Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Life Insurance Corporation of India (BOM:543526, Financial) reported a total premium income growth of 13.56% year-on-year for the six months ended September 30, 2024.
- The company's market share by first-year premium income increased to 61.07% for the six months ending September 30, 2024, up from 58.50% in the same period last year.
- The net VNB margin improved by 160 basis points to 16.2% for the six months ended September 30, 2024.
- Asset Under Management (AUM) grew by 16.78% year-on-year, reaching INR55,39,516 crore as of September 30, 2024.
- The company launched several new products, including four new non-Par products, contributing to a significant increase in non-Par APE share by 203.37% year-on-year.
Negative Points
- Persistency ratios showed deterioration in some early buckets, particularly the 13-month persistency ratio.
- The number of policies sold by the banca and alternate channels declined by 15.4% year-on-year.
- The agency workforce's market share by the number of agents decreased from 49.35% to 47.56% year-on-year.
- The company's profit after tax (PAT) growth was relatively modest at 3.51% year-on-year.
- Concerns were raised about the impact of new surrender regulations on the attractiveness and margins of Par products.
Q & A Highlights
Q: What caused the significant volatility in the Par product margin, and how will the new surrender regulations affect your margins and product attractiveness?
A: The volatility in Par product margins is due to a bumper business quarter with a shift towards high-margin products. Regarding the new surrender regulations, we have revised premium rates and product designs to maintain margins without reducing agent payouts. We aim to ensure our products remain attractive by aligning benefits with regulatory expectations and maintaining profitability.
Q: With the increase in non-Par share, what is your hedging strategy, and why did the number of policies sold in October decrease?
A: We have systems in place for hedging and will soon enter contracts for this purpose. The decrease in October sales is due to adjustments in product offerings to improve persistency and align with new regulatory requirements. We expect sales to stabilize as intermediaries adapt to these changes.
Q: Can you provide insights into your hedging strategy and its impact on competitiveness, and explain the growth spike in September?
A: Hedging provides pricing certainty but doesn't directly enhance competitiveness, which depends on investment opportunities. The September growth spike was not a deliberate strategy but resulted from market enthusiasm and intermediary efforts to capitalize on pre-festival demand.
Q: How sustainable are the current VNB margins, and what is the expected product mix for non-Par business?
A: The current VNB margins are sustainable, with improvements driven by a favorable business mix. We aim for modest growth in Par business and continued strong growth in non-Par business, maintaining the current trajectory.
Q: How are you addressing the persistency challenges, and what is the impact of the new surrender regulations on your financials?
A: We are improving persistency by revising product designs and incentivizing long-term policy retention. The new surrender regulations have led to product repricing and commission restructuring to mitigate financial impacts, ensuring a balanced approach that benefits customers, distributors, and the company.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
