Q4 20/21

Apr 28, 2021

Ladies and gentlemen, good day and welcome to Bajaj Bint Cerf Q4 FY 2021 Results Conference Call hosted by JM Financial Institutions Securities 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. Please note that this conference is being recorded. I now hand the conference over to Ms. Bani Babji from JM Financial Institution Securities Limited. Thank QN, over to you ma'am. Thank you. Good morning, everybody, and welcome to the Dosh Kinsell's earnings call to discuss the Q4 and full year FY 'twenty one To discuss the same, we have on the call Mr. Srinivasan, CFO, Bajaj Retail Limited, Mr. Tapan Mr. Tarun Chok, CEO, Badaj Galyan's Licensure and Mr. Bharat Sarku, CEO for Badaj Galyan's Licensure. Results. Thank you, Vani. I hope all of you can hear me very well. Good morning, everyone. We hope in these tough times everybody is Well at home as well as with you. We wish you all good health as we go along. Before we get into the results, I'll just make some high gain disclosures. As before, In this call, we will largely be concentrating on the consolidated results of PFS, as well as the result of our insurance operations to Bajaj Allianz General Insurance, Baijik and Bajaj Allianz Life Insurance, Baijik. And where material the standalone results of the Bajaj Finance Limited, which is another major subsidiary of ours and which is listed, has already had its conference call. Howard, if there are any high level questions on BFL, we would be glad to take that. We will not be taking any questions on the status of Allianz's Our insurance company except to state that 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 Just to remark on Inde Hayat, as required by regulation, BFI has adopted Indian accounting standards for FY 2019. The insurance companies are aware or not covered under IndeA. They have prepared IndeA's financials only for the purpose of consolidation. Accordingly, for Magic and Valid, the stand alone numbers reported below are based on the non India's accounting standard of Indian GAAP as applicable to The press release accompanying the results and our investor deck have been uploaded on our website yesterday. I hope you all had a chance Just a few points on our investor deck. For your information, we have been updated our disclosures this time in our investor presentation. We have more details about FinServ and our business model. We also included a few additional disclosures, new business value and eminent value of Padmeq and the moment briefs on our approach to risk, the reserving triangles for Biotech and the ESG, Environment, Social and Governance approach and the initiatives of the company and its subsidiaries. The detailed report on ESG will be published along with the annual report for FY 2021 as part of our business responsibility report, and I would Strongly recommend all of you do go through that when it is available. As we start FY 2022, I would like to highlight here a major event is that both our insurance businesses will be completing 20 years of service to policyholders in FY 2020. We are pleased to see the significant progress both companies have made and we remain among the top insurance groups in India in terms of market presence, Number of customers acquired, customer service, brand and profitability. I would like to point out that both our insurance Let me now come to the performance for Q4 FY 2021 and for the full year FY 2021. Overall, we saw greater momentum in Q4 as the level of economic activity reached pre COVID levels across most of our and verticals. During the second half of the year, as the economy started showing signs of revival, our businesses have shifted their focus to recovering growth, while remaining cautious to manage risk. Building on the momentum from Q3, our businesses did well in Q4, both on the growth and profitability front. Towards the end of Q4, there was a resurgence in COVID-nineteen cases. Based on the learnings and experience from the first wave, all our businesses have further strengthened their digital capability, quality, which along with greater digital acceptance by the customers should, we hope, help overcome challenges and deliver a strong for fiscal 2020. Let me now touch upon each of our businesses, starting with General Insurance. Dyadic's growth was lower than industry during 1st half, Bud is back on track as seen from the fact that during H2 FY 2021, Badri grew by 8.1%, versus a degrowth in H1. During Q4, Bagic's gross written premium grew by 5%. Excluding Crop and Government Health, where some of our competitors are not participating, the gross written premium grew by 11%, in line with our industry growth of 10.8%. Bagic continues on its approach to calibrated growth that is seeking to grow in preferred segments, which are private cars, 2 wheelers, commercial lines, property and engineering and retail health, while remaining cautious on group We continue to take a reasonably cautious stance on Group Health. Within commercial vehicles, passenger vehicles, a segment in which Continuing from the turnaround seen in the Motor segment during Q3, in Q4, Motor 2 wheeler and Motor 4 wheeler reported growth of 20 7.9% and 21.4%, respectively. While growth in commercial vehicles is not back to pre COVID level yet, but it's coming back to be right. A lot depends on how the second wave will play out in terms of the The growth in commercial lines for the 1st 3 quarters of the FY 2021 was a mix of IIB base rate hikes per property and pure growth in terms of new customers acquired and increases in some assured and other increases. As property price increase benefit was accrued since Q4 of FY 2020, the base for Q4 is already at the higher rate. Therefore, I know year on year, you will not see the effect of rate to a significant degree. Notwithstanding this, commercial lines have shown very strong growth during the quarter. Property fire growing at 23%, engineering grew by 64% and liability by 20%. The demand for retail health insurance in H1 was partly driven by sale of COVID related health policies, but availability of vaccine and price hikes by along with peers has led to lower growth in retail health. Magic registered a growth of 9.1% during the While COVID claims affected loss ratios, they were to a large extent compensated by fewer non COVID claims. The crop insurance business was profitable. Final results of the rabai crop will be known only in May, but initial indications are for a reasonably good Baidik also reported a very strong insurance operating result with a combined ratio of 96 0.6%. Our work since Q4 FY 2020 was a very strong quarter with just 93.8%, combined ratio with a 93.8% combined ratio. The underwriting profit is lower in the quarter compared to the previous The underwriting profit for FY 2021 however has increased to INR 237 crores in FY21 from a loss of 11 crores in FY 2020, which we hope will be announced the best in the industry. As we reiterate in our General Insurance is a highly seasonal business with high degree of quarter on quarter volatility and needs to be seen in terms of consistency over a Cycle of 3 to 4 years. There are catastrophes, claims, even the premium, a lot of corporate premiums come in Q1, the Cyclone and other events usually the monsoon season is in Q2. Therefore, one has to see this in terms of cycle of years. The company continues to be conservative in its motor third party ultimate loss provisions And we have further strengthened reserves in the year to account for the possible interest on delayed court judgments due to the pandemic. Provisions were also strengthened in the old book, rising onto the motor 3rd party pool, which was disbanded in 2012. Overall, BIG reserving remains comfortably prudent as can be seen from the reserving triangle. Overall, Magic has had an excellent year with 33% growth in profit after tax and 20.3% return on equity. The profit after tax of 13.30 crores in FY 2021 is the highest ever full year profit In summary, it has been a very good balanced year for Let me now come to Life Insurance. In December 2020, the industry was continuously reporting growth month on month, which is contrary toward the trend which we saw in H1 and the 1st month of this half the second half. As a result, Q4 was a generally good quarter for the industry and the industry's individual rated deal business premium grew by 29%, with private players growing by 40%. On the back, partly of the lower base, given the negative growth observed Q4 FY 2020, especially in March FY 2020 post the lockdown. Despite all the challenges during the year, Vale consistently reported an industry beating growth. We have seen that month on month, quarter on quarter and for the full year. Maligo, the fastest Growing Life Insurance are among the top 10 players, a growth of 63% in Q4 and 28% for the full year in terms of individual rated premium. Given the uncertainty due to the pandemic, the demand for guaranteed products has remained high throughout the year and hence contribution of nonpar savings to the product mix stands at 24% for the quarter and 29% for FY 2020 Retail term protection's contribution to the product mix was moderate in the quarter and stood at 4% for the quarter and 6 percent for FY 2021. With equity markets recovering in Q3, demand for units has improved and has picked up momentum. But during the quarter, the union budget was announced and which also announced that the amount received from redemption of ULIP's annual premium of more than 2.5 lakhs will be taxed as long term capital gains. With this announcement, the demand for units was expected to be impacted. Our impacts, we believe, will be fully known only in FY 2022. So early trends in February March show increasing demand for units as a catch to this. Yes, there has been some dip in the over 2.5 But overall, Unit has been very strong. So it has also been compensated by a stronger performance in the below 2.5 lakh ticket segments. As a result, the unit's contribution to the total product mix was 44% during the quarter. During the quarter, Balik also launched a new unique competitive retirement product, a guaranteed pension code. This is an annuity product. You can have deferred annuity, you can have regular premium annuity, single premium with deferment, various options that are available. This will strengthen its position in the retirement space And during March, this product did quite well. In fact, we have got 4% of product mix coming from the quarterly list with over a month of launch. With this Barrick's product offering now complete across all segments of term, savings, units and annuities. On the back of quarter on quarter industry beating individual rated premium growth, Revival of Group Protection Business with 34% growth in Group Protection Business in Q4, which I must emphasize was helped by strong disbursement growth from Bangtan and BFC and a 25% growth in renewal premiums during the year. Taliq ended the year with an all time high record gross written premium of INR 12,025 crores. New business value net of expense overruns, the key metric of profitability for life insurers increased by 59% to INR361 crores. The 13 month persistency, which was somewhat lower in H1, has rebounded and Baidu ended the year with 80 earlier. Valeck's profit after tax for Q4 at INR234 crores was significantly higher than Q4 FY 2020 of INR 38 crores. On the back of higher capital gains and better operating results on the policyholder account. Overall, an excellent Finally, both the insurance companies are financially among the most solven, Valeck is 6 66% and Bagget is 345 and hence are well poised to weather any external activity. During the quarter, both companies paid dividends, differing amounts, About 165 crores from Baidik and about 148 crores from Baidik. And both Baidik and Baidik continue to utilize their digital properties and continue to emerge followed through the crisis. We have seen a substantial increase in the digital penetration across several parts of the distribution and service chain across both our retrans. Further details of or a flavor of the Agilecan Vanix digital capability are covered in the investor deck included in the website. Let me now come to BFL. BFL has already had its call, as I said before, and we will only broadly touch upon BFL results. Quarter 4 was a good quarter for the company with most lead financial indicators normalizing to pre COVID levels. BFS business transformation plan is on track and company expects to launch its PN1 financial services in a phased manner so that it gets completed probably by Q3. After near standstill in the 1st 2 quarters of the year, new loans booked by BFL during Q3 and Q4 were a little over 6,000,000 and $5,470,000 respectively. This is compared to $7,700,000 $6,030,000 in Q3 and Q4 FY20. There's a significant improvement in H2 over H1. The company's diversified business model has enabled it to revert to pre COVID levels of AUM growth across most of its markets. BFL remains cautious on its wallet and retail EMI Card business based on its assessment of the In FY 2021, BFL recorded an all time high annual pre provisioning profit of and made loan loss provisions including expected loss. This is one difference between MBSCs and bank payments, okay, 99 crores for the year as compared to 3,929 crores, so a shade under 6,000 crores versus a shade under 4,000. This is within the earlier guidance given by BFL of about INR 6,300 crores at credit call during FY 2020 VFL continues to balance growth vis a vis risk and collections, while maintaining strong liquidity and excellent DFL still carries a management overview of INR840 crores in its provisions for expected credit losses. In addition, BFL experienced continued improvement in portfolio quality in Q4 and new volumes originated across businesses during Q4 has just metrics better than the ones originated prior to COVID. Gross NPM and net NPA recognized as per the extent RPI credential norms and provision as per the expected Credit loss method to Slidebean Mean Day as of March 2021 stood at 1.79% as a gross NPA and 0.75% as a net NPA. Standard assets provisioning, ECL Stage 12, stood at 1.81%, including additional provision on standard assets as against 1% during the pre pandemic Thanks. I will while pre provisioning operating profit was higher, PFL ended the year with a PAT of 4,420 gross, which was 16% less than FY 2020. H2 result obviously was better than H1. Overall, path for Q4 FY 2021 was more than for FY 2020 on account of lower provision during the quarter, INR 1231 crores in Q4 versus INR 1954 crores in the previous The capital adequacy ratio as of 31st March 2021 was very strong and stood at 28.34 to sell with Tier 1 capital alone being 25. For Vazazz Housing Finance as well 100% mortgage subsidy of the The capital adequacy ratio, including Tier 2 capital, stood at 21.3%. In summary, with improved bounce rates, Yes. Although we are better positioned than last year, the national lockdown will have impacts or statewide lag lockdown in the top 5 or Otherwise, we believe all the companies are in a really good position to handle near term volatility because of the external situation. For those who have not gone through the BFL investor deck, I would urge you to go to the website To summarize the consolidated results, consolidated total income from for Q4 for BFS was INR 15,387 crores versus INR 13,294 crores, a strong growth there. Consolidated profit after tax was INR 9.79 crores versus INR 194 crores. This is almost 5 times, but I will explain to you why. Badaj Finance consolidated profit after tax INR 1347 crores versus INR 948 crores. The general insurance profit after tax INR 2.73 crores versus INR 304 crores and life insurance INR 2.34 crores versus INR 38 crores. So the whole year, we closed the year with total revenue exceeding INR 60,592 crores exceeding INR 60,000 as against 54,351 crore last year and a consolidated profit after tax of INR 4,470 crores versus INR 2369 crores. As mentioned before, general insurance profit after tax was INR 1330 crores, 33 Higher and the highest in its history and Life Insurance at INR 5.80 crores against INR 450 crores was again a strong growth. The SL had a lower profit as I The consolidated results include one adjustment because the insurance companies are in Indian GAAP and we do in DES. The investments that they hold on the shareholders account for Baidik and the all in equity investments held by Baidik or equity investment, They are treated as fair value to problem loans accounts, problem loans account. And therefore, last year in FY March Q4 of FY 2020, we saw a big fall in the stock market resulting in charge into the consolidated results. But during the year, the Sensex has rebounded by 68% and the performance of the equity portfolios have also been And this has resulted in an increase in the consolidated profit after tax of INR 8.92 crores for FY 2021 compared to a decrease of INR 451 crores in Q4 FY 2020. I thought I should highlight The mark to market adjustment now for Q4 is not very significant in relation to the size of our balance sheet and P and L. Finally, India is swarmed by a second wave of COVID with daily infection rates of the kind not seen in the first wave. It's difficult for us to predict how long And we will ask and with what intensity and when it will subside to manageable levels. But as business people, for us is to Look at this as a risk and see how we can manage it. The risk of this is expected to remain elevated in Q1 and Q2 as per our current With strong solvency well above the headwind capital supported by healthy liquidity, continued focus on risk and collection, digitize and improved cost structures, we are in a better shape than we were last year to present adverse events. We will take the events as they come along in Q1 and Q2. Thank you for your patience, and I now open the floor for questions and answers. Thank you. Thank you very much. We will now begin the question and answer session. And 1 on your touchtone telephone. Participants are requested to use handsets while asking a question. Ladies and gentlemen, We will wait for a moment while the question queue The first question is from the line of Prakash Kapadia from Anubhav's Portfolio Manager. Please go ahead. Thanks for taking my question. I had two questions. You did mention it's difficult to quantify the The impact of growth, especially due to the 2nd wave. If I look at general insurance sector, most of the All are facing cases and intensity of COVID much larger than the first wave. So what kind of an outlook for growth you are looking at for the sector and for us? That's the first question. And on the crop segment, if you could give us some color because is a high contributor for us in general insurance. So what is our stance on growth going forward? Yes. Thank you for your question. The first one I will repeat. See, the issue is not with COVID. Obviously, we offer health insurance policies and therefore there will be some amount of COVID claims. The issue is whether you have lockdowns. That is what affects Not more than the pandemic itself. As of now, we are seeing a limited lockdown. It is not like the lockdown we saw last year. There is reasonable movement of people. Insurance companies are exempted in some of these states. They are treated as an essential. But in terms of growth, we will have to wait and see. For example, the car stopped selling. I mean, is that a long time to ask about growth Because any business will be now focusing on the balance sheet and profitability over growth and taking the events as they come. A lot of the business which are asset based, which are car insurance or property insurance, Obviously, if the level of activity in the economy reduces, all businesses will get affected, quite a lot of business, and we will also have But as we have seen last year, the General and General business is very, very diverse and there are pockets where you will have Better performance, maybe lower claims if your cars are running on the roads. I mean, we are seeing the last 15 days we go on the roads, I am being in Pune. So we can see that It's about maybe 20% of the traffic that you normally see, but these are temporary. We would rather see growth and full traffic And this temporary thing, but that is what it is. And we want to prognosis linear term, that is what it is. Now I'll ask Pankaj to just add to this and also answer the Yes. Thank you, Srini. I think both questions are very relevant. So if you look at overall for the industry, last year, The growth hover around 2% or so. So the industry does have an impact because the car sales, as Srini was mentioning, if they go down And car sales is a big component of the business. And if you look at other expansion from an economic perspective of industries being set up or Marine happening or transactions happening on that level, if those were done, there would be an impact on the business. But like Srini mentioned that it It is very significant if a complete lockdown happens. If the complete lockdown happens, there would be an impact, but not to an extent as it would be in a complete lockdown. But It all also depends on the mood and the sentiments. So we'll have to watch for the next 2, 3 months. But yes, compared to normal circumstances, the growth would be lower. That definitely would be there. Compared to last year, maybe same or bit higher. Now coming to crop. Now crop, we have been doing now for the past, I From the time the government started 6 years of new crops for past 5, 6 years. And we've been doing consistently. And we have tried to maintain our share in the crop business Like we do for our whole market share. So we look at our whole market share close to 7%, the crop business share would be around that about 8%, 9% or 7%, 6%, So we maintain that I think at all points of time, there's no change in our philosophy and how we look at going forward. I'll join back then. Thank you. The next question is from the line of LLP. Please go ahead. Yes. Hello. Congratulations to Mr. Srinivasan and the team for giving really good numbers. I have a couple of questions. Sir, my first question is just a sort of a clarification that the profit number which we report in Baliqa and Baliqa 21 versus 20 20. I think then we had last year more than 100 odd crores worth of some special provisions, which I think are not there in current year if I am not wrong. So the real comparison of PET, I think will be slightly different because according to the numbers which were last reported. Talking about investment provision? Yes, yes, yes. The provision for DHL and corporate bonds and all that. That's not in the last quarter, meaning, yes. Yes, yes. That was very the last Basically. So I mean taking that off, if you really compare in Bali, our pet I think has increased only by 1%. Just correct me if I am wrong. And in case of budget, it has increased by 20% and not 33 I mean, I'm just referring to those numbers. That was my first question, just a clarification. The second question is, as far as Malik is concerned, How do you see the growth now in the individual business? Because if you see today, group is constituting almost 60% of our total new business premium. So how do you see the movement in the individual rated premium amongst different products that we have So that you may cover the V and D margin can improve. That is my second question. And third question, you talked about VFL that they are into this digitalization and technology transformation process. So are they on the way to become a fintech type of company? So we have a few questions. I will take broadly the question on the individual versus group and the question on DFL. And the question on the numbers clarification, I think the CFO will take it. And then Tarun can add to what I say on the individual versus group. Sure. If you see our proportion of individual to group over the last few years has been significantly weighted towards individual business. In fact, individual growth in individual rated premium remains a primary priority for the company. But however, that doesn't mean we do not grow our food business. There are opportunities present and because it is profitable and because we have been Historically, if you look at the last 10 years, at one time, we were the only players in the group protection space who are clearly big. So people will continue to see growth opportunities is there, but we will see better growth opportunities in the individual premium segment, where you have product mix and to create more sustainable long term business and with a focus on NBV as well as top line and the balanced product mix. So Tarun, can I add to that please, sir? Coming to the question on BFL. Yes. It is a difficult question. The BFL is a Manufacturer of Products and Solutions. Yes. Obviously, technology is becoming more and more important and therefore they are investing heavily. So they are having For sell and sell more to their customers in a more meaningful manner through their own marketplace. But they will remain Financial products are risk taker and we will be lending money and requires requirement of capital. So we have another entity under Bajaj Bint Cerf Direct, which will do the other thing. It's a pure tech platform. They will provide that platform to DSL. At the same time, they will also We are an open market, open architecture company where fully customer centric and we'll be attracting customers So through those platforms, those all are working, lending, everybody. And companies in the market can participate in that. The combination of the 2 is what will make it very powerful. So one is the manufacturer, they can't really sell other companies And together we want to create a holistic experience for our FinServ customers. So will that Fintech activities remain in some separate subsidiary? Like I think we have created 1 subsidiary under Yes, separate subsidiary, Giri, it says you can call it a FinTech if you want. We don't use that terminology. We don't use that terminology. We don't use the customer and technology as Enabler. So but if you want to call it a FinTech, you may call it. So it requires more capital because it's a platform that we are developing internally for the group. And we Continue to offer technology based support to their existing customers in lending. Okay, okay. Tanuj, would you like to take the individual versus group? Yes, I'll answer that. So yes, thanks for your question. Yes. Yes. I think Srini correctly talked about the focus on individual business And the growth of 28% was largely what we talked about in the prelude to the Q and A session. So that's what we will keep focusing on. And as you're aware, the VNB largely from individual products is what is important and provides sustainable Cash flows in the future as well. So that's where the focus will remain. As a company, we've been focused on ensuring that we have a balanced channel and balanced product mix. I think that was the first step. And as of now, we've achieved that. And with the launch of the pension plan as well, now we are in all need segments of the customers as well now. Here on the focus is towards VNB and profitability of costs. And the basic risk elements of over reliance of a product mix and channel mix is now taken care of. So yes, the product mix will be a significant dealer into the BNB, if I might Put it this way. But we will always remain focused on the customer and not necessarily Kind of just try to tweak our product mix only for the VNB purpose because we are here looking at a sustainable business for long term. Correct. So, Amit, generally, how will you look at the VMD margin, which was at 12.3% in FY 2021? And say, if you compare with companies like HDFC Life, they reported a 26% of the MD margin. So how will be our journey to reach to that level? It's a double digit 20% type, may not be 26%. Yes. So see, I can't make any statement, which is a forward looking and also Parative with competition. Every company has its own capability history and lineage. I think what you see is a positive trajectory in the last 3 years. Yes. We intend to be directionally in the same way. Of course, last year was a significant, Philip, but that was A good aberration in our favor. But directionally, we shall remain positive. And Beyond that, I cannot comment, yes. Okay. Fine. Thank you very much. Wish you all the best. I'll join in with you. Thank you. The next question is from the line of Bharat Shah from ASK Investment Managers Limited. Please go ahead. Yes. Hi. Good afternoon to everyone. My question is more about long term strategy rather than the quarter results. So essentially on the insurance fee, which is basically a business of risk and protection. Most insurance firms To put a centrality to the insurance is the core part. And of course, for various reasons because The Protection and Risk Control is the core business of the insurance folks. But I would like to submit that investments And managing the investments is equally a critical function in any insurance business. And though So far in India, by and large, we have seen investment function kind of a peripheral bond rather than a central bond in the operations of the insurance box. So if you talk about the core part of Okay. And Bajik is consistently being very, very prudent and extremely Competent in the way it is managed risk with combined ratio always favorable, well below 100. And therefore, it enjoys was also negative cost kind of a slot of the money. And even though contracts are relatively of a shorter term, But a core part of the contract money is something which is forecastable, renewable. Therefore, long large part of that money Insurance float is a long term money. Equally, life in any cases, core underwriting profits are high And there is a long term non unit portion, there is a long term investment slot. Now managing this entire float through fixed income is unlikely to ever give any meaningful Significant returns and therefore return on equity magnified on that slot. Therefore, the judicious, well balanced, risk control, increased long term equity capability and equity component in the investment And portfolio of both the businesses, is it very vital to raise a bar on return on equity and to really improve The strength and the caliber of both the insurance businesses because the core part, basic has always been very strong and Bellic after initial hiccups In last some time, the business has been very, very nicely ramping up. So what are the strategic thoughts So on the Investment Management, earlier on the fixed income, we had some hiccups. We went through that. We have that phase is behind and I'm glad about it that there are no hemorrhages on account of fixed income portfolio. But even with the best job on the fixed income, it will still produce meaningfully low return. And unless there is a well calibrated equity management strategy of a long term nature with a judicious Percentage of the overall investment portfolio committed there, the return on equity In 0 or negative float, which is the core advantage of the insurance business, How do we propose to take that advantage? Yes. Thank you, Bharat. I'll take that question. See, in insurance, we are not asset managers. This is a mistake that a lot of people make. We are liability managers. If it comes to life insurance, our job is to manage liabilities. And unlike mutual funds or PMS and other people, we don't have we have to give guarantees. There are very tight regulations on how different buckets of the money can be invested And there is a large proportion of this money has to necessarily go into government of India bonds or housing or infrastructure or social structure, Just a detailed regulation on that. The purpose of that is to ensure that because of volatility, the policyholders who are getting their money out are not affected. To some extent, ULIPs can be compared to mutual funds except that ULIPs always come with a fund build And it has to have a minimum term of 5 years. So I don't know how much of money of The other competing industries actually stay for 5 years, maybe quarter, maybe a third, but not like us After money stays for 5 years and now with new regulation, I think because most of it stays for 100 and 4 months. So in terms of Vale, in terms of the policyholder return, I think we ranked among the best. Eulip, This year may not have been good, but if I look at 3, 5 year performance, I don't think it is the inferior to mutual funds either. There may be some difference. Our job Hello? Just an interruption. I'm talking my comments are on non unit business, not on unit. You look of course For non unit business, we have to provide guarantees. We have to protect them and that there are very strong ALM based management principles that have to be adopted. You have to hedge your risk and you work on the margin. Then finally, you come to the shareholder fund. We are in a unique position that we have some Surplus Capital. And in that, you can't say ROE, but over what period do you measure ROE when you invest in the financial markets? Because if you invest in equity, you have to take the volatility. If I look at the period between, say, 2017 to 2019, majority of the If you look at the index at least, I think fixed income did outperform equities even on a 5 year basis for a long period, Fixed income was superior to equity. Now with the market revival and last year we saw in March what happened, because these are not the times when you have in capital because we are a solvency heavy industry. While it will not be applicable to us as an industry, I don't think companies can say that market trends, I want more capital, nobody will give In terms of GI business, a bit different. The entire money is 1 bucket and there is no there is an internal demarcation. I think all the money is of the shareholders. Our 9 majority of the liabilities are short term. You have significant exposure to reinsurance And while you may assume that all the reinsurers are of high quality and well rated, that is what we deal with, There are occasions in the international markets when there are heavy headwinds from the reinsurance side as well. So if God forbid, even 5% of your reinsurance panel goes under, then you will need the liquidity to pay the claims immediately. This is it's worked actually bottoms up. It is not there is a big science behind how much should be the asset allocation. There is a leeway, again, it is highly regulated. I think pretty much 75% has to be in fixed income as per regulation. And both insurance industry is a big contributor to the entire Funding of the fiscal deputy of the government as well along with the SLR of banks. So overall, as we look at it, we have been increasing As and when we grow our surplus, if you see now, Badriq has grown to about 7%. As we go forward, we will continue to increase it. We will see the right time to increase it as well because when prices are looking very high, there's no point in increasing exposure to equity. That's the point the investment team will take. I mean, that is there's no strategy there. It is more about the investment performance. Same with Baidik, we already have, I think, 20% of our surplus in Equities, I mean, at the moment, we may be a bit lower, but 20% is what they look at. Within that, we have not bifurcated between what is Required for solvency and what is not required, the surplus because with more guaranteed products, with more this thing, the consumption of You must have seen some other companies are actually raising money in the market to meet solvency requirements because of the higher proportion of the non participating and the guaranteed products and term as well required capital at about 0.3% of the sum So this again is worked by the actuaries and the investment team together. And as and when the surplus comes and we do a review every quarter. And maybe once a year, we do review whether we need to increase it or not. So, directionally, that's the approach I'm taking. But as I said, it's a liability manager. Therefore, the liability make The duration, the need for liquidity, the impacts of credit defaults potentially on the non Financial investment like reinsurance and the reasonable margin for that, all these contribute to deciding how much you have Within that, obviously, you can say that each company has its appetite to see how much you want in equity or debt. Maybe there is some leeway, you could say why not 20 become 25, but can it become 35? I don't think so. In Magic, maybe the 7 can go up to 15, yes. 20, maybe More than 20, I doubt. There's something we also continuously discuss with Allianz as well because they are Globally, they have seen all kinds of cycles, equity, debt, solvency, crisis, all kinds of cycles, write off of sovereign debt. And therefore, we get input from them as well before we decide. Does that answer your question, Bharat? Yes. No, thank you for that. I had 2, 3 kind of points on that. I'm not talking about Ulipart. Obviously, Ulipart is what is dedicated as per the objective. So I'm talking of non Ulipart. I completely accept that liability management is the 1st job in ensuring prudent, sustainable, Solid and confidence in inspiring capability to standby liability mitigation It is absolutely core, especially in life insurance where long term confidence in the viability of the insurers is very, very vital. So, I need to be vocally that is completely correct. My point is general insurance Given our very prudent underwriting policy consistently for a long time, we have been in a situation of a favorable combined ratio also well below 100. Therefore, essentially, we are in a negative float situation. I accept that most of the contracts did out of a yearly duration or thereabout. But given the shift of a core portion out of Even though short term contracts, which is renewable by experience that we know is essentially long term money. Therefore, long term float at a negative cost. Now if we multiply that if we compound that float at the rate of 5% 6% compared to if we are able to do it at 9% or 10% will make a world of difference to the return on equity. Therefore, steady, well carved out, controlled risk Equity exposure with a strong capability without in any way mitigating liability management capability of the core insurance It's something I believe is possible to carve out and possible To kind of really make it work over a period of times. There will be volatility. There will be increased points where they will cause a discomfort feature. But through that over a period of time in a controlled well planned way, I would say that is a route through which far superior return on equity can be generated without compromising on risk standards or without deviating anything away from our core need of protecting liability. Harik, Bharat, I can view our returns our average returns over the last 5 years. I think it will be closer to 8 to 9. It is not lower. Maybe last year may be a bit lower because we are required by regulation to keep 75%. So we're keeping 75% in fixed income And whether you put 15% or 25% in equity and you look at the kind of extra returns on equity coupled with the volatility. I don't know how many basis points it will make in the total thing. It may move it by 1% or so. That compounding, my arithmetic is very clear to all And we do that on a regular basis. But we have been delivering that kind of investment return. And the last couple of we also do not Go by the IRD insolvency. We also maintain internally a target solvency, which is a bit higher. As you know, most of our risk based capital requirements are not risk based and they are not so premium based and claim based. But at some point, IRP will come into this case and then you We're not able to hear you clearly. Hello? Yes. Can you hear me now? Yes, sir. Yes. No, I was saying that this is highly regulated industry and 75% you have Even fixed income anyway. And within the 25%, you have to say, do I keep 15%, do I keep 10%, do I keep 20%. It depends on how much excess capital you have, not the absolute amount of capital. Solvency capital is not risk based in India. It is I mean, it's an old norm that they are following. But at the moment they go into risk space, they've already announced what we call economic capital. There are chances that the required capital may go up as well. So all you can really invest in equity is the high proportion of your Surplus capital over and above what we call as target solvency that we maintain. We are doing that on a regular basis. I could give you the numbers. Bharat, you have the return on General Debt Fund plus few years or Raman? Srini, for Magic, this year, we did about 7.7. This is and last year comparative was 8% almost. Yes. And this is But before that, I think you are doing 8.5%, 9% Yes. But this is on book value basis. If I take market value, this year is actually 11% and last year was 8%. 11% and 8%. Okay. Yes. And I think Balik is similar as well, right, Bharat? Yes. Shrini, this is a part of Telkerson. Yes. So Bharat, we have been calibratively I mean, increasing it in a calibrated fashion. And given the requirement of an excess Capital and how much it is and what we need to keep for supporting our business, and that's how it is. Okay. Point noted. I thought I'll just leave my point for thinking Yes. If you want any more, one thing we can have a call later and we can explain to you what are the Historical returns and how we have managed and what changes we made. Sure. And I was referring to basically non mandatory part You're talking about excess capital or shareholders? Yes. We will take it up. Thank you. Thank you. Thank you. The next question is from the line of Hitesh Gulati from Haitong security. Please go ahead. Yes. So thank you for taking my question and congratulations on a good set of numbers. So my question is in motor TP claims Nishu, we have seen an increase this year, which you also mentioned that you have strengthened our reserves in Motor TP segment because we expect future claims to be higher because courts are giving such orders. But if you look at the reserve, they're still as released this year. So is my understanding correct or is there something wrong that I'm looking at? Raman, would you like to take that? Yes. So you're right. If you look at the loss triangle, There is a release of upwards of INR 300 crores and that reflects on our approach of conservation in the past reserving. However, if you compare the number versus last year, it's a dip of about INR 100 crores. And that's where the indication of strengthening comes. So overall, while we have strengthened it, but there is still a release. So it's a temporary thing. But on a long term basis, we will still be close to what we've been delivering in the past. Whatever you see in the past few years, we've delivered almost a release of 5% to 7% almost every year. And hopefully, that trend should continue. Okay. So just one more question. What I would like to add is release happens when you settle claims less than what you reserved. So as a policy, you can see from a triangle that our reserving at the point of claim and for the management of the Generally, it's more conservative, which is why you have releases when the claim is actually settled. Now this is part of parcel of every CI business. Some companies may have more and more charge if they have not reserved prudently. Those who reserve prudently will have more releases, but those releases will come every year. When you reserve more, it's not necessarily that net net the reserves have increased, that means the release can be lower in that particular year because on the settled planes, you you will have leases on the expected losses you would have increased. The 2 will offset, but that offset net amount after offset this year is about INR 100 Close lower than last year, that's what Raman is saying. Exactly. If you look at the claim settlement this year has been lower because of course being closed. And that's why you see that difference. The more claims we are settled because we are prudent company and reserving is right for So once we settle claims, then what the difference gets at least, that is how you look at it. The other thing is why we are strengthening it is, if you look at there's a particular Judgment, which is the Tirthi judgment, in which the court now says that even notional income for all unemployed will be taken to calculating the Amount to be paid. Now that means the quantum of claims is going to move up in the TP segment for the entire industry across and because that is going to happen, so that is a trending part of it. So that is what is done. I think Srini explained very beautiful in terms of the 2 different things. Reserving is for different set and release is on a different set of business. Also just to add on the release which Tapan indicated that number of claims settled have gone down And that is to the extent of almost 30% lower than last year. So last year, we settled about 31,000 claims. This year, we settled only about 20,000 claims. So that's the kind of impact. Sure. Sir, can you also quantify the quantum of COVID claims paid by you in the Life and General Insurance So overall, till date, we've done almost INR 400 crores of claims, While registered are more, but paid is actually close to INR 400 crores of claims paid out. Just on operating variance, operating assumption change that you've taken in an embedded value that is related to mortality only. Is that understanding correct? So that is to have some bit of a mortality. There is not much of a variance, but it is because of a persistency of our one of the product line And that is a little negative. And then we have moved to the effective tax rate, which is positive and hence the net number is plus INR 16 crores. That's where the numbers are. The COVID-nineteen is that is the COVID part. So we have kept another INR 39 crores as our COVID reserves And we have also strengthened our IBNR by around INR 18 crores. So those are the two numbers which are sitting in the assumptions part assumption change part. Thank you, sir. That's it for me. Thank you. The next Question is from the line of Madhu Pearl Laddha from Elara Capital. Please go ahead. Hi, sir. Thank you for taking my question. First on Magic, so the higher claim provisioning is happening mainly on the PP side And this is because courts are now considering motional income as Patan explained. Sir, what is our expectation of price hikes in FY 2022? And what are we seeing on competition on the OD segment? Second question on Health. Loss ratios have improved in the Q4. And what would be the main drivers of there? And I think we're still growing in the group health segment. What are we actually seeing there? And finally, on for Dalek, my question is, how is the access channel done? And what are our Expectations for that channel going into FY 2022, do we have like targets In mind, what is there sort of a written agreement between the two partners of how much growth should be there on a year over year basis? And Yes. Thanks. Hello? Hello? Okay. Yes. Srinivas, can you take that? Motor OD, expectation of price increase in TPM. Yes. Okay. If you look at the TP price increase, it would come from the regulator. It is not something which the market controls. It is still controlled by the regulator. Last year, there was no TP price increase. This year till now, there has been no announcement. So on how much will it be? I don't think that anybody can tell you in terms of how much will the increase be or will it happen, will it not happen? It is a bit speculative in nature if anybody makes a guess on that. But when we run businesses, we always start with the philosophy that okay, it is our pie side, how do we look at business, how do we go about it. If it happens, good, then we can recalibrate and relook into the business Good. Then we can recalibrate and relook into the business model and how do we take on business. That would be my answer to OTP price hike It is controlled, it is not market price driven. So it has to come from the related. Last year didn't happen. This year, till now, there's been no announcement. If we look at the OD premium movement, which will happen at discount, this is controlled by the market. So depending on the risk, the way the company sees particular risk for particular vehicles and the business philosophy, they would underwrite or discount OD or harden it as time progresses. This is market controlled, so this fluctuates. Sometimes when you see it like last year, the 1st 2 months, there was complete 2, 2.5 months is complete locked on. The loss ratios fell down, so the Count in OD moved up. No? Then again, the losses are moving up. So there'll be some trending happening again. So it fluctuates in the market as the year progresses. So I think fix that for the whole year. This is what the discount or this is how the price handling will happen. So that will keep on moving. And depending on how the loss issues move, individual company will decide how it goes. So that is how it will look into it. If you look at the health portfolio also on the GoHealth. But just to Interrupt on this point. So what is the competitive intensity? Are we seeing any improvement? Because now For 1 year, you've not seen price hikes and economic activity has sort of come back. So have we seen some improvement in the pressure of In OD pricing, some sense on that? See, as I told you, every company has their own philosophy where they want to be. So there are some companies which would be heavily discounting, but their philosophy would be to work on discounts. Some company would be adding a lot of value in terms of claim settlement. They would be Looking at servicing the customers well and they would not be heavily discounting. So it is not a fixed price that you see. So let's say let me explain to you, I think no I understand that, but I understand that. But I understand that. So the question is, if you're saying. Yes, that's what I'm saying. Let's say there are 10 companies into the Now from these 4, 3 may actually move to hardening because they would have suffered more losses. And from the above 6, 2 may actually move to discounting more. It's a moving target between companies. You never would find that the market is moving up or down. So you'll always have in the market and any year after 2007 when free pricing happened, any year you'll find some companies are heavily discounting. And then if they suffer losses, they start sending. If some company which will be prudent, Some company would fluctuate depending on the study, which is there. So it is very difficult to say overall how the market will move, because I would want the market to correct and become more sustainable. We have seen how Solvency has become an issue in the industry for quite some companies. We have seen now how companies have been losing money. Now that is not good for industry because companies typically which lose money, There's a customer service get affected. I think that is also what we have seen in terms of the VIVIAN ratios moving up. So if you ask my personal opinion, I would say a fair price in the market and a very good service to customers what should be. But I cannot predict in terms of how customers how companies would react to different scenarios because it's a moving target for every company on the study which is there. That is what is. So if you ask me, will it move up, go down? For individual companies, yes, they can decide how it goes. Overall, there will always be some movement happening. It's a boring target. If I can just add to that, I think if you see the market till 2012, I think people are losing money on third party. Most companies are losing money. We were pretty much making money most of the years anyway, except the 1 year when the pool also happened. But thereafter, when the rate hike increased, people started making money, more companies started becoming profitable. And I think at one time, it was on 2 thirds of the market was profitable just a couple of years ago. Now if rate increases do not happen and as they're not managing their authority claims properly, they will be under pressure to find other sources of fraud. So one could logically argue that this should result in better price discipline in other segments like motor OD or property. But Depending on how much capital is there available to burn and whether their goal is to just get market share in terms of GWP, The company can have a different way of looking at it. As long as there is capital to burn, you can build a business by just writing business at a loss for some time till the capital runs out. Got it. On the Barrick side, let me just The Health segment also is left. Okay. Health, maybe Papan should Yes. So Health, what are the questions, sorry? So we've seen an improvement in the Health loss We show them 4Q, what are the main drivers? And the group help also seems to have done well. So what are we seeing there on the market side? Okay. So if you look at again the health portfolio, there are two ways to look at it. And If a company is going very aggressively, they get new business, new business has much lower loss ratio than older book. If you have a nice health portfolio, You should look at it year wise loss ratios. So 1st year loss ratio for the health book is always much lower than let's say 4th year loss ratio for any company, but that is how the health portfolio moves. So if you see a company which has high growth and losses are moving up, that is an area of No, my concern because then that means the older books is getting pretty bad as it's progressing. Or you have a lot of claims in the first So typically, if you look at Bajik, we have a moderate growth. We don't have a very high growth and we don't have a very low growth or negative growth also. On a moderate growth, typically if a loss ratio improvement happens, it will happen for two reasons. 1 is your segmentation of customers and your price. If you look at, we did a price hike no early on in the book that was there. So if you combine that together and the segmentation of the rate that you take, you would have an improvement in losses which is there. In Group Health also, I think, Srini mentioned earlier also. So if you look at our growth, we are not overboard in terms of going Speaking of any business, we have customers whom we service in the corporate business and we also have individual customers We look at us from a servicing perspective and we were the 1st in the year to then set up our own hat network of servicing customers directly, which was called the hat management team. And on that basis, we price our risk and that's how we serve the customer. So that's why you see these differences there. So basically, as a company, you understand us, we are a company which would be Approved underwriter and very focused on customer obsession service segment. I think if you look at our beta claim settlement ratios, our grievance ratios, the No, among the industry and all that stuff. So that is where our obsession would be or the customer delight has been very high. And that's why most of your questions, if you put this Parameter as our judgment parameter, the answer would come there as to why and how no, no, no crisis and how do we look at it. On the group segment? Yes, group health, I told you. Group health, If you look at it, no, we are we write risk, which we feel comfortable with at the price and customers, which have want pretty good servicing to be done, they come to us and that's how we write it. So Nothing that we say that we don't write. We look at Bajig, we write all lines of businesses and we do business through all channels, which is possible. But we do business where The customer values high servicing and customer obsession and solution providing for the customer. I mean that is how we look at it. So group also we do it, but we're not Overboard are aggressive on group and picking up any business for the sake of picking up. Let me just add one thing to that. And when you talk about group health, I think there may be companies operating at more than 100% loss ratio. Insurance is a business where the customer feels they have a risk, Otherwise, they will not buy insurance. Similarly, insurance companies also feel there is a chance that I will make money and that chance can be reasonably well calculated or assessed. When you know that I have to take 100,000,000 and to pay more than 100,000,000 then that is not insurance Because that's a certainty. So we only write business where our expectation is that we have a fair chance of making money. So we normally, if the cost is 90%, we get a bit conservative. When it's lower, we can get a bit more aggressive. But today, you know the times are not great for writing blind non underwritten policies like group because of how many COVID claims have come and all that. So one has to be careful, but we have a pricing policy. And if people accept that price, we go ahead with that. And if people don't accept it, we will withdraw. And there is no other benefit on group ads. There is no float. It is a short tail business. It is not like MotoGP where you can sit on the money for 2, 3 years. Nothing like that. Claims start coming in immediately after the policy is written because of a large group of people. So it is not even like retail So it is a business one has to look at it a bit differently and that's what we have done over the years. Thank you. The next question is from the line of Nishan Chawathee from of Securities Limited. Please go ahead. Hi. A couple of questions from my side. We just discussed about the health claims and your pricing going up, etcetera. But I was curious Whether this is what has driven the big change in the Q4? I understand the broad strategy, but is this what is the reason for because the quarter on quarter Change in the claims ratio for Health is pretty sharp. 1 is obviously the price increase, which is affected from 1st October And for the renewal policy from 1st January. But that could be the sole reason for the big Raj, what are the changes? Raman, any other reason on Tapan? Yes. So I'll take it, Shneur. So on the health It's actually one obviously is the fact that from 1st Jan, we had all policies on retail side, which is about 60%, 70% of our flagship products being sold with a price increase. The second one was also that on GMC, Like you've seen, we and like Dafan explained, we've been conservative there and picking up only the good accounts. So that is also the second reason. 3rd is the non COVID claims have also gone down to some extent. So I think the submission of all these three has led to the loss ratio coming down in quarter 4. So you said non COVID claims have gone down? Yes, non COVID also. While COVID has been there for a while now, but non COVID also because of the situation people are fearing going to the hospitals, those have also gone down. That we've seen in the past. It comes back after a while when things start opening up. So that's something which we'll have to wait and watch. Well, the 2 are opposite directions. When COVID claims increase, non COVID claims come down because hospitals have limited capacity and people don't want to go to hospital. I thought we saw non COVID claims going up in sports field for the industry because No, because a lot of surgeries, etcetera, I mean, you've seen some kind of moderation in COVID numbers. So they have sequentially moved up, Nishant, you're right. They have sequentially moved up, but versus last quarter of last year, it is still worse. Fair point. Just moving on, if you could explain the table in Slide 55 And just trying to understand how should one be reading this provision going up from 4.6% to 6% to 5.18% So, you are see the issue on hand is that okay, so the increase is almost about INR 100 crores, which I'll explain. So if you see the delta between the claims paid till last year, it's gone up by about INR 49 crores. And if you see the total provision, that has also gone in the opposite direction by about INR 54 crores. So the submission of these two is actually the strengthening of INR 100 crores. So the provision movement and the claims paid movement delta adds up to the strengthening of INR 100 crores. Of business. So just moving on to the Life side, If you could give some color in terms of how do you see business from Access Bank? I think it's ramped up quite a lot this year, while Agency, I think, on a full year basis was almost flat. So if you could give some color in terms of how do you see that playing out? Obviously, we know that there are uncertainties around the 2nd wave, etcetera. But still, do we see a very similar ramp up this year as well? This is for Vale. Yes. So see, access is going to ramp up, of course, given the base effect. We were largely in 1 vertical and now we are slowly adding to some branch banking branches as well and that is going to help in the ramp up. So I'm just going to pull up our company average on growth very clearly. It is going to be higher than the company average. But we are very clear that we have to look at profitability as well And keep a balanced channel mix. I think we've been through that phase of Balik where there was dependence on The agency channel, one channel contributed to upward of 80%. So how we intend to differentiate ourselves from the large life insurance companies is that their dependence on one partner is so high that, that increases the risk. So we will be always focused on keeping this in a balanced Sure. Just on the EV walk side, on the operating valance side, I believe you said that persistency was a bit negative in one of the products. But actually if I see the operating variance on a net net basis is positive. So I believe the other two lines have been more positive. How should we recorded. So Nishant, yes. So Nishant, two things. As I said, there's one line of nonpar saving where we saw some persistency based estimate being updated. But what we have moved is not this year we have moved to the effective tax rate. So the way we have taken the effective tax rate is in 2 forms. 1, whatever was the unwinding for this year, that has gone through a ROV or an operating variance. Whatever is the pending for the future profit, which is like whatever is the opening balance of the base and unwind of that, that we have taken as a separate line item. So you would see that there is another INR 89 crores, which we haven't taken into ROV. So this is only because of 2 things, ETR, effective tax rate change and persistence in one line of the products, which is sitting in the room and operating areas. Perfect. Just one last clarification, the reduction in unwind rate Unwinding rate purely reflects the moment in interest rates? The reduction in unwinding rate. So we will follow a consistent unwinding rate. So there is no reduction or change in No change in unwinding rate. If I look at effective unwinding rate, expected return in force upon opening EV, That ratio has come down to around 7% in 2021 from 7.6% in 2020 and around 8% in 2019. Should not be the case. We fall on 8% only, but let me just come back to you separately on this. Will that be okay? Perfect, perfect. Thank you very much and all the best. Thank you. Due to time constraints, that was the last question. I would now like to hand the conference over to Ms. Bani Pavjee. Thank you. On behalf of JVM Financial, I would like to thank Srini Vasinsar, the senior management team of the insurance businesses and all the participants joining us on the call today. Thank you and have a good day and stay safe. Thank you. Thank you, everybody. Thank you. Thank you, everybody. Thank you. Thank you. On behalf of JN Financial, that concludes this conference. Thank you for joining us and you may now disconnect your lines.