Bajaj Finserv Ltd. (NSE:BAJAJFINSV)

Q3 20/21

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Jan 21, 2021

Ladies and good day, and welcome to the Q3 FY 'twenty one Earnings Conference Call of Ajaj FinFET hosted by JN Financial. As a reminder, all participants' lines will be in a 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. Thank you, and over to you, ma'am. Thank you. Good morning, everybody, and welcome to Bajaj Singh's earnings call to discuss the third quarter results. To discuss the same, we have on the call mister Srinivasan, CFO, Bajaj Singh, CEO, Bajaj Allianz General Insurance mister Ramandeep Singh, CFO, Bajaj Allianz General Insurance Mr. Tarun Chuk, CEO, Bajaj Allianz Life Insurance and Mr. Bharat Kalsi, CFO, Bajaj Allianz Life Insurance. May I request mister Srinivasan sir to take us to the financial highlights. Post it, we can open the floor for q and a session. Over to you, sir. Thank you. Good morning, everybody. I welcome everyone to the conference call to discuss the results of the Badaj Singh Serve Limited for q three FY twenty one. As before in this call, we will largely be concentrating on the consolidated results as well as the results of our insurance operations through Bajajillion General Insurance, Magic and Bajajillion Life Insurance, Balik, and their material, the standalone results of our company, BFS. Raj Finance, BFL, which is another major subsidiary of ours has already had its conference call yesterday. However, if there are any high level questions on BFL, we will be glad to take that as well. We will not be taking any questions on the status of Allianz's stake in our insurance companies. The status has remained the same as at the end of the previous quarter and there is no change there. Any statements that may look like forward looking statements are just estimates and do not constitute an assurance or indication of any future performance result. Remark on Ind AS, as required by regulation, BFS has adopted Ind AS from FY 2019. However, the insurance companies are not covered under Ind AS. They have prepared Ind AS financials only for the purpose of consolidation. Accordingly, for BaZiC and Bialik, the stand alone numbers reported below are based on the non India's accounting standards or Indian GAAP as applicable to insurance companies. Our results, the press release accompanying the results and our investor deck have been uploaded on our website yesterday evening. I hope you have all had a chance to go through those. Now to give you an update on the performance, the conditions as you know have been tough. Though sequentially, we have seen improvement in business performance and business conditions in Q3 as compared to Q2 were better. Under these challenging times, our businesses have shifted focus to recovering growth while continuing to manage risk. In General Insurance, though the growth for Badriq was below industry for the first two quarters, there was sequential recovery that was being witnessed as seen from the fact that Badgeek reported a growth of 11% in Q3 FY twenty twenty one versus industry growth of 2% and private players growth of 8.6%. This was from a 20% degrowth experience in Q1 of this year. Magic, however, has adopted a calibrated approach to growth. Magic is seeking to grow in preferred segments, which are private cars, two wheelers, commercial lines like property, engineering, and retail health, while remaining cautious on group health. As you are aware, most of the retail health business we do are the indemnity based retail health business. Within commercial vehicles, passenger vehicles as a segment in which Bagic has had a strong presence, we have to reach pre COVID levels. At the same time, as we mentioned in an earlier call, Badgeek has been conservative in recognizing the potentially higher claims on COVID, non COVID health claims, increasing claim frequencies and potentially higher third party claims due to potential interest from MACT. Most of these have panned out as we had expected. To give some more details, the Motor segment showed a turnaround. Enhanced Motor two Wheeler and Motor four Wheeler reported growth of 13.19.6% respectively, while there was a 19% degrowth in commercial vehicles. The commercial vehicle also quarter on quarter has shown better performance because for the nine month period, we have had a degrowth of minus 53%. The demand for retail health insurance has slowed down partly on account of the fact that the first two quarters for most of the industry and for Badgeek also was supported by COVID related policies. However, Badriq growth in retail and furthermore, there has been a price increase by many of the players in this quarter, which has dampened the demand for health insurance for this quarter. On the other hand, Badri continues to be conservative on employer employee group health business due to excessive price competition leading to high loss ratios. Among the commercial lines, property, which is predominantly we call fire insurance, continues to drive the growth for the industry on the back of IID based rates. However, rate increases have been higher for riskier segments, while the more profitable segments have seen lower increases. Therefore, significant rate increases are also accompanied by higher risk. In some cases, there have been reduction in rates as well. As you are aware, Badgic is always focused on the more profitable segments and therefore the average rate increase may seem lower for Badgic. Nevertheless, we are very pleased with the overall performance on property and engineering and allied corporate lines. For example, in Q3, our property business grew by 33%, nine month growth was 39.8%, Engineering grew 22.3% in the quarter and 38.5% for the nine months. Liability also showed a strong growth at 18.5% for Q3 and 14.4% for the nine months. An important point to note here is that since the property price increases based on the IIB rates, the Insurance Information Bureau rates was started since Q4 of the FY 2020. Going forward, price related rate increases may not be as high as we have seen in the first nine months of this year. That will apply not only to us, but we believe for industry as a whole as well. In the case of life insurance, since opening up of the economy in September, the industry has continued its recovery and private players reported a growth for the first time in the last three quarters. During the quarter, the industry reported a strong growth in October, but degrew in November as spending shifted towards consumer goods and durables due to festive season. Finally, in December, post the facility, there was a swift recovery in the growth momentum. In fact, that is growth of over 40% in the month of December 2020, significantly over the industry growth is a welcome sign and we are optimistic about maintaining the momentum going into Q4, which is normally a very high scale season for life insurance. Given the uncertainty due to the pandemic, retail term protection had seen a significant uptake in Q1, but with recent increases in price and possibility of availability of vaccine, there has been a consolidation in demand. On the other hand, while Guaranty products with a strong preference in h one FY twenty twenty one because of market volatility, the demand for EULIPs in Q3 FY twenty twenty one has improved on the back of strong recovery in the equity markets. This was also a key driver for growth in Q3, particularly in December. Despite these circumstances, Baikalik has done very well, recording a growth in individual rated NB of 14% in Q3, as again, the growth of 9% for the market and a growth of 3% for the private sector industry. Both Badrik and Balik continue to utilize their digital properties and continue to emerge stronger through this crisis. We have seen a substantial increase in the digital penetration across several parts of the distribution and service chain across both our insurance businesses. For example, in Balik, the digital asset usage increased by 77% in November 2021 and two thirds of the renewals are now coming via the digital medium, which were a little under one third before COVID. Further details regarding Badgeek and Ballot's digital capabilities are covered in investor deck uploaded on the website yesterday. Coming to BFL, BFL already had its investor call. So broadly touching upon the high level results, Q3 was all about granular business recovery, significant improvement in risk metrics, tracking implementation of the business transformation plan that the company had set out and putting into motion a plan for pre COVID financial performance from Q1 FY twenty twenty two. During the previous quarter, in Q2, BFL had an estimated expected credit loss in H2 to be around INR2600 crores to INR2900 crores. Post INR1352 crores of provisioning in the current quarter, the company expects a residual credit cost of INR1200 crores to INR1250 crores in Q4. Hence, with respect to the initial estimate of INR 6,000 crores to INR 6,300 crores of credit cost in FY 2021, BFL is expected to have a credit cost of about INR 5,900 crores to 6,000 crores in FY 2021 overall. In addition, the company experienced continued improvement in portfolio quality in Q3 and new volumes originated across businesses during Q3 as this metrics better than the ones originated prior to COVID. The gross NPA the net NPA for Q3 is 0.19%. However, if we include the standstill assets as per the Supreme Court order, even then the net NPA ratio would have been 1.22% only. The company has started dialing down the liquidity buffer that it held, which was about INR22400 crores as of thirtieth September, is down to about INR14300 crores as of thirty first December. Overall from BFL, the core AUM growth will resume is expected to resume to pre COVID levels by Q4 FY twenty twenty one along with loan losses and provisions to reward to pre COVID levels in FY 2022. The highlights of our consolidated financial results, which are announced in our press release, I will just repeat it for those who have not had a chance to go through that. Consolidated total income INR 15,961 crores for the quarter versus INR 14,561 crores. Consolidated profit after tax INR $12.90 crores versus INR $11.26 crores. Badaj Finance consolidated profit after tax INR $11.46 crores versus INR $16.14 crores last year. General Insurance had a strong quarter, INR330 crores profit versus INR191 crores, which is an increase of 72%. Life Insurance shareholders profit after tax, INR118 crores versus INR143 crores. And as you know, the Life Insurance business largely works on new business margins, which also includes the expected profit as the policies get renewed over the lifetime of the policy. For the nine months, consolidated total income, INR45200 crores versus INR41157 crores and consolidated profit after tax, INR3491 crores versus INR3775 crores. I must even to add that in the case of the insurance subsidy, while their own standalone are in Indian GAAP for the purpose of consolidation, we are considering in the as compatible results. The equity securities held by these companies is treated as fair value through profit and loss account. During the quarter, this has resulted in increase in consolidated profit after tax by crores and for the nine months of INR896 crores. BFL as a matter of prudence has written off provided for principal and interest of potentially unrecoverable loans, which are under moratorium by also utilizing the available expected credit loss provisions. BFL continues to hold a management overlay of INR800 crore in provisions given the dynamic and evolving nature of the pandemic along with other variables. Overall credit costs for BFL for the quarter were higher by INR $5.21 crores on account of this and INR 2,762 crores for the nine months. Both BFL has a very strong capital adequacy ratio at 28.18% with a Tier one capital of 24.73%. This is more than twice what is required under the regulation. Regarding housing finance, 100% mortgage subsidy of BFL, the capital adequacy ratios again stood very strong at 24.94%. Magic has an excellent combined ratio in Q3 FY twenty twenty one at 96.1% versus 103.6% in Q3 FY twenty twenty and therefore it also had an underwriting profit this year as compared to an underwriting loss in the Q3 of last year. The profit after tax was INR $10.57 crore in nine months FY 2021. I must say something to add that is the highest ever nine month profit that Dagiga supported for the period April to December in its history. The underwriting profit was INR 27 crores, another loss of INR 87 crores in the previous year. Lastly, this is due to lower claim and expense ratios. Though there were lower claims reported in Motor, the claim frequency for Motor Owned damage is almost back to pre COVID levels. On the Health segment, number of COVID claims reported has started declining over the last few weeks. But as expected, the non COVID retail claims are reaching back to pre COVID levels as customers have started visiting hospitals for non emergency treatments, elective surgeries and delayed corrective surgeries. Overall, Biodig's COVID claim share is in line with its market share segment around 4%. And at the current moment, based on the available information, we are well provided for these. Finally, MotoGP claims are still not being settled at the same pace as courts are still not operating at full capacity. And we do see potentially a risk of higher interest when the claim gets settled. And I must say even to add that, Dyadic has taken a view on that and reasonably well provided at this stage. Coming to Balik, Balik AUM crossed INR 70,000 crores, is the highest ever AUM reported by Balik and its net worth of Balik is a shade under INR 11,000 crores. New business premium grew by 21% in Q3 with the total new business premium. And the performance was aided by the institutional business side as Bank Assurance Partners, Axis Bank, Bandhan Bank, RBL, IDFC First Bank and India Post Payment Bank has started contributing well. Excluding the fund business, the Group Protection business, our word de grew by 12% during the quarter. This is largely dependent on the credit offtake by banks and NBFCs and MFIs. While it is improving sequentially, it is still well below COVID levels. Balix has also recorded a strong 26% growth in renewal premiums. While there was some pressure on the thirteenth and twenty fifth month persistency, the Balix persistency has improved well on the longer vintages beyond thirty seven month to sixty first month. Overall, we do see a trend where about 5% of the thirteenth month is collected in arrears after the thirteenth month. Bialik has now a formal guarantee policy and the forward rate agreements in place to hedge its interest rates arising from guaranteed products. Finally, both the insurance companies are among the most solvent. Balik has a 708% solvency and Balik has 330% solvency and the range of financially well poised. The requirement by the regulator is only 150%. Finally, on Q3 FY twenty twenty one was a satisfactory quarter with Dialog pushing forward in growth, while Dialog recorded excellent profit growth. BFL is now looking forward to getting back to growth with a close eye on risk and the credit cost due to the lockdown and moratorium have largely been resolved. Before I open the floor for questions and answers, I have a small request. Please try to focus on the bigger questions on the larger issues. We have gone through a very difficult time and come out in a very satisfactory manner, and we are very optimistic about Q4 and FY 2022 as things stand today. We are in long term businesses, particularly in the insurance side, and one quarter's result is not really an indicator, and the capabilities that we are building over the long term is what drives our company and what has driven our companies in the past. Thank you. I now open the floor for questions and answers. Thank you very much. We will now begin the question and answer 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. The first question is from the line of Dharwal Ghara from DSP Investment Managers. Go ahead. Yeah. Hi. Hi, Srini. Thanks for the opportunity, and congratulations on good performance. I had two questions. One is related to the motor business, and I'll split the question in two parts. One is related to the TP, you know, loss ratio. And I think you mentioned in your commentary around, you know, claims getting delayed in terms of settlement. And therefore, we from 1Q onwards, we've seen, you know, like, loss ratios at a slightly elevated level. I just the question is when we see sort of normalization in your assessment And any sort of, you know, approximate time line on this would be quite useful and any monitoring around it. So that is the first part. And the second part on motor is related to growth. So I think one of the conversations which a few quarters back we used to have is around discounting by certain players, and therefore, we were not so strong or aggressive in terms of growth in the segment. How is the environment right now? And how do you see market share gain opportunity going into next year? So that is the second. And the second part is on the life insurance business. So we've, you know, made this transition towards mass affluent customer segment. But when I look at persistency data and the early early month early vintage persistency data, it doesn't seem to sort of reflect the benefit we which we envisaged while seeing this migration. So at what point do we see the persistency number move closer to where the larger players are given the migration that we have done on the customer acquisition side? Yes, those are the questions. Thanks. Thank you. I will just take a high level answer before I hand it over to Papan first and then Tarun. On the motor third party, as we mentioned, the courts are not operating at full capacity. And as you know, under actuarial principles, we are supposed to provide for the ultimate and expected losses. Clearly, there is a substantial amount of uncertainty over this and the actuaries do take a fairly conservative view. That's all I've seen are claims triangles that we publish annually. And we continue to be on that basis reasonably conservative. As to when this will normalize, I think I think it's a million dollar question. There's no specific answer, but things are improving quarter on quarter, and we wait and see as hopefully the vaccine drive works very well. We think things should be coming back to normal. On the second question on motor discounting, I have nothing much to say except that discounting is nothing new for Badget. We have always been very strong players in motor insurance across wide variety of channels. We have MISP. We have we work with brokers. We work with agencies. We have our own virtual points of presence. We also have our proprietary Salesforce. We have our online b to b b to c channel. And together, all of these, we are working very closely based on our assessment of profitability, effective price, and where we can build a sustainable business where we can acquire, keep, and grow our customer base. In terms of persistency of life insurance, yes, in the past, we had moved on to higher proportion of mass affluent and above. And majority of the persistency impact has been on the unit linked business where as you know, the higher ticket affluent people have been holding on for the last six months. But in the last couple of months, we have seen good traction in terms of appetite for risk, in terms of buying more unit products. I'll now hand over to Tapan to add to this and followed by Tarun on the life insurance persistency basis. Tapan? Yes. Thank you, Srini. I think you sounded well. See, as courts open up and cases are getting settled, we shall see the thing getting normally in terms of how settlement is happening. Now one way when you have TP claims getting settled, interest is calculated, no, from the time of the loss, which is payable. Now if you look at reserving, which typically done is based on your past experience of a normal settlement time. In today's time, because of course being closed and settlement getting delayed so let's say one year delay has happened. No? So if a one year delay has happened from a normal time, the interest in that one year is going to be added to the order which is going to be passed. So, typically, what is gonna happen is if you have a book, no, which is, let's say, if I for a simplification, let's say, a 100 rupees reserving that you have. Now in normal time, you would be doing a 100 rupees because that is normal pattern that is falling. But now this one year delay, the interest of a 100 has to be provided for because that is what the judgment is coming and is going to come because you've seen a few judgment. The interest is there for that period in which is not being settled. And that is what what Srinivas mentioning is what we, you know, provide for. And as courts open up, settlement starts happening, but this lag of this period of, you know, whatever time when something has not happened, will obviously and part interest will be paid on the book that you already have, which is there. So that is why the reserving has to be strengthened for this particular part, and that is what we have done, and that's why you see that CPE loss issue there. The second issue on motor discounting, do the market forces. They will continue to operate in terms of each company has a strategy, what they find good, what they find wrong. And we also have our own strategy. We keep on doing business in which we're able to serve customers well. If you look at our claim settlement ratios, if you look at our Reviance ratio, the lowest in the industry, if you look at IDS sites and it's all available in the IDS side, look at settlement ratios on the best in the industry. So I think our our focus is very clear. We wanna serve the customer very, very well. We don't want to be in the game of not just giving discount or zero discounting. We try and price the risk for what the risk is supposed to be. And that's what we shall continue. We're doing it from the beginning and continue doing in in the future, and that is what our focus has to be. It's the customer service claim. We are in the business of paying claims. I mean, let's be clear about it. And that we don't compromise on. No? And that is what we are focusing on. I hope I will will answer your question. Just just one clarification. So if the this delay in settlement were not to happen, would the loss ratios, which were around 65, 66% in motor t p, would have been lower because the incident rate would have been lower. Is that right understanding? Yeah. So if you look at the incident rate again, no, depends on how many cases have come to the court, no, or which have come to you or you got intimated. Right. If I look at the lockdown, no, the private cars initially were no off the road. But if I look at commercial vehicles or if I look at, no, other minus two months, they started moving, you know, on the road. And if you read newspaper reports of lot of actions happening for migrant labors and all the way, those claims have to come as yet, you know, for us to make a judgment that is the incidence rate low or high. So the integration has to come. And if you look at third party claims, there's a time for it. No? And the average time where the incidents are are maturing is about four years when we get reported. That is how it has been. But on the own damaged part, he has the frequency had reduced, no, for those lockdown periods. But if I look at today, we are at pre COVID levels, no, in terms of our frequency and the claim on the own damaged part. Already is there. So if if the own damage already is there, to to assume that TP has not picked us, no, just because you don't have intubation, but that is a trend. In TP, you don't have immediate intubation. No? You have immediate intubation coming through. So I think that as time progresses can tell. Understood. Thanks. Thank you. Okay. So let me come on the persistency bit for Balik. Hari, it's a good point made, Dhaval, and we're totally cognizant on the fact that there has been a 2% drop. Let me just give a little bit color to this data. But, actually, before I give this, let me just give you a little bit of a trend because you talked about the mass affluent and how we moved as a company. So I think your your point is absolutely on target. When there is a movement from mass to mass affluent, these things should guys start getting better. Customer capability to pay is getting better. And we have had a journey. We've moved from, you know, we weren't so great earlier in the early fifties, and now we are in the late seventies. So the journey is directionally positive, and we have moved from average premiums, which are half of what we are today. So the movement towards mass affluent is strong and sturdy. But let me just also tell you that we do have segments where, you know, we write policies where we have, like, small finance banks and others as partners as well. So that is a small mass segment that is there. Although, as Shini correctly pointed out, and until now, I've answered your question on the mass mass affluent, really. So the point I'm making is there is a segment of mass, which is on proportion basis because we are relatively smaller to the listed companies that you also track, is a little higher, given we are one of the largest players in the SMB segment. But having said that, the persistency is showing a very different kind of movement on the HNI side. And I've been interested to see if, you know, you see something similar in the other listed companies as well because this is something we are kind of learning as we are going, and this is a unique time. So just a little bit color on this. Upwards of 3 lakhs, Eulips, we are seeing we've seen a drop of persistency by almost 4.94 5%. And then if I look at the various profiles of of investors or customers who've been with us, we are seeing a segment which has actually gotten unemployed. And there is about a 5% drop from in that segment. Plus in the housewife segment too, we are now seeing a drop. These segments have been robust in the past, but as unemployment is impacting particularly and the higher ticket is getting hit, My my guess there would be that this is a lot to do with the self employed who who are now either keeping some money in their, you know, in their own in in cash with them and deploying it back into business. That is possibly impacting us in numbers. It's when you start going from the late seventies to the eighties, and you're working on fine margins. Right? So every every bucket has to get better. So this bucket has actually gotten a little worse. So that is broadly how I'd say it, but, largely on EULIPs, thirteen month persistency has actually dropped. So that is one key segment. But the positive bit there is that these are only early signs as the year progresses. See, because there is a thirteenth month and then there is future buckets that start coming in. So, I mean, of course, the IRDA benchmark that all of you also look at is a thirteen month bucket. But I'm more interested, honestly, in the second premium, whether it comes now or thirteenth, fifteen, sixteen month because an actual evaluation that doesn't really have much of an impact. But in COVID, it becomes very necessary to look at. So already, I'm seeing that my rolling bucket of the past has gone upwards of eighteen. So it is it is getting better, and this is only going to help us. The difference between us and the other listed bank assurance companies is that a very systematically large proportion of HNIs for them come from the bank side. A lot of us for Balik, although it is agency bank and and the proprietary channel, which makes a big difference. Because if you go to a bank now, I might have data of on customer mobile numbers, but there may be contactability data which I can clean or wash through with the bank. That bit on bank assurance does have a little bit of a upper edge, and I should very clearly tell you folks that that does impact persistency because contactability tends to get better. Understood. Thanks. Thanks, Arun. All the best. Thank you. Thank you. The next question is from the line of Bharat Shah from ASK Investment Managers. Please go ahead. Yeah. Hi, everybody. Once again, delighted to see the progress on the life part of the business and continuing strength in the general insurance. I hit basically one point to discuss about, which is about the technology. Now, you know, collections and payments being done digitally and policy issuance being done digitally is routine and bread and butter application. But from the point of view of how much is technology first is the DNA of the firm in terms of conceiving, creating, and executing things from digital perspective. Because in general, services are most amenable to digitization, and finance is at the intersection of that particular financial service as well as the technology. So we see that over the period of time in Bajaj Finance where things are conceived from that value and mindset. And it is important to have that DNA of technology as a fundamental approach. So from that perspective, where do we stand and what are the plans? Yeah. I will take broadly that question. I think while the guys finance has been showcased, I think the insurance companies are not far behind except that, you know, we are also looking at changing our entire core system. We are in the midst of big projects in both the companies to also make our listing adaptable. Secondly, we are investing heavily in analytics and our digital capabilities. In terms of servicing such as on the spot claim issuance for motor or health, I think we are very much ahead of the market in terms of that space. I'll now hand over to Tarun and Tapan to take the question further. Okay. So this is Tapan Singh, earlier. Good question. But let us understand the two business, that is lending and insurance, are very different businesses, and their requirements are very different in terms of deflation. So if I look at, let us say, the insurance business in terms of deflation, what do we basically do is we issue policies, certain claims. And how do we do it? Insurance business is basically distribution driven. No? It's done by distributors. So most of the advancement in technology will happen in the hand of distributors, which should be there. If you look at Badgeek in the year 02/2013, started something called VSO, which is virtual sales office. And we set up about thousand locations. You know? We have already closed about a thousand crores of premium there, set a massive distribution without any physical infrastructure. It was the first in the country and maybe to a large extent among the first in the world where something like this was experimented. Today, I'm happy to see most of my competitors also copying that footstep and, you setting up those kind of distribution with you there. Now that could not happen if you're not distally strong because they're settling policy issuing policy, settling claims at the doorstep of the customer just using a tablet, no, without any physical office presence. I think that was a very massive movement. Like Sridhar mentioned, I don't think that we have been talking about it, and that is why this question have come. Now second, if you look at, by the year February, I think, 1415 itself, we are among the first in the world to settle claims on the spot using, machine learning, uploading of documents, scanning, OCR, whatever technology is used. So we look at if a claim happens on motor, even today, if you are a automobile customer, and god forbid, if you have claimed up to the limit allowed by ID, you can actually get down from the card, use our app, click pictures, upload, and you transfer money to your account in twenty minutes time. We do it even today, and it is one of the most advanced position in the world. Now quite a few people are doing it. When we started it way back in our 02/1514, I don't think there's any company which is taking doing that. Look at the travel customer of ours. We're traveling. There's something called compensation for the flight delay. We use blockchain, and then, you know, if a flight delay happens and if you have registered it through the app, your travel policy, and you put it there, you actually get the claim paid to your phone even without you asking for it. You know? So from a digital perspective, I think as a company, you've been the front run runners of innovation and pushing things forward. Now the point that Sini was mentioning in terms of the core, if I look at it, we are the first, again, in the nonlife business across the world maybe, who is putting up the entire core, that's TCS Bank that we are now working with on the cloud. And now where have you heard somebody moving the code to the cloud? But our belief is with the number of transactions, the hyper speed at which things are happening and innovation changes happening, you can't have a code which is on premise. So we took the bold step, put it on. It's already gonna showcase the world in terms of company which is challenging and pushing this to that level. So I can go on and on in terms of the digital infrastructure that you created, but we are pushing innovation and what we are doing currently. And, like rightly, Benjamin Shini, I think this is something that we could talk more about it. But thank you for the question. Give a chance to speak about it. Thank you very much. Yeah. So, Tarun, here, let me just address this as well. I think Tapan and Srini have done a brilliant job already. Bharat, I think it's a very good question as always because numbers are finally an output of all the inputs that go into building the company. Particularly in Valek's case because it's a big U-turn you're seeing, this becomes so so much more important. So, broadly, I'll just quickly address it in four layers. I think one, you know, it's upon touched on on the the core policy systems. So Balik two is moving away from legacy systems, which all companies in the country today have. We are actually setting up a core which will be on the cloud, and it's a first of its kind system in the country. And, actually, not just in the country, in the world. So we we partnered with Infosys for this. Its system is called engine, and it's it's being set up parallelly to our existing core, which we have earlier sourced from Allianz. So a lot of things are going to be determinant on this because how soon and how often and, you know, whether virtually you can reach out to the core in a secured manner is very simply to put, is gonna decide how this future really moves for various companies. So we've already taken that sturdy call. Although this impact doesn't start coming in just ASAP, it takes time. The core is getting implemented. It will take a few more years in the case of Balik because these are long term policies which have to move. So that that is on the core itself. And there is a digital layer. I think everything else, which is CRM, CCMs, customer relationship management, customer communication management, and all other set of architectural layers that can come in, all that is already in the process of getting digitized and separate systems have been acquired and put in place. A lot of our expenses actually and investments are going into this as a company. The third layer, which I think gets referred to particularly where BFL excels is on the data side. Bajaj, Allianz Life is pretty much on the same track. There's lot of learning we have from BFL, which we've been gladly taking on. And I must say that we've only just benefited because the group is very positively inclined towards data. So as a company, we are only just getting better and better at it. The good news there is the life insurance data because we capture a lot of data points on customers much more than any other financial services sector. It is really a boom. And how to be able to upsell, etcetera, becomes very critical. I mean, one very clear outlay of the output is the fact that proprietary sales channels, which is about 10% of the company, was something that started three years back, and it's totally dependent on this upselling data. And it just goes back to existing customers and based on profiles, offers new new new policies, new services, and just kind of gets more ingrained in that household in in terms of a relationship. Because, ultimately, ours is a lot pretty long term relationship product. I think that's what we are getting to. The fourth layer is is really the innovation layer, if I might call it. And I think one thing we are very clear about in the group itself is that we don't do innovation for the heck of it. We do it based on context and and benefit to the customers. And one clear example of this has been the the one you'd we have seen in earlier decks, which is a smart assist. So we really saw that today's problem was social distancing and customers unwilling to meet. So around September, October, we launched a product where our secured app on which today you are you would buy a life insurance policy can be done on a a distant basis. So you need not be sitting next to me and looking at paper. I can be sitting five meters, five miles, 500 miles away from you, and you can actually talk to me, converse, and do form filling on that. So that's done very well. 21,000 policies and five times that multiple in terms of customer interactions have already happened through that. And that's helped us in q three as when he talked about how, you know, we've kind of moved. So I think you should be rest assured that in BFS group, each of the companies will be only just doing more and more, and I think that's the core of the group. Yeah. Thank you for those very detailed responses. One last point on that. You see, technology has become inevitable across the businesses, and increasingly businesses will be fusion of both physical and digital. So that's given, and, therefore, there is a constructive pressure on all the businesses to adapt technology. My new question was when technology comes from is a core DNA of the business of the heart of how we do things, then our technology responses are proactive and in anticipation rather than delayed and reactive. So the issue that I wanted to understand was, is technology at the heart of what we do and how we conceive? Of course, the business remains prediction and cover and to do it efficiently at intelligent cost and in in adding intelligent value to the capital of the business. But if if technology is seen as the core to the business, then our responses, our plans are of one kind. And when it is seen as popular thing to do or need is felt in the environment, then our responses tend to be even if they are efficient, they tend to be of a different kind. So I wanted to understand whether how far is it central to our scheme of things. I will give that answer, Bharat. I think across the group, I think we are very much focused on technology. However, the way we look at technology is that it has to be a digital business where technology is the significant enabler. Anybody can buy the technology, they can copy it and they can use it. But how smartly you use it will make the differentiator. BFL obviously is in the lending business, where it is more about managing risk than demand because at a certain price, there is unlimited demand for lending. Our insurance business is highly regulated. Even for the regulator to allow, full digital issuance of policies, I think it required a pandemic to allow, to enable that. There is a considerable number of rules and regulations. Every product has to approve. The product goes through us maybe a six month cycle of approval at IRDA, and the final output of the approved product may not be exactly what you wanted. So we are in a business where we have these significant overhangs. Within that, we have to operate. For example, if you take commercial vehicles, commercial vehicles, largely people buy at the time of buying the vehicle along with the registration. The insurance is also sold, and there is a whole lot of intermediaries who work in that space. Now we have to work with those intermediaries because when you buy a commercial vehicle or a private car or a two wheeler, you're not going to change your car because there is something else because the insurance is cheaper. So therefore, if you see even b two c businesses across India have not really picked up in a big way in the general insurance space. In the life insurance space, it is all about savings. In the long run, you have to deliver on your promise to the customer. You have to deliver a superior return. So if you use technology which are not adding value to the customer or where the customer does not pursue value, then you're not going to add significant, you know, value in terms of the savings or the promise you made to the customer. So given the context of all this, the whole focus of technology in the group is to enhance customer experience, make it as simple as possible to buy a policy, and make it as simple as possible to make a claim. More importantly, when there is a claim, how fairly you assess it. And I think both our companies, I think, stood out on those counts. You can look at all kinds of statistics. You can look at the Grivan statistics. You can look at the claims settlement ratios. For example, if you look at health claims, the rejection ratio of badges, because health is something which has considerable number of pre existing conditions and other clauses, is probably in less than 5%. But if you look at many of the peers, you will find that there are more than 10% of the claims are rejected. So we are very focused on customer experience. In insurance, we do deal with across the spectrum. We do with businesses. We do rural businesses. We do very small ticket businesses. We also do the affluent, the HNI, and the whole gamut of customers. In lending, one has to be selective as to which segment you want to lend to and you want to. So we combine all this. At a BFS level, we have very strong institutional framework to address technology, to transfer knowledge, and to encourage people across the group to actually, get together and learn from each other. Obviously, the new risk that we are seeing across the group is cybersecurity, which is becoming more and more important. And in a few months' time, we will have the data privacy bill as well, which will post a further layer of, you know, diligence that is required. So compliance costs are high for any regulated industry. Within that framework, depending on what the regulator allows, I think we are really on top of technology. And as we go around, if you ask me three years from now, a lot of the stuff that we do today will be seen as bread and butter, and the stuff that we are doing then would become a lot more appreciated by customers and all other stakeholders. Pawan, Tarun, anything else you want to add? No. I think, Sriniv, you did a a beautiful summary. You summed it up very, very well. You so much, and all the very best. Thank you. Thank you, Bharat. Thank you. The next question is from the line of Ajax Pedra from BNK Securities. Please go ahead. Thanks for the opportunity. I have two questions, one for Badjit and one for Balik. The question on Badjit is with respect to motor OD claims. Of course, sir, it has been better for us versus last year. And you did mention about the frequency reaching almost to pre COVID levels. So the only way that can be true is that intensity is pretty low. So how or how far can we extrapolate this into the future of for the intensity being low, or is it because of the mix shifting into per rupees savings? Okay? So yeah. Thank you, Shri. Should we look at it no. I think let's understand why the loss ratio for motor OD looks lower. It's a cumulative loss which you see. No? So what actually happens is in the month of April and May, the loss ratio dipped because the vehicles were not in use, and it was low. By making a statement that is back to pre COVID level means the loss ratios have reached the pre COVID levels as we progress now. So going forward, it will be the way it was before COVID. And all of us, if you look in the streets, you actually see the traffic back to normal. I think I remember in the COVID time, as you come to office, it was, like, no, one tenth the time I took. Now does it take me the same time it used to take me before COVID? In fact, sometimes more also now. So I think the vehicle on the road has reached what it was before COVID. So, obviously, the loss issues also. Also, the actions also has no reaching the same level as it was the pre COVID time. That is the statement. So I expect that it will not that's a normalized amount in terms of what loss issues are there. It'll continue there in terms of the quantum of loss and the frequency. Now loss issue also component of what price are you charging. So let us say if people have started charging less, you know, and the frequency and the severity is reaching the pre COVID level, then obviously, loss issue for the industry will start shooting up. That is a discounting in the market as we observe very carefully. So when the lockdown was there, it was less. And that's it cumulatively, it looks less. But as these months progress and no fresh lockdown comes in, then I think you start seeing that from a pure quantum of loss in terms of frequency and severity, it will be where to speak of it. But the price charge has been lower, then the loss issues are shooting up, you know, as months progress now in the motor business. So that is what I would be seeing as we progress further. So that was my answer to your question. I hope it I could answer what you asked. Yes, sir. So even in March, we had that, like, clock down effect for us? No. So it was it was moving up. No? So if you look at it starts breaking up quarter wise. No? You will see the frequency and the severity. No? It's a sign moving up from April to June to the lowest. The second quarter, it moved up. Now third quarter, as I told you, is relating to the COVID level. In the fourth quarter, it was the most interesting to watch. And as you get segment wise loss ratios and data from my idea, sites, it's very interesting to see how, you it has moved on and how the industry has, you know, played this on to see that. So I think that is the time when you likely you know, will be good to see. And then you see my words, what I mentioned to you, that with the frequency and the severity reaching pre COVID levels, if industry is charging less than the pre COVID times, then the loss ratio start going to hit, you know, in the fourth quarter much higher than what industry saw in the pre COVID time. So let's see how it plays out. No? Okay. Okay. That was helpful, sir. So the second question is on Badliq. The the we we saw some very strong growth on the institutional business. So what kind of businesses are these savings, protection? And if savings, is it because of us aligning in the foreign market that's giving us an advantage into that? Yeah. So, yes, the impact has been more pronounced positively for the institutional side. And as you know, Valek hardly had any institutional business for five years back. We used to be 91% agency. So that movement has been has been strong. There's a lot of ground that we have to cover, and I think that's getting covered. So, yes, from channel's perspective, institutional is the one which is contributing to a lot of that growth. In terms of the product mixes, it's currently a very low percentage of term, particularly in the last quarter as we're seeing and Sridhar talked about it in the earlier part itself that it's it's now balancing our term is maybe currently recalling in terms of growth. It's it's it's coming down as for the entire sector as a percentage overall. Maybe it will balance out once this entire price increase has gone and will get stabilized. So so having said that, the initial two quarters was pretty much in line even for institutional business where the term was was going up going up segment segmentally there as much as in the agency and the PSF side. And so but that that doesn't come down proportionately, like, for the entire entire company itself. But, yes, the non par and even the par, I'm quite happy to say, is actually selling well in the institutional side, which usually is restricted to the non par. As far as the risk side, which you just kind of allude to, yes, we are totally covered by fraud on the nonpar side, and we've actually had a very good I'd say, very comforting hedging strategy in the last four months. That has only just helped us, you know, stabilize IRRs, stabilize MVVs, and feel a lot more comfortable on the guarantees that we have. Got it, sir. That that was very helpful, sir. Thank you. That's it from me. Thank you. The next question is from the line of Nideesh Jain from Investec Capital. Please go ahead. Thanks for the opportunity, sir. Firstly, on the vendor insurance, sir, given your commentary on the motor OD loss ratio expectation in the future, do you expect price hike to come into the industry next year or in in in sometime next year? That the market forces decide. So I I I just won't think how it goes because every company has their own strategy. If you look at industry combined ratio, and this again in the world is not seen before, 2007 pre pricing happened, and now it's, what, 02/2021. No? Industry combined ratio has been way over a 100 for such a long time. If you pick up any case study in the world for the GI industry where the combined ratio has been so high for the long time, no, you may not find so. I think this is unique in its own way. And that happens because quite a few companies are comfortable with a high combined ratio, and they're comfortable with that kind of status. So to predict how the market would move in terms of pricing, it would be difficult. It depends on each company's strategy as to how they would like to push on themselves and how they would know like to be there. See, just to add to what Tapan said, see, it is about selection. See, there are two aspects to choosing business in insurance. One is the price and one is the selection. The two are linked. At a certain price, where do you want to select? And our Badgic's effort has always been to find more and more granular ways of cutting and slicing the business. It is not something we started two years ago. It has been there for the last twenty years. So we will continue to do that. We are sharpening our analytics. We are sharpening our technology. We are sharpening our data lake. So quite a lot of steps we are taking at the back end to continuously improve this. So at any given price, we would be able to select better customers because on an average only about 25% of the customers will have a claim in any given year. The challenge of underwriting is to select the 75% who are not having a claim based on data analytics and propensity models. And we'll continue to do that. Sure. This is about it. Dynamically, it seems like in motor only segment, we have lost some market share in nine months, and probably in q three also, because the probably the price is not adequate. No. I think it is largely related to commercial vehicles, especially passenger vehicles because we were more aggressive on commercial vehicles two years ago, but after COVID because of, you know, loss of production. So motor OD is not a segment for us. We have private cars, have two wheelers, we have commercial vehicles, we have multiple cuts within that by make, model, geography or goods carrying, passenger carrying. And based on what we see at a given point of time, we will take a call. And that is how this business is very dynamic. What works today may not work tomorrow, and what worked yesterday is not working today. And you have to be very agile and fast. Tapan? Yeah. I think that's the change if you look at. I think passenger carrying and the data is being available, it is yet not back to the pre COVID time. So car sales moved up. And I think the presentation, it is mentioned, if you look at the growth in the two wheeler and the private car for the quarter, it's all industry. It is not that we would have lost that portion there, but passenger carrying vehicles have not moved up to the pre COVID levels in terms of the sales or in terms of the way business is moving. And we had a good sense of commercial vehicle, the right segment again, and that is why you look at our loss ratio was good. And as you see now, that has come down. So obviously, a good segment that we were strongly present in. When that comes down, then it takes time for us to make it on other segments. And like Shini said, we it's a very agile business. We keep on moving and not seeing where and what opportunity lies, and we keep on taking it on. Thank you for accepting. On the life insurance protection, business has been quite volatile. In q four and q one, there was a very strong growth, and it has become almost 17% of our AP. And and then it suddenly declined to 5% of AP in q two and now 4% to of AP in in q three. So if you can just explain what is happening and what is the strategy going forward? Yeah. Yeah. I will I will just respond to that. I think it's a it's a good point. And, I mean, it is the pretty much the trend that we've seen in the sector. Of course, companies have been in term life for longer than us, have learned their hopes on it, and maybe they would be settling on a little bit higher percent product mix than we are at today. So, see, we are, of course, focused on the term side, but we do not want to just make this as the core. It is it is also something that customers want to buy. We should not forget that India is average age of 29 where some will sell, of course, but it will not be always the first product while it maybe should be, but it today isn't. So in terms of strategy, we are focused, but we are not going to be, you know, kind of making it so critical that we do not you know, we just focus only on this being the major product mix. It will be an important part. Let me put it this way. As we go by, we are we are looking at ways of issuing policies a lot more quickly. I think the big issue around this around the term is around how soon you get the policy issued, what is the kind of process we follow, what is the kind of reinsurance guidelines. These are things that have, you know, molded the sector in in this year, and they have changed so much in the last six months where reinsurers have struggled themselves and passed that struggle on to the life insurance companies as well. So we need to have this stabilized and then, you know, start looking at things afresh. But like I said, it will remain a very critical part, but it's not that we we kill ourselves only doing stuff. Sure, sir. And then lastly, do you expect further reinsurance rate hike on time insurance? I think for the time being, it has stabilized. I do hear some reinsurers who are dealing with some other companies who have developed concerns with them, but this is all hearsay currently. I think we we should wait and watch, but I feel at least in our book, we have stabilized quite well because we've been quite mindful of the kind of policies we're writing. Sure, sir. Sure. Thanks a lot, sir. Thank you. Thank you. The next question is from the line of Hitesh Bhilati from Haitong Securities. Please go ahead. Yes, sir. Thank you for taking my question. Sir, I just wanted to check on the pricing in group health because you mentioned that group health pricing has probably deteriorated. And also on crop, sir, because I think crop pricing has improved this year. So does that explain how why are the claims ratios down in crop in nine months and also growth has been strong in Q3? Let me take that upfront. Group Health, Tapan, will give greater flavor. But on crop, I think this is now the since 2015, the Fasalbhima Yeojuna was launched. It has undergone many metamorphosis in the process. And today we are in the sixth year. We have consistently maintained a similar level of crop insurance throughout these six years. And I think every year we have been able to deliver a very good underwriting result. As we mentioned earlier, this is not a float business because governments do take time to pay. So it has to work on combined ratio. It is because of the size of the risk, it has to be heavily reinsurance driven. And we have one of the best reinsurers in the world to support us. So therefore, crop insurance is something we take a call every year. We do stress test to see how much is the downside, what is the upside and we have taken. And over time, we have built a lot of capabilities, which I think Tapan can again further expand what I'm saying. Tapan? Okay. So let's look at group health. I think what was our assumption on group health so that, you know, we get an idea about it. So if you look at the group health, it's an annual contract. You know? And if I see how COVID was coming up and the way COVID change, you started rolling in. And I also if I look at learning which we have from the SARS issue a bit many years back, in Hong Kong, when SARS was there and what happened to hospital claims when SARS, you know, ebbed out. Actually, short of months before levels, what was there when SARS happened. So we combined the two together to make a guess on the pricing we write or not write for group health was a bit difficult because if COVID claims and the way it actually went through the roof in the month of September, October, August, know, these were 400 odd percent and start going up in terms of how it is moving up. And now with COVID coming down, the hospital claims moving up, So we we thought it's better to be a bit low on the group health policy because on an annual contract basis, it is not like a retail health policy where, okay, fair enough. You lose have a high claim issue this year, but next couple of years will be better. And a group health is an annual contract. It gets over with that. So that is why for a group health, and that's the point Shini mentioned, in terms of the pricing, we were a bit cautious on that. And we said, no, we'd go a bit slow here because not very clear as to how it will pan out. On the crop business, I think Suneet said it beautifully. We have been doing it over five, six years. Another it's not a hobby for us. No? Consistently, we have delivered good results in the business. It's not about price moving up. It's about selection of, no, like for all our business, do selection of risk, was spread, our commitment to the ground level, our commitment to serve well, our commitment on the technology part of it, and be one of the leading players. I think I mentioned in one of the previous calls also that as a company, we want to be in all lines of businesses and in all distribution, and we want to be one of the leading key players. And for that, we work hard to understand the business and do it well. I mean, that is what we have been doing consistently for a long time. So it's not like one of that we say, no. Get this quarter. This has happened or that has happened. It's part of our business plan. Thank you, sir. That's it for me. Thank you. Thank you. The next question is from the line of Harshita Krishnivam from CNG Invest. Please go ahead. Hi, sir. Congrats on the numbers. Can I audible? Yes. Hi. Just two questions. So one, that yesterday on the last finance call also, they said a lot about creating the ecosystem and marketplaces for insurance, asset management product, etcetera. Just want to understand that how cohesive the the entire group's decision is with respect to so when they say it as a marketplace, do they mean specifically for Bajaj products or they mean that they would want to be a platform for all the all of the insurance and asset management product? Let me take that question. Bajaj Finance, as you know, as a corporate agent, they're allowed to have three life insurance, three insurance, and three health insurance. And they have never been exclusive corporate agent of our group companies only. So our focus is on what the customer wants. And Bajaj Finance without the type of business they run and the various verticals they run, they have a variety of customers. You have retail customers, B2B2C customers, B2C customers, personal loan customers, home loan customers. Depending on that, I don't think there is any one company which can meet all their requirements and also meet their underwriting requirements. So it is for that company to decide, the insurance marketplace obviously will now provide a digitally seamless platform where the customer can choose from multiple insurers. And so as a distinct, they are a part of their, strategy, which Rajiv must have talked about. It will be like that. The next wave of that will be also the investment marketplace where they have their own FDs, but they have, they will now offer mutual funds and other investments. And therefore, across this customer has a choice. Now we are very confident that because we have strong companies both in life, non life and others, we have the lion's share of that business, of the type of business that the companies want. So there is interaction between the companies. Some of the ecosystem is common to all the companies, especially on the digital technology side. Some of the ecosystems are unique to each company because of the nature of their businesses. And as we go forward, it will be more and more about the ecosystem, the partnerships, and how well we combine across the board. Okay. So it is not a particular risk for any of our companies because you could say that the mind, the investment marketplace of BFL could be a competitor to its own strategy of acquiring FDs. But it won't be like that because there will be a specific focus on driving FDs, the value that they offer, the security that they offer will also drive customers' demand for those products. Similarly, insurance will be driven more and more by the claim experience, the product range, and the ability to quickly deliver what the customer wants. Got it. Got Got it. Thanks for the explanation, sir. And maybe just one more thing. On the crop insurance, when we look at the current loss ratio, so please correct me if I'm wrong. I think this is the credit season which is getting reflected for the rubbish. We are going to get the numbers in Q4, Q1. That is right. Q4 will be the time we write the premium. We make estimated provisions based on information available because we track the growth of the crop across all the clusters, over the, you know, sowing season till the harvesting. And based on that, we have a reasonably good estimate as at March. The final determination will be sometime in April, May by the state governments and the federal government. Okay. Got it. Sure. Thank you, sir. Thanks a lot. Thank you. Thank you. The next question is from the line of Sankip Godhal from Spark Capital. Please go ahead. Yes. Thanks for the opportunity. Just wanted to understand that, right, you have mentioned that excluding that probably we have taken yeah, high price hike in the retail sales segment, which I believe from October 1 onwards, many players have done. So so just wanted to understand on some of price hike we have taken and likely impact of it on combined ratio Because because do you think because of more intrusions happening, the the severity could potentially go up and for combined ratios, can deteriorate for the kind of price that we have taken, or or you think it can potentially improve? I mean, the severity is not changed meaningfully. That's the first question I have on Badrik. And and the second question on Badrik, I just wanted to understand even even our PCV or passenger commercial vehicle have slowed down. Just just wanted to understand what how our motor mix looks maybe in the current nine months and and compare this with two previous nine months of of last year. So that that is those are two questions on. On, just just wanted to understand that we have seen a sequential improvement in the credit protector for for most of for for the current quarter and even in q two. So just just wanted to understand that given even we had bit of a negative experience with respect to MFI portfolio last year because we our negative operating balance was from MFI portfolio. This growth, what we are seeing or the revenue growth we are seeing on potential basis is is largely coming from from non MFI portfolio. Or or or if you can give me give us the broader indication that how much is active bank, and the five mortgage, some some some favor on the particular piece, basically, on credit projects. Yeah. These are the questions I have. Let me just summarize the question. The first question was on retail health, the price hike, and whether with this price hike, what will be the impact on combined ratio, especially with more and more people taking health insurance. Is that your question? Yeah. Even the inclusion is increasing because of the hype of more to consider more inclusion. So the severity will go up potentially in terms of the reason or not. Yeah. Okay. Then we had a question on Life Credit Protect, whether MFI portfolio is causing losses or whether we have a better spread of business across MFI and non MFI portfolio? Right. And third was on the commercial vehicles. You had a question whether how we are seeing the nine months and the rest of the year. Is that? No. I was just largely asking for the mix of motor, how it appears now compared to previous year, even commercial vehicles have declined for us in the the current six months. Okay. Tapan? Tarun? Tarun can take the MF and the credit protecting, and, Tapan, you can take the health and the commercial basis. Okay. So let's understand the retail health issue for the industry and then see how it moves. And I think on giving a mix of, you know, our segmentation, how much business we do what, that I would like to refrain from. So that's too micro a question. But on the industry part, I'd like to answer that to the retail health. So as per relations, we can't increase the price, you know, for three years. So you have let's say, if you increase the price, then for three years, you can't increase the price. There two things to it. If you look at the medical inflation, that will hover from 12 to 15%. And the hospitals in India are not regulated. So from that perspective, price moves up and resolves in COVID times, how the prices started moving up for the treatment of COVID, which is there. The third thing which comes into play is that if you look at the book of Retail Health, on the first year, the loss ratios are in the range of, let's say, percent to 40%. And by the fourth year, they would be in the range of over one hundred percent, ma'am. That is for the same policy that moves forward. So it is not a simple calculation of how much increase we do and how the combined will start improving immediately and how does the market play out. It's a complex parameter of three, four big issues and more migrations, which seems to perspective. And then we decide how do we look at the business and how does it go So if you write a new book, new let's say, if you write a more new business, then overall, your loss ratio will look lower because the new business has a lower loss ratio compared to the older book, which is there. How do you balance the two? And how do you create a book which is long term standing and how do you serve your customer well is what the health pricing and how it is looting to. That's how it has to be done. And that is why, Shweta, that suddenly because of September, October, you saw a price hike happening. It happens once in three years. That is how the relations allow it. And then as companies see their books and they try and figure out at what segment, what they should be looking at and what is the right way to look at, that is how they do that. So that is what, you know, we have also done, and some company also done it. That is good. So which actually means that as the COVID and then the other issue comes in is awareness part of it, if you look at the retail health. In the month of April, the retail health growth industry was minus three. It peaked up in, let's say, August where it reached 40% and it had the corona product also in that. If you look at the retail book now, it's again back to about fourteen fifteen percent. So fortunately, unfortunately, if I look at the awareness level, peaks up in the crisis is high. We saw that in floods also when we saw Chennai flood or South Sudarakan flood. The awareness for home insurance was at high for about five, seven days. As the flood water receded and as things went back, the awareness level was as it was before as it is being going forward. Having said that, retail health is a huge chunk of business, which has still to be done. When we look at total coverage by the industry, it's about INR $10.12 crores. In fact, the government scheme covers about INR 40 crores, which is much more than what the industry has covered over so much time. So there's huge chunk of population which has to be covered. It's a very good product, and that is under one, and we should keep on doing that. The loss ratio will definitely, you know, get better with the price increase, but that is more a formula for pricing that I explained to you, not just simply a price increase. Thank you. Okay. Okay. Got it. This time, credit protection? So, see, the the trend in general on MFI and the the non MFI credit protect, there has been a degrowth more on the MFI side on credit product in the last nine months, and we see that continue even in the last quarter. But having said that, the the non m five part, the NBFC and Axis Bank as well, there has been an upside in terms of the credit protect in q three. Although, overall, the bucket is still negative, all of this put together, but q three has been relatively positive for the non MFI side. You did also hint about the past experience in non MFI in the MFI business as well. I think we've taken a lot of actions as a company, and I think I would say that today, as a company, we are way more led by lead indicators and lag indicators on how we manage the MFI portfolio as well. So we are actually a lot more stable and relaxed the way it seems as of now. Of course, it's a statement I'm making in the midst of COVID on the on the MFI portfolio as well. So despite the fact that, yes, it is a substantial part of our business and despite the fact that we have access in NBFC, I'm still quite proud of my MFI business. Okay. That's it from my side. Yes. Thank you. The next question is from the line of Hasmukhala from Finvest Advisors. Please go ahead. Yeah. I just wanted to know in the, Rajeet, what is the difference of net and premium and gross written premium is so wide? I think one factor will be definitely the higher reinsurance today. How how much would be the, you know, on x five reserve, etcetera? Because we don't have that with us. You're asking, see, in the general insurance, gross premium is what you get from the customer, net of GST. Correct. Then you pay the reinsurer depending on the type of policy. You may have different reinsurance arrangements. For retail policies, you normally retain more. For, large high ticket policies, you may retain less. Then if you deduct that, you get what is called net return premium. However, this net return premium has to be spread over, three hundred and sixty five days. The premium cannot be earned on day one. So you create a reserve for the amount of unearned premium. And after you deduct the net change in unearned premium, you will get what is called net net earned premium. That is the premium you book as your listing. You carry forward that unearned premium because till the policy expires, you still have a possibility of claim. And when that claim happens, you must have the premium in your books to offset that claim. Mhmm. Okay. Okay. Because, you know, in QT from PNL, we have seen that, reinsurance, it was almost 2,000 crore from gross written premium of 4,100 crore. And, this adjustment for changes in result was only 100 crore. So I just want make of business. No? If you write more of the higher ticket business, you will have higher reinsurance. Quarter on quarter, it cannot compare. Keeps on changing. Overall, it depends line by line if you check it. There will not be a significant difference. There will be some difference because every year we do, relook at our reinsurance treaties, but you won't find a major difference. But if you have more of the corporate business because this time, for example, fire engineering, there has been price increase, so their share of the premium is higher. So you'll find the reinsurance component is maybe higher. But when the motor and health are growing faster than the commercial lines, you will find that you will have higher retention and lesser reinsurance. So there's nothing specific that the company does to manage that. Okay. Okay. And my second question is in case of, you know, a lot of questions have been asked about the claim ratios being lower, and you expect more claims to come as things get to normal, especially on the motor side. Your crop claims also will start coming. So you think that you are reserving what we have done is quite adequate to cover those higher claims? The very fact that we recognize the problem early answers that question. Okay. And as more data comes in, we keep putting it into our actuarial models, and we keep recalibrating our results. Eventually, when all this blows up, we will know where we stand. And that time, we will know where we so just like the the banks and NBFCs are also providing for credit losses. If they know in April how much it will be, but by November, they have a better picture. By March, they'll have an even clearer picture. Okay. Okay. And the last question is on the unit linked policies. What will be our, strength going ahead in Bali? Arun? Yep. See, we are, we don't take any specific stand on products like the way you just said. Mhmm. We are a lot focused on segment, customer segment, and distribution segment, as well as the cities we are working in. Like, in Bombay, you'll find more unit linked selling. The moment Bombay starts thriving a little bit better, it's it's been struggling, I'd say, the last eight, nine months for all companies. You will see ULUPs going up. So these trends are actually ruled more by city wise plans that we've got and distribution segment wise plans. But, yes, directionally, we are working towards a product mix which is more balanced. And you would have already seen that impact that, Europe has come down. Yeah. And that directionally has been a conscious call. Yes. Mhmm. And shall remain. Mhmm. If I was to make a statement that am I comfortable with the amount of eulip that we are seeing, or would I want it to be higher or lower? I think at this point in time, I'm at I'm at a sweet spot. I like I like this mix. Would I want this to be higher or lower? No. I think it is just perfect. Okay. And as far as the group fund business is concerned, what is the extent? Because that has substantially increased in q three. Yeah. No. Good question. I think normally it doesn't get asked in these presentations. But this one is basically a very low margin product. Yeah. Yeah. Exactly. Yeah. At the same time, it's a very low cost product. See, because Mhmm. It's a fixed cost of, you know, your sales teams, and the the sales team the sales team is quite limited in size. It's like, maybe, like, maybe twenty, twenty five, 30 people only selling it. So if the throughput through that team goes better, you know, it's it's only just good. It's not a conscious push, I would say. So if I was to be asked whether I would do more of that than retail, I would do more of retail, of course. But if I am getting this based on the same cost containment, it's great because this then helps me, a, in terms of my brand. It helps me in terms of upselling. It helps me in stand alone profitability because group business by itself, group of employee benefits business is a profit making business. Okay. Okay. Thank you very much, sir. Wish you all the best. Thank you. Thank you. I think the next question the line. Last call, is it? Last question? We'll we'll take one last question. Yeah. The next question is from the line of Nishin Chawate from Kotak. Please go ahead. Yeah. Hi. Am I audible? Yes. Yes. Good morning, Nishin. Good morning. Hi. Hi. Just one thing I wanted to check was, you know, your views on the banking license. You know, if any you have any any updated view on this. See, that is there is an IWG report that is not a regulation yet. It has raised lot of questions. I think debates are going on. We will have to wait for the final guidelines. We had in the past, as you know, in 2013 applied for one. The situation was different then. We did not have ONTAP licenses. Then they brought in ONTAP guidelines, but then nobody really applied. But we'll have to wait and see what the final guidelines are. And whatever is good for our companies and our group, we will do. At this stage, that's all I can tell you, but we still don't know what the guidelines are going to be because RBI is responsible for weighing on the guidelines. And from a promoter point of view, is there any kind of a comfort that, you know, if you take those down to 25%, you know, is there some comfort that that that seems to be okay? Or Obviously, the higher, the better, and the law does not allow more than 26. But if it is less than that, we'll have to wait and see how we want to take a call. Obviously, that is that involves a much higher level decision than the management of the companies. Mhmm. But I think everybody sees that the problem, the risk, the opportunities presented by the banking license, the strength of the brand, and the, you know, the role of the promoters and everything there. I mean, the availability of liability financing. So we know what are the pluses and minuses of doing that. And as an NBFC, we are well capitalized now over the next three, four years. But if there is an opportunity coming up there, we will look at it on merit. And just one last aspect in this, in terms of processes or, you know, compliance with PSL, etcetera, are you kind of preparing for it, or are you well placed, or you would kind of, you know, want to do some of that? If we keep doing our math internally. I think if it does happen and we find the opportunity and we want to get into it, we'll be well prepared. Clearly, converting from MDFC from bank has its own set of challenges in terms of the asset side being logged in PSL. But as you know, we already run an SLR book. Our liquidity is almost, you know, stronger than what a normal MBSE should keep. We also do a lot of rural business on our auto finance and our regular financing side. There will be some gaps we will access as it comes. So PSN, we will take a decision. We will take a call at that time. We will do our math completely and then take a decision at that time. Sure. If I'm okay, CPFL is the only thing that you'll have to work on. Maybe. Maybe. Okay. Perfect. That was my question. Thank you very much. Alright. Yeah. Thank you. Ladies and gentlemen, due to bank constraints, that was the last question. I now hand the conference over to miss Bani Babji for closing comments. On behalf of GM Financial, I would like to thank mister Srinivasan sir and the senior management of the insurance businesses and all the participants for joining us on the call today. Thank you very much. Bye. Thank you. Thank you. Thank you.

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