ICICI Prudential Life Insurance Company Ltd (NSE: ICICIPRULI) Q2 FY23 Earnings Concall dated Oct. 15, 2022
Corporate Participants:
N. S. Kannan — Managing Director & Chief Executive Officer
Satyan Jambunathan — Chief Financial Officer
Analysts:
Swarnabha Mukherjee — BNK Securities — Analyst
Manish Gupta — Solidarity Advisors — Analyst
Avinash Singh — Emkay Global — Analyst
Shreya Shivani — CLSA — Analyst
Sanketh Godha — Spark Capital — Analyst
Ansuman Deb — ICICI Securities — Analyst
Dipanjan Ghosh — Citi — Analyst
Neeraj Toshniwal — UBS India — Analyst
Jayant Kharote — Credit Suisse — Analyst
Prateek Poddar — Nippon India Mutual Fund — Analyst
Shyam Srinivasan — Goldman Sachs — Analyst
Nischint Chawathe — Kotak Securities — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the ICICI Prudential Life Insurance Company Limited H1 FY 2023 Earnings Conference Call. [Operator Instructions].
I now hand the conference over to Mr. N.S. Kannan, MD and CEO. Thank you, and over to you, sir.
N. S. Kannan — Managing Director & Chief Executive Officer
Thank you, Samreen. Good evening to all of you, and welcome to the results call of ICICI Prudential Life Insurance Company for the half year ended September 30 of financial year 2023. I have several of my senior colleagues with me on the call; Satyan Jambunathan, CFO; Deepak Kinger, who is responsible for Audit, Legal, Risk and Compliance Departments; Manish Kumar, who manages our investments, Souvik Jash, Appointed Actuary; Dhiren Salian, Deputy CFO; and Dhiraj Chugha, from the Investor Relations team.
Let me start by talking about a few developments during the quarter, before I move on to our performance. First, I’m pleased to inform you that the members of the company have approved the item of special business, pertaining to the appointment of Mr. Benjamin Bulmer, as the Non-Executive Director of the company nominated by Prudential Corporation Holding Limited, with effect from July 27, 2022, in place of Mr. Wilfred Blackburn by way of an ordinary resolution through postal ballot.
Second, I would also like to share that ICRA, a domestic credit rating agency, has reaffirmed the long-term rating for our subordinated debt program, as ICRA AAA. The outlook on the long-term rating is also stable.
The third development on the regulatory front in line with IRS vision. But by the year 2047, which happens to be the centenary year of India’s independence, every Indian should have life cover and every family should have health cover and old age security. On this mission, the authority has taken several measures, with a clear focus on increasing insurance penetration in the country, and ease of doing business for companies like us.
I would like to talk about some of these measures. IRDA formed a Regulatory Review Committee RRC, comprising 22 members, to examine the regulatory framework comprehensively. The Regulation Review Committee has been entrusted with the task of streamlining and recommending simplified regulations, which are principles based, with a view to enhance the ease of doing business and making the regulatory regime at par with global standards.
Further, the regulators proposed the formation of Bima Sugam, an all-in-one digital platform for solidification, servicing and claims. We believe that this would be a game changer and possibly the UPI moment for the insurance industry. Overtime, we expect this unified platform to be used by the large number of customers to fulfill all their insurance needs, passed also by insurers as well as intermediaries, in conjunction with other market participants such as insurance repositories and also connectivity to external databases and ecosystems. We welcome the relaxations provided by the regulator, with respect to allowing certain categories of products to be launched through the use and file approach, relaxation of investment norms and ease of documentation for purchase of immediate annuity products.
Further, a series of exposure [Phonetic] drafts have been released by the regulator, in the areas of distribution expenses of management, other forms of capital, dematerialization of insurance policies. We believe that these regulatory reforms will structurally and functionally reform the sector and boost insurance growth and development, while enhancing ease of doing business for the insurance industry.
The fourth development during this period, is about ESG. As briefed earlier, we had adopted the ESG framework in the year 2020. To sharpen our existing board oversight on ESG, the board has enhanced the terms of reference of the CSR Committee of the board, to also include oversight of our sustainability agenda. The committee has accordingly been renamed as the Board Sustainability and CSR Committee. As a result, we now have a formal structure, with the board overseeing the ESG matters, the Board sustainability and CSR Committee, focusing on monitoring ESG initiatives and disclosures, and the Executive Sustainability Steering Committee driving the ESG agenda within the organization.
I would like to here reaffirm my commitment — our commitment to create a culture that embraces sustainability. I’m also happy to state that we continue to be the best ranked Indian insurer, based on reports by major ESG rating agencies.
I’ll now move on to the performance of the company for the quarter. Our four key strategic elements, that is premium growth protection, business growth, persistency improvement and productivity enhancement continue to guide us towards our objective of growing the absolute value of new business, while ensuring all the times that our customer is at the core of everything we do.
I’ll summarize our performance, on the fourth phase through slides 5 to 9 of our presentation, which was alluded [Phonetic] and then conclude with a commentary on VNB. Satyan will then be taking you through the performance in detail.
So let me start with the first P of our strategic elements, which is premium growth. Our annualized premium equivalent, APE, grew sequentially by 32%. For the second quarter of this fiscal. We entered the first half of the year, at an APE of INR35.19 billion with a 10% year-on-year growth and a new business premium of INR73.59 billion, with a 14% year-on-year growth.
As you can see in slide number 6 of the presentation, for H1 of FY 2023, the contribution to APE from linked products stood at 41%, non-linked savings at 28%, protection at 20%, annuity at 7% and the balance 4% came from group Savings. We would like to highlight, that this quarter onwards, we have started disclosing the distribution mix, based on retail APE.
The retail distribution mix of the first half of this fiscal APE is 40% from bancassurance channel, 31% from agency channel, 15% from direct business and balance from other partnerships at 14%. Here, our focus is on investment in building existing channels and also widening the distribution to maintain the diversified distribution mix. Further, we believe that the recent exposure draft, wherein a corporate agent can tie up with up to nine insurers, instead of three now. If implemented, we believe that will provide us a great opportunity to expand our distribution network further. We believe that our diversification agenda on both the product and the distribution mix is on track, thereby enabling us to manage the important impact of external development, and respond to the changing consumer preferences and behavior in an agile manner.
Moving on to the second P of protection business, which is presented on slide 7, the total protection APE is at INR7.1 billion in the first half of this current fiscal, resulting in an increase in the protection mix from 17% for the whole of last fiscal to 20% for the first half of this fiscal. Profession APEs have continued to grow in both the quarters of fiscal year 2023. The growth was 22%, if you remember, in the first quarter on a year-on-year basis, which has accelerated with 35% year on year growth in the second quarter, resulting in a 29% year-on-year growth in the first half.
I would like to highlight that based on the total new business sum assured for market share has increased from 13.4% for financial year 2022 to 15.7% in H1 FY 2023. With this, we continue to hold on to our market leadership, in terms of sum assured, new business sum assured in the private sector. We continue to take a risk calibrated approach to underwriting, and our practices are commensurate with the prices offered, including emphasizing sourcing of preferred customer profiles. Further, we have been leveraging the opportunity in the group protection business, even as we seek to revive the retail protection business.
And the third P of persistency presented in slide 8, we continue to see significant improvement across cohorts. Our 13 month persistency ratio has increased by 130 basis points from 84.6% at March 2022 to 85.9% at September 2022. Similarly, our 49% month persistency ratio has increased by 200 basis points from 63.4% at March 2022, to 65.4% as of September 2022.
Moving on to the fourth P of productivity, which is presented in slide 9, our total expenses grew by 20.9% year-on-year for the first half of the current fiscal. The absolute expenses are of course higher as compared to the same period last year, because we have been investing in building for future growth.
Alongside our 4P strategy framework, we continue to maintain a resilient balance sheet, as we have presented in slide number 10 of our presentation. We have evaluated the insurance risks and the emerging mortality experience, and this is within our expectation, and we will continue to monitor it closely, as we go forward as well. We received the COVID-19 claims net of reinsurance of INR272 million for the first half of current fiscal out of which INR26 million was pertaining to COVID-19 deaths in the first half of the current fiscal.
Thus, we have released the COVID-19 provisions which we were carrying till the last quarter. Our solvency ratio continues to be strong at 200.7% as of September 2022, as compared to the regulatory threshold of 150%. Our assets under management AUM stood at INR2.443 trillion at September 2022. On credit risk, only 0.3% of our fixed income portfolio is invested in instruments rated below AA, and we continue to maintain the track record of not having a single NPA since inception. Of our total liabilities, non-par guaranteed return products comprise about 2.8%, while 77.2% liabilities are primarily linked to market performance. We continue to closely monitor our liquidity and AUM positions and we have no issues to report.
Moving on to value of new business, VNB, as a result of the above drivers, the VNB for H1 FY 2023 was INR10.92 billion, a growth of 25.1% over the corresponding period last year. Given our APE of NIR35.19 billion, the result in VNB margin was 31% for H1 financial year 2023, as compared to 28% for the whole of last fiscal and 27.3% in the first half of the last financial year. While this increase in VNB margin is primarily on account of shift in underlying product mix, we on our side continue to focus on growth in absolute VNB.
Before I hand over to Satyan to talk us through some of the details, I would like to maintain that we continue to maintain our objective of doubling financial year ’19 VNB by the end of this financial year, which requires a VNB growth rate of around 23% for the whole of this financial year over the last financial year VNB. With a VMB growth of 25.1% for the first half, and with a favorable premium base for the coming months from here on, we believe that we are on track to achieve this aspiration. Our primary objective is to outperform the industry on VNB growth over the medium term. Towards this, we believe all necessary levers are available with us.
With this, I thank you all for joining the call and I’m handing over the call to Satyen, to take us through the performance of the company in detail.
Satyan Jambunathan — Chief Financial Officer
Thank you, Kannan. Good evening. Our primary focus continues to be to grow the absolute value of new business through the four P strategy of premium growth, protection, business growth, persistency improvement and productivity improvement.
On the first element of premium growth, we continue to leverage on our innovative and comprehensive suite of products, distribution strength, robust technology and strong risk management architecture. We have recently launched ICICI Pru Sukh Samriddhi, a participating savings product to enhance our offering in the category.
Coming to product performance on slide 15, you will note that we have registered a strong growth in the non-linked savings, protection and annuity segments, which have contributed to our APE growth of 10% year-on-year for H1 FY 2023. With an APE of INR2.33 billion and a 69% year-on-year growth in H1 FY ’23, we were one of the largest pension and annuity providers in the market. The protection and annuity business now contributes approximately 50% of the total new business received premium.
Our focus has been to sustain growth in the annuity line of business by driving synergy between our company and our subsidiary, ICICI Prudential Pension Fund Management company. The AUM managed by the PFM has increased by 36% over September 2021 to INR132.44 billion at September 2022. The PFM has a market share of 14.8% in the private sector AUM at September 30th, 2022.
Moving on to distribution on slide 17, a well diversified distribution, selling comprehensive products suited to customer needs, has been our goal. Strengthening the existing network and widening distribution, with new partnerships, has been one of our key focus areas.
During the half year, we have added over 15,000 new agents, three new banks and 44 nonbank partnerships. As we stand today, we also leveraged more than 13,000 branch network of our partners for the distribution of our insurance products.
Coming to the performance of these distribution channels on slide 18, you will note that we have witnessed growth across most channels. The second element of protection growth on slide 20, with an APE of INR7.10 billion, the protection segment saw growth of 29.1% over H1 FY 2022. In this segment, we continue to take advantage of the opportunity available in the group business, specifically on group credit life products. We continue to witness significant demand for the group protection products, especially now with the pricing recalibrated, closer to the pre COVID-19 levels.
The retail protection growth, though challenged on a year-on-year basis, has broadly stabilized on a sequential basis. We have also been encouraging rider attachment on our savings products and term products. The term product with return of premium that we had launched last year, continues to contribute about 15% to 20% of the retail protection portfolio. This is a category creation exercise, which we believe will take time to develop.
With all these initiatives, our total new business sum assured stood at INR4.8 trillion for H1 FY 2023, a growth of 42.3% year-on-year. We have retained market leadership in the private market space, with a sum assured market share of 15.7% in HY 2023.
The third element of persistency on slide 22. We continue to have a strong focus on improving the quality of business and customer retention, which is reflected across all cohorts. There has been a significant improvement across all cohorts in the last one year, with our 13th month and 49th month persistency ratios improving to 85.9% and 65.4% respectively at September 2022.
The fourth element of productivity on slide 24, our overall cost to total weighted received premium ratio stood at 21.6% and the cost to TWRP ratio for the savings business at 14.4%, and the cost to average AUM at 2.2% for H1 FY 2023. During the COVID affected year, we had curtailed some of our discretionary expenses. This year, we have started to see a normalization of such spends. In addition, we are also investing in building blocks to enable future sustainable growth. In any case, under the Indian embedded value principles, VNB is computed after considering all expenses during the year.
For increased productivity, we continue to invest in technology, which is central to our strategy, thereby aiding us to provide better value to our customers. Specifically on slide 40, we have detailed some of the key initiatives undertaken in H1 FY 2023. We are happy to report that we are now a financial information user and a financial information provider, in the account aggregator ecosystem. We believe this will ease the entire documentation and verification process for customers going forward.
The usage of data excellence at every phase of our customer journey has also been detailed on slide 41. The outcome of our focus on these four Ps, you may see on slide 25 has resulted in the VNB of INR10.92 billion for H1 FY 2023, a growth of 25.1% over H1 FY 2022. Given our APE of INR35.19 billion, the resultant VNB margin was 31% for H1 FY ’23, as compared to 27.3% in H1 FY 2022 and 28% in FY ’22. While this increase in VNB is primarily on account of shift in underlying product mix, we continue to focus on absolute VNB growth, which is our stated objective. As the product mix evolves over the rest of the year, the VNB margin is expected to move in line with the underlying product mix.
Coming to the financial metrics, our profit after tax for H1 FY ’23 was INR3.55 billion compared to INR2.59 billion in H1 FY 2022, primarily on account of significantly lower COVID-19 claims. Our value of inforce business, or VIF, grew by 16.4% year-on-year and stood at INR247.97 billion at September 2022. The adjusted net worth reflects the mark-to-market impact on the investment portfolio. The embedded value grew by 8.1% and stood at INR326.48 billion at September 2022.
To summarize, we continue to monitor ourselves on the 4P framework of premium growth, protection business growth, persistency improvement and productivity improvement. Our performance on these dimensions, is what we expect to feed into our objective of doubling the FY ’19 VNB in this financial year and VNB growth over time.
Thank you. We are now happy to take any questions that you may have.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Swarnabha Mukherjee from BNK Securities. Please go ahead.
Swarnabha Mukherjee — BNK Securities — Analyst
Hi sir. Thank you for the opportunity. Sir, a couple of questions. First one on the ROP product. So I was looking at the run rate since the last three quarters and the product has been launched, the run rate remains fairly same across quarter in the absolute number. I understand that 4Q was, of course, a very small period in which the product was launched. Now I wanted to understand you as you mentioned it’s a category creation exercise and it will take time. But if you could throw some color on what are the efforts that are being put in and what is, if there are any kind of challenges that you are seeing, maybe from the channel side or maybe from you know what the customer is asking for in the product? And whether if there is any supply side issue also in this, like we have seen in the retail protection side. So that was my first question.
Satyan Jambunathan — Chief Financial Officer
Sure Swarnabh. So you’re right, it has been consistent at 15% to 20% over the past three quarters since we have launched it. And as you mentioned, it is a category creation. The point really is that, the customer segment which is choosing this product is a more market oriented customer segment and therefore for this to continue growing, it will have to be based on a suitable distribution customer segment match, typically distribution channels which have a strengthened more mass oriented customers, such as agencies or small finance bank and some other distribution partners who have access to their customer segments, are what will popularize this.
We don’t see any supply side issues in this. These products are priced with an appropriate level of mortality, and therefore I don’t expect that to be a challenge. I think it is contributing meaningfully even now, in that we are not out of line with the rest of the market, with the exception of 1 company. I do think that it will take a period of time before it becomes a larger mix, but we are quite happy with the way that this business is progressing.
N. S. Kannan — Managing Director & Chief Executive Officer
And just to add to that, I would only say that we would be more focused on growing the retail protection site together and we are quite happy if ROP continues to stay at 15% to 20%, but we are quite okay with that outcome. The focus is more on growing the entire pie rather than focusing on ROP or non-ROP.
Swarnabha Mukherjee — BNK Securities — Analyst
Okay sir, that’s helpful. Any comment on the pure term side, what are you seeing and should we expect any growth, I mean any movement this year?
N. S. Kannan — Managing Director & Chief Executive Officer
On the retail protection, so year-on-year basis, obviously you would have seen this challenge, because that’s also looking — overall numbers also still declined on retail protection. Of course we give out the numbers only by the end of the year, in terms of split between retail and group. But I can say that year-on-year declines have been coming down on retail protection, that’s one trend I can point out towards. And the second trend is that, on a sequential basis when I look at, it has been stable. So that is the two trends I can tell you.
Demand side we are not seeing any lack of demand. Demand continues to be stable for this product. And if I really look at the underwriting side, the processes have stabilized and the pricing is also stabilized. So those are the indications I can give you in terms of a sequential stabilization, stabilization of processor and stabilization of pricing, and that is what we are seeing with a lot of positive outlook in this segment, as we move forward.
Now if we look at the customer protection from a demand perspective, why I say that the demand is impacted, because we are seeing a rider attachment increase. If I look at the ULIPs, the rider attachment has gone up to about 45% plus in the recent month. If you look at the rider attachment mid-term, that has also gone up. So these are the things that give me an indication, that the protection demand is quite impacted amongst the consumers.
Now to answer your question on when it will really look up, I think the growth will come back in the second-half of the year, that is what we believe. Because when you look at the last year, the second-half, things have started plateauing and actually started coming down. And slowly, we are clawing our way back, in terms of a sequential stabilization now, and slowly a sequential improvement, which in the second-half we are hoping, that will result in the year-on-year growth also. This is the color I can give you on pure term, on the retail side.
On the other side, pure term on the group side, that is growing quite well. Yes, there have been some news reports about the pricing and all that, but we believe that the employer-employee and other groups do have a lot of need for the group term cover. It’s a continuous movement towards increasing the employee coverage or the coverage per employee, and we are one of the leaders when it comes to this segment, so that is also helping us to continue to show a robust growth on the group segment. So this is the color I can give you.
So the sense is that, by the time when you see any plateau on the group side, the retail would have got stabilized and then they will come to help fund [Phonetic] the growth of overall protection.
Swarnabha Mukherjee — BNK Securities — Analyst
That’s very helpful. Couple of quick questions on the channel side. First on the non-ICICI banks. So that segment has been growing very strongly. If you could give some details on you know what would be the product mix difference between say non ICICI Bank and ICICI Bank, for us to gauge you know how this growth can pan out going ahead?
N. S. Kannan — Managing Director & Chief Executive Officer
Yeah. If we really look at ICICI Bank first, as we have always told you, from a customer franchise perspective, they have not been selling any non-linked products to the saving side. So that strategy sort of continues. So the focus of the channel on ICICI Bank, just to give you a color, continues to be on protection. And of course given that in general, we are seeing the supply side constraints on protection, as — same as ICICI Bank and rest of the channels as well, same as us in the industry as well, given that it has been a bit slow, but given that the environment is improving, and as I said earlier, things have been stabilizing on the retail protection, we should expect the growth to happen in ICICI Bank protection.
On Annuity, ICICI Bank continues to drive growth. On linked, of course since they don’t distribute non-linked, on linked to given the environment and the market conditions, that that has been a decline in ICICI Bank, because they don’t sell any traditional products to offset the decline in the ULIP. So this is as far as ICICI Bank is concerned, but we are happy to look at protection and annuity as two key segments of growth in ICICI bank.
Now, you talked about the other thing — first, let me talk about other banks. So wherever we have tied up with the banks in the last couple of years, we continue to see momentum in those banks, and those banks are very much focused on the fee income rising out of insurance, and that is something we are leveraging as well. So that part is moving, and you have seen in our retail distribution, other banks other than ICICI contributing to about 17% of our numbers, 17% of our business. So this is — that expense is testimony to how things have been moving on the non-banks. And we have added three more bank partners. Of course, these are all cooperative and small banks. That’s what we have added, and that is something which we are having.
Then as I said in my opening remarks, the exposure draft, the IRDA sales, that corporate agent can tie up with nine life insurers, instead of three. I see it as a great opportunity, because we are used to not just working with ICICI bank, but also working with 30 banks now. So that itself should give us a good entry into this new opportunity and that is something we will be in a in a focused manner we will be doing.
Now you asked about the products in the — other than ICICI bank segment. We have really left it to the partners. You know if you really ask me, some of the smaller banks really ask us to do only traditional products, and not so much on unit-linked products, and that is something we are happy to give it to them. If you look at the agency side, agency also used to be skewed four years back towards ULIP. But agency now is becoming something like one third, one third, one third in terms of traditional protection annuity and the other products. And we believe that it is the right match, because the kind of the customer segments they cater to, there would be a lot of mass and mass affluent kind of segments, where this kind of a product mix is probably a better mix compared to the highly skewed ULIP product mix.
So to answer your question, yes, you know the channel by channel, we do have the mix which we had left it to the respective bank partners or the other partners and we will take the outcome as it comes. That has been our approach. For example, if you look at our slide 17, we have talked about what has been our strategy within each of the segments. If you look at the agency as an example, their protection annuity is 31%, non-linked selling at 35%, and linked at 34%. So if you look at the bancassurance, protection annuity mix is 42%. So this is and then partnership distribution which is corporate agents and brokers, we have product and the protection of annuity mix of 28% are non-mix savings of 51%.
So these are all the outcomes based on the customer segments the channels are catering to, and the channel preferences. So that is the way we would like to — and we have come to a situation today as a company, that we are a 40% ULIP and 20% protection, and you know the balance constituting traditional and other products that we are completely, completely neutral and we are very happy to cater to the customer and the channel requirements in terms of product mix.
Swarnabha Mukherjee — BNK Securities — Analyst
Sure sir. And in terms of the…
Manish Gupta — Solidarity Advisors — Analyst
Sorry to interrupt sir. Sir, I would request you to please come back in the queue. Thank you very much. Ladies and gentlemen, in order to ensure that the management is able to address the questions from all participants, we request you to limit your questions to two per participant. Should you have any further questions, you may join the queue back. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead.
N. S. Kannan — Managing Director & Chief Executive Officer
Hi Avinash.
Avinash Singh — Emkay Global — Analyst
Yeah hi Kannan. A couple of questions, we do — the accounting profit or surplus generation, I would just need your help. I can see I mean if I’m looking YOY for the quarter, the big variance has come in pretty sparse. Shareholder accounts understood how the markets were so [Indecipherable]. Non-par life again because you have seen strong growth, so of course there will be a strain or like you know — it will have a negative [Indecipherable]. Another big swing that is in the non-par annuity surplus. Now I mean, for the last two quarters negative, I understand what was — if you can help me, why it was such a big positive number last year the same quarter? So I mean, why there is such a swing when it comes to surplus in your annuity YOY basis? Because that is a thing that is driving kind of a YOY surplus loss. So if you can help me in that process?
N. S. Kannan — Managing Director & Chief Executive Officer
Avinash, the strain under the annuity portfolio is a function of mix between single pay and regular pay, and also a function of the tenure of the deferral period for annuity. So for every period, the annuity strain need not be the same. We recently launched a regular pay deferred annuity, which is much more longer term. So the strain profile for the annuity business this year is definitely different from what it was in the past year.
Avinash Singh — Emkay Global — Analyst
Okay. And last year it was a big positive number? [Indecipherable] was something bad timing based on the mortality or something, I mean just I am trying to understand? Because last…
N. S. Kannan — Managing Director & Chief Executive Officer
No mortality. Last year in the same period, there may also have been some realized investment income on the fixed income portfolio, that may have costed. But otherwise there is nothing unusual that is happening on those portfolios. It’s really a function of the underlying mix of what we are selling.
Avinash Singh — Emkay Global — Analyst
Okay. The second question now, annual report you know, the details of your hedging is disclosed. Just I mean on incremental basis in the first half from March ’22 to now, what would have been you know the MTM movement in your FRA [Phonetic] and what that — its impact on your solvency and net worth, if you can help me, first half?
N. S. Kannan — Managing Director & Chief Executive Officer
MTM on FRA has had no impact on solvency. Because in aggregate, the equity portfolio plus the FRA portfolio MTM is net positive. So there is no impact on solvency. You can’t take credit for positive. Only if it is in aggregate negative, will you take a hit from a solvency point of view. So there is no impact. In fact, the MTM has come down quite sharply at the end of this quarter than it was at the end of the last quarter. Those numbers are not specifically publicly disclosed, but I can confirm, no adverse or positive impacts on solvency and MTM impact substantially lower now than it has been at the end of the last two quarters.
Avinash Singh — Emkay Global — Analyst
Perfect. Okay. So I need your equity MTM and now hedging MTM, both put together, I mean if they are negative, then only you have a hit on solvency? I mean of course you cannot take all in, but the kind of — if you are getting, so if you are based on negative on FRA, at some point even equity, I mean they kind of cancel each other? Okay?
N. S. Kannan — Managing Director & Chief Executive Officer
That is correct.
Avinash Singh — Emkay Global — Analyst
Okay. Lastly I mean, again, this is very minor thing. Based on kind of a negative you know in your evaluation result in the property side, is it because of some sale or like some property valuation has — certain investor property has come down?
N. S. Kannan — Managing Director & Chief Executive Officer
So you’re talking about negative one?
Avinash Singh — Emkay Global — Analyst
No, no. Some decline, if I look at sequentially, your revaluation reserve in property has come down slightly, of course a very minor number, but typically I think — so is it some kind of sale of property, or is it like a usual reevaluation?
N. S. Kannan — Managing Director & Chief Executive Officer
No, no, it’s just a usual revaluation. We get it done once a year. You won’t have any change in this period. You would have had it at the end of last year. This period, the only thing that would have happened on property would be that, we moved one piece of a property from the par pension fund to Par Life fund. So to that extent, it may be sitting in a different place. But there is no revaluation which has happened this quarter, that typically happens only at 31st March.
Avinash Singh — Emkay Global — Analyst
Thank you.
Operator
Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.
Shreya Shivani — CLSA — Analyst
Thank you. Congratulations for a good set of numbers sir. I had a question on new bank partners that you wanted.
Operator
There is some disturbance coming from your line.
Shreya Shivani — CLSA — Analyst
Okay, one second. Is it better now?
N. S. Kannan — Managing Director & Chief Executive Officer
You seem to be in a windy place. Yeah, it’s better. Please go ahead. Hi.
Shreya Shivani — CLSA — Analyst
Hi. So I just wanted clarification on the three new bank partners you’ve added. Just a bit of a understanding on how many bank partners do you look to add. These new bank partners I just heard, they are small banks I believe. Are you like the number one, two third insurer for them? So some more flavor around these new bank partners is my first question? And my second question is, any APE guidance that you have for the full year of this year?
N. S. Kannan — Managing Director & Chief Executive Officer
So share, these three partners actually got added in the first quarter. So they are in the first half year. In this quarter, we haven’t added anybody new. These are very small, so it doesn’t really matter whether we have how much share of shop we have. But the point really is that, all of these partners put together, now are building into a reasonable scale, and I think that’s the more important part that we tend to focus on, with now 17% of the retail APE coming from the non-primary bank partnership that we have developed. So to that extent, these are not big. Let’s see going forward whether we are able to get more or not. Without an objective, we would like as many as who as people would like to have us. But it’s really a long gestation period, we keep working and pitching with various potential bank partners with established credentials, and if it comes to, it should be positive.
APE Guidance for the year, we have not given any APE guidance. We are still holding on to our expectation of the 23% VNB growth. We have said this in the past, once upon a time we would have to depend on a 20% APE growth to get to that VNB growth. But now the degrees of freedom are many more, given the diversification in products. So even if the APE growth is either faster than what it was for H1 or even a little slower than what it was for H1, we still feel that we have a fair shot at getting to the objective.
Shreya Shivani — CLSA — Analyst
Got it. Understood. Thank you sir.
N. S. Kannan — Managing Director & Chief Executive Officer
Thanks, Shreya.
Operator
The next question is from the line of Sanketh Godha from Spark Capital. Please go ahead.
Sanketh Godha — Spark Capital — Analyst
Yeah, thank you for the opportunity.
N. S. Kannan — Managing Director & Chief Executive Officer
Hi Sanketh.
Sanketh Godha — Spark Capital — Analyst
Hi sir. [Indecipherable]. Satyan, just wanted to check, that non ICICI Bank growth which was very strong around 69.33 first quarter. So I assume it should be because of a low base in the previous quarter. But it seems to have moderated a bit to 13 percentage in second quarter. Though the 1H numbers looks very strong, but second quarter looks to be little moderating and the divergence. Is it converging closer to the overall APE growth of the company? And if I look at similarly to the other channels like agency and direct, they also have not done that well, relatively, given the partnership channels have done well. So just wanted to understand anything to read while non ICICI bank channels have not grown to the expectation, or again the same point that the market share potential which we had a low hanging fruit we have reached it, and incrementally it is more a channel growth?
Satyan Jambunathan — Chief Financial Officer
So Sanketh, maybe I would look at it as this, and maybe talk about the agency and direct first before I get there. Agency had a very, very strong base in Q2 of last year, and some of that is what we are seeing come through as a base effect. Also in agency, you would have noticed that one-third of the businesses unit linked. To the extent that unit linked has been a bit more of a struggle in the current quarter that is an impact which has happened. As we get to the next two quarters, typically both December and March tend to be fairly peak periods for agency. So we have no concerns about the trajectory for growth for agency into the next two quarters.
Direct to customer for us is predominantly the upsell channel executed by our proprietary sales force. Now this is executed on existing customers. Given that our existing customers are predominantly unit linked oriented. This channel has seen the same impact that we have seen for the unit linked category as a whole, and that’s why for the quarter, it was relatively slower.
As we go into the next two quarters, we think that should not — that should again self-correct over a period of time. So again from a direct point of view, while the number does seem modest, we are not concerned in any material fashion about the trajectory.
Banks other than ICICI Banks, I mean, from a 70%, 80% growth in the past, I would hesitate to say that it will not moderate — that it will moderate. Those are periods of time that will happen. I don’t think one should read too much into what happens in a month or what happens in a quarter. This is the channel which has been growing at a fairly robust pace. And if you look at even the wider industry context, this is a segment which has been doing as well as the rest of the industry as well.
So from a growth point of view, I would actually say that the base effect is going to be an important determinant through these quarters. Like Kannan mentioned in his opening comments, Q2 last year was a YOY 35% growth. And eventually Q3 and Q4 last year were 16% and 4% growth. That should be a slightly more benign base, when we look at potential growth into the future.
So yes, you will always have periods of improving growth or decreasing growth, but I’m not so sure that we can live our life based on what happens on a month or month basis.
Sanketh Godha — Spark Capital — Analyst
Got it Satyan. And second thing, Satyan, what was — just to understand better. If I look at our look at our 61st [Phonetic] month consistency compared to FY ’22, it has improved very sharply from 54, it is almost 61. So which means to some extent, can we assume that we have a lever, given which is the structural improvement in the persistency of the five years — in the [Indecipherable] assumption after five years of completion, is that lever substantially available from the two year point of view to further expand the margin?
Satyan Jambunathan — Chief Financial Officer
Yes Sanketh. It may well be a lever when we get to the end of the year, but we would like to assess it when we get there.
Sanketh Godha — Spark Capital — Analyst
Okay. And finally, if you can quantify the MTM impact or negative economic variance number on the embedded value in the values number, given the impact on the network seems to be around INR509 crores, on embedded value, how much it could be?
Satyan Jambunathan — Chief Financial Officer
So Sanketh, we have not disclosed that specifically. You will have to wait for the full year before we disclose all the breakup of movement in embedded value.
Sanketh Godha — Spark Capital — Analyst
Got it.
Satyan Jambunathan — Chief Financial Officer
I can only reiterate that the value of inforced has continued to see a very strong growth at 16.5% year-on-year.
Sanketh Godha — Spark Capital — Analyst
Yeah, got it. Got it. Thanks. That’s it from my side.
Satyan Jambunathan — Chief Financial Officer
Thanks Sanketh.
Operator
Thank you. The next question is from the line of Ansuman Deb from ICICI Securities. Please go ahead.
Ansuman Deb — ICICI Securities — Analyst
Yeah, thanks for the opportunity. So one of my question was regarding that persistency part. So we have seen a very sharp increase. And it could be because of a little bit of lower ULIPs. But regarding our base case assumptions, is there a chance for a positive release in the year end, right? That would be my first question.
Satyan Jambunathan — Chief Financial Officer
So Ansuman, hi. That’s what I confirmed in response to Sanketh’s question as well. It may well be the case. We’ll see where it gets to. Right now I’m not getting into an explanation of what is causing this. Whatever is the cost of improvement, I will take it happily.
Ansuman Deb — ICICI Securities — Analyst
Right sir, absolutely, absolutely. Point well taken sir. And the second question is more of a thought process in the sense, when we started this journey of doubling the VNB, you know we had a very high protection growth trajectory and as we moved ahead and we are almost as you rightly said, we have a great shot of kind of meeting that objective. It has been more towards savings. So if you could just tell us in terms of the strategy of the company, has it absolutely remained the same in terms of like you know — as per the whatever the customer demand is, or we have done certain special strengths or objectives in meeting or protection — or a savings kind of a business? Because we have now a significant portfolio in terms of savings, which has given us a good VNB growth group.
Satyan Jambunathan — Chief Financial Officer
So Ansuman, what we had articulated then was that, protection and annuity would be very significant engines for us to grow our VNB. That has not changed at all. And I don’t think protection growth has slowed down. If we just look at this year, first quarter protection growth was 22%. Second quarter protection growth was 35%. So I know we all get very caught up about retail protection, and in that we missed the fact that the protection business growth is actually not moderated. I think most companies across the world would give an arm and a leg to get a 30% growth in protection over a half year period. So to that extent, I have absolutely no discomfort with the way the product is moving.
What we have added to our armory, that we did not have five years back is what you have mentioned, a wider product suite. Now the benefit of the wider product suite is that, it helps us reach many more customers and improve opportunity. So the purpose of widening the productivity was not about improving margins. It was about adding more to growth. It was about getting more customer opportunity that were not choosing the product categories that we were present in earlier.
So strategically nothing has changed. Protection and annuity are very, very core elements in our VNB growth. Savings, whatever is the need of the customer, we are happy to offer. But whatever we offer on savings, risk will be a very big filter. Market risk is not something — or unhedged market risk is not something that we would want to take on a balance sheet.
Ansuman Deb — ICICI Securities — Analyst
Great, Sir. Yeah, that’s very clear, Sir. Thank you. That will be all. Thank you.
Operator
Thank you. The next question is from the line of Dipanjan Ghosh from Citi. Please go ahead.
N. S. Kannan — Managing Director & Chief Executive Officer
Hi Dipanjan.
Dipanjan Ghosh — Citi — Analyst
Hi, guys. Hope I’m audible? Just maybe in the following up on one of the points which has been discussed in the call, you know on your non ICICI Bank channels, bancassurance channels. Could you give some color on the counter share that you maintain out there? Or in other words, are you going faster than the channel, on the larger [Phonetic] non-ICICI Bank partner? And my second question is on similar lines, you mentioned that the proposed circular by IRDA to expand open architecture and bancassurance packaging channels, is favorable for the company, because we get to tie up or you have a chance to tie this on the other bank partners.
But if you go back and see the history of the events that happened after the first open architecture, there is also a chance that some of the smaller players yet to enter the channels or the four channels at ICICI Bank, that you have been doing at a faster pace today. So how do you kind of think of it from that perspective also, maybe four, five years down the line, given that some of the smaller players also have a relatively diversified product kitty [Phonetic] today, compared to let’s say what they were having three, four years back. So those are the two questions.
Satyan Jambunathan — Chief Financial Officer
On the other bank partnerships, at least what we are seeing is, we are more than proportionately contributing to the growth of their business. The objective that we are focusing on, is to expand the pie for them, and that eventually is resulting, and will continue to result in an increasing share of shop. But our objective is about growing the pipe for them. So to that extent, we are very comfortable with the progress, and we will continue to work on it.
With respect to an open architecture ecosystem, I think eventually every bank will have to make their decision on what they are comfortable with, whether they want to stay with one, stay with three, expand to five, go all the way to nine or whatever else that the regulation may permit, we expect the regulation to be permissive, but not mandating. And therefore to that extent, even if it means in some of the partnerships where we are one of three, if somebody else enters, we would like to think that our brand is still significant enough, our product width is still good enough, and our technology capability is still strong enough for us to maintain our position.
And to the extent that some of the banks which may have lesser partners have not opened up, if it gives us an opportunity, we would be happy to take it. But like I said, it does not in any way establish that currently partners were only distributing for one insurance company, such as an SBI or a Kotak or an ICICI Bank will move from one to multi. That is the position they have to take over a period of time. We don’t think there is anything given about what that outcome will be. On balance, we see the opening up to be more positive to us than adverse.
Dipanjan Ghosh — Citi — Analyst
Sure. Thanks for the detailed explanation. Sir, one small question. We have seen some of the banks increase their term deposit rates over the past let’s say one month to two months in a very aggressive manner. And assuming credit course continues to remain at levels they are, probably we can expect to see some amount of faster translation of the repo hike rate to the overall term deposit rate. On that key take, do you see some of the guaranteed return products across the industry, seeing some amount of pressure on incremental growth out there, in [Indecipherable]?
Satyan Jambunathan — Chief Financial Officer
Dipanjan, at one level, I know we all tend to compare bank deposits with guaranteed return product. But all said and done, the products are chalk and cheese. Bank deposits — 75%. 80% of bank deposits are for a tenure of up to three years. All insurance products are five years plus. We have life cover which makes it very different. And overall, when I look at the banking system flows, we are but a small part of it. And if indeed it was so fungible, in the last two years, insurance companies should have been growing at 50% per annum. I don’t think that’s quite what has happened. So yes, at a conceptual level it seems substitutive. I don’t think in actual buying behavior, it is as closely reflected.
From our point of view, what’s important is that, as long as we reflect available yields, and as long as people see value in the product, whether adjusted for tax or otherwise, that will keep the demand for the product alive. In case we start seeing the change or a shift in the cycle from high interest rates to lower interest rates, we may well see a shift in product mix from non-par to par. And that’s something that we would be very comfortable with. I don’t think that would be a problem at all from our point of view. So we wouldn’t get too caught up.
I don’t think an opportunity is created by a product. An opportunity is actually created by a customer opportunity. A product is only a way to leverage that opportunity. So beyond a point, we wouldn’t worry too much about these relativity.
Dipanjan Ghosh — Citi — Analyst
Yeah, thank you. That’s all from my side and all the best.
Satyan Jambunathan — Chief Financial Officer
Thank you.
Operator
Thank you. The next question is from the line of Neeraj Toshniwal from UBS India. Please go ahead.
Neeraj Toshniwal — UBS India — Analyst
Hello? Yeah hi sir. So, my first question is, we wanted to clarify on the group protection pricing recalibration. So hasn’t been totally accounted for. We may see some impact coming in the subsequent quarters, so that growth might actually you know take an impact from the same?
Satyan Jambunathan — Chief Financial Officer
Hi Neeraj. Group protection renewal now, we are seeing a pricing which is pre-pandemic levels. So every scheme that gets renewed, I would expect at least over the next three months or so, assuming that nothing else happens on the pandemic side, will be at a lower pricing pre pandemic. This has already been the case for the past three months or so. What you’re seeing as growth for the quarter, is despite or after the change in price that has happened on group term.
Neeraj Toshniwal — UBS India — Analyst
So we have added the new partners, or we were able to at the middle level corporates as well? Because earlier, the focus only larger corporation understand in terms of pandemic?
Satyan Jambunathan — Chief Financial Officer
Absolutely, you are right. That is what we had said we want to target and we are doing that and that is working well for us so far.
Neeraj Toshniwal — UBS India — Analyst
Got it. And the second question I have is in terms of understanding — just to mention that we might see shift of product from non-par guaranteed products towards par, and we have recently launched product towards par as well, probably thinking on the same lines. So wanted to understand the margin trajectory or the absolute VNB as well in the — over the next course of let’s say — I understand you have already given guidance till FY ’23, but beyond that, would it become a linear or even — because par, I understand would be a much lower margin compared to non-par. How should one think about it in terms of aggregate margin profiling?
Satyan Jambunathan — Chief Financial Officer
So Neeraj, the way we tend to look at it is, there is an overall savings portfolio margin which will be driven by a combination of links mix, par mix, non-par mix. At any point of time, amongst these you will see some shift in mix. I don’t think we can stand up and say that the mix is going to be stable at exactly some level over a period of time. The point that we are making very simply is, that we are happy to take whatever is the margin outcome. Our approach is more on absolute VNB, and in a way, the more pronounced impact on margin will not be about par, non-par, it will be about protection annuities versus other parts of savings.
So there will always be pluses and minuses. We are not at this stage seeing anything to suggest downside risks to margin. We think there should be stability. If at all we would expect there to be a positive bias over a period of time, given the fact that retail protection may come back. Once retail protection comes back within protection itself, the portfolio margin can improve. Second, the mix itself of protection can improve. Third, persistency delivery can translate into some amount of margin improvement. And fourth, over a period of time, expenses also will contribute. So while there are possibilities of positives and negatives, on balance we think there is the chance of a positive bias overall, over the medium term with respect to margins.
Neeraj Toshniwal — UBS India — Analyst
Got it. Just on protection, given — I understand some relatively smaller competitive entities or players are actually picking up in terms of lowering the retail protection pricing and the market share again have been happening at that side. How do you think about it and how sustainable is it, and whether it is impacting demand or actually there’s a shift between some share from the larger players to relatively smaller players?
Satyan Jambunathan — Chief Financial Officer
So Neeraj, I would only point you to what we showed on this slide with respect to new business sum assured market share, where we have actually gained market share from 13.2% to 15.7%. I’m not really seeing any small player gaining in any fashion. There are one or two midsize players who are putting in more focus, and that is bound to happen. That’s the way the business will operate. But I’m not seeing that diluting our position in any way or creating a lot of in market position for us.
Neeraj Toshniwal — UBS India — Analyst
Perfect. That’s really helpful. Thank you so much.
Satyan Jambunathan — Chief Financial Officer
Thanks, Neeraj.
Operator
Thank you. The next question is from the line of Jayant Kharote from Credit Suisse. Please go ahead.
Jayant Kharote — Credit Suisse — Analyst
Thank you for the opportunity. Sir two questions from my line, between group term and credit life, which segment has grown faster in this quarter?
Satyan Jambunathan — Chief Financial Officer
Jayant, we have not given the breakup in business between the two. What I can however say that, both have grown quite strongly.
Jayant Kharote — Credit Suisse — Analyst
Okay. And said last quarter you had given a guidance that — not a guidance but Indication that VNB growth will be in line with the industry, probably going ahead. Where do you see that number settling at, and is there any number in your mind?
Satyan Jambunathan — Chief Financial Officer
Jayant, we had said that in the context of life beyond FY ’23. But that is something again, we have not given any number guidance with respect to what it can be. We will see at the end of the year, whether we are wanting to do that. But as of now, we are not giving any number guidance beyond FY ’23.
Jayant Kharote — Credit Suisse — Analyst
Sure, thank you. And just one last thing sir, on the easy sensitivity to interest rates, have you seen that move up steeply in the first half? Just calculated economic variance seems to be slightly higher, so directionally, is that number moving up?
Satyan Jambunathan — Chief Financial Officer
Jayan, we disclose sensitivities only at the end of the year. So at the end of this year, you’ll be able to see it.
Jayant Kharote — Credit Suisse — Analyst
Okay. Thank you.
Operator
Thank you. The next question is from the line of Prateek Poddar from Nippon India Mutual Fund. Please go ahead.
N. S. Kannan — Managing Director & Chief Executive Officer
Hey Prateek.
Prateek Poddar — Nippon India Mutual Fund — Analyst
Yeah, hi sir. Hi. So just one question and you know looking beyond FY ’23. See in the last 18 months, we have had benefits of good pricing on the group term side, and we have had a wider product suite, as well as a better distribution access to other banca partners. Now going into FY ’24, if you can just maybe — medium term, if you can talk about what will drive growth for you on the APE side, not on the margin side, you have explained that anyway. But maybe on the APE side, beyond FY ’23, what will be the real growth guidance?
N. S. Kannan — Managing Director & Chief Executive Officer
Prateek, you want me to give a sense on where are the growth drivers? Okay. So if I if I really look at it from a channel perspective, you know, I already talked about a little bit of opening up, which was likely to happen from an IRDA perspective, in terms of adding more banca partners and insurance partners by banks. Here you know I do believe that, as a company, over a period of time we have been able to get this whole alliance proposition growing quite strongly. That’s the reason why we see the 30 bank partners, you know primarily a banca promoted company, and this is quite unique, I would suggest. So that — given those experiences and ability to tie up, I think the widening of the bancassurance itself could be one big platform, where we would like to grow.
I’m not saying that all the banks will jump into adding some nine insurance players, I’m not suggesting that. But I do believe that wherever the growth momentum for the existing players are not happening, we can make a meaningful proposition to them to say that, at least [Indecipherable], I think that is going to be inherent part of our strategy going forward.
Second on agency, that is an area where I do believe that the attempt to significant investments, including manpower, addition of phase-ins [Phonetic] etc in the last year or so. And as you know, the business lacks the investments in agency, because they have to come up to full productivity. So if you do that, you know hopefully agency would grow from here on. It has been a bit of up and down depending on the base effect. But otherwise, a secular basis, we do see agency contributing much more than what it is doing today. So that is the second channel.
The third one is direct to consumer. This is an area where we do believe that we can make a huge difference. On one side you have seen IRDA talk about Bima Sugam. On the other side, we do have our own assisted online channels and direct online channels, which are already contributing about 15% of retail in the APE. And given the kind of customer base we have today, we do believe that there is a huge opportunity to go direct in terms of upselling process.
So widening the bancassurance partner, or increasing the agency share further and increasing the B2C share, I think this will be the medium term growth drivers beyond 2023. This is how we have sized up our own strategy.
So if I have to really look at long term, I would definitely expect the agency to contribute at least one third of our APE, that is broadly the direction in which we will grow. You know we create with banca, continuing to stabilize and the other direct to consumer channel contributing much more than what they are doing today. Directionally this is where the company will be going, in terms of the growth service on the channel side.
On the product side, now we have become completely neutral to customer and the channel preference on the product side. We are no more glued [Phonetic] to any particular product line nor we have any preference to a particular product. We just completely leave it to the emerging environment, market environment or consumer preferences or channel preferences. They are happy to take the outcome. You know that is where we are positioned on the product. So this would be the approach beyond 2023.
Prateek Poddar — Nippon India Mutual Fund — Analyst
And just wanted to check, you talked about the IRDA, I think more banca partners. Is there a marginal — from a marginal utility perspective, if a bank already has three partners adding more, does it make sense for them in your view?
N. S. Kannan — Managing Director & Chief Executive Officer
Yeah. So [Indecipherable] let me answer first — to me when we discuss internally, it doesn’t make any sense for banks to go up to nine at all. So let me throw out there I think nine because there will be a lot of chaos will be there on the shop floors, and that is not going to be something which is useful neither to insurance companies, nor to the banks. But on the other side, if you’re looking at three becoming four or four becoming three — becoming five, that will really be a case to case basis,
For example if some bank has got already three partners, and let’s say the momentum is not happening with one or two partners. That is where I meaningfully see a play in terms of going on presenting to them, showing them the numbers and show what we have done with others, 29 bank partners and ICICI Bank as well, and then show it to them and make a pitch to say that maybe, they would benefit a lot by adding a four plus.
I see a play only there, I mean not really on a market basis people are adding and our getting into every bank, but I’m not seeing that kind of a play. I’m just being practical about this.
Prateek Poddar — Nippon India Mutual Fund — Analyst
Really helpful. 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
Good evening and thank you for taking my question. Sir, just one-on the exposure draft…
Satyan Jambunathan — Chief Financial Officer
Shyam, we are not able to hear you well.
N. S. Kannan — Managing Director & Chief Executive Officer
Your line is a little distorted, Shyam.
Satyan Jambunathan — Chief Financial Officer
Volume is okay, but now we are getting…
Shyam Srinivasan — Goldman Sachs — Analyst
Yeah, yeah. Just on the exposure draft, one on expenses of management, one on payment of commission, what are your initial thoughts? I know these are still exposure drafts, but is it going to benefit — is a place like you visibly smaller, could it lead to consolidation. Just your overall thoughts in the industry, and what is your micro story there in both those exposure drafts?
N. S. Kannan — Managing Director & Chief Executive Officer
Yeah, overall thoughts, we believe that any such reform oriented approach is very good. We welcome it completely, because this also helps us to structure the payments the way we want to get the best outcome, rather than talking about some you know segmental basis or a micromanagement of you know what to pay here or what to pay there, that sort of gets completely overwritten by over payment [Phonetic]. So that is a lot of operational flexibility from our perspective.
Second, yes of course it is a larger players like us will welcome it, because it is really beneficial to companies with good expense ratio like us, because if you look at our expense ratio, it will be probably up to in the industry, in terms of expense ratio. So naturally it is beneficial to players like us.
So those are my initial thoughts. Of course at what level they expensive stabilize or commissions will stabilize, that we’ll have to see based on the competitive dynamics. But definitely, the flexibility and the efficiency of the current state we are in, it is beneficial to us.
Shyam Srinivasan — Goldman Sachs — Analyst
That was helpful. Second question is on reinsurance supplies. We have started seeing supply from reinsurance perspective come back now, now that COVID has gone. And any chances that we will see very high price hikes you think like last year from them, or you think it’s a little bit more normalized?
Manish Gupta — Solidarity Advisors — Analyst
So the way I would look at it, Shyam, is to say that given our balance sheet capacity, current solvency, expected increase in sub debt limits and expected shift to risk based capital, I would be perfectly happy even retaining more on that balance sheet, if there is not adequate capacity from a reinsurance point of view. So at least to participants in the market like us, it doesn’t matter too much beyond the point what is reinsurance capacity. What is important is, what is the price at which we are getting reinsurance in the context of the experience that we are seeing. And over there, at least our experience, we are very comfortable that if experience in the context of our pricing is consistent, so we are happy to retain more. We’ll see where it goes. Not really too concerned about capacity from where we are.
Shyam Srinivasan — Goldman Sachs — Analyst
Got it sir. Last data point I may try is on, I think it’s called out guaranteed income contribution to APE in the the previous quarter, is it like still around the 20% number or it’s gone higher than that?
Satyan Jambunathan — Chief Financial Officer
Shyam, I never called out guaranteed return products in the mix ever. Not last quarter, not year end.
Shyam Srinivasan — Goldman Sachs — Analyst
I believe there’s a 20% number that we had actually called out in 4Q, maybe my memory is wrong. 20% of APE.
Satyan Jambunathan — Chief Financial Officer
I don’t know. So we haven’t publicly disclosed it.
Shyam Srinivasan — Goldman Sachs — Analyst
Got it, got it. Thank you and all the best.
Operator
Thank you. The next question is from the line of Nischint Chawathe from Kotak Securities. Please go ahead.
Nischint Chawathe — Kotak Securities — Analyst
Thanks for the opportunity. Most of my questions have been answered, just one — and this is, you know, one of the news articles of a couple of days back about, you know, about GST input tax credit, where I guess you know, there was some investigation on the insurance industry. You know, just on behalf of the industry, can you kind of make us — you know, help us understand what really happened? And does it mean that, you know, you need to make any payouts right now or probably make any provisions for payouts?
Satyan Jambunathan — Chief Financial Officer
So Nischint, you’re right, this is an inquiry that is being carried out with respect to the entire industry. The conflict of the inquiry is about certain expenses and how GST input credit has been availed on that. As far as I understand, the entire industry and we are continuing to provide data and cooperation to the authorities as they are seeking. They will have to go through their process and assess whether — whatever evidence we have of the activities that are carried out are suitable or not, we will wait for that process to conclude and if necessary afterwards, it may move into litigation. You know, in order of magnitude or what it could be or even whether there will be any impact, I think it is too premature to call, because right now it is a data gathering exercise by the authorities.
Nischint Chawathe — Kotak Securities — Analyst
But have you paid anything right now to the authorities, or is it something that — or provided for anything in the P&L?
Satyan Jambunathan — Chief Financial Officer
Nischint, we haven’t spoken about any payment. But generally whenever there is tax related litigation or inquiry, and this is true in litigation as well, expectation is to deposit some proportion of the disputed amount upfront, and then continue with the litigation. And eventually the decision of adjudication will decide, whether it goes in our favor or not, in which case if it goes in our favor, we get a refund of whatever we deposited.
Nischint Chawathe — Kotak Securities — Analyst
Sure. And then this kind of probably has — I mean if you’re making advanced payment, this kind of has some implication on the P&L?
Satyan Jambunathan — Chief Financial Officer
It doesn’t. One payment has no implication. Only when there is a substantive action, does any implication on P&L even get considered.
Nischint Chawathe — Kotak Securities — Analyst
Okay. So this this will probably — from a P&L point of view, considered as an advanced payment to the…
Satyan Jambunathan — Chief Financial Officer
That is correct.
Nischint Chawathe — Kotak Securities — Analyst
Okay. Perfect. I think that was my question. Thank you very much and all the best.
Operator
Thank you. The next question is from the line of Manish Gupta from Solidarity Advisors. Please go ahead.
Manish Gupta — Solidarity Advisors — Analyst
Thank you for the opportunity. Sir, what I wanted to understand is that, you know the way we measure our progress is doubling of VNB between FY ’19 and FY ’23. Now typically in other categories in insurance, what we see is that the experience of people in group term has been very, very poor. So for example, if we see health insurance, the combined ratio in group policies is well over 100, meaning it’s a loss making proposition. Now my question to you is, that in life insurance, the true profitability is only measured over long periods of time when you make the adjustment on the EV. So is there a — can you give some data if you can share, about what your experience in group term has been? Visibly what your assumptions are? Because as we measure progress through VNB, we can end up reporting very good VNB when we book these policies, only to reverse it at a later date.
So I just wanted to understand whether, my interpretation of the accounting is correct and what your experience in group term has been, basically the VNB margins be estimated in the past? Thank you.
Satyan Jambunathan — Chief Financial Officer
That is a perfectly valid question. One should not look only at VNB. One should also look at movement in embedded value, particularly within that, the operating experience variance and assumption change impacts over a period of time. You will notice from slide 64 in our presentation deck, that over the years, right from FY ’18 onwards and even before when we did the IPO disclosure from FY ’16 onwards, mortality morbidity variance has been consistently positive with the exception of the pandemic period. And this has been only possible, because both groups, as well as retail and within group, credit life and group term, have consistently delivered positive operating variance.
So from our point of view, at the level of pricing that we are operating and offering the products on, we are very comfortable with the loss ratios and the profitability emerging. Health; particularly within health, corporate health may be a completely different ball game from what you see in life. Clearly, at least from outside and what I have seen of that and what I know of the life insurance industry, I have no reason to believe that for the significant companies, group term should be a loss making proposition. I can confirm this for ourselves. This has been consistently positive over the years.
Manish Gupta — Solidarity Advisors — Analyst
Okay, thank you. And one more question is that, you know because the accounting and life insurance is fairly complicated, if one was to look at accounting very, very simply. How does one think about, from a shareholder perspective, what is the return on equity of an insurance company?
Satyan Jambunathan — Chief Financial Officer
So this this is this is really the tricky part. The problem is, return on equity. I will have to associate it with the profit under an accounting standard. And given the Indian accounting standard today, the return on equity becomes a very distorted measure. So let me give you an example, if I’m selling INR100 worth of term life policy. Under Indian GAAP, I may well have a first year P&L, which is a loss of INR200. If I were to account on an IFRS 17 basis, I may well have an answer where the first year profit — it’s not a loss, but the first year profit may be INR25.
Now between the two, how do I determine what is return on equity? That is the tricky part of it, which is why as a proxy to return on equity, what we use is return on embedded value. Essentially what we are saying, is that the embedded value which is the pool of future profits, is like the capital which is supporting business growth, and the operating EV profit is the equivalent of a profit metric in that context, and that’s how we are looking at the equivalent of return on equity. So an ROEV offers 16% to 17%, does seem like a reasonable level for somebody like us to be operating on, and that is what at least in the current accounting context, Manish, I would prefer looking at as a measure of return on equity. Of course tomorrow, if we move to an IFRS 17 basis, we may well decide that the EV approach can be jumped, and we can move with the financial statements itself and an ROE the way it would emerge from that, as a true measure of profitability. But that to my mind is a little out into the future.
For now, our view is the current framework of embedded value and return and embedded value is the closest substitute, if you will, to return on equity that we would consider appropriate.
Manish Gupta — Solidarity Advisors — Analyst
But have you ever calculated the ROE on an IFRS basis?
Satyan Jambunathan — Chief Financial Officer
Yes, we have. That’s what I was telling you, that if because — with no new business train, it’s effectively no capital deployed.
Manish Gupta — Solidarity Advisors — Analyst
Well, I hear that, I hear you. But if you were to calculate your ROE today on an IFRS basis, what would it be?
Satyan Jambunathan — Chief Financial Officer
IFRS is — still India has not started reporting on an IFRS basis, Manish, it’s still another two to three years later. I gave you a representative information. But I’m saying that I don’t have a capital — I don’t have a loss in the first year at all, so there is no capital to be provided. So technically it is infinite ROE.
Manish Gupta — Solidarity Advisors — Analyst
Okay. Maybe I’ll just take this offline. Thank you.
Satyan Jambunathan — Chief Financial Officer
Sure. Thanks.
Operator
Thank you. The next question is from the line of Swarnabha Mukherjee from BNK Securities. Please go ahead.
Swarnabha Mukherjee — BNK Securities — Analyst
Hi, sir. Thank you again for the opportunity. So a couple of questions. One is on the September new business monthly data that was released, what I had noticed was that for the group business, if I calculate the EP generally for the top players, as well as I think for you the group APE number was quite tepid. So if you could give some color on you know, why would that be the case, is there a base effect or something other in play, given that dispersions [Phonetic] particularly have been very — you know continue to be strong and I was kind of expecting that the credit life portfolio would you know continue to be robust at least. So some color on that piece?
Satyan Jambunathan — Chief Financial Officer
Swarnabha, the group business has multiple parts. You have group term, you have group credit life which are protection oriented, and then you have the group funds business. By nature, the group funds business is a very lumpy business. I don’t think you can ever arrive at any conclusion on trends and patterns based on monthly numbers, with respect to the group’s APE.
Swarnabha Mukherjee — BNK Securities — Analyst
Okay. So, I mean the only trend that I picked up was that, for all the larger players it was bit slow,.so that’s why I thought that was — learning [Phonetic] to read at the industry level trend or anything?
Satyan Jambunathan — Chief Financial Officer
So I would actually suggest Swarnabha that, I don’t think there is any trend at all in that. If you look over a period of time.
Swarnabha Mukherjee — BNK Securities — Analyst
Okay, Sir, sure. Another question a big fundamental question sir, if I look at the persistency numbers, say the 60 month persistency at five months FY ’23, that should be a function of what your product mix, or channel mix and customer mix was at five months FY 2018 right? And also maybe how they are behaving right now. Does it have to do with anything else to read into?
Satyan Jambunathan — Chief Financial Officer
You’re absolutely right Swarnabha, nothing else.
Swarnabha Mukherjee — BNK Securities — Analyst
Nothing else, right. So whether you know what would be the new business environment right now has nothing to do with that, right?
Satyan Jambunathan — Chief Financial Officer
Not at all.
Swarnabha Mukherjee — BNK Securities — Analyst
That’s all from my side sir. Thank you. Thank you so much.
Satyan Jambunathan — Chief Financial Officer
Thanks Swarnabha.
Operator
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. N.S. Kannan for closing comments.
N. S. Kannan — Managing Director & Chief Executive Officer
Thank you. We have answered all the questions and in case there are any residual [Phonetic] questions, please talk to our team. So thank you so much for joining on a Saturday evening. Sorry to have bothered you on a Saturday. We just finished the board meeting, so we didn’t have a choice. Thank you so much and have a great weekend. Bye.
Operator
[Operator Closing Remarks]