Q1 19/20

Jul 26, 2019

Ladies and gentlemen, good day, and welcome to the Bajaj Finserv Limited Q1 FY 'twenty Results Conference Call hosted by JM Financial Securities Limited. As a reminder, all participant lines will be in the listen only mode. And there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to mister Karan Singh from GM Financial. Thank you, and over to you, sir. Yep. Thank you. Good morning, everybody, and welcome to Bajaj Finsar's earnings call to discuss first quarter FY twenty twenty results. To discuss the results, we have on the call mister Reshreenivasan, CFO Bajaj Finsar mister Tapan Singhal, CEO Bajaj Allianz General Insurance mister Karun Chug, CEO Bajaj Life Insurance mister Milan Chaudhary, CFO Bajaj General Insurance and Mr. Ramandeep Singh Sani, CFO, Bidaj Alliance Life. May I request the management to take us through the financial highlights, subsequent to which we can open the floor for Q and A session. Over to you, sir. Thank you. I am Srini here. Welcome, everyone, to the conference call. We will be discussing the results of Adarth Sinsur Limited for Q1 of FY twenty nineteen-twenty twenty. As always, it's a pleasure to have all of you here attending this call. In this call, we will largely be concentrating on the consolidated results as well as the results of our insurance operations to Badajidean General Insurance and Badajidean Life Insurance companies. Badaj Finance, which is another major subsidiary of ours, has already had its conference call. However, if there are any high level questions, we'll be glad to take that as well. We'll not be taking any questions on the status of Allianz stake in our insurance companies, except to state that the status has remained the same as at the end of the previous quarter, and there is no change. Any statements that may look like forward looking statements are just estimates and do not constitute any assurance or indication of any future performance result. As required by regulation, we had adopted Indian accounting standards for FY 2019. So this year, in the first quarter, our consolidated results are as per Ind AS and the comparable numbers are also as per Ind AS. The insurance companies are not covered under Ind AS. So the stand alone numbers of the insurance companies are as per the Indian GAAP. Now to give you an update on the performance. During this quarter, the tight liquidity conditions witnessed in the aftermath of the default by IFRS last year did not show any signs of abatement and companies with stronger balance sheets were favored by lending banks and investors. This quarter towards the end of this quarter actually, we saw a default by Devan Housing Finance on a part of its commercial paper obligations. It is in this difficult environment that we have seen DFL deliver excellent results. While both Badmik and Badmik have recorded strong growth in premiums, their profits have were adversely affected by a provision that we decided to take for impairment of their holdings of DHFL fixed income securities. To give you a highlight, our consolidated total income was up 40%. Profit after tax was up just 2.4% at INR8.45 crores. However, if you were to exclude the impairment provision on DHFS, consolidated profit after tax would have been higher by 16%. Now to give you an update on the provision we made for our holdings in DHFL. Last year, both Badmik and Balajac provided for 100 of their exposure to ILNFS as was reported in the financial statements as well as in the investor calls. As disclosed in the public disclosures of the insurance companies in March 2019, we had exposures to DHFL, which defaulted towards the end of the quarter. However, before they defaulted, we collected about $3.50 crores approximately between the two insurance companies on the commercial papers, which were due in the earlier part of June. The companies now have, apart from this INR 50 crores of defaulted CP, NCDs falling due into quarter two in FY twenty twenty and in FY 2020. As a measure of abundant caution, we have decided to make provisions to the extent of 60% of the balance holding as of thirtieth June. This resulted in a pretax provision of INR 126 crores in BALIC, which is the impact on the shareholders' account and INR 76 crores in Badging. Now let me go to the results of our operating subsidiaries. The debt finance has had another excellent quarter, total income higher by 47%, AUM by 41% and profit after tax by 43. The risk parameters are holding well with net NPA at 0.64%. Magic was able to grow its premium by 17% as against 11.7% recorded by the industry, excluding specialized companies. Ex crop, Magic recorded a growth of 13% in GWP. Badriq recorded strong growth in Fire, up 58%, liability by 18% and Retail Health by 26%. Overall, Motor Premium grew by 13.4%, which we consider as very good given the low volume of auto sales for new cars and two wheelers. Of this growth, the third party premium recorded 21.5% growth and the OD premium represents a modest 4.5%. As a part of the company's plan to optimize profitability, as we mentioned in the concourse of Q4 of last year, Group Health, which was loss making, as shown, we have tightened the underwriting and pricing guidelines. As a result of this, the growth is a modest 4.5%, and there is a degrowth in the government health care business as well. The profit of Badriq 200 crores was affected by several factors. One is INR 98 crores of underwriting losses from crop insurance mainly due to crop claims of ruby season of FY twenty eighteen-twenty nineteen, which was determined in this quarter. There was Cyclone Fani of which resulted in losses of INR30 crores after reinsurance. Overall, the business is on a good wicket. We have seen an uptick in motor OD loss ratios, 63 and a half percent as against 55.8% in PY, which has impacted the underwriting profit by about 30 crores as well. Going forward, it is our endeavor to continue to focus on profitability. We will do what we have Badget generally is good at doing, which means reviewing every relationship and moderating our business where required in terms of loss making businesses. Coming to balance, we had an excellent quarter on the business front, 17% growth in individual rated premium, 41% in total MB, 29% in renewals, 35% overall. More importantly, product mix delivered with 22% par, 17% non par and 61% unit in the individual weighted premium. PATs, however, profit after tax was affected by the provision for DFFL as mentioned above. However, one good news is that excluding the impairment provision, the profit of balance would have been higher than the previous year, which is for last few years, we have not been able to record. Since IRD has come out with draft expanded public disclosures, including the reserve triangles for non life insurers, we have chosen to publish the reserve triangle as of thirty first March twenty nineteen in our investor presentation, which was uploaded on our website yesterday evening. We hope you have had a chance to look at it, and we do hope you find it useful. Let me now open the floor for questions and answers. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press and one on your touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder, you may press and 1 to ask question. The first question is from the line of Barat Shah from ASK. Please go ahead. Hey. Hi, Shini. One broad question. I'll Richard continues to do very good job of the risk control and underwriting prudent insurance business. And and despite the bank assurance part of the life in not really strongly in favor of Balik, The overall life insurance performance still continues to be pretty robust. But my concern is that a lot of gains are getting fittered away by investment side of the business. Ultimately, investment, income and the investment returns is a key for both the business changes, given the fact that the float is the key element in bottom line. And earlier, we saw gains being fitted away by investment into ILSH. Yes. Now some 325 crore of Divan housing. Yes. Therefore, this kind of investment or losses can undermine, otherwise, a very strong business performance. Would like to I would like to understand better the history investment policies and whether the size of the business is really kicking in if it should be done. Right. Thank you, Bharat. Let me first say that in hindsight, we should not have invested in ILFS of. Having said that, I think one of the reasons why this investment was made, I believe a number of insurance companies have exposures to these two. Because under the IRDA guidelines, you have to invest 15% of your corpus in housing and infrastructure debt. Unfortunately, because of the lack of available names and over dependence on credit ratings, the investment was made. Having said that, we have taken a full stop of the investment philosophy of both the groups. And, by the end of this quarter, we would have redefined the entire investment philosophy for both the groups. In balance, it's a little bit more complex. We have the participating funds, 90% of which needs to go back to policyholders. And therefore, our objective will be to see what is the maximum return we can give over and above the guarantees. In terms of nonparticipating business, which is savings, it is guaranteed, interest business. Therefore, we have to manage the spread very carefully, and we can't afford any more, such write offs. And thirdly, on the unit linked business, it is market business. So there, we have to perform in line with at least in the first quartile of all insurance companies, if not mutual funds. And then we have a large shareholder surplus, which we need to now make it work a bit harder. There's no doubt. Doubt. I think in the if you ask me, to be very frank, both INFR and DHML have been eye openers for us, and we have deeply engaged with the management of both companies, and we are in the process of completely redefining investment philosophy. Other than that, I cannot say because what is already invested remains there. Some of what we feel is the stressed exposures, we would be winding down if we get an opportunity. Unfortunately, in both these cases, we did not get an opportunity after the ILFS scandal broke out. I think there is hardly any paper traded in DHFL, although we tried our best. Nobody was willing to buy. What going forward, we will we we are redefining the entire way we look at things, including, putting in place internal, ratings as to whether we should invest or not. Right. No. That's useful, Shini. I just made a broad comment. Yeah. Is a vital part. It's really the risk control. Yes. And especially, we've seen in case of the cash finance over the long period of time Right. That both sides of the coin have been always, you know, very careful manner with a great deal of agility managed. Right. So that growth has not been compromised. As soon as the rest of the call has remained very granular and tight and with a good deal of agility all the time. Yes. In terms of the business risk on the insurance side of both the both life and the gender, the business part of the risk management will seem to be very prudent and strong. Yes. Yes. It is the risk management on the investment side which gives the concerns and worry. And, unfortunately, that happens to be the predominant part of the value addition, especially in the general side of the insurance. Given that underwriting profits may be marginal overall, the investment ratings are the key. And therefore, that is a source of significant concern that whether there is a tight review and whether the philosophy and the methods are strongly in place to ensure that the overall ratings are not behaved by investment purpose. Right. I agree with you, Bharat. That is why we said we are putting in place a completely detailed review mechanism. And going forward, we'll be reviewing investments much the same way as we do our underwriting portfolios. Particularly in the case of Badgeek, I think our business model, which stood us apart in the market, was to underwrite prudently, retain well, generate cash flows, and invest them prudently. Unfortunately, the last part has taken a bit of a beating over the last year, and that has been, as I told you earlier, and I open up for us, and, we have we will set it right within the next, eight to ten weeks. I think by the second quarter, you should see that we have in place adequate mechanisms. I hope there are no more, hopefully, shockers lying around on the investment portfolio. See, we have if you look at our L-thirty five and, I think, an L-thirty seven, I think, two public disclosures, we are required to disclose any downgrade of any investment security every quarter. Now some of these have now been downgrading as per the regulation and as per the credit rating agencies. There are some other names which are being talked about in the market, but to the extent they have been downgraded, we have been, we have disclosed that in our public disclosure. That is available. We do have some exposures to Yes Bank. We think as a bank, RBI would take appropriate action to safeguard the interest of the depositors. We do not consider that as exceptionally risky. We do have a couple of other names in that list, which we are watching very carefully and that the earliest chance we will exit those investments if we do get a chance. Interesting. One last suggestion. Yeah. If we see the debt finance output after the quarterly result, it is very, detailed and, absolutely, completely eliminating in terms of the, the profile and the character of the business, the Yes. Along different lines that it is done. And it becomes almost a self explanatory document. Yeah. I would suggest that both for Balik and Baljing is relatively more sort of value added details are provided, that will make it much more engaging and informative in terms of that output itself. Sure. We'll take that input, and we'll discuss with the management, see how we can improve it. Because there are a lot of public disclosures required for insurance company, we thought we would not duplicate some of the stuff, but I think you we will look into whether we can improve the presentation. Thank you. You. Thank you. The next question is from the line of Hitesh Vallati from Highton Securities Limited. Please go ahead. Yes, sir. Thank you for taking my questions. I have a couple of questions. Firstly, sir, what is the quantum of advanced premium from long term motor policies on our balance sheet as of the end of quarter? Yeah. We have around 463 crores of advanced. March, we had around 319 or so. So downgrade has improved in this quarter. So $4.63 plus is our. Okay. And, sir, I'm assuming most of this is again TP only, and OD traction in long term policies is relatively lower. Yeah. The attraction is relatively lower. But what I find is that as compared to the whole of last year, which was done since the long term policies were introduced, The offtake for long term, particularly, miss three by three in private cars, has improved a bit, while, the offtake in terms of five by five in two wheelers has slightly gone down. And, sir, can you can you just, for the sake of everyone, I believe, walk us through the reserving triangle first page that you've given. So you've given couple of pages. So, I I think it's page 31 of the presentation. So because what is what is exactly being conveyed there? If you could just walk us through that. You see, in the first page, we have in the page, 31, I think, we have given the, as of we have given for the last ten years. We have clubbed the period up to thirty first March zero nine, and then we have done for every year. What was the because we provide on the basis of ultimate net loss cost after reinsurance that is expected to be paid when all, the claims have been settled for that accident year. Predominantly, third party insurance is where where it takes a very long time for the triangles to evolve. From that net ultimate loss cost, we deduct what has already been paid and what is outstanding as of the end of the period to arrive at what is called the IBNR provision. So therefore, if you look at the first column for the prior period prior to I'll take the second one, thirty first March ten. In thirty first March two thousand ten, we had provided 525,011,000 as the net loss cost expected from that accident year, out of which 4,158 was outstanding as at the end of that period. Over the period, that loss cost keeps getting adjusted as we get claim experience. So as of now, nine years later, that $11,005.25 has become $10,004.96. The triangle is showing what is paid cumulatively at the end of first year, second year, third year against that provision of $11,005.25. Coming to the next page, we are showing the same net loss cost and we are showing what is the revised net loss cost. This includes not only what was paid, which was shown in the previous triangle, but also any change in the outstanding claims, readjustment of the net loss cost. So again, if I take the period thirty first March ten, the column, we estimated $11,005.25. Nine years later, that estimate of the net loss cost is 11,006, which means as of today, thirty first March two thousand nineteen, we have 519,000,000 of favorable development. Means out of 11,525, only 11,006 has so far crystallized. These estimates as of thirty first March two thousand nineteen are based on the available information as on it has been updated for all development which have happened between then and thirty first March two thousand nineteen. In 5% of my 11/2025 is still available for me as this develops. Like that for each of the accident year cohorts, we have, updated and given those numbers. I hope that clarifies your question. Yes, sir. So so, basically, what you're saying is, $10.10 $4.09 6 for year ten has already been paid $0.06. That's what able to pay. You paid 31. Yes. Yes. Okay, sir. Thank you, sir. That's it from my side. Yeah. Very much. Thank you. The next question is from the line of Kejar Gala from Finvest Advisors. Please go ahead. Please, I want a clarification. On Bajaj Finance, I could not get a chance to ask the questions. My question was that Rajas Finance has always been saying that they work a very robust system of big data analytics, etcetera. Now during these last few quarters, the way in which the slowdown has slipped in, do our analyst data and the point of sale people who are present at the place where the loans are dispersed, do they get any feedback as to what is actually happening at the ground level, why people are spending less? Like, what has happened is that people did buy a lot of air conditioners because of the extended summer, but they did not buy buy TVs to watch the World Cup. So like that, you know, in some of the items, spending has been there. Some of them, it has been less. Now what is happening is that just because now we have got a very stable government, which people have voted, even then now our confidence level is not returning and people are resuming to the normal, you know, taking goods on the tech basis. See, let me clarify this. First of all, consumer discretionary spending as evidenced by auto sales for some months now, And recently, some other discretionary spending, which they don't have to spend, which they can delay, that has come off in certain sectors. Having said that, in Bajaj Finance, we have a very robust system. No disbursement happens at the stores where we operate. The entire credit rule engines are driven from the system, from analytics. It is very closely and tightly reviewed across every bucket. If you see the type of, portfolio performance that we disclosed in our annual, in the investment presentation, it is very detailed, and it also indicates that we have that much more information. Every month, we have risk decks which go up to maybe 800, 900 individual slides, which are reviewed currently by the management team, and a segment of that is even reviewed at our level. So therefore, the question of us not knowing does not arise. Now given the situation, why confidence is dropping, that we don't know. That is we can we can sit and argue it's a macro event. There is a the banking sector first went through an NPA issue, then it was followed by HFCs not getting adequate funding after ILFS. There is a credit event in the market, both ILFS and DHFL. Therefore, the capacity to lend in the market has shrunk. Within the NBFC sector, bankers and lenders are preferring the better quality names including Bajaj Finance, so we are not facing any difficulty in raising money. In such a situation where cash flows in the economy are down, one would normally expect demand for money to increase, which is in a way correct. But as a prudent NDFC, it is our responsibility to see that we lend it to the type of people who we think, will repay. 65% of the loans that we give are to our existing customers where we know the credit record, and therefore, there is no issue there. In remaining the 34 is something where you have acquired the business, and within three, four months, you know where they stand, and then you keep pruning that business to make it better. So it is not our intention to, not to grow. We will continue to grow. However, we will continue this is the time when the risk button needs to act, with greater force. Therefore, that is what we will be doing. I think over the BFL con call as well as in the, TV interviews, it has been, very well clarified by the BFL management that we will be tightening some of the underwriting norms so that the, borderline cases and the gray areas do not enter into our system. That does not necessarily mean that we will degrow because we are not consumer durable finance years now. We do digital finance. We do we were originally an auto finance company. From that, we have moved on to now nineteen, twenty businesses. Geographically, we are spread into thousands of 1,800 odd locations. Our rural sector is doing well. We do everything from gold loans, SME funding, lab, everything we are doing. So we believe that our diversified model will help us withstand this much better than anyone else, and we are hoping that the macro situation will improve too. Okay. That helps a lot. Now coming to Bali. Sir, how much has been the new business margin? Because that is one important statistics we don't get in your presentation. No. We do not publish margins every quarter because in light business, the business is, highly skewed towards the last quarter. So therefore, things like your expense overruns and all have a very volatile pattern across the year. We published it as of thirty first March. All I can tell you now is that we are on track to deliver growth in NBV and margins as we stand today. Okay. Now, sir, last year in thirty first I mean, in FY nineteen, we had about six point odd percentage as our new business margin. Yes. Do do you think that that will grow year over year? Let me, give a flavor. If you look at the new business there are two aspects to it. The new business value before overruns actually increased by more than 50%. Correct. And therefore, the margins before overruns had actually increased to about 16 and a half percent or so, which is about 5% higher than what we used to report three, four years ago. Correct. Clearly, our strategy for product mix and all. The second aspect is the overruns. Over time, we have been reducing it, which is why we entered positive territory in FY 2019. Correct. Now going forward, I will request Tarun to give a flavor or and Raman. Yeah. Tarun, Srinivas, this is Tarun here. Yeah. Yeah. Yeah. Pretty much, give you the direction that you're on, but let me just add a little bit more. Yeah. So largely, the NBN starts popping up particularly in the second, third, and the fourth quarter, mostly the fourth quarter. But, yes, our our trajectory is positive. Yeah. Coming to the mix and of of various elements that do help. First, the product mix itself. Now versus last year, our par, non par mix has gotten more diversified and has only just improved in such a way that the nbn is going to get better. We did not have much of non par in last year's first quarter. Non par is adding non par, as you aware, has a better NPV. That should help us more. The other big factor moves the needle in NPV is the mix of channels. Agency usually is the costliest channel in India. Now versus last year, already we have a change in our mix now. Agency, which till about three years back, was as high as 90 odd percent Yeah. Is is and the rest is only 8%. Yeah. So now a lot different. So our non agency channels are up close to 40% now in our Mhmm. Mix, in which we have our institutional business, which is going quite fast. Yeah. The proprietary sales force, which is the upselling channel, where Mhmm. On the panel of any out out there of any commissions. Mhmm. It's also grown quite healthy with the channel we set up last year. So Okay. That is really making getting the channel mix also towards the lower cost and more variable channels, if I may put it. Okay. That helps a lot. Now, sir, the question in Balik will be that we have got huge results of more than 8,000. So how do you plan to utilize this? See, as of now, we have started paying a modest dividend. It is not our intention to take significant amount out at this stage, a, because the company is in the growth path. And because of the product mix, the more, proportion of guaranteed business Mhmm. We think we could use some of it to support the business. Secondly, we are now working out, obviously, this investment thing, as Bharat said earlier. Yeah. We are doing a complete review. We want that money to work a bit harder for the company and for us. Because taking the money out, unless we have a need for it, actually has no meaning because it only ends up in paying an additional tax Correct. In terms of DTT. And it will again, we'll do the same thing out here. So we can see, so we can only invest in group companies. So we are doing that every year. As of now, it seems the better option for us is to keep it in the live company itself. Okay. Sir, any M and A plan? No. As of now, no. No plan. Okay. And, sir, last question from my side. These stress assets, you know, either DHFL or any other group, how much is still outstanding which we are yet to collect and we have not provided? Can you give that number? To our public disclosure in thirty first March. I think all the assets are given there. No. As on thirtieth June? Thirtieth June will be up after as soon as the public disclosures come, it will come up. Okay. So there is the details will be available. The latest provision will be available. Obviously, DHFR, we have collected a lot of money. Okay. Okay. Therefore, the amount will be less than what it was in thirty first March. Okay. Sir, thank you very much. Wish you all the best. Thank you. The next question is from the line of Harish Kapoor from IIFL Asset Management Company Limited. Please go ahead. Hi, sir. So my first question is on Badgic. You know, we've obviously had some one off this quarter and some one off last year. But in terms of the overall combined ratio and the loss ratios, obviously, it's kind of in stock. Could you just help me understand by the end of this year, how do you see the combined ratio? Because for the last few years, we've always been in the early 90s or the mid-90s. This quarter obviously is elevated, but do you still expect to close around mid nineties in terms of combined ratio, or what is the overall outlook for this year? Has Kapan joined us? Yeah. I'm there, Srini. Yeah. Yeah. Okay. So if you look at it, I I think our level always has been that we write good business, and I think and we make a writing profit. And this time, we look at the assets and I think corporate as such. So what will it be? Not very bad from my side, but we shall continue our number of now going over the market and having a writing profit is what we keep on continuously working on. So if you can please work on that, I think the results And that is what I can say that. Any particular range will be helpful. Range is also we wanted to do a 100, and that is our ambition, you know, as a company. So we continue striving for that. My second question is in terms of the digital bonds that we have provided for 60% right now, and it's kind of indicated that some of the instruments will be getting, you know, expired by '20 or '21. But what is going to be the part in terms of recognition of the other policy plan? Are you going to provide in q two, or are you kind of comfortable on the 60% level? How are you thinking about this one? See, this, let me almost all insurer mean, lot of insurance companies have exposure to DHFL because that's where the regulation had put 15% in infra and housing, and therefore, we were one of the investment people had picked up because it's no breaker to play at the time. Having said that, we have taken a bold stand in try providing 60% of our holding. At this stage, we think that is sufficient. There is a lot of news flow coming. There is an interpolitical agreement to be signed by the banks. They're waiting for the resolution plan. And depending on that, we will take appropriate action. If in the meantime, we get an opportunity to recover what we have done, we will obviously not overlook that possibility. So at this stage, we believe 60% is adequate. As the developments happen because lot of this is the media news, there is rumors, and then some news comes today. And then after two days, you find the completely opposite news. We have to wait and see. Okay. And just in terms of valid, just two questions on that side. One is the mix has changed, obviously, this quarter. We expect the savings fees to remove up the second half of the year, but the only people indicate anything in terms of mix, likely mix from this year, any other projects, etcetera. And second, on valid side, if you could talk about, you know, the thirteen month persistency has obviously come out. You know, last year too, you kind of had a gate of kind of thing that you started with 73 and it at 79. So, you know, what is the reason for, you know, persistency being more in q one, and do you expect the same recovery in by the end of this year, or what is the reason? Let me just give a very brief comment to your first question as to the product mix. As of now, we are very comfortable with the product mix that we have. Clearly, one piece which is missing in our listing is the individual risk product. We do have a product in the market, but the way the rates have moved in the last few years, even what you find two years ago seems to be outpriced in the market. That is something the management is looking at. But now I'll hand it over to Tarun to handle the question on the product mix as well as the persistency both Tarun and Raman can handle. Yes. So on the product mix, we're quite comfortable as Sriniv just kind of put across to you. We have a very clear city based strategy where based on the kind of customer segment we are in the city, we go out and put our product mix based on the kind of customers that are there. HNIs and mass affluent were able to take a higher call on markets and can participate more on the growth story. Typically are the ones who buy units. And that's where our focus is not just on top cities, but also we as you know, we are a little blessed in terms of spread. We have six twenty branches and more than four seventy cities. So that is where we are able to manage this with the right selling approach that we've got. But broadly, strategically, our product mix shall remain balanced. And with a fair this year onwards, a fair mix of non par, with non par saving currently, it will move to non par production in the second half. We are expecting an approval and as soon as we have the product that we want, that will be there. Our existing product, the Sinifed, they could come down. So that is a little of a blip there. Plus, the good thing is our entire mortality risk and all of those are looking quite strong. So we are a lot better now placed to sell risk products. Your second question was on persistency. Yes. I am much of not happy with the 73 having come down to 72. Although I must say it's a blip which is incidental at this point, We expect this to roll back up, and we are focused very heavily on persistency. Just to give you a little bit more information, March persistency last March, which was reported at 79, up from 77 the year before, that bucket is at about eighty, eighty four 80.5% now. So what you see usually is the thirteenth month. But what really goes ahead, we have a little lopsided, aging. Usually, fifteen, sixteen month onwards starts looking a lot better. So I would wait before I talk to the government on the '73 and it comes down to 72. Our persistency bucket otherwise has improved on whether it's twenty fifth, 37, '49, 61. So all of this is looking a lot earlier. And we shall very clearly endeavor to be in the top five, six in the persistency buckets. So that's the reason. What is the reason? You kind of said, I understand it looks better for a larger time frame, fifteen, fifteen months, etcetera. But what could be the reason that, you know, there's been such an impact? See, the I think it's it's a 1% drop, so '70 three to 72. So you're talking about that? Yeah. No. I'm largely looking at even the year end number. So I'm just Oh, okay. Understand that. There a consistency trend, you know, because if you look at other players, they do report consistency in terms of within the quarterly number, you know, such for the thirteen month, you know, consistency. Just trying to understand. Fair. Fair. No. I I get that. So like I was answering, we we have a little more lopsided on the way the fifteenth to sixteenth, seventeenth month comes. This is a culture change that we're bringing in. Usually, if you have better auto pay pickup, where usually happens with a very high banker focus, because in the bank itself, we can just hook up the auto pay, and and there is no paperwork, that is required to take signatures and all of that. So it's a lot more easier with bank card companies. So their thirteenth month by itself, the is usually higher, while our fifteen month, seventeen month gets a lot less a lot better. The way to look at it, not just from a metrics perspective, is thirteen months is just an indicator. Ultimately, the second premium, if that's coming in or not, then that's what the way I would look at it. Our second premium will be healthy. Our it's just that our thirteenth month bucket may be lower than the bank card company, but our second premium will be higher. So you'll find it coming right back in the fourteenth, fifteenth, sixteenth month. Okay. Thank you. That's it so much. Thank you. The next question is from the line of Nadeesh Jain from Investec Bank. Please go ahead. Thanks for the opportunity, sir. The first question is on life insurance, sir. There is a fair bit of increase in nonparticipating guaranteed products. So if you can give some color on what is the level of guarantees or tenure of these products, premium payment terms, and how are we hedging this interest rate risk given start for reduction in interest rates in the economy? Yeah. See, the non par largely is our pause and product that we launched. It varies between five and a half to a little over 6% depending on the age provided they hold it to maturity. This is largely sold through certain segments of agency as well as through the IB business. It is a high margin product, but the margin is volatile because it is dependent on interest rates. As of now, our book size is not big enough. We just launched the product last year. Therefore, we are able to completely hedge it through partly paid bonds of very high quality, bonds with companies like HDFC and others. So therefore, we have which are at a fixed coupon, the money is called over maybe five, seven years, and the maturity is up to fifteen years. Arun, would you like to add to that? I think you've answered it perfectly, Suneet. So it fully has on, not just a AAA set of papers, but name checks very clearly in place. This is our learning from whatever we've seen in ILOFS and DHFR. We've very careful about the heavy rebind. The other is the product, which is a very low ticket product. So this will that kind of keeps a check on the amount we sell. So the maximum premium on this product is only 1 lakh, unlike others that are in the market. So this is and this is not a long duration, Wazvi. Our our average duration, as Suneet said, will be in the range of five, seven years. But usually, I mean, the maximum outstanding guarantee won't be beyond ten, twelve years, and that is perfectly hedged. Sure. Sure. And just to confirm, the prepayment payment term is on an average is five, seven years? Yes. So if you look at the duration, if you do it on a duration basis. Yes. Okay. And secondly, in general insurance, if we can share the segment wide loss ratio, that would be very, very helpful. And if not, at least the commentary on x of crop and x of this one off cyclone event. What is the combined ratio moment y o y? Milan, would you like to take that? Yeah. Regarding the claim ratio. No? Yeah. Yeah. Loss ratio segment wise. Yeah. I think as far as segment wise loss ratio is concerned, we find some increase in the four wheeler portfolio specifically. And that is contributed also because of some increase in the discounting. So that that is one area where the loss ratio has increased. We've also seen some increase in our retail health loss ratio, which we are seeing now, tapering down, which is, getting witnessed in July. Well, I think we witnessed some additional claims, particularly during the onset of monsoon and other things. So we we have seen some increase in retail sales too. But I I these are the two segments, I think, where we have seen some increase in those people. Sure. Sure. And And we we also have an impact of the Olyza cyclone, which is funny. So the net impact on our books is around 30 crores. And especially on the on damage side, we have seen the loss ratio for the, I think, entire industry inching up. Yeah. So do you think, incrementally, it will worsen or players have started taking corrective action on pricing now? I have seen some action from the other companies also in this regard. We have also seen some action being taken even from the OEM side as far as this issue is concerned. So we have seen some, I would say, freezing up in terms of the discounting levels of what will be offered by OEMs. So I think there is some turbulence in the market coming up. So so we don't expect it to rise very high. And then lastly on the expense ratio in general insurance, it is slightly on the higher side if you look at the last seven, eight quarters data. So is there any one off there or any comments on that? In light last quarter of last year, met Hello? Hello? Can you hear me? Yes. Last quarter of last year, we had said that expense ratios had rolled up because we have signed up a large number of bank card types. This includes public sector banks, private sector banks, big ones like SDFC Bank, and now even Citibank has started kicking off from this year. These require a lot of manpower to to before it reaches a certain scale. In the initial part, you will not find productivity as high as a mature banker relationship. So that investment has already been made. We're already seeing good traction. I think the first quarter, we have seen a 35% uptick in our bank assurance business. And over the next three to four years, we think bank assurance not only will it grow as a proportion of our total channel mix, but we think it can become a growth as well as profitability engine. It gives us high quality nonmotor business. It there are so many bank card relationships. Some of them, we are starting from scratch. Therefore, the base effect itself should give us good growth. Apart from that, the downside is only that bank assurance typically is the most visible when you have a catastrophe, because bank insurance tends to have barring some very large losses, which may come from corporates, a lot of the mid sized losses usually happen through funding by banks, and therefore, you'll find that in catastrophes, you will have the bank as well as getting it. But net net, I would say over the next, three to five years, we think that should power this company back to higher profitability and growth. Tapan? Yeah. Right, Shani. So if you look at the we need to capture the investment, not less than what will happen in the certain time frame, sir. The investment, this will give return the time progresses. So you're fine, sir. That's it from my side. Thank you. You. The next question is from the line of Ashish Sharma from Enam Asset Management. Please go ahead. Yeah. Hi. Thanks for the opportunity, sir. Just on the on the Magic, in in in your motor, what will be the mix between cars, two wheeler and and CV? And in in in two wheeler, do we do only the charge or the I mean, this is one one clarification on that. And second would be on on how do you see the behavior with with this new norm kicking in where I IRD has sort of unbundled even the OD component. So I mean, technically now, the customer can have three different policies. So I mean, how do you think the behavior will pan out in in one sense that those norms sort of come into effect from September 2019? Uh-huh. Yes. Viles? Yeah. As far as the mix in terms of the total motor business is concerned, around 11% to 12% is coming from two wheelers and around 48% coming from, four wheelers. Remaining around 40% comes from the commercial vehicles and other material types of vehicles. So, what we have seen is that, as compared to last year, there is a slight increase in terms of the contribution of the mix from two wheeler business. The motor four wheeler business is slightly lower as compared to last year, down from 52 to 48 now. But rest of those segments, particularly commercial vehicles, I think they continue to grow in the same, same manner as as per the last year. So the in terms of mix, I think, the four wheeler portfolio dominates, the entire, motor business. And moments in the four wheeler business also affect overall performance favorably or uncertainty. Sure. In in terms of I mean, is is this two wheeler entirely the charge? No. It's it's not entirely per charge of such. Basically, we have a type of per charge. But I think as far as other OEMs are concerned, we do not have direct tie ups. So there is some some, I would say, insurances happening through the VSAs and the finance years and other things and also through the multiline agency. Okay, sir. And then on on that unbundling of the OD component, how how do you see that sort of I mean, do we see that customers preferring an integrated plan or does does and and and does the the unbundling sort of creates further competition and further pricing power on on on the on the Apart. Do you like to take that? Yeah. So if you have we can run bundling, it had to come. Last year, when the renter allowed three year long term policies and five year policies, they also allowed one year OD with three year policy. Yes, sir. Which means that in the second year, you had to have a separate OD. That's how would you know have a cover? So this is unmodeling is something which is a direct, you know, follow-up of the previous decision. Okay. If you look at unbundling, it does mean that if you want to buy an OT cover, you can buy from one. The company will give you the TV cover, or you can buy from any other company of your choice. Which also means that now the ratio is earlier was, like, OD to OD, and TP to TP also start coming to play in time to come from pure observation perspective. But broadly, it will not have much impact in terms of how the pricing and how things are moving. This so we'll be giving a nice thing to help. Most most customers would actually take OD from the place that they have taken. Most customers would. Some will take it differently, but that is fine. So not with a big impact as as now as we are thinking. Only problem can be that some people may not take an OD policy. So for some people taking OD may decrease a bit, but that will be margin, not very much. Okay. So perfect. And just lastly, if I can, in terms of direct, I mean, what's what's the road map as to I mean, some some some color on that would be helpful, sir, and that would be also. Siri, that's the making a proper announcement later in the year. It is, an internal initiative. It will be a digital company. It will focus on, selling products across the group. Beyond that, at this stage, we have nothing more to say. There is a lot of, research and r and d work going on, lot of background work going on in setting up that. So we will make a proper announcement once we are ready to launch that company's products. But this this will be launched this this year. I mean I mean We are hoping to. Okay, sir. Okay. Perfect. Thank you, and all the best, sir. Thank you. The next question is from the line of Anirban Sarkar from Principal Mutual Fund. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. Most of my questions have been answered. Just one question I have on the net earned premium being higher than the net written premium in this quarter. So am I right in understanding that this would be because during the last quarter, I mean, in the comparable quarter last year, there would be a large chunk of premiums that were not earned and that came into this quarter. And what segment would they be if that is the case? Vilan? Yes. Actually, the change which has happened is in the current quarter. It has nothing to do with the last year same quarter. Basically, we entered into a, long term, dwellings where we had increasing concentrations in certain areas. So, where we entered into a new reinsurance arrangement, and we have to see the the long term dwelling premium to the reinsurers. So that is why the net written premium, in this quarter is lower because, the sessions, have been disproportionate in terms of what has been written in the GWT because the long term premium was sitting, on our books. So which has been treated to the reinsurers. That's why the ratio is little skewed, and it it also has an impact in terms of the ratios, which are derived in terms of the net return premium. Even for example, I would like to mention about the combined ratio, which is currently at Connect three. That is because, the expenses and the commissions are being the denominator, which is being used is the net return premium. And if you look at the complete net earned premium based combined ratio, it is still less than a 10%. All right. All right. Fair enough. Thank you, sir. Thank you. The next question is from the line of Mayur Prakaria from WealthManagers. Please go ahead. Good afternoon, sir. Just two couple two small questions. One is on a consolidated basis, apart from the insurance and finance company, there was a loss of 10 crores where others are there. What is that? No. That is our internal expenses for setting up our Bajaj Finsur Direct. Okay. So okay. So in that company, that that is our concern. We have many of these new initiatives. We call it the information expenses. We are studying various things happening in the market that we will be spending this money going forward. Okay. Okay. The in Dalit, that we have transferred from the, you know, money from the shareholders account to the policy holders 30 crores. For which pool that would be? The non par, I think, Ramad. It's largely non par because of the strain we are getting, but then because we have never sold so much of non par. And because of that, we are getting this trade. And also the impairment part was setting in policyholder funds, and that's what also appeared there. Actually, it is p and a neutral for shareholders because you transfer it back, and then the profit goes up in policyholder fund that again, you transfer it back to shareholders. Sir, the last part I didn't get. Can you please explain? No. It is an income in the policyholder account and an expense in the shareholder account. Right. Then if the net account is positive, then that will again get transferred back to shareholders on the non par side. At the par side, it will not happen. Yeah. But this figure must be net of it. Right? Go ahead. Ahead. Sorry. No. So, Shini, what you said is not actually true. That's also only for the AUM funding we do. Yeah. But otherwise, this is largely coming from the new business train, which is coming from the nonpaid. So there is a loss on the nonpaid account, which is what it is. How do we see this going ahead? Corrected. Yeah. Yeah. So, Ramani, how do we see this going ahead? Will it continue for some more time? See, till that past till the time we have huge growth appearing in any segment, so for example, in non par, we believe that this trend will continue, for some few quarters, because this product has just picked up. So this trend will continue for the next few quarters and until the raw scale is achieved in this line of business. Okay. Just one little bit more on this. Are we trying to cap this, or will we have a policy where we cap this loss? Or is it based on the business growth, which will first want to achieve a decent scale and then look at this? Okay. I'll take that question. I think we do have a very rigorous planning mechanism. We do a three year plan and a one year plan. Always, when there is an opportunity in the market, the question is how much do you want to burn in terms of new business train because it is a very profitable product. So that is the call we take looking at the entire business mix and all parameters of P and L. Clearly, given the high solvency surplus and the excess capital sitting in the live company, we can afford to invest a little bit more. Our focus is to grow the new business value. And, therefore, the end that will maybe, having a new business trade when we have a growth opportunity, and we want to tap it. Okay. There's an annual number we just take. I mean, you'll have to see what the growth is, and based on that, we will take. Okay. Just a very small bookkeeping version. You know, if you see the individual rated new business and group new business, the total does not add up to the breakup. So there's a small difference of only $14.15, 18 crores every quarter, but just was wondering if it's consistent there. So if you can just see into that. So sorry. Your question is individual rated, does it add up to what? Individual rated plus group new business does not add up to the total new business. It will not because rated business has 10% for single premium. Yeah. Yeah. Yeah. So the No. My I'm saying after which we write, it is the impact of plus $332,000 crores, but in total, we say it is $1,001.04 crores. Yeah. Because one is on rated weighted. So individual rated means where you have single premium, you've rated it at 10%. So if you gross it up, it will be that small component because we write very small amount of premium. Okay. It's a small component. Yeah. It will be available in the public disclosure and the revenue account and the premium schedule as to what is the first year premium, what is the single premium, and what is the yearly of premium. Regulatory disclosures for q one are uploaded? Not yet. Okay. Okay. Thank you, sir. Thank you. The next question is from the line of Sanket Gora from Spark Capital. Please go ahead. Yeah. Thanks for the opportunity. Just on crop insurance, just wanted to understand that we we had a loss of INR 98 crores, which you mentioned in initial comments. With respect to FY 'eighteen and FY 'nineteen crop, have underwritten. So it is it is like the ultimate loss has been crystallized or we still can see that loss to come up in subsequent quarters with respect to the products which we have returning FY 'eighteen and FY 'nineteen on crop? Praveen? I think whatever we have written this quarter, it was only a spillover of last Rabi season, which was little loss making, particularly the Maratra and Karnataka states. This will not be carried forward going forward. No. Because we said that in in the quarter, we provided for FY 'eighteen also. So so the all the losses with respect to FY 'nineteen also have been crystallized in that sense? I mean, what actually happened when can find the problem, miss. There are two parts. One is Khaled and is Ravi. Now, Ravi, as as it's finalized, now it's over. Now the Khaled's know, it's stuck. So from then, whatever losses comes to, we provide the product, and then it move from that's that's our we also bought the actual timing of that, and a bit of deviation from that came up. So last year, Ravi was back, and that's why he said this quarter, the results looks a bit bad. We removed the crop losses. And Nilin also mentioned, including the crop losses also, our combined ratio on the earned basis is lower than 100. No? It is because of when we remove the crop, it's much better. But having said that, the news is good enough. You don't have to know. We need to actually say what is coming. We had a bad ravine and reflected here in this quarter. And next quarter, we will take out that to not be there. Okay. And and just wanted to understand, just if you can re re re repeat your loss corridors for the crop insurance. Maybe you have said it in the previous quarter's phone call, but can you do further tell the what are how the loss corridors for our crop work? And second question is, what is our crop strategy going ahead? How much is Karif and which state have the what is the Karif? Which states will be contributing to Karif in the current year? And what will be our stance on, Ravi, for the year? See, first and foremost, our strategy on crop has always been that our market share of the total business, let's say, about 7% or so would be there. Our our business is already closed yet, bit less, a bit more. But we are never trying to be very overweight on crop or underweight. Crop is a significant amount of business. It's it's about $20.20 plus, 20,000 crores kind of benefit there, which means that as a large player, you have to have some play into the crop business, which we do. And we keep it within the limit of our market share. So our strategy in crop has been clear from day one, and we have delivered very good on that. When we do businesses like crop, one off, there will be bad season. They will be able to predict everything to be right. It's because the volumes are large. As you look at our product, we are again diversified our selection of business. We spread all across the country. We do that so that we could be one off in a particular location goes bad. You still have to protect it from that perspective. And the monsoon, because I think it keeps on fluctuating. Earlier that we would, then we will be able to. Now again, we think it's going to be good in the places that it is there. So, hopefully, the things would come out well. Okay. And can you just give me give us the loss recorded details of crop insurance at at at what rate does stop loss stops for us works for us? Sorry. You're asking a a reinsurance detail, is it? Or your Yeah. Yeah. Re any insurance details. Yeah. Yeah. Yeah. Yeah. I think the stop loss would be working over at 01:30 or so. Correct me if wrong. Yeah. Yeah. Yeah. And and it come back to us at what level after, I 2018, what details. I think that is all we can confirm. Okay. And and one more question on Bajaj Bajaj Life. Just wanted to understand the group group protection business, what we have written, what is the contribution of Bajaj Finance and non Bajaj Finance. And I just wanted to understand whether Bajaj Finance has also started selling savings products for us because one of the other competitor has said that Bajaj Finance is selling is is is a part into selling savings products for them. See, Bajaj Finance has been has started last year itself selling for the savings products for us. And group business, not only Bajaj Finance, we do group business with a lot of other partners as well. Okay. If you can share the mix between Badaj and Otherwise, details will just take that. Okay. No issues. Thank you. Thank you. The next question is from the line of Niraj Poshnivall from MK Global Financial Service Limited. Please go ahead. Hello, sir. So taking the last question to Bajaj Finance, so sending seeing sort of for the Balaji. Anything we are doing for the Balaji side of it also in terms of channels from the Balaji Finance? Hello? Can you repeat the question, please? So how much contribution is coming from the Raja and from from Balik Balik channel from Balik? We cannot provide that kind of information. We are one of their major partners and one of their largest partners on the, insurance distribution side, pathology and. So now what is the road map? And if at all we want to, upscale that business from management has taken the route of going for multiple, partners, keeping in mind that different types of verticals they do and the need to provide charge to the customer. So our objective will be to grow, the business that we're already doing with them. And it's a plan that every year, the company and the guys, like any other partner, they will sit and work out what is needs to be done. And are we paying mark market benchmark rates then? Because I think it's usually the bigger partner for them. So I just want to understand that context if we pick the pie. I mean, how it's going Everything is at arm's length. You can't really do business with any partner which is not at arms length. Okay. Got your point. And on the second question, the on the RDA TP rate increase, what would be our portfolio rate increase? Because we are CV heavy portfolio. I think it was a little lower in this side in this year. So what would be the blended rate increase for us? No. We have million. Yeah. I I think the overall rate increase is coming around, say, around 10%. Six to 7%. Six to 7%. Okay. And in terms of strategy, like, we have already seen in the call, like, on money of the e motor OD or increase of discount already, which is hampering your four wheeler loss ratio or the, let's say, for the TP loss ratio is also inched up. So what is our strategy going ahead? And how we are actually targeting to contain the combined ratio below 100 apart from the x crop if we talk about just which is not in our hand, but definitely if we can have some color. And also on the fire, which I think after GIC has increased the rates, a lot of interest has started coming into that. So any strategy and color will be very helpful. Uh-huh. You want to tell? Okay. So I think the strategy for us is always very clear. No? Think in the market, we want to be servicing our customers well. And we're gonna write the risk at the price that we see we are comfortable with, know, be it fire, be it motor. If you look at the GIC rate increase in fire, it is an average increase based on the IID loss ratio, which is there. And the entry that the insurance has a right to underwrite what comes with, and that is why GIC rate is lower than the average rate of losses, which is there with the ID. And I think they were right in their sales and they said that. We didn't pick up, you know, what would be good for a company perspective and design that purpose. So strategy is always doing the same for our company, that we'll be customer obsessed to we will pick up business at the price that we are comfortable with. See, customers who come to our food, we will service them very well, and we should keep on looking for market opportunities where we feel that growth can happen. So that is what we are doing. And, like, set up businessmen like top, which are large scale businesses, we understand that there is volatility in that business. But on a scale of five years, it's it's, looks like good business. That is why, again, there, pick up the tender where we feel we are comfortable with the way it has to go. And your strategy will always remain what's driving in the past. Okay. And on the on the targets towards combined ratio, I mean, any color on that? See, we want to be and have been a good underwriting company, and we should continue that. We we are letting that go. So as somebody is like you said in the call earlier, that in that industry's combined ratio is deleted. If you look at the combined ratio from last year, this year, it's about eight to 9% that the management industry has not fallen. And compared to that, I think we are still done really well. If we are not seeing a 04:00 losses come up, which are still having a pretty decent result. And as Melin said that, monthly basis, the management still below 100. So we we continue being a good underwriting company. That is what we want to do. Okay. And the last question, how has been your experience in terms of Aishman Bharat scheme and any initial comments on that? Any the claims have been? Yeah. We have already supported the government and all the initiatives that they have taken, especially for the insurance sector. So we are also part of the additional work. We have two states with us, and it's it's too early to comment on how the schemes will move. But, yes, we want to be a a part to government fees, benefits the citizens at large. Okay. Okay. Thank you. Thank you for my help. Thank you very much. Ladies and gentlemen, due to time constraint, that was the last question for today. I will now hand the conference over to mister Karan Singh from GM Financial for closing comments. Yeah. On behalf of GM Financial, I would like to thank mister Resh Shrinivasan and the senior management team of Bijaj Finserv and all the participants for joining us on the call today. Thank you. Thank you. Bye. Thank you, everybody. Thank you. Thank you. Thank you very much. On behalf of GM Financial Securities Limited, this concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.