Ladies and gentlemen, good day and welcome to the Bajaj Finserv Limited Q3 FY 2022 results conference call hosted by JM Financial Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sameer Bhise from JM Financial Limited. Thank you, and over to you, sir.
Thank you Faizan. Good afternoon everyone and thank you for joining us for the Bajaj Finserv Q3 FY 2022 results conference call. From the management team of Bajaj Finserv Limited, we have Mr. S. Sreenivasan, CFO, Bajaj Finserv Limited, Mr. Tapan Singhel, CEO Bajaj Allianz General Insurance Company, Mr. Tarun Chugh, CEO Bajaj Allianz Life Insurance Company, Mr. Ramandeep Singh Sahni, CFO of Bajaj Allianz General Insurance, and Mr. Bharat Kalsi, CFO of Bajaj Allianz Life Insurance. Thank you for this opportunity given to us by Bajaj Finserv. I'll now hand over to Mr. S. Sreenivasan to open the call and we can take it. Over to you, sir.
Yes. Good afternoon everyone. Welcome to the conference call to discuss the results of Bajaj Finserv Limited for Q3 of FY 2021-2022. Let me clear up some hygiene points first. As before, in this call, we will largely be concentrating on the consolidated results as well as the results of our insurance companies through Bajaj Allianz General Insurance, BAGIC, and Bajaj Allianz Life Insurance, BALIC, and where material, the standalone results of our company, BFS. Bajaj Finance, BFL, which is another major subsidiary of ours, has already had its conference call. However, if there are any high-level questions on BFL, we would be glad to take that as well. We will not be taking any questions on the status of Allianz's stake in our insurance companies. The status has remained the same as at the end of the previous quarter, and there is no change.
Any statements that may look like forward-looking statements are just estimates and do not constitute an assurance or indication of any future performance result. A remark on Ind AS. As required by regulation, we have adopted Indian accounting standards from FY 2019. However, the insurance companies are not covered under Ind AS. They have prepared Ind AS financials only for the purpose of consolidation. Accordingly, for BAGIC and BALIC, standalone numbers reported below are based on non-Ind AS accounting standards or Indian GAAP as applicable to insurance companies. Our results, the press release accompanying the results, and our investor deck have been uploaded on our website yesterday evening. Let me give you now an update on the performance for Q3 and nine months. Economic recovery gained further strength on the back of sustained drop in infections, rapid vaccinations and continued surge in mobility.
Aggregate demand indicated sustained recovery across sectors, although supply bottlenecks impacted 15 regional sales of motor vehicles. Extended unseasonal monsoons did result in claims for general insurance sector. Under these circumstances, our businesses should get focused to growth and continue to tightly monitor risk parameters. The company and its subsidiaries continued their initiatives for arranging vaccination for employees and their families, while also conducting periodic testing to reduce the risk of spread of infections. Apart from ensuring the well-being of its employees and their near and dear ones, this also ensures greater preparedness of the company and its businesses in the event of another wave. Let me now touch upon each of our major businesses. Let me start with BAGIC. Overall, a decent quarter for BAGIC.
For the quarter, degrowth of 13.2% in the headline numbers in gross domestic premium income is on account of higher chunky businesses like crop and government health businesses underwritten during the previous year in the same quarter. Therefore, there was a base effect. While BAGIC has been cautious in the group health segment, given the uncertainty with respect to multiple COVID claims, it has underwritten the business wherever right pricing was available. Excluding these tender-driven businesses, GDPI growth for the quarter is 6.1% as against industry growth of 9.9%. During nine months FY 2022, excluding crop and government health, BAGIC GDPI growth was a tad under the industry growth of 11.6% at 10.2%. BAGIC continues its approach to calibrated growth.
That is seeking to grow in preferred segments, which are private cars, two-wheelers, commercial lines, and retail health, while remaining cautious yet opportunistic on group health. To give some more detail, ex crop and government health, growth of 6.1% in Q3 was driven by fire 15%, engineering 40%, marine 25%, liability 14%, and travel 227%. Overall, in all these lines, BAGIC has been able to grow faster than the market. During the quarter, the preferred segment of new private cars and two-wheelers was impacted with slowdown in sales of motor OD policies. The commercial vehicle segment, which was under strain to grow for much of FY 2021, however, continued to recover, and barring any significant impact of a third wave, we see it improving towards pre-pandemic levels in the coming quarters.
Overall, in nine months, BAGIC had a motor growth of 3.6%, which was in line with industry growth of 3.7%. While it is expected that the auto industry will continue to face some supply-side constraints in the near term, the performance in Q4 will also depend on what will be the impact on overall demand due to the third wave of COVID. In commercial lines, with the aid of its strong bancassurance and agency channels, as well as underwriting and reinsurance capacity for covering large risks, BAGIC continued its strong performance across retail, commercial, and industrial risk categories. Fire and marine segments continued their growth momentum.
Engineering and liability lines have also shown strong growth, overcoming the slowdown seen in the previous quarter. Overall, commercial lines continue to do better than industry with Q3 FY 2022 and nine months FY 2022 growth of 17.9% and 17.1% respectively, as against industry growth of 15.7% and 13.7%. Within health, given the strong demand for Corona coverage policies in the previous year, the base for retail health for Q3 FY 2022 and nine months was high. Despite this baggage, Q3 FY 2022 retail health growth of 5.8% was more than the multi-line insurers growth of 3.6%. Overall, in nine months of FY 2022, retail health growth of 7.5% is marginally more than the 6.5% growth of multi-line insurers.
While BAGIC continues to be cautious on group health, growth is driven at the right pricing for each relationship. Excluding government health schemes, BAGIC registered a strong growth in health of 20.3% and 20.9% in Q3 FY 2022 and nine months FY 2022 respectively. Finally, to further strengthen its offerings during the quarter, BAGIC launched its Health Prime rider in collaboration with Bajaj Finserv Health, which is another subsidiary of ours. This offers customers unlimited teleconsultation, cashless OPD, diagnostics, pathology, radiology and annual preventive health checkup. On the claims front, the experience was generally better than the previous two quarters, which were negatively impacted by higher health claims from the second wave of COVID-19. There was quarter-on-quarter reduction in COVID-19 claims, but severity of non-COVID health claims was still relatively higher compared to pre-COVID levels.
Given that the extent of economic activity is not impacted as much as it did in the earlier waves, motor-only claims frequency and severity are back to pre-Covid levels. Moreover, heavy rains in Kerala, Uttarakhand, and Tamil Nadu witnessed in this quarter had some negative impact on claims. All these factors did impact results for the quarter, but notwithstanding these, combined ratio increased only marginally to 98.9% as against 96.2% in the Q3 of FY 2021. In a market which is intensely price competitive, this result we believe is encouraging. Let me take a couple of minutes to explain the top level drivers of the GI business. The impact of Covid and the lockdown on the GI business are unique. The main drivers of growth in GI business are capital formation, including spending on automobiles, float generation, and claims and expense control.
About 48% of the GI industry is property in the current year, motor, fire, engineering and marine. About 38% is liability oriented, retail health, group health, travel, corporate liability and workman's compensation. About 11% is tender driven, with the rest a small component being miscellaneous, which is difficult to classify. COVID has affected new vehicle sales as well as new corporate investments in fixed capital, thus the property side has been affected apart from the fact that existing assets depreciate annually. While overall property-driven lines have maintained their contribution in the mix at 48%, motor's contribution has come down and other lines have seen improvement. It is in these lines that BAGIC has performed better than the market. The liability businesses have been stronger.
Of this, health business has low float and must deliver over the medium term a good combined ratio. Due to Covid, health claims went up, thereby affecting the profitability of health business across the market. Tender-driven businesses are volatile and crop business is exposed to large claims, which may happen once in a few years. While Q3 of FY this year, the crop loss ratios did go up, overall for the nine months they are profitable for us. Historically, low interest rates meant lower yields on investment book as well. In these circumstances, Bajaj has focused on profitability and remaining selective in growth while focusing on customer experience. Bajaj did indeed maintain its market position, improve efficiency and enhance customer experience with underwriting discipline in this difficult environment for the insurance business.
Bajaj is cautiously optimistic on growth as it enters the last quarter of FY 2022 as the green shoots are visible. Once auto sales and corporate investments pick up and in absence of pandemic-related health claims, the prospect for FY 2023, we hope, will be better. However, as growth returns, there could be some strain on reported profits as earned premiums may lag GWP growth for a couple of quarters. In summary, it has been a balanced but soft quarter for Bajaj. Coming to life insurance next. Overall, the life insurance industry continues to deliver a solid growth driven by private players.
During the quarter, while few private players saw slowdown in month-on-month growth during either October or November, Bajaj continued on its month-on-month growth trajectory and reported an industry-beating individual rated new business premium growth of 68% against the industry growth of 20% and private sector growth of just 28%. In fact, in Q3 of FY 2022, Bajaj was the fastest growing among life insurers among the top 10 players. On a nine-month basis, among the top 10 private players, Bajaj's individual rated new business growth of 58% was the second fastest against industry growth of 20% and the private players growth of 30%. When compared to pre-pandemic levels by taking a two-year CAGR for Q3 IRNB, Bajaj has delivered a CAGR of 38%, which is the highest in the industry.
On the product front, the annuity product launched by BALIC in Q4 FY 2021 continues to be well received in the market. During the quarter, as well as in nine months of FY 2022, 12% of the rated new business was from annuity segment. In line with the industry, demand for retail protection continues to be sluggish on the back of successive price increases. Hence contributed 2.5% and 3.6% of the total product mix in Q3 FY 2022 and nine months respectively. Despite the brief volatility seen in equity market during the quarter, the risk appetite of the retail saver seems to be higher as evidenced by the strong demand for units. BALIC's unit contribution to product mix was 43% in the quarter versus 42% in Q3 of FY 2021.
Guaranteed non-par savings contribution to the mix in IRNB terms dropped to 23% from 28% in Q3 FY 2021. While contribution to the mix has come down, in absolute terms, non-par savings have grown by a solid 41% during the quarter. The annuity line of business is part of non-par savings, and post inclusive annuity, non-par savings has seen growth in mix at 36% versus 28% in Q3 FY 2021, helping the overall NBV as well. Participating or the par segment contribution in the mix witnessed some reduction and stood at 19% versus 25% in Q3 FY 2021. In absolute terms, the par segment has shown growth of 24% and 15% in Q3 and nine months respectively.
It can be seen that while most lines except retail term have shown solid growth, the business mix changes reflect relative differences in growth and hence not a matter we are concerned about in the short term. Group protection business continued to display strong growth of 66% from INR 431 crore in Q3 FY 2021 to INR 717 crore in Q3 FY 2022. Overall group new business grew by 19% from INR 1,084 crore in Q3 FY 2021 to INR 1,288 crore in Q3 FY 2022. You may recall that group business was muted in the nine months of FY 2021 as lending by banks and NBFCs had slowed down considerably.
During the quarter, growth was driven by all the main channels of BALIC, with agency, institutional business and BALIC Direct growing at 44%, 102%, and 42% respectively. Renewals registered a strong growth of 18% during the quarter, and because of these factors, BALIC's GWP grew by 30% to INR 4,080 crores in Q3 of FY 2022. One point I would like to highlight here is the strong year-on-year increase in persistency across all vintages. 13-month persistency increased by 3%- 81%, while 61st-month persistency increased by 5%- 46%. The effort of the management to increase contactability, improve the quality of products, enhance digital offerings, and focus on customer value over the last few years have been the key to delivering this increase.
On the claims front, COVID wave two impact has largely come down in Q3. Gradual month-on-month improvement claim experience observed in Q2 continued, and total claims in Q3 of FY 2022 were actually lower than expected. On the retail side, BALIC has received about 550 claims in the quarter pertaining to COVID-19, amounting to INR 27 crore on gross basis in Q3. BALIC has reserved for probable future COVID claims on account of third wave, and the reserves for the same stand at INR 93 crore as at 31st December 2021. The total impact of COVID claims and reserves in Q3 FY 2022 on policyholders' PBT was a negative INR 9 crore as against negative INR 105 crore in the previous quarter, and INR 335 crore in Q1 of FY 2022. Similar to the previous quarter, we have continued making quarterly disclosures of NBV.
In addition to the NBV for the quarter, we have also indicated the NBV for the 12 months ended 31st December 2021. Due to high variations in seasonality of business across quarter, I would advise investors to exercise caution while reading into Q3 NBV and margins. We had mentioned in our earlier call that quarterly NBVs and NBMs may not reflect the possible year-end results. Investors may already be aware that as a significant portion of life insurance business usually comes in Q4, most of the fixed costs borne during the year gets absorbed in the last quarter of the year. Please note that NBV on rolling 12-month basis does not indicate a forecast or expectation for FY 2022.
New business value net of expense overrun, the key metric of profitability, increased by 89% from INR 81 crores in Q3 of last year to INR 152 crores in Q3 of this year. For the twelve months ended 31 December 2021, the NBV was INR 533 crores as against just INR 256 crores for the twelve months ended 31st December 2020, and INR 361 crores for the whole of FY 2021. BALIC's PAT for Q3 FY 2022 was INR 88 crores against INR 118 crores, impacted mainly by higher new business strain arising out of strong business growth. Overall, another very good quarter for BALIC.
Finally, both the insurance companies are financially among the most solvent, BALIC with 204% solvency and BAGIC with 333%, and therefore are well poised to weather any external adversity. All our businesses are further augmented by digital capabilities, which along with greater digital acceptance by the customers should, we hope, help overcome challenges and deliver a strong performance in the final quarter of this year and beyond. Both BAGIC and BALIC have seen an increase in the utilization of their digital properties by customers and intermediaries, and further details regarding their digital capability are covered in the investor deck uploaded on the website yesterday. BFL has already had its investor call, and we will only broadly touch upon BFL results.
Q3 FY 2022 was an excellent quarter for BFL, as the company delivered on all its long-term financial guidance metrics: AUM, profit growth, return on asset, return on equity, as well as gross and net NPA. Continuing the growth seen in the number of new loans booked in Q2 of FY 2022, the number of new loans booked have further increased to 7.44 million in Q3 as against 6.04 million in Q3 of the last year. This is almost in line with the pre-COVID times when 7.67 million loans were booked in Q3 of FY 2022.
The company's diversified business model has enabled it to record a strong AUM growth as seen from the total AUM standing at INR 1,81,250 crore as at 31st December 2021, as against INR 1,43,550 crore on 31st December 2020. Debt management efficiencies across products improved in Q3 FY 2022. BFL also added a further 251 crore to its management overlay provisions just to cover a third and possible future waves of COVID. The total provision or management overlay for losses stands at INR 1,083 crore as of 31st December 2021. Overall, pre-provision profitability remains strong and adequate to cover expected losses.
BFL ended the quarter with a profit after tax of INR 2,125 crores, which was 85% higher than Q3 FY 2021 PAT of INR 1,146 crores. Capital adequacy remains strong, with including Tier 2 capital it was 26.96%, of which 24.44% was Tier 1. Bajaj Housing Finance, another 100% mortgage subsidiary of BFL, continues to do well. AUM grew 39% to INR 49,203 crores from INR 35,492 crores in the Q3 of last year. The profit after tax grew by 87% to INR 185 crores in this quarter as against INR 99 crores in Q3 of FY 2021. On account of robust AUM growth, higher net interest income, and better portfolio performance.
Capital adequacy ratio stands at 19.37%. Finally, the BFL board has approved an infusion of up to INR 2,500 crore in Bajaj Housing Finance and INR 400 crore in our securities business, Bajaj Financial Securities, to support their capital needs for the next 24 months at least. In summary, we believe BFL is well positioned to navigate any temporary stress. I would request investors wanting to have more information to go through BFL's investor presentation and transcript of their phone call. Coming to the consolidated results, total income up 10%, INR 17,620 crore. Consolidated profit after tax, a 3% decrease at INR 1,256 crore.
I must add, on the consolidated profit after tax, under Ind AS, the insurance subsidiaries have chosen to hold a large part of their equity securities portfolio at fair value through profit and loss account. Therefore, unrealized mark-to-market gain or loss on investments post-tax included in consolidated profit was a loss of INR 38 crore in this quarter versus a gain of INR 384 crore for Q3 FY 2021. If we exclude the volatile impact of the MTM losses, or gains, and which generally follow the trends in the equity market, the core profit after tax would have increased by 43% in Q3 of FY 2022 and 20% in nine months FY 2022 respectively.
Finally, with the gradual reopening post second wave of COVID-19 and the third wave so far being not seeing as damaging as the previous two waves and steady economic recovery on in the offing, we are cautiously optimistic. Even though we are facing the risk of a third wave, the future outlook remains positive. Under these circumstances, our businesses have shifted focus to regaining growth while continuing to manage risk. Backed by strong solvency well above the required capital, supported by healthy liquidity, continuous focus on risk and collections, digitized processes, and improved cost structures, we believe we are in a strong position to maneuver through these difficult times. Let me now open the floor for questions and answers. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Bharat Shah from ASK Investment Managers. Please go ahead.
Bharat, good afternoon.
Good afternoon.
Thank you for your question. I will let Tarun first and then Tapan take the questions. Tarun, the question was, are there any soft spots that very good performance of life company does not reveal. That was the question I think.
No, I think great. Thanks, Bharat. Always deep and insightful questions from you. Yes. Let me just talk about the spots where we could have been a little better. First, our term mix has dropped significantly because of the impact of the reinsurance regulations changing very often. It is causing a lot of customer pain, hence we calibrated our entire approach and took a little of a wait and watch on our underwriting platform and our analytics platform to be able to set our processes right and stronger before we took more terms. Versus the other companies, you'll find that this is a strategy we build differently. I think it's time well spent, and we are feeling a lot more strong on the quality of lives that we are adding versus the general market.
Yes, in terms of results, it will show that our term business is low. The number of policies that we've added, while overall the growth has been fantastic, I mean, it's been a very good quarter for us. On a nine-month basis, the number of policies added could have been way better. The growth is not as high. It's largely growth because of average premium, average ticket size that has gone up. NOP growth, if I remember, was softer to about 6%-7%, in that range. I would have been happier if the growth came more from that than average ticket size.
That being said, average ticket size also shows that BALIC is now kind of strongly on the journey which we envisaged three to five years back of moving to more affluent base than in the mass market. That, of course, on one end seems to be good, but on the other end, NOP growth could have been better. On the product mix, I would have been happier with maybe a little bit more par and lesser ULIP. Given the addition of new channels that we've had, there was a good run towards ULIP plans in the last month of the quarter.
As a result, it has helped increasing productivity, but at the same time, it has been more than what we envisaged we'd write. Good thing is that all this is at the behest of increasing top line. It's not that there we have done less and within that product mix has changed. I think it's no loss really, but would have been happier if a lot of that came from the par plans. We are hence looking at our strategy on par plans, and we already have a pretty strong presence in Indian states where. Yeah. Thank you.
We do have a good presence in states where par plans do well, and we would be focusing a lot more on that and training our teams on par plans. Largely, these are the three things that I can think of. Bharat Kalsi, is there anything you feel that we should add to this?
No, no, I think Tarun you has covered all the relevant points.
Yes.
Thank you, Tarun, for that explanation. Very useful.
Yeah. I must add one point to what Tarun said, is that, you know, we will be looking to, you know, more diversify our distribution, especially on the institutional business side over the next two to three years, because we have done well, we have Axis, but some of the younger relationships, IDFC, RBL, Karur Vysya, they need to grow IPPB. A lot of this, you know, balancing act will happen over the next two to three years. That volatility could remain if depending on how the market behaves.
Sure.
Tarun, general insurance side, behind obviously a difficult environment in quarter, anything good which has happened and happening or being designed?
Thank you, Bharat. I think first and foremost, if you look at the general industry, it follows two things. One, the economic growth of the country, and second, it also gets impacted by the losses which happen, which is a direct impact like it's not in the future. So we look at new car sales has been down. We all know the chip story. I think that that's not happening, which is a big component for the initial purchase. Second, look at COVID wave keeps on coming. So, you know, I think health claims keeps on moving up. Third, if you look at the automobile claims, which were down because of lockdowns, you know, but this time there were not such intense lockdowns. After the lockdown opening up, the motor claims also went up.
Fourth, there has been no hike in TP premium increase, which also contributes significantly. If you look at overall growth for industry also has come down. Growth now is going to slowly reach to single digit, you know, from the high double digit it used to be earlier. Now it's just hovering around low double digits right now, but the way it's going, it's going to reach into a single digit kind of proportion. The loss ratios industry has moved up. Look at the comparative base entire industry, you'll see for companies which were close to us, their combined ratios overall have moved over 10% or so compared to the previous year, which was there, you know. For us the movement will be 2%-3%, which is the best.
Overall growth also if you look at from a perspective of the industry, Bajaj Allianz would be at industry growth. When the market is taking a beating in terms of loss ratios, it is taking a beating in terms of, you know, the growth opportunity is getting restricted because of the different circumstances. I think if you look at Bajaj Allianz company, it has been still able to maintain in the lines of business it wants to grow, growth over the market and the combined ratio which is very comfortable in terms of still making and writing a profit in the market which is losing money considerably. Now, having said that, you know, the plus point which would be from your perspective, the question you asked me, the awareness is getting created.
One, for health insurance, I think people are now aware about health insurance and that awareness is getting created for non-insurance as well, which we hope that is a long-term tailwind. It will take a lot of time. We have also seen that the public memory is very short. When things get normal, I think these awareness levels also drop very significantly. Second thing which is happening good is in terms of digitalization. If you look at a lot of work is happening in terms of digital processes, in terms of making things very simpler for customers, in terms of the data lake getting created, in terms of processes becoming much better for customers. Customer experience has really moved up. If you look at the grievances in terms of, you know, the customer ratios, they would be, you know, down.
Bajaj continues to be the one of the least grievance company in the industry. I think those work in terms of strengthening the infrastructure of the company, strengthening the distribution of the company, strengthening the servicing capability of the company is a good thing which is happening. The market is, there's now one quarter. If you look at it is for general industry, if you pick up entire industry numbers, you'll see this industry is going through a difficult time, which would always happen if economic slowdown starts happening in terms of the sale of vehicles if it starts happening, you know, produce coming up, if losses keep on happening because of pandemic is happening. The industry would go through this turmoil, it would be there.
Tapan Singhel, you want to highlight on health, value add?
Yeah. That, Sreenivasan , I think what we're also doing is a good point as Sreenivasan mentioned is we believe that the issue in today's time is, customer looks for value. We have strongly believe that it's not only about, the customer always looks for the cheapest, product which may not give it, value. In fact, a lot of question I ask a lot of people is that how many of us actually wear the cheapest shirt in the town or the cheapest food we eat or we stay in the cheapest place in town? I get to find somebody who can give me an answer what is cheapest. Do I figure out what is cheapest when I ask this question. Nobody has it, which means that people pay for value.
A general insurance product which is so transactional in nature, I think as a company we are very focused on providing value. From the very beginning we have been making huge efforts. The first and foremost effort was that we have this ambition and we have been striving and we have received awards for this as one of the best claim-paying company in the industry. We are very obsessed about payment of claims. It has to be of the highest quality. Second, what we have been doing is from very early on, we are bringing a lot of value-add product for the customer. Let's say in motor we were one of the first to bring in roadside assistance, you know, from a customer perspective.
If you look at now for our health which we have done and with our sister company we have come out with a product which is marvelous. Like it's a rider which we are giving on top of our health product if you look at. Now look at the rider, what does it offer? For a family floater, I think I'm just talking the highest range of it. So a premium which is plus INR 2,000, in a year you get the tangible benefits of up to INR 25,000 of diagnostic charges being paid to you or doctor consultation being paid to you. You get unlimited tele consultation. You get a huge benefit in terms of OPD, you know, also being done cashless for you.
Now, that also we have brought in with our main products as a rider. If you look at the value addition we give from a customer perspective, a lot of work in the company is going on to see that from a customer who comes with Bajaj, the amount of value that the customer sees is much beyond just transition registration. This is always there. When you see a difficult time for industry, I think it's a very good time for you as a company to really make yourself much more stronger in terms of service to customer, much more stronger in terms of value to customer, and that's what we're working on, Bharat.
Now, that goes at the core of the brand building. Is the effort to communicate value a tougher exercise because the price everybody can see, much like in the investment world, prices are tangible, but value has to be discerned? Therefore, when you have to communicate the value proposition, if it is sought to be done through the distribution channels, probably it may get lost in the noisiness of the distribution channels. How exactly sustained and superior value equation and experience is being communicated and the brand perception is getting strengthened?
It's a very good question again. We do a lot of surveys, you know, by independent bodies in terms of NPS scores or in terms of the brand positioning compared to market or in terms of how the customer perceives it.
You'll be happy and proud to know that in the lines that we do our NPS scores, be it the retail lines, we have had the highest NPS score for a considerable length of time. Or if you look at the brand recall, we have the highest brand recall in the market. Or when you talk to customers or talk to, you know, distributors in terms of what is the recall that they have, I think most of the surveys show that, you know, we are known as the best claims-paying company which offers our value. We do a lot of these dipstick checks in terms of how it is building up.
We do our communication, which is through digital media, social media and to distributors and, you know, and we do come out with a lot of things and customers sees a huge value and we keep on checking this. I think in all reports that we check on these parameters, we are way above the market.
Sure. One last ratio. In terms of the investment book, how much is the equity percentage in the life part of the business, and how much it is in the general insurance part of the book? Policy and framework-wise, are the equity percentages different for each of the books?
We are talking about the shareholder funds, because the policyholder funds are in the mass and depend on the terms of the policy. UL will be all policyholders. In the non-par, it's all guaranteed, so we don't hold much equity there. In the par, we will have close to 20%. I think it's 18%. I think the allowed regulatory limit is 25% there. The shareholder funds, we have 20%, the total shareholder funds, including the solvency capital and the excess capital. We currently may be close to that, about 18% or so. In the non-life side, our policy limit as of now is 10%. They have the opportunity to increase it as we go along, but as of now they are at about a little under that, about 8.5% or so. Ramandeep, Bharat, are the numbers right?
Yeah.
Yeah.
About 8% for Bajaj, right?
Yeah. Broadly that is close.
I suppose philosophically, given the fact that general insurance is a shorter term contract, equity percentage conceptually has to be lower than for the life business.
That is right. Because, barring to some extent the motor third party liability, almost all others are short-tail businesses. Roughly, if you look at our excess capital in general insurance is a little over INR 4,000 crores, and we hold about little under half of that, or about 35% of that as equity. In the life business, I think it will be similar. Bharat, the shareholder funds, what percentage of our excess capital would be in equity?
Of the excess capital it will be.
Yes.
We have a total of shareholder funds around INR 10,500 crore.
Yes.
Excess capital will be around INR 7,000 or so. At the total level we have an equity exposure of 15%.
Okay. That means you'll have about 20%-22%, right?
Yeah, 2021.
Technically it could go up to 30%.
Yeah.
Policy limit is 30% because 20% of 10,000.
Yes.
Yeah. That's where we are.
About 18.5% on the general insurance side.
That's right. Of the excess capital, yes. The capital on the plus for solvency and
Okay. Yeah.
Overall, 25% is the general limit for both under regulation.
Right. All right. Thank you.
Thank you.
Thank you. The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors. Please go ahead.
Yeah. Very good afternoon. My question is regarding the two verticals that are being created. One is on the health side. And also, the second question is on this app that you have on the finance side. My understanding was that there were two apps on the finance side. One which was only selling the Bajaj Finance products, and the second one was on the open architecture, which was under the Bajaj Finserv. I'm little confused in that.
Yeah. What's your question?
Okay, I will repeat my question. On the finance side.
Bajaj Finance is offering marketplace and for their own customers, and Finserv has an open architecture marketplace. What is the question?
No. Are there two apps or there is one app?
No, they are two different companies. They are two apps. But at the back end, the architecture, there will be a lot of commonality because the Finserv Direct makes the IT platform for Bajaj Finance. So some of the marketplaces are built. So to that extent there will be a common backend because the way we are developing Finserv Markets is also as a fintech company. In that sense, we don't like to use the word fintech, but I'm just using it because at the backend it is a technology-driven company. We have a lot more software and engineers working in that company, a lot more youngsters. They would have a platform.
They will also develop platform for BFL as per their need because they have open investment marketplace which is limited, or they have a different set of partners for GI or LI. The main difference between the two is that people will come to Finserv Markets because there are multiple partners other than Bajaj Finance. They will also come directly. They could come for insurance, they could come for loans, they could come for e-store, whatever the different product lines are there or investments. In Bajaj Finance, they come for a loan, and then the whole platform is for a cross-sell to their existing customers. In terms of experience, I think there will be some commonality in tech side, but experience could be different because of the different partners and the APIs.
Okay, thank you. The second question was on the Health. The Health platform, any, well, update, how is it like shaping up? What are the metrics that you all
Now it is, we are building that business. The company is focused on driving the tie-ups with the doctors. They have signed up with a lot of doctors. We are exposing the numbers because we still need to know we need more stability. They have apps for doctors. They have apps for patients who will get OPD through those doctors, and those doctors will start using those apps, and they already started. Many of them have started using it. We are now present in, I think probably about 150 towns or so in India. Apart from that, they also do like this health plan rider with Bajaj. They sell the health card through Bajaj Finance, and they will also be doing a few corporate deals where they are helping the corporates manage their health claims.
It is still in early stages. We still have to invest in capital over the next couple of years. We will be investing from Finserv putting in that capital. We will see how it goes. I think by about a year and a half, we should have reached a level of maturity there. You know, direct obviously is already. I think the partners here and they will be looking to acquire more and more customers as we go along.
Thank you.
Thank you. The next question is from the line of Heena from Systematix Group. Please go ahead.
I wanted to ask if there was any possibility of a reverse merger.
Reverse merger?
Yeah.
Between what?
Between Bajaj Finance and Bajaj Finserv.
No, we have not considered that at all.
Okay. Okay, thank you.
Okay, thank you.
Thank you. The next question is from the line of Nidhesh Jain from Investec. Please go ahead.
Thanks for the opportunity, sir. Three questions. Firstly, on the Bajaj Finserv Markets, are the e-store and the EMI store is owned by which company and, which.
Yeah, as of now, the e-store which Bajaj Finance has is what Finserv Markets offers their platform. Over the next few years, they will develop their own e-stores, which may be outside of categories that Bajaj Finance may not do as well.
Okay. Today, yeah, EMI store or e-store is owned by Bajaj Finance.
To the extent that they already have a presence and the e-store is there, yes, they have it, but customers do come through Bajaj Finserv Markets as well there. Over time, we will have multiple options and we will have more categories which Bajaj Finserv Direct will also bring. That is not our first priority. Our first priority is to develop the loan business and the insurance business, followed by the investment business and the e-store.
Sure, sure. Second, sir, in the general insurance business, how do we see about the direct to consumer companies which are coming up, where they are offering motor insurance policy at sharp discount to our pricing or industry current pricing? How do we think about that?
Let Tapan take that question.
See all markets will have different strategies. If you look at the companies, what you should evaluate is their performance in terms of, you know, what is the market share that is being acquired or in terms of, you know, the positioning within the market in terms of profitability, in terms of the balance sheet. That is something if you as an investor have to assess that. Now, having said that, if you look at Bajaj Allianz company, we also have a very strong direct website, which is there in terms of, and we also do quite a significant amount of business from there. For companies like us, for the customers, there are options. You know, if they want direct service, they can approach our website, and they get direct service there.
If they want through intermediary, so they can approach intermediary. Intermediary also we have different intermediaries. Be it banks, be it agents, be it brokers, you know, or be it POS or the CSC village network. I think the advantage that legacy companies and companies like ours which have massive distribution is that as a customer you have so many choices. If you want to come direct, you can also come direct. I think everybody has their own space in the market, so they'll all find different strategies. Overall, as an investor, you're looking to perform in terms of market share, in terms of the profitability, in terms of customer service there to assess what would be more relevant at times to others.
Just to add to what Tapan said, I think if you look at property insurances, which is motor, fire and all that is where pricing is free. Almost all the liability products are brochure pricing. Usually, where B2C customers come in are low-ticket, sacheted products. Number two, they discount where there is free pricing, especially in motor. Largely, they will be more into the cash indemnity part, you know, where the claims are settled in cash because building the garage network, building the network for monitoring third-party claims, the MACTs and all that is whether you are acquiring customers directly or not, it is the same. So globally, I think there is no, I think maybe barring U.K., I don't think there is any specific evidence that direct companies have a lion's share of the market. We'll have to see how it goes.
As of now, there is heavy discounting going on by them, but they do not have any tie-ups with the OEMs who control a lot of the new car sales through their marketplaces and platforms.
Sure, Sreenivasan. Lastly, sir, on the life insurance, on the protection, you mentioned that we are strengthening our underwriting analytics platform. But is there any change to our reinsurance strategy that we were having in the past, and are we rethinking about that?
We will be doing that by end of the year because normally that's the time we do that. We're doing changes during the year in pricing. See, clearly, the more you retain, the more you have to be responsible in underwriting.
Mm-hmm.
With the COVID wave happening, mortality and morbidity risks were staring at you in the face. I mean, the more business you do, the higher the risk immediately, and the chances of making money were much lower. Notwithstanding, you know, what the assumptions were in NBM or NBV which companies may have used. We have been fairly conservative there. As things ease up, I think that is something we will look at. Obviously, we'll have to balance and over time we'll have to keep increasing the retention because unlike, say, property or other business of GI, in life business the premium in relation to the claim amount is very small. It is a financial payout, so there's a great incentive for fraud and term claims.
Over time, term premiums had dropped to such an uneconomic extent that the reinsurers were losing money, and that's why they have pulled the plug. The next few years we will be looking at increasing retention, but not overnight we go for a big increase, but gradually we will increase it. In the meantime, we will continue to strengthen our underwriting. Did I answer your question?
What is your retention policy today? At what sum assured level we reinsure?
Bharat?
Yes. Today, Nidhesh, we are at INR 40 lakhs, which is after the revised reinsurance guidelines for the retail.
Thanks, Bharat. Thanks. Thank you all. Thank you.
Thank you. Participants, to ask a question you may press star and one. The next question is from the line of Mayur Parkeria from Wealth Managers. Please go ahead.
Good afternoon. Am I audible?
Yeah. Yes, please carry on.
Actually, just, correct me if I'm understanding. Actually, did I read somewhere on the, maybe in the press release that the life insurance profitability was lower due to new business, strain?
Yes.
Right. Is this something which is expected to continue for a couple of quarters? Because the growth on the protection side has been higher and the profitability is obviously back-ended. Is it that the new business strain will continue for a few more quarters before we see.
If you grow strongly, there will be more new business strain. Because that is every new business done by all the life companies irrespective of the product, the first year is a loss. Now, the amount of loss will vary according to the product, but by and large, it is from year two, year three onwards that you start making money, which is why the entire, I mean, the emphasis on persistency. My feeling is if growth is strong, the NBV will go up if you have managed your business mix reasonably well and contained your productivity and costs. New business strain will continue to be there. That's why you have to invest that capital up front. Luckily, we are in a position where we have surplus capital.
We are sitting on a very strong solvency, and this is why we are using part of that to build this. Tarun, you would like to add something?
I think largely you answered, Sreenivasan. Maybe only one added point I'll say. The right metric to look at any life insurance company's bottom line is not really in India, basically in India, particularly given the fact that accounting practices assume all the costs of the life insurance company, which usually has a 10- 20 year kind of a span every of these policies of ours. Everything, all expenses have to be taken in first year. Hence, if you grow fast, the losses will be higher, as Srini said. The added point maybe to that is, you to basically see the net, the new business value added.
The NBV is the one which unfurls over a period of time and tends to draw the value out in the business and from the insurance plan. That is what we've been focusing on, not so much on the PAT, because the NBV is the one that goes up.
Srini, correct my understanding. Sorry, I may not be well-versed with the accounting here, so much on the life insurance side. If because of new business the profitability is impacted, how does NBM increase on a annualized basis? I get that from 11% last quarter it is 12.9%, right? How is it that the NBM has increased but the profitability because it's or am I mistaken somewhere?
Yes, I think there is a little bit more you may have to work on this information. Yes, the NBM is the right metric. The NBM percentage growth is the way Srini hinted is the way you can look at the health of a life insurance company if that is growing. The entire NBV, the entire pool, is also growing. Those are the real indicators of profitability of a life insurance company.
Okay. This does not include the impact which you mentioned about the end-to-end losses on the equity side?
No, no. Those are quarter-on-quarter adjustments, and they would not impact. That is only for the purpose of consolidation in our consolidated results. It does not affect the standalone results of the insurance companies. Insurance companies have to, because life insurance is a long-term business, they have to consider the future profits that will be earned over the policies we have written in the year, and that is what NBV reflects, is the present value of future cash flows expected from new business policies that we have written during the period.
Sir, other two questions were slightly on a consolidated level. We had taken a mutual fund asset management license in October, if I'm correct.
Right.
I haven't. Sorry for the wrong choosing of words, but, you know, we have been relatively quiet on that side. If you can throw light on what is going on.
It's not quiet. The process of getting full registration, there is a multi-step process with SEBI. We got in principle approval. Now we have to do step one, after which they'll come do an inspection. Then there will be another step, after which they will grant us the right to launch our products. We think that will be at least another 12-15 months from now before we are allowed to launch products by SEBI.
Oh, another 12-15 months?
Yes. That is the process for getting a mutual fund registered, licensed, and then go through the whole process, and then we launch the product. Meantime, we have started planning and strategizing and see how we can differentiate in that market. Over time we'll share about it.
Okay. Sir, at the initial comment, did you also mention that we are from the BFS balance sheet, we are gonna invest INR 2,500 crore in the housing finance subsidiary, right?
BFL is investing INR 2,500 crore in the housing finance subsidiary.
Isn't Bajaj Housing Finance a subsidiary fully owned by the financial.
They need capital, right? I mean, they are preparing for a higher period of growth. They have grown 39%. Their capital adequacy is 19%. BFL, I mean, both BFL and BFHL decided that they need to infuse capital.
Sir, have you mentioned the percentage stake which we will have there? I'm sorry, I've missed our notes.
As of now, 100% BFL.
No, no. For our investment, what will be our stake?
We are not investing in Bajaj Housing Finance. BFL is investing INR 2,500 crores.
Okay. Thank you so much.
Thank you.
Thank you. As there are no further questions from the participants, I now hand the conference over to Ms. Bani Babji for closing comments. Thank you, and over to you, ma'am.
On behalf of JM Financial, I would like to thank Mr. S. Sreenivasan, the senior management team of the insurance businesses, and all participants for joining us on the call today. Thank you. You may now disconnect your lines.
Thank you. Thank you all.
Sir.
Thank you.
Thank you.
Thank you.
Thank you, everybody.
Thank you.
Thank you. Ladies and gentlemen, on behalf of JM Financial Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.