Ladies and gentlemen, good day, and welcome to the Q1 FY 2024 earnings conference call of Bajaj Finserv Limited, hosted by JM Financial.
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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded.
I now hand the conference over to Sameer Bhise from JM Financial.
Thank you, and over to you, Bhise .
Thank you, Michelle. Good morning, everyone, and welcome to the Q1 FY 2024 earnings conference call of Bajaj Finserv Limited.
First of all, I would like to thank the management team of Bajaj Finserv for giving us the opportunity to host the call. From Bajaj Finserv, we have Mr. S. Sreenivasan, our CFO, Mr. Tarun Chugh, CEO of Bajaj Allianz Life Insurance, Mr. Ramandeep Singh Sahni, CFO of Bajaj Allianz General Insurance, Mr. Bharat Kalsi, CFO of Bajaj Allianz Life Insurance, Mr. Ashish Panchal, CEO of Bajaj Finserv Direct, and Mr. Devang Mody, CEO of Bajaj Finserv Health. I would like to now hand over the floor to Mr. S. Sreenivasan for his opening comments, post which we will take the Q&A.
Over to you, sir. Thank you.
Good morning, everybody. Well, I welcome everyone to this conference call to discuss the results of Bajaj Finserv Limited for Q1 FY 2024.
As before, in this call, we will largely be concentrating on the consolidated results, as well as the results of our insurance operations through Bajaj Allianz General Insurance and Bajaj Allianz Life, and there material the parallel results of our company, BFL, which is another major subsidiary of ours. Bajaj Finance has already had its conference call. However, if there are any high-level questions on BFL, we would be glad to take that as well. We also have with us Devang and Ashish from Bajaj Finserv Health and Bajaj Finserv Direct, and if you have any specific questions on those businesses, they will answer, of course.
We will not be taking any questions on the status of Allianz's stake in our insurance companies. The status has remained the same as at the end of the previous quarter, and there is no change there. Any statements that may look like forward-looking statements are just estimates and do not constitute an assurance or indication of any future performance as well. As a remark on Ind AS, while BFL prepares its financials in compliance with Ind AS, the insurance companies are not yet covered under Ind AS. They have prepared Ind AS financials only for the purpose of consolidation. Accordingly, for Bajaj standalone numbers reported are based on non-Ind AS accounting standards as applicable to insurance companies.
Our results, the press release accompanying the results and our investor deck has been uploaded on our website yesterday. I hope most of you would have had a chance to go through that. Let me first put in a word on Bajaj Finserv Asset Management Limited, which launched its first mutual fund during the quarter. It filed for its first of its seven products in February, March 2023, and April 2023. The first two funds, the liquid fund and the overnight fund, were launched by the end of June 2023, while the money market fund, NFO, was launched in July 2023. The NFO is the first, and it has recently opened on 24th July, the Bajaj Finserv Flexi Cap Fund with a mega trend strategy that is currently ongoing.
Over the next few months, BFSL will be launching other categories of funds, including balanced, large and mid, banking, PSU, and other trust funds. Let me now move to the update on performance for Q1 of FY 2024. Macroeconomic conditions were stable during the quarter, with a higher level of business confidence, and overall business conditions were very conducive. Our companies have once again delivered very strong operating performance. Let me start with Bajaj. Bajaj regained retail growth momentum, with proactive growth across products and channels. New initiatives, including the geo expansion initiated in the FY 2023, started yielding results. For the quarter, Bajaj reported a strong growth of 22.2% in gross direct premium income, GTPI, as against the private sector growth of 21.2% and an industry growth of 15.5%.
Excluding the tender-driven business, which are crop insurance and environment health schemes, the GTPI growth for the quarter was a very healthy 26.7%. In Q1, Bajaj continued its momentum with growth in the motor business, recording strong performance of 26% year-over-year growth across private cars and two wheelers. Growth health in which Bajaj recorded a 500% loss ratio in FY 2023 continued to grow strongly with a 33% growth. Commercial line, fire, engineering, marine, and liability continued the growth momentum of earlier years, recording 22.1% growth. The growth in commercial line was aided by Bajaj's strong bike insurance network and multi-line agency channels, supported by strong underwriting and large reinsurance capacity for covering large risks.
Bajaj was able to capitalize on its strong presence in small accounts and rural areas through its bank of virtual satellite offices. In terms of retail health, Bajaj grew 11.9%. Due to high incidence of fraud in reimbursement claims, Bajaj continues to be cautious, and it's focusing on strengthening the use of analytics and processes to control fraud and focus on growing in profitable areas. Note on earned premium, as you may be aware, when growth is strong, the earned premium grows less than the gross premium, as premiums are deferred across the tenure of the policies, while costs are written off upfront. As a result, net earned premium grew only 5%, but this unearned premium is expected to get mostly earned in the subsequent quarters of the year.
Q1 FY2024, the loss ratio was lower at 74.3% as against 77.9% in Q1 of FY2023. The improvement in loss ratio was attributable to lower claims in local and commercial segments, and this after absorbing losses of INR 10 crore from Cyclone Biparjoy and other catastrophic losses. As a result, the combined ratio for Q1 FY2024 was a healthy 100.7% as compared to 104.6% in the same quarter of the last year. We expect this will be around the best as when compared with other composites general insurance companies. In a market, which is intensely price competitive, this is a good result we believe displays Bajaj's commitment to a balanced and profitable growth on the back of strong sourcing, claim management, and controlling the expenses.
The profit after tax of Bajaj was INR 415 crore in Q1 FY2024 versus INR 411 crore in Q1. The year-over-year growth was attributable mainly to lower realized gains from sale of equities, which is offset by higher current income and lower combined ratio. Excluding the effects of realized gains, the core operating profit before tax would have increased by over 40%. Bajaj AUM grew 13% to INR 28,611 crore as on June 30, 2023 versus INR 25,362 crore on June 30, 2022. The flow generated, which is represented by the increase in AUM, was INR 3,249 crore during the last 12 months, which includes advanced premium as of March 2023, which was INR 1,678 crore.
Strong growth in two-wheeler and TV business helped in this growth. Another key highlight of this quarter was the conduct of the first-ever General Insurance Festival of India in Pune, which won an entry in the Guinness Book of World Records for the largest attendance at an insurance conference, with over 7,000 agents attending the event. This event, which is one of a kind, also reiterated a significant connect that Bajaj has with the agent community. Going forward, we would hopefully want to make it an annual event. In summary, it was a quarter with intense competition, Bajaj has performed very well with solid growth, supported by its strong underwriting performance. I'll go to Bajaj next.
During the quarter, Bajaj continued its growth trajectory and reported an individual weighted new business premium growth of 15% against the industry and private players growth of 2% and 8% respectively. The market share in IRNB terms, therefore, increased from 8.3% in Q1 of FY 2023 to 8.8% in Q1 of FY 2024 among private players, leading to Bajaj improving its ranking on IRNB basis from sixth to fifth position. Bajaj's 2-year IRNB CAGR of 44% in Q1 is among the highest in the industry. Bajaj's 15% growth is to be seen in the backdrop of an 18%+ growth in Q1 of FY 2023, which resulted in a very strong base. The total number of policies sold by Bajaj grew 18% to 1.44 lakh in Q1 of FY 2024.
Overall, IRNB mix of Q1 FY2024 stood at PAR 13%, non-PAR savings, 33%, term, 5%, annuity, 6%, and unit, 42%. In absolute terms, we have seen a significant growth this quarter in retail term segment of 158% as compared to Q1 of FY2023, although it is on a small base in the same quarter of the previous year. After the uncertainty initially followed by very strong growth in Q4 due to the tax changes, since business in the Q1 were likely to be usually muted, Bajaj decided to use this period to strengthen its unique product, the launch of a new and innovative product. As a result, there was a lower share of PAR business, which the company expects to correct in the coming quarters.
During the quarter, growth was driven by all the main channels, with agency, institutional business, and Bajaj Direct growing at 22%, 8%, and 18% respectively. During the quarter, Bajaj started activating several of the recently signed corporate agency tie-ups with DBS, City Union Bank, Canara Bank, Punjab National Bank, and Indian Bank. Moreover, with the opening of a rep office in Dubai, Bajaj looks to further strengthen their institutional business. Another point I would like to highlight here is the various initiatives undertaken by Bajaj to improve consistency across most cohorts, especially in the later buckets. 13-month consistency stood at 83%. 49th and 61st month consistency has improved to 63% and 50% respectively. The increase in consistency over the last few years helped deliver a very strong growth of 31% in renewal premium in Q1 of FY 2024.
New Business Value, net of expense overruns, grew by 30% from INR 135 crore in Q1 to INR 94 crore in Q1 of FY 2024. This is mainly due to a lower proportion of PAR in the product mix, as I explained earlier, and also the effect of interest rate movement on the guaranteed Non-PAR businesses. The profit after tax grew 26% from INR 124 crore to INR 155 crore, supported mainly by higher shareholder income, lower tax claim, partially offset by higher new business claim on account of business growth. Overall, a good balanced quarter for Bajaj, with a strong focus on retail distribution growth. Finally, both insurance companies are financially among the most solvent. Bajaj sits at 475% solvency and Bajaj with 388%, hence are well poised to weather any external adversity.
Let me move to our lending businesses, BFL and BHFL. BFL has already had its investor call, hence we will only broadly touch upon BFL's results. Q1 of FY 2024 was another excellent quarter for BFL, the company is delivering on all its long-term financial guidance metrics, AUM, profit growth, return on assets, return on equity, as well as gross and net NPA. Continuing its growth story, BFL acquired 3.84 million new customers in Q1 of FY 2024. Total customer franchise stood at 7.3 crores or 73 million, while the personal franchise stood at 44 million. Building on this customer franchise, the number of new loans booked in Q1 of FY 2024 increased by 34%, from 7.44 million to 9.94 million.
The company's diversified business model has enabled it to report a strong AUM growth, as seen from the total AUM standing at INR 270,000 crore as on 30th June, 32% higher than the INR 204,000 crore in the previous year. 61.4% of BFL's customers are the repeat customers. BFL's loan losses and provisions were INR 995 crore on 30th June in the Q1 of FY23. It has a management overlay provision of INR 844 at a consolidated level as of 30th June. The company released INR 120 crore from the overlay in Q1. The gross and net NPA continue to be, or which is recognized as per the expected credit loss method prescribed in Ind AS, continue to be exceptional, with at 0.87% and 0.31%, respectively.
In the same quarter of last year, it was 1.25% and 0.51%. It is worth mentioning here that in fact, during this quarter, BFL has had its lowest ever GNPA over a number of years. BFL entered the quarter with a PAT of INR 4,551 crore, which is 30% higher than the same quarter of last year. The capital adequacy, including tier two capital, was very strong at 24.6%, and tier one capital was again very strong at 23%. Bajaj Housing Finance Limited, the 100% mortgage subsidiary of BFL, continues to do well. AUM grew 29% to INR 74,000 crore as on June 30, and the profit after tax grew 23% to INR 526 crore in Q1.
Capital adequacy ratio stood at 22.52%. GNPA and NPA were again quite exceptional at 0.23% and 0.08%, as against 0.27 and 0.11% in the same quarter. In summary, a super quarter for both BFL and Bajaj Finance. To give some update on our newer companies, Bajaj Markets, BF Bajaj, Bajaj Finserv Direct, and Bajaj Finserv Health. During Q1 FY 2024, Bajaj Markets attracted about 88 lakh customers on its digital platform, out of which 2.3 lakh became customers. BFSI lending, unsecured and secured, with both BFL and external partnerships, recorded a disbursement of INR 1,427 crore, as against INR 1,313 crore in the same quarter of last year.
74,000 odd cards were sourced, as against 65,000 in the previous quarter. In Q1 FY24, Bajaj Finserv Health carried out 10.36 lakh health transactions. That is crossing 1 million health transactions, where, versus just 4.86 lakh in Q1 of FY23, having 3.22 lakh+ monthly users. For the quarter, Bajaj Finserv Health had 1.14 million paying users, versus 8.55 lakh in Q1 of FY23, with 3 lakh users having renewable products. Bajaj Finserv Health is also expanding the provider network, which includes 1 lakh+ doctors, 5,000+ lab touchpoints, 1,950+ hospitals. Utilizing the network strength, BFH is able to offer and service differentiated product plans for both retail as well as the corporates for employee health benefit segment.
You will find more details about these in our presentation, which is uploaded on the website. For those of you who have not seen our presentation, I'll just summarize the consolidated results. Consolidated total income, 47% increase at INR 23,280 crore versus INR 15,888 crore. Consolidated profit after tax, a 48% increase at INR 1,943 crore versus INR 1,309 crore. The consolidated profit after tax it includes the unrealized mark-to-market gains and losses on investments of the insurance companies on account of the adjustments required under the Ind AS. If we exclude the one-time impact of BNPP and losses and gains, the core profit after tax would have increased by 24% since Q1 FY 2024.
Before we open for questions, considering the paucity of time, I would request the audience to keep their questions brief and preferably not repeat questions that have already been asked or covered, so that we can cover more queries during this call.
With this, I now invite questions from all of you. Thank you.
Thank you very much, sir.
We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press Star and two. Participants are requested to use handsets while asking a question.
Ladies and gentlemen, we will wait for a moment while the question queue assembles.
We have the first question from the line of Prakash Kapadia from Anived Portfolio Managers Private Limited. Please go ahead.
T hanks for the opportunity.
Motor has been doing well for us. You know, is it some OEM market share gains, what we've done? Is it some new geographies, you know, which we have now targeted? What is driving this growth? You know, is this growth sustainable for us because we've grown pretty well. Secondly, you know, on expenses on management, what impact does it have on the industry as we move forward? Will it lead to, you know, better consolidation, better pricing, and, you know, what impact would it have as we move forward? On BALIC, what is the unwind rates we should look at, given, you know, the current interest rate cycle? These were my three questions.
I will first give a high-level response by passing on to Raman. I think in BAGIC, what we are seeing is that last year and a half, we have been investing quite a lot in expanding our distribution outside of even the OEMs. In terms of smaller towns, we have digital offices, digital banker, we have virtual satellite offices. Last year, we were doing a lot of correction there because we had to get the people, we had to get the strategy right. I think that has started falling in place. My own assessment is that it has been broad-based growth across OEMs, as well as agency and other channels in motor. On the EoM and the rest.
To give a more detailed flavor on the motor business, I now hand over to Raman.
Hi, thanks, Sreeni. I think Sreenivasan rightly articulated, so if I try to summarize the way the motor business has been operating for us, one of the big levers for growth has been the two-wheeler business. As we discussed in the past, two-wheeler from an OEM perspective, used to be a handicap for us because there were many OEMs who didn't want to work with the Bajaj brand because they looked at it as competition, given the group level branding on Bajaj from Bajaj Auto perspective. Over the last 15-18 months, we've been able to kind of break that gym. Barring Hero, I think we've been now able to tie up with all the OEMs on the two-wheeler space.
Hence, if you see for the quarter, the growth on two-wheeler has been upwards of 50%, and that's been the trend for last two, three quarters now. That is the biggest lever of growth in our overall motor numbers. If you look at it from a channel contribution perspective, also, one is motor dealers, where we've been seeing a gain of market share. To give you some flavor of the market share numbers, on four-wheeler, our new car market share last year, same quarter, was about 4%-7%, and then this year, for the Q1, it moved close to 9%.
Three-wheeler, which 3 years back used to be sub 4%, last year we had already moved that to about 6%, and now in Q1, it moved to about 11.5%. TV, also very healthy, a number of 4%-25% market share. The motor dealer channel seems to be contributing significantly to the growth, but like Srinivas said, the growth is more balanced across all the channels. If you also recall our past discussions, we have said that we will try to penetrate more, as a strategy, we'll try to penetrate more into the smaller towns of the country, and we call it the Bharat model. That's something, you know, the numbers have started to register some recent growth, and that's one of the other levers for the growth.
Also, on the more established channel, like agency, there also we've, added a lot of manpower and, agents, which is, leading to the growth. Overall, if you recall our previous conversations, we have said in both the pandemic, we have kind of consolidated our manpower and reach and so on and so forth. We have said that there will be some stress on the bottom line as we start expanding. I think some of the expansion which we've done in the last 12 months has started to show the results. That's the reason, these are the reasons for the overall growth in the, motor side. Now, obviously, because we've added, we've done the expansion, we've seen the growth sustain, and we'll continue to expand for, at least for another year or two.
Maybe, in the medium term, you will see this growth sustain is what we believe. Obviously, it's also outcome of how the market moves. As you know, it's a very, very dynamic market in terms of discounting and promotions, and that is something which we'll have to wait and watch. As things stand today, maybe the growth in the medium term at least looks sustainable. Even the subject, as, you know, we've discussed in the past, given the most of the industry, at least half of the industry is non-compliant, and hence, we were of the view that, there should be some sanity which should come in the way the commercials are moved over a period of time. Well, it's too early to say that, because it's only been one quarter.
As of now, we are not seeing any outcome of that, because I think people are just getting aligned to the new regime. Maybe another quarter or so will be required to figure out the real impact. What we are clearly seeing here is that on the bulky businesses like crops, and so on and so forth, there the level of engagement from many other private players has got actually raised. You know, the competition is becoming even more intense in crop business, because as you know, that gives the arbitrage on the UM ratio. That's the only thing I would like to comment at this stage, and let's probably wait for another quarter or so to really figure out what the real outcome of the regulation.
Thank you, Raman. I'll just add to what Raman said. On the EOM, I think it is now the regulator has given a budget,
30% of your gross to complete.
Different companies will have to evaluate where do they want to pitch more, because there are no individual limits on product level or intermediary level. If they pay more somewhere, they'll pay less somewhere else. Clearly, I think it is for each company to decide. Some people may say, I want to pay on motor, companies are paying more to go to banks, which other channel or product they want to pay for. This will evolve and this will keep changing as companies keep changing their strategy because a very competitive market.
I think we will keep watching, but we were well, we were below the limit, and we do have very significant solvency. We have the strength to play out any of the combinations that might one might see in the market. I'll hand it over to Bharat to take the question on the unwinding rate on the life business.
Yeah. Thank you, thank you. The unwind rate, it basically depends on the market yield of the assets which we are holding and as well as what are we expecting in terms of a return. If you see that consistently, it has been between 8% to 8.5%, and I think it'll be hovering around there only. That's where the number is.
Okay, fine. I'll join back if I have more questions. Thank you.
Thank you. The next question is from the line of Supratim Datta from Ambit Capital. Please go ahead.
Thanks for the opportunity.
I'll start off with BAGIC. The loss ratios on the commercial lines have improved this quarter, despite the reinsurance hardening and the fire pricing, being rigid by the regulator. Just wanted to understand, you know, how have you achieved this improvement in loss ratio despite these headwinds? That would be, you know, the first question. I, you know, I have a few more, but I will, I will, you know, pause before I go through this.
In commercial businesses, the loss ratio has been across the cycle because they're also exposed to catastrophes. Raman, would you like to explain?
Yeah, if I just look at the movement, like you rightly highlighted from last year, same quarter. Last year, I remember in the same quarter, there were some large claims which were reported in quarter 1, and hence, in some of the lines, the loss ratio has moved up. I remember that we saw in engineering and fire. Fortunately, that's not the case in this quarter. Like Sunil said, you know, cyclical at times, we have some calamities and because of which it happens. Given the fact that, you know, in the quarter 1, there has been a cyclone, but we've seen only a return from net of INR 10 crore, while the gross was a very higher amount of INR 50 crore, but the net impact for us has been lower at INR 10 crore.
Just a word of caution, these are quarter one numbers, and we've seen, you know, the way the nature has been creating havoc in quarter two, I think this doesn't end here, and we are just keeping our fingers crossed to see how quarter two plays out, because, you know, the heavy rainfall, north side of the country has been experiencing. That's just a word of caution. While quarter one has been good, we did see a small impact of INR 10 crore and because of the cyclone, but quarter two is something which we'll have to wait and watch. Otherwise, to answer your question, I think like Sunil said, it's a cyclical thing. This quarter has been better compared to last year, where we had some bulky claims reported in quarter one.
I was, thank you a lot for that. I was actually, this was going to be my second question, but you know, from the North Indian, what kind of impact are you seeing? Could give us some, you know, color on, you know, what kind of claims that you are getting or what kind-
I'm sorry to interrupt. Mr. Dutta, your voice is breaking. Could you please repeat your question?
Yeah. So what I was saying is, you know, my second question was on the North Indian floods. Wanted to understand what kind of claims trends are?
There is in Delhi, Haryana, Lahaul and Spiti , Rahman.
I understand that. As of now, nothing material has been reported. Obviously, on the motor side, there are many claims which have got reported, but I think, maybe in few weeks' time from now, we will really have the right assessment. Maybe a quarter 2 call is when we will really be able to give the right picture. The claims, like I mentioned, have gone up. Fortunately, at this stage, only the retail ones, we have seen having been reported, nothing significant on the commercial side, so far. Maybe, we'll get a better picture in the quarter 2 call.
Got it. hat's very helpful. Last question on balance. You know, if you could quantify what was the impact of the interest rate move on the VNB margin, that would be very helpful. I just wanted to understand what is the hedging strategy when it comes to Non-PAR products?
Bharat?
Yeah. I'll take that?
Please.
First of all, let me just cover the hedging strategy part of it. See, on our Non-PAR book and annuity and a good extent of term book, which has a long tail also, is being effectively hedged through FRA, path-dependent option. Obviously, we look at other hedging strategies, including a cash flow matching and a duration management. To that extent, the comfort is about a 90%-95% for the book is hedged through the relevant instruments. Wherever it is an unhedged portion left, say, something which is beyond 40 year of a liability, we assume a very minimal rate of interest to make sure that there is no interest risk. From a hedging perspective, it's completely in control.
As far as your question on the margin concerns is that, see, compared to previous year, if you look at quarter one versus now, the yield curve has actually changed, and it is not just a shift in the curve, the slope of the curve has also changed significantly. If I broadly put, two things can be done. One is that you immediately react in terms of customer IRR change, or there could be a little bit of a lag, because when you decide by the time you make a change, there could be a lag of a two weeks, three weeks, or a month. That could have an impact on the margins. In our case, that could number be around 1.5% or so compared to previous year, quarter one number.
The other dent in the margin is basically because of the product mix change that Shailen in the beginning also mentioned, that we wanted to pick up the quarter one on a high momentum. Those are the two broad breakup in terms of change in margin versus previous year.
Got it. Thanks a lot.
The other thing just I want to update is that, see, as I said, if the margin has dropped around 3.5%, maybe give and take 2% is because of the product mixing, 1%, 1.5% because of the yield curve change. Both the corrective actions in terms of product mix, as well as in terms of changing the IRR in line with the yield curve, has already been done, executed in the month of July itself. This was just a Q1, where the momentum was decidedly for us, and the corrective action has already been taken. Tarun, in case if you want to add anything?
No, I think you have largely answered, the third question on ticket.
Yeah, sure.
Thanks a lot. That's very helpful. I'll join back with you for the questions.
Thank you. The next question is from the line of Nidesh from Investec. Please go ahead.
Thanks for the opportunity. The question on VNB again, because we are not seeing such margin trend for other insurance companies. Is it primarily because that we have we not repriced our guarantee product when interest rates have changed? That is the main reason for margin decline. Also the product mix, because the PAR has declined, but at the same time, protection has gone up, and Non-PAR has also gone up. Product mix, 200 basis points what explains product mix change, impact of 200 basis point on margins. How did we look at margin for the full year results?
Hello, Bharat, would you like to take it?
Yeah.
I think let Bharat, let Bharat answer. Go ahead.
Okay, sure. Thanks for the question. As I said, one is that because there has been a little lag in terms of reducing the customer IRR. It's just a timing difference, not that it's a structurally a drop in the margin. To your answer, your question, whether this is... It's just because of the time lag of two, three weeks or a month, is what is reflecting in the Non-PAR side of the world. Otherwise, if you look at from a ULIP, which has gone up compared to last year, ULIP is as we know, is a very low margin business, and PAR obviously helps us in terms of the overall cost being managed in terms of the total policyholder funds.
I think those two working in the negative, like, ULIP going up as well as PAR going down, has a double impact in terms of the margin, which is where we have already corrected it. If you look at in the beginning of the July only, we have dropped the IRR of our key products, which is AWG and other. Similarly, our ULIP mix has also dropped and PAR mix has gone up. What we have done is we have launched a new PAR product that is helping us.
Secondly, in Q1, the call was that because the market was also showing positive results, and after the Q4 euphoria of being a high quarter for the industry, we didn't want to lose the momentum, and we went with the approach of what the customer would, as of now, wants to buy in terms of the, say, the preferences, which is more linked to the market. Hence, we launched a very specific product in the month of May, which has kind of took a initial euphoria of taking ULIP higher, and now all that has already been settled. Our product mix is already back to what we were last year. Even if you look at last year till YTD December, because last quarter was not the right mix for the industry, we are back to the YTD December mix already.
It's just a quarter where we have seen it. Given this quarter is a small for the industry and for us also, we could take some calls that this quarter, whatever plus, minus comes in, we can cover up it in the 9 months. In the deck, you would see that our rolling 12-month margin-
Is steady at 14.8%, compared to last year also. It's just a quarter doesn't take away the margin directionally up or down. The numbers are hovering around 15%.
Just to add to what Bharat said, see, quarter one is when life companies can afford to try different tactical strategies. Therefore, because it's the lowest quarter in the whole year, and every year you will see that the Q1, at least the last couple of years, I've been noticing they have been doing something different. As the Q2 comes, I think things will start falling in line, and the distribution gets aligned to the rest of life.
Sure. Thank you. Thank you for the explanation. Secondly, on the BAGIC, we have seen a sharp improvement in market share on the motor OD side, but we keep on hearing that the company intensity in that segment is quite intense, specifically on the private car side, the company intensity is quite intense. So, how are we able to gain market share? How should we look at the profitability, from a combined ratio perspective, given the company intensity is still remain intense in the motor OD segment?
We have just broadly started off saying that in motor, while competition intensity is largely price driven and therefore there is price competition. I think the way Bajaj selects the business, grows the distribution, mixes up OD and TP, and the different ages of vehicles do what they hold, all have a very well knowledge. Raman, would you like to expand on it?
Thanks, Sreeni. I think from a risk selection perspective, nothing has really changed at all. It's only about getting deeper into the markets, whether it's the dealer side or otherwise. That's the only change that I mentioned. You know, it's the result of the expansion and the penetration which we focused on. From a risk selection perspective, we've been quite early where we rest of the markets, and nothing really changes there. It's not that, you know, we've relaxed some of our norms and then got into some lines of business which we wouldn't have done earlier. That's not the case.
It's largely coming from the fact that, we've done some amount of expansion on manpower, on geographies, in terms of infrastructure, and added many more agents, and because of this, we see a deeper penetration. Otherwise, nothing really changes on the quality aspect of this aspect.
Sure. Just lastly, the related question. One is that, what is the advance premium for Bajaj? Secondly, the disbursement number, I think you shared widely those numbers for the Bajaj Finance markets, disbursement, for the quarter and then credit cards originated for the quarter.
I already gave you the disbursement number, which is in the Q1 was INR 1,447 crore, and we sold 74,000 cards. INR 1,427 crore. Last year was INR 1,313 crore. The same here.
The advance premium side, sorry, on the advance premium side, the numbers for us from June 30 is about INR 1,678 crores, which is moved up by almost 44% from INR 1,168 crores on June 30th last year. This, like I mentioned earlier, previously, sorry, but it happened largely because of the two-wheeler business, where the advance premium has really grown by 58%, and also on four-wheeler new business, where it's grown by 21%.
Thank you, sir. Thank you. That's it for my part.
Thank you. We have the next question from the line of Sanketh Godha from Edelweiss. Please go ahead.
Thank you for the opportunity. The first, I have two questions on BAGIC and, and a question on BALIC. On BAGIC, just, just wanted to understand that our retention strategy seems to have changed meaningfully compared to what we were two years back. Even in the retail lines like, like, like motor, we seems to be retaining less compared to what we do in the past, and given, given our solvency is very strong. Just, just wanted to understand the entire logic of, of having a strategy very different from, from what we were two years back on, on retention across the board segments. That's, that's point number one.
The second question what I had is that is with respect to OEM, basically, that we are the market leader in the crop business. OEM, in my view, is in fact most of the crop business if a company wants to change that particular product. Given, you have already in mind of bidders for Kharif, so I just wanted to understand what you are picking up at the ground level, whether OEM is impacting the pricing or anything on crop, where we are always market leader, it has been a profitable product for us. Just on BAGIC, maybe after that I'll ask on that.
On the reinsurer and while we don't disclose the complexities of the strategy that BAGIC follows, there are many, many layers of, we have a base treaty, we have a catastrophic treaty, excess of loss, we have excess of loss for certain lines, and we have proportional treaties for majority of the lines, and we continue to increase capacities as and when the reinsurers' markets allow us. Having said that, within this, within our retention, which are fairly high. Because of our large spread of banker business and our large retail spread, we do have several sub-treaties specifically for certain products for certain periods of time. And that is how the retentions can vary across years as well, even on the retail lines. Raman, would you like to add on to that and anything on the EoM, on crop insurance?
I think you rightly articulated, the retention part. I think, compared to any additional point I made, just, you know, some of these businesses, you know, have been under stress. Many of you all have mentioned it also, that, you know, some parts of motor, because of the high level of expenses, have been under stress. That's one of the strategies we are trying to, you know, manage by, managing our, retentions in a particular way and particular portfolios. Like, on average, we not have that strategy, but that's something which we are working on.
On the crop business, you're absolutely right, and that's what I mentioned a little while earlier also, that we are seeing a lot of stress on the crop business, especially from some of the private players who've been facing some stress on regulation and also from some of the PSUs. The level of activity has indeed gone up significantly, and it has a bearing on the pricing. But, you know, some of the tenders have already been closed, and from our perspective, I think while this year may pass with similar level of numbers, which we've done in the past, but year on, I think it is going to be a circular situation because that one arbitrage people really have clearly identified and started doing focus on. We'll have to wait and watch what happens year on.
We can, from our perspective, this year, maybe we will have similar numbers because some of the tenders have indeed got closed. Year on, you're absolutely right, that there is, there is likely to be stress, even on our numbers, from a traffic perspective.
There will be a bit of paradox again on this crop business, because a lot of the players who are traditionally keeping away from that will now do it for top line.
Yeah.
to increase their EoM expense allowance. In the process, they will bring down the prices, and so the premium will drop.
Mm-hmm.
Many players have already gone to the 80/110 model, which means that the premiums anyway will have to drop. Overall, the benefit they expect may not fall, come through, but people like us who are in the crop business, will wait and watch and keep entering on, where we feel, there's a better opportunity. For us, I think as of FY 23, even including crop, we were well below the EoM limit, so crop was not required for us to achieve the EoM limit. Hopefully, the will continue that, a cost leader, among the cost leaders.
I understand that point, Sreeni and Raman, but the only reason I was asking this question is that the geographic diversification was the biggest factor for us to be profitable in this particular line. Given the EoM, whether we will be able to achieve that geographical diversification of the intent competition which we achieved in the past. That's the only reason I was asking this question.
I think Raman already answered that next year will be a better time, which we have already closed, and we have got reasonable model participation.
Got you . On, on BALIC, see, the obvious question is again on the margin and, and related growth. Margin compress, maybe, maybe you kept IRR on the higher side, maybe, maybe to achieve the growth. Even despite that, our growth and launches for ULIP was what, 15% growth reported in the quarter. If you are taking a cut in IRR and, and given incrementally, Axis Bank will be a bigger base. And, and, and, and if you intend to refocus a bit on ULIP, then, then, the growth what we have delivered in last few years, could, could come down, is the point we wanted to check. What, what exactly you are thinking on growth and how it will be delivered?
Before I pass it on to Tarun, I would just give one comment there, that the Q1 contribution to NBV is already 15% last year. Out of that, because as I told you, because it's a quarter where we were trying different things, and as Bharat mentioned earlier, a lot of actions have already been taken, and now IT details are already bringing it back to where it was. Tarun, would you like to take the rest of it on, whether it's back on growth and profitability balance?
Absolutely. See, Sanket, the Q1 has to be seen in the light of a 81% growth of Q1 last year. Right. On our CSR, we remain the highest in the industry, on IRNB at 46% and GWP of 34% over three years. I would not worry about growth. Our standard answer on this and more than that, the delivery has been, we'll be easily growing more than double of the private sector. I think that I, I want to allay your worries. You've gotten specific on a few bits, but let me just say more. The intent this quarter really was to widen our product offerings. As Non-PAR in March and PAR as well, had reached a certain peak. t was a challenge the entire sector saw, saw, and we've seen it in the growth of the sector as well. It's been quite muted. I'm trying to get people back in the market talking to their customers. They felt that they, you know, they've already met their Non-PAR, PAR requirement.
Mm-hmm.
You see the impact on the overall growth of the sector. Some companies may have grown because of various base impacts here and there.
Right.
For us, the objective was then to pretty much launch a offering which widened our offering screen every month. We launched, like, 4 offerings, and we've actually done significant there. You've seen the launch of our unit plan in April. In May, the small cap funds which were unit, and then the direct pay term plan, which we're getting some significant reviews, positive reviews, and experience has been very encouraging. In July, as we are, I can disclose that the case plan, which is a PAR plan, has had a good takeoff. PAR is kind of right up there, and unit is settling back to what it had to. I think Sunil already talked about the fact that Q1 is a good time to reengineer and rework. That we've achieved.
We've become the 3rd largest in the private sector in terms of number of customers that have been added in Q1. After 2 bank-owned significant number 1, number 2 companies, we're very happy with that. Honestly, I've achieved what we wanted immediately. In terms of distribution width, we've been adding a lot many bank insurance partners, albeit not as big as Axis. Axis has grown by about 8%. Our contribution to our business is down from 25 to 23. If you remember in the previous calls, I've always been saying our endeavor would be never to depend on 1 bank, unlike other companies, and we would want it to be in the range of 20-25.
versus the company growth rate, actually Axis growth rate is, for us, has been low. But having said that, we will of course want our customer penetration to be far higher in the Axis array, and that, that shall remain. Our, our base is getting higher, so don't expect the growth like last year and the CAGR that you've seen over the last three years, which has been the highest in the industry at 26% and whereabouts. But given the width of our other businesses, other than just Axis, there has been PSF has is expected to grow near double of the company growth rate. Our agency has given the trend year on year. We are expanding our branch network further.
Even our institutional business, kind of partners and area of partners with the 3 to 9, give us a good platform to extend further. The engine getting all this moving is really our focus on data and technology. That remains. With that, now the product innovation that has is kicking in as well, I'd say it was a success for last quarter, because we've seen significant take-up of each of these. Already these offerings, like within a very short time, has already been a significant part of our product mix. That there is distribution get more and more things to go and get a higher share of the customer wallet. I hope that answers your question.
Perfect, sir. Perfect. Thanks, thanks. That's it from my side.
Thank you. A reminder to all the participants, anyone who wishes to ask a question, may press star and one now. Th
e next question is from the line of Swarnabha Mukherjee from B&K Securities. Please go ahead.
Hi, sir. Thank you for the opportunity and a very good morning. A couple of questions on Relic. First of all, the VNB margin, the 12-month number that you have shared in the presentation. That being stable, I just wanted to understand, could be the role of expenses in this number. Maybe, you know, some color on how it would have moved really cost over and versus post-cost over. You know, because I felt that, you know, since the scale has gone up, there might be some benefits that might be coming out of the expense ratio. Some just thoughts on that.
Secondly, in terms of the Non-PAR category, if you could highlight if any impact you are seeing because of the taxation on INR 5 lakh plus policies, how that is being handled. Whether we are seeing some amount of sales that earlier would have happened in the Non-PAR category being, you know, moved to other categories. Because I think in terms of proportion, the number is very steady. Also wanted to understand what is happening in the annuities and the individual business, because the number looks expected for this particular quarter. So that's on Relic. I, I have one question on Relic, and then I'll come back after your response on this.
Let me take the last two, and then I'll ask Bharat to come on, adding on the expenses and any further thing that he might have. On the annuity side, I think it's a natural flow of business. The base has been in the 5%-8%, and it will remain broadly there. We don't see a big shift in any form whatsoever. Of course, annuities are getting now relatively, given the tax equality now all across, maybe relatively more attractive versus the others. Now, we were the first ones to launch the deferred annuity, and we shall remain focused on that segment, which is also a non-medical product, which makes it quite easy to sell.
That shall remain, but I do not expect this to significantly change from, you know, what, what, where we are. To ballpark 5 to 8, maybe sometimes 10%, but that's the whereabouts. On the INR 5 lakh and above, yes, there is, there is an impact there for the entire sector, and this is exactly why we chose to widen our proposition base, and we've successfully done that. There are some refining thoughts we have, and I think we are going to be rolling out in the next 3 to 4 months to be able to take benefit of that. Although INR 5 lakh and above, the taxation is put on life insurance companies, were part and not part for the customers there.
Having said that, still, the ability to structure, structure that in the customer's favor through products, is significant. Our power product, for example, allows that quite well, because, because you can actually structure when the tax is going to be coming in. I do see an impact on the sector, but I think the sector has enough tools available with itself to get that sorted. The good thing is that now, above INR 5 lakh, we remain possibly the only product range which does have the capability of helping the customer in its, in, in their tax planning versus any other product in the entire financial services side.
That should finally, after I think we should assume this year is a year where the base will get settled in and it'll sink in with the customer, HNI customer as well, and then should sort itself out after this year. Bharat, on the expenses or anything else you'd like to add?
Thank you, Tarun Chugh. The question was on the overall margins and the overruns. Just to be clear, what happens with the overrun, like, as we are adding new partners, as Tarun Chugh and Sreeni also mentioned, we recently added five, six banks, and they are in the early stage or even early months of the operation. They will always produce an overrun. Technically, overrun is also like a rolling number. As we add more partners, initial period, they will give overrun by the time they become a complete number. On the overall basis, if I take steady state that where we are, maybe the overrun could be in the range of 5-6%, which is already there.
This can improve significantly even in the next quarter, next year, or it can be there if we start adding more partners. I think having any number of overrun to me, does not suit a business like LIC, which is as of now adding, growing and adding new channels, not only on the third-party side, but if you look at our on agency side, we are expanding. We are getting into new territories, we are getting into new sub-channels. All we are in the initial stage will always add to an overrun. I think it's just a way of looking at what is overrun. To me, it's not the best metric to see as of now for a company like LIC, which is adding on to the partners.
Let me just add to that. You asked about the 12-month rolling margins. The reason we report 12-month rolling NBP is precisely because the life insurance is very seasonal. The fixed expenses are pretty constant, the top line is varying from Q1 to Q4. Last year, specifically, Q4 was very high. Therefore, the rolling 12-month is view on a rolling basis, on an annualized basis, where we are moving without annualizing in terms of assumptions about future margins. This is a distortion we started doing just to give the benefit of this. Secondly, the company's goal is to grow its NBV. See, the business has got multiple lines with different capital requirements, different levels of risk, different levels of profitability. One margin, internally for us, does not indicate what it is.
NBV does, because that is the absolute amount of money you are making. The company has the flexibility to grow, grow certain high-margin business or low-margin business, high-volume business or channels, focus on something more or less. End of the day, we should grow our margins at least at the same rate as IRNB or better if we can. Historically, last year, we have been doing better than the growth in the IRNB. This is will continue. We have transformed the company from where it was, from a negative margin to a fairly healthy double-digit margin. We have some way to go, and over the next few years, you will see this playing a lot more effectively.
Understood, sir. If I were to think about the margins for the full year, how will your guidance would it be at a similar level to last year? Because I think for 22, there is, of course-
Guidance on margin, as I told you, but you can assume a certain growth in NBV, you know, what our past trend is, but we normally try to avoid giving any guidance on product.
Understood. Couple of questions on the-
Just to add to, just to add to Sreeni, as Sreeni rightly said, we do not give NBM margin. What we look at is NDP as an absolute value. Even if you look at our 12-month rolling VNB, this quarter, if you look at on the, 12 months to 12 months basis, has also gone up by 24%. Margin is a different way to look at it, but the absolute VNB has grown by 24% on a rolling 12 month also.
Right, sir. Just a, a clarification on that. If I had to think only about the Q3 for this year, then, it might not grow as much as what we are seeing Q1, right? Because of the additional-
For the industry, for the industry as a whole, yes.
Okay, understood. Couple of, couple of queries on the general insurance side, if I may. First of all, your loss ratio number for the health insurance segment has worsened compared to last year. Just wanted to understand, you know, what is causing that, because Q1 is generally more benign in terms of claims that come about, and it is generally from Q2 onwards, with monsoons, et cetera, it starts to increase. If you could also split out how the experience has been in detail and improve. That is one. Secondly, in terms of the GA initiative, if you could quantify, you know, what proportion of your premium right now comes under this GA initiative and any kind of quantification on what additional growth it is bringing.
That will be very helpful. Thanks.
Tapan?
Sir, I sorry, I didn't understand the second question. Can you just repeat it?
Yes, Nava, we are getting from Geo. I don't think we want to disclose that number, because it's a general initiative on a geographical basis of expanding rural and semi-urban areas.
I Tapan, we just started the underwater stand, and like you said earlier, we are adding many people and infrastructure in these locations. I just thought we just started the journey. I think it's only been 3 quarters, and we are adding about 100+ branches this year. I think it's too early to even start discussing these numbers. While the numbers are good and the growth is pretty early, but maybe it's too early to start talking about that. The health piece, I think it's the result of the mix of the portfolio between retail and trade. There are 3 parts, while we've not done any damage or business in this quarter, but there are 3 parts.
One is the GMC, then there is the non-employer employees that are linked to our lending business, and then there is a retail health, absolute retail health. The loss ratios have actually made that in few accounts from the GMC side, and they're still profitable, but it's moved back compared to where it used to be, and we've seen some hardening of rates happening there. Which you had mentioned also last year, if you recall, that, you know, the benefit of the pandemic is probably going to be the same for a short time, but the rates will start happening in due course, and I think that's the reality of life.
Retail, while, you know, the loss ratios have not changed too much, but they are on the higher side, and it's something to do with, you know, the way the claims are being reported by the hospitals. We have seen emands have increased significantly in quarter 1. Every retail claim, whether it's cashless or reimbursement, goes through an investigation process. We are hopeful that, you know, some amount of fraud which we are seeing on the retail portfolio should start coming down. I had made this candid comment last quarter also that while on the motor side, our anti-fraud processes were very, very robust, and while, given the, you know, the shift we were seeing between hospitals, doctors and other parts of the ecosystem, it was very difficult to crack that code.
I think that's something which we've now started focusing on. Like I said, during the quarter, we played a chain that every claim now getting thoroughly investigated, every admission in the hospital is being physically verified or, or done through a video call and so on so forth. Hopefully in, the next, quarter on that, we'll hopefully start seeing some, benefit of that through. That's just to summarize what's going on in health association.
Understood, sir. Would it be possible to just even in ballpark, give some idea about how the retail ops issue has been, because you say, you can play employee of the credit link business?
Sorry, your voice is not very clear. Can you just repeat what you said?
Sir, I was asking that, if you could give some color on, you know, how the loss ratios have been in retail versus the 2 group lengths that you have mentioned, even in ballpark figures?
I will not divulge the numbers at least and indicate to you that, you know, the best benchmarks of that is comparing with the 5 companies. We may be on the higher side, for 2 reasons. One, I just mentioned. Secondly, is the mix of our new business was on the lower side. As we all have seen that the growth for the 5 companies has been far better, and the mix of new business has been on the better side for them, for Bajaj. That's, that's 1 reason, in addition to what I mentioned, our loss ratios are little higher compared to the 5 companies. Like I said, we are working on that, and in due course, we should start seeing the results of that.
Also just to recap what we've mentioned in the past is that we've now set up a separate HAT cell, which is headed by a very senior person, coming from Apollo Munich. The gentleman is leading the portfolio to include all aspects of health business, whether it's distribution, products or underwriting, claims, and so on and so forth. With this demand focus, focus, we should, you know, see some benefits occurring on the retail side. Well, lot of work has been done by the gentleman on the in-non-employer employee, which is, you know, the credit link scheme. There, our growth is very healthy at upwards of 30%. DMS also, they've done a great job.
Retail is where we are now investing in, and, hopefully we should start seeing some results in that quarter as well. Yeah, thank you. Very welcome. Thank you so much again.
Thank you. We have the next question from the line of Nishant Shah from Kotak. Please go ahead.
Thanks for taking my question. Most questions are answered. Just, in continuation of the last one, what proportion of group health would be credit and what would be employer-employee?
I won't share too much of data, Nishant, but the ratio would be 2 is to 1 to dealing with DMS. That would be the number.
Sure, sure. Thank you.
Yes.
Thank you. Ladies and gentlemen, with that, we conclude our question and answer session. I would now like to hand the conference over to Mr. Akash Jain for closing remarks. Over to you.
Thank you all for joining the call and management of Bajaj Finserv Limited for giving us this opportunity to host this call.
Thank you very much. Ladies and gentlemen, on behalf of JM Financial, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.
Thank you all.
Thank you. everybody.
Thank you, sir.
Thank you, everyone.
Thank you.