Life Insurance Corporation Of India
NSE:LICI
Earnings Call Analysis
Q3-2024 Analysis
Life Insurance Corporation Of India
For the nine-month period ended December 31, 2023, premium income experienced a decline of 5.69% year-on-year, from a total premium of INR 3,42,244 crores to INR 3,22,776 crores. Despite this dip, the company held its leadership position in the market, albeit with a slight reduction in market share from 65.38% to 58.90%. The market share in individual business decreased from 40.93% to 38.74%, and in group business from 78.65% to 72.24% for the nine months ending December 2023.
Individual new business premium income remained relatively stable at INR 38,679 crores, compared to INR 38,828 crores in the prior year. The annual premium income from individual business incremented by 5.84% from INR 1,61,601 crores to INR 1,71,040 crores, contributing to a 4.64% year-on-year growth in total individual premium income. However, group business presented a stark contrast with a 20.28% decline in total premium income, down from INR 1,41,815 crores to INR 1,13,057 crores.
Profit after tax for the nine months ending on December 31, 2023, rose by 17.14% to INR 26,913 crores, up from INR 22,970 crores for the corresponding period in the previous year. This profit includes a significant transfer from the non-par to shareholder's account amounting to INR 21,461 crores. The value of new business also grew by 8.40%, reaching INR 5,938 crores, with an improved net VNB margin expanding by 200 basis points from 14.6% to 16.6%.
The company has improved its solvency ratio, a key measure of financial stability, from 1.85 to a healthier 1.93. In lockstep with this foundational strengthening, assets under management (AUM) ballooned by 11.98%, signaling enhanced capacity and reach. The AUM stood at an impressive INR 49,66,371 crores as of December 31, 2023, compared to INR 44,34,940 crores from the previous year.
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Ladies and gentlemen, good day, and welcome to LIC's Q3 FY '24 Earnings Conference Call. [Operator Instructions]
Please note that this conference is being recorded. We have our senior management of LIC led by Mr. Siddhartha Mohanty, Chairperson on this call. I now hand the conference over to Mr. Siddhartha Mohanty, Chairperson, LIC. Thank you, and over to you, sir.
Thank you. Good morning, everyone. I'm Siddhartha Mohanty, Chairperson, LIC. On behalf of the senior management team, I warmly welcome you all to the results and corporate update call of Life Insurance Corporation of India for the third quarter and 9-month period ended December 31, 2023. The [indiscernible] and the presentation can be accessed on our website and on websites of both the stock exchanges, BSE and energy. Along with me on this call, I have 4 Managing Directors, Mr. M. Jagannath, Mr. [indiscernible] Pande, Mr. [indiscernible] and Mr. [indiscernible]. Senior officials of the corporation present on this call are Mr. Dinesh Pant appointed actuary and the Executive Director; Mr. KR Ashok, Executive Director from the actuarial team; Mr. Sunil Agarwal, CFO from the finance team; Mr. Ratnakar Patnaik, Executive Director of Investment front office and the CIO; Mr. K. [indiscernible], Executive Director, Investment Backoffice from the investment team; Mr. R. Sudhakar, Executive Director, Marketing and the CMO; Mr. [indiscernible], Executive Director of BankAnsurance; Ms. Manju Bagga, Executive Director, Penson Group Business; Ms. Anjala Purushottam, Executive Director, CRM Claims Annuities; Ms. Rachana Khare, Executive Director, CRM, Policy Servicing; and Mr. Sanjay Bajaj, Head Investor Relations. I would like to thank all of you for sparing your valuable time to join this call today and listen to the LIC team. Let me now mention the key business, operational and financial highlights for the past 9 months of the financial year 2023, '24.
Premium income. For the 9 months ended at December 31, 2022, we have reported a total premium income of INR 3,22,776 crore, as compared to the total premium of INR 3,42,244 crores for the current 9-month period of last year, ending December 31, 2022. The individual new business premium income for 9 months FY '24 is INR 38,679 crores. And for comparable 9 months FY '23, it was INR 38,828 crores. The annual premium income individual business for 9 months FY '24 is INR 1,71,040 crores as compared to INR 1,61,601 crores for 9 months FY '23. Therefore, for 9 months ending December 31, 2023, our total individual premium income, including renewal is INR [ 29,719 ] crores as compared to INR [ 2,0429 ]crores for 9 months ending December 31, 2022. As measured by total individual premium, we have grown by 4.64% on a year-on-year basis. The group business total premium income for 9 months ended December 31, 2023, is INR [ 1,13,057 ] crores, comparing a new business premium of INR [ 1,8,726 ] crores. In comparison for 9 months ended December 31, 2022, last year, the group witnessed total premium income was INR 1,41,815 crores and comprised new business premium of INR 1,37,240 crores. Therefore, for 9 months ended December 2023, total grew premium has declined by 20.28% compared to similar period of previous year.
Hence, our overall premium for 9 months ended December 31, 2023, has registered a decline of 5.69%. Our market share while first [indiscernible] income is 58.90% as per IRDA for 9-month period ended December 31, 2023, as compared to 65.[ 38 ]% for the similar 9 months figure ended December 31, 2022. If we have to split this total market share of 68.90% into segment-wise, they are an individual and group business. We have a market share of 38.74% in individual business and 72.24% in group winners for 9 months ending 31 December 2023. On a comparable basis for 9 months ended December 2022, the respective market share for individual and group business were 40.93% and 78.65%. Therefore, we continue to retain the levers position in both individual and group business segments in the Indian insurance industry. I would also add that we are conscious about doing profitable business. In an AP basis, the breakup of weakness is as follows: total annualized premium equivalent, APE, for 9 months ended 31st December 2023 is INR 35,790 crores, which is comprised of the individual AP of INR 23,503 crores and a group AP of INR 12,287 crores. Therefore, on AP basis, the individual business account per 65.67% and group business accounts for 34.[ 33 ]%. Further of the individuals AP, the par business accounts for INR 20,203 crores and non-Par amounts to INR 3,299 crores.
As you can see, our par share of individual AP is 85.96% and the non-Par is 14.04% for 9 months FY '24. You will recall that our non-par share for the year ended 31st March 2022 and 31st March 2023 on AP basis within the overall individual business was 7.12% and 8.89%, respectively. Further, you'll also remember on the last call, on November 10, 2023, we have mentioned about our non-par mix to be 10.76% for H1 of FY '24. At this point, I would like to emphasize that our strategy of focusing on changing product mix by launching new nor products and marketing the same in a focused manner to meet our customer needs in showing results as we have result. While we have shared non-par mix for the period of 3 months, 6 months, 9 months at a disclosure, you can very well arrive at your own estimates of how these successive months and the quarters are getting better for us on this aspect since we have been listed. Profit after tax. The profit after tax for the 9 months ended 31 December 2023 was INR 26,913 crores as against INR 22,970 crores for the 9 months ended 31 December 2022. The current 9-month period profit includes the transport of an amount of INR 21,461 crores, net of tax pertaining to the accretions on the available solvency margin from non-par to shareholders' account. The amount of INR 21,461 crores comprises of INR 7,692 crores for this quarter ended 31st December 2023, besides INR 6,277 crore, and INR 7,492 crore for the quarter ending 30 June '23 and 30th September 2023, respectively.
At this point, I must highlight that the 9-month profit of FY '24 is not comparable to the published 9 months profit figure of FY '23. Therefore, I will request our CFO, Mr. Sunil Agrawal to provide details after my opening remarks, and we produce start of the Q&A. D&B and VNB margins. Value of new business is INR 5,938 crore for the 9 months ended December 31, 2023, as compared to VNB of INR 5,478 crores for the 9 months ended December 31, 2022. As you can see, the GMV has registered an increase of 8.40% on a year-on-year basis. Further, the net VNB margin for the 9 months FY '24 is 16.6% as compared to 14.6% for 9 months ended December 31, 2022. Then, the VNB margin has expanded by 200 basis points on a year-on-year basis. In comparison, you will also remember that our VNB margin for the past 6 months of FY '24 ended September 30, 2023, was 14.6%. Therefore, the 9 months ended December 31, 2023, they just also demonstrated the positive impact of changing product mix in Q3 of FY '24 when new products have been launched. Solvency ratio. The solvency ratio as on December 31, 2023, improved to 1.93 as against 1.85 on December 31, 2022. Assets under management.
AUM as on 31 December 2023 grew by 11.98% year-on-year to INR 49,66,371 crores as compared to INR 44,34,940 crores as on December 31, 2022. Product mix and new product launches. Now I would like to inform about new product launches. In line with our strategy of increasing the proportion of the non-par business, we launched new non-par products during the past 9 months of FY '23, '24, to capture to customer requirements, namely LIC [indiscernible] plan, LIC [indiscernible] and LIC Group, both retirement medical benefit plan, respectively. Number of policies sold during the 9 months ended December 31, 2023, we sold 1.25 crore new policies as compared to 1.28 crore policy during the 9 months ended December 31, 2022, registering a margin decline of 2.6% over the corresponding period of last year. Agency workforce. As on December 31, 2023, the total number of agents was 13.74 lakhs as compared to INR 13.23 lakh agents at 31st of December 2022. The market share by number of agents are on 31, 2023, stands at 49.67% as against [indiscernible] for December 31, 2022. Therefore, we have a net sum of approximately 51,000 agents in last 1 year. A number of policies sold basis, the agency force has sold [ INR ] 1.21 crore policy during the 9 months ended December 31, 2023, as compared to [ INR ] 1.24 crore policies during the corresponding period of last year, registering a decline of 2.39%.
Therefore, more than 96% of our policies for the past 9 months of FY '24 was sold by our agency force. Even on a premium basis, approximately 96% of new business premiums came from our agency channel for 9 months FY '24. Contribution of bankcard and alternate channel. During the 9 months ended December 31, 2023, other [indiscernible] and alternate channels collected new business premium aggregating INR 1,423 crores, which was INR 1,355 crores for 9 months ended 31st December 2022, registering a growth of 5.02% on year-on-year basis, with this -- the share of bank card and alternate channel has increased to 3.69%. For 9 months period ended 31st December 2023 as compared to 3.50% for a similar period of last year. Our overall expense ratio stands at 15.28% for the 9 months ended December 31, 2023, as compared to 15.26% for the same period last year. As you can see, the increase was very, very marginal, 2 basis points on year-on-year basis. Persistency. On premium basis, the persistency for [indiscernible], 37, 49th and the 61st month for 9 months FY '24 stands at 67.22%, 58.59%, 54.80% 52.01% and 50.23%, respectively, as compared to 64.9%, 59.06%, 55.32%, 52.45% and 51.42% respectively, for 9 months FY '23. Operational efficiency and digital progress in our digital initiatives through the agent assisted another app we have completed [indiscernible] policies through this up during the 9 months ended 31st December 2023 as compared to [indiscernible] policies for the comparable period ending December 31, 2022, thereby registering a growth of 47.59% on year-on-year basis. I feel very happy to let you know that more and more agents are adapting to do business on ANANDA. We had also announced during the last call that we have started a digital transformation project called [indiscernible] digital innovation and value enhancement. At that, we have taken on board a top reputed international consulting firm for this project. Claims. On the claims front, during 9 months FY '24, we have processed 1 crore 8 lakh 2,767 number of claims, which includes 1 crores 32 lakh 4,597 maturity claims.
On an amount basis, during 9 months FY '24, maturity claims were INR [ 10,30,222 ] crores, and the dead claims were INR 16,288 crores. On a comparable basis for 9 months FY '23, maturity claims were [ INR 1,13,936 ] crores and the dead claims INR 17,350 crores. Therefore, the death claims are lower by 6.12% and the maturity claims are higher by 14.29% on a year-on-year basis. In summary, I would like to make 3 points -- our efforts towards changing our product mix are succeeding and we have been able to increase our non-par share within the individual business to 14.04%, which is a significant increase from 7.12% around the time of our listing. Secondly, we are able to launch products that are competitive, meet customer expectation and the needs of various marketing intermediaries and channels. Finally, our sharp focus on enhancing margins in the business is also yielding results as is evident in the 200 basis points increase in VNB margin to 16.6% on a year-on-year basis. Before I close my opening remarks, I would like to say that the Board has approved an interim dividend of INR 4 per share in its meeting held on 8 February 2023 -- 2024. We are thankful to our customers, shareholders, employees, agents, marketing channels for their test and trust in us. We remain committed to maintaining our leadership in the market while delivering superior value to all our stakeholders. Thank you very much. Before we open the floor for questions, I would like to invite the CFO, Sunil Agrawal to explain the profit number, especially with respect to the comparable numbers for a similar period last year. Sunil?
Thank you, sir. Good morning, everyone. The profit figures for the quarter are comparable. The profit figure for the quarter, INR 9,444 crores is comparable with the quarterly profit of last year INR 6,334 crores, which is a 49% increase. The profit number for 9-month period ended December 2023 is not comparable with the 9-month period in the previous year because previously included accretion of ASM for the quarter ended 31st March 2022 also, which amounted to INR 4,542 crores. So we removed that from INR 2,969 crores. The profit for 9 months -- the comparable profit for the 9-month period, 31st December 2022 is INR 18,427 crores, which is comparable to the profit for 9-month period ended December 31, 2023, which is INR [ 20,913 ] crores, which is a 46% increase in profit, comparable profit. Thank you.
We now invite questions.
[Operator Instructions]
The first question is from the line of Sujit Jain from Bajaj Allianz.
Mr. [indiscernible] team are compliments on a great set of numbers. Sir, I wanted to check with you the sustenance of this VNB margin going into Q4? And what would be the guidance for FY '25 and over medium term? And it's not guidance, in terms of your aspiration, how VNB margins will pan out next year and in the medium term, let's say, over a period of 3 years.
Actually, it would not be appropriate to give any specific figures. But as you observed, whatever commitment we made during listing, we are in line with achieving our commitment from 14.4% to [ 16 ]% now. And you see the product mix, we are launching high-margin products -- and it is not only for the older but fast to keep in mind the customers' interest. So those products get traction in the market. And in coming will continue this effort and a margin mine sense will definitely improve, and it will be competitive in the market in coming days.
Okay. And you have some mentioned in a variety of your interactions in post listing about improving on 3 vectors. In the initial commentary, you given the progress on these 3 vectors as well, which is product mix, channel mix and digital intervention. Specifically on product mix and channel mix, you've given numbers. But directionally, where do you see LIC going in FY '25 on these 2 [indiscernible] product mix and channel mix?
The product mix, channel mix -- already under its own result -- product as new products we have launched, and you will see the share of AP, CP has gone up like substantially has gone up -- and in coming days also new products, which will be not all take care of customer as well as all other stakeholders. So definitely, this product mix will help us not only margin but share and good growth will be there. But at the same time, channel mix venue we say our alternate channel, we are focusing alternation banks, [indiscernible] slight increase there from 3.5 to 3.7 -- so further growth, we expect we'll focus more on out of channel in coming days. But more than that, digital marketing also we are focusing where our strategy very, very neglible less than 1% -- because we have taken this initiative project did digital innovation and value enhancement. So coming with the customers also will be happy to contact directly LIC and consider their policy decision, whatever policy they want to take, if they can take. So on these 3 fronts, already work expected and those are showing results, and it will continue.
What targets you've set for you to eventually say that you kind of met the targets or the milestones or did not achieve, et cetera, especially in non-par share, where do you see it going? What is your target there and the Banca share in the mix and the digital share in the mix.
Non-par share, we committed it will be 15% share of non-par to total business. And we have almost reached there today. And my sense is by March, it will further our commitment, we will deliver more than our commitment. And so far as [indiscernible] channel, those are going if the other insurance companies, which are doing well in bankcard, they are owned by banks. So they have their advantage. We tie up with many banks and gradually, slowly, it is going up. And it is being volume-wise also our position will be, I think, 7th -- 6th or 7th the total volume of a premium in a ban. So that progress will be there. But more than that, we will focus on the technology path, not only for customer action because that is the one area we are focusing more and more coming days, that will be our focus. But also all our aspects total servicing everything. So that a customer never comes to out of it stateroom, you can take policy can get all services.
This policy he can get his loan, he can get you the claim, he can change the nomination as end all everything. So that is our objective.
Next question is from the line of Anuj Singla from Bank of America.
Congratulations on a good set of numbers. Mr. Mohanty, the first question is with regards to the strong performance in the non-par...
I'm sorry to interrupt you can be please. Yes.
Is it better?
Yes, yes.
Yes. Sir, my first question is with regards to the non-par mix -- so what we have seen is that you had this product -- [indiscernible] Utsav, where I think which has done very well. Would it be possible to share what kind of premium you collected in that product? And the second part is when you look at the pipeline for 4Q, do you have any similar product which can support strong growth on the non-par momentum continuing in the 4Q as well?
See, we have collected almost more than INR 1,000 crore under this product only, [indiscernible]. And it recently, we have launched, of course, this last month, LIC Index Plus then [indiscernible] to report plan also which we have launched. So all these products are very competitive compare return on other aspects.
So these are competitive products. And also, we have revised the rates in our annuity products like [indiscernible] and [indiscernible]. So these rates have been upward icon has been done. And we have also [indiscernible] single premium product. There also, we have [indiscernible]. So all these products will get traction in the market, and we expect a very high performance during a couple of days left for the year to close.
Okay. Sir, just to circle back on the question which the previous participant also asked. When you look at the margin outlook the third quarter, which we tend to look at by taking out the 6-month number from the 9 months is a very strong performance on the VNB margin side. When we look at the outlook for the next quarter or the next year per se. Do you think this is sustainable on that part? You alluded to the non-par savings mix continuing to improve, but it's a very strong performance in this quarter, and I think driven by this [indiscernible] product, so do you think this kind of margins we can sustain and given the annuity repricing which you have done, does it pose a risk to the margins in the next couple of quarters?
See, if I say, definitely, we are very much positive on this aspect. Particularly in [indiscernible] product that has taken care of all segments that has not only taken care of customers while giving high competitive return, but also intermediate and at this time shareholder. And [indiscernible] other products also, I am very much confident in coming days, we'll sustain that margin. I would request our contractor, Mr. [indiscernible], you will throw light further.
We need to appreciate on on that, yes, it is a very conscious strategy that [indiscernible] has taken about rebalancing. And despite of the fact that last year, revision into rates happened twice. But the overall VNB margin, even for the 9-month period has not come down for us. That has been possible because of the business mix.
While, yes, certain products have given us head start of this thing. What we are looking forward is not overdependent on any single product. It's the entire mix of the products is going to sustain this momentum. But we are largely also looking not only in the context of margins, but also in context of overall absolute VNB that is important to us. So the [indiscernible] strategy is going to be very dynamic in which the growth and a reasonable level of margins coupled together would drive towards the VNB and overall profitability.
Got it. And lastly, sir, on the protection side, the performance, again, there is a decline on Y-o-Y, which is what steps are we taking in terms of maybe product and distribution to address that?
Yes. On the production side also, you will appreciate that the industry overall, and we also had revised our premium rates in order to make sustainable viable -- it's very interesting that even when the number of growth is less, actually, the margins have improved there. And even the VNB has improved there. But again, we are looking at it very closely. We are trying to -- in fact, we feel that in our [indiscernible] production also we have done very good the very good growth has happened, and the margins have also significantly improved loss ratios that have come down there. So again, we are continuously looking into this segment, and we'll look into which are the elements where we can look into reviewing the pricing also. In fact, we also look forward to some more variants of term products to be worked on and considered in the coming quarters.
Next question is from the line of Avinash Singh from MK Global.
Thanks for the opportunity and a good set of performance. A couple of questions. The first one is more on the margin side. So if I see 2 parts of margin, I mean, the non-par and par, at such a large scale, our margin Y-o-Y is appearing to be declining slightly.
Now what experienced that? Because generally, power margins are stable and even interest rates have been broadly stable. So what explains minor drop in power margin. And on the non-par side, I mean, including [indiscernible] or 63% kind of a margin with a little help from protection looks pretty strong. Now that would mean that in terms of your benefit offering likely would be lower than what your competitors are offering on the non-par savings and annuity side. So if competition heats up and you want to sort of improve your offerings in the non-passing an annuity. Do you think that this 63% can come under pressure. Of course, I am complicated on the fact that an overall level your non-pap will sort of increase, but the non-par margins. So just -- I want to experience that what is causing sort of a pressure on par margins? And what sort of margin do you think that can be sustained in this non-par? That's my first question. [indiscernible].
Yes, this is Ashok. See, if you look at the Parnate agree that's a small decline in the pharma -- but basically, what happens is part is portfolio. And the...
So sorry to interrupt you. Can you come a little closer to the mic?
Yes. Yes, it is true that the par margins -- am I audible now?
Yes, sir.
The par margins are slightly declined. That is basically because this is an inherent the business mix change in the -- within the park because there are certain products which are having a higher profit signature compared to other products.
So normally what happens is as our portfolio that fluctuation do happen were. And it is also aided by the movement in the risk credits. So putting into all together that the minor decline in our margins was expected. Looking at the non-par and the annuity, you see, what happens is the profitability and the competition or 2 sides of coin. If the competition increases, automatically the profitability is expected to reduce. But the art is in balancing the 2. And I think we have successfully done that in our recently launched products because we could able to run a good amount of premium from the market. And also, we could sustain growth in these margins.
Okay. So just on par, just to confirm, Y-o-Y 9-month margins or this minority, is it not caused by any sort of a change in operating side, either the expenses or the persistency behavior? Or some contribution coming out of these 2 factors as well?
Yes. See, there are a little bit tough, but the car emissions are very minor compared to the upside that we get on the business mix. If we look at the margin what we have given, the 2 big impacts, 1 is on the business mix, which already shared pay our Chairman, that there is a good movement in the non-par share, including units that are added to that. And in -- we have repriced annuities twice during the year, increasing the benefits naturally pushing the margins up. But the other components are very minor in nature. The major impact regarding for the assumption changes in [indiscernible] case, which is pushing it south. And there has been some certain updates in the modality looking at the recent experience, and we're just pushing it slightly up. So putting it all together, the single 1 driver is the disease which I pointed out.
Okay, sir. And my second question is, again, more sort of explanation I will require from your side. If we see the the segmental surplus that you gave in your results of the past surplus that the for GAAP accounting share softness has been in the deficit for last few quarters, and also, last year in the 9 months, you were building, I mean, the FFA almost in the tune of roughly INR 9,000 crores, whereas in this 9 months, you have taken out the FFA and INR 3,000-odd crores.
So what is sort of explaining this that -- again, I'm not looking at 1 quarter. I'm looking 9 months as a whole. What is explaining this sort of this -- your change in how you are sort of building FFA versus with growing and also the surplus emergence in par that seems to be negative last 9 months.
Yes. If I would like to explain that, actually, we would appreciate that general insurance companies would be building on the base for the purpose, either for the purpose of requirement of solvent or when there's no certainty a more certain amount that we distributed at any particular point of time. You would have seen from the results of the corporation. Corporation has been going from strength to extend as far as the solvency is concerned. In fact, some years back, we used to have around [indiscernible] so today, we are standing at 1.93. So in this year, we had taken calibrated decision, right, for the first quarter that in which the certain amounts which were hitting the FFA, we used for the provisions for the liability purposes -- because that has to be routed through the revenue account.
That's why you are seeing that with it. Actually, it's not a deficit. The balance sheet is the entry fee. It is only adjustment of the FFA. Frankly, going towards the end of the year, FFA should keep on reducing because one gets more certainty about how the distribution should happen. So right now, the strategy is not to go [indiscernible] FFA, it is not a requirement. And we expect this deficit, which has been activities. There is no deficit as such. It is only that the amount which was there in the FFA around INR 4,000 crores plus [indiscernible] plus. So that amount has been adjusted towards making greater provision and the actual the liability side of it. And because the entry passes to the revenue one, therefore, it looks like negative. Otherwise, there's no negative. The fund is very much in the plus and very surplus position itself. So FFA, we do not want to have much, but a certain amount of question is required in any point. That's why is provided here. Otherwise, it's not required for any some we would like to make actual distribution on whatever success result there in the past numbers.
Lastly, if I can just speak because you read the point of solvency and very valid point that at 193% you are sort of having very strong solvency. And also to add to that, a very large amount of unrealized gains that is not right now counting towards your delivered solvency margin. In that backdrop, I mean, should we expect the dividend, of course, you have announced for sale -- going forward, I mean Q4 also, the board would likely take up dividend because, I mean, the amount sort of you realize from your unrealized, that is not any way going to impact your solvency part because today that is not part of your ASM. So I mean, should we expect an again in the next quarter that the Board will be considering dividend?
Let us wait for that, at this point, we do not give anything Board has to take a whole call what is the capital plan of the company or as well as the overall interest of all the stakeholders. I think very bold and rightful decision has already been made with our Board and that would be the core production in future also in the overall interest of all the stakeholders.
Next question is from the line of Sanketh Godha from Avendus Park.
Sir, if I see your nonpar margin in 1H was around 50 percentage. And now we be closer to 64 percentage. So I believe it is largely because of [indiscernible]. So what needs -- the whole nature of so makes it better margin? And if you keep on introducing whole life products in non-parks or longer tenured plants in non-par -- do you expect the 64% margin to hold up going ahead or not? That's my first question.
Yes, Sanketh, actually, you realize and appreciate that our business strategy is not -- there is no single [indiscernible] it's not that every product just because it is a whole life that is going to sell the purpose because then it also brings a more challenges in terms of reinvestment risk and long duration risk also. So it is -- that's why I said earlier also that the larger purpose of introducing products, the primary product purpose to ensure that your product basket is complete, you are able to tap and your -- whatever the overall directions are mentioned reaching every [indiscernible] ensuring for all policies that the larger purpose that customer-orientated solutions are provided -- so it is not only from a margin point of view that products are introduced. So this product, we -- it took us a longer time to design things around.
So that give us a holistic approach -- and what we are looking forward is, yes, this is a great product for everybody, as [indiscernible] mentioned earlier also. But what -- every product may not necessarily right solution. So what it's not -- we have right -- we're also using the part side also we already have a given amount, which is also online product. And it's a very comprehensive product that 1 also. So -- but we -- what we are looking forward to is that coming out with a different variety of products. We have -- in fact, if you look into leasing products. We have introduced short-term premium income products also.
So what we are looking forward is that product should be, first of all, rifle from the context of the policy holders. It should be attractive enough for the marketing channel. And then it should definitely have a value for the shareholders also. So that is what has happened. That's what I was earlier also saying that the overall strategy is not just in context of products. But the strategy on marketing there and whatever technology the support can be provided so that the ultimate value comes out of that. So that's going to be. And therefore, all our products in that context are important for us.
Got it. But the margin expansion, what you are seeing from [indiscernible] to [ 9 ] is largely attributed to the and then the nature of the product. That's a fair understanding, right, sir?
Yes, yes. This is also a product, but there are other products also which are delivering much higher margin than the overall margin that we are seeing. So at this point of time, we will have to review our margins also because then in a competitive market, it's a also between what margins you want to give and what is the business growth? Because market share optimal market share is also a consideration. So we expect that there is going to be some centration points.
So we'll continue to introduce a different variety of products and continue to review our existing products. And second point, sir, if I look at your growth, your par business is struggling a bit to grow in the 9 months. And whether just because company is focusing on non-par whether the focus on non-par is cannibalizing to par and to, therefore, it is not translating into overall company growth, maybe product mix is good. Margins coming from day is good. But overall, growth is struggling. I mean, I just wanted to understand that -- is it fair to conclude that the non-par focus has cannibalized linked to par or to some extent, [indiscernible] when the market share that great and you're not going industries in that sense.
The first thing is that when we talk of Par and the non-Par as focus is the customer. Better to design, we give customers in mind and the design so that customer gets the best of the product. And since there has been a directional change and the focus is more on non-par. Some, in fact, has been there on par or mall as our person put it, there will be some impact on the Par side also.
But time, we are focusing that there are different categories of agents are having their specialization and they are actually selling their products. That is why Par continues to be the large proportion of business which we are having today. There are very strong plants, which are there in par also, which have actually grown. At the same time, during the last year, there were also revisions which we have made in the -- some of the plans in the Par business, increasing the summer sure and increasing the ticket size in certain cases. So such increases have impacted a little bit of a number of policies in those plants, which are being compensated for in the non-par side through the non-par products, which we have been launched in the recent past.
Got it, sir. But sir, given this strategy, can we expect a positive growth to happen in FY '24 or growth to come back in FY '25 in total EP term or your bet not growing as significantly but mix changing and resulting in the margin?
Definitely, we would like our growth trajectory to be there. In fact, it is already on track to that. And it will be -- the growth will also continue to be our driver. So that's very much on the focus. And that if you see quarter-to-quarter, that situation has improved. In fact, in the individual side it is already -- there is an AP growth, which is already there. So if we -- so that we are looking forward to having rational margins, margin improvement, there will be improvement as well as the AP growth because without AP growth and the combination of the margin, the overall [indiscernible] grow. So that direction is very clear for the past ratio we have to [indiscernible].
Okay, sir. And last one, just on group business on overall basis, it has declined for 9 months. Just if you can give a little color on the group business, what led to this decline, whether it is GTL or fund-based business or annuity just -- and your outlook on, say, a GTL or not, what is your given it has declined in the current year.
Group business, you see some of the big ticket we could not get in time. So those are coming. If you see whatever decline was there in Q2 that has been reduced in Q3. And if today, it has further improved. So I'm confident whatever target is there for group business, we will definitely achieve in the current year because we are getting confidence from all our customers to the clients. So they are gradually relating money.
Sir, but the pressure is largely in annuity or GTL or it's more in Fundis business the moderation in the growth.
This is [indiscernible] -- so there is definitely a reduction in the funded business. because 1 business is a lumpy business, and therefore, some premiums, which have come last year, definitely, we'll not be repeated, but we are looking into more function other business. And as in our [indiscernible] and ties are also continuing to grow.
Okay. So sir, the moderation is only because of the fund-based business, the profitable segments like GTL and annuity have grown in the.
Yes, those are growth.
Next question is from the line of [indiscernible] from Sundaram Mutual Fund.
Congrats on a good set of numbers. Sir, if I just back compute the new business from individual non-par, the new business on the AP side of things. It seems to be a decline Q-on-Q. Is that what you're getting at?
Sir, non-par, you are talking, I'll give you a specific figure for [indiscernible].
Yes, please, please go ahead.
Yes. Non-par -- prior business. Hello, can you hear me? Yes, on non-par AP on per last year Q3 up to Q3 9 months of 2022 and at 9 months '23, if you compare earlier, it was INR 2,213 crores. As against that, currently, it is INR 3,299 crore. So thereby, we are showing 49% growth in total volume. They are also non-par share also, as I mentioned earlier, it has moved up to more than [ 14 ]%.
Yes, sir. I understand that. I was talking from the new business mix, which you gave at a proportion, you give the split of new business mix and coming from the other non-par segment. Probably I can take it off-line also in case you don't have the numbers available.
But sir, again, the follow-up to Avinash's question, the others again, if you split the first half and 9 months, we see that the new product margins are phenomenal like versus the industry is -- so you mentioned that there is a case for you to come off and be more competitive. So if that is the case, how much will you sacrifice on the margins there to gain growth?
We have to maintain balance because growth is recurrent -- so it Yes, as we explained earlier also, this challenge is always going to be there. And that's what we have ensured that even in the 9-month period, while we have previously increased our rates. There has not been any let down on the base -- so certain products for sure, at a certain point of time when the competition no market is without competition. So they're -- in order to remain compete will have the review. But then we continue to introduce new products also simultaneously. Our ultimate aim, if you look at 16.6, we have to move from there upwards on the margin side, that's the direction.
And on the VNB side, we want to secure robust growth also. So that is a very dynamic strategy about rebalancing the margin. But it's very interesting point to be noted here is that when we are having good margins here. The returns to the policyholders are also very good. And the cash products have been so designed in a manner so that we take care of all the [indiscernible].
That's very promising. And sir, just question. Final question from my side is that sequentially, 2Q versus 3Q, except this new product, which is propping up margins substantially, have we gained product level margins sequentially 2Q versus 3Q?
Product level margins, every product might not have gained, as I was saying, at certain point of time, certainly the products would be the leaders in the margin setting others would have to be because we'll also have to look at which are the point of competition. And we'll have to review our offerings there, for example, recently the net products, we have seen a lot of competition there.
So then at certain point of time, you have to look into margin versus your growth strategy there. So the overall mix has to deliver, and that's the strategy.
Yes. I was talking from 2Q to 3Q perspective, historically, 2Q versus 3Q product level margins have broadly remained the same, other than this.
Yes, yes. Under the nonpar, we can say they have remained almost same. Sequential or also when you ask the board, we need to understand that when new product offerings are given, the customers can be very common at certain times, they can choose the new ones. So in this small variations in the participating side also need to be seen in that context also that when the greater offerings, which are not earlier there, now when they come, people in process to have been a shift. It's not necessarily because LIC wants them to take nonparty building products a customer choice. So this sort of varies comes from quarter-to-quarter over the years also can be seen.
Next question is from the line of Aditi Joshi from JPMorgan.
So I have a couple of questions. The first one is related to the nonpar. Just if you are able to provide some details on it. The first one is, sir, can you please share the duration of these products as in what is the typical duration as compared to your par products? And the second, can you also provide split of the type of premiums, which is coming from these non-par as in sitting a single premium versus the regular premium products. And -- from a risk management perspective, how do you plan to manage the risk from these products, especially from a perspective of investment spread management. I think I just want to understand your thoughts as in what challenges are you facing? Or if not, is it is the asset management assets remain comfortable at this point? Or what challenges you might face in the future? The reason I'm asking that as you shared previously that had been mix where you're trying to limit is around 15%.
So I'm just trying to understand what is limiting you to this 15% mix because given the margins are pretty much higher for this product? And just a related one is that as you increase the share of non-par in your next, how will it affect the unwind in your emitted value because the EV mix is largely skewed towards the value in force. And if you look at the EV movement, a large of it comes from the unwind. So this is the first question.
Yes. As far as you're pointing to that, there's nothing limiting us to 15% sort of level. The appreciable growth I was mentioned earlier from around 8% to 14% has happened, because this is a strategic efforts which have been made towards creating a larger set of products, which because as you all will appreciate that again we are not offering many non-par products because the distribution making something in a different manner. And now that is being offered. So that there's a natural traction towards that also because larger offerings are there, and there's a cautious effort also on that side. So there is nothing limiting that we shall be at 14%.
Our aim is to provide products, which are value addition and good offerings to the customer, and they will pick and chose. And then automatically, we would expect because the people who are interested in guarantees will move towards nonparticipating products, people who want discretionary of benefit at continue to take and many people will like to take more site products because they would like to guarantee as well as discretionary. So that's the element. As far as risk management is concerned, we are very cautious about how to ensure, in fact, very line of business line specific calls are taken, you would see that larger distribution equity would be there in the participating [indiscernible]. So therefore, annuities are matched by long-dated paper so that -- and where the cash flow matching is actually in tune with the investment aspects there. Similarly, for the funds in the non-par side also, the larger proportion a significant proportion is towards securities. And a very created approach is taken. The investment market is always good to risk, and our job is to ensure that the property risk management is done. So all the policies and as all the actions are taken. And we try to ensure that ALM matching takes place. But within that, optimize of returns can be ensured. So the continue activity, which is undertaken and which is -- that's why we are taking line of business-wise as well as product-wise approach on what should be the banking assessment, how should their risk and rewards we decided based on this available opportunities there.
Ari, sorry, Artico to come back for a follow-up question. Participants will be the last 2 questions. The next question is from the line of Nischint Chawathe from Kotak Securities.
I'm looking at your VNB walk -- and this is Slide 18. And what it suggests is that the impact of product benefits over a 9-month period, and I know it's not directly comparable, but it's actually down minus 3.6%. And I know we've seen margin expansion, but it's kind of -- I'm just trying to understand why -- why the negative.
Am I audible now?
Yes, yes, sir.
Yes. See, as I mentioned earlier, we have replaced annuities twice during the year. That is 1 in August and 1 in February. And that is the main reason why the margin was low at contributing to a lower margin for the period.
Sure. And if I look at the impact of assumptions, right, this is 0.7% in the 9-month period versus 1.9% and 2% in the previous 2 presentations. So is it something that assumptions have been downgraded as well for this quarter?
So actually, the major part of the assumption is the RFR change, which on which we don't have any control. and it's a market-driven number. And the RFR is actually pushing the margins by the down south. And the requirements of the VNB calculation required us to update the latest information into the calculations. And we have updated the modernity element based on the recent experience in doing. And that is [indiscernible] sometime in June '23. And these 2 are the major things that impact [indiscernible].
And just 1 small question is, if I look at the average policy term that has gone up from -- in the non-par segment has gone up from 16 years to 43 years. What really explains this?
Actually, the -- if you look at the current quarter's performance, the current quarter's performance is riding on the products were given so under -- and the average term because that being a old policy, naturally shift the average or nonpar savings term.
I'm just trying to see, first half the term was 16, 9 months a term is 43. Probably, it means that your term that you sold in the quarter would be like 50, 55 on your average age is something like 32. So is that how one should think of it and that's where it goes to like 80 plus as a whole life policies.
Actually, since we just sold it technically, it is all right? So it goes to the end of the --
And your assumption would be like 85 --
And therefore, this projection period will also be till the end of the contract. And that is because of the huge number of business that is being done there, it is the average term. But this is not the premium paying term it is a policy premier generally [indiscernible] products.
Next question is from the line of Supratim Datta from AMBIT Capital.
So my question is on the mechanism. So could you not as low now that non-par has become 14% of your AP. How are you is [indiscernible] Okay. So I wanted to understand the hedging mechanism for your non-par products. How are you touching the risk now that has become a substantial part of the book?
Yes, there are 2, 3 things to be appreciated that. First of all, as far as non-par annuities are concerned, there is not a great requirement for hedging there because the cash flow management as long as you can get adequately matching duration long-term bonds, which are available and on, for example, they have been there. So to that extent, the reinvestment is get cash because the cash flows coming from the coupon very well matched to the payouts. As far as the -- you will [indiscernible] as of now, our portfolio in the non-par segment is not that big as a portion to portfolio. But we already have our derivative for [indiscernible] the board and we start to roll it out now onwards, so that future cash flows or reinvestment risk can be taken care out of it. The current amount of volumes are there, they don't pose any in that context. But we are very cautious about it. Therefore, already the derivative policy is in place, and it will start getting claimed very soon.
And sir, just a follow-up on that. So now that you're rolling out the treater mechanism or -- so should that will come at the first may be now. Can you come the better suction area, please? Is that -- yes. So I wanted to understand now that you're putting in place this derivative in mechanism, how would that impact margins because they will come at a cost.
Definitely. That's why we have not gone for it as long as the cash flow general derivative will be required last year when there are cash flows that are an issue for an insurance company. More a requirement for them. So we want the policy in place and make a selective utilization of that wherever we need it. Because it's not only about the cost of derivative, but it in interest rates go up -- so those many challenges are there in that also. But the option should be available, so that whenever you are taking calls or such instruments are another way of managing that is the duration management. So in case there are challenges. Like we have introduced long-term product. We also are introducing shares products also, for example, we talked about single-frame products. So there, the risk will be left because the netting instruments will be available we want to optimize whatever the best option going for the derivative are not going for that. So that will depend upon the cash flow and the situation at that point of time. It's not just because you're derate policy, you are supposed to hedge everything that you have.
So what is our interest rate view at that moment of time in case if the interest rate movements, what are we expecting? So we'll take a base net.
As there are no further questions, I will now hand the conference over to Mr. Mohanty for closing comments.
Thank you. I hope we have answered all your queries satisfactorily. Please feel free to reach out to us if you need to understand more. Once again, thanks for your valuable time, we are committed to living up to the expectation of all our stakeholders. Thank you.
Thank you very much. On behalf of LIC, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.