HDFC Life Insurance Company Ltd (HDFCLIFE) Q2 FY23 Earnings Concall Transcript

HDFC Life Insurance Company Ltd (NSE:HDFCLIFE) Q2 FY23 Earnings Concall dated Oct. 21, 2022

Corporate Participants:

Vibha Padalkar — Managing Director and Chief Executive Officer

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Avinash Singh — Emkay Global Financial Services — Analyst

Suresh Badami — Executive Director

Niraj Shah — Chief Financial Officer

Eshwari Murugan — Appointed Actuary

Analysts:

Prakash Kapadia — Anived Portfolio Managers — Analyst

Swarnabha Mukherjee — B&K Securities — Analyst

Akshat Mehta — Sameeksha Capital — Analyst

Nidhesh Jain — Investec Group — Analyst

Shyam Srinivasan — Goldman Sachs — Analyst

Dipanjan Ghosh — Citigroup Inc — Analyst

Anand Bhavnani — White Oak Capital — Analyst

Madhukar Ladha — Elara Capital — Analyst

Nischint Chawathe — Kotak Securities — Analyst

Deepika Mundra — JPMorgan — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the HDFC Life Insurance Company Limited Q2 FY ’23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Ms. Vibha Padalkar, MD and CEO of HDFC Life Insurance Company Limited. Thank you, and over to you, ma’am.

Vibha Padalkar — Managing Director and Chief Executive Officer

Thank you, Faizan. Good afternoon, everyone. Thank you for joining us for the discussion on our results for the half-year ended September 30, 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; Eshwari Murugan, our Appointed Actuary; and Kunal Jain from Investor Relations. I would like to take this opportunity to congratulate Suresh on his elevation as the Deputy Managing Director. We look forward to continue building an industry-leading and customer-centric franchise.

I will take you through the key highlights of our H1 FY ’23 results and would be happy to take questions post that. As you may be aware, our subsidiary Exide Life merged with HDFC Life on October 14, pursuant to the receipt of the final approval from IRDAI. The entire transaction right from the announcement of the deal in September 21, followed by the acquisition in January ’22 and the eventual merger was completed in less than 14 months. I would like to thank our regulator and all other authorities involved in the M&A for their encouragement, support and timely approvals.

Customers across both entities will now have access to a wider bouquet of products and service touchpoints. All policy holders of Exide Life will continue to receive best-in class service from us. All Exide Life distribution partners will now have access to HDFC Life market leading products, services and digital capabilities. This merger accelerates the scale-up of HDFC Life agency and broker channels and also enhances its geographical presence in Tier 2 and Tier 3 markets. We strongly believe that this amalgamation will result in value creation for our customers, shareholders, employees and distribution partners.

As we emerge from the shadow of COVID, we wanted to take stock of the performance of the Indian life insurance industry compared to regional insurers. The Indian private life insurance sector has grown at a two-year CAGR of 14% during the COVID years and continues to record double-digit growth in the current year. While growth in retail protection continues to be a challenge, companies had several other levers to deliver consistent margin expansion, and hence, robust growth in value of new business, while maintaining balance sheet resilience. This is commendable, especially given the large life insurers in the Asia-Pac region have experienced degrowth in both top line as well as value of new business.

We are happy to have played our part holistically, delivering a two-year CAGR of 17% in top line, 18% in value of new business and about 150 basis points expansion in new business margins between FY ’20 and FY ’22. This was possible on the back of continued product innovation, diversified distribution, balanced product mix, focus on technology and calibrated risk management approach. It is worthwhile to note that despite the claims payout during the pandemic of over INR40,000 crores in FY ’21 and around INR69,000 crores in FY ’22 by our industry, adequate solvency levels are maintained and there was a range-bound impact on the embedded values of large insurers. This speaks quite highly of the inherent strength of the Indian life insurance sector.

We continue to be excited about the growth prospects of the industry on the back of renewed support and incorrect encouragement from our regulator. We are enthused by the regulator’s vision of significantly improving the global ranking of Indian life insurance from its current number 10 position to number 6 and look forward to being a meaningful contributor in this journey.

Starting with our business update, we continue to maintain a steady growth trajectory, growing by 11% in terms of total APE in H1 FY ’23 on a pre-merger basis, i.e. excluding Exide Life. We have grown in line with the industry and faster than listed players this quarter, which also led to market share improvement from 14.6% in Q1 to 15% in Q2 on a pre-merger basis. We have maintained our market leadership position as a top three life insurer across individual and group businesses.

Market share in terms of individual WRP for the merged entity i.e. including Exide Life stands at 16.1%, amongst private players and 10.2% within overall industry. Our product mix, both on a pre-merger basis as well as for the merged entity remains balanced. On a pre-merger basis, non-par savings sat at 37%, participating products at 29%, ULIPs at 23%, individual protection at 4% and annuity at 7% based on individual APE. Within the non-par segment, our shorter tenure product Sanchay FMP continues to grow well and now contributes over a fifth of our non-par individual APE. The prevailing high interest rate scenario continues to augur well for demand across our traditional saving products.

On the protection front, the credit protect business has registered a strong growth of 66% for H1 FY ’21 on the back of rising disbursements across most of our partners. While growth in retail protection remained tepid on a Y-o-Y basis, quarter two grow is sequentially higher by 26%. We expect Y-o-Y growth to gradually pick up in the second half of the year. We also launched a new product Click2Protect Super during the quarter. This product has been received well across channels, especially on digital platform. We continue to steadily improve our individual protection policy conversion ratios through process efficiencies and several other initiatives. Protection APE has grown by 24% in H1 FY ’23 on a pre-merger basis.

On the retirement fund, our annuity business in H1 FY ’23 has grown by 4% on received premium basis compared to a 4% degrowth for the industry. Growth of annuity on an APE basis is 44%. Our regular premium annuity product, Systematic Retirement Plan introduced in December ’21 last year, continues to attract interest from customers across channels. We also launched Click2Protect Optima Secure in partnership with HDFC Ergo. It is a comprehensive financial protection plan that offers dual benefits of health and life insurance. We continue to lower innovative ways to help deepen protection penetration, hence, in addition to the existing products such as pure term return of premium variant, credit life and group term, we are also now offering savings products that offer higher than typical 10 times this covers.

Moving on to key financial and operating metrics, new business margin for H1 is 27.6%, up from 26.4% in H1 FY ’22 on a pre-merger basis. There has been margin expansion for both the existing business, i.e. pre-merger and acquired Exide Life business in H1 FY ’23. We are close to achieving our aspiration of maintaining FY ’22 margin neutrality for the combined entity having delivered 26.2% NBM compared to 26.4% in H1 FY ’22. The value of new business has grown by 16% on a pre-merger basis and is at INR1,258 crores for H1.

Our embedded value on a pre-merger basis stood at INR33,015 crores as on September 30, 2022, with an operating return on embedded value of 17.7% for H1 FY ’23. The embedded value of the merged entity stood at INR36,016 crores. Profit after tax on pre-merger basis stood at INR682 crores, a year-on year increase of 18% during H1 FY ’23. This was aided by strong growth of 35% in existing business surplus.

Our solvency ratio is 210% as on September 30, 2022 as against 178% last year. The solvency was strengthened by way of an equity capital raise of INR2,000 crores during the quarter. Renewal premiums have grown by 21% on a pre-merger basis, persistency continued to improve for both the existing business, i.e. pre-merger basis and the acquired business. Our 13th and 61st month persistency for limited and regular pay policies is at 88% and 54% respectively on a pre-merger basis and 87% and 51% on merged basis.

Next on channel performance, our bancassurance channel grew by 12% in FY ’23 based on individual APE. Within bancassurance, we continue to see strong growth momentum across our newer relationships such as Yes Bank, Bandhan Bank, IDFC First Bank amongst others. In our quest to expand and diversify our distribution, we have won the bancassurance mandate with India Post Payments Bank. IPPB has a vast network of 650-plus branches and over 1.5 lakh post offices, serving a customer base of over 55 million customers. A large part of the post offices are in rural areas, thereby giving us wider access and furthering our goal of ensuring India.

Our agency channel grew by 23% based on individual APE in H1 FY ’23 on a pre-merger basis. We added about 24,000 agents in H1 FY ’23 and continue to focus on improving activation and productivity across our base of financial consultants. The share of agency to individual APE has increased from 15% to 18% in the merged entity. We expect growth in this channel to be driven by the larger agent base with access to a wider suite of products.

Moving on to tech and innovation, we have integrated our customer journey with external databases such as credit bureaus, traces and EPFO to ensure seamless onboarding. This will enable us to access latest ITR returns and EPFO passbook with customer consent, ensuring stronger and faster underwriting and quicker policy issuance with — for both salaried and non-salaried customers. Innovative solutions such as enabling cardiac risk assessment at the customers’ residence for medical underwriting, furthers our motive of simplifying customer journey and provide best-in class service. In an industry-first initiative, we have now launched home medicals for our overseas customers in over 20 countries.

Now, an update on HDFC Pension. As on September 30, 2022, HDFC Pension had a market share of 39.3%, up from 35.9% a year ago and an AUM of INR35,146 crores clocking growth of 57%, they were maintaining its leadership position in the private NPS, Pension Fund Manager trace.

Moving on to regulation, IRDAI has taken several measures with clear focus on increasing insurance penetration in the country and enhancing ease of doing business. One of the initiatives we have taken is a form of Bima Sugam, a digital platform that will give more choice to the customer. We believe this is a step in the right direction. Having several insurers on this platform would increase collaboration and help save resources to enter individual campaign to increase customer awareness. Bima Sugam can help sharpen underwriting through real-time data access, some account aggregators and multiple repositories, with due customer consent, thereby enabling faster turnaround.

The most noteworthy distinction between Bima Sugam and existing digital marketplaces is opening up a direct-to-customer connect that besides policy purchase shall also serve as a platform for servicing and grievance redressal. To conclude, our objective remains to empower individuals to provide financial protection to their loved ones and widen insurance coverage for the mix of innovative products and diversified distribution. The detailed disclosure on our results is available in our investor presentation.

We’re happy to take questions now.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Suresh Ganapathy from Macquarie. Please go ahead.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Yeah, hi Vibha. So I had three questions —

Operator

Mr. Suresh Ganapathy, your line is in talk mode. Please go ahead with your question.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Yeah, hello. You can hear me? Hello.

Operator

Mr. Ganapathy, your line is in talk mode, please go ahead with your question.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Yes, sure, okay. So I had three questions. One on the FRA aspect —

Operator

There is no response from the current participant, we’ll move onto the next question from the line of Avinash Singh from Emkay Global. Please go ahead.

Avinash Singh — Emkay Global Financial Services — Analyst

Yes, hi. Good afternoon. Couple of questions. The first one particularly is a bit on the segmental surplus deficit. So, what kind of a product dynamic changes are there —

Operator

I would request you to please repeat your question?

Avinash Singh — Emkay Global Financial Services — Analyst

Hello, am I audible?

Operator

Yes.

Vibha Padalkar — Managing Director and Chief Executive Officer

Yeah, Avinash, go ahead.

Avinash Singh — Emkay Global Financial Services — Analyst

Yeah. So one is on the segmental part. I mean, in the non-par, your surplus deficit movement, now it seems in this financial year with Exide and HDFC merged numbers, it looks like almost like you have no deficit. But in earlier, where we had, I mean, a standalone HDFC Life, there used to be a bigger deficit. So what kind of product dynamic has changed because of this merger that sort of a leading to this — the quarterly surplus. Of course, I know that this number keeps moving with the product dynamics in that particular quarter. So that’s one.

Second, more in terms of — because you touched upon Bima Sugam. I mean, do you see, I mean, not immediately, but that will be a meaningful number contributor and how is that going to behave these further channels? Because, I mean, I’m calling from the fact, unless there is kind of a pricing difference, as a customer, I mean, you have n number of reasons to be in touch with a lot of distributor [Indecipherable] or bank. So why I’m going to — if I’m going to let the product with the same price on that platform, why should I just get attractive price for that platform. And if there is sort of price benefit then how you are going to manage channel conflict? Thank you. These are all my questions.

Vibha Padalkar — Managing Director and Chief Executive Officer

So on the first point, Avinash, the — on the segmental non-par, it is largely because of the claims settlement. Segmental non-par will have [Indecipherable] outcomes. As you know compared to unit linked, unwinding of profits to Indian GAAP will take little bit longer, but that should be very, very healthy. Also in terms of your next question on Bima Sugam, the way we see it is that, may a thousand lotuses bloom to put it very succinctly that it is not this or that, it should be in whatever form or shape, that we’re able to extend insurance to the average Indian, so that by 2047, we are able to ensure that this is the regulator’s vision that every Indian has some level of insurance cover.

And so the more and mores of reach to the customer, the better. Now to your point, will it be cheaper? I think some of those modalities will get worked out, but there will be no intermediation, there will be no calling, so it is not that you login something and there is a calling or there’s an intermediary, that is not to say that either all business will come through Bima Sugam or new business will come. I think it’s a question of different avenues of purchase like with everything else, some people will want advisory at least for more complex products, some lower ticket simpler products might go to the Bima Sugam and so on.

I think what is very creditable is the vision of the regulator, in a way, it is like Farm-to-Table concept, wherein as a manufacturer, I’m directly able to offer it to the customer. Another important aspect is, what the regulators rightly said that, even existing distributors or partners can come on to Bima Sugam, so it can be that there is a broker for example, who is also on Bima Sugam, who says I’m broker X, Y, Z/Bima Sugam/ — whatever. So you go through that broker. So, somebody might want that, it’s a hybrid model, it’s a digital model. So really it is a one-stop shop. We’ll have to see how the pricing evolves, but I think it will be more attractive at least for certain types of products than perhaps in some of the channels.

Avinash Singh — Emkay Global Financial Services — Analyst

Okay. Thank you.

Vibha Padalkar — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Suresh Ganapathy from Macquarie. Please go ahead.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Yeah. Hi, Vibha, am I audible now?

Vibha Padalkar — Managing Director and Chief Executive Officer

Yes, Suresh, please go ahead.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Yeah. Okay, great. Okay. So I have two questions or rather three questions. One is on the FRA aspect itself. I mean, now that we have seen some problems emerging in some of the European banks, and also the fact that the yield curve has significantly flattened out. Do you think there could be an issue of supply of FRAs in any way which could of course hamper your ability to offer non-par guaranteed products? That’s question number one.

Second thing, Vibha, very clearly there is weakness in the protection segment. I mean, you may argue Q-o-Q, it’s gone up, but Y-o-Y, the individual APE in the protection segment is down 39% as per my calculation. And even in your overall business, you have lost market share. I mean, your overall growth for the quarter has been only 4% APE, the other guys have done brilliantly well. Some of your other channel — HDFC Bank channel partners like Tata, Birla, all of them have done very, very well with very strong growth. So you have actually lost market share this year. So wanted to understand what’s happening on the growth front, because it’s pretty rare that HDFC Life loses market share.

And the third question is on Bima Sugam, obviously you did explain, but do you think it can possibly take away some of the market share from other digital marketplace players. In case, they’re really coming up with a great deal in a open platform like UPI, there is a possibility that the other digital market players may lose, just wanted your views on that? Thanks, Vibha. Over to you.

Vibha Padalkar — Managing Director and Chief Executive Officer

Yeah. So typically in the private space, Suresh, we — I’m taking the second question first, which is on market share.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Yeah.

Vibha Padalkar — Managing Director and Chief Executive Officer

We have tendered at about 14.8% to 15%. We are very much there in terms of market share. It is a mid-tier company that have grown quite significantly on market share. And when you triangulate that holistically with how much of risk is being taken on the balance sheet as well as what are the cost ratios, very little disclosure, then just one aspect of it is, it’s quite — it becomes unidimensional. We are fairly confident of continuing to grow down the line and I’ll talk about it faster than the market, this I’m talking about life insurance — the private life insurance sector.

Yes, there will be some blip. One of the reason for the blip, while quarter two has been better in terms of market share than quarter one, market share excluding Exide has been 15% in quarter two versus 14.6% in quarter one. And we will definitely trend upwards. If I were to deconstruct between growth in HDFC Bank versus other than HDFC Bank — other than HDFC Bank in terms of versus every metric you take whether on quarter two, whether it is on H1 and so on, we have grown faster than the industry at least 2x to 3x faster than the industry, other than HDFC Bank. So this is my proprietary channel, Broca channel, new tie-ups so that has happened.

With HDFC Bank, we have slowed versus the industry growth and consequently some of the mid-tier players have grown. Now, two things here, one is that there is a base effect, so base effect will also normalize. Also the merger itself, wherein HDFC Bank becomes our promoter, it is bound to happen and HDFC Bank management has also alluded that closer to regulatory approvals coming through, there certainly will be alignment because your promoter is also your largest distributor. So some of those things, alignment will start happening. So, I think deconstructing where there’s been degrowth, wherever we’ve had a direct control, we have grown. So quarter one, quarter two and so on, we have grown much faster than the market.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

How much does HDFC Bank contribute now compared to a year earlier?

Vibha Padalkar — Managing Director and Chief Executive Officer

It’s about 48% — between 46% to 48%.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

And year before?

Vibha Padalkar — Managing Director and Chief Executive Officer

It’s about 200 basis points higher at that time.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Okay. So this 200 basis points is lower now, you mean to say?

Vibha Padalkar — Managing Director and Chief Executive Officer

Lower, yeah.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Okay, okay.

Vibha Padalkar — Managing Director and Chief Executive Officer

Yeah. So, about 50-50 if you see then in quarter two, for example, we have grown other than HDFC Bank, we’ve grown about 18%, which is about 2.5 times what the industry growth has been.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Okay.

Vibha Padalkar — Managing Director and Chief Executive Officer

So it’s more in terms of just getting this part of it sorted out with some of the structural changes should come through. Of course, we will continue to offer innovative products and customer service and all of that. But I think structurally that changes will happen. Second, if I can move on to Bima Sugam —

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Protection, when the protection has been weak, Vibha, I want you to address that also —

Vibha Padalkar — Managing Director and Chief Executive Officer

Yeah. So on that protection, yes, we continue to — like we mentioned while Q2 is better than Q1, but yes last year there was bit of a ramp-up before if you recall end of December when again price changes happened, second price hike for the reinsurers. So it was reasonably gaining traction before again the insurers increase the prices. Now on retail protection, we Suresh tried to continue taking a calibrated basis. Obviously, we would not want to say no to business, but say on aggregator platforms, where there is a direct comparison and we can see that the pricing at which there is an ask is not making sense to us as well as the risk is not — not asking the right underwriting question is not making sense to us, we want to stay away from those profiles of life.

We do believe that down the line and we are beginning to see some level of stress when you calibrate it with either claims rejections or from sum assured and so on, the balance sheet risk that is there. Anecdotally we know that some — lot of high ticket cases that we say no to does get converted elsewhere. And some of those balance sheets do show higher levels of risks that are being retained. And here we are talking about maybe 400x the first year premium. So while we remain enthused and we’ve been the first movers in this space, we will grow this brick by brick. And the traction we are seeing quarter two versus quarter one, another data point is that we did mention that we are low — around 60% that is some of the channels have now exceeded 70% in terms of conversion.

So we are looking at aspects that we can get right, we are also doing another thing, we are also retaining more risk in the sense, calibrated risk on our balance sheet. For example, if reinsurers are taking a very, very conservative view to say that — I won’t say last three years of tax returns, we have the last two, the last — the third year from today going back in time that individual doesn’t have. We will try and triangulate that with some other means, rather than saying no to business. Now that we have more capital and we’ve raised that in this quarter, it’s come through, we are taking some calibrated calls rarely in the case of medical calls but in the case of financial calls.

So, we’re doing that, but we have no reason to believe that the business we’re saying no to will magically exhibit very good levels of mortality. And when you triangulate that, Suresh, with some of the — most of the industry apart from mid-tier players that there is no disclosure versus what has been — what has been assumed actuaries of their company. In the absence of that, it’s very difficult to understand what is going on. Suresh, you want to add anything on this particular —

Suresh Badami — Executive Director

No, I think you covered it elsewhere, just to say, I think there has been a fair amount of focus in continuing to diversify and grow on our proprietary channels as well as the new [Indecipherable] and we see significant traction there in terms of both market share and quality of business. I think even at HDFC Bank while there has been a slight difference there, Vibha, correctly mentioned that it should correct once the overall merger is in place and we see the value in the subsidiaries. But I would also say that, look, we have been fairly cautious in terms of which business, what quality of business and we’re quite happy in terms of the business that we’re writing through HDFC Bank. And we do believe that over the next half of the year, you will see significant growth in terms of our market share at H Bank [Phonetic] also.

Vibha Padalkar — Managing Director and Chief Executive Officer

We’re also trying to get to the same answer like I mentioned in my opening remarks of higher levels of sum assured, rather than going through just — just through a pure protection. Also looking at return of premium, how do we increase that to customers that want to buy that, also riders. So these are different ways of getting to the customer rather than just losing on risk management.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Okay.

Vibha Padalkar — Managing Director and Chief Executive Officer

Yeah. The next one is on Bima Sugam, I’ll just finish that before I hand over to Niraj on FRA. On Bima Sugam, you mentioned as to how this is versus other digital platforms and so on. In the near-term, I don’t think it will get impacted, however, what we’ve seen in the payments ecosystem of at least on smaller ticket payment, massively taking off. I expect to see that happening at lower and — lower ticket kind of simple products and younger people coming there and buying without the need for a intermediary. I do see that taking off but it will take some time, it will take some time and traction, word of mouth because none of this is going to be massive advertising budget, all come together to perhaps pool together advertising money. We already have that through the life council, but everyone needs to join to be able to also include it in there, otherwise how do you pass on that message that, hey, you can come onto this website and if a reasonably savvy, you can do your own search, pinging the companies you want to ping and then you’re buying journey from here.

So it’s conceptually very, very strong proposition. I think over the next two or three years that kind of a roadmap, it can start getting meaningful especially in the term space.

Suresh Ganapathy — Macquarie Capital Securities — Analyst

Okay.

Vibha Padalkar — Managing Director and Chief Executive Officer

Yeah. And FRAs, I’ll hand it over to Niraj.

Niraj Shah — Chief Financial Officer

Yeah. Suresh, on FRAs, a couple of things that you mentioned in terms of situations with a couple of banks and second is in terms of the way the interest rates are moving. So I’ll start with the second one first really, see, the primary objective of FRAs is risk management, yield pickup if it comes because of certain interest rate environment is just a bonus. Yeah, that source has obviously dried up now compared to what it was couple of years, but that’s fine. It’s about spread management to be able to be neutral on that front and that is something that we continue to do.

So for us, we continue to focus on FRAs is one of the tools of risk management for us. Our dependence on FRAs probably is very different and lower than some of the other players who may be actually looking at this instrument. For us, this continues to be diversified across more than 10 counterparties. The two banks that are in the news — not more than about 10%, 12% each. And again from an instrument perspective as you know these are basically daily margin settled in any case, so there is no credit risk that is carrying on in this instrument.

What happens is in a scenario where [Indecipherable] because of which further operations are not possible to be continued, it’s about unwinding the contract and carrying on that contract with somebody else, so that’s the only aspect of it, which can be a bit of an operational issue challenge for maybe a couple of weeks before that can get done. But nothing really beyond that. And as we speak, we see more and more banks coming into the fray, domestic banks are getting larger in this space, so we don’t see a supply-side issue here, Suresh.

Suresh Badami — Executive Director

Okay. Thanks, Niraj.

Operator

Thank you. The next question is from the line of Prakash Kapadia from Anived Portfolio Managers. Please go ahead.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Yeah. Thanks for the opportunity. Two questions from my side. On the EV walk-through, could you give the breakup of the 12.4 billion negative impact between debt and equity this quarter?

Vibha Padalkar — Managing Director and Chief Executive Officer

Yeah. I’ll hand it over to Esh — Eshwari.

Eshwari Murugan — Appointed Actuary

Yeah, Prakash, the INR1,250 [Phonetic] odd crores of negative investment variance is mainly because of the increase in the interest rates thereby having an LTM on the bonds that we hold, that is about INR1,000 crores, the balance is from the equity. We expected around 4% return on the equity based on that unwind rate, but the equities have been more or less flattish, that is why there is an impact due to the equity on the —

Prakash Kapadia — Anived Portfolio Managers — Analyst

Okay, got it. And with the current interest rate regime, any change in unwind rates from the 8% envisaged just earlier? Do we expect any —

Eshwari Murugan — Appointed Actuary

So we have been following the method of setting the unwind rate at the start of the year. At the start of the year, we take a view based on the economic environment at that time. This 8.1% has been set based on the environment at the start of the year and we don’t change it during the year. Any difference, it’s reflected in the investment variance, and at the start of next year, again based on the environment at that time and based on the asset that we hold will reset the unwind rate.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Sure. That’s helpful. And lastly now given the Exide merger has done, what kind of APE growth and VNB margins can we look at in the second half? Because this quarter also, few months have been good in terms of growth, few quarters have been muted. As we step into the second half, Q4 was a bit muted. So on a consolidated basis, what are we looking at in the second-half of the year?

Eshwari Murugan — Appointed Actuary

So we are looking at about a 15% to 17% kind of a growth. And again some of the things that I mentioned in terms of a parent company merger also will help accelerate that. On the margins what we have said is that we will get to margin neutrality by middle of next year, which means that, if you exclude this one year from 14th of October onwards, one year from that of a merger with Exide Life, thereafter we should get back as if we are back on the treadmill of where HDFC Life standalone was. So the entire merger and synergy extraction would have got subsumed within that.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Okay, fine. Thank you. All the best and Happy Diwali and Happy New Year to the team there. Thank you.

Eshwari Murugan — Appointed Actuary

Likewise, thank you.

Operator

Thank you. The next question is from the line of Swarnabha Mukherjee from B&K Securities. Please go ahead.

Swarnabha Mukherjee — B&K Securities — Analyst

Thank you for the opportunity. My question, sir, on two areas. First of all, on your group portfolios. So if I look at the product categories, Group Term Life and Group Annuity, so very divergent pictures there and I wanted to have your comments on the same. So Group Term Life looks — seems to be doing pretty well, but what are the trends you are seeing about pricing in that portfolio and how do you see it growing ahead? And on the Group Annuity book, it seems to be degrowing every quarter. So — and your annuity portfolio seems to be driven by the individual side. So what is happening on the Group Annuity side, with some color on that as well. So that is the first area.

On the second thing, I wanted some color on how we should think about the EV roll-forward after this merger for the combined entity? So how should we think about the, say, unwind rate? How should — given that VNB is a very small component for Exide Life right now, so what would be the operating ROEVs you will expect and started putting the consolidated number in EV? And how would be the persistency given that the renewal rate for Exide Life is much lower than what our standalone entity has right now? So, those are my questions.

Suresh Badami — Executive Director

Yeah, this is Suresh. So let me address your question on the Group product. I think you were referring to the Group Credit Life, I’ll cover both the Group Credit Life as well as the Group Term Insurance kind apart. See, GTI, which is — actually we have still not picked up and growing to it fully because we are calibrating in terms of the risk as well as the pricing, it’s an annual renewable product. So in some sense, we will monitor and come into the group term. Moreover in, group credit life which is where we see and to add on to the earlier question which was there on protection, we have been fairly agnostic in terms of how do we cover protection overall. That business has been growing considering for us on — because of multiple parameters.

One of course is the fact that our partnerships by themselves are growing in terms of disbursement. Second, there has been deepening of relationship across most of our partners in terms of the value penetration as well as the newer loan verticals that we’ve been able to add on. We have also been able to add on a fair number of newer partners. And more importantly having gone through the whole COVID experience, understanding the market across each of these relationships, we have been able to reprice significantly in terms of what is it that we can do across each of these particular.

So both in terms of profitability as well as growth, we are seeing a significant improvement on the credit life business. And in some sense frankly while the individual protection has been slightly muted overall for the industry, we have managed to get our overall protection growing on a combined basis. On the Annuity — Group Annuity side, clearly, we have invested in the pension company, we have also a huge amount of relationships which is happening in terms of the PSU relationships and we do believe that that market in terms of market share across most of the [Indecipherable] we have a significant presence. So we have been able to grow that.

We have had a steady increase in market share if you were to look at it, in terms of the annuity business, in fact while the overall annuity numbers for the industry has degrown, we have been able to get a growth at HDFC Life. So there have been a little bit of a slowdown in the group annuity because of deferment in anticipation of better rates. But I do believe that over a period of a time, the annuity segment will continue to grow at fairly significant rates over and above the industry growth rates.

Niraj Shah — Chief Financial Officer

Yeah. To your question on what happens to the embedded value post Exide Life, there are a couple of things here, we did discuss in terms of our aspiration to get to margin convergence in the next few quarters. As you know on a half yearly basis, already including, Exide we are very close to last year margin levels. So the two components of the embedded value would be the VNB accretion and the second would be what is earned on the existing assets or the unwind. On VNB, as we are talking about convergence to HDFC Life margins over a period of say three to four quarters, you should see that coming through in a similar form as it is in HDFC Life, so there should not be a leakage from that perspective.

Unwind is more in terms of the kind of assets that you hold, given that the product mix as you are aware is very little, unit linked largely it’s a bond kind of portfolio. So the unwind rate and the methodology will be set then we’re looking at setting assumptions at the end of the year. So that would be a uniform approach on those assets as well. So given that Exide Life is about 10% of the embedded value of less than 10% of the embedded value of the overall combined entity today, we do not see much of a gap coming through on account of that, there could be a couple of quarters while this alignment happens but over a year or a couple of year basis, we do not see any sort of gap in the pre-merger and post-merger EVOP.

Persistency also you mentioned is — has been improving, so on a standalone basis, 13-month improved from 73% to 76% we have a line of sight of getting to 80% very quickly. And given the kind of product mix that they are — that is being generated in those segments, we do believe that this can be fairly — the experience is fairly close to the assumptions that have been set, so that’s something that we had very carefully assessed at the time of — in the early part of the transaction itself. So no concerns on that front either.

Operator

Thank you. [Operator Instructions] We’ll take the next question from the line of Akshat Mehta from Sameeksha Capital. Please go ahead.

Akshat Mehta — Sameeksha Capital — Analyst

Hello.

Operator

Please proceed.

Akshat Mehta — Sameeksha Capital — Analyst

Yeah. So I [Technical Issues]

Operator

Mr. Mehta, sorry to interrupt you, the audio is not clear.

Akshat Mehta — Sameeksha Capital — Analyst

Okay. Can you hear me now properly?

Operator

Yes, sir, please proceed.

Akshat Mehta — Sameeksha Capital — Analyst

So my first question was on the ROP business. What is even share of ROP in the overall business post-merger and what kind of strategy are you planning to expand the share going forward and if there is any kind of target share that you are looking at? That is the first question.

Vibha Padalkar — Managing Director and Chief Executive Officer

Yeah. So Akshat, no target per se. We are reasonably agnostic of — as long as end game is to protect oneself adequately in whichever form or shape. So this is a product offering we have, we are in the zone of 20-plus-percent and it will also depend on which channel is selling it. So we’ve had this product for quite some time and we continue to sell this. And really between this, between regular premium, between limited pay to credit life, these are all different modes of getting to adequate protection.

Akshat Mehta — Sameeksha Capital — Analyst

Okay, okay. My second question is on the FRA part, given the current environment, what would be the mark-to-market losses in your FRA, if you can give some kind of a number? And I mean because of that, is there requirement to increase the rates in annuity and non-par products given that the FB rates are also increasing. And what would be the impact on the margins on account of that?

Niraj Shah — Chief Financial Officer

Yes. So on FRA, the mark-to-market really on a net basis is — there is no impact because of the equity FEC that you can set off against any sort of FEC negative that you may on the debt side and then in increasing interest rate environment, so there is no impact on that front on a net basis. As far as being competitive on non-par products, the headline rates they continue to move up, we have the opportunity to increase the rates and we’ve taken those opportunities both on the annuity front as well as the non-par savings, while managing our spreads, so that is something that we can continue to offer.

Compared to shorter-term products you know that, these are on a tax advantage basis, fairly strong proposition from a customer perspective and also the tenure is 10 years and above. So as such they do not really compete with the shorter-term products that are offered by other financial services.

Akshat Mehta — Sameeksha Capital — Analyst

Okay, okay. Okay. Any new products that you are planning to launch in second half of the year?

Niraj Shah — Chief Financial Officer

Yes. So that journey continues, in fact, across all segments as Vibha mentioned, we’ve already — we introduced the new product Click2Protect which allows a fair bit of flexibility to customers to switch and change their cover mid-policy as well that was launched just couple of weeks back. We’ve launched two products on the retirement front, one on the participating side and one regular premium annuity product, so that’s something that has been done in the last few months. We’ve launched in partnership with our sister concern HDFC Ergo, a combination product with fairly well-regarded Optima Secure best-in class health product in the market and we have a combination product along with that as well, so that was something that was launched last month.

And as we go forward, there are many such products in the pipeline across protection, savings as well as retirement and pension. So you’ll hear more about it as we go forward. With some of the guidelines having been more flexible in terms of the go-to-market with use and file, I think there’ll be more coming through in each of these categories.

Operator

Thank you. [Operator Instructions] We’ll take the next question from the line of Nidhesh from Investec. Please go ahead.

Nidhesh Jain — Investec Group — Analyst

Thanks for the opportunity. Firstly on the EVOP, can you share the breakup of the operating brands in persistency, mortality and expenses?

Vibha Padalkar — Managing Director and Chief Executive Officer

The operating variance is mainly coming from persistency and expenses, mortality is almost neutral because the experience has now normalized post-COVID.

Nidhesh Jain — Investec Group — Analyst

Sure, sure. Secondly, how should we think about the volume growth for the industry, because if you look at the data for last four, five years, the volume growth for industry and for most of the players have been quite weak. So how should we internally think about that volume growth for the industry is weak and is this be the trend going forward also or how should we think about that?

Vibha Padalkar — Managing Director and Chief Executive Officer

I’m smiling a little bit because when you say over the last three, four years you’re saying volume growth is weak, actually that’s exactly what I covered in my opening remarks, wherein if you’re looking at — so for us, for example, we have doubled over the last four years in terms of everything top line and bottom line and so on. Also if you were to look at the two-year CAGR in terms of top line, it has been a 17% two-year CAGR. This year, a little bit weaker, there is also — it’s also a little bit weaker on the number of policies, so that I will certainly admit that as a sector. We’ve all selling higher ticket size policies and perhaps thanks to the father of all of this is perhaps Sanchay Plus. And so perhaps that’s actually more our affluent customer.

So all of us need to also focus on how do we increase penetration in the real terms in terms of number of lives covered. So there we do have work cut out for us. At the same time, we have covered the number of lives overall to credit life of 2.8 million — 28 million lives or close to 3 crore lives and this is a growth of 41%. So the group has done well, individual not so well. Also the less than INR50,000 ticket size, I think that also has not done very well while more than 1 lakh ticket size has done well.

So all of this, in terms of — if data is available then we can price it more appropriately and maybe Bima Sugam, while we’ve talked a lot about it on this call, what the regulator is promising is that different databases that the government collects and with customer consent, this could be more enriching in terms of how we underwrite policy, which today frankly it is a challenge and especially it’s the challenge at the lower end in terms of ticket sizes.

So a combination of that would mean nothing has changed in terms of demand. And so the demand is there, lower penetration of insurance coverage is there, the protection gap is there. So there is also a little bit of inverse correlation perhaps with banks, minus because the size is very big, but protection again — and I talked about in this call, retail protection, while credit life has done well, retail protection for almost everyone in the industry has lagged versus the past couple of years. As protection starts getting fixed and it’s a matter of time before it does, again protection is based on much higher levels of– number of policies covered. Ticket sizes are small but number of people covered are more. Some of this should start turning around.

Also if you were to look at cyclicality on a few things, for example, unit linked has not done well at all, right, for us it’s always been calibrated but even as a sector, unit linked has not done. Some of our tie-ups, for example, I did mention about India Post Payments Bank, so we’re very gung-ho about it, we’re talking about 650 plus locations over 1.5 lakh number of the feet on street and so on, so where Gramin Dak Sevak. So — and that augurs well in terms of expansion in non-metros, Tier 2 and 3. Exide Life acquisition was also for us to increase our footprint in Tier 2 and 3 and also this, we won this RFP with India Post Payments Bank and we will start work as we speak. That also should see a lot more of penetration in the $0.02 of the word. Do you want to add anything?

Suresh Badami — Executive Director

No, I mean, broadly, look, we will look at expanding the distribution but I think even at an industry outlook, the number of steps being taken by the Chairman of IRDAI and the regulator, in terms of looking at growth, allowing so many new flexibilities in terms of how the overall sector should open, I think at an industry level, there is clearly given the opportunity a fair amount of growth that we will see. I agree with Vibha, I think the challenge really is for all of us to get together and look at an NOP increase or we need to be increasing the number of lives. And our strategy in terms of how do we reach out to Tier 2, Tier 3 how do we reach out to newer geographies, how do we have state-level coverage, there are fair amount of detailing that, I guess each one of us is doing as insurers, definitely at HDFC Life, we are very clearly focused.

And some things like whether in terms of how we deepen some of these markets, we’ll — it’s just the fact that we can look at use and file, we can come out with more innovative products, there’s so many such things which will aid the overall industry growth and as HDFC Life, we would expect to grow a little faster than the industry.

Nidhesh Jain — Investec Group — Analyst

Sir. And lastly just one question that. So if you look at the competition on — earlier it used to be very intense competition on protection, now on non-par and on annuities, I see that there is significant price-based competition, which is increasing. So in that context, these products are becoming commoditized. And in that context, how should we build our presence, so that we will be able to generate higher returns for shareholders despite these segments getting commoditized?

Vibha Padalkar — Managing Director and Chief Executive Officer

Only market share is something that every financial services industry sees, whether it’s banking, mutual funds and especially banking. And so growing market share isn’t, but if you look at insurance and you talked about growing market share on the back of non-par. When you triangulate that with — when you read the balance sheet as well as what is the retained risk also, we are able to triangulate in terms of what hedging strategy is based on the interest rate sensitivities if some have put out. It could be something that we don’t want to go down that path. So we want to have market share growth at the same time, I think the previous caller asked in terms of what is your operating variance. We want to have a operating variance that is close to zero, which is very close to what actuarial assumptions are and we disclose this every quarter. So that’s really the treadmill that you have been for the past decade and we want to continue with this.

And so — but it’s not to say that we don’t want to grow, we do. And so amongst all these constraints, that’s why we launched Sanchay FMP and today it’s close to 30% — between 25-odd-percent of our non-par business — non-par savings business and continuing to grow. That is easier to hedge shorter end of the spectrum and we can have an aggressive play over there, as against having an aggressive play on lifelong payouts on some of the non-par products. So we will continue to push and pull on this — in this space so that the combination of various stakeholders, including risk management is something that we are fairly comfortable with.

We pride ourselves on having a pristine embedded value. And there is no known risks that has not been factored into our embedded value and we want to keep it that way.

Operator

Thank you. [Operator Instructions] Thank you. We’ll take the next question from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Shyam Srinivasan — Goldman Sachs — Analyst

Good afternoon and thank you for taking my question. Just on HDFC Bank again, I think you mentioned 46% to 48% of your revenues comes from there. But how is it the other way around? In the sense market share for you in their life insurance business how has that been trending?

Vibha Padalkar — Managing Director and Chief Executive Officer

So we have not really been giving what the share is, there are many nuances to this, because again just looking at the share as against looking at though share of value of new business becomes a very one-sided discussion, not looking at the persistency, claims ratio and so on. So I think the way we look at this is even from a risk management perspective, we like hovering around 50% in terms of HDFC Bank shares, growing our other channels faster than industry growth, which we have demonstrated for everything, whether it is quarter two, the recent quarter two or FY ’22 or FY ’21. So track record of other channels other than HDFC Bank growing faster by mile than private sector. So we’ll continue to do that rather than just looking at one metric of HDFC Bank. You want to add?

Suresh Badami — Executive Director

No. I think, look, we do expect greater alignment in terms of the overall strategy of the HDFC Bank team along with us, the merger is not very far away. So hopefully we will be able to get our market share up but like we were rightly mentioned, I think it is also a question of what quality of business, where we want to do the business, what is the share of the VNB that we are looking at, all those are into consideration and we do believe that top line back based on our product mix will move upwards.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. Thank you. And just the second question, I think Vibha in your opening remarks you talked about multiple levers for VNB growth, right. I think retail protection like you mentioned has been challenging, but what are the other things now, right? I think you called out like product innovation, the risk management and stuff. But, I’m just looking at product mix, now we have reached a phase where do you think there is further and just keeping aside Exide merger right. So, let’s assume ’24 and ’25, what can change right in terms of helping VNB growth to be not correlated to APE growth for example. What are some of the other levers that are still there?

Vibha Padalkar — Managing Director and Chief Executive Officer

So many, many. So, for example, new pools of profitability and obviously I can’t share all of them and we’ve been the market leaders, whether with everyone talks about pure term now, market leaders in pure term or looking at the cancer, cardiac to looking at deferred annuity to Sanchay Plus kind of products, to riders, to you name it. And we — the more recent kit on the block Sanchay FMP, again margin accretive for us. Even if you look at par, we believe that we are the highest in terms of par margins. And so any switch between some of the other lower-margin products to par, of course the customer consent makes a lot of sense. Also some of the tweaks in terms of whether it’s riders, whether it’s group annuity, whether it’s individual annuity.

Also in terms of expense leverage, that’s an important point while we optically look like our expense ratios have gone up but actually the fixed costs have continued to trend downwards. And that is, I mean, you look at agency, in our agency channel, say about 60%, 70% is fixed costs. So with agency growing upwards of 20-plus-percent, most of that should fall to the bottom line as margin accretive contribution of — to the growth contribution. Also mix pay — mix change becomes important, especially on say participating. Even with Exide Life, we saw — right at the beginning, we did mention that it’s low-single digits, now we’re talking about high-single digits in terms of Exide Life around 8-odd-percent.

So in a span of less than a year, we’ve been able to get Exide Life margin from low-single digits to close to 10%. So — and that has not been with any major surgery as you know because it was still a separate entity. So that can only continue to increase getting to margin neutrality. So I’m adding in every market share of 1.2%, 1.3% but at the same time able to get Exide Life very close to HDFC Life margin. So all of these are levers but obviously, I can’t talk about some of the things that are in the pipeline, but we will continue to extract. And I think some of the core strength, because we have not dropped margin in any quarter versus the previous year. For the last several years, I think except with the exception of Sanchay Plus when we launched Sanchay Plus and we told all of you that. So that is a product-specific aspect. But apart from that, this margin is trending smooth upward curve, every quarter, every year has been because of many, many levers to margin as against this one big-bang lever that — that could be as a copied or it could be, where there is some disruption — macro disruption that happens to it.

Operator

Thank you. [Operator Instructions] The next question is from the line of Dipanjan Ghosh from Citi. Please go ahead.

Dipanjan Ghosh — Citigroup Inc — Analyst

Hope, I’m audible. Just one question I think you mentioned on your credit life business that some of the newer partnerships have been delivering strong growth and also some new product verticals have been added. So can you kind of extend this argument and give some color on the attachment rates or maybe the growth across some of the newer partnerships versus the existing partnerships and how do you see it going forward?

Niraj Shah — Chief Financial Officer

So, look, I think we have 300 plus partnerships now across banks and NBFCs, SFBs and MFI. We have registered a growth of almost 66% on this particular business in H1. And we have a fairly large player in terms of — across all the verticals, so we do have a complete gamut of products whether it’s unsecured loans to CVC to home loans to LAP, MFI all of that. So in H1 for instance, the LAPs housing business was almost 29%, MFI was 35%, the housing and LAP grew by 44%, the MFI grew much faster at 100%, so any other segments grew by almost 50% and there is a complete attachment rates between ranges from vertical to vertical, it varies anywhere between 30% to 70% depending on what product mix and which loan vertical we are talking about.

Obviously for MFI, it’s 100% because they need to work on that particular model. And we are trying to see how we can look at the value penetration more than just the attachment rates in terms of the number of loans and that’s something that we have done. In parallel what we have also done is, we’ve integrated a lot of our technology platforms across all our partners. So in terms of claims settlement, in terms of processing, you have significant embedding which has happened with many of our partners. So we have been looking at this so I do believe that, look, if the industry continues to grow in terms of disbursements, we will grow so much and this is across outside HDFC also. HDFC in some sense gives only less than 30% overall in credit life business, so it’s fairly well-diversified even within the credit life LOPs.

Operator

Thank you. We’ll take the next question from the line of Anand Bhavnani from White Oak Capital. Please go ahead.

Anand Bhavnani — White Oak Capital — Analyst

Thank you for the opportunity. With regards to the India Post tie-up, can you give us some sense of what’s the rollout schedule? And do they have any other tie-ups other than us?

Niraj Shah — Chief Financial Officer

So Vibha did mention in terms of their vast postal network which is there. They do have an Aadhaar Enabled Payment Services, which is the single largest platform in terms of doorstep banking to set of customers. We have recently launched the relationship only the last week or 10 days back is when we had the official launch along with the field teams. But we see a huge opportunity in terms of both the protection and savings across the group and individual customers. The POSP model will work very well in this particular model.

Secondly, we should be able to go across not just through their offices but through the Gramin Dak Sevak, which is another department of post. Now one of the challenges which we mentioned earlier on the call was in terms of growing our number of NOPs as well as looking at a certain set of products we can go into the Tier 2, Tier 3 and the rural markets. So normally it takes anywhere around 90 days to 120 days for us to be able to launch our relationship end-to-end, in terms of integration, in terms of product training, in terms of resourcing on the ground and we’ve been fairly successful in terms of onboarding new partners. So you should see us active in terms of logins fairly quickly on this. Even as we speak, internally, we have already aligned a fresh vertical which will handle this particular relationship and we should start seeing the business soon.

Vibha Padalkar — Managing Director and Chief Executive Officer

I want to add one more point, Anand, and that is HDFC Bank is also tied up with them. So down the line, where the HDFC Bank becomes our parent promoter, there can be a lot more of integrated working and integrated offering and these are two independent tie-ups. And so we look forward to that. The second point I want to make here is that persistency is robust. So what we have struggled typically in smaller towns is, one is reach, how do you get to them and second is quality of business. So what we feel very enthused is the very good work and the traction that — that has been seen. So we intend to be able to grow quite meaningfully into Tier 2 and Tier 3.

Operator

Thank you. We’ll take the next question from the line of Madhukar Ladha from Elara Capital. Please go ahead.

Madhukar Ladha — Elara Capital — Analyst

Hi, thank you for taking my question. Most of my questions have been answered. Just a clarification, you mentioned a 46% to 48% of the business comes from HDFC Bank. Now does that also include the group side of the business or is this only individual?

Vibha Padalkar — Managing Director and Chief Executive Officer

Only individual.

Madhukar Ladha — Elara Capital — Analyst

And on the group side how much comes from HDFC Bank?

Vibha Padalkar — Managing Director and Chief Executive Officer

Relatively small like Suresh mentioned, all HDFC entities put together, which is HDFC Limited, Group and HDB is about 30%.

Madhukar Ladha — Elara Capital — Analyst

30%. Got it. That will be it from my side. All the best. Thank you.

Vibha Padalkar — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Nischint Chawathe from Kotak. Please go ahead.

Nischint Chawathe — Kotak Securities — Analyst

Yeah. Thanks for the opportunity. Vibha, you mentioned that you’re looking at margin neutrality by over the next 12 months. But if I look at the data today, you’re almost there, right. So I wonder why would it take another four quarters or so for you to achieve margin neutrality?

Vibha Padalkar — Managing Director and Chief Executive Officer

So you’re right. I think the more likely scenario is faster. However Nischint you will agree that now it is truly part of us. While we’ve been — we’re very, very happy that our key distributors have continued to — have migrated to us, key employees have migrated to us and so on. But we’re a just little bit cautious that for some of these — the migration, golden handcuff and so on that we want to see that stability. So we’ll have a better sense certainly and we’ll give you an update when we connect in Jan.

Nischint Chawathe — Kotak Securities — Analyst

Because whatever could have, I mean, it’s been last four quarters, right, so whatever had to go up could have gone out already. I mean, I’m just —

Vibha Padalkar — Managing Director and Chief Executive Officer

Nischint, absolutely not, because we didn’t tamper with their model at all. The last thing to do is start meddling into their model, of course, we had our HDFC Life person there and so on. Oversight was certainly there, the Board was our — members of our Board but the business model on the ground was as is. So given that, now it is, we are for example having an overlay of say persistency, Niraj mentioned about and it’s also known that lower levels of persistency. So we are now mandating to say at least above a certain ticket size. Please have SIECS mandate standing instruction like it is in HDFC Life. So this is one example, like that there could be several other examples wherein there is an HDFC Life rigor, governance and so on, which we stayed away from largely up to now.

Branch reductions will happen, a technology revamp will happen, products — today they have from day one, most of our marquee product, we will also have, how is that panning out and so on. So we will also move into other geographies, so the whole point of this acquisition was not just to acquire it and have a 1.2%, 1.3% increase in market share. We will be investing in new geographies because they are strong, typically in the South but we will — as we speak we are expanding into Tier 2 and 3 and replicating that model into especially West and North. So that will require — so that will require investments. So all of that is factored in here.

So there is nothing that — that we know that we’re not telling you, but it’s just that, for us to really invest in the Exide Life formula and grow it and invest in it, it’s just little bit of caution in terms of margin neutrality. Yes it could happen a quarter or so earlier.

Operator

Thank you. We’ll take the next question from the line of Deepika Mundra from JPMorgan. Please go ahead.

Deepika Mundra — JPMorgan — Analyst

Hi, good evening and thanks for taking my question. Just on the — again on HDFC Bank, post the Bank becomes apparent, how do you foresee the visibility on better alignment given that some of the other competitors within the channel, of course, are selling very attractively priced products it seems, given the growth that we’re seeing in HDFC Life versus some of these.

Vibha Padalkar — Managing Director and Chief Executive Officer

So Deepika, this is not only the first one, in terms of open architecture, how do they handle. We are in many, many open architecture situation and the senior management of those banks have a rough way of how they’re allocating the shares between their insurance partners. While at the same time of course, giving the customer the choice. So if other banks are also doing it and all the various partners that we work with, HDFC Bank, but there are various levers of doing it. And that’s what you will see it happens, it’s not only a product thing, there are also many white spaces that today nobody is doing.

Obviously, I don’t want to talk about this white spaces but they are there and those conversations have already been had with the bank, right. So you’ll see some of that happening also ultimately, bank is going to be our promoter. And so governance, risk management all of that also bank will partake in those aspects. So — and also it is not a surprise that no bank today that holds more than 50% has embraced open architecture, right. So from that — so HDFC Bank also understands that. While they’re not going to roll back on open architecture but there is a reason why apart from HDFC Bank, there is no bank in India today that has opened up — that holds. So clearly there is a balance between three things, one is our open architecture accretion, being a parent of that entity and hence all the risks and rewards being aligned and third is that, at the same time giving customer a choice. So all those conversations are ahead and they are completely aligned on both.

Suresh Badami — Executive Director

And just to add, because so many of our products have clearly a much stronger value proposition both on the brand servicing, claim settlement and overall technology. So given the customer profile, given the segment we operate in, I think there is a significant upside even in terms of the product value proposition which is [Indecipherable].

Vibha Padalkar — Managing Director and Chief Executive Officer

I also want to add to what Suresh is saying. So hypothetically what he’s saying is that, if somebody has a much cheaper product than in the open architecture then that’s where business goes to. By that logic, with an aggregator, for example, we would not be able to sell even a single policy because we are really the cheapest, but we do. And we have enjoyed share of anything between 20% to 25% in same in term. So it goes beyond only pricing when — especially when you’re buying a protection especially when you’re buying long-term larger ticket savings, so it’s holistically in terms of the experience, the brand, are you in the zone in terms of pricing, what is your track record on claims settlement servicing, entire thing.

So while it made out to be about price, it is a full package and so the bank is also as a promoter would be promoter very cognizant that it’s an entire package and so there is an alignment.

Operator

Thank you. Ladies and gentlemen, we’ll take the last question from the line of Anand Bhavnani from White Oak Capital. Please go ahead.

Anand Bhavnani — White Oak Capital — Analyst

Thank you for the opportunity. Given that we are seeing as a industry-wide phenomena that protection despite the penetration level theoretically the balance of degrowth and it doesn’t sustain growth. As the industry is there kind of campaign required like you’ve seen in case of let’s say mutual fund for the consistent high decibel campaign by the industry. Do you think is there any change in approach needed by the industry maybe campaign is one of the options, but any other option do you think that industry as a whole should do, needs to do this a sign of it’s not happened on the recurring basis?

Vibha Padalkar — Managing Director and Chief Executive Officer

So Anand, maybe you’ve not seen some of these campaigns, so we have had Sabse Pehle Life Insurance. So that campaign again will take off, you will see some more visibility on that. But ultimately this will anywhere in the world, people are not going to wake up and buy insurance, you do require that merge, you do require a little bit of fraud and this comparison versus some of the other sectors might not really work and that’s why I’m great provident that that some level of handholding of all our channels and that’s why there is a place under the sun for all our channels to evangelize the need for life insurance. Even credit life was hardly turbulent and with a CAGR of about 15% to 18% growth in credit, in retail credit offtake, now credit life has come into its own.

So it takes time. And it will — I have no doubt in my mind, especially younger population. We’ll continue to be interested in buying this and also it’s easier for them in terms of life underwriting. We do have a portal, if you’ve not seen it please do on call KlarifyLife that’s with K. And there it is with to engage with younger people to say it’s not so complex, it is — don’t buy it if you don’t have X, Y, Z situations in your family, but to have an honest conversation on what term is. At the same time, it will take — like I said, like I mentioned to percolate for the need for it. But I have no doubt in my mind that all things being equal on this reinsurance, COVID and so on, it should grow faster than overall industry level growth.

Anand Bhavnani — White Oak Capital — Analyst

Sure. I have one data keeping question if I may.

Vibha Padalkar — Managing Director and Chief Executive Officer

Yeah, please go ahead.

Anand Bhavnani — White Oak Capital — Analyst

Yeah. So if you were to look at the persistency numbers, we have two different sets given in the disclosure, say one is in the IRDAI format, which is on the [Indecipherable] PDF uploaded on Next-in, whereby I see the 60 plus month persistency had fallen year-on year and some that even sequentially as well, whereas in the presentation on Slide 6, we see year-on year persistency higher and it’s different. I presume the methodologies are different into capex, can you kind of explain this a bit?

Vibha Padalkar — Managing Director and Chief Executive Officer

Yeah. Anand, it is because of the merge, one is a merge number.

Anand Bhavnani — White Oak Capital — Analyst

Okay. So far in the first one, the IRDAI format is completely merged and second one is premerger comparison.

Vibha Padalkar — Managing Director and Chief Executive Officer

The higher number is premerger.

Anand Bhavnani — White Oak Capital — Analyst

Yeah, sure. Thank you. All the best.

Vibha Padalkar — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Ms. Vibha Padalkar for closing comments.

Vibha Padalkar — Managing Director and Chief Executive Officer

Thank you, everyone for joining the call today. I wish everyone a Happy Diwali. Thank you. Take care.

Operator

[Operator Closing Remarks]