Ladies and gentlemen, good day and welcome to the HDFC Life Insurance Company conference call. 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, this conference is being recorded. I now hand the conference over to Ms. Vibha Padalkar, MD and CEO of HDFC Life. Thank you. Over to you, ma'am. Thank you, Robin. Good evening, everyone. Thank you for participating in this conference call to discuss the financial highlights of the year ended March 31, 2023. Our results, which include the investor presentation, press release, and regulatory disclosures, have already been made available on both our website and the stock exchanges. Accompanying me are Suresh Badami, Deputy Managing Director, Niraj Shah, CFO, Eshwari Murugan, our Appointed Actuary, and Kunal Jain, representing Investor Relations. I will provide an overview of our FY 2023 results and be happy to respond to any queries following that. As was done in the previous year, we will be presenting the financials, including the acquired business. Therefore, it is possible that the numbers from the previous year might not be entirely comparable. Before I proceed, I would like to take this opportunity to congratulate Niraj on his elevation to the board of HDFC Life as Executive Director and CFO. As you may be aware, the RBI has permitted HDFC Bank or HDFC Limited to increase their shareholding in HDFC Life to more than 50% prior to the effective date, thus clearing any uncertainty around HDFC Bank's eventual shareholding in us. We look forward to collaborating with our parent-to-be towards creating value for all stakeholders. Moving on to our operating performance during the year. We closed the year with a strong growth of 27% in individual WRP, with a market share of 16.5% and 10.8% in the private and overall sector, respectively, clocking expansion of 40 and 70 basis points, respectively. We continue to grow faster than the private sector and we ranked among the top three life insurers across individual and group businesses. In terms of individual WRP, we have outpaced the private industry over multiple time frames, including in the past three, five, and seven years, thereby consistently demonstrating growth leadership. As you're aware, the fourth quarter saw budget announcements with respect to changes in tax regulations effective April 1, 2023. Individual WRP growth till February was about 15% and did not have any impact of budget changes. The new business premium recorded in the month of March 2023 was boiled on account of the additional demand, especially in the non-par and high ticket size segment. The incremental business can be estimated for us as the difference between actual growth for the year of 27% and extrapolation of the 11-month growth trajectory of around 15%-16%. In the month of March, we were able to leverage the opportunity whilst offering competitive solutions managing profitability and adhering to a calibrated risk management approach. In this month, we stood number one across agency, broker, bancassurance, as well as sales through our website, which quadrupled. As a result, we registered a growth of 56% in quarter four, more than 2x growth of the industry and ranked number one amongst private players. Looking ahead, the medium-to-long-term growth opportunity in our sector remains intact. The long-term guaranteed savings product proposition is unique and the returns offered are best-in-class even after the recent tax changes. We believe that the opportunity has only widened with the tax changes for certain other asset classes. Protection and annuity remain areas that are exclusive to life insurers. In light of the above, we remain confident about being able to grow our APE in FY 2024 after adjusting for the additional business that was generated in March. We will continue to aspire for higher than industry growth. Our focus will be on broadening our customer base and increasing number of policies sold and the lives covered. The building blocks for this are in place, aided by our diversified network of distribution partnerships and agency distribution, which was boosted by our acquisition of Exide Life. These avenues give us the ability to reach out to multiple customer segments across Tier 2 and 3 cities and deepen our reach. Our largest distributor and our parent-to-be, HDFC Bank, has embarked upon its branch expansion in Tier 2 and three locations, which will be complementary to our strategy. We recognize that the persistency and mortality experience would be different for some of these segments, and the same is being factored in our overall actuarial assumptions. Our distribution continues to be supported by suitable product propositions for this segment. Our overall product mix remain balanced. Amongst the savings products, non-par savings was at 45%, participating products at 27%, and ULIP at 19% of individual APEs. The non-par share increased to 53% in quarter four due to the higher demand and is expected to normalize in FY 2024. Within the non-par segment, our shorter tenure product, Sanchay Fixed Maturity Plan, comprised about 13%-15%. There's been an increase in protection share in total NBP from 24% in FY 2022 to 29% in FY 2023. Our overall protection APE grew by about 20% in FY 2023. This was led by a market leadership in Credit Life, delivering strong growth of 46% across nearly 300+ partnerships. Retail protection trends remain encouraging, with sequential growth of over 50% and Y-o-Y growth of over 40% in quarter four. Our FY 2024 outlook for retail protection is positive on the back of the growth trends experienced over the last three quarters across channels. On the retirement front, we have steadily gained market share in the annuity business. Our annuity business in FY 2023 grew by 18% on received premium basis compared to a 2% growth for the industry. APE growth is much higher at 59% due to a pickup in our regular premium annuity product, Systematic Retirement Plan during the year. Moving on to key financial and operating metrics. Our new business margin for the year was 27.6%, thereby delivering value of new business of INR 3,674 crores, which is a growth of 37%. Margin neutrality after considering the acquired business was achieved well ahead of target. The full year margin factors in an investment of INR 60 crores that was made towards our technology transformation strategic initiative named Project Inspire, which I had spoken about in the last analyst call. We expect to continue our VNB expansion in FY 2024 through faster than industry APE growth while maintaining close to FY 2023 margins. We will increase our investments in technology and distribution, including our proprietary channels, to take advantage of digital opportunities as well as achieve our growth objectives. We anticipate further investments of about INR 100 crores each in FY 2024 and FY 2025 towards Project Inspire to make us agile and future-ready by providing a 360-degree view of our customers, seamless integration with new partners, resulting in an improved customer experience and productivity across channels. Our embedded values stood at INR 39,527 crores as on March 31, 2023, with an operating return on embedded value of 19.7% for FY 2023. Profit after tax for FY 2023 stood at INR 1,360 crores, a robust Y-o-Y increase of 13%. This is despite the increased new business strain arising from the higher growth in quarter four. The profit emergence continues to be aided by strong growth of 27% in back book surplus. The board has recommended a final dividend of INR 1.90 per share, translating to a payout of about 30% of our PAT, in line with our dividend payout since FY 2017. Our solvency ratio was 203% as on March 31, 2023. Renewal collection trends continue to be healthy on the back of steady persistency. Our 13th and 61st month persistency for limited and regular pay policies stood at 87% and 52% respectively, compared to 87% and 54% last year. Next on channel performance. Our bancassurance channel grew by over 25% in FY 2023 based on individual APE. We are witnessing robust growth in all our partnerships. Our collaboration with HDFC Bank remains strong as we strive to enhance insurance accessibility to the bank's customer base. Our agency channel witnessed strong growth, surpassing company-level growth by more than one and a half times in terms of individual APE. It has grown at a five year CAGR of 34%, almost doubling its share from 11% in FY 2018 to 20% in FY 2023, aided partly by strong performance in the marketplace as well as by inorganic growth. Our focus remains on enhancing activation and productivity of our financial consultants and aim to drive growth by expanding our presence in new territories and reaching out to a wider range of customers. Our subsidiary, HDFC Pension Management Company, doubled its assets under management in a year and a half, to exceed INR 45,000 crore as of March 31, 2023. It is the largest and fastest growing pension fund manager in both retail and corporate NPS AUM segments. Our market share here has increased from 36.9% to 41.2% over the last year, with 60% growth in asset under management. Our subsidiary, HDFC International, has received the final approval from the concerned regulatory authority, enabling us to establish a branch in Gift City. We are excited about the new opportunities it presents for us to expand our global presence as we target to commence operations in quarter one of FY 2024. Moving on to regulations. IRDAI is proposing several changes that would enhance insurance penetration, facilitate sustainable growth and ease the operating environment. We are enthused about the new EOM regulations, which provide greater flexibility for cost management, encourage the development of longer-term products, and improve persistency by offering higher allowances on renewals. These changes will also aid in the revival of the pension segment. Slide five of our investor deck plots how we have fared better than the industry post every major turbulence. The 1st significant disruption was in FY 2011, post the new unit- linked guidelines. The 2nd was when HDFC Bank adopted open architecture in FY 2018. The 3rd upheaval was the pandemic, with the industry being hit both by business disruption as well as a massive surge in claims, as well as change in unit-linked tax exemption limit in FY 2021. The latest disruption is due to the budget announcement made on 1st of February 2023. Between the 1st and 2nd disruption, which is unit- linked to open architecture, we delivered 2x industry growth. Between the 2nd and 3rd disruption, i.e., open architecture to COVID, we delivered one and a half times industry growth. In the last three years, we delivered two times industry growth despite COVID and the unit-linked tax changes. We have consistently doubled on all metrics, including new business premium, renewal premium, value of new business, embedded value, amongst others, across multiple blocks for four years. Being able to deliver a predictable performance predicated on sustainable business practices remains a hallmark of our way of conducting business. We believe that the recent changes, whether on taxation, business models, or regulations, are part of the growth pangs of the private life insurance sector that has only recently reached adulthood. The larger companies with strong corporate governance and disclosure standards are poised to fare better holistically on growth, profitability, business quality, as well as risk management. To conclude, our focus remains to provide a wide range of insurance products that cater to the diverse needs of our customers, thereby ensuring their financial security. Furthermore, we are dedicated to leveraging technology and digital advancements to create a smooth and convenient customer journey. We are optimistic about the growth prospects of the industry and are committed to driving a significant increase in insurance penetration in line with the regulator's visions. The detailed disclosures are on our, result is available in our investor presentation. We are happy to take questions now. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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. Before we take the first question, participants, you are requested to please limit your questions to two per participant. The first question is from the line of Suresh Ganapathy from Macquarie Group. Please go ahead. Yeah, sure. Thanks. Vibha, actually three questions I've got. First, can you say something about the contribution of this high-ticket policy? Just to understand this a bit better, your full year APE growth was 37% and your 4Q APE growth is 70%+. I mean, what is the contribution of high-ticket policies to the overall business done in 4Q? Can you tell in percentage terms greater than 5 lakh? Yeah. Hi, Suresh. I can give you some indication in terms of number. It's Yeah. Suresh, for the year it was in the region of about 12%-14% and for the quarter four it was in about 35% odd of the business would have come in that ticket size. That's the reason why we, you know, referenced the growth, actual growth and the normalized. Basically, you could take it as 27% actual growth and 16% normalized growth. The delta would basically be the impact of the budget. That's what we are saying. Ganapathy, for the normalized growth what? It's just confusing. Full year you ended at 37%, right? What are you normalizing it? Yeah. 27 is the full year actual. Okay. February we were at 16%, right? Okay. The budget impact was actually in the month of March, which is the incremental business. That's what we called out. Okay. Suresh, February had next to no impact. Most of the impact came from about the second week of March. There the delta works out to about INR 1,000 crores. Okay. INR 1,000 crores? Yeah. Okay. Okay, cool. Now, the other two questions I have got is, the fact that you ended, you had a 37% VNB growth for FY 2023 means there is a very strong base, Vibha and Niraj. On the backdrop of this strong base, can you deliver, I mean, I'm not putting a particular number in here, but can you deliver a strong VNB growth heading into FY 2024? We are very confident, Suresh, that we should be able to deliver growth that is in line with the APE growth while more or less holding margins. The only caveat is the investment that I talked about in the tech transformation. Even that I have articulated, which is, see overall it's about INR 250 crore of which we have spent INR 50 crore. INR 100 crore give or take would be the outlay. We should be able to deliver, you know, similar kind of margins except for this tech transformation. Okay. The last two questions. One is on the relationship with HDFC Bank. You know, you said 45%-47% is the contribution earlier, in earlier call, and that has come down from 50%. What is the target here? I mean, any conversations with Sashi that you have done that you can share, you can increase it to 60% or whatever it is. Can you give us some guidance on it? Finally, on the EOM guidelines, you know, how does this work? I mean, depending upon each player's competitive advantage, either in the product space or in the distribution space, there can be adverse effects, right? I mean, if I want to pay a banker more, I can pay more. If I want to push a particular non-par product, I can pay more, and push it and, you know, create an adverse effect in that particular channel because it gives you complete freedom and flexibility. Do you think that's the way it plays out or there will be fair competition in the entire market? Yeah. On the first point on percentage, you know, we don't track as a percentage of our overall composition because different channels can grow at a different rate. By targeting that, you know, bank assurance has to be this and HDFC, then you have to calibrate others. That's not how we look at it. Yes, the counter share at HDFC Bank, as HDFC Bank and Sashidha r have articulated is that, you know, as they are now our parents, to be, that should start inching up. Those are conversations that will fall in place because if you were to look at it's not just at HDFC Bank, but if you look at all the other new partnerships, we have been making very significant inroads even without them being our parents. It is in terms of do we have the best triangulation between products, between pricing, between the brand, between claim settlements. It's a package. If we are making inroads in other banks, then even here it's as a parent that should organically happen. Of course we'll be the best in terms of presence in the branches and so on. You should start seeing that trending upwards. But not tracking in terms of percentage of our business, but certainly percentage of the business that's being done by HDFC Bank. That is on that front. On the second one on this whole EOM, you see it all depends on, or how the regulator is looking at it is that to move towards a principle-based approach to sell more longer term products, and that's very well August. That's really how we've been selling. We were, and this is a aspect wherein we pride ourselves that we have one of the biggest share of longer term products. We also give some of this information. Not very onerous for us and also really depends on affordability. Different companies, and this is in the public domain, different companies have different levels of expense of management, so that determines affordability. 100 - the expense of management is the maximum that you can go to. At the same time, we hope that everyone triangulates in terms of distributor, what are the customer economics as well as regulators direction to bring costs down. you know, it's a 3-way triangulation which will evolve. For us, we have 300 partners and these conversations are going on, keeping this principle-based approach in mind. Okay, fine. Thanks, Vibha. Thank you. Thank you. The next question is from the line of Deepika Mundra from JP Morgan. Please go ahead. Yes, thank you. Thanks, Vibha. In terms of the margin guidance that you mentioned, looking at flattish next year, could you comment on in terms of the key drivers between the merger synergies, expenses, as well as product mix? Yeah, sure. I'll start off and hand it over to Niraj. The way we look at this is that the VNB certainly like I mentioned, will be driven by APE growth. Margins, there will be, you know, more and more margin extraction from some of the nuances on products, for example, on protection. I also mentioned the quarter-on-quarter trend. It's also there in our investor presentation. That will continue to go up. I also mentioned about Credit Life continuing to do well. That will continue to give us the upside. Also in terms of investments that we have made on a lot of partnerships, whether it is in AU Small Finance Bank and India Post Payments Bank and YES BANK and so on. As you know, we have to invest ahead in terms of manpower before the, you know, the revenue starts kicking in. We expect that also to happen. Also the acquisition of Exide Life in our Tier 2 and 3 locations. What I'm trying to say is that the costs have already been incurred and are being carried in our P&L and reflected in our margins. That is the exit margins in March. The upside should start coming in in terms of productivity increase. Niraj, do you want to add to that? No, you covered it. Right. Okay, great. Hope that answers your question, Deepika. Yeah, it does very much so. Thank you. Any co-comments on the potential for composite licenses, and how do you all think about the health offering in conjunction with, you know, HDFC ERGO, or would you like do it standalone? If you recall, out of all the committees that were formed, HDFC Life chaired the Development and Penetration Committee. In that report we did ask for composite. It's no surprise that that has come through. We ask a whole lot of other things like the genesis of Bima Sugam and to have a marketplace and also we talked about being allowed to distribute products, other financial services products, including other products that are regulated by IRDAI and other regulators. We're happy that this is hopefully seeing light of day wherein the bill gets passed and we're able to do this. In terms of, okay, if you're allowed to do this, there's the next step is the regulator needs to form regulations to be able to say, you know, what is it that they would like to see. Assuming that they are on board, to your last question, you know, we're not really interested in redistributing the pie. We want to grow the pie. When you triangulate that wherein 60%-70% is still out of pocket and the numbers are not even at 1% in terms of penetration, much lower than what it is in life insurance, I think we would be doing disservice by just redistributing the pie. Not really want to play just in the mediclaim space, but having a to juxtapose between life and a mediclaim. There are many layers. It could be in terms of riders, it could be in terms of, embedding, health solutions within a life product and so on. We do have a few ideas that are ready to press the button if you're allowed to, correct. At the very least, our ask has been, which was in the earlier committee, that at least allow us to distribute health, products if not to manufacture. Yes, that is admittedly not the best outcome, but at least that. All these options are open and worldwide health sits much closer with life. Underwriting becomes easier, understanding the person's health condition becomes easier, and so on. We'll wait and watch, but we certainly have our plan ready depending on any of these avatars that we're allowed to do. Okay. Thank you. That's very clear. Sure. Thank you, Deepika. Thank you. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead. Hi. Good evening. A couple of questions. First one is on, I mean, basically your back book surplus in the SNAC. I mean, if I were to adjust for the last year's excess mortality reserve, probably the back book surplus generation looks like 78%. I mean, typically much weaker than your typical trajectory. If you can provide some more color on that's my question one. Second question is more again, to just repeat perhaps your kind of a FY 2024 outlook that on this strong bumper base, do you expect your APE to grow in FY 2024? On the similar thing, the margin, I'm a bit confused because, I mean, of course you are seeing a positive trajectory for retail protection. You are going to see probably more granular growth as far as the non-par policies are concerned, and probably some synergy from your HDFC Life, thing, and also Exide Life, the base performance improving, going forward as well. Those synergies playing out. You are sort of, being guarded on margin guidance. They are my questions. Thank you. I'll start with the margin question, what you spoke about. What Vibha did mention is that there will be basically a couple of things here. One is in terms of on the product mix side, we said that there will be more longer term business that we would expect to get over the next year. We will look at the product mix beyond that. As we've said, in terms of protection for the quarter, we've had a significant growth around 40 odd percent, and we expect protection to continue to grow on a normalized basis as we go forward as well. Some of these things will obviously help in margin accretion. That will be balanced by the investments that we have made and will continue to make in building our distribution in terms of people on the ground, as well as in terms of the technology investments that Vibha spoke about. We started that, and we'll continue with that over the next couple of years. The idea really is to generate VNB growth out of APE growth. We did mention that we are fairly confident about delivering growth next year on a normalized basis as well. Our aspiration will be to continue to grow faster than the industry. All our VNB growth we expect to come from APE growth next year while maintaining margins in spite of all the investments that we will make. Of course, there will be adjustments that will happen as the year progresses in terms of how the market evolves. There was earlier question around EOM and the practices that may be followed across the industry. We'll have to look at all of that as well. All in all, we have talked about directionally how we would like to approach it, and that's how we are looking at margins for next year. As far as the question on EB surplus is concerned, even on a normalized basis, we are basically looking at adjusting for the COVID number that you talked about, 18%-20% EB surplus growth. That is something that we believe has been achieved and is something that we will expect to continue. No, my question was on back book surplus, that is on slide, that has gone from 30. That's on slide, 10. Sorry. Yeah. Yeah, yeah. That INR 34.9, if you normalize for excess mortality reserve for that COVID delta wave, it goes to INR 41.4, and from there, INR 44.2 is like some 7%-8% kind of a growth. That is a lot muted considering your past. I mean, of course, FY 2021, 2022 had some COVID impact. What is driving this sort of a slower than your trajectory of, you know, back book surplus in a sense? Is it Exide Life or is it something else? No, I think what you're doing is basically taking the full COVID impact into the EB surplus. That's not really the right way to look at it because there was a new business impact as well. You have to actually distribute the impact on new business as well as on existing business, certainly. If you back that down, that's the reason I mentioned the number. Yeah. To add to that, there will be some other impacts like we would have had assumption changes or some operating variance that would flow into the idea. Just completely excluding the COVID, impact would not be the right way to look at the ex- underwriting profits or the existing business profit emergence. Okay. Thank you. Thank you. you. The next question is from the line of Sanketh Godha from Avendus Spark. Please go ahead. Thank you for the opportunity. Vibha, just wanted to understand that the HDFC Bank, which will ultimately become 50% ownership, whether it will be a new fresh capital infusion or it will be a secondary market purchase. Just to understand if it's a fresh capital infusion the way HDFC Limited did in the early part of this year, then what kind of capital or solvency you would be looking at? The second, maybe after you answer that question, probably I have a couple of data points as well in the next. Yeah, sure. See, at this point in time, we haven't had concrete discussions with HDFC Bank. We will over the next few days. We don't require extra capital. As you know, we raised 2,000 crores. In all probability, it will be secondary. Okay, perfect. If I look at the unwind rate, probably it is lower compared to what it was last year, which you even guided at the start of the year at around 8%. Given the interest rates are trending a little higher, can we expect that your ROEV next year could be driven by the better unwind rate? Like we mentioned, in the first quarter, we have completed the unwind for the year based on the assets that we had and the cash flow pattern at the start of the year. For the coming year, that's FY 2024, we will do the same exercise, and based on the computation, we will let you know what the unwind rate will be in the first quarter. Yes, as you rightly said, as the interest rate curve has gone up, we expect the unwind rate to be higher, but it's not that it's going to be completely only influenced by the interest rate increase in the shorter end. Whereas the longer end, the interest rate has been fairly similar. Depending upon the composition of the cash flows that comprise the risk, the unwind rate will be influenced by the average of the movements. We'll definitely let you know the computation in the first quarter of the year. Got it. Last one, probably the, I mean, honestly, the 12% or 13% is of the entire year's business, which is high ticket, if entirely get disrupted. Assuming entirely get disrupted or you can't regain that business in FY 2024, then, your confidence of the APE growth is largely driven by the market share increase in HDFC Bank or somewhere additional business could come from other channels. Just I wanted to understand the thought process because, 10% disruption, I mean, 100 becoming 90 and 90, even if it grows by 20%, for the next year, then the growth what we are looking is 7%, 8%. In that sense, I'm asking you, what gives you a confidence that the APE growth could be driven even if that high ticket gets disrupted next year? Hi. This is Suresh. I mean, just to let you know, look, even till February before this spike came in March because of the budget changes, we were growing in the range of 15%-16%. Right. If you really look at the growth which has come in, has come across product segments and has come across different channels. Our proprietary channels which is agency and direct have been growing. A lot of our new banker partners and other banker partners other than HDFC Bank have also given us great support. You know, whether it's Yes Bank and Bandhan and IDFC, we have been tremendously supported in terms of growth from them, and we see that trend continuing as they expand. The third piece of course is the fact that, look, there are certain opportunities which we see in the smaller ticket, par and non-par also because, look, that will be a segment which will open up. The number of policies that we'll be able to gather from there should be fairly high. Lastly, most importantly, we do believe that now with HDFC Bank as parent, they will give us a fair amount of spike in terms of market share. We are working towards that in close coordination with them. While, you know, we will definitely, you know, like how we have done in the past, target to grow faster than industry. We're fairly confident of that. Whether we are confident whether it's a 10%-15%, I think like Vibha mentioned earlier, there have been four or five instances of disruption in the market. Across all those disruptions, you will find that, look, we have somehow managed to grow in the range of anywhere between 10%-15%. We are hoping that, you know, even in this case, we'll be able to replicate that. Copy. Just to add to that, you know, apart from, you know, on the distribution side that Suresh spoke about, on the product front itself, you know, this whole premise of 100 going to 90 and 90 being the starting position is something that, you know, we don't necessarily believe in. Because even after the budget changes and specifically more after, you know, the other announcements were, that were made around debt mutual funds, we believe that this product category still is incomparable. There is no product proposition that exists over this period of time. Mm-hmm. which gives this kind of a proposition even on a post-tax basis. You know, to, we don't really subscribe to this thought process of, you know, starting position being lower. Of course, the bump up that has happened, we have definitely, we are looking at normalizing that. The starting position in our mind will not be, you know, less than 100 from that perspective, and we'll aspire to grow from a normalized base. I want to add one more point to this. While there's a lot of talk on, you know, and focus on more than INR 5 lakh in budget, an important data point is that in the month of March, our below INR 5 lakh grew by close to 50%. It is not that there's no growth in that. Another data point is that unit- linked also when this INR two and a half lakh tax change happened, our composition of unit- linked is actually has gone up significantly. Rather than one would have expected it to have gone down. There is a fair bit of decoupling between tax being the reason, at least for our section of customers, and it actually translating into their buying behavior. Got it, Vibha. Thanks for the answer. That's it from my side. Hello. Thank you. The next question is from the line of Swarnabha Mukherjee from B&K Securities. Please go ahead. Good, good evening. Thank you for the opportunity. First question is on the cost structure. Given that, you know, the VNB walk that you have provided, given that we have had a very strong scale-up in FY 2023, despite that, I see that the VNB has a negative impact coming from fixed cost absorption. While I would have thought that, you know, because of the strong growth, there would be some amount of operating leverage actually playing out in the positive manner. I wanted to understand, you know, how to read this and what will be the proportion of, say, variable cost in this cost structure, which is resulting in this. Also, if we could look at it from the length of the AUM ratio glide path. You know, where are we? I mean, our AUM ratio I think is almost closer to 20% the number that you report. How should we look at it? Are we above the limits that, you know, the IRDA calculations, right, and how the glide path would be. This cost related, you know, be my first question. Secondly, in terms of persistency, I see that in the 61st month bracket, there is a drop in the persistency, whereas in all other cohorts you have improved the persistency. Just wanted to understand, is this related to some kind of persistency challenge in the ULIP book that has played out particularly, or anything else to read into that? Thank you. These are my two questions. I'll just quickly start with the second question on persistency 61st month that you're referring to. It's largely the impact of the merger. There were certain cohorts of business of the acquired business which was historically trading at lower persistency. While there has been improvement across, you know, the business that has happened over the last few years in Exide Life, the business that was written six or seven years back did indeed have poorer persistency. That is something that is getting addressed, that was basically the impact that you saw. If you look at whether it's category-wise in terms of product segment or in terms of ticket size, persistency across the board has been improving over the past few years, we expect that trend to continue as we go forward as well. To your question on the VNB trajectory, there has been clearly some operating leverage that we saw in Q4 because of the volume pickup. Some of that got neutralized by the investments that we have made and continue to make in on the people front as well as on the technology front that we spoke about. This also does carry the impact of the Exide Life business, which was at operating at a particular scale. While some of the synergies have been realized in this period and the cost of acquisition or the cost of writing business has come down from over 100% to 70% or 75%, we expect that to go down even further in the going forward as well. Got it. Just a follow-up, on the, on the, this answer. The INR 100 crore investment that we plan to make this year, how much headroom does it leave us to, you know, push in some kind of, you know, favorable terms in terms of commissioning reuse in certain products? Do we have a lot of headroom given that we would also have to have a glide path for EOM, directionally which should be lower? I didn't understand your question. Are you saying that whether we can afford the INR 100 crores within EOM? Yes, very comfortably we can because we do have a fair bit of headroom on and have had for the last several years. We have been one of the few companies that have been compliant both at the company level as well as at a segment level. no issue at all on that front. Yeah, sure. Very clear, ma'am. Thank you. Thanks. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, you are requested to please limit your questions to one question per participant. The next question is from the line of Madhukar Ladha from Nuvama Wealth. Please go ahead. Hi, good evening. Thank you for taking my questions. First, you know, I missed out a little bit in the beginning. When you say the growth in this quarter was what 16% was normalized and 11% was the high ticket size tax impact, right? Are these numbers on what basis these numbers are for the full year or for the quarter? Because for the full year, the individual APE has grown about 39% year-over-year. You know, for the quarter it's at about 75%, right? I didn't quite follow these numbers. Madhukar- Yeah. You need to take Exide Life into the base. The growth is 27%. What we explained right at the beginning of the call is that if you were to look at where we were trending, which is YTD Feb, we were trending about 15%, 16%. If you back out from 27%, you back out 15%, 16%, that could be attributed, which comes to about 1,000 crores is what we said is the March effect. Okay. Got it. Got it. I missed the Exide Life part of it in the earlier part of the call. Sorry about that. The other thing also about this Project Inspire, what exactly are you trying to do over here? It is a holistic transformation of everything from having a 360 degree view of the customer, and looking at, you know, various capabilities. For example, looking at our application architecture, the IT governance model, our cloud strategy, especially on the roadmap on the cloud strategy, why we'd embarked upon it, suitability in terms of which of our IT assets, the tech assets, how much would be on-prem, how much would be on cloud, to look at our overall architecture. You know, typically we would have the core policy admin system every life insurer, whether in India or abroad would have that, and then you have a middleware. That does reduce our speed to market, both in terms of customer propositions, partner integration, new products, and so on. Apart from having a single view of the customer that I mentioned, the 360-degree view, and not only of the customer, but we would like to have a 360-degree view of the family as well, with a lot of adjacencies that we can triangulate, as well as having a data strategy at the core of it. It's a not only tech, but tech plus data. We already have a data labs in Bangalore. How do we use data also enriched by what IIB is trying to do, Bima Sugam will hopefully happen. Triangulating that, how can we reduce the pain that a customer goes through in terms of underwriting? How can we give pre-approved sum assured? How can we have customer nudges? How can we triangulate wherein exactly like you have when we start watching a movie on one device, and then end up on a handheld device when you're traveling. Similarly, how can we have a customer conversation on sales or servicing on one platform and end up seamlessly on another platform? And many things like that. When the time is right, we do intend to have, and we haven't had one for some time, we do intend to have a tech day, wherein we would like to showcase to all of you in terms of the inroads that we have made towards, in this journey. Understood. One final question. You know, you also mentioned that you saw growth about 50% year over year in the less than 5 lakh rupee category as well. You know, are you worried or what are your thoughts on how much pre-buying has sort of happened so that people keep their 5 lakh rupees limits available for FY 2024 and beyond? I- Could that sort of dampen sales a little bit in FY 2024? Yeah. I just want to put out very, very categorically. I don't believe, Neeraj mentioned this, but I just want to mention this again, Suresh mentioned this as well. I have no doubt in my mind about the prospects of life insurance, that has nothing to do with the here and now tax or no tax. Because now there is parity, which is rightly so between similar kinds of products, right? With that, Neeraj also alluded to even if I exclude life cover thrown in, our IRRs are better, the product proposition, that's the most important in terms of there's no other product that gives long-term assurance of return. I think we're somewhere minimizing it and narrowing it down to an IRR conversation that an HNI will want. I think that cannot be further away from truth. Another part is that a lot of HNI, whether fortunately or unfortunately, have very low tax rates. Tax is often not the driver for it. The fact that you get non, no ambiguity in terms of what am I gonna get 20 years from now, no other product can give that. That doesn't change. That's what gives us the confidence that we go back to basics in terms of engaging with the customer and explaining some of the nuances and to say that, okay, if unfortunately something were to happen to you know, your dependents will get this no matter whether a person is there or not. Suresh, would you like to add? I think Vibha covered it. You know, one is not the issue in terms of whether pre-buying has happened. I think the fact that now almost everybody who is less than 5 lakhs, you know, in terms of the number of unique lives that we can cover can see this as a product that they can buy because there's a very strong value proposition below 5 lakhs in any case, right? It's not that that has gone away below 5 lakhs. The number of customers who may want to look at this almost like an ATC, even from a tax perspective, is almost similar to that to say that, "Look, why don't I invest at least INR 5 lakhs into it and we should be able to broad base." This is really in line with the vision to say, look, the smaller ticket size everybody should have, insurance in India. We should be now able to maybe drive multiple policies because the product proposition remains very, very strong. The last point I wanna make is that, in the overall objective of going back to basics, HDFC Life has been a middle class to upper middle class to affordable segment focused insurer, right? Somewhere we were getting pulled into as the market was pulling us into the high net worth segment. It is in a way playing to our strength to come back to the core of what we are comfortable with, wherein the levels of underwriting, especially on mortality, because it's not difficult to say I won't ask any questions. I'll ask very few questions. I will keep this on my books. You, you know, you just have to triangulate with a lot of public information that is available of a lot of insurers that have kept more and more, retained more and more on their books. Now, some of this, there's no reason to believe why that retention at high ticket sizes is okay, and is going to pan out the way it is going to pan out. limited point is, you know, we are now playing to the strengths of HDFC Life, and that's what gives us also the comfort and the confidence that the growth is unaffected. Great. Got it. All the best, Vibha. Thank you. Thank you. The next question is from the line of Nidhesh from Investec. Please go ahead. Thanks for the opportunity. Two questions. First, on the protection, the growth that we have seen in this quarter, is it any channel specific or are we seeing broad-based growth? If you can comment how the growth we have seen in the agency, on a agency side, specifically on the protection. Secondly, if you can share the mix of APE which is coming from more than 5 lakh category because I remember that when the budget announcement came at that point in time, we have shared that such policies contribute around 10%-12% of our PV business and I believe in Q4 that share of business would have gone up quite significantly from those policies. What is the share for the full year from 5 lakh + policies in our APE? The growth, if you were to look at almost all channels have done fairly well, but one noteworthy aspect that is showing very good traction is our bancassurance channel. Also on the back of some of the product launches that we've had. Another noteworthy aspect is that other than the top 10 cities, we are beginning to see traction in the protection space. This absolutely, we're delighted by that kind of a traction that we're seeing. Of course, somewhat early days because we're talking about a quarter, but that's that is quite noticeable. Also if you were to look at HDFC Bank itself, the branch activation on protection, and this is there on slide 15, that has increased by 50% year-on-year. That focus will only increase. We've had multiple conversations with HDFC Bank to say that this is an opportunity, it's a question of focus. There are solutions such as the return of premium and so on to give lighter touch underwriting. All of that has come through and worked well. Also to summarize, all channels have done well, but noteworthy is what we see in bancassurance. Sorry, your second question, I- What is the share of high ticket, more than INR 5 lakh policies for full year? We remember that the last time when you shared the data that the number was around 10%-12%. Given that we have seen very sharp growth in Q4, that number would have been quite high in my view. What is the number for the full year? Yes. It remains, see until February it was 10%-12%. For the month of March, Niraj has given the number. It's about a third for the month of March, Niraj. When we are talking about normalized base, should we co-remove the entire number from FY 2023 APE or should we just remove INR 1,000 crores of delta that we have seen in March QDP? Yeah, Nidhesh, that's what we should do because honestly lot of it is conjecture in terms of what will happen to greater than five, less than five and all that, and we'd all have points of view on that. What is data is what was the growth YTD February, which was normalized growth and what is happened in March. You just back that out and you take a 15%, 16% as the normalized growth for the year. That's what we would have actually achieved had it not been for the budget. That's what we are working with. The various segments within that I guess will anyway evolve as the business progresses going forward. Sure. Basically we are guiding that, on the INR 12,300 crore of AP, we expect positive growth next year. Yes, absolutely. Okay. Thank you. Thank you. That's it from my side. Thank you. Thank you. Ladies and gentlemen, we request you to kindly restrict your questions to one question per participant. The next question is from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead. Yeah, thanks for taking my question. Two questions actually. You know, if I look at the increase in existing business surplus, is a part of it kind of contributed because of the merger as well? No, Nischint. Actually, if you just look at the standalone business which we now don't track, there isn't any significant accretion to the PAT or EB surplus coming from that business because of the cost at which the business is getting done. Like I just mentioned that, at the time of acquisition, the cost was over 100%. We've brought it down significantly below that, so there isn't any significant EB surplus generation from that business yet. Sure. Any specific drivers that you could call out for this growth? I, you know, our product mix has been changing quite significantly over the years and it is taking longer for profits to emerge. If you recall, we started on this non-par as well as some of the new par products last about four, five years ago, and that has increased in its intensity. It has taken about four to five years for those profits to emerge as against more of a unit- linked strategy or even a par strategy which will emerge sooner in over the two, three year kind of a time horizon. You want to add anything, Suresh? Yeah. Just to add to that, unlike the earlier product mix where unit- linked profits could be mostly coming in the first five years or not much later on, the contracts that we are writing now are more longer term in nature, and we'll continue to get the profits over a period of 25, 30 years. Which means that after say five, 10 years the surplus emergence or the growth will be much higher. Because in the transition period of the last five years business getting replaced, the emergence or the growth looks lower. Perfect. Got it. Just one more question is about the new business, sorry, about the business that you're looking at from the new branches of HDFC Bank. You know, you somewhere mentioned that the persistency outcomes and the mortality outcomes could be different. Does it mean that margins in those branches would be a little lower? No. Overall looking, it's a portfolio approach. We don't really see it that way wherein overall it's an overall approach and it will be subsumed within the company level margin. Yeah. Listen, just to, you know, add to what Vibha mentioned. The good thing is we've been tracking our persistency across geographies, customer segments, and there has been an improvement across the board. That's the reason why we're very confident about getting into Tier 2, Tier 3, you know, with very good experience now compared to what we would have done probably three to five years back. What we basically are saying is that, can we expect Tier 1 kind of persistency in a Tier 3 market? Maybe not. Will our Tier 3 persistency keep improving from where it is today? Answer is yes. All of this would be priced into our products and we will ensure that this is factored into our assumption setting as well. Perfect. Got it. Thank you very much, and all the best. Thank you. Thank you. The next question is from the line of Akshen Thakkar from Fidelity. Please go ahead. Yeah. Most of my questions have been answered, but just going back to the point on growth on sort of 27 and 15, that's largely towards retail APE, right? It's the group business shouldn't get impacted by that much. That's right. Yes. Okay. All right. broadly, just assume INR 1,000 crores of excess APE and then think about growth. The way you're thinking about it is on a normalized base, you see industry-leading growth, INR 1,000 crores, maybe INR 12. That's right. Yeah. Okay. Great. Thanks. I'll fall back in queue if I have other questions. Thanks. thanks, Akshen. Thank you. The next question is from the line of Supratim Datta from Ambit Capital. Please go ahead. Thanks for the opportunity. Two questions here. One, on the annuity side, it looks like the growth in the 4th quarter slowed. Is there any particular reason for that? Number two would be, do you see a scope for this 5 lakh threshold that you have currently been given also being taken away going forward? Based on that, what kind of, you know, product innovations are you looking at? That would be questions. Thank you. Yeah. On the annuity front, so we held our market share and continued to be robust even in quarter four. It was overall, it was an industry thing in terms of, and also, you know, what are the government employees and is there some deferment or is there, you know, lesser in terms of the, you know, the funds that are flowing into annuity. Sometimes the release is not done by the public sector undertaking. A myriad of issues like that. You wanna add anything to that? No, I think frankly, the idea was also to maximize on the opportunity. The March numbers are almost like a full year number of what normally happens across some of the others. You know, the volume, the channel, everything was devoted to this. We ensured that we didn't slow down on annuity. We continued to maintain our market share as such. Like Vibha mentioned, some of the group annuity numbers depends on, you know, a lot of other factors on the ground in terms of how many people are coming in. Really the channel in the field were quite swamped with the kind of budget related, you know, business which flowed into us thanks to the brand as well as the product. In fact, you know, our annuity business in FY 2023 grew by almost 18% on received premium basis compared to maybe a 2% growth for the industry. You know, you can see that we focus on annuity like how we've been saying, continues to be there. Okay. On the second question. Sorry, can you just repeat that question? Yeah. What I was saying is that, you know, now you have been given a INR 5 lakh threshold, but you know, a similar threshold has not been given to either debt MFs or fixed deposits. Should the government take that away, you know, what would your strategy be? Have you started strategizing for a similar event or not? Yes, absolutely. It goes back to what I mentioned that we have no doubt in our mind that the whole concept of reinvestment risk is very well understood. See, if this had happened just when we had launched Sanchay Plus and nobody else was in the industry was selling Sanchay Plus then, you know, people would not have appreciated what reinvestment risk does and long-term assurance of returns. Now that, almost, you know, every player in the amongst our peer set is selling some avatars of this product, a category has been born, over the last two, three years, and there's a pull, for this product and it is well understood versus the nuances of, a fixed deposit or a debt mutual fund. We believe that if you go back to the basics of asset allocation, if a person has, say, 50 lakh INR, maybe there could be 30 lakh INR into a Sanchay Plus kind of a product and 20 lakh INR or 10 lakh INR into other forms of which will give him more liquidity that could happen. It's not gonna go down to zero. That's what gives us the confidence that I mean, the 5 lakh INR going away will be somewhat of an unfortunate outcome because of the fact that people do need to save longer term and something that they don't dip into at the shortest or the first emergency or first discretionary spending, that is very important. Yes, we do believe that it goes back to the fundamentals of what this product has to offer, and that's not gonna change. Sorry, and last point is, the math very clearly shows that, you know, the post-tax IRR is more attractive, you know, versus any other product that is there. Also today people buy annuity. Just now we talked about and you raised a valid point about annuity and that we are market leaders via Miles. Annuity is taxed and that is something that is factored in by people. It doesn't deter people from buying annuity. These are not only people who are buying annuity because they, that's the feature, but also people buy annuity in open market. Longevity risk is very well understood, and that's only going to increase as people, you know, the, our population shifts more and more towards 50 and above. Got it. Thank you. Thank you. Thank you. The next question is from the line of Parag Thakkar from Anvil Wealth. Please go ahead. Mr. Parag Thakkar, your line has been unmuted. You may go ahead with your question. Yeah. First of all, congratulations for the entire team and HDFC Group that you got this relaxation and due to which HDFC Bank will be able to increase stake. Definitely with skin in the game, I can also understand that now every branch and the entire machinery of HDFC Bank will be more willing to sell HDFC Life products. The one another trend which I'm saying is that again, in order to mobilize more and more deposits, including HDFC Bank which is taking the lead from the front, because of merger with HDFC Limited, many other banks are also opening branches in Tier 2, Tier 3, Tier 4 cities. I would say that, whether HDFC Life is very focused on developing products for this, Tier 2, Tier 3, Tier four cities, where HDFC Bank is now going to open branch or any other banks are also going to open branch, to attract those customers also where the ticket sizes might be small and the insurance penetration might be negligible. Absolutely. Thanks for the question. I think, like, you know, we just discussed in terms of our progression to Tier 2, Tier 3 in terms of quality of business. That gives us the confidence that as we broad base our customer base in these branches that you're talking about across, you know, not just HDFC Bank, but other new partnerships that we have like AU Small Finance Bank and some of the other larger banks which are also increasing presence in Tier 2, Tier 3. Also our variable agency business, which is primarily in Tier 2, Tier 3 markets. We are very confident of being able to not just distribute and get growth out of that, but get growth with quality and maintaining our profitability. In terms of product constructs, definitely what we have to address is in terms of recognizing that the kind of documentation that's probably available in Tier 1, Tier 2 may not be available in Tier 3. We are looking at a lot of solutions around that as well. The lot of information is now available across third party databases which we are able to leverage. Lower ticket sizes, typically the kind of underwriting from a medical perspective that's required is a lot limited. We are already in arrangements and discussions with our reinsurers to be able to participate in this kind of an opportunity and the reinsurers are fairly enthusiastic about it. All of this put together gives us a lot of confidence in our ability to not just create products and, you know, reach out to these customers, but do that business at scale and on a sustainable basis. Yeah. Basically if we put all this together, the banks are opening branches in Tier 2, Tier 3 towns where insurance penetration is not there. Looking at this, if you just leave aside FY 2024, where you have a disadvantage of FY 2023's very high base because of this budget thing. What is the overall expectation of growth over the next three to four years, considering the under-penetration of insurance and considering the fact that now banks are opening branches everywhere, because in order to mobilize deposits? No, you're absolutely right, Suresh. you know, I think look our whole strategy of ensuring that we reach to every segment in every part of the country, we've been working on this for the past several years. it's, you know, of course we have the advantage of HDFC Bank, which now has increased their branch network to 7,800. They added some 638 branch even during the last quarter, right? Yes. The whole year for INR 1,479. If you really look at it, you know, whether it's Bandhan in the east, whether it's CSB, SIB, Ujjivan, Equitas, whether it's Capital Small Finance Bank, whether it's Utkarsh, whether it's AU Small Finance Bank, a lot of them have very, very strong regional presence and we've been actually getting extremely good support like I mentioned earlier to all of them. Clearly, you know, if we have to work with them to sync our strategy in terms of their growth plan on deposits, you know, we will find our growth and our product strategy also syncing with what they are doing. Of course, we've had the added advantage of now getting the entire Exide Life and if you remember the entire proposition of looking at the acquisition of Exide Life was to look at the south market, which was a little weak for us, as well as the Tier 2, Tier 3. There's a lot of learning which has come in terms of their product and the way that they go about, whether it's in terms of venue marketing, whether it's in terms of the agency model that they have, we plan to now scale that up and take it across. Thirdly, more importantly, I think being pioneers in technology, we've had a fairly strong presence in a lot of ecosystem partners. You know now with multiple things happening in terms of the India Stack, in terms of 5G, in terms of mobile penetration, in terms of how we've been working in the past, we do believe that this is again an opportunity in terms of increasing the NOPs as well as our penetration into the Tier 2, Tier 3 markets. Clearly this year we will focus in terms of how do we expand in some of these markets. Of course the regulator is also, you know, looking at some of the other initiatives like Bima Vistaar, which will go through Bima Wahak. You know these are great initiatives to be able to take market beyond even the Tier 2, Tier 3. Great. Great. Congratulations. This HDFC Bank increasing stakeSo is HDFC Life does not need capital, so mostly it will happen through secondary route, right? Standard Life, because generally Standard Life we have seen that they have been selling stakes in the past. What is the stance over there? You're right. In all probability it'll be secondary because we don't need capital. You're also right that Aberdeen has been a seller, and there's a last bit that is there of 1.66% more because, you know, it's, whatever, you know, it is part of the promoter group and so on. These are all conversations between HDFC Bank, and who they wanna buy the stakes from. I guess that, that should materialize in the next month or so. Okay. Great. Great. Thanks a lot. All the best. Thank you. Thank you. The next question is from the line of Dipanjan Ghosh from Citi. Please go ahead. Hi. Good evening. This is two or three data keeping questions. If you can provide your rider attachment rates. Second, some color on the Credit Life growth, maybe across your channel partners, maybe segregate it across some of the channel partners out there on the MFI side. Lastly, on the annuity margins, we are seeing the market leader take multiple rate hikes, so how are the margins shaping up across that particular business segment without taking into consideration the mix change within annuities? Yeah, on rider, we are growing. Not really giving out specifics of that, but the focus continues to be there at every product that we can attach and so on at every channel level. There are pushes and pulls, but that has grown fairly well, both in terms of individual and group riders. Your second question was in terms of MFIs. MFIs. Uh, on, on- Sorry. Oh, sorry. On the Credit Life business across channels and MFIs. Yeah. Credit Life we are very, very happy, you know, over the years in terms of how well distributed it is. The reason why we are happy is that many possible business disruptions or one kind of a sector goes up or down, or one kind of a line of business is unattractive, mortgage is unattractive for something or it is attractive for something else, LAP is, you know. It's about one third, one third, one third. About MFIs is about a third, and HDFC is about less than a third, and balance is whole host of marquee banks and NBFCs. That's how it is. Similarly we are very well spread across the lines of businesses there. Sure. Maybe the last part on the annuity margins and how for the industry that is shaping up. Very robust. You know, I was a bit surprised on, I thought we were the market leaders on, you know, annuities in the private sector, but maybe you're referring to. No, I was talking to PSU player out there. Right. Okay. The annuity market has been developing, you know, quite well. What we are really seeing is a fairly calibrated approach from all the players who are participating in this, primarily the three or four large players who are writing this business. If you were to track in terms of how the market is behaving, you'll find fairly frequent repricing that is happening in the marketplace as a consequence of any changes in the interest rate environment. That's something that we expect to continue to see given that this is a long-term risk management product. We will be in a position to manage our spreads and maintain higher than company level profitability in the annuity business as we go forward because of the market conduct that we've seen over the past many years since this product category has expanded. Across the whole business, there are multiple sources from which this business really comes, whether it's, you know, what Vibha mentioned in terms of discretionary savings, that as a segment has been growing in the annuity business. As our NPS business becomes larger, that is also contributing fairly well to this category of business. In terms of, we did discuss in terms of some of the regulatory changes that have happened more recently in terms of UN. We do expect that pension category as a product will also get revived very shortly. When that happens, that will also become a feeder to the annuity business as it was still a few years back. Sure. Sure. Thanks and all the best. Thank you. Thank you. We have the next question from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead. Yeah. Hi, yeah. Thanks for the opportunity. Vi like, one question around how easy do you think it will be to redesign the KRA and change the overall strategy focusing on the annuity so as to limit the impact of budgetary changes? Also if you can provide as to how the April has trended so far to suggest that the impact of new tax law is minimal? On the first one, you know, it's going back. If you look at three to four years previously, we were exactly doing this, wherein we were selling to more and more customers. We were selling a lot more to, like I said, middle class, upper middle class kind of customers, as well as solving for how do we broad-base growth. It's going back to that. It plays to our strengths again, because the DNA. I think it's a question of maybe a quarter or so, if at all. This was coming and really I, you know, one point I wanna make is that even if the budget had not come, this is exactly what we would have done. This is something that my management team is very aware of, that our focus has been to go back to basics about Number of Policies. That broad basing and getting more and more customers was equally important. This is not really a budget-led recalibration of KRI sheets, and that gives me a fair bit of confidence. As regards April, et cetera, this is a forward-looking statement, and that's something that we will give you an indication when we come to our June numbers. Okay, sure. One, more question as to how do you see the HDFC Bank counter share now moving over coming years? All right. Yeah. Look, I think obviously, the overall strategy, once they become the parent, they will see it more closely, and we expect a huge amount of support in terms of, you know, how HDFC Life is. It's not that we don't have that support right now, but I think the way we are looking at it is in any of the business that we do, we have always looked at the right balance between the quality of the business as well as the risk that we take. Given, you know, the relationship that we have at all levels across the bank and their comfort with HDFC Life brand, we do see the more counter share moving up. In various forums, we've had the senior management of both the entities saying that, "Look, we will inch it back up to the 70% mark," and I don't see any reason why we shouldn't be heading there. Obviously, it is open architecture, and HDFC Bank has very clearly stated that they would want to remain in the open architecture mode. We will have to be competitive, whether it's in terms of product or whether it's in terms of servicing or whether... Those actions clearly are, you know, planned for us, but you will see a sequential quarter-on-quarter growth in terms of our market share, and we are working very closely with the team there to see how we can take this up. Yeah. Sure. Thank you. This was very helpful. Thanks a lot. Thank you. We have the next participant in queue, Ms. Pallavi Deshpande from Sameeksha Capital with the next question. Please go ahead. Yes, sir. Thank you for taking my question. I wanted to know what would be the share of ROP in the product mix and any expected hardening on the reinsurance side. ROP overall would be about 20 odd% of the business. It has gradually expanded over the last couple of years. We started in single digits a couple of years back, and now it has caught on as we go deeper into Tier 2, Tier 3 markets, and also in terms of the Exide Life business, which was, you know, catering to this segment. We are around 20 odd% at this point in time. On the reinsurance front, I think, it's been a fair bit of the conversations that we've had with them in terms of how they are looking at the marketplace now. While, two of the reinsurers are, you know, fairly active now. I did mention some time back in terms of they are fairly excited about now getting back to the growth mode, you know, given the situation that was, you know, in terms of from a funding perspective, there was a bit of defensiveness, of course, at that point in time, but all of that is now, you know, gone. It clearly is in terms of ensuring that we are back to growth in this segment. There is a lot of excitement around the protection growth coming back, and there is a fair bit of enthusiasm among the reinsurers on that front as well in terms of taking on new risks, new segments, as well as deepening the current business. The good bit here is that some of the practices have been put in place which will safeguard the interests of the customer as well as the insurers and the reinsurers. We expect that to continue. Pricing will continue to reflect the changing risk environment. As you go deeper into Tier 2, Tier 3 markets, the mortality experience is likely to be different, and that will get priced in as appropriate. Gotcha. Lastly, on the banker channel, which you mentioned HDFC Bank there, which would it be, you know, which out of the products, would be the more focused ones out there? We are having a balanced product mix at HDFC Bank, that will continue. Really, it's all the products that we have. The only nuance there, which I alluded to one of the earlier callers, is that we are also having a SURU focused strategy, which is the semi-urban and rural and the non non-top 10 cities, branches in the non non-top 10 cities. There we have seen a fair bit of traction for us in both protection as well as some of the easier underwriting underwritten products. That will continue. Sorry. If I can also add, I think, look, really the way we are looking at our product mix also is in terms of the overall opportunity on the product penetration at every branch level. You know, we understand at a specified person level or RFLS level map, what is the opportunity in terms of being able to be par active, non-par active, term active. While, you know, Vibha mentioned that we always drive a balanced product mix, our objective would be to make sure that we totally penetrate in terms of the customer base on whether it's the OMO annuity opportunity, whether it's in terms of the par opportunity less than INR 5 lakhs, as well as the term. Even in certain markets, we'll sell ROP in certain markets. Somehow across all the channels and the segments, we should be able to get to the right product mix with the right quality. Right, sir. Thank you so much. Thank you. Ladies and gentlemen, we will now take the last two questions. The first from the line of Viraj Shah from Axis Capital. Please go ahead. Hello, am I audible? Yes, you are audible, sir. Go ahead. The first thing that I wanted to understand is that with the merger going through, the kind of branch addition that is expected to be done in the next two years would be about 1,200 to 1,500. I wanted to understand what could this take the bank assurance contribution to in the overall distribution pie, and what kind of impact could it have on the expenses itself, distribution expenses itself? Could they significantly come down with the addition of the branches and the bank assurance network going up? The second question was there have been various reports about some GST and income tax notices being sent to the company. Is there any ask in terms of what could be the amount, what are the charges, and what could be an impact of this on the company? Yes. Let me answer the first thing about the branch expansion and what will be the bank assurance contribution. Really, we don't look at that way. I think we were answering one of the earlier questions. It's not to say that, look, what we don't target by contribution. Yes, obviously, bank assurance will go up because the branches are expanding, and it's not just at HDFC Bank. I think all our partners, there are like 300 partners, 28 partners on the scheduled bank side where, you know, where we'll be expanding and we can see that growing. Similarly, the investment in terms of how we are looking at growing the agency business or where we have a broking partner or where we have large other direct relationships, I think that will also continue to grow. You know, the way we look at it, each of our channels in some sense are regular business lines, and each of them is headed by almost a channel CEO who's looking at end-to-end growth, profitability and quality of business. Yes, we do believe if bank assurance grows and we gain share in HDFC Bank and they expand, maybe the HDFC Bank contribution will go up. Really the idea would be to ensure that we have a diversified distribution mix as well as grow each of the other channels. Obviously the cost structures will also be accordingly in terms of, you know, if you can get scale and you can get volumes. I think we have demonstrated that in the past also in terms of how this branch expansion and what kind of and we have amongst the best in class productivity across most of our banker partners. On the GST, I'll just hand it over to Niraj. Yes, on the GST front, as we are aware, this is an industry-wide issue. While there has been a request for information to be provided around, the, deductions that have been availed of on the input tax credit, we've been cooperating with the authorities and giving them all the requested information, and we await to hear from them in terms of a formal, you know, show-cause notice and future course of acion we will obviously determine based on what we hear from them. As of now, we are not in receipt of any such communication from the authorities. Thank you. The next question is from the line of Neeraj Toshniwal from UBS India. Please go ahead. Yeah, hi. First question is on the product level margin. If I look at the product mix, it has moved significantly towards higher margin products. In terms of margin outcome, you know, the respective is the same. Any gaps here or we would see it is largely because of the investments we are doing into it, or there has been some deal sweetness because of the higher premiums coming in, because of higher competition in the last 15 days? How to think about it? If you're talking about the waterfall of margins, is that what you're referring to? Yeah, that is one question. Waterfall of margin is obviously, you can see, the result that new business profile have been, you know, the things has gone down significantly from what was there in nine months. Yeah, we wanted to understand any change or drop in any product level margin you have seen? Product level margin. No. See, actually that's a very good point because when there is intense competition that you see even in, you saw that even in the month of March in terms of giving very aggressive and rates on non-par, we stayed away from doing that and that just means preservation of product level margins. You'll find the same thing, especially on aggregator platforms. We are rarely the cheapest because, you know, there is the pricing becomes extremely thin, especially if even one or two lives are worse off than what you have factored in. It's a very calibrated approach and there's been no drop in product level margins. I mean, when you compare, say March versus before March, or quarter four versus before quarter four, there's nothing that is at product level. Got it. what kind of margin over the next two, three years? Next year obviously you told that it will be somewhat flattish, but over the next two, three years, where do we aspire to kind of, you know, reach in terms of margin profiling? See, over a period of time as, you know, the synergies between HDFC Bank and us as its subsidiary starts coming through, then you would see some level of margin expansion. Also we, you know, there are some optionalities that we talked about that are there in the insurance bill, whether it is in terms of being allowed to do some part of health, whether health riders, whether it is in terms of being able to distribute other financial products. There are a lot of optionalities that are out there are GIFT City because we're talking about next two to three years. Apart from our base, which should not change, we will be able to layer it and be first mover in many things that we already are. That will start showing some margin uptick, once this year, which has two moving parts settled down, then we should get back onto the upward movement on margins. Why I'm asking this particularly is because in, at one point we were the leaders in margins in terms of, you know, compared to peers. I think everybody has reduced or, you know, passed that hurdle. Wanted to know what are different are we because we have the best products and still, you know, somewhat, you know, margin-wise, we are probably not at the best in terms of the product level. Wanted to know when we are getting back to that, because obviously that will be an outcome which will be driven by a lot of factors. Yeah. A couple of points here. When you say that, we are not the best in margins, I think one thing is that we need to look at are we holding market share? If you look at HDFC Life, we are holding market share as well as growing market share and holding our positioning. We are amongst the top three life insurers by in any which way that you cut it, in terms of new business and renewal premium, and that continues. Without if we were to give up one or two positions, then the margins can be much higher. The one is that triangulation between top line, margins, VNB growth, EVOP. All of that is a holistic scorecard. That is number one. Number two is that if you look at the consistency of margins, because if you take one particular cut, you know, then one can say that, okay, in this period you have not grown in terms of margin, but if you look at the four-year period, and that's why we've put out our charts in our investor presentation, that if you look at any four-year period, we have doubled in all parameters, right? I don't. You would agree that that is not an easy ask and we will continue to do that. Even way forward over the next four years we will continue to double. Whether it is embedded value, assets under management, value of new business and so on. That kind of a trajectory, we have time and again showed over many cohorts of four years and not just one cohort of four years, and we'll continue to do that. Margins will go up over time in a nutshell. Got it. Second question, if I may chip in, is on the HDFC Bank. Sorry, last point I wanna make on margins is that very little in terms of headwinds because see, open architecture, there are companies wherein the banks have not opened up to open architecture. It's more in terms of is that the right approach and do customers really need a choice? Down the line, if customers don't have a choice, in this world, then in all probability, the younger ones at least are gonna wander into other ecosystems, whether it is into an aggregator platform, whether it is into, some other kind of digital platform, and perhaps at least explore and eventually buy. Information asymmetry cannot contain as a way of life, and so those headwinds down the line, do exist, which is not the case in HDFC Life. That was actually my second question. In terms of HDFC Bank, will you get support in terms of market benchmark rates also because now becomes the parent, instead of, you know, second cousin we had earlier and the timeline for the 70% wallet share, I think we are at 50.58%. How much timeline we kind of, you know, have pegged in within to reach that target 70% mark? I couldn't really understand your, I couldn't hear you very well on the first part. I think what you're saying is that. The question was basically in terms of the timeline on when we'll be hitting 70% market share. Yeah. I think, look, once the entire merger is through, and I'm sure the bank will be equally busy with the merger, yeah, already once you become a subsidiary and, you know, we have those discussions, we will want to inch it up quarter on quarter. Now how fast, frankly we'll be able to get to the 70% mark is in terms of the broad direction which comes in from the bank, as well as probably the hard work that we need to put in from HDFC Life. We do see this happening. Difficult to put a timeline to it, yeah, as early as possible given the efforts on both sides. Got it. First question on, first part was on the cost side. Will we get support on the on the commissions market benchmark rate or we'll continue what we are paying currently? Look, right now we're just focused on how do we work more closely with HDFC Bank and other conversations will follow because the merger announcement or the 50% stake has just come in. The ink is still not dried and I'm sure over the period, over the next few months, we will have those kind of conversations. Got it. Thank you. Thank you so much, and all the best. Thank you. Thank you. I would now like to hand the conference over to Ms. Vibha Padalkar for closing comments. Over to you, ma'am. Thank you all for joining us on the call today. Please feel free to reach out to our IR team if you require further information or have any follow-up queries. We look forward to speaking with you again. Thank you and good night. Thank you. On behalf of HDFC Life, that concludes this conference. Thank you for joining us. You may now disconnect your lines.