CANHLIFE — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

MR. PRAYESH JAIN - MOTILAL OSWAL FINANCIAL

SERVICES LIMITED · Management

Canara HSBC Life Insurance Limited October 27, 2025

Moderator · Conference Operator

Ladies and gentlemen, good day and welcome to the Canara HSBC Life Insurance Limited Q2

Questions and answers

Moderator · Conference Operator

Thank you very much.

We will now begin with the question-and-answer session.

Our first question comes from the line of Mohit Mangal from Centrum.

Please go ahead.

Mohit Mangal

Thanks for the opportunity and congratulations on successful listing.

My first question is basically the impact of GST.

You said that it's 0.5%.

So, if you can just bifurcate between, what was the new business premium impact that is basically the business procured after 22nd September and the renewal premium and how do you see the impact on annual basis?

Will it be 0.5% or how do you kind of foresee this?

Anuj Mathur

Right.

So, thanks Mohit for asking that question.

So, I think I partially covered this in my earlier discussion where I mentioned that for the full year and this is without taking any management action, it will be about 2.25%.

But we have taken a couple of measures and through that, we are confident that we will be able to kind of retain our current new business margins going forward.

There will be short-term impact, but because of various initiatives which we have taken, we will be able to kind of go back to the numbers. which we had earlier envisaged.

Mohit Mangal

Understood.

That's helpful.

My second question is on the product mix.

So, ULIP is still 50% odd.

Do you think that we go to around 37% which was there in financial year '24 or should we see ULIP at elevated levels?

Anuj Mathur

See, I think it's basically the customer demand which is quite evident in the market.

It was evident last year also and currently also we are seeing that customer preference is actually, particularly in metro cities, is moving towards Unit Linked and as such, see there's no problem with the Unit Linked business as long as you can protect your margins.

And we have taken a number of measures to kind of protect our VNB margins.

So, first of all, our cost is kind of cost- base is very low.

We are quite efficient that way.

In terms of our total cost ratio, you will see Canara HSBC Life Insurance Limited October 27, 2025 that we are in top quartile, which helps us to optimize VNB margins.

Number two, through new products launches which we are going to do and various other measures including further sustainable saves, further OpEx savings, we will be able to kind of protect.

Also, I would like to mention that along with the Unit Linked products, now we are also attaching riders.

So, that's something which we have started about three months back and we are already seeing a good amount of premium coming from riders. attachment.

So, that also helps in improving the VNB margins, plus our focus on protection business.

So, there also, now we are looking at both retail protection as well as the group trade and as I already mentioned, we have seen growth of more than 40% in our credit life portfolio.

So, all these measures will help us to kind of recoup whatever loss is there on account of input credit.

So, we are fairly confident that we will be able to maintain our VNB margins to the levels which I have already spoken about.

Mohit Mangal

Right.

Just one clarification.

So, looking at your PPT, basically the product mix on the basis of APE.

So, a non-PAR is basically the savings component which is 17%.

Is that understanding right?

Anuj Mathur

Yes.

17% is non-PAR savings, traditional.

Mohit Mangal

Okay.

I will join back in the queue.

Thanks and wish you all the best.

Anuj Mathur

Thank you very much.

Moderator · Conference Operator

Thank you.

Our next question comes from the line of Swarnabh Mukherjee from B&K Securities.

Please go ahead.

Swarnabh Mukherjee

Hi, sir.

Good evening.

Thank you for the opportunity.

So, sir, I think, I mean, my first question was in terms of your cost ratio.

So, you have highlighted that there is a 100 business points kind of improvement in the cost ratio.

I wanted to understand, sir, that as we set up our agency business, what will be the impact on the cost ratios and subsequently on the margins because of that?

And if you could give us some guidance related to the margins going forward, because I think these are the two key events.

One is basically your investment in the business primarily on the agency side, as well as the GST impact, which you were saying that you are trying to mitigate.

But if you could give some glide path on how do you see factoring in these two events, it would be very useful.

That is the first one.

And I will ask the other questions later, sir.

Anuj Mathur

Right So, first of all, actually, what we have seen in our expense ratio is improvement of 1.5%.

So, it was 20.5% last year.

It has improved to 19% as of now.

As far as agency is concerned, I mentioned that earlier also that we will go for phased….

First of all, apologies for this problem, for the disconnection.

And I don't know till what stage people were able to hear us.

Moderator · Conference Operator

Mr. Swarnabh sir, may we request you repeat your question once again so that we can continue?

Canara HSBC Life Insurance Limited October 27, 2025

Swarnabh Mukherjee

Sir.

I think you were responding to the question on agency setup and the cost implications of that.

Anuj Mathur

Right.

So, as I had mentioned that agency we are ramping up in a phased manner.

And that will actually help us to kind of maintain our margins.

And maybe I will request Tarun, our CFO to give exact numbers.

Tarun Rustagi

So, as we are ramping up agency this year in a phased manner, so we don't expect any impact, significant impact on the various parameters.

One is the cost.

Second one is, your VNB margin and other financial parameters.

And therefore, and in the first, generally what we have seen also, the agency is expected to sell most of the (Inaudible) 17.28, so that will also maintain the margin.

And as we will generate more and more cushion from the profitability over next month, few months, we will start ramping up the agency accordingly.

So, we don't expect significant impact coming from agency channel.

Anuj Mathur

In fact, just to add, I think the agency model also over a period of time has got evolved.

And of late, we are also seeing that the distributor payouts are also kind of forgetting kind of rationalized to some extent.

So, I think this new environment will help us to kind of continue with agency business.

But as I mentioned, in a phased manner.

Swarnabh Mukherjee

Understood, sir.

And in terms of, sir, basically mitigating the impact of GST on our margins.

So, just wanted to understand what all steps we are taking and if there is any negotiation going on with our distributors.

What stages are we?

If you could, basically highlight the levers. that you have at hand, which gives you confidence that you will be able to mitigate most of the impact?

Tarun Rustagi

That's a really good question.

And so, there are three things which we are doing with respect to minimizing the impact.

The first one is rationalizing rationalization of our operating expenses.

We have been doing this and that's why we are able to maintain our cost ratios at such a low percentage.

So, we have identified various levers. and areas where we can further rationalize the cost, which is operating costs.

So, this has already been actioned and we are confident that we will be able to complete those actions.

The second part is, basically, the product mix shift.

Basically, as Anuj mentioned, the group credit life is already doing very well.

So, that is helping us in terms of increasing the margin.

And therefore, some of these product mix shift is helping us to improve the margin and taking care of some of the impact of GST.

And the third parameter is, basically, is the commission rationalization.

Now, the commission rationalization is depending upon the various distribution types we are having.

And we are assessing each and every one as per the kind of scale and the kind of commission rate which we pay.

So, in terms of these actions, we have already discussed and negotiated.

I will not use negotiated, but we have already agreed to the agreement with most of the distributors. that the impact will be neutralized on the commission side.

Anuj Mathur

And I would just like to add that in our case, particularly with our bank partners, our commission rates were already lower than the industry.

So, we do not want to further cut in terms of the new Canara HSBC Life Insurance Limited October 27, 2025 business.

But in terms of renewable business, we are assessing if there is a need for adjustment.

But because our costs are low, including commission rates, which are low, the impact is going to be much lesser compared to the competition.

Swarnabh Mukherjee

Right, understood.

So, would it be fair to assume that as we move to the second half of the year, we will not see any major impact of this coming through?

Or if you could quantify, if you assess that some impact might come through in Q3 and then normalize?

Tarun Rustagi

So, like we mentioned that we are targeting to maintain the VNB margin at the current level after taking the impact in this second half.

Second half is going to be in terms of the business volume also is going to be higher than the first month, only the month impact, which you have seen.

But we will, we are confident that we will be able to maintain this level of margin and show the growth over the previous year.

And next year onward, which is FY'26-'27, the impact will be almost minimized.

And there are many, many steps which we have already initiated.

Some of them have already been actioned and agreed, like I mentioned.

So, it will continue to help us in terms of maintaining the healthy margin.

Swarnabh Mukherjee

Sure, sir.

Very helpful.

Just a couple of quick data keeping kind of questions.

One is on your protection mix.

So, if you could split that up between individual products and credit life.

I think right now it is showing 8% on the basis of APE.

So, what would be the mix between individual and group in that?

That is the first one.

And secondly, if I look at your persistency disclosure, I mean, on a half year to half year basis, there is an improvement.

But if I look at the numbers. basis say 3 months ended June and 3 months ended September, there seems to be a drop in the numbers.

So, I just wanted to understand how to read this?

Tarun Rustagi

So, out of 8%, the protection, majority of the businesses, the contribution is done by the group credit life, which is also very profitable.

And individual protection business is now picking up because we have, like we mentioned, there is the demand which is coming up now.

For basically asking for more and more protection business, there is a direct 18% saving, which is happening there.

So, as of now, this is mainly coming from almost 75% is coming from group protection, which is group credit life.

Swarnabh Mukherjee

Got it, sir.

And on the persistency query?

Tarun Rustagi

Q2 versus Q1. So, overall, H1, there is a decent increase in 13-month persistency, but quarter and quarter, there is, I think, some decrease, which they are talking about.

So, just let us come back on this particular point.

Anuj Mathur

We will revert, but just one thing I would like to mention that this change which happened in GST, many customers. actually decided to kind of, the clarification also came, that there was deferment of premium payment by customers.

So, if you are taking, if you look at very, very short term, quarter-on-quarter, partly it could be on account of this clarity which came around GST for existing customers, which came actually on the last day of the quarter.

Canara HSBC Life Insurance Limited October 27, 2025

Swarnabh Mukherjee

Okay, sir.

Understood, sir.

Thank you so much, sir.

Thank you and all the best.

Tarun Rustagi

Thank you.

Moderator · Conference Operator

Thank you.

Our next question comes from the line of Nidhesh from Investec.

Please go ahead.

Nidhesh

Thanks for the opportunity.

The first question is on product mix.

The share of annuity is pretty high for us versus our listed peers.

So, what is driving it?

And if you can share some details about the product structure within annuity, how much is regular pay annuity and how much is single premium annuity and which specific channel is driving that, because that is a quite commendable share of annuity that you have achieved.

Anuj Mathur

Right.

So, I am requesting our appointed actually, Nitin, to kind of provide these details.

Nitin Agarwal

Right.

So, on the annuity side, so we have seen a potential of annuity in terms of the market and there is good margin.

So, I think annuity again, from a VNB margin perspective, it provides margin similar to our non-PAR savings business, which is the reason we have increased focus on annuity.

And in terms of the split, most of our, about 80% to 90% of the annuity portfolio comes from actually the regular pay before the annuity.

Tarun Rustagi

Just adding, there is a clear segmentation which we have and that's why you see an increase in the annuity business both in Canara, in terms of customer segmentation, and that's the work of outcome or a result of our deeper analytics, along with these distributors, that we are able to identify the need of customers. who are actually looking for annuity products, both in Canara and HSBC.

Especially in HSBC, you can see that there is a clear segment, customer segment, which is looking for it.

And therefore, you see that this annuity proportion is actually improving over a period of time.

And as Nitin mentioned, mostly it is deferred annuity, which is profitable for us.

Anuj Mathur

And just to add, my long-term view is that this particular segment, which is retirement, solutions, pension products, I think that we are seeing increased demand coming in.

That is because of the longevity of customers. and all that.

And we see this as a segment where I think there's good revenue opportunity, which is there, and we are going to capitalize on it.

Nidhesh

Sure.

So, on annuity, what is the average deferment period and how are we hedging it?

Nitin Agarwal

So, the average deferment period on annuity is about 4 to 5 years.

That is the maximum one which we sell, while it goes up to up to 10 to 11 years. as well.

The maximum proportion that we are selling is up to 4 to 5 years.

And what is the second question, sorry?

Nidhesh

How we are hedging.

Canara HSBC Life Insurance Limited October 27, 2025

Nitin Agarwal

So, we are also investing in derivatives for our annuity book as well.

So, we are hedging, as we sell, we are hedging most of this book through forward rates--

Nidhesh

Sure.

Secondly, on distribution mix, if you can share data on the distribution mix for H1, how much is Canara Bank, how much is HSBC, and how much is other channels on an overall APE basis?

Anuj Mathur

Right.

So, I think this we covered in our RHP also.

So, broadly, 70% of the business comes from Canara.

And another 14% to 15% comes from HSBC.

And remaining is alternate channels.

And as we grow agency, we expect that in percentage terms, the contribution from the banks may come down and overall alternate channels will grow.

But that's a broad composition.

It may vary month-to-month, quarter-to-quarter, but broadly this is how the current mix is, channel mix.

Nidhesh

Sure.

And lastly, around VNB margin, are you guiding for around 20% VNB margin for the full year?

Is that the guidance, despite GST impact?

Anuj Mathur

Inching towards that, we can say that.

Nidhesh

Okay.

Thank you, sir.

That's it from my side.

Moderator · Conference Operator

Thank you.

Our next question comes from the line of Vinod Rajamani from Nirmal Bang.

Please go ahead.

Vinod Rajamani

Thank you for taking my question.

Just wanted some more details on this agency rollout.

If you can provide some kind of color on that?

That would be question number one.

Question number two would be on how many riders, what is the attachment ratio in terms of the policies that you have and the riders that are attached?

How many policies currently have a rider attached and what is the aspiration in terms of the rider attachment ratio?

These are two questions that I have.

Anuj Mathur

So, I will go first on the agency.

So, as I mentioned, we are going to ramp up in a phased manner.

And we are going to use our current infrastructure.

We have 104 branches which are there throughout India.

So, we are increasing our agency presence in these locations first.

And there's a ramp-up plan as part of our long-term strategy which has been agreed by the board and we will be gradually increasing.

But at the same time, I would like to mention that we would not like to see any VNB compression on account of agency.

So, the agency ramp-up will be gradual and diversification over a period of time.

We are in no rush actually to scale up agency to levels which can impact our margins.

So, I hope that answers. the question.

Vinod Rajamani

Yes, sir.

That is very clear.

Nitin Agarwal

On the rider attachment, so I just want to highlight that, we have only introduced rider last year.

So, it's been steadily picking up.

And in the recent business that we are selling this year, it's about 65% to 70% already and we are only looking to increase this further.

Canara HSBC Life Insurance Limited October 27, 2025

Vinod Rajamani

Okay.

Noted.

Thanks so much.

All the best.

Nitin Agarwal

Thank you.

Moderator · Conference Operator

Thank you.

Our next question comes from the line of Sucrit D.

Patil from Eyesight Fintrade Pvt.

Ltd. Please go ahead.

Sucrit D. Patil

Good evening to the team and congratulations on a successful quarter.

I have a specific question for Mr. Anuj, a forward-looking question.

You have briefly explained about the margins and all the books and everything.

Just my question is, as customer expectations shift and digital adoption deepens, what long-term changes do you foresee in how Canara HSBC Life Insurance builds trust and relevance across different customer segments?

Anuj Mathur

Yes.

Thank you.

So, very good question.

And I am glad you asked about the long-term strategy also as to how we are going to grow the business.

So, as I mentioned earlier, also see the space we are in, wherein we have very good Bancassurance presence, our penetration in current customer base, which we have, the captive customers we have, is less than 2%.

So, our focus will continue to be on the Bancassurance business, along with ramping up the agency.

We are fully committed to agency business, and you will see ramp-up happening over a period of time.

But Banca will continue to kind of lead in terms of growth.

As I mentioned, less than 2% penetration.

What we are also seeing, and you touched upon the digitalization, which is a very important aspect, we are seeing that demand is coming from Tier-3, tier 4 cities also.

So, we are fully equipped.

And just to mention a few numbers, because as a Company, we have always invested in technology, and we have achieved a very high level of digitization.

Roughly 99% of our business, we acquired digitally.

When I say we acquired digitally, even with banks, we have got digital assets to which the customer is onboarded, making sure that onboarding can happen very, very smoothly, and location is not a constraint.

So, I think that's something very positive about us, that 99% of our business is digitally onboarded.

Number two, on servicing also, roughly 85% of customer service requests are on DIY journeys.

So, that way, we have achieved a very high level of digitization and these channels will grow.

They are underpenetrated right now.

We are also focusing in terms of growing our digital business.

So, that's also on the cards.

We are already having decent, I will say, reasonable kind of business, which is coming from digital only also.

But yes, overall digitalization, we have a clear strategy to use that to our advantage, both for banca business, agency business, as well as alternate channels.

And overall, we continue to outgrow the industry performance.

If you see our growth rate in the past has been much superior compared to the industry.

You take any time frame, 3 years, 5 years, 10 years, we have always overachieved the industry growth.

And we are very confident that in years. to come also, because of our superior business model, which we have and a strong support, we will continue to deliver good numbers.

Sucrit D. Patil

Thank you.

My final question is to Mr. Rustagi.

Looking ahead, what kind of internal levers. or any strategic choices do you see as most important for balancing growth with disciplined risk and say capital efficiency?

Canara HSBC Life Insurance Limited October 27, 2025

Tarun Rustagi

So, one is the product mix play a very important role in terms of the capital requirement and also risk.

And if you actually see, we have been able to manage the balanced product mix.

Obviously, we are trying to shift the product mix and expect that product mix will move as per the customer demand towards more traditional business.

And for that, we have a very robust hedging strategy, which is able to help us in terms of protecting the interest rate risk.

Apart from that, the cost management is another lever, which we are constantly working and able to rationalize or maintain our cost ratios.

Not only operating expenses, but also basis the arrangement or agreement, which we are having with our distribution partners, we are able to maintain the cost ratios very well.

Also, another thing which you can clearly see in terms of outcome is our persistency, which is basically a right sale, need-based sale.

And need-based sale is resulting into higher persistent customer and a satisfied customer, which is helping us to improve the persistency renewal book, which is further helping us improving the VNB margin and embedded value.

So, these three things are very, very critical.

And keeping in mind, keeping all these three, we will continue to outperform industry basis the distribution model, which we are having, the reach which we are having.

So, all these things are helping us in terms of outperforming industry on all the financial parameters, including topline.

And cost efficiency is a USP.

We are at a competitive edge there with our cost ratios, both OpEx as well as commission ratio being very, very reasonable.

Sucrit D. Patil

I think that is a very detailed guidance on your part.

And I wish the entire team best of luck for the Q3.

Tarun Rustagi

Thank you.

Moderator · Conference Operator

Thank you.

Our next question comes from the line of Mr. Prayesh Jain.

Please go ahead.

Prayesh Jain

I am just looking at the interest rate sensitivity.

What we disclosed in the RHP and the presentation that we have disclosed, the sensitivities have gone down.

And so what's kind of driven that?

And do we see further improvement there?

Or how should we think about this?

That would be my first question.

Nitin Agarwal

Hi.

Thanks, Prayesh, for this question.

So, we have been constantly working on this.

So, I think two of the main reasons how we managed to get our interest rates sensitivity down is, obviously, to increase hedging.

We have been constantly increasing our hedging, not in more new business, more new business we write on tradition, as well as the annuity.

We have been hedging that business.

And secondly, we have also been constantly working on the duration of our assets.

So, increasing the duration of our assets.

So, these are the two reasons how we managed to reduce and we have been seeing this constant.

And yes, we should expect to see further reduction in this in the coming months.

Prayesh Jain

What percentage of our non-PAR book will be hedged?

Nitin Agarwal

About 70%.

Canara HSBC Life Insurance Limited October 27, 2025

Prayesh Jain

And do you expect this to go to about 85%, 90%?

Nitin Agarwal

Yes.

That is the intention.

Prayesh Jain

Got that.

Nitin Agarwal

To go upwards of 20% of that.

And also, just to add, we also have agile repricing framework.

So, we are also looking to keep repricing as per the interest rate movements to ensure that the VNB margins are maintained.

So, they are not adversely impacted by the interest rate movements.

Prayesh Jain

Got that.

Second question is on the efficiency in the Canara bank channel.

What are the medium term plans to kind of increase the efficiency there in order to kind of drive more growth there?

Tarun Rustagi

So, in terms of efficiency, what I am understanding is you're talking about the productivity, right?

In the Canara channel.

Prayesh Jain

Yes, productivity.

Tarun Rustagi

Can I request Soly Thomas, our CDO, to just provide a response?

Soly Thomas

So, if we look at, we have almost 6,000 touch points in Tier-2 and Tier-3 and that's one of the strategies which is in leveraging our distribution expansion.

And currently, we are having just less than 2% penetration.

So, we will keep on focusing on these Tier-2 and Tier-3 cities where we have more than 6,000 touch points, to increase our productivity.

Tarun Rustagi

Yes, this is in addition to the tech usage.

Like you all are covering the bank which you're talking about.

And the kind of enhancement and advancement they're doing on the technology side, which is analytics plus also the segmentation is another thing.

They are also working very hard and very positively and very effectively on the digitization of their, one is process and also the touch point from the customer like app is there, website is there.

So, all these things are going to help us in terms of reaching to the last customer, each and every customer of the Canara Bank, which is going to help us in terms of improving the productivity and in each of the branches and also enhance the sales in this channel.

Prayesh Jain

I got that.

The other question was on the commission discussion that you are having.

You mentioned that you are looking to cut commissions.

So, is it also in the discussions are on with both Canara and HSBC as partners. or is just about the remaining 15% is where you would look to cut down commissions?

Tarun Rustagi

I think we covered that in case of Canara and HSBC we are already having a very reasonable first year commission rate.

What we are discussing is mainly on the renewal, which is having a basically a longer impact in terms of the other financial parameters.

That discussion is going in Canara HSBC Life Insurance Limited October 27, 2025 a positive direction for balance 15% is definitely on both front.

That discussion is also going in a positive direction.

Prayesh Jain

Got that.

Yes, that's all from my side.

Thanks.

Moderator · Conference Operator

Thank you.

Our next question comes from the line of Harshal Mehta from AMSEC.

Please go ahead.

Harshal Mehta

Thank you for the opportunity and congratulations for listening.

Just have two questions.

First in terms of agency channels, so like given that we are now expecting a phased reimburse of the channel.

If I can give some current out of numbers, like what type of number of agents, agency APE, their productivity, and how we see agency APE chair moving over the next few years.

And the new initiatives that we are taking in the channel, so that will be helpful.

And secondly, in terms of our product-wise lapse and surrender rates, what we assume, so how to read those in line with the persistency for each products?

And if you can give some comfort on assumed lapse or surrender rates, that will be my second question.

Anuj Mathur

So, I will answer your first question, which is on the agency.

And then I will request our appointed actually to talk about the lapse and surrender rate.

So, see, in terms of agency, as I mentioned, we are going to ramp up in a phased manner.

I will not like to give any forward- looking kind of in terms of numbers.

I will not like to give any statement, but yes, over a period of time, you'll see the growth there.

And in agency also, see, at times there are benefits of starting late.

So, now when we are starting agency, we are also evaluating various models within agency, which will help us in terms of cost optimization and also generating more business with maybe not very high number of agents.

So, that's what we are looking at, that we will look for hybrid kind of model, different models which are existing, which is variable agency model, tied agency model.

And we will try to achieve a balanced mix between the two and we are going to grow this channel over a period of time.

I will not like to make any statement in terms of number of agents and all that.

But as long as we are protecting the VNB margin and kind of diversifying, I think you guys should be all okay.

Harshal Mehta

Sure.

Nitin Agarwal

On the lapse and surrender rates, so as you are aware that, the lapse and surrender rates vary by product.

So, there's not one product, depending on the channel, depending on the features, it does vary.

So, there's not one single rate which will apply to all products.

But yes, we are seeing it, we are seeing continuous improvement in our lapse and surrender rates.

And typically persistency on the unit-linked side is slightly better, which is even better from the overall profitability perspective.

But we are seeing an improvement, we are seeing further improvement both on unit linked as well as the traditional business side on lapse and surrender rates.

Harshal Mehta

Thank you, sir.

And all the best.

Canara HSBC Life Insurance Limited October 27, 2025

Nitin Agarwal

Thank you.

Moderator · Conference Operator

There are no questions at the moment.

As there are no further questions, I now hand the conference over to the management for closing comments.

Anuj Mathur

First of all, thanks a lot to all the participants for joining in for this late evening discussion, but very insightful and very interesting one.

And now since we are listed, I am looking forward to this engagement on a regular basis.

Every quarter we will be publishing our results and look forward to kind of inputs coming from all of you.

And please feel free to ask questions as we move forward in this journey.

So, thanks once again.

Thanks a lot.

Moderator · Conference Operator

Thank you.

On behalf of Motilal Oswal, that concludes this conference.

Thank you all for joining us and you may now disconnect your lines.