Ladies and gentlemen, good day and welcome to Bajaj Finserv Limited Q4 FY 2025 earnings conference call hosted by JM Financial Institutional 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. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ajit Kumar from JM Financial. Thank you, and over to you.
Thank you, Yashasvi. Good afternoon, everyone, and welcome to the conference call of Bajaj Finserv Limited to discuss the Q4 FY 2025 results. First, I would like to thank the management of Bajaj Finserv Limited for giving us the opportunity to host the call. As always, we will have the opening comments from the management team, after which we will open the floor for a few minutes. From the management side today, we have Mr. S. Sreenivasan, President, Insurance and Special Projects, Bajaj Finserv Limited; Mr. Ramandeep Singh Sahni, CFO, Bajaj Finserv Limited; Mr. Tapan Singhel, MD and CEO, Bajaj Allianz General Insurance Company Limited; Mr. Tarun Chugh, MD and CEO, Bajaj Allianz Life Insurance Company Limited; Mr. Ankur Anil Kanwar, CFO, Bajaj Allianz General Insurance Company Limited; Mr. Vipin Bansal, CFO, Bajaj Allianz Life Insurance Company Limited; Mr.
Ashish Panchal, Whole Time Director and CEO , Bajaj Finserv Direct Limited, and Mr. Devang Mody, MD and CEO, Bajaj Finserv Health Limited. With that, I would like to hand over the floor to Mr. S. Sreenivasan for his opening comments. Thank you, and over to you, sir.
Good morning, everyone. Thank you. This is the conference call to discuss the results of Bajaj Finserv Limited for Q4 FY 2025 and the year-ended FY 2025. I will now hand over to the great CFO, Ramandeep, who will take you through the highlights of the performance.
Thank you, Sreeni. Good afternoon, everybody. We welcome everyone to the conference call to discuss the results of Bajaj Finserv Limited, BFS, for quarter four FY 2025. 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) . Where material, the standalone results of Bajaj Finserv. Bajaj Finance, BFL, and Bajaj Housing Finance are other material subsidiaries that already had their conference calls, and hence we would pursue only high-level questions on BFL and BHFL. To start with some of the hygiene points, as a word of caution, we affirm that the statements that may look forward-looking statements are just estimates and do not constitute any assurance or indication on any future performance results. Let me just start by giving an update on the basis of accounting first.
As required by the regulations, Bajaj Finserv prepares its financials on Ind AS basis. However, the insurance companies are currently not covered under Ind AS. They prepare Ind AS financials only for the purpose of consolidation. Accordingly, the BAGIC and BALIC standalone numbers reported are based on Indian GAAP accounting standards, as applicable to insurance companies. I also confirm that our results, press release accompanying the results, and our investor deck have been uploaded on our website last night. Now, let me start by giving a brief update on the status of Allianz's exit from the joint venture agreement. BFS and the insurance companies are currently in the process of getting regulatory approvals from both CCI and IRDAI, and there is no further update on the matter as we stand today.
Let me now give a high-level update on the consolidated financial results for quarter four , which we have also put in a press release issued yesterday. To start with, the consolidated total income for BFS grew at 14% to INR 36,596 crore, up from INR 32,042 crore for the same period last year. Similarly, the consolidated PAT has also grown by 14% to INR 2,417 crore, up from INR 2,119 crore for the same period last year. In terms of BAGIC, the Gross Written Premium did grow by 13% to INR 4,326 crore versus INR 4,962 crore for the same period last year. Excluding the bulky crop and government health businesses, the GWP for BAGIC for the quarter was flat at close to INR 3,800 crore. The profit after tax did grow by 4% to INR 363 crore versus INR 380 crore for the same period last year.
The ROE is at about 12.5% versus 14.5% for the same period last year. Combined ratio at about 104.8% versus 101.6% for the same period last year. Moving to BALIC, the Gross Written Premium grew 13% to INR 9,237 crore, up from INR 8,184 crore for the same period last year. For BALIC, the profit after tax did grow by 61% to INR 41 crore, down from INR 106 crore last year. The value of new business registered, however, has grown 14% to INR 549 crore, up from INR 480 crore for the same period last year. Finally, on BFL, the consolidated total income grew 23% to INR 11,917 crore, up from INR 9,714 crore for the same period last year. The consolidated PAT grew 17% to INR 4,480 crore, from INR 3,825 crore for the same period last year, and the ROE is stable at close to 19%.
This was just a summary of the results which were published in the press yesterday. Now, I'll deep dive into each of the companies to give you further texture on the performance of each of the companies. To start with, on BAGIC, effective 1st of October 2024, as was mandated by IIDA, the premium on long-term products was to be accounted on 1/n basis, where n is considered to be the contract duration. As compared to the earlier philosophy of recognizing premium upfront, from long-term contract perspective, the law required us to amortize the premium over the contract duration. Hence, qurter four and FY 2025 numbers are not comparable with prior years. The change in the accounting, however, has no bearing on the underwriting profits and PAT for the year, but it impacts the gross return premium and combined ratio for the period.
As highlighted earlier, the GWP for BAGIC decreased by 13% during the quarter to INR 4,326 crore, down from INR 4,962 crore for the same period last year. The degrowth is largely impacted by two elements, one being the timing variance on the booking of the bulky crop and government health business, and the second one is what I referred earlier, the change in the accounting on long-term products. If we exclude the impact of volatility in the tender-driven crop and government health business and the impact of 1/n regulations, the growth, in fact, for BAGIC is about 8% for the quarter as compared to the reported degrowth of 13%.
Similarly, on a full-year basis, the growth, excluding crop and government health and the impact of 1/n regulations for BAGIC, is 12%, which is about 3% higher than the industry growth of 9%, again, industry compared both on ex-crop, ex-government, and 1/n basis. Further, it is heartening to see that the growth on core business lines of BAGIC, such as commercial lines including fire, marine, engineering, and liability, and on motor and retail health, the growth for BAGIC has been far better than the industry for both the quarter and the full year. Group health, however, continues to be a tactical play with pricing continuously under pressure. The underwriting loss for BAGIC for the quarter stood at a nominal INR 3 crore, as against a loss of INR 76 crore for the same period last year. This underwriting result, we believe, will be by far the best in the industry.
The combined ratio, however, stood elevated due to the accounting anomalies, which I explained a little while earlier, at about 104.8% in quarter four versus 101.6% for the same period last year. However, if we exclude the impact of 1/n regulation, the combined ratio stood at 103.1%. The elevated combined ratio is attributable to the degrowth in GWP, which we discussed earlier, and uptick in motor business during the quarter. While elevated, we believe that the combined ratio reported by BAGIC will still be amongst the lowest in the multi-line market. The profit after tax for the quarter stood at INR 363 crore, down from INR 380 crore last year, a decline of 4%, but this was primarily attributable to realized gains on investments, which was lower in this quarter because of market conditions compared to the same period last year.
However, if we eliminate the impact of the mark-to-market changes on investments, the PAT has actually grown at a healthy 21%. The AUM for BAGIC, which represents cash and investments, as of 31st March 2025, stood at INR 33,115 crore, as against INR 31,196 crore for the same period last year, an increase of 6% in spite of paying a very healthy dividend in FY 2024 and on account of market volatility. BAGIC continues to deliver superior ROE on an annualized basis at about 16% versus 15.2% last year. If we exclude the impact of surplus capital, which is taking solvency at 200%, the ROE is supposed to be even healthier at upwards of 22% for BAGIC. On the customer front, BAGIC relentlessly drives the theme of caringly yours on the foundation of customer obsession through innovations in customer experience.
Accordingly, BAGIC continues to have the lowest grievance ratio in the industry and the highest NPS consistently year- on- year. In a market which is intensely price competitive, this operating result, we believe, displays BAGIC's commitment to a balanced and profitable growth on back of deep and broad distribution and prudent underwriting while focusing on best-in-class customer service. In summary, despite market constraints, a decent result from BAGIC in terms of growing higher than industry on core retail business lines and commercial lines and maintaining strong profitability metrics. I will now move to BALIC. During the quarter, BALIC's new business growth was muted, which is in line with the industry, largely impacted by the new surrender regulations and the stock market volatility. During the second half of the year, BALIC launched BALIC 2.0, which focused on sustainable and profitable growth while restructuring products to comply with revised product regulations.
Simultaneously, it restructured most of the other products as well, focused on balanced product mix and focused on cost for operating leverage. The early results from BALIC 2.0 are visible through three outcomes for the quarter. The VNB growth, the first one being the VNB growth of 14% from INR 4.80 crore to INR 5.49 crore, despite the individual rated premium being flat and despite group protection degrowing by 4% during the quarter. The second one being retail protection growth of 84%, also backed by increase in share of higher protection units and focus on riders. The third and the most important being the NBM expansion by almost 4% at a strong 22.1% for the quarter, as against 18% reported for the same period last year. On the back of continuous strong renewal premium growth of 29%, BALIC GWP grew 13% during the quarter.
The consistent growth in renewal premium reflects the improvement in persistency over the last five years. Overall, on individual rated new business basis, the mix of business for quarter four stood at PAR at 21%, non-PAR savings at 27%, term at a very healthy 6%, annuity 6%, and units at about 40%. BALIC has been increasingly enhancing focus on protection business, and hence retail protection grew by 63% to INR 393 crore in FY 2025 versus INR 241 crore of premium in FY 2024. BALIC is also building on the data and analytics for direct sales through upsell and cross-sell initiatives. It has led to BALIC's presence in 407 cities with dedicated verticals for various customer segments. On the institutional business side, the company continues to expand its network of partners and grow existing partnerships. BALIC now has reasonably large number of bancassurance tie-ups, which should help it reduce any concentration risk.
On the persistency front, we have largely maintained position in line with the previous year. The profit after tax for quarter four stood at INR 41 crore versus INR 106 crore in the same quarter last year. This is lower due to lower realized gains as we saw for BALIC as well, and on account of higher tax provisioning. BALIC ended the quarter with an AUM of INR 1,23,734 crore. Overall, a mixed quarter for BALIC, but on the right trajectory of sustainable and profitable growth year-on. Finally, both insurance companies are financially among the most solvent in the industry. BALIC with 369% solvency and BAGIC at 325% solvency. Hence, both the companies are well poised to weather any external adversity. 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 interests of the policyholders.
Let me now move to our lending businesses, BFL and BSFL. To start with, on BFL, a very good quarter on all metrics, including business volumes, AUM, OPEX, and credit costs. The number of new loans booked in quarter rose 36% to over 10 million, as against 8 million in the same period last year. BFL added about 4.7 million new customers during the quarter, with customer franchise now standing upwards of 100 million. The company's diversified business model has enabled it to record a strong AUM growth of 26% at INR 416,661 crore as of 31st March 2025, as compared to INR 330,615 crore as of 31st March 2024. The net interest income grew by 22% to INR 9,800 crore, as against about INR 8,000 crore in the same period last year. The OPEX to total income improved to 33%, as against 34% in the same period last year.
Net loan losses and provisions for the quarter were about INR 2,300 crore. The company made an additional provision of about INR 360 crore on account of TCL model redevelopment in quarter four . Adjusted for this, the loan losses and provisions for the quarter were about close to INR 1,970 crore. In quarter four , net increase in stage two and stage three assets was only about INR 289 crore. Stage two assets increased by INR 784 crore, and stage three assets decreased by INR 495 crore. The company has indeed started seeing improvement in early vintages across all portfolios. The GNPA and NNPA stood at 96 and 44 basis points, respectively, as of 31st March 2025, as against 85 basis points and 37 basis points as of 31st March 2024, which we believe is amongst the lowest in the industry. Profit after tax grew 17% during the quarter, from INR 3,825 crore to about INR 4,480 crore.
Both the return on assets and return on equity remained steady. The capital adequacy remained strong at 21.93% as of 31st March 2025, and Tier One Capital was at about 21.09%. The Bajaj Finserv app has now 7 crore net users, and the FinAI transformation is progressing well for Bajaj Finance. You would have also heard about the corporate actions declared by Bajaj Finance last evening, which include a share split, bonus shares, and a special interim dividend. The bonus issue and special interim dividend reflect the company's strong financial position, robust reserves, and a positive growth outlook. Moving now to Bajaj Housing Finance, the mortgage subsidiary of Bajaj Finance. A very good quarter on an overall basis. AUM grew by 26% to INR 114,600 crore at March 2025, up from INR 91,370 crore from the same period last year.
Growth was very well distributed across all the business segments of Bajaj Housing. The home loans AUM grew by 22%. Loan against property grew 28%. Lease rental discounting grew 24%, and developer finance grew by 49%. The net interest income grew 31% to INR 823 crore, as against INR 629 crore for the same period last year. Operating efficiencies improved significantly with OPEX to net total income at only 21.7% in the quarter, as against 27.1% in the same period last year. The loan provision was a best of INR 30 crore in the quarter, as against INR 35 crore for the same period last year. Healthy asset quality was maintained with GNPA and NNPA of 29 basis points and 11 basis points, respectively, at March 2025, as against 27 basis points and 10 basis points for the same period last year.
Profit after tax grew by 54% to INR 587 crore for the quarter, as compared to INR 381 crore for the same period last year. Both ROE and ROA were steady. Capital adequacy remained strong at 28.24% as of March 2025, and Tier One Capital was at 27.72%. In summary, another very strong quarter for both our lending companies, Bajaj Finance Limited and Bajaj Housing Finance Limited. Now, let me give you an update on our platform companies, which is Bajaj Finserv Health Limited, also referred to as eBH, and Bajaj Finserv Direct, referred to as Bajaj Markets, and Bajaj Finserv Asset Management Company. Let me start by Finserv Health. The numbers for the previous year are not comparable here due to the acquisition of Vidal Healthcare in quarter one 2025. Hence, the previous numbers have not been provided in the investor data.
In quarter four FY 2025, Bajaj Finserv Health carried out 2.8 million health transactions versus about 2.3 million in the immediately preceding quarter, which is quarter three of 2025. Bajaj Finserv Health continued expansion of provider network, which includes about 87,000 doctors, about 4,500 lab touchpoints, about 15,000 hospitals. Utilizing this network strength and its tech platform, eBH is able to offer integrated OPD, IPD, and wellness experience to both our retail as well as corporate customers. Moving to Bajaj Markets, during the quarter, Bajaj Markets attracted about 850,000 consumers on its digital platform. Bajaj Finserv, sorry, BFSI lending this quarter, including secured and unsecured, and both through BFL and outside partnerships for the quarter, stood at INR 1,865 crore of lending for the quarter, as against INR 1,636 crore for the same period last year. Bajaj Markets has been achieving new milestones regularly.
Some of the highlights of which are six new partnership additions during the quarter, taking the overall unique partnership count to 96 in number. Bajaj Markets has also been achieving cash profits consecutively now for two quarters. There has been no capital infusion in the company since March 2022, showing capital efficiency of the company. Now, an update on the Bajaj technology piece. The vertical closed a new GCC deal and two deals in the Middle East during the quarter. It has also published two solutions from the cloud practice in AWS Marketplace, which demonstrates the AWS expertise the company has built over a period of time. Now, moving to the asset management company. The asset management company ended the year with an AUM of upwards of INR 20,000 crore, which is up 17% from the immediately preceding quarter, which is quarter three of FY 2025.
We believe the Bajaj Finserv AMP is the fastest to cross the INR 20,000 crore mark, which is in less than two full years of operation. The non-group share of AUM stood at a very healthy 84% of the total AUM. This was the update on the performance of all our companies. Before we open the questions, considering the paucity of time, I would request the audience to kindly keep their questions brief so that we can cover more questions during the call. With this, I invite questions from the audience.
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 the touchstone 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, you can wait for a moment while the question queue assembles. We'll take a first question from the line of Avinash Singh from Emkay Global. Please go ahead.
Hey, good afternoon. Thanks a lot for the opportunity. Two questions. The first one on BAGIC. Now, your capital pool is getting very, very strong. Also, there have been some changes regarding the cross-border resource revolution and all. Do you see, I mean, your retention is slightly changing from here? Because, I mean, if I see typically, of course, you have been writing proper and all that. You also explaining that. Your retention has been lower, despite the fact that your capital pool is getting very strong.
Now, there is kind of at the margin some changes required to this cross-border insurance and all. Do you see yourself kind of changing your retention strategy or increasing your retention going forward? That's my question on Bajaj. On Bajaj, now, a lot of, I mean, regulatory changes are already kind of behind in terms of your evolution or AUM evolution. Going forward, I mean, and also that the markets are now more sort of balanced than the goal and state had in last year. What kind of a product mix and corresponding the transition of VNB margin do you see from here onwards? Thanks.
I'll request Tapan to take the first one on retention, please.
Thank you. I think in your question, lies the answer, you mentioned that with the CBR rules changing, and you also mentioned our strong capital, which is there, and also strong solvency issue here. I think that is where the answer lies.
Strong capital or strong solvency, it doesn't really matter now. If the CBR rule changes, if the fact gets more difficult, we have enough to be able to retain also, and we have enough underwriting competence, which you demonstrated for several years, to write good risk. I think the retention, if it makes sense, then it's good. If you look at the overall results, I think it is perfectly fine. As of now, the balance is very good in terms of what we've done and what we also. As you rightfully said, if there is a shortage of capacity because of strong capital risk, resilience will still continue being good and be able to handle this very well.
Avinash, I'll just add to that. I think our retention, if you see in the past, has been on the lower side vis-à-vis the others in the market because of the bulky businesses we've been writing. Especially in the last two years, we've written a lot of crop and government health. That is one reason. The second is we write a lot of commercial business also. There you see that the growth we've been registering on commercial lines, which are some of the large risk. There also, because of the risk being very large, our retentions are on the lower side. That's one reason you see some anomaly vis-à-vis others in the market.
Avinash, just to add to what Ramandeep and Tapan said, basically, the aggregate retention for a composite insurance company is just a summation of the past. We have multiple lines of business, the product mix changes, and we have always been strong in the large-cap operator and the commercial lines. Therefore, line by line, if you see, I don't think our retention has lowered at any time. The mix of multiple businesses come with lower high retention will eventually determine what the net retention premium is.
We'll move to Tarun for the product mix and the margins question.
Yeah, thanks, Raman. Avinash, you're right. Regulatory changes largely behind us. In terms of product mix, you see more in line with what you saw in Q4, higher growth in protection. The other part of the retail business, largely remaining product mix remaining stable in the direction that you saw in Q4.
As far as group protection is concerned, I think we are all waiting and watching how the interest rate change impact happens and whether we have higher growth in lending. That is what is going to decide how credit life really grows, and that will impact the industry equally. We are now well-positioned because we are well-diversified, not as dependent as we used to be a couple of years back in any one segment. That should help us.
In terms of VNB margin trajectory, I think that's a good point. You saw the change expansion already in Q4. Beyond what you heard Ramandeep talk about, we have also taken significant calls on cost structures, looking at more productive investments, removing wastage, inefficiency, and some places significant cost cuts. This is helping us leverage to an extent you saw that operating leverage show up in Q4.
We expect hence the VNB margin trajectory to be far more steeper and hence a higher growth in VNB margin versus what you would see in the revenue side. I hope that answers your question.
I'll just add to what Tarun said, Avinash. I think one is obviously structurally doing more term, or group is margin positive on an aggregate basis. We are confident from a BFS level that the actions that BALIC has taken also structurally improved the margins of the other lines of business. Therefore, that may fully play out only in FY 2027, but we should start seeing the benefits by second half of next year. With more than margin, we continue to concentrate on improvement in VNB and the growth in VNB being better than the growth in the latter two years.
Thank you. Thank you.
Thank you. We'll take our next question from the line of Swarnabh Mukherjee from B&K Securities. Please go ahead.
Hi there. Thank you for the opportunity. For BAGIC, I just wanted to understand the combined issue outcome. First of all, the loss ratio looks very benign this quarter, but I see that the motor TP and the fire loss ratio has.
I'm sorry to interrupt. Can you use your handset mode, please? Your audio is not very clear.
Is this better?
Y es. Please go ahead.
Yeah, sure. Thanks. I just wanted to understand the combined issue outcome because the loss ratio has been benign. Can you see that motor TP and fire loss ratios are lower?
Just wanted to check about the reserve releases there, which quarter, I mean, where you felt that need to release the reserve, particularly looks from the triangle that in Excel in the financial year 2024, there has been a bit of a release. If you could give some comment on that. On the expense side, again, there has been quite an increase. Is this finally coming due to the fact that most of the growth this quarter has come from the broker segment, and hence the outlay has been higher? If you could just break down that, that would be very helpful for BAGIC. And BALIC, first of all, congrats on the VNB outcome. I think very strong numbers which you have reported compared to what we are reporting historically. I wanted to understand that right now, how much of crossover is baked into the margin?
If you had to absorb later on, what could be the possibility of if you could give some color on the structural nature of the margin for our product mix. Second, if you could call out the reasons for the operating variance and there's uncertainties in the EV work. These are for BALIC. J ust a small question on Bajaj Health. There is a segment mentioned internationally where I think a lot of large share of claims are coming. Just wanted to understand our nature of offerings here, who would be the customers, if you could give some color and whether the claims outcome is unfavorable in this segment. Yes, that's all. Thank you.
We'll start with BAGIC first. I'll just try to answer that and hand over to Tapan or Ankur thereafter. I think what's relevant and what I mentioned earlier also, if you look at the underwriting loss for the quarter, it is very, very low at only about INR 3 crore. It's almost close to zero. What you're seeing as elevated combined ratio is actually an outcome of GWP not being there in the quarter because of the 1/n regulations and anomaly in the crop and government health distribution of premium during the year. I think that's causing a stress on the expense ratio for the quarter because that's the way the combined ratio is calculated. I think that when you see the underwriting loss, it's an upward tilt, INR 3 crore. That's why I thought I'll just highlight that before I hand over to Tapan or Anckur.
No, Raman, I think you have covered it very well.
Sorry. Just a follow-up. I mean, in terms of permissions, etc., there is nothing very incremental even day-to-day mix change.
No, I think what has changed and what I highlighted earlier also was that the growth on motor and retail health has been on the higher side, both for the quarter actually. There, obviously, on new sales, you know that the commission is on the higher side. That is, the mix of new has moved up, and that is why the commission is looking higher. It is only a mix variance. There are no incremental payouts which we are doing. This should get normalized when you look at the wholier numbers.
The overall EOM is well below the regulatory allowance. BAGIC has the leeway, subject to market conditions and the businesses they want to pursue, and if things start improving, I think they have the levers available to them to go back into growth into the preferred segment.
Yes.
Okay, we will move to BALIC. Tarun, or Vipin on the?
I will have Vipin. Vipin, if you can answer that, please.
Sure. Sure. I think this is the first question on overruns. All the overruns are accounted when we report our VNB and margins. I did not understand the question, but all that we incur, even if there are overruns, all of them are accounted for, and they are reflected in our VNB and margins. In terms of operating variance, there were fewer new segments that we started writing a year, year and a half back.
Some of them have produced a little lower persistency than what we had generally experienced. While they are still profitable to similar other products, these are new segments that we have been testing. On the ellipse side also, beyond the 61st month, we have seen some surrenders and all of that coming. Maybe that is because of market upside. I think those are the reasons. Purely on mortality, if that is your intent, on the mortality side, our experience is in line with expectations, so there are no variances there.
Okay, sir. Understood. If you could highlight on international business .
Sorry?
International piece, Devang is here. He will speak up.
I could not hear the question very clearly.
He just wanted a flavor on the international business.
Okay. I think on the international side, our stated strategy is India has a lot of volumes, and we handle considerable volume. Our aim will be to convert that transaction volume into capabilities, which we can probably offer to international insurers. In that direction, we already have two customers internationally. As we speak, in the last quarter, we have serviced those two insurers. Our focus just now is less on business development, but to harden our capabilities, which can be utilized by international insurers. We do a fair bit of transactions there, because in international markets, OPD is 70% of total value worked by insurers. We have, obviously, over a period of the last six years, created a lot of capability around OPD. That's why the number of transactions are very, very high internationally. We are just scratching the surface, as it is widely known. While India is 16% of global population, India is less than 1% of healthcare spend of the world.
Now, while these statistics are very colorful, we are very optimistic that given that we process a lot of volumes in India, our competency set in technology, in AI, would create a proposition for international markets. That as we continue to create this capability and service our customers, we will be able to actualize the benefit of these revenue streams. I hope I have explained what you are looking at, unless you have any clarification over this.
Yes, sir. Just one small query with that. In terms of the profitability, if I were to think about the domestic versus the international piece, how will it stand?
No, sure. In terms of profitability, obviously, international is significantly higher. Actually, it's not a very apple-to-apple comparison. The investment in creating capabilities is completely absorbed by domestic business. So it's not an apple-to-apple comparison.
It's like international business for us is actually a clean part of the overall business architecture. The profitability in longer term also will always remain higher in international. All of us know that India is an extremely cost-conscious as well as competitive market. Going forward also, we believe that international will be higher on profitability, significantly higher on profitability. The market size there is tremendous. It's not that we are pricing ourselves too high. It's just that those markets have the ability to pay more. The key for us is how do we create capabilities on what we internally call is whatever we sandbox in India, how are we able to convert that into capability which can be sold internationally. Profitability will always remain higher internationally.
I think just to add to what Devang said, the 2.8 million claims that we service, it's a fairly sizable number. That kind of volume will never get internationally in some other countries. Therefore, this is the bread and butter of our business. That is the one which helps us as it grows. We'll continue to invest in capability, and we've got to make a gold standard for that in terms of technology, service, in terms of integration, digital, AI, all of them linked together with the data science built-in for handling abuse management and various other things in terms of medical understanding the medical field better and better as we do more transactions. I think it's a very long-term business. Over the next 15-20 years, we believe this is going to be a very large play in India.
Today, we have a lot of fintechs, some hospitals, there are insurance companies, there are patients, and all of them doing bits and pieces of these. As we see the next 15 years, the size of the opportunity being very large. Once we build the capability over the next few years, we think we should probably be in a better position than any other because we have the brand to back it up as well.
Understood, sir. Thank you so much for the detailed answer. Thank you and all the best.
Thank you. We'll take a next question from the line of Madhukar Lada from Nuvama Wealth Management. Please go ahead.
Hi. Good afternoon, everyone. Just had a couple of questions. First, on BALIC, the margin improvement has been very good. Congratulations on that. In terms of growth, I see that growth is slowing down, which is as per what we had discussed earlier as well. Moving on into FY 2026, FY 2027, how do you see AP growth and VNB growth panning out? Some sort of sense of where will help us. Second, on the variances, operating variance and assumption change, I understand all of this is related to persistency, or is there any other element of mortality or expenses also? Those are my questions on BALIC. On BAGIC, the underwriting performance has been quite good this year. However, if you look at GWP growth, it is a little bit slower. I am guessing we are losing out on market share in a few segments. Any comments around how you look at that? I sense that growth in motor also has been a little lower than the industry. Some color around market shares would be helpful. Thanks.
Vipin or Tarun, do you want to take the first one?
Yeah. Maybe I'll start off. Yeah, thanks. I think the VNB margin, I know this is the second time we're getting this response from these questions. Yeah, the VNB margin is looking good. Honestly, that was to be expected. We've been saying this as a guidance in our last two calls that we will be making a significant strategic shift, which we did make. We have ensured that our VNB margin is now moving up in the direction. I've seen that while we look at margins, there is a lot of noise in the margins from the group business. Hence, the VNB is what we'll be focusing and talking about more.
In terms of growth, BALIC has been, in the last five years, the fastest growing private sector, fastest growing company in the country. We've had a CAGR of 30%. We consciously took a pause when the entire sector just changed the traditional plans only. We really looked at every plan that we had, units, which is the term units that we have nowadays, and traditional plans as well. We looked at redesigning, restructuring our products entirely. While 50% of the products changed in the market, we changed all. We changed 100% of our products.
This was to result, and I think it was a call which, on hindsight, has gone correct because we did foresee that with so much of parameter value changes happening and all 50% of the products changing, 3 million advisors having to undergo training, all bancassurance branches having to undergo training, there will be a slowdown in the sector for the second half, which is exactly the way it panned out. We hence kindly chose the time to plan more on a far more significant one-time structural change, which we've done. Now, that change on anything that we had to do on margins is behind us. Now we have to work on frugality, ensuring that we are cost-efficient, and that will ensure that the direction of VNB margins remain high.
Your question, the second part of the first question is on, will the margins be growing or will the top line be growing? As far as the top line is concerned, if I just get a little bit more detailed, the bancassurance business has picked up from where it left, and the transition has been a lot more smoother. Proprietary sales has taken a little bit more time because we changed all the unit plans as well, which nobody else changed. That was a significant part of their product mix, which has, of course, resulted in them going a little slower, although it remains still the fastest growing business for us. The agency side has required to have a lot more discussions with advisors because we changed the compensation. That, I think, will be taking a little bit more time to settle in.
The growth we expect, which has been muted for particularly agency, shall remain slightly muted even in Q1. Having said that, for us, it is unique because we were one of the fastest- growing last year, H1 as well. We grew by 31%, and while our peers said it was far far lower. That high base effect will also come in. We will have to look at it and put it in perspective from that. As Sreeni mentioned, H2 onwards, you see growth for top line also starting to come up significantly. You should expect overall for us a higher growth in VNB in this coming year. I think that is the message I would like to leave you with. Your second question is on variances.
Although very clearly, we can discuss some of it, but I just mentioned because it was specific, there is no impact of mortality or expenses on these variances.
Okay. Great. Thank you for the detailed answer. On BAGIC.
Yeah. On BAGIC, if you look at, if you look at the year-end numbers and the surprise on the comment that you have lost market share, if you look at your year-end number, and Raman explained the 1/n, that is why this is, and we have this proportion of higher share of the market of long-term business. I think that is what gives you the perception. Otherwise, if you look at segment-wise, you do not know if I adjust for the segment-wise number.
If you look at it, then I think be it commercial lines, be it motor, be it retail health, be it government health, it would be that the only two lines of business where our share would be lower than the market, one would be crop insurance, which we had mentioned earlier that if you look at this kind of crop, and I remember a couple of years back, everybody was shying away from crop, and the question I was answering is that crop business, we understand and we will do it, and we continue doing it. Now, when people saw that we did it well, everybody's into the crop business currently. Obviously, when we see a lot of intensity in some business and pricing is not what we feel is appropriate, then we go slow a bit.
Crop insurance, I think we would have a lower market share. In this clearness, it is because of the capital business that we had, which we have gone slow because lending has gone slow, not because we have slow intensity, but lending on that business has gone slow. Minus that, I think we would have been ahead of market in all lines of business. If you pick up the yearly number, you are actually ahead of the market. It is the 1/n which is playing out in spite of letting go of some crop business and not letting go because of lending being less and the capital business, that being a bit less. That is where the actual question is. Ankur, you want to add something or Raman, you want to add something?
Maybe I can just talk about, I think one thing which is playing out is the proportion of long-term business for us versus the market has been on the higher side. On an average, long-term business, which is impacted by the 1/n regulation, for us was 7% of our GWP. For the market, it's been 3%. That's why the numbers look a little odd. If you look at, like Tapan highlighted, if you look at the full year numbers, the industry growth on GWP has been about 5% both for us and the industry. Now, if I exclude the impact of government health and crop, we have grown at about 8%. Industry has grown at about 7%. We've grown 1% higher. If we negate the impact of 1/n , we have grown at about 12%, and the industry has grown at 9%.
Now, if I break that further into retail segments, which is what you were referring to on motor, in fact, our growth has been in line with the industry. Industry has grown at 7.9%. We've grown higher at about 8.5%. Retail health, industry has grown at 8%. We've grown at about 13%. Commercial lines, which is a summation of fire, marine, liabilities, all of that put together, industry is flattish. It's grown only 1%. We've grown at 8.5%. What Tapan highlighted, actually, the sales is looking only from the 1/n part and also the loss of some business on crop, which we mentioned earlier. We will do that business only if it makes commercial sense. We know most of the people are doing it only to get arbitrage on today.
To answer your question, I think from a top line perspective, I think we've outperformed the market almost in all segments this year.
Great. Understood. Thanks a lot, sir.
Thank you. We'll take our next question from the line of Manish Dhariwal from Fiducia Capital Advisors. Please go ahead.
Yeah. Good afternoon. Am I audible?
Yes. Please go ahead.
Yeah. Thank you for this opportunity. My question was at three levels. One, that the organization, the group has taken this decision of buying 100% of the two insurance businesses. Now, and now your approvals and all, the thing that functioned earlier, it was that it's going to happen sometime. Now it's happened. Now your insurance execution part is happening. I wanted to understand how, over the past about three to four or five, it's a long-term question. How would the flavor of these two businesses undergo a change?
Like you did mention about some international forays, which I'm sure earlier there was maybe some restrictions. And I am being a partner, already being a bold player. If you could just give us some long-term perspective on both the insurance businesses that you run.
Sure. I mean, I'll take that question and see you. Thanks. I think when we look at the opportunity spectrum in both the insurance spaces, it is very large. While both the businesses continue to remain very competitive, and we expect more competition to come in the future, in the long run, it is a game of balance sheet size, capital, and brand. We have already done the hard work over 30 years.
If you see, most of the people who are coming in recently are finding it more difficult because of the level of competitive intensity to get to the minimum scale that is required for a viable insurance business. As far as the decision of Allianz to exit is concerned, it is a decision of Allianz to exit, and we have executed the FPA. It does give us the opportunity now to use the Bajaj brand and the capabilities that we have at the Bajaj group to play the opportunity spectrum in insurance business. Clearly, in a joint venture, there are always restrictions. There are shareholding patterns, and there are difficulties in dilution. There may be difficulties in various strategic initiatives that you may want to take if it is not viable for both the shareholders who are headed back.
We think there are three, four things that we mentioned. The first is we now have at 100% a lot more leeway to look at strategic opportunities, which may involve dilution maybe. We can look at other business initiatives, including, for example, in the GIFT City, we can look at the pension business. Potentially, we can look at international foray as well because this is a sign of a very large amount being put up as domestic capital. We have fair confidence that this capital will yield the shareholders a very good return over the years to come. There are many levers that will play out, and we are not short-term players. We are more than a 100-year-old group. Therefore, we have the patience and the resilience to be able to play it with the [guess] capital and the power of the brand that we have. While we lag a little bit in flexibility, we get that as well now.
Yeah. Thank you. Thank you. And some bit of favor on the health business. The way the number of transactions are increasing, Vital acquisition happened, scope sets are happening, more and more hospitals and the footprint expanding. When are you seeing this to emerge and a meaningful business, say, three years, four years, five years, where the numbers actually make an impact on the balance sheet?
Yeah. Let me take that first before I pass it on to Devang. As I said earlier, we believe healthcare, healthcare services, the entire spectrum of healthcare from tooth to tail is going to be a significant industry in India. We have a significant proportion of the population which requires government schemes to be able to support healthcare.
We also see that the insured population is much smaller because of the higher price and the fact that insurance today covers only the hospitalization. There is a missing middle. All of these are continuing to grow. Therefore, we believe there's a long-term opportunity. We already have made the most difficult part of building the network for the OPD services. It is easier said than done because it is a very small, I mean, it's a significant amount of effort, capital, and time. You have to then build a model out of it with the GPA, with our insurance company in BAGIC, and the OPD capability, and the initial foray into international business that we already have. We believe we have all the tools available now, but we need the volumes to be able to further sharpen our capabilities.
We are very confident that BFS value may or may not come from the traditional way of measuring profit in terms of profit and equity. In the long run, value will emerge because of the size of the opportunity and how long we remain invested in the business. We are all intentional to be remaining invested in the business. Devang.
I think your question was about relevant for numbers. Of course, we have meaningful numbers. Yeah. We are very proud to have very large companies in the group which contribute a substantial portion of consolidated revenue. See, our view as a group about health businesses, health remains one of the largest spend items for Indian consumers, and it will only grow further in percentage spend of Indian households in coming years. Point number one.
Correct.
Point number two, health is ripe for disruption in our view with ingestion of new technologies, specifically AI, because there are certain nuances of health business which are very suitable for usage of AI. Globally, health thrives on unstructured data because every patient is different. Third point is India has tremendous population enhanced. In technology world, if I say humongous training data, this can be put to use to service Indian consumers and also to monetize those capabilities globally. It is a health has longer gestation. Number relevance is a matter of spreadsheet work. What we are focused on is that we add value to Indian ecosystem and take those capabilities globally to add value to some of our international customers.
It is a longer journey, but as a group, we are, in my view, we are extremely suitable because we are long-term players in anything we do to solve this problem over a period of time. It is a very contextual question. Number answer would require a lot of spreadsheets. We are not focused on that relevance on spreadsheet. Yeah.
Thank you. Thank you. That helps. Thank you.
Thank you. Ladies and gentlemen, before we take the next question, we request participants to keep their questions brief as we have other participants waiting for their turn. We will take the next question from the line of Umang Shah from Banyan Tree Advisors. Please go ahead.
Hi, sir. Am I audible?
Yes. Please go ahead.
Yeah. Thank you. Sir, just one question on BALIC. What would be how much of our AP would be coming from the largest bancassurance partner that we work with? Per year.
This was for BALIC or BAGIC? BALIC. BALIC. Okay. The largest one contributes to about 22% of our business.
Sure, sir. Sir, with that player now looking to acquire an insurance company that we compete with, would you be looking to reduce your presence there, or would that business be coming at a lower profit than other channels?
We are talking about this very clearly here, right?
Yes. Yes. Yes.
That player has had an investment already, and they have been and they were declared promoters of that company. It was the intent, I guess, from them for a long time. They were very clear when they added us that they would be as a partner, that they would be going ahead and adding a lot many partners in the bank itself for life insurance. Despite the fact that they already have their own company, we are still maintaining 25% ± 1% here and there margin. Sorry, margin as in the market shares in the—understood—yeah—in the bank. As far as margins are concerned, we do not talk about margins individually for players. These are bilateral transactions.
Sure, sir. Thank you so much.
Thank you. We will take our next question from the line of Sanketh Goda from Avendus Spark. Please go ahead.
Yes. Thank you for the opportunity. I have quickly a question from BAGIC first. Sir, if you look at our tender-based business, it is almost 25% of our total GDP. See, obviously, the predictability of the growth of this particular number looks very difficult for us to estimate. I just wanted to understand how confident you are that this business, this 25% of your business, will repeat again next year.
Suppose if you don't win, then you have a game plan probably to substitute that business with some other line of businesses. We just want to understand that thought process on the continuity on growth, given tender-based business is 25% of total profitability . That's one thing. Second is on reinsurance acceptance because rates are a little better. There are a couple of insurance companies which have already alluded that they might be a little aggressive with respect to accepting as a reinsurance business, which could help in GWP growth. Do you have any thoughts on those lines of the business? Lastly, on data keeping on BAGIC, can you give two, three figures? Advance premium number, duration of our bonds, and yield to maturity on the bonds. Yeah. That is from BAGIC. Maybe I have two questions from BALIC. Sorry.
Just look at when you talk of bulky business or tender-based business, whether it comes here and come, you understand the nature of general business. It comprises of two, three parts. It is the inherent part of the business. One is retain. Second would be tender-based. Tender-based is not only in terms of when you talk of government or you talk of corporate, also in commercial enterprises. A lot of large risks also are tender-based in the marketplace. Commercial lines also.
If you look at the segmentation, the tender-based business in the total industry portfolio would also be close to about, if I'm not wrong, about 30% or so, or more, 30-35%. That is there. Now, if you're a large company, if you're a company with one of the largest number of customers in India, if you're a company which is top three, including government companies in India in terms of top line, if you're a company which is among the best command-issued companies in India, you will reflect what the market is. If the market tender-based business is close to about 30%-35% business, and you have a 25% tender-based business, I think perfectly fine because you can't be a large company and say that I'm not a tender-based business at all. The second part of the question is that how will it play out?
We have been doing it for so many years. I don't think that something is new. Some tenders we win, some tenders we lose. It's the inherent part of business. Overall, it goes. Sometimes if we lose a lot of tenders, then obviously that part of business market share may drop for some time. We didn't clock this time, and we found the tenders being very aggressive in terms of the pricing, which was about 30%-40% lower. We reduced our presence. We never exit any business, and we are always there. We still have a leading crop insurance in labor today. We still are there, will be there, and we keep on participating in that. It has no bearing in terms of that we feel that it will just disappear, become zero, or it will become like 100. It doesn't work like that.
As a large player, you would be present in all lines of businesses. You would be having a substantial market share in all lines of businesses. What makes sense in terms of our underwriting principle, that is where it will be disproportionately higher. Where it doesn't make sense, we'll be lower in the market. This keeps on changing. It is not like a retained stone. This year, this will be it. Next year, the same result. It keeps on changing. This is the inherent nature of business. I don't think there's something one has to really be surprised about. We have looked at each line of business separately, each product separately, and each we should write well and serve the customers very well.
If you look at our rebalance ratio and we have publicly available data at IRDA, we have been among the least rebalance ratios in the country for so many years. It's over a decade now. Every quarter, every time, IRDA publishes in there, "Serve the customer well." This is a principle of business. I don't think there's something which we have to really be very worried about taking a stride what happens if we lose a tender or gain a tender. It's part of the business. That was the first question. Second question was what on BALIC?
I was asking about a couple of companies are doing more reinsurance acceptance compared to what they were doing in the past.
The second question. What people are talking about is not reinsurance acceptance. This is a right-wing commercial line of businesses. See, reinsurance c ompanies, they make treaties and they make circumstances. That is just kind of a plan in way of projecting a balance sheet. There is no question of reinsurance acceptance by companies.
Now, if we even look at commercial lines of businesses, as Ramandeep mentioned in his talk, we look at last year, industry was going at about what? One percent, less than one percent. We are going at 8%. We are 8x the industry growth in commercial lines of business. We have been doing that. Why would we slow down? I think whenever the pricing is right and where we can serve the customers well, we understand the risk, we would have a disproportionate market share there. If anything substantial happens. Thank you.
The data keeping question, actually, advance premium, duration of bonds, and IPM.
For advance premium, Sanketh is closer to INR 2,500 crore.
Okay. And duration of our bond?
It is around 5.5.
And current IPM?
So the reliability is 8%.
8% is it, right? Ankur?
Yeah. The reliability is 8%. Slightly in excess of 8%, 8.03%. Yeah.
Okay. Okay. Okay. Perfect. Thanks. Maybe one question on BALIC. See, this strategy shift probably impacted meaningfully the agency channel as you alluded. That is almost till first half, it was more than 40% of our EP. You are fairly confident that the reset is already done, or it will take some bits of more time, and therefore the growth probably in this channel will be a little back-ended, or you believe that in FY 2026, agency might be a little muted because of the strategy shift what we have done on Balix side. This. One question on that side, and if you can give your contribution of Axis Bank. That's the second one. Yeah.
As for the second part, which I just said, Axis is 22% of our business. Overall, if you notice that most of our players said their largest bank is, of course, 40%-50%-60% as well. It was a studied strategy that we shall not be dependent on one bancassurance partner . I think that's how the bancassurance partner also wants it. I think that strategy has played out quite well. We'd like to have all businesses grow at their healthy pace and not be over-dependent on one. Yeah. Coming back to Axis, sorry, to agency. Agency is a 150,000 agents business. We've been looking at changing the product mix for some time, and finally, we landed up doing it in the second half of the year.
It required a lot of reset, and that reset is in place. We are seeing positive green shoots come in in terms of activity, productivity, which are the usual bits of first indicators. Engagement from agents has been reasonably on the uptake. We added about 57,000 agents last year, and we opened 60 offices. Largely, these offices are used by agency itself. We are continuing to grow in the way we are hiring more agents. That is only going to be a positive as we go ahead in time. In terms of growth rate, I did mention that we did have a significant growth in the first half last year. In fact, even agency in H1 grew by 23%. That higher base is going to impact, I'd say, mathematically, the expected growth rate from agency, which is obviously going to be muted in the first half.
Second half, we should see a significant client back in. Again, because mathematically, it was back for the entire sector. Even otherwise, my indicators will be more on number of agents getting active, the segment of agents getting active, how many policies are they doing, whether they're consistent or not, all the usual distribution parameters which we look at. They are all in the, I'd say, the green shoots are visible. Directionally, we are feeling a lot more confident. Because don't forget, agency has been our mainstay all this while, and agency shall remain a very strong part of our growth engines.
Perfect. Perfect. That answers my question. Thanks.
Thank you. Ladies and gentlemen, we'll take that as the last question for today. I now hand the call over to Mr. Arjit Kumar from JM Financial for closing comments. Over to you.
Thank you to all the participants for joining the call. It was a special time for me to be a management team of Bajaj Finserv for giving us the opportunity to host the call. Anything else Sreeni Sir you said you want to add?
No, nothing else. I think we are in the first half. We still believe the geopolitical and external environment will continue to be ready to watch. It can be volatile. But we are looking very cautiously optimistic about H2 of the coming year when we should come back to growth. We are using this opportunity on Team AI and BFL in looking at our OpEx cost in Band-Aid and the margin profiles, restructuring the business on different charges. In the case of BAGIC, we are waiting to continue our calibrated growth with a focus on strong underwriting performance.
Our platform businesses, we want to see them achieve more scale in terms of number of transactions, both direct and the health business. The mutual fund can be, depending on how the market is, the AUM growth can be a bit volatile, but we believe that we continue to differentiate in terms of each of our funds, and we'll continue to build on distribution and grow the business from here. This is largely what we are looking at over the next 12 months.
Thank you, sir. On behalf of JM Financial Institutional Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you. Thank you very much.