Q3 19/20

Jan 30, 2020

Ladies and gentlemen, good day, and welcome to the Bajaj Finance of Q3 FY 'twenty Earnings Conference Call hosted by GM Financial Institution Securities Limited. As a reminder, all participant lines will be in 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 GM Financial. Thank you, and over to you. Thank you. Good morning, everybody, and welcome to Bajaj Finsar's earnings call to discuss the third quarter FY twenty results. To discuss the same, we have on the call mister s Srinivasan, CFO, Bajaj Finsar Limited mister Tapan Singhal, CEO, Bajaj Allianz General Insurance, mister Milan Chaudhary, CFO, Bajaj Allianz General Insurance, mister Talan Chuk, CEO, Bajaj Allianz Life Insurance, and mister Lamandeep Singh Zahani, CFO, Bajaj Allianz Life Insurance. May I request Mr. Srinivasan to take us through the financial highlights? Yes. With which, we can open the floor for Q and A session. Over to you, sir. Good morning, everybody. It's again our pleasure to welcome you all to the conference call to discuss the results of Badaj Singh Serv Limited for Q3 and nine months ended of FY twenty nineteen-twenty twenty. In this call, we largely be concentrating on the consolidated results as well as the results of our insurance operations through Vajaj Ilihan General Insurance and Vajaj Ilihan Life Insurance companies. Bajaj Finance, which is another major subsidiary of ours and which is listed, has already had its conference call. However, if there are any high level questions, we'll be glad to take that as well. We will not be taking any questions on the status of Allianz's stake in our insurance companies. The status has remained the same as at the end of the previous quarter, and there is no change. Any statements that may look like forward looking statements are just estimates and do not constitute an assurance or indication of any future performance result. As required by regulation, BFS has adopted Indian accounting standards from FY twenty nineteen, that is the last year. The insurance companies, however, are not covered under Ind AS. They have prepared Ind AS financials only for the purpose of consolidation. Accordingly, for PagSeg and PagSeg, the stand alone numbers reported below are based on non Ind AS accounting standards as applicable to insurance companies. The stand alone numbers of Bagic and Bionic given in the investor presentation, which was uploaded in our website yesterday, is also on the Indian GAAP basis. However, the consolidated results of BFL will reflect the India's adjusted numbers of Magic and Balik. Let me now take you through to the key highlights of the quarter. All the three companies, BFL, Magic and Balik have recorded strong growth in premiums. BFL has continued its stellar performance. It has recorded its highest ever quarterly consolidated profit again, boosted by strong growth and solid operating performance. BFL growth was also aided by the lower corporate tax rate. Both BFL and Paglik have already opted for the lower tax rate of 25.17%, including surcharge for this financial year. BFR recorded year on year growth of 35% in consolidated AUM, 41 in consolidated total income and 52% in consolidated profit after tax. Given the general slowdown in the economy, we believe this growth is quite exceptional. And it's once again a testimony to the strong momentum that GFL is keeping not only in top line but in bottom line as well. The GNP and NNPA as per expected credit loss method prescribed under index were 1.710.7%, respectively. Excluding the provisions for IFRS made in the previous quarters, the GFP and NNPA would have been one point four five percent and zero point five nine percent, respectively. Raja Housing Finance Limited, BHFL, closed the quarter with an AUM of INR3535 crores, with 115% Y o Y growth and a profit after tax of INR131 crores, which last year was INR37 crores. BHFL recorded an annualized ROTA of 2.1% for Q3 FY twenty twenty, which is an encouraging sign for us. Highest name ratios, including losses in crop business from Maharashtra and Madhya Pradesh, affected the underwriting results for the quarter of Bagging. Bagging's combined ratio for Q3 was 103.6, which increased as a result of highest name ratios in the primarily in the higher claim ratio of 72.6% for the quarter as against 64.3% in the Q3 of FY twenty nineteen. The claim ratio increases were largely noticed in Motor, OD and Crop Insurance segments. Profit after tax decreased due to the higher underwriting losses, and they were partly offset by higher capital gains of INR 58 crores and a lower tax rate as well. Balik recorded excellent growth in new related individual premium, renewal premium and gross premium. Ballik also recorded growth in profit after tax, which was also helped by a higher profit on sale of investments and a lower tax expense. Ballik AUM grossed INR 60,000 crores during the quarter. Before we open up for Q and A, I would like to inform you that from first February twenty twenty, Mr. Bharat Kalsi, who has been with us for the last few months, will be taking over as the CFO of Ballik. Ramanteep, the CFO of Ballik, will be moving to Pagik, from where he will take over from Milim Chaudhry, who will retire in April. This is part of a planned succession as part of our group succession plan. Before I pass it on for Q and A, I would like to highlight one more point. For the last few quarters, we have found that in the I mean, have explained in great detail our approach to crop insurance business and various segments of business. So we would very much appreciate if we focus on the results for the quarter. We have the team, Tafan the team from Magic and Ballad led by Tafan and Harun with us in the call, and they would be assisting us in giving us appropriate replies to your questions. Finally, to come down to the consolidated results. The consolidated total income was up 31% at INR 14,561 crores. The consolidated profit after tax was up 32% at INR $11.26 crores. Bajaj Finance consolidated profit after tax was up 52% at INR $16.14 crores. General Insurance profit after tax was INR 191 crores for the quarter. And Life Insurance shareholders' profit after tax was INR 143 crores, which is an increase of 28%. For the nine months, the total income is up 39% at INR41157 crores. The consolidated profit after tax is INR30175 crores, which is 33% higher than last year. Verage Finance consolidated profit after tax was higher by 53% at INR 4,316 crores and the General Insurance profit after tax INR $6.95 crores, which is flat compared to the previous year for Europe, $6.97 crores and the Life Insurance shareholders' profit after tax is at INR $4.12 crores is higher by 6% over the previous year. I'll now open the floor for questions and answers. Thank you very much. We will now begin the question and answer session. Session. The first question is from the line of Hitesh Gulati from Haitong Securities. Sir, I just wanted to know the advanced premium number from long term motor third party policies in our General Insurance business. Vilan, Raman? INR $6.83 crores. Okay. And sir, just also wanted to understand, sir, that in motor own damage, the claim ratios are moving slightly upwards because of competition. But motor third party, we are able to, like, maintain claim ratios. So are we like really confident that this is the trend in motor third party that claim ratios are going to be stable? Or do we see any impact coming here as well? Let me put this, please. The General Insurance business, as you know, our third party claim ratios have always been fairly good. And last year, we did give out our reserving triangles as well for the benefit of the investing community. In general insurance, as far as claim ratios go, we cannot take any quarter as a trend, and we have to look at a long term trend. And we have been having a fairly reasonably good performance for Motor Third Party over the last two to three years. Going forward, we will have to wait and see how things evolve. Yes, in the past, we had been getting price increases. But each year, the rate of increase has been lower than the previous year. Of course, the overall industry performance will also determine how rate increases will happen going forward. The new Motor Vehicles Act has come into force. It is too early to say what the impact of the new Motor Vehicles Act will be. There is an expectation that the time for reporting claims will shorten. So in the initial stage, part of the floor, which remains with us from the time of loss till the time of reporting, may reduce. At the same time, the settlement of the cases still has to go through the MICT and other courts. So therefore, the settlement periods the court periods, as of now, there's no indication that they are going to come down. Faster reporting will also could also mean that there will be fewer frauds and instigated claims, which normally happen after the first year. And therefore, these are trends that we will be watching carefully and we will be evaluating. Praful, would you like to add anything to that? No, Shneur, you summed it up very well. Thank you, sir. That's it from my side. Thank you. Next question is from the line of H. R. Gala from Advisors. Please go ahead. Yeah. Hello, the Finvest team. Hello. Yeah. Hello to the Fintel team. I think congratulations for a really good set of numbers. Badass Finance really pleasantly surprised us yesterday. Yes. Talking about, sir, our life in general, you said that the taxation has been lower. So we have adopted this 25.17% in insurance company loans. Well, as far as Bagic is concerned, it is applicable because Bagic has adopted 25.17, and that was announced last quarter with Jazz. Okay. As far as Life is concerned, not covered by the new tax change because they are under a different tax regime where the effective tax rate is much is at 14.42%. Okay. So basically, they are already adopted. As you can adopt it. Yes. Okay. Now sir, as far as the crop is concerned, which has been mainly the reason for underwriting loss, how do you see fourth quarter panning out? See, crop is it's a business we do. It is a short term business. There is a current season and a rabbi season. Each year, depending on the reinsurance terms, depending on the way we assess the market and the performance of the past years and the general feel of the market, we will decide whether to quote or not and which clusters to quote. That has already happened. Obviously, in this business, as we have always been saying, that once in three, four years, you will have a really bad year. This year has been exceptionally bad because we had rains even in October and November. Even after the harvest, were losses. So therefore, this is the kind of loss this business will take. However, if we look at the last three, four years, this has been a reasonably good business for us. And that is where we stand. Going forward, we will continue to do the business, but we cannot say how much we will do. That depends on our assessment of the market. We may or may not participate. Last year, we did not participate in Kharif. We participated in Ravi. This year, have done in Kharif. We will be participating in a modest way in Ravi. But next year is a different story altogether. So there are multiple factors here, which determine whether you participate or not. This is not a recurring retail business. Request for the coordinator, Sapansar got dropped. So if you could reconnect him. Yeah. Sure, sir. Connecting him. I think so. He could he said it made a drop in between. Okay. I understand. Also, third question is regarding the impairment of the some of the troubled bonds, etcetera, which we had. We still have to provide a 115 crores in Bali? Of? Of of the the nonperforming Right now, if we take company by company, we first had last year the ILFNS, which we provided 100% in both the companies. So there is nothing to be provided for in those cases because we are holding the unsecured paper there. As far as DHFL is concerned, we provided 60 of our holdings in Q1. We believe that we are waiting for further information. It has been referred to the IPC, and we have to see what further comes out of that. As of now, we are comfortable with this provision. Okay. So these are the only two accounts? These are the only two ones which are not performing. All the others are performing assets. And only what we have shown as wealth assets are only those assets where we have enough public disclosures. We have over the last since last July, July, we have indicated that we have been downgraded since we bought it. It doesn't mean that they are nonperforming. They are outperforming assets. Okay. As of now, they're paying interest, and we have no reason to believe they will not pay in future as of now. Yeah. Yeah. Now the last question on Vale. We don't report the VNB margin, but last year, we had 6.9%. As of now, I can only say that the trend is positive. We are very hopeful because in the Life business, happens is the last quarter is very critical in terms of top line. And therefore, a substantial proportion of their expense overruns actually come down Q4 because expenses don't go up in the last quarter. So that is a big swing, which is why we have chosen to report it only once a year. Arun, would you like to add anything to it? I think broadly you addressed. Let me just add one more point to that, is that we are actively monitoring our product mix and channel mix. That too contributes to NBV. And orientation is to keep only just growing our NBV margins. And more important to me actually is the absolute NBV. K. Also, as far as the product mix, as you rightly say, is very important. Now we see from the trend that now ULEAP is, you know, contributing relatively lesser percentage. So our focus will be more on nonpar par protection. How are things going to move from here on? See, so it's a it's a balanced approach Mhmm. From higher ULEP, we are now down to way lower ULEPs. Yeah. As a company, last quarter three, we had 61% ULEP. We're down to 52% ULEP. Yes. We believe ULIP as a product is particularly for the affluent and the HNI in larger cities has good acceptance. Again, there is a significant move to non par par, and we were not in the term business. We've now launched our term plan as well. Last time in my call, we're starting launching that. Now the risk product is also coming on board. Okay. So as a result of change in product mix, you see the positive trend in BNB margin should happen because the profit margin are probably relatively better as compared to in unit. Is that the best? Will always be careful talking of the future, yes, but the focus is to try to get it up. Yeah. That's the same basis. You're right. It should be. But like we discussed earlier, we have made some investments in terms of manpower for access. So like Tarun rightly said, we'll have to wait and watch how q four plays out for us. Okay. Give some guidance. Okay. Okay. And how is the excess coverage? So as Ramon said, we are we have system integration. Starting up with a new partner usually takes some time. Yeah. That is quite progressive in the way we are working. So there are system integrations we're trying to do frictionless processes, and, of course, there's hiring that is underway. Okay. That is currently going on. Okay. Thank you very much. Wish you all the best. Just a request, Tapan needs to be reconnected. Yes, sir. He's connected back. Sorry, sir. Thank you. The next question is from the line of Nidej Jain from Investec. Please go ahead. Thanks for the opportunity, sir. So firstly, in General Insurance, especially in Motor OD segment, we have been seeing consistent increase in loss ratio, and that is true for peers as well as industry also, I believe. So do you expect that trend to reverse next year? Or we should expect sustained higher loss ratio in Motor this year. One component is, if you see, there has been a series of So a flood also has impact on the motor OD ratio because a lot of losses happen when car goes into water more than what is supposed to be going into. The second is the the discounting in motor had increased when MIC was implemented. Other discount increases, then obviously, premium that you would like for a vehicle goes down. When the premium goes up, the ratio goes higher. No? I was confident of it. Now if I look at it, the the ratio may change if last next year is lower than what it is today. There's something I think is more or less week. I don't see it going forward anymore in in the next year. So if a reduction happens next year, it will probably be be because if the price are less than what it was this year. Does it answer your question? Sure. So on pricing, you are not seeing any any positive relief. Pricing continues to remain Yeah. If you if you look at it, no, overall, the motor combined ratio for the industry also. There has been a couple of percentage point shifts which will happen. Pricing increase may happen if the TP price increase does not come the way industry expected. Then there will be a price increase happening in the motor part of it. But predominantly, there will not be a very significant price increase in the lowering of discount, if I say so, next year compared to what is is my personal fee. Sure, sir. Sure. Secondly, in the general insurance business, we have seen expense ratio also going up despite decent growth coming from crop insurance where the operating expenses should not be material. So what is the reason for that? Yeah. So if you look at the expense ratio moving up predominantly, if I look at, let's say, our company, we are doing a massive transformation on on IT space. We are now investing lot in that. And we also have gotten new relationships. We invested in Manpower customer relationships. Those obviously taper down as the year progresses and and the coming year comes through, which is good. Now from a pure industry perspective, if you look at the growth of industry, it's now coming down. Now if you look at the for the month of December, the growth of the industry was a low single digit number. The general industry normally follows the economic growth of the country. The lag about eight, nine months to the economic growth of the country. So as the slowdown is there, starts reflecting into the insurance growth also, which is the reflection coming through right now. So when the industry growth starts coming down, obviously, the industry expense ratio will start moving upwards. The ratio, again, of premium to the expense ratio there. Does that answer your question? Yes. Yes. Thank you, sir. And on life insurance, sir, in this quarter, specifically, we have seen strong growth in institutional channel, new business institutional business. Does it include Axis Bank or sir? No. Not yet. Not Okay. Okay, sir. Okay, sir. Thank you, sir. That's it from my side. Thank you. The next question is from the line of Abhinath Singh from SBICAP Securities. Please go ahead. Abhinath Singh, your line is in talk mode. Hello? Yes. Hi. Two questions on PagSeg. First one, looking at, I mean, the health line. I mean, that claims ratio has been somewhere in the range of 85% to 90%. Now given the sort of a low float and all those things and adding the OpEx and commissions, of course, overall underwriting loss will be meaningful. So I mean, do you are you comfortable with this kind of one? Do you see this to be this range bound or do you expect or taking certain initiative to improve this? And what would be the sort of your comfort zone as far as that claims in the health segment is concerned? That's the question number one. And second question is more from that sort of industry direct perspective given the recent you know, that decisions that the regulator has taken in the context of how distribution is being done by the large OEM related driven brokers, I mean, you see that can bring meaningful change to the industry distribution dynamics? Or it is just going to be, I mean, very slow and not very, very impactful decisions? Abhinash, can I take the second question first, and then I'll transfer to Tapan? See, there has been a regulatory order against some motor insurance service providers who are in the who are organized as brokers. However, this is a legal matter. Those companies, we believe, will go to the Securities Appliance Tribunal, and we'll have to wait and see what the order is like because there are many multiple issues which are raised in that order, and it is for appropriate legal forum to comment on the appropriateness of that. So till such time, we are not taking any call on that. We will wait and see what happens. These things take time. In fact, today only I was reading about a very old order on a life company where it has been referred back to the regulator to review the amount of disgorgement that, that company was asked to do. So these things will take time. On the second question, the health fees, Stefan, would you like to Yes. Sorry, I missed the question, Sridhar. Could you just repeat the question? What he was saying is that the health loss ratios are about eighty four percent, eighty five percent. He wants to know whether we are comfortable with that loss ratio. Do we see that going which way going forward? Okay. So if you look at the health loss ratio, predominantly, we had extended monsoon strike. Now if you predominantly look at the entire industry health loss ratios over retail, you'll find the major two reasons are fevers of unknown reasons, Telugu and chikungunya, which actually picked up on the past three, four months. And this year, it was extended. So the phase in which the loss ratio moved up was higher compared to what it was last year. So if you you can see the health code. I think the line is dropped. Go ahead. So mister Sapang got disconnected calling him back. Yeah. Is he gonna connect him again, or we'll move forward and then take this question later? So, mister Tapani, I'm Yeah. Sorry. The I think the I think telecom is in bad shape, but it keeps on dropping. Yeah. Coming to the point. So if you look at the health health loss ratio movement that happened, it is because of this reason. Now going forward, on the retail health basis, the loss ratio, I believe, would be constantly around 73 to 75% is where it would be, and that is how it would stabilize. The movement up is because of the monsoon, which has been there. And I think next year, it will come down from where it is today. Yeah. So, I mean, given your mix of, I mean, the retail and group, so, of course, extensively are different. What would be sort of your comfort zone? I mean, where you think that, okay, your ROE is get on that your capital backing that will be respective also. I mean, is it like on a portfolio versus 80%? Where is the comfort zone? No. As I said, 50% to 5%. On a on a overall portfolio or just for retail? No. No. Overall also, if it if you back it up if you just talk to your group, group should also be the group will always be at 95% plus. Yeah. So, miss, you see this year, we have reduced the group exposure. No, and we're pushing retail higher. So overall, if you have a health loss issue with seventy three percent, twenty five percent, then you get the requisite, no, See, Abhinat, just to add to what Upan said, while we reduce group, we have already contracts in place. So the claims will continue to come. That is the nature of the business. It normally takes about nine months to twelve months before you see the result of any action that you take. Having said that, we started this initiative on group prioritizing by Tapan couple and system of strategies almost a year ago. And now we will start seeing hopefully better results. And the mix between group and individual is a very complex state, which keeps changing every time the way the market behaves. Sometimes this is profitable, sometimes that is profitable. So we'll have to wait and see how it comes out as we go along. And just a quick follow-up. Your health insurance business sold on Banca platform, that does that come under group umbrella or individual? I mean, in classification, behaviorally, it will be retail. But how do you classify if you are selling a certain health product offered on a Banca platform? Hello? Srini sir has dropped for a while. So can I take the call, please? Hello? Sir, you may go ahead. Hello? Helene, are you there? Yeah. Yeah. I'm there. Yeah. Can you just repeat your question? No. No. I think just to clarify on that, these products which are sold through banks, they come in the group platform or a group classification. Okay. Okay. Yeah. But behaviorally, will be more of a retail product. Okay. Very clear. Yeah. Yeah. Thanks. Thank you. The next question is from the line of Ajakt Henry from BNK Securities. Please go ahead. Mr. Henry, your line is in talk mode. Mister Henry, if you have muted yourself from the handset, kindly unmute yourself, please. As there is no reply from the current participant, we move to the next question from the line of Vindur Rajamani from HSBC. Please go ahead. Hello. Thanks for taking my question. I have two questions. One is what is the mix in terms of two wheeler passenger cars and CVs for your motor portfolio? And the second one is that now reinsurers are signaling that there's going to be some price hike in fire. So how do you see the fire portfolio sort of developing? Yeah. Yeah. In terms of the business mix as such, overall, around for the nine months, two wheeler is around 15%, Four wheeler is 46, and commercial vehicles is 38. And I think remaining 2% comes from from miscellaneous classes, which is motor others extended warranty. Hello? Hello? Hello? Mister Rajamani? Yeah. Did did I answer the first question? Mr. Rajamani, you can hear us, please do reply. So thanks for answering that question. The second question was on on fire. So reinsurance is signaling that there's going to be some kind of price hike in the fire portfolio. So how do you kind of visualize how that portfolio is going to develop for you specifically? Okay. This is. Let me answer this take this question. Now if you look at the fire and the capability made of reinsurers, it's not reinsurers that's sending on this. What GIC has said, which is Indian national reinsurer, that based on the loss ratio of the industry, their minimum price, what they would accept in the TT, would be fixed. Now the loss ratios are being taken from IIB, which is a central repository of the data of insurance companies in terms of their disposal. So let us say one occupancy has a high loss ratio. The the loss is that occupancy is the minimum which GICL except in the treaty. The occupancy which has lower loss ratio, their prices go down. And the occupancy which has higher loss ratio, the price will move up. So the statement that, overall, there's a price increase is not a is a right statement. The price increase and decrease will happen on the portfolio performance, which is since most of our underwriting consideration, GIC has taken. Yeah. It is not something which every reinsurer is taking on that patient, but, obviously, they will look for how the portfolios are delivered. So some lines of business, movement will happen. But for some, it will go down. No. So the ones which have performed well, this premium will decrease. So this is how so the average, there would be some decrease in what we see. That is not something which you would see a significant increase happening on that basis. So they're just taking the underwriting compared to the loss ratios. That's what they are doing. Understood. Yes. Thanks so much. Thanks for answering those questions. Yes. Thank you. Thank you. Next question is from the line of Ravi Mehta from Deep Financial. Please go ahead. Yes. Hi. I have a broad question on Magic strategy. So are we opting for the underwriting profits or this year is an updation? Okay. So if you look at our strategy, it has not changed over time. We keep on looking at opportunities to grow, and we also remain an underwriting company. That has been a clear strategy, and that's what it is. If you see this year, the things which hit us really bad was the series of plus which happened. And since that budget, even in the file portfolio, we are predominantly a retail player, and we also have some commercial which is there. But because we have a a big retail book in the fire portfolio also, and since we also have a big book in the private care and health also because of this rains and same monsoon also had effect. So you'll see a loss issue movement, which has happened in all these three lines of business because extended the flood and it is a flood which happened. Now when you are a player which has a good retention because you want to be underwriting company, and when you have series of losses happening, it hits you more compared to the market which is there. And that is why you will see an increase in the combined ratio. And the strategy is very clear. We want to be able to remain a good and healthy company, but our belief is good and healthy company able to serve customer care. Does that answer your question? Sure. So just to ask you further that, but any thoughts on bringing down underwriting profits for growth? Is there a thought going around? No. Why should we just change our philosophy? We have sustained his philosophy so many years. He continues the way. Okay. So probably an ninety five ninety Sorry? No. Probably a 9596% kind of a combined ratio is something what you always target. That, no, you'll be asking me. All I'm saying is that we have believed in strong underwriting. We don't change the philosophy there. This year, we had series of which has happened, which has obviously affected our results. But in the business relations business, you see the volatility all across. So unlike other businesses, GI business has high volatility in terms of payments. So if you look at this year, let's say, the Australian fire or the cyclone in in Japan. No? So you have this cyclone in the GI business. So it's a normal cycle. I don't think that indeed cyclone is how the philosophy of this future. Sure. Okay. Yes. Thanks. That helps. Thank you. The next question is from the line of Rishi Junjunwala from IIFL. Please go ahead. Yes, thanks for the opportunity. Just one thing on the provisioning made on the investments in Badgeek, that number seems to have gone down. Has there been any reversal? No, nothing. No reversal. Sir, actually in 2Q PPT, we had said impairment provided for was 1,000,000 to million, whereas now we have said INR742 million. Correct. So I I think the $1.43 crores is the total portfolio on which 50% provision is needed. Okay. And because the the disclosure last time we did said impairment provided for one two three one. So that's you're mentioning about the portfolio. Yeah. Yeah. Right. Okay. So what would be the okay. So you're saying 60% has been We are maintaining the same. Understood. So second is just wanted to get some understanding on the crop in terms of, you know, split of the loss ratio. Right? How much is attributed to the excess loss cover versus actual experience on losses? Hello? Yes. Can repeat your question? Yeah. So our year to date cross loss ratio is 110%. Just wanted to understand the split between the loss provided for and the excess loss cover cost. See, basically, losses are there, they are currently within the threshold only because our excess of loss treaty will trigger only after 130%. Okay. But there would be cost associated with taking that treaty. I'm just trying to understand, is it like 10%, 15% of the That cost is very different because it has different different variables. So I will not be able to tell you exactly what is the cost effect because it it keeps changing based on the impact of other catastrophes also. So, I mean, whatever cover we would have taken is a cover over and above the overall crop also, which is a entity level catastrophe cover. Understood. And in motor, basically, mentioned two wheeler breakdown is about 15%. Just wanted to understand, from a slightly longer term perspective, where do we want to take it to considering that clearly if we really look at the regulatory changes that have happened, there is more focus around two wheeler compliance or at least from a long term TP perspective and all that. What percentage of OEMs are we already tied? And is there restriction in terms of how much more we can put in? Let me take this question, Tapan. So if you look at it, I think the way we plan a business is, wherever we have a good opportunity in terms of a good portfolio and our service network is good, we do that business. So two wheelers, you are aware, there was 72 wheelers on the road are still uninsured. No? And the impact of the changes was renewed for a couple of months. And then, again, it went back to the normal jet. So if if because of the new act and the people awareness goes up, people issues will obviously be will take our reasonable share of market in that business. In the OEM types, we keep on looking at good portfolio and keep on trying that. That's a regular business model, which is there. Does it answer your question? Just if you can give some sense in terms of how how how many of the OEMs we are tied up in terms of percentage. We have three or four OEMs tied up right now. Fair enough. And one last thing, you know, any update you can provide on the Axis Banker in terms of how the ramp up has happened? Have we started getting, you know, business, and what's the plan from a twelve to twenty four month perspective? See I'll just take this question. Yeah. So it's a deal with access. I don't think we can get into too much detail about their own plans and what we intend to do in details. But what I would broadly do say is that it's a stepwise process and a structured methodology. We've started hiring people. And as you would have seen since December, we've been upon that task. There are some segments which are opening up. Pilots are already on the month of January. Some business will maybe start coming in q four. Will it be very significant? Not really, but it will be there. And then I think the effect will start really showing up in the Q1 or Q2 next year. And sorry, I'm going back to the first question. In your disclosures, you have mentioned, Badgeek, the total nonperforming assets are INR123 crores. Out of it, INR74 crores have been provided, which I guess is 60%. This number last time in 2Q was INR172 crores and INR123 crores. Am I reading it wrongly? Because ILFS has been forwarded last year. So Including IFRS, it will be INR120q. All right. Maybe I'll take it offline. Thank you. Thank you. The next question is from the line of Madhu Karlaada from HDFC Securities. Please go ahead. Hi. Just following up on the previous question, that was I had a similar question. And in addition to that, in quarter three, there is an increase investments from INR five sixty crores to INR $7.13 crores Q o Q. What is this on account of? What exposure is this? Have we added anything? Raman Millen? Milan, Raman, has there anything been added to the downgraded list in this quarter? No. I don't think we've added anything. No. That's not in Balik. It's in Balik, actually. So Is it? Yeah. Maybe we added Yes Bank. We'll have to check that. I think it'll be in the public disclosures anyway. Yes. Okay. And Balik, correspondingly, there's been a decline in the total stress exposure on a quarter over quarter basis. We have been some of them we have sold during the quarter. Okay. Okay. Also noticed that on a quarter over quarter basis, our commission and expense ratios are going up. So what is this primarily on account of? Sorry, this is about Badrik or Balik? Badrik, Badrik. I'm sorry, Badrik. Yeah. Commission expenses are directly in proportion to what kind of premium we are procuring and the kind of competition which is going in the market. So commission rates actually will keep fluctuating depending on the market situations. And I think the expenses part, Tapan has already mentioned earlier, that the kind of investments we have been making at the beginning of the year and some of the expenses which are the investments which are getting tapered, I think you will see an improvement towards end of the year in terms of the overall expense rate. I understand the expenses because we are obviously widening our distribution reach with additional partners. But is there anything specifically happening in the market which suggests that we're paying higher commissions for certain segments of businesses? That I will not be able to indicate on the call. Okay. Which segments we are paying higher commissions. Okay. Or but there are certain places where competitive intensity is Of course. I I think our strength lies in terms of segmentation and underwriting. In order to attract the right segments, we need to pay higher in some places and lower in some places. Alright, sir. On Dalik, have have Can you disclose what would be the sort of strategy with Axis Bank and how much can we scale up with them? Are there any targets that I'm sure you'll have some targets. Can you talk a little bit about that over the next one, two years? What sort of numbers can we achieve from there? Broadly, before I pass it on to Tarun, I'll take that question. See, roughly, if look at the total business of Access, that is about the total individual rated premium of Balik from all channels. I'm going on individual retail business. We already do a lot of group business with Axis anyway, which is a group protection business. So therefore, even if we get a reasonable share of that, I don't want to put a number there, which Tarun will explain, It is still a significant growth for us. And as we build the relationship, it will continue to grow. As of now, we have not put any numbers. We are still discussing with Axis, and we are integrating the systems and putting together the whole platform. Arun? Yeah. I think Sridhar has directionally said what is correct. I know there's a lot of excitement around access externally and internally from our side as well. But, I mean, it's it's a long term relationship that we are getting into. We we do want to take a lot of that share as well, but then there is a process towards, you know, improving that share. And I can assure you it will be a significant part of our peak business. But then when the discussions do move, then at appropriate times, we will keep giving you the guidance. And and there is still some more time before momentum builds up there. On the at least on the journey which we started on the group side, a lot of momentum has indeed fixed up. And for nine months, we ended up doing about INR 170 crores of business. So at least that side is picked up. Like Tarun said, on retail, we will come back maybe after a quarter or two. Understood, sir. All right. Thank you for taking my questions. Thank you. The next question is from the line of H. R. Gala from FinVest Advisors. Please go ahead. Yeah. I just wanted to know this Chinese virus. Can it become a big problem for the insurance companies in India? Good question. I think in the past, we have had care like this. We had SARS, we had H1N1, we had bird flu and things like that. But so far, we have not seen a pandemic in India, which has resulted in a lot of claims. It largely depends on the cost of treatment, how long they'll get treatment and whether, in fact, it breaks out in India in a big way or not. The positive side of that is today, people seem to be better equipped. We have started screening from day one in all the airports, and thousands of people have already been screened, which is a positive sign. Okay. The negative sign is because it is from China, nobody really knows what it is. Yeah. Exactly. And therefore, we'll have to wait and see. The market penetrations are a lot higher Mhmm. In terms of what it was, say, five, six years ago when we had H one nine one. Mhmm. Therefore, the chances that, you know, more people will claim if it happens is also there. But these are things that we'll have to wait and see how it turns out. Okay, fine. Thank you. Thank you. The next question is from the line of Sanket Gurda from Spark Capital. Please go ahead. Yeah. Thanks for the opportunity. Just wanted to understand what would our combined ratio would look if if you exclude the flood related losses. So so the or the loss ratio, how it would look? Because of one zero three combined ratio is including the flood events. Excluding it, what would the likely number would be for us? Or is it comparable to last year? Few crores. So I would presume it will be closer to a 101 between a 101 and a 102. Oh, okay. Okay. Perfect. And just just two questions on life. When I go and check policy bazaar, the protection pricing, what we are offering is now the lowest among the industry. And just just wanted to understand because most of the life insurers in the call have said that the reinsurance rates are hardening in the individual protection business. So whether this pricing, what we are offering in the protection business is sustainable or we will revisit if the rates harden in future? Yeah. I think it's a very good question. I really appreciate that you've been, you know, watching the sector very closely. Yes. The prices will harden. And, yes, we will increase prices at the appropriate time, and we will. It will be a pass through the way we are looking at it. But there is no change from our side in the quarter. This is a strategy that we follow because to break the clutter. It's a profitable business at this pricing itself. What we've done is we've taken a lot of mitigants in place. So none of our policies, incidentally, can be issued on a nonmedical basis. So with a 100% medical, we are getting very good quality lives. The percentage of in fact, from policy bazaar, we have this data, of lives which are upwards of 10 lakhs of income annual income. It's a significant proportion of the this this quality. It's very good quality that's coming in. And because they're all medically appraised, so the underwriting is also so much more comfortable. The reinsurers are really have have taken this call because of the not so good experience that they've had from a lot of other people who had a lot of nonmedicals, which is why we took that call. So strategically, I think it's it's really worked well for us. We're seeing a good amount of momentum in our agency business, and now policy was our also now that the systems are ready, moving on with this. And this will remain a key product in our portfolio. You should expect a price increase from us also, but this quarter, there's not gonna be any. Thanks for it. And internally, do we have any target of individual protection to be contributing to our individual rated premium in, say, next two or three year line three years down the line? What appropriate mix we are looking at? So so see And this channel will drive the growth. Yeah. Yes. Yes. So what happens is that, currently, we've been because of this pricing, we've been restricted in terms of how many cities we can sell it in. So we are currently only selling it in a 150 locations. So as a result, as a proportion, it's going to be not very high. It is only going to go up slowly. We I think in the last or the call prior to that, I had explained that we were getting our claim process payout processes right, and that they're now looking very strong and good. Quite satisfied with the way we've moved on our claim handling capabilities. You'll see that claim settlement ratio has already moved up to upwards of 98.5 or around. So that that's very good. First, that had to improve, and then we had to move on. This is going to be a constant feature in our portfolio and will grow up gradually because it's a strategic call. I'd rather have good quality than have any bank. And on the distribution, will it be more quality by not driven business model for us, or or we will be focusing, say, on the agency and also on the incremental access bank type what we are getting into? So every channel every channel will sell. Agency at this point is is certainly selling much more than policy bazaar, and that's been a good movement for us. Of course, then what it does is it hits our average premium in agency because this average premium is is is a good premium, but it's under 30,000. So while our average premium was well above $5,560,000 for agency. But there's a good quality customer. Bottom line is pretty good. PolicyBazaar has just about started selling in the last two weeks because it takes a little bit more time. The other channels are also gonna be selling. Access, of course, will also sell. Will you will you mind to quantify the monthly run rate of the business, how you have seen for last two, two and a half months since we have started doing it? No. I don't think I will be able to do that. Okay. And lastly, the group group protection business, I just wanted to know the $12.50 crores of business, what did what we did it for nine months. Can we get that breakdown into channels like BaaS, Bandhan Bank, and others? And and also within the products, consumer durables, MFIs, and mortgages. So Raman will answer that. So I have it partner wise. We don't have it at the consumer segment level. I'll just give you the partner wise. Like we've discussed in the past, out of INR $12.50 crores, it's largely divided in two parts. One is the MFI piece and then there is the other, which is the other credit protection. So of INR $12.50 crores, about INR 700 crores is credit protection through MFI and the balance is through banks and NBFCs. Of which, like I mentioned earlier, access is about INR170 crores. And Bajaj Finance would be? Bajaj Finance is another INR250 crores. Okay. Fine. Thanks. Thank you. The next question is from the line of Adesh Parasrampuriya from Nomura. Please go ahead. Just before that, I wanted to reconfirm what Srini mentioned about downgrade of investments in Badgik. It is on account of U. Bank only, 75 crores exposure which is there. Okay. Sir, I just had a repeat question on the protection rates that the insurers are expecting to hike. You did mention about the experience on wherever policies don't have medical. So can you just confirm whether it's mostly related to that or there are more factors? Because when we discussed with a few insurers, it seems that in general as the penetration is expanding, including say online platforms, the profile of customers that is in general coming is because the penetration expands, you are having different experiences, so different set of profiles are entering protection space. So if you can just kind of talk through what is apart from what you mentioned, the medical, what is leading to them to hike the reinsurance rates? Yeah. No. Very good question. See, it's early days for us to be able to claim the right to knowledge on this. So let me not, for a minute, even imagine that I can give you a perfect answer. But but let me just take it up based based on my experience. Otherwise, see, the moment you see the customer face to face and the moment you are doing the proper due diligence, which is through medicals usually, then at least you're able to get the anti selection out of the entire portfolio. Why did I answer the earlier question from Spark that we want to do this gradually is exactly the reason. Some people, for whatever reasons, are going for numbers, and it's a strategy that works for them. Once you've got a, let's say, a 200,000, 300,000, or even a 100,000 lives, then maybe from an insurer perspective, because we reinsured most of the risk, you can start relaxing lots of these issues. But, like, Balik is starting slow, and we've our number of lives covered. Bill, of course, is increasing quite nicely. I'm quite happy with this. But having said that, we'll still be in, you know, a few thousands, maybe under 10,000 by the end of or near about that number by the end of this quarter. So there is a long way to go for anybody to relax. So you have to basically tailor make from an insurer perspective, how do you want to approach this entire segment. From a reinsurer perspective, life is very different because it all depends it's a it's all a case of whether whether they've been able to price whether they pay pay on play on large volumes, whether they've been able to price correctly, partner wise, based on the experiences they see. And then they get tied on to that price, and that's where the problem emerges. So, yeah, lately, given the fact that term is getting to be the flavor of the month, there is an issue. And I think reinsurers correctly, therefore, are increasing the pricing. Nobody wants to lose business here, so they're very clearly doing it in a calibrated form and doing it correctly. And I think this is only happening. If you do realize and just go back in history, we have reduced pricing and term where we started selling in the in some significant numbers online and otherwise, only around February. So in the last ten years, prices have come off crazily, almost by 70%, the prices have come off. So we did go one way. Now we are there has to be some recalibration that's required. Overall, pricing still will be quite handsome. We will be quite comfortable with the customer. But this is a a process of experiential learning and then maybe correcting because the data wasn't there earlier. Only a life you possibly have that data. They don't share that data. So as long as we stick to medicals, as long as we stick to proper due diligence, which is the process that we are using, pricing can be controlled. But the moment you start going for volumes and, of course, there's going to be a balancing act that people will have to play. But you already heard a few other CEOs talk about pricing increasing, and I think it's imminent. We too will be doing that just to be safe. And I think reinsurance are doing the right thing. And and I know it's too early, but do you do you sense that some of these hikes in cost on reinsurance may not be fully passed. So because everybody wants to do protection, people may be willing to lower the threshold on margins that one operates at in the protection space. God bless whoever will be wanting to do that. We are not gonna do that. We are very clear. We will we we will pass on the price hike because see, here, you are taking of life on for not a year, which is like in the case of credit life. Here, you're taking on the life for tens and twenties of years. So and there are various people who trying to outdo outdo each other in terms of, you know, aggression or product structures. So one has to be very careful in in in the way one handles this. So I would only recommend that it should be appropriately be passed on to the customer. Because like I said, it's already down by 70 odd percent the time it started ten years back. And having said that, life insurance companies will have to, of course, take their own calls. Margins on these products are good. And if it becomes a dog eat dog market, it doesn't help. But what I've seen is is that if you go for margins and volume in any case, even the reinsurance rate for some companies will go against the their wishes worse than what reinsurance will price for other companies. So it is a balancing act we'll have to play. Actually, if I can add to what Arun said, is even if look at our product mix and within that, the guaranteed ones and term are the two major risks where you end up you could end up taking a significant amount of risk. And it is not something like a non life that comes over renewal every year. So you can decide that, okay, I tried something. If it don't work, so I can move on. In life, you are stuck for a long period. And if you see the experience of countries in the West, largely, these two are the ones which have really been the significant risk for life companies. We don't see that kind of issues maybe with the unit linked product or even the par products, which although there is a guarantee, think the way the par product is structured with an IT can structure, I think it is not that significant. But on the non par guarantees and the non par risk, we need to be a lot more what we want to create is what to add what Arun said is sustainability. We don't want to do something this year because that's the flavor of the year. And then next year, we find that something has gone wrong and so we have rolled back, which is not good to build a very long term business like a life business. Perfect. Thanks, Arun. Thanks, Shini. Thank you. The next question is from the line of Indore Rajamani from HSBC. Please go ahead. Sorry to kind of verate on this, but on this term plan, how much of it is medical underwriting? How much of it is there no medical underwriting? And also, is the combined ratio that some indication of the combined ratio on term that you're currently have facing? We don't work on a combined ratio after that one first. It's a different approach that we have because typically it's not a one year product. The one year product, can work on combined ratio. No, no, that's right. But just an indication because if you think of it, it's almost like a nonlife product. It's a long term product, but just in terms of just comparing it just on a stand alone, you know, annual basis, what what would be the combined if if you were to do it? So it's still let me update again. It is not comparable. There is nothing like combined ratio possible in this. If I was writing a single premium for a one year, you can do that because the risk is carried forward for twenty, thirty years. Yeah. So you can't. I mean, will be based on some assumptions. Right? Right. Every year will be on fifty years by that. Yeah. Results of I mean, assumptions, basically, will result in an NBV, and the NBV on these products is very good. It's the best Correct. In all our portfolio. The other is, of course, it hits on first year. If you were want a blunt answer, it's a higher strain product because, you know, you are Yes. So the pack takes a hit. Yes. The more we grow the and the first, also, if the underwriting is not right, the more will be the strain, and the part will hit on pack. Yes. So that's something we'll have to be careful because we'll have a lot of growth engines including access, and we'll have term. So that could you know, that that does typically hit on pack. But of course, the NBV is very good, and that results in PAT in subsequent years. Let me add to what Arun said. See, the focus of BALIC now is the most important metric for us is NBV, not even the NBM because you have multiple products, some products are inherently having higher margins, some have lower margins. And there is always a gray area on how to create single premium in this. Therefore, as your NPV reflects both your volume and your margin and the breadth of business that you have in terms of the profit maximizers, the scale builders, the ones which are like NBP. And we try to balance that in a manner such that we get a desired amount of NBP growth. We have been growing our gross NBV quite strongly over the last two, three years, obviously, over a smaller pace. And we are very hopeful that over the next three to four years, we will continue to see good traction on NBV combined with the higher volume leading to lower overruns and better cost control, we think our net of overrun margin, we should see a fairly significant move. Of course, this is forward looking, and there are so many assumptions or expectations built into this. But I'm just giving you a directional move, what the company is seeking to achieve over the next three years. It's a significant improvement in NPV. Your first question on medical, the nonmedical, so just to kind of give you comfort, we are currently not writing any business level 50 lakhs cover. It is usually, if you look at statistics, the phone number of deaths come in twenty five lakhs and around and below. Yeah. And sometimes the pricing becomes, you know, too tight to be able to handle this in a portfolio. The other piece is we are 100% medical today. If we have to offer this kind of a price, we are 100% financial underwriting and medical underwriting. And like I had answered earlier, we'd this is a long term sustainable business we want. And the more better our experience to start with, the better will be the belief of the reinsurer to give us good rates and that we can give that benefit to the customer. The other way around, very high volumes means bad experiences and therefore lower rates higher rates from the insurer, and that that is something we don't want to do. And that that becomes in too many practical calls in the entire process. So we we are going around in a very cautious way, and I'm happy to say that at this point in time. And I even like venture out that and say that among all the insurances, I think we possibly have the best quality lives coming to us despite the low rate. Yeah. Thanks for that. Thank you. Thank you. The next question is from the line of Nitish Jain from Investec. Please go ahead. Thanks for the opportunity again, sir. Sir, can you explain how the reinsurance work in protection? Do we when we get a reinsurance coverage, it is covered for the entire life of the policy, or it is just a one year cover? No. It's entire life. That's why the reinsurers are getting worried and increasing price. In in Okay. Okay. So that's for the product. So the longer the it's basically you tie up for the length of the product. So so on the policies which are already underwritten, there should not be any significant risk in terms of profitability. But the forward policies that we will write if there is a reinsurance price increase and if someone is not able to pass it on, there will be a impact on profitability. Yeah. Yeah. Yeah. So so yeah. It's only that way. The only thing is, of course, if we experience that, you know, mortality, this is a direct hit. You know? So that is where the due diligence comes in. So and it it there is some retention on our books, then the rest, of course, is ceded to the reinsurer. So whatever is on our books, that, of course, hits us. But as you can see in the case of other life insurance companies, the reinsurers are facing pressure and therefore a problem, and therefore they are increasing pricing. Because maybe the feeding that happened to them is not good, so the reinsurers losing money. Life insurance, they have the money loss on even mortal bad mortality usually is restricted because the retention is low on our books. And is there any pressure to retain more also from the reinsurers? Or No. No. So it all depends, actually. See, reinsurers, if you ask me, if you look at 3,000 feet, reinsurers hardly underwrite anything significant on life. They the business business in general. So as a portfolio, from a reinsurer perspective, they're just about getting started in getting some of the books created. So they would if I mean, they'd rather increase the price, but and keep some same retention. And that's how the actual model usually works. So there is no pressure at that. Pressure is only to increase pricing, not retention. Just to just to add to that, I think the key here is the selection, the type of customer segmentation you do, the kind of data you use. Unfortunately, live being a product where the higher tickets normally go to the more affluent segments, and they tend to be of the older age. So the choice becomes a little bit more complex. However, once we are starting this product with full medicals, we will learn that quite well. That's why we said gradually. And as we gain more experience, our long term goal may be to retain more and reduce the depends on reinsurer, except where we feel the risk is too high for us to take on any individual case. And that is a direction over two, three, four years we may seek to do. As of now, we have not decided, but this is just directionally, this is the way we are looking at the business. Think that's a very good point Suneet raised. The moment we get to a number of 100,000, one lakh lives or more lives, I mean, maybe I don't need to see too much as well. So rather and we do have a large capital, so we could use a little bit of that. But currently, we are I mean, it's well I can give a parallel with Magic where over the last fifteen, sixteen years, you see how our retentions have moved up over time as we gain underwriting knowledge on segments. Some segments are very new to start with liability, for example. Today, we have eaten a lot more in liability than we used to do before. So this is a process of learning, and it's a very long term business. So we have to build it carefully and sustainably, and that's what our companies are doing now. Sure, sir. That's it from my side. Constraint, that was the last question. I now hand the conference over to Ms. Pani Babji for closing comments. On behalf of GM Financial, I would like to thank Mr. Srinivasan, the senior management team of the insurance businesses, and all participants Thank for joining us on the call you so much. Thank you. Thank you. Ladies and gentlemen, on behalf of GM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect.