Ladies and gentlemen, good day and welcome to the Bajaj Finserv Limited Q1 FY 2027 earnings conference call hosted by JM Financial 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 at the end of today's presentation. 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 would now like to hand the conference over to Mr. Raghvesh from JM Financial Limited. Thank you, and over to you, sir.
Thank you, Manav. Good evening, everyone, and welcome to the Q1 FY 2027 earnings conference call of Bajaj Finserv Limited. First, I would like to thank the management of Bajaj Finserv for giving us the opportunity to host this call. As always, we will have opening comments from the management team, post which we will open the floor for Q&A. From the management side today we have Mr. S. Sreenivasan, President, Insurance and Special Projects, Bajaj Finserv Limited. Mr. Ramandeep Singh Sahni, CFO, Bajaj Finserv Limited. Mr. Tapan Singhel, MD and CEO, Bajaj General Insurance Limited.
Mr. Tarun Chugh, MD and CEO, Bajaj Life Insurance Limited. Mr. Avais Karmali, CFO, Bajaj General Insurance. Mr. Vipin Bansal, CFO, Bajaj Life Insurance. Mr. Ganesh Mohan, MD, Bajaj Asset Management Limited. Mr. Ashish Panchal, MD and CEO, Bajaj Finserv Direct Limited, and Mr. Deepak Matai, CEO, Bajaj Finserv Health Limited. With this, I would hand over the floor to Ramandeep, sir, for his opening comments. Thanks, and over to you, sir.
Thank you for the introduction. Good evening, everybody. We welcome you to the conference call to discuss the results of Bajaj Finserv Limited, BFS, for quarter one FY 2027. As before, in this call, we will largely be concentrating on the consolidated results of BFS, the results of our insurance operations through Bajaj General and Bajaj Life, our emerging companies, which include Bajaj Finserv Health, Bajaj Finserv Direct, and Bajaj Asset Management Company. Lastly, where material, the standalone results of Bajaj Finserv.
Bajaj Finance and Bajaj Housing Finance, our other material subsidiaries, have already had their conference calls, and hence we would pursue only very high-level questions on these companies. On a few hygiene points, as a word of caution, we affirm that any statements that may look forward-looking statements are just estimates and do not constitute an assurance or indication of any future performance result. To just give you an update on the basis of accounting as we do always.
As required by the regulation, Bajaj Finserv prepares its financials in compliance with Ind AS. The insurance companies, however, are currently not covered under Ind AS and hence they prepare their Ind AS financials only for the purpose of consolidation. Accordingly, for Bajaj General and Bajaj Life, the standalone numbers reported are on non-Ind AS accounting standard basis, which is referred as Indian GAAP, as is applicable to the insurance companies. Further on this subject, in line with the recent prescription from IRDAI, both our insurance companies would transition to Ind AS from 1st of April 2027.
Let me now give you a high-level update on the consolidated financial results for the quarter. The consolidated total income for Bajaj Finserv grew at 19% to INR 42,037 crore. The consolidated profit after tax grew at 18% to INR 6,297 crore. This is just to give you a flavor of the consolidated numbers. Now I will deep dive into each company's performance, starting with Bajaj General. The GWP for Bajaj General grew at 11.3% for the quarter at INR 5,789 crore, which is in line with the industry GDPI growth of 11.1%.
Excluding the bulky tender-driven crop and government health businesses, the GWP increased by about 10% as against the GDPI growth of the industry of about 12%, a little lower than the industry due to tactical reduction in the motor segment on account of elevated pricing pressures. The underwriting loss for the company was at about INR 130 crore for the quarter as against INR 116 crore for the same period last year, impacted by high health loss ratios attributable to higher mix of the government health business in the net earned premium.
The combined ratio for the quarter was elevated at about 104.7%. However, if you look at the number on old accounting basis, it's at about 103.9%. The same period last year, the combined ratio on new basis was 103.6%. The elevation is largely on account of degrowth in the fire segment as is seen for the entire industry and also as indicated earlier, a slight increase loss ratios on the government health business.
Despite that, we believe that the reported COR would be the best in the industry despite the stress in the market in terms of pricing. The profit for the quarter was at INR 478 crore as against INR 660 crore for the same period last year. The reduction is mainly on account of lower capital gains booked in the quarter as compared to the same quarter last year due to the challenging external macro environment. The annualized ROE, excluding the surplus capital, considering solvency at 200%, stands at a healthy 17.3%.
The AUM for the company for the quarter ended stood at about INR 35,000 crore, a tad lower than the same period last year, largely attributable to the reduction in AUM from the buyback which we did in the previous quarter and a high dividend payout which we did during the quarter. Both of these combined have reduced the capital by about INR 3,515 crore for the company. This would mean that going forward, the ROE, which seemed to be depressed and we were disclosing ROEs with adjusted solvency, would get normalized going forward.
In summary, these operating results, including combined ratio and ROE, underscore Bajaj General's disciplined focus on delivering balanced and profitable growth in the most challenging, difficult, and highly competitive market. I will now move to Bajaj Life. Bajaj Life's financial outcomes have been in line with the plan for sustainable and profitable growth, which we had articulated in BALIC 2.0. The retail weighted received premium for the quarter grew at 17.5% to about INR 1,474 crores, better than the industry growth of 16.2%.
Retail protection contributed 12% to the overall retail business, growing at 60% year-over-year. Group protection business has also registered a very healthy growth of 95% for the quarter. Accordingly, the VNB for the quarter grew at a very healthy 87% to INR 271 crores for the quarter. The new business margin was up at 15.9% for the quarter, as against 11.1% for the same quarter last year, an expansion of 4.8%. The outcomes are despite the GST impact of 2.9% on the margins.
On the back of continued strong renewal premium growth of about 18%, Bajaj Life's GWP grew 35% during the quarter. However, there were some persistency dips observed across certain cohorts, which is in line with the market, and the company is working towards improving these. The profit after tax, as was the case with Bajaj General, also de-grew for Bajaj Life to about INR 51 crores, down from INR 171 crore for the same period last year.
Again, attributable to lower capital gains during the period, which again was attributable to the external macro environment and also the GST impact, which we have recently experienced. Bajaj Life ended the quarter with an AUM of INR 143,744 crores, up almost 10%. Overall, the quarter for Bajaj Life has been very good and in line with our expectations. We continue to reap the benefits of strategy of Bajaj Life 2.0 of sustainable and profitable growth.
Both the insurance companies continue to be financially very strong with the solvency of Bajaj Life at 285% and Bajaj General at 254%. Hence, we are very well poised to weather any external adversity. I will now move to the lending companies, starting with Bajaj Finance, a very strong quarter, as you would have seen in the results declared by these companies. The number of new loans book grew 20% to 1.61 crores in the quarter. The company's diversified business model has enabled it to record a strong AUM growth of about 24% at INR 546,944 crores.
The net total income grew about 22% to INR 15,224 crores. PAT grew by about 27.6% to INR 6,081 crores. The OPEX to net total income was at 33.4% as against 33.1% for the same period last year, with the sequential increase attributable to the gold loan branch expansion. However, with visibility of green shoots in operating efficiencies due to our AI implementation, the company is confident that the OPEX to NTI ratio will improve by about 25-40 basis points in the current financial year.
The loan loss provisions was at about INR 1,993 crores for the quarter as against INR 1,969 crores for the same period last year. There was, however, a loan loss to AUM ratio reduction to about 1.54% this quarter as against 1.87% for the same period last year. Accordingly, the GNPA and NNPA are far better than what we had seen for the same period last year at 0.96% and 0.39% respectively. The capital adequacy remains strong at about 20.9% as of 30th June 2026. Moving to Bajaj Housing Finance, our mortgage subsidiary.
Again, overall good quarter for the company with AUM growth of 24%, driven by good momentum in disbursement amidst higher portfolio attrition. Growth was very well distributed across all business segments. Home loans AUM grew 20%, loan against property grew 22%, lease rental discounting 41%, and developer finance by 19%. The net interest income grew by 9% to about INR 968 crore. The growth was muted largely on account of attrition of higher rate portfolios. The operating efficiencies continued with OPEX to net total income at a healthy 19.6% as against 21.2% for the same period last year.
Year two, a very healthy asset quality has been maintained with the GNPA and NNPA of 0.29% and 0.12% respectively for the current quarter, which is again much lower than the numbers for the same period last year. Accordingly, the PAT grew by 23% to INR 715 crore on account of higher variable fee income and assignment income, a reduction in OPEX, and lower credit cost during the quarter. The capital adequacy ratio stood at 21.59% as of 30th June. In summary, another very strong quarter for both our lending companies, Bajaj Finance and Bajaj Housing Finance Limited.
Now to give you an update on the emerging companies, I'll start with Bajaj Finserv Health. Bajaj Finserv Health executed about 6 million healthcare transactions during the quarter, up from about 5.6 million for the same period last year. The revenue for the quarter, however, registered a small degrowth on account of restructuring required in some of our partnerships on account of the recent RBI regulations around business conduct for HFCs. Bajaj Finserv Health continued its expansion of provider network, which includes 130,000+ doctors, 15,000+ hospitals, and about 7,000+ lab touchpoints.
Utilizing this network strength and its tech platform, Bajaj Health is able to offer integrated OPD, IPD, and wellness experience to both retail and corporate customers. I'll now move to Bajaj Markets. The total disbursements for the quarter for Bajaj Markets was at about INR 2,269 crore, up from INR 2,046 crore for the immediately preceding quarter, and compared to the last year same quarter of about INR 1,209 crore. The company ended the quarter with a total unique partner count of 103.
The operating revenue for the company accordingly increased to INR 107 crore with a healthy growth of 32%. As you may recall, the growth used to be muted for the full year last year. However, we are back on the growth trajectory after the planned digital customer journey enhancements, which had impacted the growth for FY 2026. Further, some of the revenue structures are now trail revenue-based, providing stability, predictability, and non-linearity to the future revenues. I'll now move to the asset management company.
Bajaj Asset Management company continued its good run, recording assets under management of about INR 31,400 crore as at 30th June 2026, with a growth of 26% as compared to the same period last year. It retained the 26th spot amongst all the mutual fund companies in India in terms of AUM. Within the AUM, the equity mix stands at a healthy 63%, and the non-group share of the AUM constitutes almost 91% of the total AUM. Additionally, the company's SIP book saw a surge of 66%, with SIP folios also increasing 69% year-on-year.
On the other emerging businesses, with respect to the alternate investments company, which has been set up during the last year, we have now commenced business operations with the launch of our PMS products, and also expect the launch of our real estate and the AI AIF in the coming quarter. Also happy to confirm that the board of Bajaj Finserv has earlier during the day approved for setting up a reinsurance company as a natural progression of furthering our insurance capabilities.
We shall now prepare to seek necessary regulatory approvals to set up the company. That's from my side on the performance updates. Before we open for questions, considering the paucity of time, I would request the audience to kindly keep the questions brief so that we can cover more questions during the call. With this, I invite questions from the audience.
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 touchtone 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'll wait for a moment while the question queue assembles. Before we take any questions, a reminder to all participants, if you wish to ask any questions, you may press star and one.
The first question is from the line of Shreya Shivani from Nomura. Please go ahead.
Yeah. Thank you for the opportunity. I have two questions. First is on the general insurance business. There was a Supreme Court ruling on motor insurance, third-party calculation for homemakers. If you can help us understand this, the impact on us, how are we going to reserve for it, and if any measures are being taken as an industry. My second question is on Bajaj Direct platform. So a lot of the NBFCs which have reported their first quarter results this time around have shown big uptick in digital or fintech aggregated loans, etc .
Just a couple of quarters back, I think there was a lot more conversation around concerns on asset quality of this book. How has the trends been on our platform? Any color that you can give around it? Those are my two questions. Thank you.
Tapan, you want to take the first one?
Yeah. Okay. When you look at the Supreme Court judgment on TP that you're saying, after that, there are two other judgments. I hope you followed that. The Punjab and Haryana High Court.
Correct.
They did not fully say that it's INR 30,000. They actually once said completely very lowered down version of it. Fundamentally, one has to first watch the developments. I don't think that the initial reaction of INR 30,000 being for everyone is being really applicable as of now what I see. Second, if you see as a company, for us, our ultimate loss ratio that we take for TP in the initial is actually a bit conservative, which actually needs to release on TP as the TP book develops. We actually mean that we already have enough buffer to absorb any such if an increase does happen subsequently.
That's already built in the reserving that we do. That is how it is done. If as a company don't have enough reserves and that gets stressed, then I think people have to harden it. For a company like us, where the ultimate loss ratio that we take takes into consideration such kind of extrapolation. It's already built into it. If you look at when we release as the book develops. There are two things to see. I don't think that we should get very nervous about the Supreme Court ruling as such. Third, if you look at in the books of accounts, the number of cases is very few.
It is not that it is a majority of such cases of housewives into the portfolio which will be there. I hope it answers your question.
Right. In terms of any measures that the industry or all of you as an industry is taking-
See, there are two things. As an industry, what we've been asking for is a TP price hike which has been there. We have been talking to the regulator, to the Ministry of Finance, to MoF, because right now the TP price happens with MoF in consultation with the regulator, and that is there. We've been asking for that. A lot of good discussions keep on happening.
All right. That's good to hear. Yeah.
Shreya, I understand that GIC has also filed a review petition against this judgment. We'll have to wait and watch how this shapes out.
All right. Yeah.
Ashish, over to you for the next one.
Yes. Thank you for the question on Bajaj Markets. Yes, you're right that credit quality at industry level was a bit of a concern, and it was not only for the last few quarters. It was sustained for two, three years. Over a period of time, we have seen our partners moving the needle towards a better position of risk matrix. The whole industry has moved for better. Starting with Bajaj Finance, many of the lenders have taken appropriate measures. We also see that.
While we have 50 + lenders on Bajaj Markets and each with different risk-return equation, and hence their thresholds are different, they are growing their business in general and they are growing their business with Bajaj Markets. Yes, we see that the position has improved. Wherever we have trailed revenue deals with our partners and select deals, there we have far more direct insight into the way the portfolio is behaving, and we are happy with the results. Does that answer your question?
Yeah. Just a follow-up. For majority of your lenders that you're speaking about, most of these are just going to be personal loans, right? The customer is taking a personal loan from your platform right now in this one quarter.
The platform per se has 35 different products across various asset classes. Within loans, if you ask me, we offer home loans, gold loans, personal loans, business loans, etc . Yes, as a product class, it is most amenable to digital lending. It is a leader as a product, but we see other products also growing very fast. For example, gold loans, home loans are growing fast.
Got it. This is useful. Thank you so much.
Thank you
I'll get back in the queue.
Thank you.
Thank you. We have our next question from the line of Mayur Parkeria from Wealth Managers India. Please go ahead.
Good evening to the entire team and gentlemen, and thank you for taking my questions and congratulations on a good set of numbers. After multiple periods of time, finally the BALIC has started showing the kind of actual numbers which we were expecting, including FY 2026 and now continuing in the current year. We hope that this continues. All the efforts have started to show results, so congratulations on that. I had two questions, basically. One is actually on general on BALIC and maybe Tapan, you can add on that.
As we see the current year panning out, there are lot of natural disasters and situations led by multiple situations coming out, and this is spread across the country, Maharashtra, Gujarat, even south now Assam. Many places this is happening. It may be slightly early, I understand, but we are still from the monsoon angle also, we are now almost a month, one and a half month inside this and the disruptions taking place. What is the kind of estimate of impact which BALIC can see in the next couple of months or in this year.
Given these issues which are coming especially with reference to motor, commercial, and crop, which may have been more prone to impacts which may come because of these floods or other natural disasters which are playing out. That was my first question. My second question was on the other businesses outside of insurance and lending. There is very little movement as far as the road to profitability and breakeven is concerned on most of the subsidiaries barring financial securities. What is our path on that?
We were expecting while breakeven may be some time away, but even the improvements appear to be very shallow and the visibility of that. If you can lay some path as to how do we see this over the next 18 months or till FY 2028, and individually and how do we see that? Thank you. These are the two questions.
Tapan, you want to take the first one? Tapan or Avais, can you take the first one?
No, it's a very good question. I think if I look at what you have asked. If you look at globally also, insurance business, it goes through cycles. There are times when the rates are hard, there are times the rates are soft. If you look at the Indian market, because there were no major catastrophe losses earlier, the market is soft right now, which means the pricing is much lower than what the average pricing would be in all lines of businesses, be it crop, be it fire, be it motor. Everywhere you see a soft market.
That's why you look at the first quarter results of quite a few of companies, their deterioration combined ratio has been upward or close to 5% more or upward of that. If you look at Bajaj General, it is not much. It is just about a percentage or so. What it shows is that the company has always been picking up the right kind of business and has been able to shift the lines of business depending on how the market has behaved. Nothing new. They have been doing it for 25 years now.
If you look at the performance, I think at all point of time, our combined ratio compared to the market is always better than at least 16%-18% than the market, which would be there, and it's continuing even now. The beauty is can you select businesses where the losses are better compared to other places, and can you get it right? I think that is what the technical expertise, underwriting skills is what it's called. If you look at crop also, you look at the segment that you have picked up, and you try and see that the impact would be lower compared to other states.
If you look at motor also, this time you see our motor business has gone down compared to what it was. We have now reduced our exposure there because we felt that it's not there. This is what the company keeps on doing. Your observation is right. Right now the market is soft. Because of if these losses happen the way it is happening, the market will harden as it progresses. That is the nature of this business. It goes like that. Your observation is right, Bajaj General, I think even in soft markets, always outperform the market.
In fact, we are outperforming the market much more compared to what would have happened in a hard market. From that perspective, as of now, it's showing good results.
Are we trying to understand that the losses can be actually quite meaningful for the industry as a whole, while Bajaj may outperform is one thing, but the impact can be.
Yeah, because if the rates soften, the losses do move up. I think it's very natural. That's why I said it's a cycle. Right now rates are soft. I think the observation that you have is right.
I think, Mayur, the bigger question is, for how long can people sustain this? That is something which we have to really watch for because, while we have a very diversified portfolio, we may still outperform the market, but there will be others who may feel a huge amount of stress because of that. Hence, we may see a improvement over a period of time. As we stand today, it is looking stressed to the point you made.
That will be further accelerated or accentuated because the underwriting results will further get impacted because of the catastrophes of this current period which we are seeing now.
That's why I said the rates keep on changing. As of today, what you say is right. Let's say the market hardens tomorrow. Again, it changes. That is the nature of this business. That's why I said globally you look at, you'll see cycles of softness and hardness in the market. Right now the Indian market is soft. As of today, your observation is right. Tomorrow it may change.
That will be true for the new business. For the business which has already been written.
No, no. Here, unlike life, you don't have a fixed contract. Every business is like a new business, even renewals also.
Yeah.
You get it? It's an yearly contract. It's not a long-term contract.
No, no, I mean even for the one year which has been written already, we will see. The impact of that will be there.
Yeah, agreed. Let's say tomorrow the price is higher by 20%. From tomorrow, what business you write, that moves up. Your earned premium is moving up after the month.
Okay.
You get it, no? That is how, as of today, what you say is right. We have to see how the market moves.
Just to add, as a company, we have a philosophy of always putting a certain amount of money away as part of Nat Cat reserves. We will continue to do so in the future.
See there, I think what Avais is trying to say is that our treaties are very robust to take care of any impact from Nat Cats. You would have seen that in the past few years, wherever there have been large calamities, also, the net impact to us has been not very material. I think that's the other point.
Okay. Thank you. The second question, if you can-
Yeah. Second, I'll just start by giving a summary from a Finserv perspective. Then I'll request the CEOs to also chip in. Firstly, I think from a road to profitability perspective, we are very clear and articulate in our stance. We've been calling it out very clearly in our investor day. If you refer to the decks for the respective companies, you will see that we've called out the break-even. I'll just take one company at a time. From a Bajaj Finserv Direct perspective, I think we've been very clear that we will break even in Q 3 or Q 4 of this year.
In fact, we had called it out that we may do it last year, but there were several changes we had to do because of the few reasons I'll talk about. One, I think we transformed the entire CRM from a frontline management perspective. Second, we had to align with the digital lending guidelines of the regulator. Thirdly, the third one was with respect to the changes we did on some of our structuring with partners where we moved commission on trail basis. The outcome of this was while we had some stress for the year on the revenue, but from a long-term perspective, the business model was very clear.
Hence as an outcome of that, we are certain that in quarter three or quarter four on a quarters results basis, we will break even and on a full year basis, we will break even in the coming year. From a Bajaj Finserv Health perspective, again, I think we had called out that in quarter three or quarter four of next year, which is FY 2028, we should break even and full year basis the year after that. I think our path to profitability has been very clear. We've been calling it out in our investor day very categorically.
I'll also add a flavor on the Bajaj Finserv Asset Management. There also, we've been very clear that while we've over-invested to gain scale, we've already reached INR 30,000 crore. We believe that in the next three years, we should hit the INR 1 lakh crore AUM mark, and that should be the path to profitability. I'll just request the CEOs to add if there is anything. Ashish?
Yes. Ramandeep has primarily outlined all important points. With the trail revenue, it provides non-linearity to the bottom line. I'll give you an example. Last year, same quarter, our operating revenue was INR 81 crore with zero trail revenue. This quarter, quarter one, FY 2027, the revenue has grown 32% from INR 81 crore to INR 107 crore, INR 15 crore, I'm rounding off, is the trail revenue in this. It's growing quarter-on-quarter. That provides the fillip to the momentum towards break-even.
Quarter four, yes, we are steadfastly moving towards quarter four break-even at company level. On a full year basis, FY 2028 should be decently positive for us.
Okay.
I'll request Deepak also to add on the Health company.
As far as our health platform is concerned, the differentiator really comes with technology and network build, we continue to invest in technology and network build. The good thing is that our revenue is very diversified. We are getting revenue from insurance companies, from corporates, from life insurance companies, etc . Therefore, the whole idea is to continue to invest in technology and network, this should start paying back next year onwards.
From Finserv perspective, the infusion will continue in Health for another four quarters?
If you look at our capital allocation plan for Bajaj Finserv Direct, they don't need capital. From a health company perspective, they'll probably need capital for next six quarters, is what I believe. The amount will not be as material. I think INR 200 crore -INR 300 crore is at best we may need. Where we will need capital going forward is the asset management company. We will need a little, again, not as material as what we've done earlier. The larger chunk will go into our alts business, which is the newest baby on the block.
Obviously, what we said earlier, we are planning to set up a reinsurance company, I think that'll take a while, and that's where I think some amount of capital will be required.
Thank you, gentlemen, for detailed answer. Thank you, wish you all the best.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, we request you to keep your questions brief. We have our next question from the line of Sanketh Godha from Avendus Spark. Please go ahead.
Thank you for the opportunity. My first question is on Bajaj Life. We saw a significant jump in group protection business in the current quarter compared to the last year. Just wanted to understand the nature of growth. Is it largely because of revival in the MFI business, or you got into new relationships or new products within some banks, which contributed to the growth? I just wanted to understand this color of almost 100% growth year-on-year basis.
Tarun, you want to take that?
Sanketh, great question as always. It's a combination of both, Sanketh. I'm sure your excel sheet is already showing that. Yes, there is a revival of the MFI business across the industry. We've had a significant growth there, and as you know, it's one of our larger books, so that helps. In terms of new partnerships in the last 15 months, we've added more than 20 partners. If you roll back a few, maybe almost about a year or 18 months back.
At that point in time, we'd started on the journey of de-risking ourselves from banking on one, A, the number of partners we had, because at that time, we had a pretty large set of two, three partners, which contributed significant percentage, that time more than 50%, of our business. No longer is that so. The other way is in terms of each of these sub-sectors within the lending sector. That is very well spread, and we continue on that path.
Understood, sir. Sir, on Life again, I have two more. One, just wanted to understand again, if I look at your product mix growth, it seems like annuity business grew at the expense of non-par. Is it fair to say that these two products compete with each other? If you target annuity, maybe non-par takes a back seat or it is other way around because you typically do regular pay annuities. Whether when you look at the business, we should look it in combo or you guys internally think both are very different businesses?
Second question is on margin again. Means if I do the GST impact, it still comes at 290 plus points on the margin, still we've managed to expand the margins. Is it that we don't want to pass on any pain to the distributors? Whatever the margin accretion will happen will be more led by product mix. That's the call we have taken internally is the point we want to understand.
Okay, great. Another great set of questions. On the product mix, yes, annuity and non-par are similarly structured, but the focus markets are very different, Sanketh. One. We should acknowledge the fact industry is picking up annuities because the risk of living longer is getting to be a significant risk and I would bet a lot of money on that and say that over longer period, the 50+ age, which is a significant part of the customer segment in the country and usually would want to start planning there, is picking this up which is a good bit.
As far as non-par saving is concerned, of course, we haven't yet hit the numbers as we were last year. That is more a product which also backfired incidentally for the sector. You would know that our persistency got hit for early gratification products where withdrawals were made possible. I think the industry's gotten hit on that. We've reconfigured and closed that product because we do not want to really re-experiment with something like that. Now it should be on an upswing.
Yes, these two buckets contribute to the same chassis but non-par saving will also grow and so would annuities. Should expect that. On margins, while Vipin will just step in. Why don't you?
Sanketh, I wasn't very clear on your question, but 290 impact. I couldn't understand the question on the pass on. If you could repeat that. You said the partners. To an extent, let me say, we have taken a structured approach there depending upon the kind of channel. Bulk of the sector has also just done that where we've been able to add for the same commission riders to our products and commission remains the same, the profitability though goes up. Depending upon wherever we could find avenues of passing, we have passed.
There is no need for us to get too specific around that, though. I think what will be different from Bajaj Life versus the rest of the sector is that we were on a path, as you're aware, for the last almost now 21 months on cost reduction as well and cost savings. I think Bajaj Life 2.0 has been able to give us that operating leverage. Does that answer your question, Sanketh?
That answers broadly in that sense. Maybe I have one on general insurance. Basically, I want to understand the future trajectory of these both tender-based businesses because we understand that crop renewal probably did not happen as was expected, three-year renewal. We have a INR 1,600 crore of business from that line of business last year and equally on government health around INR 3,600 crore. How do we see these businesses play out in the current year, given maybe experience some government health and given the crop cycle is not renewing as planned?
Tapan?
If you look at the crop business, I think this year, as per the tender that we have got would be more than the last year. The government health actually was a two plus one contract. We should be getting the renewal for this year because that is how the contract was when we picked up the business. Business or government doesn't depend on number of lives that are covered, plus the overlap that happened last year in terms of building that. It may be a bit less than last year in terms of base, but since the contract is 2 + 1 , we'll be getting that. I hope it answers your question.
Understood, sir. On government health, you intend to repeat, sir, that contract?
Yeah, because it is automatic. It's 2 years + 1 . That is how tender was when we picked it up last year.
Okay. Understood, sir. Thanks for the answers.
Thank you. A reminder to all participants, if you wish to ask any questions, you may press star and one. The next question is from the line of Nischint Chawathe from Kotak Securities. Please go ahead.
Hi. Thanks for taking my questions. Just on the reinsurance bit, have you called out the capital that could be required in the business?
We are, like I said, Nischint, we are at the drawing board stage and we are putting in a plan together. I think the way we're going to structure it, we will divide it in a few parts. I think phase I will largely focus on doing domestic, where we may not need too much of capital. Then phase II, once we get the ratings in place, which will be a three-year process, then we will move into the international market, which is where we will need a big chunk of capital. We've not quantified it as yet.
While internally we have done some scenarios, but we are still to firm up the exact numbers on that.
Got it. Just on the life business, first of all, I think, fairly impressive margin expansion. I was just curious that in terms of product mix, the mix that I see in the first quarter, is this how we would expect an optimal mix or is there some more scope for enriching the product mix?
Nischint, I think if you look at about last four to five quarters, our mix has been largely stable except for retail protection, which has been growing. If I just go a year back, retail protection for us was about 8%-8.5% same quarter last year, it's 12% this quarter. I think other than this, our mix has been largely stable. To the question earlier asked, I think if we look at non-par and annuity, because while they are distinct products, we do play between these two kind of products.
I mean, par has been in the range of 22%-25%, non-par plus annuity again in 22%-25%. Retail protection has grown and ULIP has been about 45%. I think this is a mix that we believe is sustainable. Should it get better or should it improve or move towards products with higher margin, I think that's the intent. If we are able to get our non-par mix a little higher, I think that would be an ambition.
No, actually my question was in terms of non-par protection, what is the thought process in terms of this ratio? I mean, we are already at 12% now.
I think, look, if I take you nine quarters, right, except the quarter one of FY 2025, which was June 2024 quarter, which was 30% growth. Other than that, we have grown upwards of 40%-45% every quarter. Obviously, having grown so fast, I think there'll be some moderation in the way the retail protection mix will grow hereon. Tarun, you want to add?
Yeah, I just want to add to that, . First of all, thanks for the acknowledgement on the margins. Nischint, when we move, we move holistically and while Vipin's correctly said that you can't expect the same percentage growth because the base is significantly going up. I must say that the company and the team has done a phenomenal job on acknowledging the team's work in terms of the shift on selling risk, something that is a different kettle of fish altogether for our sector.
Now, 34% of our customers last quarter were only onboarded with term plans. Another 16% had an enhanced rider on their product mix. Directionally, you should see this number keep going up again and again. We are not stopping, is all I'll say at this point.
Got it. Just on group synergies, since you raised this point, in terms of number of customers added, what would be the overlap with other group companies?
Not too much. As you know that number of NOPs in terms of with group, you mean as in Bajaj Finserv group, right?
Yeah, that's right.
Not too much actually because when it comes to NOPs, none of the companies in the group really sells much of retail. There is barely currently any dependencies there, and largely it is in the open market.
Got it. Any specific reason there was a sharp decline in the earnings, I mean, impact?
Nischint , that's essentially on account of two things that, as Raman mentioned in the opening remarks. This is Indian GAAP financials, the investment income is on realized basis. The equity markets were subdued, we didn't really have any equity gains that were realized and recorded in the P&L during this quarter. I think that's the largest reason. Obviously, the GST cost gets written off upfront, that's the other reason. I think these two were the reasons. Otherwise, it is BE.
Sure. The last question is just more a nature of clarification. What you mentioned is that in the general insurance business, we are pretty well provided for including the current Supreme Court ruling because one of your peers obviously made a very large provision and the other one is probably reviewing their books. From our point of view, you're saying that we've already done the review and we're firmly well provided.
Yeah, Tapan answered also. See, given that the homemakers do not constitute a very immaterial number in both the settled and outstanding claims. That is one reason we don't see the impact to be material. Second is clearly that you see our trajectory of reserve releases. We have always been very conservative. Given both of these, we do not see any need at this stage to strengthen any reserves because of this.
Got it. Thank you very much and all the best.
Thank you.
Thank you. We have our next question from the line of Raghvesh from JM Financial. Please go ahead.
Hi, sir. Thanks for taking my question. I had a couple of questions. First, in the Ind AS financials, can you guide us what is the timeline we have in mind, and what is likely to be the impact for both the life subsidiary and the general insurance subsidiary? Secondly, on the life insurance subsidiary, what is the kind of percentage of rider attachment that we are seeing and any aspirational level we are looking at?
I can take the first one broadly and request Vipin and Avais to chip in. One, what I articulated earlier, as per the IRDAI regulations, the effective date of Ind AS adoption was 1st April 2026. However, they allowed a forbearance of one year, and both the insurance companies had applied for forbearance and have got forbearance from IRDAI. For us, the effective date becomes 1st April 2027. In terms of implications, I think the biggest one comes from amortization of acquisition costs.
As you know, currently in Indian GAAP, the acquisition costs are upfronted and hence there is a new business strain which one sees. That will go away. It will get amortized over the contract duration. This applies to both the insurance companies. Specific to general insurance, currently the long-term liabilities, which are essentially from the TP portfolio, are accounted for on undiscounted basis. Given they are long-term in nature, as per the Ind AS, they are supposed to be discounted. You could see a big release coming on that front.
Third is, which is relevant more from a GI perspective, and it could be arbitrage for us is there is this concept of onerous contracts under Ind AS, which says that at the time of writing the contract, if one knows that the contract will be loss-making, then you're expected to recognize that loss upfront. Given that we operate closer to 100% combined ratio and the industry is at 120, we believe we could get arbitrage here because some of the players who are writing loss-making contracts will indeed have to book the losses upfront.
There may be a capital call there. This is broadly what we are seeing. Both the companies are doing their numbers and while we've started filing quarterly numbers with IRDAI on pro forma basis, there are a lot of clarifications which we've sought from the regulator in terms of various positions one is to take. As an industry, we've approached them. Some of these clarifications, I think, will come in due course. I think we'll start calling out the impact clearly once we have clarity on these. Vipin, Avais, anything you want to add, please?
No, I think Raman has answered.
Thanks, Raman. Thank you.
Thanks. Vipin, you want to take the rider one?
Yeah, I'll take that, Raman. On the rider, I indicated in Nischint's answer about the impact riders already having. Just to give you a little bit more specific data. Now, if I look at term riders which go on term plans and riders which go on saving plans, put together that number actually comes to 22% of our NOPs, having some rider or the other. That is for both, for term and savings.
Yeah.
The number is 22%. That's how we measure it. The intent is to keep increasing that. I guess that's the way you'll keep hearing from us, and that's the guidance we'll possibly only provide in terms of how we look at riders. We sell multifaceted riders.
In the savings business, the riders would predominantly be in the ULIP business. Is that the right assumption?
It is across. Like I explained, the term itself has d espite term being 33%, 34%, there are riders on term and otherwise, there's another set on savings, where ULIP, yes, a few channels do very well on ULIPs and add riders there. The others, there are also riders available on par and non-par as well.
Okay. Got it. Thanks.
Thank you. We have our next question from the line of Nidhesh Jain from Investec. Please go ahead.
Thanks for the opportunity. My question is on motor own damage segment. The loss ratio in this segment has increased over last couple of years. I want to understand which particular segment within motor own damage is driving that loss ratio and what is our strategy for this financial year in this motor own damage segment with respect to growth and loss ratio management.
Tapan, you want to take that? Tapan or Avais, if you want to take that.
Sure. The increase in the motor own damage claims is what you're seeing is essentially an industry-wide phenomenon. You see similarly the impact at Bajaj General. Sorry, was there a question?
I want to understand which segment basically is contributing to this, whether it is private cars, two-wheeler, TP within private car, any particular cohort which is leading to this higher loss ratio. What is our strategy given that loss ratio is elevated, what is our strategy for FY 2027 in terms of growth and loss ratio management?
Our strategy is very clear. We focus on risk selection. We have a return on risk-adjusted capital model that we use for our selection basis, we will continue to do that. You see that we slowed down on motor a little bit. When the time is right, we will increase again. These are all tactical shifts that we do as we've been doing for the past 25 years.
We should expect continued slowdown in motor own damage, right, through the year till the time pricing is not adequate?
As Tapan said, there are cycles, right? There are cycles, there are soft cycles, there are hard cycles. It depends on what happens. We have a daily selection criteria. It's an institutionalized framework we use across our sales channels. We continue to use that to select the risk. Depending on prices, depending on changes in commissions, we will make tactical shifts as we deem appropriate.
If I can add something to this, Raman, Avais.
Yes, please, Sreenivasan .
Sure.
I think this is a long-term business and temporary slowdowns, I think, we're not really bothered. While I know there are a lot of people who look at gross premium as the only measure of top line, we have a large number of customers, we issue a large number of policies. Each of these customers, the lifetime value is quite significant. That's how we have built our business in the past. Therefore, if one segment slows, we will have to correct it. Ultimately, the goal is to increase the absolute operating profit, if we can, and that will continue to be our goal.
You can grow the absolute profit only with volume margin plays, and sometimes the margins are weak, you have to give up volume, but you have to protect your bottom line. I think that is a very clear strategy of the company in the last 25 years. We will continue to do that.
Sure, sir. What particular segment in motor OD, which is contributing to higher loss ratio? Is it new private cars, or renewal private cars or any other particular cohort which is showing higher loss ratios increase?
This is Tapan here. It is not so simple. For that, you have to sit together to see a rule engine. There are micro segments, there are segments geography-wise. You can't really bucket it as the segment one, two, three. That would be too simplistic to look at the business.
Sure. Okay, that's it from my side. Thank you.
Thank you, Nidhesh.
Thank you. Ladies and gentlemen, that was the last question of the day, and I now hand the conference over to the management for closing comments.
Thank you all for the great questions. I think we are done with this. I think we can close the call. Thank you all.
Thank you so much, sir. On behalf of JM Financial Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.