HDFC Life Insurance Company Ltd (NSE: HDFCLIFE) Q1 FY23 Earnings Concall dated Jul. 19, 2022
Corporate Participants:
Vibha Padalkar — Managing Director & Chief Executive Officer
Srinivasan Parthasarathy — Chief Actuary
Niraj Shah — Chief Financial Officer
Suresh Badami — Executive Director
Analysts:
Avinash Singh — Emkay Global — Analyst
Hitesh Gulati — Haitong Securities — Analyst
Adarsh Parasrampuria — CLSA — Analyst
Sanketh Godha — Spark Capital Advisors — Analyst
Shyam Srinivasan — Goldman Sachs — Analyst
Akshen Thakkar — Fidelity International — Analyst
Prakash Kapadia — Anived Portfolio Managers — Analyst
Nitin Agarwal — Motilal Oswal — Analyst
Atul Mehra — Motilal Oswal Asset Management — Analyst
Rohit Jain — Carnelian Capital — Analyst
Nischint Chawathe — Kotak Securities — Analyst
Nidhesh Jain — Investec — Analyst
Dipanjan Ghosh — Citi — Analyst
Jayant Kharote — Credit Suisse — Analyst
Rishi Jhunjhunwala — IIFL Institutional Equities — Analyst
Dhaval Gada — DSP Mutual Fund — Analyst
Prateek — Nippon India Mutual Fund — Analyst
Madhukar Ladha — Elara Capital — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the HDFC Life Insurance Company Limited Q1 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Vibha Padalkar, MD and CEO, HDFC Life Insurance Company Limited. Thank you, and over to you, ma’am.
Vibha Padalkar — Managing Director & Chief Executive Officer
Thank you, Faizan. Good afternoon everyone. Thank you for joining us for the discussion on our results for the quarter ended June 30th 2022. Our results, including the investor presentation, press release and regulatory disclosures are already available on our website as well as that of the stock exchanges.
I have with me, Suresh Badami, Executive Director; Niraj Shah, CFO; Srinivasan Parthasarathy, Chief Actuary; Eshwari Murugan, our Appointed Actuary; and Kunal Jain from Investor Relations.
I will take you through the key highlights of our Q1 FY ’23 results and would be happy to take questions post that. Starting with the business update, we continue to maintain a consistent growth trajectory growing by 22% in terms of total APE in quarter one FY ’23. This has enabled us to maintain our market leadership as Top 3 life insurer across individual and group businesses. Our product mix remains balanced with non-par savings at 35%; participating products at 30%; ULIPs at 25%; individual protection at 5%; and annuity at 6% based on individually APE.
On a total APE basis, our non-par savings segment has grown by 29%; protection by 31%; annuities by 39%; par by 23%; and unit-linked by 10%. Within the non-par segment, our shorter tenure product, Sanchay FMP continued to grow well, and now contributes almost one-fourth of our non-par individual APE. The prevailing high interest rate scenario augurs well for demand across our traditional savings products.
While elevated inflation has not materially impacted savings products, premium flow into retail protection has remained tepid for the quarter, possibly due to postponement of expenditure on account of tight household budget. However, we see this as a temporary phenomenon and with resolution of the ongoing global conflict and consequent easing off of macroeconomic stress, we expect to see traction in the second half of this year.
We continue to steadily improve our individual protection policy conversion ratios and will adhere to a risk-based approach to underwriting. Our Credit Protect business has registered strong growth of 96% on the back of rise in disbursements across most of our partners. We continue to look at overall protection growth across individual and group platforms in an agnostic manner since we assess risk as well as service members covered under the group platform at an individual level. Our protection share based on APE has improved from 15.7% last year to 16.9% during quarter one FY ’23.
On the retirement front, our annuity business has grown by 10% on received premium basis compared to a 9% degrowth for the industry in the quarter. Growth of annuity on an APE basis was 39%. The regular premium variant of our recently launched annuity product, Systematic Retirement Plan, has been well received across channels and is almost one-fourth of our annuity in APE terms. We have also launched a new product, Systematic Pension Plan, which is a participating pension plan. This product adds to the existing suite of pension products being offered to customers.
Moving on to key operating and financial metrics. Renewal premiums have grown by 19%, supported by improving persistency. Our 13th and 61st month persistency for limited and regular pay policies is at 88% and 54%, respectively, which is an expansion of 2 and 3 percentage points, respectively. New business margin for quarter one was 26.8%, up from 26.2% in quarter one of the previous year on the back of profitable product mix and growth in protection business. Value of new business has consequently grown by 25% and is at INR510 crores for the quarter. Over the past several years, we have seen a distinct seasonality in quarter-on-quarter new business volume and therefore a steady uptick in new business margins. We expect this trend to continue.
Our standalone embedded value as on June 30th, 2022 was INR29,709 crores with an operating return on embedded value of 16.5% in quarter one FY ’23. The drop in embedded values since March end is primarily on account of dividend payout and anticipated adverse economic variances caused by interest rate movements and fall in equities. We expect the latter to reverse as macroeconomic volatility subsides.
The profit after tax for quarter one FY ’23 was INR365 crores, an increase of 21% over quarter one FY ’22. As highlighted in our last earnings call, we completed raising sub-debt worth INR350 crores during this quarter. Post the dividend payout of INR1.70 per share, which was approved by our shareholders in the AGM, our solvency stands at 178%. In order to further strengthen solvency to fuel growth, we will continue to evaluate raising equity capital as needed.
Next on channel performance. Our bancassurance channel grew by 18% in quarter one FY ’23 based on individual APE. Within bancassurance, while HDFC Bank continues to grow steadily, we are seeing strong growth momentum across our newer relationships such as Yes Bank, Bandhan Bank, IDFC Bank, amongst others. Agency channel grew by 26% based on individual APE. We added about 9,500 agents in quarter one and continue to focus on improving activation and productivity across our base of financial consultants. We are also taking multiple initiatives to augment our direct channel, including geo-based lead management for increasing efficiency, AI-based incentivization for promoting productivity, and cloud telephony for simplified sales process. With these tech-enabled initiatives, coupled with capability-building programs, we aim to build a robust, agile and empowered proprietary distribution.
Moving on to tech and innovation. Post the successful implementation of the initial rollout of our in-house automated underwriting engine, we continue to expand its scope across a larger range of businesses. Tools such as MediEasy enables customers to schedule real-time video medicals and get assistance for financial underwriting. Innovative solutions such as enabling cardiac risk assessment at the customer’s residence for medical underwriting furthers our motive of simplifying customer journey and provide best-in-class service.
Now for an update on our subsidiaries. Subsidiary number one, we are delighted to share that our pension subsidiary HDFC Pension crossed the 30,000 crore AUM mark and has almost doubled its AUM in just 15 months. As on June 30th, 2022, HDFC Pension had a market share of 38%, maintaining its leadership position in the private Pension Fund Manager space in terms of NPS AUM.
Subsidiary number two, HDFC International, our overseas subsidiary, has received an in-principle approval from International Financial Services Centers Authority, IFSCA, to set up a global in-house center at GIFT City. This entity will pool and optimize all processing activities of our international business. This is an important step for us towards eventually setting up an IFSC Insurance office, IIO, at GIFT City, which can cater to the overseas insurance needs of the Indian diaspora.
Subsidiary number three, Exide Life witnessed strong growth of 34% based on individual WRP in quarter one FY ’23 and continues to enjoy a healthy product mix and growth across channels. The integration of Exide Life is on track. We have received the initial NCLT approval for triggering the merger process, including intimations to various regulatory authorities and related NOCs. Subsequent to receipt of the NOCs from various regulatory authorities, we can expect to receive the final NCLT approval. We expect to receive the final nod from IRDAI and to be able to merge the subsidiary in the second half of FY ’23. On the regulatory front, we have been in regular dialog with IRDAI and working on charting a roadmap to deepen life insurance penetration in India and welcome the initiatives taken by the regulator in this direction.
Moving on to the impending merger of our promoter HDFC Limited with HDFC Bank, as you are aware, an in-principle approval was received from the RBI on July 4th, 2022, on the merger application. Look forward to a further strengthening of our relationship with HDFC Bank with our largest partner also becoming our promoter, subject to all regulatory approvals.
To conclude, our objective remains to empower individuals to provide financial protection to their loved ones and widen insurance coverage through a mix of innovative products and diversified distribution. The detailed disclosure on our results is available in our investor presentation. Wishing everyone success as we embark on a new financial year. We are happy to take questions now.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Avinash Singh — Emkay Global — Analyst
Yeah, hi, good afternoon. So two questions, firstly on the margins. I mean, yes, protection retail continues to — I mean, I think, appears to be sudden, yet overall protection mix has improved, even non-par has increased. All in all, ULIP has gone down. And with this and also improving scale, we could have expected a better margin expansion, but it seems that the operating leverage actually, I mean, somehow missing and then margin improvement as compared to product mix looks a bit, I would say, on the disappointing side. So that’s number one.
And second, on your EV walk, the economic variance, if I look at your kind of interest rate to EV sensitivity, that’s like 2% for every 100 bps and also consider some bit equity market related sensitivity, yet close to 3.5% kind of a negative economic variance looks a bit on the higher side. So anything also in this. Thank you.
Vibha Padalkar — Managing Director & Chief Executive Officer
Yeah, hi, Avinash. I’ll take the first question and, maybe the second one, I’ll pass it on to Srini. The first one, you’re right. However, just keep in mind that our margins are mark-to-market in terms of cost, so whatever we incur here and now. So there is no straight-lining of that. And sequentially, you should see the throughput of fixed costs coming through as you know, every quarter is sequentially higher, ending up — typically, quarter four is the highest. So you will see that coming through. Some of it is back to business on COVID receding and so on. So a lot of activity, travel investments that perhaps were some more on the back burner. You will see a fair bit of that coming through. So that’s why you have in the walk, you’ll see the expense impact having a 0.6% drag on the margin. Srini, you want to take the…
Srinivasan Parthasarathy — Chief Actuary
Yeah. So on the economic variance, the negative [Technical Issues], see, there is a equity fall that’s contributing to about INR400 crores of the total INR1,200 crores of negative variance, and the remaining INR700-odd crores is on account of rising interest rates. So if you look at the sensitivity, separated for equity and interest rates, it will broadly tie in with the overall impact that we see on the economy.
Avinash Singh — Emkay Global — Analyst
Okay. So, I mean, we are looking from March to June, so if you broadly say INR700 crores, that is kind of 2.5% broadly or 2.4% of your March ’22 EV. So that’s — I mean, that’s sort of a sensitivity more than 100 basis points or 1 percentage movement in interest rates. So that, I mean, from March to June…
Srinivasan Parthasarathy — Chief Actuary
[Speech Overlap] 2% positive, right? So the expected returns for the year, roughly, is around 8%, right? So for the quarter, you’ll expect a positive 2% for one quarter as against that you actually seen in the equity fall. So you have to relate it with the positive 2% as expected and the actual drop that you’ve seen in the equity markets.
Avinash Singh — Emkay Global — Analyst
No, no, no, equity is fine. I’m talking of that — the yield-led. Yield-led, you are saying INR700 crores, the balance. That is like almost reflecting more than 100 basis points move in yield curves. So I mean, for market yield of more 100 basis points, it looks a bit, I mean, unlikely move. I mean the yield curve would have moved like…
Srinivasan Parthasarathy — Chief Actuary
So it is the shorter end of the curve that’s risen a little bit more. And as we are holding, say, shareholder funds which has got no liabilities and there are some excess assets in the VIFs, the value of in-force, so those ones are exposed more to the shorter end of the yield curve. So they have risen by 130 basis points during the quarter.
Avinash Singh — Emkay Global — Analyst
That makes it clear. Thank you.
Operator
Thank you. The next question is from the line of Hitesh Gulati from Haitong. Please go ahead.
Hitesh Gulati — Haitong Securities — Analyst
Yeah, thank you for giving me the opportunity. I just wanted to check on the operating assumption change in the VNB walk that we have shown. And also on what is our view on unwind rates this year, given that risk visits [Phonetic] are generally expected to be higher?
Vibha Padalkar — Managing Director & Chief Executive Officer
So, Hitesh, on the first question, we are fairly pleased that for the — right from inception, from when we started disclosing our embedded value and the walk, our operating assumptions has been positive and we continue to do that even against — and, of course, excluding the COVID impact that we have seen. Barring that, it has been positive and we continue to show that. On your second question — Srini, you want to take?
Hitesh Gulati — Haitong Securities — Analyst
Sorry, ma’am, if I can just interrupt, on the VNB margin also there is some change on operating assumption. Can you talk about that also?
Vibha Padalkar — Managing Director & Chief Executive Officer
Yeah, oh, VNB.
Hitesh Gulati — Haitong Securities — Analyst
Yeah.
Vibha Padalkar — Managing Director & Chief Executive Officer
So these are change in assumptions versus the assumptions that we put in last year, right? In the month of March, typically, that we put in, this has come through, which is an annual exercise. It is — this is really a strengthening of assumptions that we do annually.
Srinivasan Parthasarathy — Chief Actuary
That’s right. So primarily, it’s mortality assumptions on the protection book that we strengthened in March. So that’s the impact that we captured in the slide. And as far as your unwind rate is concerned, the — see, we are not very gung ho on the equity markets for this year. So that’s reflected in our lower unwind compared to last year.
Hitesh Gulati — Haitong Securities — Analyst
Thank you. So this — should we expect this kind of a rate for the full year as well, because last year’s rate was about 8.6%?
Srinivasan Parthasarathy — Chief Actuary
Yeah. We will — we can expect the same age point. Also, we basically set the unwind rate at the start of the fiscal year and we keep it flat throughout the fiscal year. So next time we’ll change just fiscal year.
Niraj Shah — Chief Financial Officer
Any change from this, Hitesh, will be reflected in the investment variance through the rest of the year till we reset this rate at the beginning of next year.
Hitesh Gulati — Haitong Securities — Analyst
Okay. Okay, thank you. That’s it from my side.
Operator
Thank you. The next question is from the line of Adarsh from CLSA. Please go ahead.
Adarsh Parasrampuria — CLSA — Analyst
Yeah. My question is — hi, Vibha and team. My question is relating to protection rate, term life. Both you and your peer group has seen a 30%, 40% drop. Just wanted to understand the tightening of norms has been there for about six months. So looked a little awkward and just wanted to understand from a little more medium term perspective, do you all see this — some of the tightening in underwriting norms to really affect the population set of — at least over the next two, three years as to how much protection could have been underwritten earlier versus what you can do now?
Vibha Padalkar — Managing Director & Chief Executive Officer
So, Adarsh, I’ll give you a backdrop to this. Our SEO [Phonetic] was hardly writing any terms just before the pandemic. Maybe two years before — couple of years before the pandemic, maybe overall, typically it was 1% or 2% in APE terms — individual APE terms, I’m leaving out credit life. And then suddenly to expect that to ratchet up for the sector, we just need to put it into context. Yes, there was an uptick that we saw during the pandemic, and we don’t want to lose there and we’ve been a believer in the story. However, again, it’s been a continued perfect term, there was COVID that happened, the reinsurers like you mentioned, now the inflation. And we think that — and like I said in my opening comments, like in the basket of good, in terms of disposable income, we are sensing that either there is a pullback to say this is my outlay that I can afford and then let me pay down on my sum-assured, or else let me defer it a little bit or I’m taking a loan, let me cover it through credit life at least — so at least I have sum-covered or I want to lock in at higher — the more attractive interest rates that we’re seeing currently so that will anyway give me 10 times to 20 times cover depending on which product and so on.
So these are various things that are going on in people’s minds. And so relative to what we saw, last year, first quarter again because of the peak of the pandemic, it appears that it is muted. But what we are certainly no longer seeing is that, why do I need insurance? Why do I need protection? I don’t think that question is coming up very much right now. So that’s a good progression in the minds of people, but it will take time.
I think another aspect is that if you look at IRDAIs annual report and if you see each company and how they are retaining risk on their balance sheet, you will find that some of the smaller companies have shown a fairly steep rise in what they’re retaining on their balance sheet. And we’ve always maintained that this has to be somewhat calibrated. And we will do — we will triangulate between topline, whether it’s a retail protection or anything else, topline as well as bottom line, risk management persistency and this will grow steadily. So we still expect second half, there is some tempering on installations for medium protection to come back. Suresh, you want to add anything?
Suresh Badami — Executive Director
[Technical Issues] You’ve fully covered it. If I can add, the overall demand in the market [Technical Issues] probably the surge has also come down a little bit for all the industry. [Technical Issues]
Operator
Sorry to interrupt, sir, the audio is not clear from your line.
Vibha Padalkar — Managing Director & Chief Executive Officer
We’re getting a lot of disturbances.
Suresh Badami — Executive Director
Is it clear now?
Operator
Yes, sir.
Suresh Badami — Executive Director
Yeah, okay. So I mean, not to take away the story of the overall protection gap in the opportunity, I think there is enough opportunity for us to be able to grow protection. But you have for the next six to seven months, given that there are certain good products in the market, even for the field teams and the channel to look at return on effort on some of the other products and all the factors that Vibha mentioned, you may probably see a little tepid growth. But again this is on the back of a fair amount of demand, which came in last year.
Vibha Padalkar — Managing Director & Chief Executive Officer
And the last point I’ll add, Suresh has touched upon it, is on the Google search trends. While they have come down, whatever searches are happening, HDFC Life continues to remain right up there.
Niraj Shah — Chief Financial Officer
If we actually look at how [Technical Issues]
Operator
Sorry to interrupt you, sir. The audio is not clear from your line. There’s a disturbance coming. Please check.
Suresh Badami — Executive Director
Just try to mute the line.
Niraj Shah — Chief Financial Officer
Yeah, so I mean, when we are looking at the current environment, interest rates going up and it’s about starting to maybe pinch household budgets and disposable income, there are couple of these things to look at. One is, if you look at some of the surveys that have come off recently in terms of our people feeling about their prospects — job prospects and pay hikes in the current environment, a lot of people are optimistic, two-thirds of the people surveyed are optimistic about that, which basically means people are not worried about disposable — income coming through. At the same time, savings is something that is — this is what is going to give a tailwind to the savings. But on the expenditure side, anything that is seen as a discretionary expense, people do start looking at what is really coming for the same rupee that was spent earlier. So these are trends that you will see for some more time in a fairly low middle income country like India. So that is something that we should not be too surprised with. We’ve always maintained that retail protection will grow over a period of time in India, and this is something that have to be comfortable with so that we continue to balance growth with profitability and risk management. So that’s how we’re thinking about it.
Adarsh Parasrampuria — CLSA — Analyst
Just a follow-up here. Majority of the reasoning looks to be more like discretionary power of spending going down. Just wanted to just reflect on how much do you think is it caused by the tightening, right, like, what kind of population set it cuts off at least for the near term in terms of processes becoming onerous or the ask rate of processes going up, including medicals?
Vibha Padalkar — Managing Director & Chief Executive Officer
I think people start getting used to whatever is prevalent in the industry. Yes, there are looser and, then on the other spectrum, tighter guidelines but largely, people do start getting quite accustomed to the new normal. So I — my hunch would be — it’s always difficult to exactly pinpoint, but my hunch would be that it’s more to do with the inflationary aspects rather than the process per se. I think largely companies have stabilized in their process. We have and so have others to the new normal that these documents are required, because the reinsurer requires it or we have tried to triangulate who’s this customer through other means and so on. So whether it’s 50-50 or 30-70, difficult to know, but the new aspect certainly is inflation.
Adarsh Parasrampuria — CLSA — Analyst
Got it. Thanks, Vibha and thanks Niraj. That’s it from my side.
Operator
Thank you. [Operator Instructions] The next question is from the line of Sanketh Godha from Spark Capital. Please go ahead.
Sanketh Godha — Spark Capital Advisors — Analyst
Yeah, thank you for the opportunity. If you look at the credit protect business in the current quarter, around INR250 crores, INR260 crores, it’s back to pre-pandemic levels on a lower base but almost a doubling of the business has not happened. So just wanted to understand the sustenance of this particular business, we did Q2, Q3, Q4, because we have got with that run rate of 200 to 230 kind of a [Indecipherable] number even in second quarter, third quarter and fourth quarter of last year. So just wondering, do you think that this growth can moderate going ahead, given the low base effect is over? Just one question, yeah.
Suresh Badami — Executive Director
Yeah. So from what we have seen, most of our partners, and we have a fair spread across banks, NBFC, small finance banks who we work with in this space, the growth has really come in from the loan disbursements, year-on-year growth that they have seen which range anywhere between 70% to 90%, so only larger players have — even the larger players have grown fairly fast. Now at our end, we look at higher value penetration, we look at rider attachment, we look at a little bit of a price increase based on that. So that has led to a faster growth for us even above the loan disbursements which is happening for our partner. So I would assume that the loan growth would continue at a certain rate. It may not be as high as this, given that last year, the base effect started coming into place between Q2, Q3, Q4, but a significant growth on the partner loan disbursement and a slightly higher growth on our CP business is — can be expected for the rest of year.
Sanketh Godha — Spark Capital Advisors — Analyst
Got it. Within the products, probably, is it still — because you’re the market leaders in MFI segment, so it’s largely led by MFI segment or it’s mortgage which is driving the growth?
Suresh Badami — Executive Director
No, we are very well diversified now across almost all the verticals. If you really look at it across the partnerships that we have got, we are present across mortgage, we are present across MFI, we are present across each of the segments. So it’s not just we have housing, we have lab [Phonetic], we have MFIs, we have others, and each one of them has grown by — some of the other ones have grown by almost 70%, 75% also. MFIs have grown slightly higher. So — but if you look at H Bank itself, the growth in terms of their overall has been 70%. Some of the NBFC large partners have grown at anywhere between 60% to 150%. [Speech Overlap].
Sanketh Godha — Spark Capital Advisors — Analyst
Yeah, got it. The second question, just wanted to understand on the part of protection itself. So we have almost 15 months or more than 15 months, we have launched it, six quarters, we have launched the ROP plan. So just wanted to understand any traction there, whether it still continue to contribute around 16% to 18% in the total protection business? Because the entire pie has or the absolute amount has come off, whether ROP somehow has supported or you don’t see the trends that ROP is supporting the growth for the protection business?
Vibha Padalkar — Managing Director & Chief Executive Officer
It continues to do so. We are present in all offerings and all parts of the possibilities. So ROP continues to become more and more meaningful. Today, it’s about one-third of our business on the retail — just on a standalone quarter basis. It was about one-fourth, it is about one-third, could vary here and there, but we don’t really drive a product, Sanketh, it depends on which channel, what is the preference of the customer. But it is there as an offering.
Suresh Badami — Executive Director
If I can add, I think, as a trend, as we go more into Tier 2 Tier 3 and some of these markets, the ROP product share in some of those markets will be fairly right.
Niraj Shah — Chief Financial Officer
And also coming back to the earlier discussion in terms of the impact of higher interest rates on both savings and spends, ROP is seen as a hybrid in terms of buying protection, but yes, if nothing happens, then money comes back. So in some sense, a bit of a hybrid between protection and savings. So that does address the current sentiment as well.
Sanketh Godha — Spark Capital Advisors — Analyst
Perfect. And last one from my side. Just from a data keeping point, what is our market share right now in HDFC Bank compared to what it was probably for the same quarter last year, or full year last year or FY ’22?
Vibha Padalkar — Managing Director & Chief Executive Officer
So we’re not really giving out numbers like that because each partner is — it changes quarter-on-quarter. Suffice to say that at HDFC Bank, we will continue to write business that makes sense, accretive on VNB. We will look at what is our persistency because often just taking one lever will not make sense because we might say no to some business because we either don’t believe philosophically in some kind of a product or the persistency, we might not be very convinced about and be okay to say no to. On term, there might be a price war in a particular quarter. So I think we’ll have to say, typically, we have been about two-thirds of their business and like I mentioned in the opening comments, as the merger fructifies, we are hoping too that this strengthens further.
Sanketh Godha — Spark Capital Advisors — Analyst
Got it. That’s it from my side. Thank you.
Vibha Padalkar — Managing Director & Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Shyam Srinivasan — Goldman Sachs — Analyst
Thank you for the opportunity and good afternoon everyone. Just a first question on solvency months, 176% went to 178%. You did some sub-debt raise during the quarter as well. So are we now full up in terms of capacity to do any more incremental sub-debt? I think, Vibha, you made a comment that you could look at equity as well. So just want to understand what is the comfort level on where solvency is. Let’s assume it is at this level, how much — how many years of growth can we do without having to raise equity? If you can help us understand some of the dynamics around solvency, please.
Vibha Padalkar — Managing Director & Chief Executive Officer
Right. So the straightforward answer is that today, our growth is not getting impacted — our retail growth, because of the solvency. Our stated objective has been around 180%. We’ve been in the 180% to 190-odd percent range, sometimes been about 200%, but anywhere between 180% to 200% or thereabout. So slightly shy because of the Exide Life merger. Now in terms of looking at raising equity, we might look at it depending on whether, is there growth opportunities or we perceive prolonged stress in the system, so that we feel little bit more comfortable with strengthening our solvency, we might do that. It should not be a very large amount but back into the kind of zone that I just mentioned.
Shyam Srinivasan — Goldman Sachs — Analyst
Got it. So you are at the lower end, so you think once you cross 180% to — you should be okay from a growth perspective.
Vibha Padalkar — Managing Director & Chief Executive Officer
Yeah, I mean, yeah, I mean anything 200%, 220%, something like that would ensure that we don’t have to keep tapping the markets again and again. But we are still in the process of evaluating and seeing how prolonged some of the global tensions are and are they receding, some of the — largely macroeconomic factors.
Niraj Shah — Chief Financial Officer
So just to add to what Vibha has mentioned, if you recollect, before the Exide transaction, we’ve, like Vibha mentioned, operated in the 180%, 190% band and we’ve been fairly comfortable that this will support organic growth for three to five year period. Two things have happened since then, Exide Life transaction, yes, and also the environment has been — become a lot more volatile compared to where we were talking about this maybe a couple of years back. So that pushes up our threshold marginally from, say, 190% or to maybe a little over 200%, but that’s about it really, so…
Shyam Srinivasan — Goldman Sachs — Analyst
Got it. That’s helpful. Just back on to retail protection, I was just looking at your Slide 19 to understand where the weakness in terms of this is most exemplified, right? Seems to be at least some bit in agency and some bit online seems to be the biggest drop. So is the whole push thesis around this coming off because — or am I reading this kind of table or chart wrong? And I would assume online people have higher income. So just trying to understand even from a demand perspective, what’s happening across these channels on retail term.
Vibha Padalkar — Managing Director & Chief Executive Officer
Want to take this?
Suresh Badami — Executive Director
Yeah. So let me just address the online first. Like Vibha had mentioned earlier, the Google searches really have started coming off as compared to the previous year and you’re also right that in our online channel as well as overall for HDFC Life, the profile of customers is slightly higher on the affluent side. So we remain the Number 1 brand when it comes to search, we remain there, but the numbers are coming down a bit in terms of the total online conversion that is happening. So there has been a dip, which you’ve seen, and we assume it probably holds true for the full industry because the same trending in terms of Google searches seems to be happening on keywords either on Term or in terms of the specific brands which are there in the market. So there has been a little bit of a slowdown on online, but we are putting in our efforts in terms of digital marketing and all of that, and we expect that to pick up over a period of time.
Agency, like we mentioned earlier, I think, yes, it’s probably a little lower than what it was. But there again, there are a combination of factors, what we explained in the previous question, I think a little bit of inflation, a little bit of push on the ground, where people are being able to — agents are able to sell non-par kind of a product at much easier return on effort as well as the fact that there are — some of the customers are waiting for this whole thing to go through before they come back and take Term maybe at — maybe easier processes or better pricing. But frankly, for us, it’s broadly in the range in terms of how we expect agency business and product mix to happen. We should be able to push the pedal in terms of agency production as we go forward.
Shyam Srinivasan — Goldman Sachs — Analyst
Got it. Last data point, I know you shared this, for every 100 applications that come through, I remember fiscal ’22 was 64 retail term in terms of what we were able to close. Is that number changed at all?
Suresh Badami — Executive Director
Yes. So that has started improving for us now. So it’s around 3 basis points improvement in terms of the conversion that — 3 percentage points which is improving — has improved in terms of what we are. It is a combination again in terms of what percent and profiles you’re sourcing on the ground, what are the underwriting credit easing that we have done as well as a little bit of analytics at the back end that we are able to push some of these down. So we have moved up a bit in terms of the conversion throughput.
Vibha Padalkar — Managing Director & Chief Executive Officer
Also you would have picked up during the last month, we had mentioned about how we are doing cardiac risk assessment. This is one of the things that would help. So — and this is something we’ve been solving for the past 24 months at least because getting people to go to a hospital or nursing home to do their stress test during COVID and so on was just becoming a roadblock. Now with this — and it’s there in our investor presentation, with this, now we are able to use this stepper, go to the individual home, be able to assess cardiac risk and so on. And this would have been a bottleneck earlier, for example. So just systematically working through each one of these bottlenecks, to be able to, one, give ease to the customer and, equally important, not take on risks on our balance sheet just because somebody else is willing to do it.
Shyam Srinivasan — Goldman Sachs — Analyst
Fair enough. Thank you and all the best.
Vibha Padalkar — Managing Director & Chief Executive Officer
Thank you.
Suresh Badami — Executive Director
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Akshen from Fidelity. Please go ahead.
Akshen Thakkar — Fidelity International — Analyst
Yeah. Hi, just a question on the EV walk on the investment. Could you just maybe help us understand on how much of the shift was due to interest rate and how much of it was due to equity market, just if you could break that up? Thanks.
Vibha Padalkar — Managing Director & Chief Executive Officer
Srini, you want to…
Srinivasan Parthasarathy — Chief Actuary
So equity is around INR400-odd crores and the balance is from interest rates, out of the total INR1,200 crores.
Akshen Thakkar — Fidelity International — Analyst
Okay. Because I was just looking at the sensitivity that you had published in F ’22 which called for a roughly 2% hit on EV for a 1% move in interest rate. So interest rate movement has been slightly lower than that, if I’m just looking at year end or average, maybe 80 bps, 90 bps and then the sensitivity to EV seems to be a little higher than that. Could you just sort of help us understand…
Srinivasan Parthasarathy — Chief Actuary
So the shorter end of the curve has actually gone up by 130 basis points during the quarter.
Akshen Thakkar — Fidelity International — Analyst
Sure. Okay.
Srinivasan Parthasarathy — Chief Actuary
So it’s more than 100 basis points.
Akshen Thakkar — Fidelity International — Analyst
So it’s more sensitive to shorter end or to — we just use a 10-year as a proxy, but you’re saying we should look more at the shorter end of that.
Srinivasan Parthasarathy — Chief Actuary
Yeah.
Niraj Shah — Chief Financial Officer
So you need to look at — okay, so we need to look at the full curve because different assets are sitting at different ends of the curve. So what we discussed a little while back as well, at the shorter end, the hardening has been a lot more, 130-odd basis points. At the longer end, it has been, say, 50 to 60 basis points. So basically, wherever the assets are sitting at the shorter end, that’s where the impact is. That’s — to give you an example, shareholder assets, also the excess assets sit at the shorter end of the curve and the non-par assets, for example, backing the 15, 20, 25 year products, so annuity products, sit at the longer end. So the effect is different at different parts for — and wherever the assets are being held. So collectively, you will see that this is the impact of about INR700-odd crores in debt, about, like Srini mentioned, INR450-odd crore in equity.
Akshen Thakkar — Fidelity International — Analyst
And Niraj, assuming interest rates remain steady hereon, and market should remain flat hereon, incrementally there wouldn’t be any negative investment variance, right?
Niraj Shah — Chief Financial Officer
So — okay, now, take a base scenario of, let’s say, the yield curve going up parallel. If the yield curve is going up parallely, then you will have absolute — you’ll be able to then correlate one to one with the sensitivity table that you see. Like you started off with a 1% sensitivity, that’s basically a parallel shift. If there is a slope change that happens, which has happened in the past few quarters, this is the result of that. A parallel shift upwards or downwards will have the linear impact that you see in the sensitivity table, Akshen.
Akshen Thakkar — Fidelity International — Analyst
Got it, got it. No, my question, Niraj, is that assuming that 30th June rates yield curve and market levels hold, incremental investment variance wouldn’t be there, right?
Niraj Shah — Chief Financial Officer
On account of interest rate, it would not. But equity would have other aspect of it and then it — that’s your question, right? Interest rate, nothing changes.
Akshen Thakkar — Fidelity International — Analyst
Yeah, yeah. Okay, all right.
Srinivasan Parthasarathy — Chief Actuary
So, yeah, we are basically expecting around 8.0-whatever-percentage the unwind is what we are expecting to earn on the assets. So if you are saying there is no further shock, we assume that it will earn 8% — the assets will earn around 8%. So in that, there is no variance against that expected, then you will not see any further [Indecipherable] variance.
Akshen Thakkar — Fidelity International — Analyst
Okay, that’s it for now. I’ll come back in the queue for another question. Thanks.
Operator
Thank you. The next question is from the line of Surya Kumar from Birla Sun Life Insurance. Please go ahead. Surya Kumar, your line is in talk mode. Please go ahead with your question. Mr. Kumar, please unmute your line from your side if muted.
As there is no response from the current participant, we’ll move on to the next question from the line of Prakash Kapadia from Anived Portfolio Managers. Please go ahead.
Prakash Kapadia — Anived Portfolio Managers — Analyst
Just one question from my end. Recently, the regulator has come out with risk-based capital adequacy norms. And the idea of the regulator is to increase penetration, so they’ve set growth targets. So how does this change the dynamics for the industry and for us, if you could comment on that?
Vibha Padalkar — Managing Director & Chief Executive Officer
So we are still awaiting in terms of some clarity on RBC. And we are hopeful that they take into account some of the asks of the industry. So eight committees have been formed and at least in a couple of committees, this has been an ask. Yes, they have rolled out targets to insurers and we appreciate that the regulator is equally focused on developing as much as it is on regulating. So that is welcome. But having said that, I think I’m sure all the life insurers would — whether the regulator is directing them to focus on top line or not, they would anyways want to solve for low penetration and so on. So more of that will continue.
Prakash Kapadia — Anived Portfolio Managers — Analyst
But this wouldn’t, Vibha, in a sense, lead to margin erosion or profitability being compromised in lieu of higher growth or it’s too early too?
Vibha Padalkar — Managing Director & Chief Executive Officer
I think it’s too early because I would hope that it is more in terms of cajoling life insurers to continue with their attempts at insurance penetration rather than mandating.
Prakash Kapadia — Anived Portfolio Managers — Analyst
Sure.
Vibha Padalkar — Managing Director & Chief Executive Officer
Even today, if — there are companies that perhaps their persistency is a lot lower than the listed players, there is next to no disclosure on their margin, there is next to no disclosure on their operating variance on embedded value or embedded value itself. So all of that is there. So in the absence of apart from the listed players disclosing these numbers, it’s very difficult to say what a company is operating at today and where — and [Indecipherable] the drive on top line where are they — where have they ended, everything is fairly difficult. So we’ll have to wait and see. I think, directionally, it’s welcome, but personally I would hope that it’s calibrated because specially life insurance is a very long tail product and risk management and quality of business, right selling customer, mis-sell complaints, claims, settlement ratios, all of those aspects are equally important and that happens fore-sale. So I would — and I’m sure regulator is very cognizant of all of those aspects. So would like to see the holistic ask from us as a sector.
Prakash Kapadia — Anived Portfolio Managers — Analyst
Sure. Thank you.
Vibha Padalkar — Managing Director & Chief Executive Officer
Sure.
Operator
Thank you. The next question is from the line of Nitin Agarwal from Motilal Oswal. Please go ahead.
Nitin Agarwal — Motilal Oswal — Analyst
Yeah, hi, thanks for the opportunity. So, Vibha, one question around the competitive intensity. How do you see it in the non-par savings business? And with the recent increase in product IRRs, how do you see the margins trending in this line of business?
Vibha Padalkar — Managing Director & Chief Executive Officer
So given — I’ll answer from towards the end of your question on margins. Given our upward trajectory, continued smooth upward curve on margin quarter-on-quarter, year-on-year, doubling in four years in terms of VNB, all of that, that will continue to happen, no change in that. Yes, some quarter here and there, what we do find is more the mid-tier, apart from the listed players, a lot of competitive intensity. But again, there is very little disclosures, next to none, on any of their metrics. So that is expected I guess. And if you extend the horizon a little bit, things do normalize — things do tend to normalize and that too will happen. There is a trade-off in the minds of the customer between the market leader. For example, Sanchay Plus has been our innovation, Sanchay Par Advantage has been our innovation. So there is a premium that customers are willing to pay for that. Yes, we have to stay in the zone.
But if you were to look at annuity, we have grown by about 10% when market has de-grown by 9%, this is on NBP terms. So — and there too, there is competitive intensity and I think that is the power for core [Phonetic].
Nitin Agarwal — Motilal Oswal — Analyst
Okay. And one clarification regarding the shareholding of HDFC Limited. I just want to know, like, how easy or difficult it is to do a press [Phonetic] issue to HDFC Limited and will there be any regulatory hindrances in that?
Vibha Padalkar — Managing Director & Chief Executive Officer
See, they’re our promoter. It is every promoter’s obligation and for them to extend support to the life insurer, so they’ve always expressed that. I don’t see there to be any issues per se, because the capital that we might want to raise and might feel comfortable about, like I talked earlier, depending on market volatility, is not going to be huge. It’s going to, like I said, put us in the zone of maybe 200% to 220% or somewhere along that line. So none of that should take it above the currently permitted regulatory norms.
Nitin Agarwal — Motilal Oswal — Analyst
Right. No, I’m asking this question not from your perspective, but from HDFC Limited’s angle. Can it lead to…
Vibha Padalkar — Managing Director & Chief Executive Officer
Yeah, from their angle only. They are permitted to hold up to 50% today. Had the Exide Life transaction not happened, they would have been there.
Niraj Shah — Chief Financial Officer
So they’re currently at 47.8%, Nitin.
Nitin Agarwal — Motilal Oswal — Analyst
Yeah. So — no, the question was like, if you now want to increase, then is it easy to like to do a press issue and get this done? Or will it be quite a task?
Vibha Padalkar — Managing Director & Chief Executive Officer
In what — from what angle? From funding angle or a regulatory angle?
Nitin Agarwal — Motilal Oswal — Analyst
From a regulatory angle, yeah.
Vibha Padalkar — Managing Director & Chief Executive Officer
So that’s what I’m saying. See, regulatory — what is the extent [Phonetic] regulatory requirement, that they should not exceed 50%, right? What Niraj just mentioned, the kind of capital we might want to look at will not take it above 50%. So there is no regulatory issue here per se apart from, as we’re in the midst of a merger, yes, all regulatory people will be kept in the loop. But it is — when you look at underlying, that your subsidiary would feel more comfortable against the volatile situation on having a little bit more of capital, the current tax and regulatory norms will not be valid.
Niraj Shah — Chief Financial Officer
It’ll be normal course of business, Nitin.
Nitin Agarwal — Motilal Oswal — Analyst
Right. Sure. Thanks so much and wish you all the best.
Vibha Padalkar — Managing Director & Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Atul Mehra from Motilal Oswal Asset Management. Please go ahead.
Atul Mehra — Motilal Oswal Asset Management — Analyst
Yeah, good afternoon and thanks for the opportunity. Just one follow-up on the previous question. So the current regulation says that if — maybe if you were to imply NBFCs shareholding and NBFC bank shareholding in the life insurance company, then they are at 47% and the regulator basically says that either you be at 30% or you be at 50%. So there have been some instances where there has been some confusion around this. So just to reconfirm, what we are saying is going from 47.5% to 50%, that doesn’t require any kind of regulatory approval in the current scheme of things?
Vibha Padalkar — Managing Director & Chief Executive Officer
I want to make it clear here that extent regulatory guidelines, this is when HDFC Ergo bought Apollo Munich, that’s when HDFC was asked to bring down the stake from — to 50%, right? And that’s — and we would have stayed there had it not been for the Exide Life merger, right? So that still holds. And this capital we’re looking for is within what already holds.
Atul Mehra — Motilal Oswal Asset Management — Analyst
Right. And ma’am, is there any timeline to this fund raise?
Vibha Padalkar — Managing Director & Chief Executive Officer
No, I have not — we have not said that there’s going to be a fund raise. All we’re saying is that we will evaluate all options in front of us, and also whether we need to have more, but given extended volatility, it’s something that we might feel comfortable about, but it’s an evolving situation, as you know, on the macroeconomic front.
Atul Mehra — Motilal Oswal Asset Management — Analyst
Right. Ma’am, just one more clarification on the same point. We’ve also seen one more instance in case of, say, ICICI Lombard and even they went…
Vibha Padalkar — Managing Director & Chief Executive Officer
Sorry, your voice is not very clear.
Atul Mehra — Motilal Oswal Asset Management — Analyst
Is it better now?
Vibha Padalkar — Managing Director & Chief Executive Officer
Slightly.
Atul Mehra — Motilal Oswal Asset Management — Analyst
Hello? Yeah, sorry. So I was just saying that there was another parallel in the industry, ICICI Lombard, where they went through an M&A and it’s not perhaps too clear now what’s happening there, where ICICI Bank shareholding has to be got down to, say, 30% or they’d be allowed to get it back to 50%. So from our perspective, do we see that as a parallel at all or not at all?
Vibha Padalkar — Managing Director & Chief Executive Officer
So, boss, you are selectively picking an example. What about at least five examples wherein there is 100% or 60% or 55% and so on? So all the senior companies — and I think this is a point that has been mentioned by HDFC Bank leadership, HDFC Limited leadership, to say we would welcome parity. This is not a new application. This is an existing application. We were the first ones to get an insurance license — life insurance license. And there are enough examples wherein there’s more than 50%. The example that you gave, in that particular scenario, the other Insurance entity under the bank was not asked to — they were not asked to bring that down.
Atul Mehra — Motilal Oswal Asset Management — Analyst
Correct, correct.
Vibha Padalkar — Managing Director & Chief Executive Officer
And so I’m sure this is well known reason so — and has been said this by our current promoters and new promoters. So really very little that I can add here, given that the regulators are looking at it.
Niraj Shah — Chief Financial Officer
And just another fact here really is that, if you look HDFCs shareholding in HDFC Life, it was 50% before the Exide Life transaction. Exide Life transaction is not undertaken by HDFC Limited or HDFC Bank. It was an HDFC Life transaction, which resulted in HDFC Limited’s holding falling from 50% to 47.8%. So that’s the other difference between — and that Lombard transaction, that was — it was a — that’s the difference between this and the Lombard transaction.
Vibha Padalkar — Managing Director & Chief Executive Officer
And final point is, I think HDFC Bank leadership have also clarified that in their minds, whether it’s 50% or 30%, it is going to be there and it is a material investment and they see it, and they will be the promoter, subject to regulatory approvals.
Operator
Thank you. Mr. Mehra, may we request that you return to the question queue for follow-up questions. The next question is from the line of Rohit Jain from Carnelian Capital. Please go ahead.
Rohit Jain — Carnelian Capital — Analyst
Yeah. Thank you. I had two questions. One is on the EV. I heard Srini say impact of INR700 crores on the shareholder and the excess of — with assets. I would guess the change of long-term interest rates and the size of our book, wouldn’t that be much higher impact on the debt portfolio? That’s point one. And point two, if my interest rates rise, ideally, I am able to invest at a higher rate. Why is my savings rate or offered rate is similar? Wouldn’t my view on the margin increase? Thank you.
Srinivasan Parthasarathy — Chief Actuary
So, yeah — so this is on the back book. So on — the VNB will increase for the new policies that will be written at a higher interest rate, you’re right. Also bear in mind that we hedge as and when we write any new policies. We immediately hedge the book as well. So what we are actually exposed to when interest rates rise is to the extent of the shareholders assets where there is no corresponding liability and also the excess assets on the non-par book as well. So those are the ones that are sensitive to the interest rates going up. And like we explained earlier, the shorter end of the curve where these shareholder assets and the VIF assets — excess assets in the VIF, so those are the ones who get exposed and there, in the short end of the curve, the yields have gone up by 130 basis points during the quarter. So that’s why you see this INR700 crores on the interest rates sensitivity.
On the new business, like you rightly pointed, on the new policies, as and when we write it, you will be able to write it at higher interest rates and, all things being equal, you’ll be able to get a higher margin as well.
Rohit Jain — Carnelian Capital — Analyst
Sure. Thank you. But our margins in Q1 have not increased materially, right?
Srinivasan Parthasarathy — Chief Actuary
Corresponding to the same quarter of last year, it has gone up because you understand there’s a little bit of a seasonality to our business. So it’s gone up by 60 basis points compared to the first quarter of last year.
Niraj Shah — Chief Financial Officer
Yeah, and typically in quarter one, you will see about, give or take, 15-odd percent of the year’s business coming in Q1. Expenses typically get front-ended in terms of things like manpower, technology, etc., and you see that effect unwinding through the rest of the year. So…
Srinivasan Parthasarathy — Chief Actuary
And also our expenses are reflected in our VNB margins. We don’t normalize it throughout the year. So it’s as and when it gets incurred, we reflect it in the margin for the quarter.
Rohit Jain — Carnelian Capital — Analyst
I understand. Thank you.
Vibha Padalkar — Managing Director & Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Nischint Chawathe from Kotak Securities. Please go ahead.
Nischint Chawathe — Kotak Securities — Analyst
Thank you for the opportunity. I’m just looking at margins on a year-on-year basis, which is up essentially 1Q to 1Q and trying to understand if there was — if there were any changes at the product level margins. I do understand that, I think, there were some higher expenses because of travel and new investments, etc., kicking in. But at the product level, have you seen any pressure on margins, given the fact that, probably the cost of hedges would have gone up or maybe even on the protection side, you would have seen that insurance rate’s going up?
Niraj Shah — Chief Financial Officer
So Nischint, if you look at the Q-on-Q product mix, you will find that the changes are fairly small. You’ll find that unit-linked has come down marginally, par is at a similar level, Term has gone down Q1 to Q1. We’ve discussed that. On the non-par side, it’s gone up, but the profile of the non-par products have changed, we’ve discussed, we have Sanchay FMP, which is a significant part of this business. Annuities have gone up. So they have — and the fair number of compensating effects in terms of what’s happening in the product mix itself, product level margins may not have moved too much. There could be instances in the period where the spreads may have gone up to some extent on some of the products like annuities and maybe non-par. But that again depends on what the rate is at a particular point in time, how are we reacting to competition within the quarter.
So the lot of these effects are kind of canceling out each other. And the key really is 60 bps in expansion and basically the smallest quarter of the year and the expenses are not necessarily, in that sense, to that extent. So expenses are more front-ended compared to what you will see in terms of the revenue pan out over the rest of the year. So it’s all of these effects which are creating this net effect of 60 bps expansion.
Vibha Padalkar — Managing Director & Chief Executive Officer
So on the expenses, Nischint, for example, HDFC Bank added about 700 branches in Q4 of last year. Some of our other partners — the newer partners, I mentioned quite a few names on my opening remarks. So there is a lag in terms of us having manpower feet-on-street versus beginning to see business. And there is also a bit of a COVID impact. We had reined in quite a bit of these sorts of investments and now it is full throttle. Also some of the activities that we have in order to kick start sales, that’s also front-ended, and you will see this evening out as a percentage as we go through the year. But like Srini said, we mark-to-market every quarter, we don’t straightline our MBMs.
Nischint Chawathe — Kotak Securities — Analyst
Yeah, that’s right. Thanks. Just the second one is on the Term business. Do you see — I mean, I understand that at this point of time, probably, the return on effort for the team was to sell some other products versus Term, etc. But do you really see that changing in the second half of the year or should we kind of remain in negative for the entire year in Term?
Suresh Badami — Executive Director
Yeah. So look, I think it’s a combination of multiple things that we will need to do. One is, of course, like we said that the overall customer sentiment has improved to in terms of the overall awareness and what kind of ease of journey we will be able to provide to the customer. There is a little bit of effort on our side in terms of ensuring that all channels, all frontline is activated in terms of being able to convince customers in terms of Term being available for them. A little bit of innovation is also possible in terms of the product and the features that we can do.
But, frankly, there are a few positives also. Customers are now more willing to go for medicals. So some of those trends we have started seeing. So as these go into quarter three, quarter four, a little bit of push in terms of how do we activate all the channels, the product proposition and the journey becoming easier, will lead to, we believe, an increase in terms of the Term. So we’ve still budgeted higher numbers in Term but we’ll have to wait and watch as to how the overall industry grows over quarter three and quarter four. But these are trends that we see across the industry. We can easily do it by changing pricing, but really that is not what the end objective is.
Nischint Chawathe — Kotak Securities — Analyst
Perfect. I think that’s very insightful. Thank you very much and all the best.
Operator
Thank you. The next question is from the line of Nidhesh from Investec. Please go ahead.
Nidhesh Jain — Investec — Analyst
Thanks for the opportunity. Two questions. First is with this inflationary expectation going up and interest rates going up, how do we see the growth for non-par savings business for us through the year? That is the first question. And secondly, how do we think about a sustainable operating ROEV for our business? I think it has declined from 18% to 16.5%. Is the 16%, 17% the new normal or we expect to go back to 18%, 19% in future?
Vibha Padalkar — Managing Director & Chief Executive Officer
So I’ll answer the first one and then hand it over to Niraj. The first one, we continue to see very robust demand for non-par and that will continue. We are — even versus bank fixed deposits, even on the shorter end, the Sanchay FMP, we are at least 100 to 130 basis points more attractive because they’re our highest marginal tax bracket and even lower tax bracket, we are — we come out meaningfully more attractive than just parking it in fixed deposits. I think that’s well understood. Apart from that, the longer tenured non-par also, the category has been born. Now we’ve launched this about four years ago, and people understand reinvestment risk and no longer confused debt mutual fund or parking it into fixed deposits with long tenure, a Sanchay Plus and so on, because locking in and getting assured returns until you’re alive, all of that is now well understood. So no issues on that front. We also reprice fairly swiftly. So taking advantage of what we are able to earn, we look at it on a dynamic manner. So really no major concerns on that front. On ROEV, Niraj you want to take that?
Niraj Shah — Chief Financial Officer
Yeah, in terms of ROEV, if you look at the key — when you deconstruct ROEV, you look at the two key aspects of unwind and the NBFC accretion. So in terms of unwind, we’ve already discussed, we are expecting our assets to earn a little over 8% in this year. Anything over and above that will get or rather different from that will get reflected in the investment variance. And NBFC accretion has started on a strong footing in Q1. We expect that to continue with gradual, steady margin expansion as we have delivered in the past couple of years. With that, you will look at an ROEV which — so last year, if you look at the ROEV, it was about 16.5%. This is after normalizing the impact of COVID. Prior to that, it has been in the 17%, 18% range. So that band of 17%, 18% is something that we believe is possible to achieve and, of course, this will depend on the interest rate environment over the years as we go forward.
Given our philosophy, we expect operating variances to be in a fairly small territory, in the neutral to positive territory. So these two blocks of unwind and PNB accretion is what would dictate this number. So we would expect this to gradually inch upwards as the year progresses.
Vibha Padalkar — Managing Director & Chief Executive Officer
Also, I hope you not comparing the first quarter ROEV with the full year ROEV because there is a fairly large uptick in terms of seasonality.
Nidhesh Jain — Investec — Analyst
Sure, sure. And lastly, the second question on the reported profitability…
Vibha Padalkar — Managing Director & Chief Executive Officer
Sorry, just in terms of the numbers, because it is important that we compare quarter with quarter, quarter one with every quarter one of the previous years. And it has been in the range of about — between 14% to 16%, somewhere in that zone over the last few years.
Nidhesh Jain — Investec — Analyst
Sure. And just lastly on the reported profitability, how should we think about that, given that last year in Q1, there was a major disruption because of COVID and for the claims would have hit our P&L? Despite that, Y-o-Y growth in PAT is not that significant. So any light on that?
Vibha Padalkar — Managing Director & Chief Executive Officer
So if you deconstruct it further and we do give what is the shareholder versus policyholder, last year, there was some — because of the market being good, there was a profit booking that we did on the shareholder. But when you look at what the policyholder back book generation has been, that has been extremely robust, so about a 50% growth, which you’ll agree is fairly decent growth.
Nidhesh Jain — Investec — Analyst
Sure, sure. Thank you. That’s it from my side.
Vibha Padalkar — Managing Director & Chief Executive Officer
Yeah, sure.
Operator
Thank you. The next question is from the line of Dipanjan Ghosh from Citi. Please go ahead.
Dipanjan Ghosh — Citi — Analyst
Hi, good evening. Just three questions from my side. First is, you have highlighted that the new banca channels have demonstrated strong growth. If you can just quantify something on that, what is the mix or what has been the Y-o-Y growth? Secondly, if you can qualitatively mention your countershare or how it varies between HDFC Bank branches with vintage of less than five years and vintage more than five years more qualitatively? And third, I think one point you’ve discussed on the non-par side, we have seen hierarchs of the Sanchay Plus product increasing significantly during the quarter. So does that reflect competitive intensity or do we still hold up the spread for the margins that we’re doing in the business. Again, if you can give some color on that.
Vibha Padalkar — Managing Director & Chief Executive Officer
So I’ll answer the last one on the spreads. Our margins have not been impacted any significantly. So yeah, more or less the spreads have been great. It’s not just a spread business, there’s expenses in there as well, how we underwrite. So all of that goes in, so into that melting pot, we have been able to hold our margins on non-par. Suresh, you want to take the…
Suresh Badami — Executive Director
Yeah, your first question was on Term growth across the channels or was on overall growth across…
Dipanjan Ghosh — Citi — Analyst
Overall growth across the non-HDFC Bank channels and also what is the mix today on the overall or just non-HDFC Bank channels in your overall mix.
Suresh Badami — Executive Director
So we have seen fair growth, firstly, on our proprietary channels, which was in line with our overall strategy. We have been investing both on our agency as well as direct. I think also plus to not that Exide, on the other hand, while we run as a subsidiary on the agency, has also grown in the first quarter. So you will find that our strategy in terms of being able to grow agency and direct. In broking, we continue to maintain our market share and the growth there has also been much higher than what we are seeing at an overall growth level. The other banca relationships, which is other than HDFC Bank, in more so far other partnerships, whether it’s Yes Bank, Bandhan or IDFC, we are seeing significant growth, almost 90% to 100% growth, which has come at an overall other banca relationships. So if you were to leave aside HDFC Bank, which has also grown at a fairly decent rate in Q1, given that they’ve always had a large base and there we have different pressure on multi-type, but we have seen growth across proprietary which is agency direct.
The only cause of concern, which like I had mentioned earlier, right now is online business, where there’s a little bit of a pricing war which is happening as well as a lower sentiment on the direct. So those are the two, probably, channels, which we probably need to focus on. But other banca, broker and proprietary on agency and direct have been growing reasonably fast.
Dipanjan Ghosh — Citi — Analyst
Sure. And on the vintage countershare at HDFC Bank based on branch vintage?
Suresh Badami — Executive Director
So typically, some of the larger branch — so HDFC Bank obviously now has a huge number of branches and they have been growing, they have been growing 700 branches. We do track branches based on city categories as well as they have A, B, C, D, E, F to I categorization which is happening. Their presence in terms of the large branches in the metro Tier one Tier 2 is obviously very large. The productivity of these branches is huge because, one, they have a very large customer base in most of these A and B category branches. So there, of course, again, we have more or less similar market share across each of these type of branches. Probably the presence for HDFC Life in some of the upcountry markets is higher, but now, more or less, that has evened out after three, four years of multi-tier. So obviously, the productivity of the larger branches as well as the growth — the growth has been fairly similar across. I think some of the Tier 2 Tier 3 branches have been growing faster. But it is not a huge deviation in terms of how — I don’t have the exact specific in terms of how the greater than INR5 crore and less than — greater than five year and less than five year vintage branches are. But I would assume that the growth would be on similar lines.
Dipanjan Ghosh — Citi — Analyst
Sure. Just one data keeping question, can you quantify the non-HDFC Bank — the other banca channels, what is their proportion in your overall Individual business today?
Suresh Badami — Executive Director
So approximately 15% to 20% is the kind of number, but they are growing very, very rapidly.
Dipanjan Ghosh — Citi — Analyst
Sure. Thank you and all the best.
Suresh Badami — Executive Director
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Jayant from Credit Suisse. Please go ahead.
Jayant Kharote — Credit Suisse — Analyst
Thank you for the opportunity. Just one question. This change in assumptions of mortality strengthening, is this across the protection book or specific to any segment like CP or individual?
Srinivasan Parthasarathy — Chief Actuary
It’s both.
Jayant Kharote — Credit Suisse — Analyst
It’s both. And after this change, are we provided for FY ’23 or this will be an evolving situation?
Srinivasan Parthasarathy — Chief Actuary
No, we don’t provide anything. And I think, like we said, we set the assumptions at the sort of start of the year. So that goes through, so next revision, if at all, depending on the experience, would be in next February, March of next year, 2023.
Jayant Kharote — Credit Suisse — Analyst
Okay. Thank you.
Operator
Thank you. The next question is from the line of Rishi Jhunjhunwala from IIFL Institutional Equities. Please go ahead.
Rishi Jhunjhunwala — IIFL Institutional Equities — Analyst
Yeah, thanks. My — most of the questions have been answered, just one quick thing. You mentioned about a decline in the protection — term protection business on the online channel. Is that trend similar between your own online website versus web aggregators? Because it seems like the largest aggregator is still doing reasonably well there.
Suresh Badami — Executive Director
Yeah. They are along similar lines. I think, look, for us, we needed to ensure that there is parity on our pricing between our own sourcing as well as what we have on the largest aggregator. There is a little bit of a price differential, which you can see on the web aggregator level, which is one of the reasons we have — like Vibha had mentioned earlier, any kind of pricing which we have on any particular is what we would like to maintain across all our partners and all our channels. So the trending is similar and we’ve also tried to ensure that we have the right product mix even with the large aggregators or whoever we are playing with.
Rishi Jhunjhunwala — IIFL Institutional Equities — Analyst
Understood. And just — you’ve mentioned in your PPT about new product, Click 2 Protect Optima, being launched in FY ’23. Just wanted to understand, here the health cover is something that again, it’s a benefit one or is it something that you’re doing with your general insurance sister concern?
Srinivasan Parthasarathy — Chief Actuary
We have been doing this Click 2 Protect Optima for some time. It’s Ergo, which has launched a new health indemnity product called Optima Secure. So they had Optima Restore earlier, but now they got Optima Secure. So this combi product is to reflect their new product.
Rishi Jhunjhunwala — IIFL Institutional Equities — Analyst
Understood. Okay, thank you, all the best.
Operator
Thank you. The next question is from the line of Dhaval Gada from DSP Mutual Fund. Please go ahead.
Dhaval Gada — DSP Mutual Fund — Analyst
Yeah, hi, thanks. Sir, just one question relating to the GTI business, if you could just comment around sort of prospects there and profitability around that business. Yeah, thanks.
Srinivasan Parthasarathy — Chief Actuary
So GTI is now coming to some sort of a normalcy now more recently. So we believe that the pricing is more reasonable now. So therefore, we have also seen some uptick in our business and we believe that at these prices it’ll make some money for us.
Niraj Shah — Chief Financial Officer
It will be a fairly — relatively a tactical kind of a business because it’s bid out every year, right? So it really depends on how the pricing kind of works for the risk that we take and that’s how we look at this business.
Dhaval Gada — DSP Mutual Fund — Analyst
Got it, thanks.
Operator
Thank you. The next question is from the line of Prateek [Phonetic] from Nippon India Mutual Fund. Please go ahead.
Prateek — Nippon India Mutual Fund — Analyst
Yeah, hi. If I were to look at individual protection and compare it to 1Q FY ’20, the absolute amount is the same, but there is a pricing element sitting over here, plus this quarter you had ROP, which was not there in 1Q FY ’20. So adjusted for that on volume terms, the de-growth seems substantially to the extent of 30%, 40%. Is this only consumer discretionary the reason for it or is there something more to this?
Srinivasan Parthasarathy — Chief Actuary
There is also tightening of the underwriting norms, right? So, when you look at FY ’20, we are talking about a couple of years ago, and in the last two years, you’ve seen, there’s lot of stringency in the underwriting norms. So that’s also sort of contributing to the drop in the NOPs.
Prateek — Nippon India Mutual Fund — Analyst
But then it looks like that — I think someone was asking also, there is a cut-off, right? With higher pricing, the size of opportunity has reduced, right? Is that a fair understanding for protection?
Vibha Padalkar — Managing Director & Chief Executive Officer
So it’s either that or people are saying that, I will reduce the sum assured. So either they reduce the premium or they reduce the sum assured, these are the two levers that are there, or they will postpone.
Prateek — Nippon India Mutual Fund — Analyst
And when I look at your number of individual policies sold, on a three-year basis, the CAGR is just 1%. The lives insured is minus 6%, whereas our total individual APE has grown by 16%. Can you help me reconcile this in the sense, is there a element of volume de-growth happening and only average ticket size increasing? And I’m saying on a global basis.
Suresh Badami — Executive Director
I mean, given the — some of the products that we have launched on the non-par and par side, the average ticket size of some of these products has been significantly higher and it’s also been, like I mentioned earlier, an ease of sale for some of these products, given the high demand, which has been there for these products. The NOPs on the Term have actually degrown, that is right. Like Vibha mentioned, there were a few reasons in terms of whether the customer postponing or not taking it up based on the pricing and we also tightening our underwriting norms. So if you were to look at it without the Term, our growth has been — on NOPs has been there. But overall, the industry has been struggling with NOP growth and which is really where the challenge is for the industry in terms of the number of lives, which we need to cover. But we have grown — if we exclude this, over a greater than three-year CAGR of almost 10% in terms of NOP.
Prateek — Nippon India Mutual Fund — Analyst
And, Srini, if you can give me a number of [Technical Issues]
Suresh Badami — Executive Director
Sorry.
Prateek — Nippon India Mutual Fund — Analyst
No, no, go ahead. Sorry, sir.
Suresh Badami — Executive Director
No, I just mentioned that there are certain cohorts on the low-ticket size that we have exited because we found the quality of the business there in terms of persistency or in terms of claims or mortality being higher.
Prateek — Nippon India Mutual Fund — Analyst
Okay. And, Srini, can you give me some rough idea of number of unique customers which you would have, and the growth to do this, let’s say, over FY ’20 versus ’22?
Vibha Padalkar — Managing Director & Chief Executive Officer
We might feed that in subsequently, don’t have it handy.
Prateek — Nippon India Mutual Fund — Analyst
Okay, surely. Thanks. Looking forward to that. Thank you.
Operator
Thank you. Ladies and gentlemen, we will take last two questions. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Avinash Singh — Emkay Global — Analyst
Yeah, hi. So quickly, one thing on [Indecipherable]. So I mean, is that, again in terms of the volume, fall entirely led by the subdued demand or is it that — I mean if you can quantify that, okay, how much subdued demand is contributing and how much of it is because, I mean, your acceptance rate from proposal coming to acceptance had gone down, that’s all. And second, if you are able — if you are already able to launch this combination product, [Indecipherable] Ergo, if at all, regulator allow you to distribute a health product, what does it change really? Thank you.
Vibha Padalkar — Managing Director & Chief Executive Officer
I’ll take the second question and maybe Suresh can answer the first one. We have been at the forefront of nudging the regulator to allow us to sell, and this is something that we have been selling in the past, until about 2015. What this will do is, I mean, it will depend on what form or shape we’re allowed to. The ideal would be right from manufacturing to distribution, we can do both. Otherwise, it will just be distribution, which is what we have given — what we were allowed to recommend. So distribution is an ask that is there in the report that has been submitted. So first is that it will depend on the form or shape. If we are allowed to manufacture, great. What this will do is not just offer mediclaim products, that’s fine, but it will allow us a lot of product innovation, which today, that’s the missing piece. And while we can collaborate with and we do collaborate with companies like HDFC Ergo, it is at best a post-fit and it’s somewhat clunky from the customer’s point of view. So this will allow us to give a feature and build in a future into our existing product offerings, wherein it is — becomes very customer-centric as a one-stop shop for everything from mortality to wellness to morbidity, everything in between, right? So — and for us to ratchet up down to be able to add riders, similar to what we see in some of the other geographies and I talk about wellness as well. So it will allow us to do that. But we’ll have to see what we are allowed to do and then do the best that we can under that new regulatory regime. Over to you, Suresh.
Suresh Badami — Executive Director
So I’ll add first to Vibha’s second point, I think the overall value proposition and the improvement in productivity that we can see at a customer touch point of engagement, especially when we have a combination product like that, I think, can significantly add value, both in terms of the customer coverage that they will get as well as the total sales that we can generate or the additional sale that we can generate at every engagement.
On your first question, look, frankly, Niraj had mentioned this in one of the earlier questions, if you really look at it, our product mix has more or less remained stable across par, non-par, UL and Term. So there is a slight dip of 1% in Term, the par has more or less remained. We mentioned this earlier, I think, look, we do tend to balance our product mix based on what the overall market scenario is like. And we have been managing to do that across each of the channels. So while on the Term side, there has been — we do see a little bit of a customer sentiment slowdown in terms of searches, we see that happening, like we had mentioned and there is maybe the impact of inflation or a delay and postponing. There has been a little bit of a tightening at our end because we are looking at all product lines across all channels to help us deliver on both the risk side as well as the quality of business.
So if you’ve noticed, our persistency continues to remain top-in-class. Our product mix remains the same and if for a certain quarter, we see a little bit of Term slowing down, we have tried to make sure that the overall sum assured or the protection that we grow has helped from the credit protect business. So both protection and annuity combined put together are going up. Our credit protect business is leading to the overall protection in terms of both number of lives as well as the sum assured that we are covering. And depending on how we find the overall market evolving, we’ll be able to change the product mix as we go forward.
Avinash Singh — Emkay Global — Analyst
Any sort of pointers in terms of your acceptance rates from proposal [Indecipherable] issuing a policy. I mean, if there is some metrics. I mean, how much sort of you had become — accepted from your side rather or your issuer sides kind of issuing it out of a proposal hypothetically.
Operator
Sorry to interrupt you, Mr. Singh, your audio is not clear.
Suresh Badami — Executive Director
Yeah, again there is a little bit of a disturbance. Yeah, now it’s improved a bit. So look, I think there’s a fair amount of effort in terms of understanding which persona, which profile, which markets will want to source and where we would want to push the channel’s resource. So while our throughput has increased, like I mentioned earlier, almost 3, 4 percentage points, our throughput has increased. What we have tried to do also is to ensure that we are getting the right profile in today’s underwriting norms. Like we had mentioned earlier, there were certain cohorts, where we saw the risks higher or the persistency lower. We have tried to go back and say that we probably don’t want to source those profiles. So there has been an improvement in terms of our throughput. We are looking at that, but it is very closely balanced with the risk that we would want to take on these kind of offers.
Operator
Thank you. Mr. Singh, may we request that you return to the question queue for follow-up questions. The next question is from the line of Madhukar Ladha from Elara Capital. Please go ahead.
Madhukar Ladha — Elara Capital — Analyst
Hi, thank you for taking my question. You mentioned that the shorter end of the yield curve has risen more than the longer end of the yield curve, which obviously implies the yield curve is flattening a little bit. And so the question is, if this trend continues and if we go back to a yield curve, which was probably prevailing two or three years back, which was very much more flatter than what we are right now. How would you see that to impact the supply of FRAs? And then, would it be that easy to sort of construct the non-par products that the market seems to be doing now? Your comments on this would be helpful.
Niraj Shah — Chief Financial Officer
See, we don’t expect the shape of the curve to change the supply of FRAs. More and more banks are coming into this, the banks are increasing the capacity and more banks — more domestic and foreign are coming into this. So we don’t expect the supply of FRAs to get impacted by the slope of the curve. What can get — what will — what can change is in terms of the economics in terms of what happens to the spread that gets dictated by the difference between the spot and the OIS yields, and that is something that can change from time to time. But ultimately, from our perspective, it’s about managing the spread, right. We’ve discussed, we were doing non-par using our internal capacity before FRAs were allowed and FRAs were allowed and we started using that. Even today, when we look at our entire risk management approach, it’s not disproportionately dependent on FRAs.
So what we are doing today, if you look at our FRA numbers for the last couple of years, you will find a INR10,000 crore odd number in FY ’21. We got it during FY ’22 in spite of business having going up. So as such, dependence on FRAs is — it is a good instrument, we use it for risk management, but we are not overly dependent on it. So the economics of it, we will try and managed by managing our spreads. So if we’re getting a positive spread on that, some of it can be reflected in the rates given to the customers, some of it can get reflected in terms of the spreads that we get. So that’s how we look at it, Madhukar.
Madhukar Ladha — Elara Capital — Analyst
Right. And just a follow-up on this, from the bank’s perspective, obviously a flattening — a more flatter [Indecipherable] curve would mean lower spreads for them. Don’t you think that would then disincentivize them from sort of writing more FRAs?
Niraj Shah — Chief Financial Officer
So, again, you can, of course, talk to the counterparties. But actually if you look at the the way this business works is really the bank is using the balance sheet to earn this spread themselves. Now unless that balance sheet is being used to write some other business at high levels, it’s very, very different. And also in terms of — you see the economics of global banks, the kind of returns that they may have in their own global balance sheets. What you get in India is still fairly attractive, no matter how flat the curve gets just because of the level of the interest rate itself.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Ms. Vibha Padalkar for closing comments.
Vibha Padalkar — Managing Director & Chief Executive Officer
We would like to thank all of you for participating in today’s results call. Good evening.
Operator
[Operator Closing Remarks]
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