend. Thank you. On behalf of HDFC Life Insurance Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.