Please note that this conference is being recorded. I now hand the conference over to Mr. Raghvesh. Thank you, and over to you, sir.
Yeah. Thank you. Good afternoon, everyone, and welcome to the Q1 FY25 earnings conference call for the Bajaj Finserv Limited. First of all, I would like to thank the management of Bajaj Finserv for giving us this opportunity to host the call. As always, we'll have opening comments from the management team, post which we'll open the floor for Q&A. From the management side today, we have Mr. S. Sreenivasan, CFO, Bajaj Finserv; Mr. Tapan Singhel, CEO, Bajaj Allianz General Insurance Company; Mr. Tarun Chugh, CEO of Bajaj Allianz Life Insurance; Mr. Ramandeep Singh Sahni, CFO of the General Insurance Business; Mr. Vipin Bansal, CFO of the Life Insurance Business; Mr. Ashish Panchal, CEO of Bajaj Finserv Direct; and Mr. Devang Mody, CEO of Bajaj Finserv Health. With that, I would like to hand over the floor to Mr. Sreenivasan for his opening comments.
Over to you, sir. Thank you.
Thank you. Welcome, everybody, to the conference call to discuss the results of Bajaj Finserv Limited for Q1 of FY 25. As before, in this call, we will largely be concentrating on the consolidated results as well as the results of our insurance operations through Bajaj Allianz General Insurance, BAGIC, and Bajaj Allianz Life Insurance, BALIC, and where material, the standalone results of our company, BFS. Bajaj, we'll also be covering our emerging businesses, which include Bajaj Finserv Direct, Bajaj Finserv Health. However, if there are any high-level questions on Bajaj Finance Limited, BFL, we will be glad to take that, since they have already had its conference call yesterday. We will not be taking any questions on the status of alliances taken on insurance companies.
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 word on Ind AS. As required by regulation, in Bajaj Finserv, we prepare our financials in compliance with the Indian accounting standards. The insurance companies are not yet fully covered under Ind AS, particularly Ind AS 117 is not in operation. That will change the way insurance results are measured by both life and general insurance businesses. However, for the purpose of consolidation, both BAGIC and BALIC provided non-Ind AS, provide Ind AS compliant financial statements, largely focusing on the rest of the Ind AS. The standalone numbers of BAGIC and BALIC we quote are as per the Indian GAAP applicable to them.
Our results, the press release accompanying the results and our investor deck have been uploaded on our website, this morning. I would like to draw your attention to the newly revamped investor deck with more disclosures. We do hope you appreciate this and look forward to your feedback. Let me start with the key highlights of Q1 FY25. Q1 FY25 was a strong quarter for growth across all our major businesses. Risk metrics, however, varied across segments, and our company focused on balancing risk with growth. Overall, I would say it was a mixed quarter. Bajaj Finserv's consolidated profit after tax for Q1 FY25 was INR 2,138 crore, which is 10% higher than the previous quarter.
Excluding the volatile unrealized mark-to-market gains of BAGIC and BALIC, the consolidated profit after tax was INR 2,122 crore, which is up 8% over the same quarter of the previous year. The lower growth in PAT in the current quarter at a consolidated basis also has the following items. In the previous year, Bajaj Finance had raised capital through qualified institutional placement. Post this, the BFS shareholding in BFL is reduced to 51.34% from 52.49%. This has impacted consolidated profit by INR 45 crore. You may recall that Bajaj Finserv has also subscribed to the QIP in the form of a preferential issue, which is to be converted into shares by May 2025, at which time this share should further go up by about 35 basis points.
Cumulative losses from emerging businesses of Bajaj Finserv Health, Bajaj Finserv Direct, and Bajaj Finserv AMC were INR 119 crore, as against INR 82 crore in Q1 of FY 2024-25, as the businesses are trying to achieve scale. These are within our annual operating plan, and as you know, we continue to invest in these businesses, for achieving scale and to achieve the objectives for which they are set out. As mentioned in the BFL's investor call, in Q1 FY 2024, at Bajaj Housing Finance, we had a one-time deferred tax liability reversal of INR 73 crore, which we thought repeat this year. This impacted consolidated profit by INR 38 crore profit after tax.
Together, these items reduced by year-on-year percentage in the consolidated profit after tax by 7% in Q1 FY25, and it is our hope that, some of these items will not recur, being of a one-time nature. Coming to BAGIC, it recorded market-leading growth of 24% in gross written premium, touching INR 4,761 crore, and even excluding the multi-tender driven crop and government health business, growth was strong at 22%. Its profit after tax increased by 39%. BALI C continues to record market-leading growth of 26% in individual rated new business, and its net new business value, grew by 11% in the quarter. BFL resumed sanction and dispersal of loans under the eCom and Insta EMI cards, after the RBI released the embargo and the issuance of, this happened on 2 May 2024.
It's BFL's quarterly consolidated profit after tax was higher by 14%. BHFL, the housing finance subsidiary of BFL, has filed a Draft Red Herring Prospectus on 8th June 2024, with SEBI and stock exchange for potential IPO of equity shares and is awaiting clearance. We would not, therefore, be able to take some questions on BHFL. Bajaj Finserv Health successfully completed acquisition of Vidal Healthcare, along with all necessary approvals. The capital has been infused in the first quarter of this year, and the post-acquisition integration work has commenced. Now coming to the highlights of our consolidated financial results, which have been put out in our press release. Consolidated total income was up 35% at INR 31,480 crore. Consolidated profit after tax, as I mentioned earlier, is up 10% to INR 2,138 crore.
BAGIC recorded top line growth of 24% at INR 4,761 crore. Profit after tax increased by INR 576 crore, and the ROE on an annualized basis was 21.3%. The combined ratio, as reported under the IRDA's guideline, is 103.7 versus 100.7, largely because of some large commercial claims. However, on a pure NEP basis, on the basis of net earned premium, the company had an underwriting profit of INR 16 crore, and that's combined ratio below 100%. BALIC recorded top line growth of 24%, at INR 5,018 crore, on gross written premium. And the individual rated new business, as I mentioned earlier, was again up significantly above market and the private sector.
The profit after tax was a 37% decrease at INR 97 crore versus INR 155 crore. As you are aware, the life insurance business, higher growth results in a higher new business strain, and therefore there will be a strain on the statutory profit, as we call it. The new business value was INR 104 crore versus INR 94 crore in the previous year's first quarter, which is an 11% increase. BFL recorded 34% increase in consolidated net total income and 14% increase in consolidated profit after tax, with an ROE of 19.86%. Let me start with BAGIC now. BAGIC continues to balance growth with profitability and consistently delivers a superior overall performance versus the industry.
BAGIC continued its growth momentum, recording above-market growth in Q1 of FY 25, going at double the pace of the industry, 24% as against 12%. Its market share increased to 6.5% from 6% in Q1 of FY 24. The growth is largely attributable to commercial lines at 19%, health at 48%, personal accidents at 25% and miscellaneous at 73%. The combined ratio, as I said earlier, was 103% on account of higher claim ratio. There is also an element of higher ceding, including ceding of a past book, which has reduced the net written premium for the quarter. This is a one-off adjustment, which is not expected to occur at the same level in the subsequent quarters. The underwriting profit was INR 16 crore.
For your information, for the year FY 2024, the underwriting losses for the industry were INR 29,620 crore, and for the private sector it was INR 10,760 crore as per the public disclosures. It is in the context of this, that the underwriting profit of BAGIC has to be seen. Aided by better underwriting result and higher profit on sale of investment, the profit after tax for Q1 FY 2025 increased by 39% to INR 576 crore versus INR 415 crore in Q1 FY 2024. Motor insurance business growth was muted due to BAGIC's tight focus on writing only preferred categories of business, particularly in the case of commercial vehicles. BAGIC continues to take a cautious stance, and is not growing that line of business.
Lower new vehicle registrations in Q1 and the base impact of Q1 FY 2024 also contributed to some extent for the muted growth of motor insurance. The subsequent quarters, as BAGIC continues to balance growth with profitability, it will continue to seek opportunities to grow. In the case of two-wheelers, BAGIC has signed up with Hero MotoCorp in Q1 of FY 2025, which, as you know, for the last 20 years was not a tie-up that was with BAGIC. We believe this can add significant value going forward. While motor still continues to dominate the business, with other significant improvements in movements in Q1 of FY 2025, including increasing the health portfolio in the mix by 5%. Overall claim ratio increased to 77.1% versus 74.3%.
The increase in claim ratio is mainly attributable to a few large property and liability claims. We do not believe such claims are recurring in nature, but it so happened in the Q1 of the year, but hopefully they will not recur in the next remaining three quarters. BAGIC's AUM, including cash, increased by 11% to INR 31,651 crore as on 30th June 202 4 versus INR 28,611 crore. BAGIC continues to drive the theme of carrying the years on the foundation of customer obsession through innovations in customer experience. Accordingly, BAGIC continues to have the lowest grievance ratio in the industry consistently, year on year.
Many of the initiatives in BAGIC, in which BAGIC invested in the last 18-24 months, which includes largely also the focus on smaller tier towns, distribution expansion, doing more with bank insurance partners, and strong presence in large ticket corporate segment, continues to be monitored closely, and we expect will continue to contribute in the coming quarters to both growth and profitability. These are all long-term initiatives, and BAGIC has calibrated growth in this for the quarter, especially in the motor segment.
In a market where asset insurance is intensely price competitive, where incidents of frauds are high, and where the market often goes into irrational pricing, this operating result, we believe, displays BAGIC's commitment to a balanced, profitable, and sustainable growth on the back of a deep and broad distribution and prudent underwriting, while focusing on best-in-class customer service. In summary, a solid result from BAGIC in terms of top-line growth and strong profitability metrics. I must, however, reiterate that insurance is a long-term business, and we remain steadfast in our commitment to drive profitable growth, create sustainable value, and always prioritize the interest of our policyholders. Let me move to BALIC next. BALIC continued its strong market-beating growth trajectory and reported an Individual Rated New Business premium growth of 26% against the industry growth of 20% and the private industry growth of 24%.
Its market share in IRNB terms increased from 8.9 to 9% in Q1 of FY 2025. BALIC was ranked 5th among private players on IRNB basis, and 4th on retail regular new business policies in Q1. The company's growth was secular and driven by all key channels, with agency growing 15%, institutional business growing 27%, and BALIC direct growing 75%. On the back of continued strong renewal premium growth of 30%, BALIC GWP grew 24% during the quarter. The consistent growth in renewal premium reflects improvement in persistency year-on-year that BALIC has been displaying over the last five years. In terms of new policies, BALIC grew 8%, and the number of policies in Q1 of FY 2025 was 1.55 lakhs.
During the current quarter, BALIC MBV, as I mentioned earlier, grew by 11%, and the growth in MBV is mainly due to higher business growth and change in the channel distribution mix. Overall, in terms of product mix, it was 23% par, 19% non-par savings, 6% term, 5% annuity, and 47% from unit. We have seen across the market all companies showing a higher proportion of unit because of the strong performance of equity markets, and therefore, this quarter has seen a higher proportion of unit for us as well. BALIC has been increasing its focus on protection business, with 5-year CAGR of group protection business at 10% and retail protection at 91%. During the quarter, the retail protection business grew 30% on a QOQ basis.
BALIC has been scaling up agency and the direct channel through investing in people, processes, and deepening existing channels. It has led to BALIC building up one of the largest agency channels in the private life insurance space, with 150,000 agents. BALIC is also building on the data and analytics for the direct sales through upsell and cross-sell initiatives. It has led to BALIC 's presence in 342 towns, with dedicated verticals for different customer segments within the direct space. On the institutional business side, the company continues to expand its network of partners and grow existing partnerships. BALIC now has a reasonably large number of bank insurance tie-ups, which should help it reduce any concentration risk. During the quarter, BALIC has further tied up with Federal Bank and Yes Bank as a bank insurance provider.
On the persistency front, there has been improvement across most cohorts, with 13-month persistency at 85% and 65-month persistency at 52%. If you do see a small blip in the 37-month persistency, it's largely because last year's 25th month persistency was affected due to a certain book of business that we had written a few years earlier and which we have since de-grown. The profit after tax was lower, mainly on account of higher new business strain due to business growth and product mix, partially offset by higher profit release from past business, shareholders investment income, and unit charges. BALIC ended the quarter with an AUM of INR 1,17,000 crore. One of the questions investors may be wanting to know is the impact of the new surrender regulations.
The changes in the product regulations require surrender values to be paid from year 1 and also define the method of calculating special surrender values. We welcome the new regulation from IRDA as it enhances the product propositions from customer point of view, and it's positive for the industry in the long run. BALIC margins have been consistently expanding over the last 4-5 years, from 7% in FY 2019 to 15% in FY 2024. The changes in regulations in the short term may temporarily impact the margin expansion. However, given our overall growth trajectory and focus on sustainable growth, we expect to see our margins continuing to expand in the medium term. To mitigate the impact of this change, we are proactively implementing various measures, including but not limited to product filings, cost optimization, and productivity improvement.
Overall, another balanced quarter for BALIC , with top line increasing at a higher rate than the market. Finally, both insurance companies are among the most solvent in the industry, with very strong solvency ratios. Coming to our lending businesses, BFL and BHFL, a mixed quarter, good quarter on volumes, AUM, operating efficiencies, portfolio metrics, and ROE. Loan losses were elevated in Q1. The company resumed sanction and disbursement of loans under eCom and Insta EMI card and issuance of EMI card after the RBI removed the restrictions on these businesses on May 2. Profit after tax grew 14% from INR 3,437 crore to INR 3,912 crores. BFL acquired 44.7 lakh new customers in Q1 of FY 2025. BFL disbursed 1.1 crore loans and added 45 lakh new customers in Q1 of FY 2025....
As against just point one crore new loans in Q1 of FY 2023, registering a growth of 10%. Total customer franchise as on thirtieth June 2024 stood at 8.81 crore, while cross-sell franchise crossed the milestone of five crore and stood at 5.51 crore. The Bajaj Finserv App now has 5.6 crore net users as on thirtieth June 2024. AUM growth was higher by 31% and has crossed INR 350,000 crore during the quarter, and the net interest income grew by 25% to INR 8,365 crore, notwithstanding the NIM compression in Q1 of FY 2025 of 23 basis points.
The gross NPA and net NPA at 0.86% and 0.38% were in line with the previous year and among the best in the NBFC industry. The loan losses and provisions in Q1 were elevated primarily on account of muted collection efficiencies, and stage two assets in Q1 went up by INR 864 crore over Q4. We have already taken steps to strengthen collection efficiencies, slowing down rural B2C business and other steps which we expect will yield results in H2. The company remains watchful across portfolios and also proactively pruning segments. BFL's capital adequacy remains strong at 21.65%. Bajaj Housing Finance, BHFL, the 100% mortgage subsidiary of BFL, continues to do well. It has filed the DRHP on 8th June 2024.
Its AUM grew 31% to INR 97,000 crore as of 30th June 2024 from 74,000 in 2024. The company is just 7 years old and is already close to touching a lakh of crores in this quarter, the coming quarter. The profit after tax was INR 483 crore, which is 5% higher, however, the net profit before tax was up 20% because of the one-time tax adjustment, which I mentioned earlier. BHFL's capital adequacy ratio was 23.82%, with tier one capital at 23.2%. It continues to track excellent, collect, loan loss metrics with GNP and NPA at 0.28% and 0.11%. In summary, another very strong quarter for BFL and BHFL.
Coming to Bajaj Finserv Health, it carried out 26.6 lakh health transactions versus 10 lakh in Q1 of FY 2023, having 3.08 lakh monthly active users. Obviously this quarter, the transactions can be also attributed to the acquisition of Vidal Healthcare during the quarter, which now, I mean, at 26.57, it stands about 9 lakh transactions a month. Bajaj Finserv Health is also expanding its provider network, which includes 107,000 odd doctors, 5,838 lab touchpoints, and 16,813 hospitals. Vidal, the acquisition of Vidal gave access to a substantial number of hospitals to Bajaj Finserv Health. Utilizing the network strength, BFH is now able to offer and service differentiated product lines, both for retail as well as to corporate for employee health benefits management.
Bajaj Markets, our other subsidiary, Bajaj Finserv Direct, attracted 72 lakh consumers on its digital platform, of which 1.7 lakh became customers. BFSD lending, unsecured, secured, BFL, and partnership disbursement for the quarter stood at INR 1,789 crore, as opposed to INR 1,636 crore. It sourced 42,294 cards and has started selling the cards of BFL again, which were temporarily restricted by the RBI restrictions on BFL. Bajaj Finserv AMC, as is its AUM, has crossed INR 12,000 crore as of thirtieth June. It has launched two new passive equity funds, the Nifty 50 ETF and the Nifty Bank ETF, and also has a large and mid-cap fund. All the NFOs have received very good traction. And as of Bajaj Finserv Asset Management AUM was up 26% QOQ.
It is ranked 27th out of 43 on 30th June 2024. I will now hand over the questions to the audience, but before we open for questions, considering the paucity of time, may I request the audience to keep the questions brief so that we can cover more queries during the call, and please avoid asking questions which have already been answered. Thank you very much.
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 touchtone 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. The first question is from the line of Supratim Datta. Please go ahead.
Thanks for the opportunity. Now, my first question is on the Bajaj business. Now, just wanted to understand, what are you seeing in motor CE that, you know, you have preferred to allow this category to decline during 1Q? Is it cost, you know, higher commissions? Is it, the, you know, higher loss ratio? What is exactly the concern here that you are facing? That's one. Two is, you know, more of an accounting question of, you know, what I see is that the NEP this quarter has been higher than the NWP. Just wanted to understand what is driving that? If you were able to, could you explain that. I have, you know, two more questions for the Bala and Bajaj Health business, but I'll go after, you know, this.
Okay. So the first question was on TP: What are we seeing in terms of losses, and why are we cautious on some segments of TP? And the second question was on the NWP, NEP, is there a one-time adjustment? So I'll now ask Tapan to take over the first question, and Ramandeep can follow it up with the second. Over to you, Tapan.
Sure. Thank you, Srini. If you look at TP, price is controlled. If you overall look at the GI business, most of or nearly every product, you know, the pricing is free or left to the companies, and now the wordings have also got free. But for motor third party, it is controlled by the government, you know? MORTH decides based on recommendations sent by IRDA in terms of the pricing. And over the past couple of years, there has been no price revision, but the inflation claim keeps on happening every year. So in a way, you have to keep on recalibrating your business and how it moves. And for the rest, you can reprice, you know, depending on how the business is moving.
But for TP, you can't. You don't have the price control. So there's been no price hike for a couple of years, and then some businesses which would have been, you know, good, let's say two years back, will not be so good today, you know? Because the inflation claims keeps on happening every year. That is the reason why you heard the statement Srini made in terms of recalibrating our business in the motor business, looking at how it's run. I hope it answers your question. Raman, would you like to take the NWP one or the reinsurance part?
Yeah. Yeah, sure. So, like Srini highlighted in the opening remarks, during the quarter, we've actually done a new ceding on a treaty, which actually covers the book of the past. So this is actually some of our rural business which we were trying to cede, but didn't happen before the year end last year, but we were able to do it this year, and it included the past book as well. And that's why you see that our NWP growth is actually negative compared to the NEP growth. If I actually exclude this one-off impact, my NWP growth would have been close to 16.5%. So that's the abnormality which is being caused only for the quarter's results.
So let me explain it a bit further, you know, why and how it gets done. See, in our business, when we write a large chunk of business, you know, and it's always good to have good reinsurance support, because, you know, that is where the collaboration also happens to see how it goes, and you build experiences on that. And that is why this, you know, treaty got done. But if you look at this quarter result, we have an underwriting profit. So technically, if you look at the combined ratio on NEP, which is the way when you calculate underwriting profit, our combined ratio will be below 100, you know?
Got it. Got it. But if I do not take into account this one-off impact, then you will not have an underwriting profit as well, right? Because you would have gotten commission inwards due to the ceding, which would not exist.
So that would not be to such an extent as you're seeing in such a large portfolio, no? The Combined Ratio way off like that, it'll not be that high impact.
Let me just add one more point to this. So Prajin, you know, in the end of the year, we do publish our claims triangles, and now under the public disclosure, they are available for all the peer group companies as well, for the current year as well as for the previous year. And when we checked at least, we found that the paid claims to the ultimate loss expenses provided initially, even after six or seven years, we are the lowest in the market. So we are prudent. We believe in reserving for claims at the point of loss, and we will continue to maintain the prudent stance. This obviously, you would have seen occasionally some companies having to strengthen their reserves or have large items on P&L.
We do not anticipate that kind of situation for Bajaj in the near term.
Understood. That's, that's pretty clear. Now, you know, coming to BALIC, now, on the margin bit, you know, last year, first quarter, you had indicated that the margin was lower, due to, you know, launch of a low-margin product and the growth being slower. So now this quarter, the growth has been strong at, you know, 18%. You know, while there is a product mix shift, however, despite that, this, you know, the margin appears to be very soft. So just wanted to understand, you know, why is this being the case? And, you know, is there something beyond the product mix shift that you know is there?
Yeah. Before I hand it over to Tapan and Tarun and Vipin, let me just highlight this, that Q1 is the softest quarter for life insurance business. Last year, we did have a launch of a uniquely low-margin product. This year, the market on the whole, we have seen, is shifted towards lower-margin products because of consumer demand. We have seen at least for our results have come down, we have seen margins softening across the companies that have already reported results. And it will be for this quarter and possibly next quarter an industry phenomenon. Tarun, would you like to take it?
Yeah.
So, so I think it's on the same line that Srini mentioned. I think it's largely driven out of the mix that you spoke about. And it is also important that where is the mix coming from into ULIP? So, you know, you see a bulk of that mix coming from the savings side, and that's where the delta is. And, you know, first quarter is always a small quarter. You still continue to run the fixed cost.
... And that's why there, the swing can be very significant in the first quarter. I think as we go through the year, the year normalizes and there is better absorption, of course. So I think that is the normalization for now.
Okay. Hello?
Ladies and gentlemen, the line for the management seems to have disconnected. Please hold.
Can you hear me?
Yeah, I can.
Srini is there.
Yeah. No, no, we are there. I'm also here. We aren't disconnected. You can hear me.
We hear.
Yes, I can hear you.
I can hear you.
Yeah. Should I go ahead? Yes, okay. Just one last question, you know, on the Bajaj Health business. So the Bajaj Health business, you know, you now have Vidal in that business. Just wanted to understand what kind of scale, you know, do you think is required in this business to turn profitable? You know, do you have, you know, a certain target or, you know, is there a business plan that you know, at which, you know, this business turn, it turns profitable, and what would help you to reach that scale?
Let me just take it this before I pass it on to Devang. I think the acquisition of Vidal now gives us the complete toolkit required to operate across the health care spectrum in terms of services, products, platform provision, and management of claims, apart from managed care services. We already have OPD and wellness, which we have invested in. Now, the acquisition of Vidal, the integration is going on, and we will eventually come out with within the next six to nine months complete long-term plan, which will give us the visibility on the break even. Devang, would you like to?
Yeah. It's a valid question, and of course, operating leverage is going to be the largest trigger. But at this point of time, where we are focused on is, TPA industry is highly commoditized, and there is not material difference besides stickiness of existing clients of, in employer-employee group, that employee is used to working with certain TPAs. I think that's the only whole point for choice of TPA in industry in our view. What we are focused on today is, how do we create value proposition for our customers, which is differentiated. So we are focused on few things, which is highly propagated by regulator as well as government, that how do we make healthcare transactions more digital? So, I think, so to answer your point, while, once the integration is...
Integration is underway in terms of improving Vidal's platform capability, creating differentiated products for their customers. So these are the two important tasks of integration. And as Srini answered that in next three months, now that we have visibility and thought process of what together we can take to market, we will do the long-range plan, which would mean also running the actual numbers. Most important thing we are focused on currently is that how do we differentiate in the market? Another very important lever for PNL, for health business, is as we create meaningful products for our customers, like now with Vidal acquisition, we can also offer hospitalization as a service. Similarly, we have lined up for ourselves services which we can offer to our same customers.
So last quarter, we have launched diabetic care as a service, which is a fully managed package, which our customers, employers or insurers can offer to their customers. Similarly, we have a plan to launch one or two services every year. Now, that requires investment. For example, in H2, we will be focused on providing maternity as a service. Now, that requires a completely new dimension of network providers to be enrolled. So, every year we'll roll out two services. That's another trigger for us to do investment on, and rest of the business will continue to drive operating leverage. Our loss rate, quarterly loss rates are reducing YOY by at least 20%-30%, and that trajectory will continue. But our we are focused on launching more services and creating differentiated products.
So, that's the focus of the organization at this point of time. Hope I am answering your question. I'm not giving you any revenue number at which we will break even. The reason is it will depend on our investment horizon rather than just the optimization of our operating leverage.
Understood. That's very helpful, Devang. Thank you.
... Thank you. The next question is from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
My question, you know, first, I think on the life side, you know, we're trying to sort of translate the margins and, you know, looking at reasonably high increase in in unit linked and pure business, you know, taking away from non-par. You know, just curious how the margin stacks up, you know, given the fact that there was you know, very small compression in margins, you know, on a year-on-year basis. So is it something that margins at product levels have changed?
So, Nischint, I think, you know, margins are a function of a lot of things, including what are the current interest rates, what we are able to earn, what do we offer to customers, right? It's a function of all of it. However, we will also have the distribution mix that plays a lot of role. So, I think at a broader level, like I answered to Supratim earlier, we do believe that quarter one is too early to react on any impact on margins, because this is a very smallest quarter for our business, and, you know, there'll be a huge impact on the rate it got. So I think as we go through the year, I think that's the time, we should read too much into margins.
Just specifically to your question, have our product margins changed very significantly? Probably not, but we do keep taking price corrections, reacting to what competition is doing and what is happening in terms of the yield that we earn.
And let me, let me just add on to this. There are two other elements that become critical. One is the productivity, and there, there's a 24% increase on top line. There's been an increase in productivity as well, plus the channel mix. So if our proprietary sales channel does better, usually that's a lot more profitable than a few others. So I think that those things also play in other than product structures.
So just a little question on the agency side. You know, growth this time was around 15%. I guess we have been stepping up a little bit more now, so is this kind of a mid-teens agency growth that we're looking at? You are the master.
We don't make a projection on growth of channels, and otherwise don't talk of forward-looking statements. But having said that, yes, the previous CAGR on agency has been at 19%. Our focus is always to ensure that we, despite being now one of the largest agencies, look at the base effect, get into more cities. We run multiple agencies, we don't run one. So a lot of these will play out over a period of time, but I don't think I can make a statement on in terms of growth rates on something like this.
Listen, just to add to that, what Tarun is, to what Tarun said, I think agency has these multiple channels with different, economics on growth and profitability, and depending on how the overall requirement of the company is in terms of balancing the product mix, I think the levers will be, used differently. So more than the overall growth, it's a balance between growth and profitability that you should see. It was a channel which was said to be across the industry, not possible to make money, but I think now we are into double-digit margin territory there, and we would like to keep it, growing in that space.
Axis Bank, since you have stepped up this quarter.
Yeah. So is that a question or a statement? It's a question. Question. No, so Axis Bank, we are where we are. We usually tend to keep our market share between 25%-30%. And as Sreeni, I think, mentioned upfront in the call that, we're very clear that we do not want to be one bank channel-led, unlike our peers, who are largely skewed, and that brings a lot of risk to the business mix. And, you know, kind of... It is better to be distributed always, and that's how we are going, and I think, Axis has been keeping in step.
You know, one is on health insurance. You know, if you could kind of, you know, help us understand the trend in health loss ratios. Is it a mixed change or is it something that, you know, we are able to see some, you know, whether there's a deterioration or improvement in those retail loss ratios? And just finally on, Bajaj Markets, you know, we're looking at organic visits and transacting customers sort of going down. So, you know, how should one look at this and whether we need further investments on this? So those are the two final questions.
Right. Someone would like to take the health? Ramon? I can. Sorry, can I just get the question again?
Yeah, sorry. On the health side, if you could break the loss ratios between retail and growth and, you know, the change in loss ratio this quarter. Yeah, so basically on the retail side, have you seen an improvement or deterioration in the loss ratio? And if possible, you could break it between retail and growth.
So if you look at the retail loss ratios, no, it is a combination of the year of policies, and that's across the industry. Your first-year policies has a lower loss ratio. Second year goes up, third a bit more, and fourth, you know, goes up for the ... So, so depending on how you acquire fresh health business, the loss ratio moves on that basis.
... That is one way to look at, loss ratio, which predominantly happens in the industry. The other way to look at, the loss ratio is how do you redefine your, business mix and acquire customers, at what age and where do you put it up? So if you look at our average age of customers, you know, has gone down in retail health, which shows that overall this would be a better book as it, progresses further. The loss ratio movement has not been very significant in terms of, you know, that compared to the last time it moved up or down significantly, but we are in the process of correcting the, books so that it gets better over time.
Sure. At a quarter level, there has been this thing, and if you look at FY 2022 onwards, the market as a whole, the number of policies hasn't grown at all, it's fairly flat. Most of the increase in premium for the companies are because some of the companies have increased their prices. So the number of new people coming into the market is not growing as fast. Given our position, we have also now located that there are many pockets in the country where we need to do more health business, where traditionally we were doing more of motor and other businesses. Over the next two to three years, we will focus a lot more effort onto that. This is very clear from our side.
Nischint, I'll just add to the loss ratio. See, I think what you rightly highlighted is, while there is an increase in the loss ratio, but it's a result of the increase in the proportion of government and, GMC business, which is causing a minor increase in the loss ratios. Also, like we had mentioned earlier, we, you know, if you recall in the last call, I think we had highlighted that we will be repricing our products, because I think on that front, we are lagging versus the market. And, some amount of repricing has gone into play, late during this quarter, and I think about 50% of the book on the retail side will get repriced in quarter two. So you will hopefully see some impact of that coming in the coming quarters.
From Bajaj Markets.
Yeah. Ashish?
The question has two parts. The first one was on organic traffic going down. In traffic, it's total traffic, that has gone up. It comprises of six channels, and organic is one. But while organic, has momentarily gone down for the quarter due to some changes in Google algorithm, but, if you, if you look at our direct channels, for which we have zero cost, these are organic, direct, and social. The sum total of these three has gone up for us, which means our free channels have traffic, and therefore, while the total traffic has gone up and the, the free channels total traffic has gone up, organic going down has not affected us economically, per se.
As for the trend of transacting customers, our transacting customer count in Q1 FY 2024-25 has decreased by 71,000 against Q4 FY 2023-24, but 90% of this reduction is only on account of mutual funds. And in mutual funds, we are in the process of migrating from offering direct mutual funds to regular mutual funds, and in turn, we are moving from RIA to ARN, and therefore, this change of strategy caused us this decrease in transacting customers. I hope that clarifies this. Thank you so much.
Thank you. The next question is from the line of Dhaval from DSP. Please go ahead.
Yeah, thanks for the opportunity. One question on the general business. Bajaj, could you talk a little bit around these few liability claims that came during the quarter? So that's the first one. Second, on the Bajaj Life business, the rolling 12-month margin is about 14.3%, and initial comments that I think Srini made were that this year the margin is expected to be more consolidating given the surrender impact. But medium-term, the margin continues to expand. That's what our aspiration was earlier. So could you talk a little bit around near-term margins in the context of the last 12-month margin?
What should one expect over the next 2-3 years in terms of margin expansion? So that's the second one. The third question is on Bajaj Health. On slide 51, you have the business model. I understand, you know, you haven't yet made the proper, you know, LRS for this business. So but could you give some perspective around what will be the biggest driver of operating leverage that Devang talked about earlier? And just a data-giving question on Bajaj Health is, this quarter, the revenue includes Vidal. If you X out Vidal, would the revenues be close to INR 160 crore-INR 165 crore? That's just a data-giving question. Yeah, so those are the questions from my side. Thank you.
Dhaval, the first question was on liability claims. While we can't give out, the exactly what kind of claims they were, I can only tell you that in the, P&C business, P&C , this is the C part of, P&C , claims tend to be large but infrequent, especially with respect to corporate liability claims. Whereas in the terms of asset insurances, you'll find a large number of claims are more frequent and, you know, low severity. So and then I'll hand over to Raman or Tapan to explain. Yeah, I think, Srini, you rightly highlighted why we can't take names of the clients and the nature of claims, but, there are basically two, three claims which are large in nature. Unfortunately, see, this liability business is largely, you know, managed, amongst the top five private players.
And there, all the three claims which I spoke about are co-insured, and you'll hopefully see a similar impact either in this quarter or next quarter in most of the other private players' accounts also. But like we said, they seem to be one-offs, and hence, don't seem to be an area of worry at this stage for us. And usually they take time to settle, so eventual settlement, depending on how the company is reserving, could be less as well. But that takes time, because these are all matters of their own liability and contracts. The second question was on life. We can't give any picture on margin, but if Vipin or Tarun would like to highlight that?
Yeah, Srini, so I'll take that. Yeah, you're right, we can't talk about numbers, but we understand that there is a concern on the SSV that is coming in. So what we're doing is a little conservative in the way we are talking about this year. A lot of this is yet to pan out, which is why the statement from Srini that there could be lesser of an expansion, let me put it this way. See, as a company, if you look at our motion of the movement on our NBM, we've only been going up, and the last five years, our margins have grown up, grown significantly in terms of sheer percentages, and although we largely look at NBV.
What you will find is that our expansion of margins shall continue, but maybe for the short term this year, we'll wait and watch, and we are not making any significantly optimistic for, forward-looking statements, even directionally, for this year. Maybe there will be a little bit of pause before it starts expanding again. That's the way I'd like to answer it.
The third question was on Bajaj Finserv Health. You want to understand where the operating leverage will come and whether X, Vidal, what would that be in the revenue growth? I will only add one thing before I hand it over to Devang, is that the business that, Bajaj Finserv Health built was basically a capability on OPD, wellness, and networks, mostly smaller ticket riders and products sold. Vidal is a different, stream of revenue. I'll hand over to Devang to explain that further.
Yeah. So I think, let me take the revenue number question out first. So it, the standalone revenue is INR 167.65 crore. That answers your question on that. I must also mention that this quarter has decent amount of acquisition-related expenses, because as transaction gets consummated, then we have to pay the bankers' fees, et cetera, so that is passed through both PNLs. On your point on slide number 51, where operating leverage would come from, see, practically, we are too small a business at this point in time, and hence, all the pieces of payer stack should add to operating leverage.
To explain you, I think, every quarter we are adding one more non-life insurer and one life insurer to our, payers who are offering OPD services to their customers. Now, these are, large, these contracts take time because they formulate the product, they file the product, they do the technology integration with us, and after that, they roll out in the market, and that's when our revenue clock starts. So I, I think that addition of non-life insurance and life insurance will be continuous, and these are fairly sticky business unless we, falter on services tremendously. It will keep adding value. A lot of, most of these products on life as well as non-life side are renewable, and that's what should provide kicker to, revenue without having to spend on business development, initial integration, product launch time.
So I have a business development team which is, knocking doors and, product launch takes anywhere from 3 to 6 to sometimes 9 months with, insurance companies. So there is more revenue which sits in. So that's what will add to our operating leverage, which is non-life, more partnerships, life insurance, more partnerships. In those partnerships, more products and more penetration. But I think, as a company, we see largest, trigger to come from corporates. Vidal, since, Vidal in the market is heavily skewed towards corporate as payer, the percentage of premium under management, they would be amongst highest corporate as total premium under management. And we believe that our digital experience as well as OPD capabilities are much more suited for corporate as a payer. So-
... ever since we are a small business, all the payer sectors should grow, but corporates will find much quicker revert as there is an existing demand which is not getting met, and we have what it takes, but it, it requires a little bit of solutioning because insurers have to be brought on board, et cetera, et cetera. So all those things we complete, then corporate will give immediate revenue increase and hence operating leverage. Insurers is a longer work, but much more sticky business. I hope I have answered your question.
Yeah, thanks, and all the best.
Thank you. The next question is on the line of Sanket Goda from Avendus Spark. Please go ahead.
Yeah, thank you for the opportunity. So, my question is largely related to motor own damage in BAGIC. Our growth on OD is strong, around 22%. By any chance, this growth includes Hero as a OEM addition, or we expect that Hero addition will come in subsequent quarters from that OEM this thing? And second thing with respect to OD was to understand the claims, because last year we ended at 63.6. Today, it is at 69.4. It's a meaningful deterioration, around 600 basis points. So just wanted to understand any specific reason why this motor OD loss ratios have marginally or have increased compared to last year's full?
There is a question on BAGIC I have, then I'll ask on BALIC.
Yeah. Raman, would you like to take it?
Yeah. Yeah, I'll take it. So Sanket, yeah, Hero has not yet started firing guns. I think it'll take a few more weeks. Business has started, but in Q1, it was not material enough to talk about. Your second question on OD, now, I think to understand that better, if you just look at our OD loss ratios, they move quarter on quarter. You know, if you see the trend for last three years, every year you'll see in quarter one, there is a spike, and by year end, from quarter two, actually, it starts you know, normalizing. So I think that's a trend we've seen reoccur every year.
Having said that, you know, at least, what we believe seeing the trend for, last, month and so on, we believe that, what was the trend for full year last year is close to where we should end, this year at, on as-is basis. Now, obviously, like Tapan has been reiterating, now and then, it all depends on the quality of the portfolio you write. But if I were to just look at, the past trends and answer your question, you'll see that, you know, this normalizes over the balance three quarters, and, we on as-is basis should settle at close to 65%.
Got it. Perfect. And, Hero, you might have assessed internally, how big is the potential, if it starts firing from second quarter, how much extra layer it can add to the growth?
Like I think we all have said in the past, we'll not make any forward-looking statements, so let's wait and watch how the numbers shape up. Because it's also a matter of how much commission we want to pay, right?
Mm-hmm.
It's very easy, like we've been saying every now and then, it's very easy to buy business in the motor segment, so it will all depend on what the discounting is, what the commercials are, depending on that. So let's wait and watch. Hopefully, in the second quarter onwards, you'll start seeing the result.
Okay. Okay, Raman, thanks for that question, answer. On BALIC, my question is, if you can break up that growth of banca of 27% into Axis and non-Axis. Just wanted to understand where the growth has come from, compared to the large banca channel we have. And the next one was, again, with respect to growth, see something a little different have we done, in direct channel which led to that such a strong growth? Anything which you want to highlight, this 75% growth? How is it sustainable for the full year?
Because that probably is one of the way to recoup the margins if certain norms impact, as you rightly highlighted, direct channel will be little lenient on product mix to protect the margin. So if you can give a little more color on that part will be very useful.
Okay. See, it's always not that we can't be so transparent that we tell you exact percentages of all our banks, and honestly, they keep changing. But I mean, broadly speaking, Axis is of course our largest contributor.
Mm-hmm.
I mean, a little less than all our other banks banker business comes from, less than half of that comes from Axis Bank. But we do have partners in aggregator space, in the broking space, et cetera, they are not adding up to that. So, overall, this share is on overall basis, Axis will be under 23%, which is what we've always been saying. And banca would be, banca, broking, everything would be close to about 50-ish, 45, 45-50%. It varies, depends on the-
This quarter.
This quarter is 45. Now on the direct business, see, direct is something we've been working on for quite some time, and we've been actually quite positive in making a lot of investments, adding a lot many verticals. We started a defense channel as well. These are customers who are existing with us, and we have to get more and more efficient about servicing them and upselling them new products. And as our product, you know, mining has been going on, we've been able to decipher where there are more possibilities of developing efficiencies in the channel. We do expect this channel to remain relatively faster growing versus the rest of the other businesses, namely agency and traditional business. But yeah, these are exceptional growth rates we've been able to get this quarter.
I don't think that this kind of level will be sustainable going forward.
Got it. So, just, is it fair to assume that, if, if direct grows at a faster rate than the other channel, then any, any margin loss because of the surrender norms can, can this play a role in recoiling, a bit, from, from, from the surrender norms?
To an extent you're right, but it's not entirely that story, because it's also a product mix play that is there, direct plays a lot more role. And plus there are more commission payouts there. And usually, you know, surrender, commissions, costs, it's a very complicated ride in the way things will pan out after H1 . Among all of these, yes, direct sales tends to get a positive benefit of all of these three.
Okay. And, and lastly, if you can squeeze one, if I'm trying my luck, if you want to answer, you can answer that, but,
Obviously, you're not lucky anyway.
Then, just if you can quantify by any chance the impact of surrender norms on your margins. See, that means on FY 2024, I need to say, the 14.6, assuming you don't do anything with respect to payouts and all those things, what is the number you could see?
I'll tell you correctly, Sir, you are trying your luck too hard. That there could be a slight pause in the growth, but the expansion is going to be back. And what is yet to be seen, on the way commissions pan out and the way productivities pan out, product mixes pan out. There is this huge underlying surge in the market, given the fact that the Sensex is at the top. So units are flying off the capital. So it's going to be a combination of a lot of factors. Even if I also make a statement, I will be 100% sure it won't be correct.
Okay, sure. Sure.
Yeah, Sanjay.
The only limited point there is that a lot of the surrender is based on surrender values. And so these are all actuarial reserving that needs to be adjusted now.
Mm-hmm.
As the business builds over the next few years, if there are no actual surrenders, which are much higher than where we are today-
Yes, yes, yes.
Then the amount is not going to get paid out only at maturity, which is already built in. Okay?
Right.
So this is a game of actuarial reserving and actual results demonstrating that for the industry as a whole, for this particular product lines which are affected, will play out over the next few years. Like all industry specific things, it is not one company which is getting affected, and we'll all adjust. You know, last year there was a big, this thing about tax, on traditional products. In reality, I think you can see in hindsight, we all adapted.
Mm.
How margins will evolve is we will adapt, and how we will adapt will vary from company to company, but eventually the focus will be in improving the margins while continuing to grow better than market. That remains our... Rather than be we, others should grow faster than we, where we are today. That is our primary objective.
Got it. Got it. Thanks, thanks, thanks for the answer.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Hi, good afternoon. Most of my questions have been answered. Just couple of ones which are left. One on the Vidal acquisition. Now that you've acquired Vidal, are you seeing, you know, other insurance companies associated with Vidal, withdrawing from... Withdrawing business from there? Because that was one of, you know, the fears that, you know, the market and me, and I also had. Second, you know, you've done a pretty large government health transaction last year, the Gujarat government transaction and you would be completing about a year.
So maybe you could talk a little bit about your experience and your learnings and, you know, how would you sort of see that business in terms of, you know, whether you would still like to continue, or what sort of, you know, anything else that you would like to add in terms of making that business more profitable? Yeah, any comments and color around that would be helpful. These would be my two questions.
The first question is for Devang.
... You know, as a policy, we have a board approved policy that not more than 10% of our PPA business from Bajaj Finserv will be done with our insurance companies. So we don't see that as a particular block. But, Devang, can you add flavor to that?
Yeah, yeah. I think, we, as soon as we announced the transaction, as it is required, and it is desired, we informed to all the insurance companies with whom Vidal was working. And post that, we engaged with them. Obviously, they had this question, that you are now becoming part of the group which owns a insurance company, what does it mean for conflict of interest? So we explained it to them, which are all facts, that Vidal is a regulated entity, regulated by IRDA and open for inspection of IRDA. And there are regulations around use of data and, et cetera. So, IRDA has approved the transaction with caveats and reasons, and hence, they should have that, as mitigant, that there is a regulator in place. Besides that, there is DPDP law. DPDP has become a law now.
So the fine prints of what are the bylaws, et cetera, are yet to be released, but it's an act. So nobody can just misuse the data for any other purpose than as used as required. Third thing, our Vidal's customers had these questions. We have answered them. We are continuing business. Vidal is continuing the same premium under management. And hence, there will be some reluctance on some of the customers for the time being. The key question is: What is the value add we are putting on the table?
And this risk, we, in our mind, was thought out risk, because even for OPD services, while we started our business with BAGIC, because we co-created a product, every quarter we are adding one non-BAGIC health insurance company and non-BALIC life insurance companies. They have same questions. And if you are able to add value, people will work with you. That is our experience from last four, five quarters, that we are adding one health insurance company and one life insurance company. Obviously, they also have, in competition, our group companies. And I think market is becoming mature that, we are a listed company with Nifty 50 presence, fact that group has impeccable, brand imagery. And, I think, so it should be mitigated.
When I approach any insurance company, this is the first question they ask. Over a period of time, with 3-6 months of business development, they come on board. So, yes, it's a legitimate question which customers will have, but if you are able to add value, people will work with us. In our group, in lending business, we bank all the checks of customer EMI into some bank only, and those same banks we compete for our loans business. So this is all. Since there is no group having services business in the market, that's why it is a legitimate question from customers as well as the question you are asking. If you are able to add value, they will work with us, and that has been our observation till now.
I hope I have answered the question you asked.
Oh, got it, sir. And the next one on the government- On the group, on the government group, if you look at our company's philosophy, and over time we have said it, also, we are into all lines of businesses. And, you know, you have never seen us say that we, we are walking out of a business or we entering again, and I've seen over a quarter of, you know, our peers do that, but we always consistently stay in all lines of businesses. And, we learn from it, and we keep on, you know, looking at what to do next. That is how we are also in government health. Gujarat is not the first one. We have done Jammu and Kashmir before. We have done, you know, other states also before. So it's a continuous process of, you know, doing business.
Awesome. Any, any comments qualitatively on the loss ratios or on, you know, what needs to be done?
That, that I don't give. I think I've mentioned that last time also, because, see, this is our hard work that we do to figure out our businesses and do that. So obviously we'll not be giving details on our individual businesses and, you know, LOBs and lines. That we don't do.
All right. All the best. Thank you.
Thank you. Ladies and gentlemen, that was the last question for the day. I now hand the conference over to Mr. Raghvesh for closing comments.
Thank you to all the participants for joining on the call. A special thanks to the management of Bajaj Finserv for giving us the opportunity to host the call. Thank you.
Thank you.
Thank you, everybody.
Thank you, everybody.
Thank you, sir.
On behalf of JM Financial-
Thank you.
That concludes this conference. Thank you for joining us, and you may now disconnect your lines.