Bajaj Finserv Ltd
NSE:BAJAJFINSV
Earnings Call Analysis
Q3-2024 Analysis
Bajaj Finserv Ltd
The company experienced a robust growth in Net Asset Value (NAV) of 13% this quarter, demonstrating a significant improvement from single-digit growth in previous quarters. The Asset Management business witnessed assets under management (AUM) crossing INR 30,000 crore, marking a year-over-year growth of 17%. This performance reflects the company's focus on expanding distribution, fostering relationships with bancassurance partners, and making inroads into smaller towns and the corporate sector.
BALIC, the company's life insurance arm, reported an impressive individual new business premium growth rate of 24%, outpacing the industry's 6% and seeing a substantial increase in market share among private players. New business value also climbed by 19%, despite a temporary dip influenced by a lower volume in group protection business. The life insurance segment's growth was comprehensive across all channels, bolstering the company's sixth position in market share and fourth in the number of policies.
Remarkable performance indicated by a record customer acquisition and the highest number of loans booked in a single quarter. The financial arm, BFL, grew its profit after tax by 22%, even in the face of elevated credit costs and marginally lower net interest margins due to increased cost of funds. The company also expanded its geographical reach and strengthened its capital ratios, maintaining a robust Tier 1 capital level.
Despite a temporary regulatory setback impacting the issuance of digital cards, Bajaj Market or Bajaj Finserv Direct onboarded approximately 84 lakh customers, and Bajaj Finserv Health recorded a 50% jump in health transactions year-over-year. These growth numbers reflect the company’s commitment to not only servicing but also expanding its digital and health consumer base.
The insurance segment is emphasized as a long-term endeavor, where the company has maintained the lowest grievance ratio in the industry, showcasing a customer-centric approach. The loss ratios for Own Damage (62) and Third Party (72) insurance claims have shown improvement. The executive team explains that their strong reserving practices should give investors confidence in the sustainability of these results.
The company reported a 34% increase in consolidated total income and a 21% rise in profit after tax, reflecting robust growth across segments. Long-term strategic moves, including the acquisition of Vidal Healthcare, position Bajaj Finserv as a comprehensive healthcare management platform. These steps underscore the company’s intent to grow and diversify its offerings in the rapidly evolving healthcare industry.
Bancassurance partners, including Axis Bank, have historically prioritized their core products over third-party offerings such as insurance. While this might place pressure on bancassurance, the products must adapt and coexist within the bank's ecosystem. The company addresses this challenge by not being overly reliant on any single bancassurance relationship, indicating a thoughtful diversification strategy.
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Ladies and gentlemen good day, and welcome to the Bajaj Finserv Limited Q3 FY '24 Earnings Conference Call hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sameer Bhise from JM Financial. Thank you, and over to you, sir.
Thank you, Zico. Good morning, everyone, and welcome to the 3Q FY '24 earnings conference call of Bajaj Finserv. First of all, I would like to thank the management team of Bajaj Finserv for giving us the opportunity to host the call.
From the management side today, we have Mr. S. Sreenivasan, CFO, Bajaj Finserv Limited; Mr. Tapan Singhel, CEO, Bajaj Allianz General Insurance Company; Mr. Tarun Chugh, CEO, Bajaj Allianz, Life Insurance Company; Mr. Ramandeep Sahni, CFO of Bajaj Allianz, General Insurance Company; Mr. Bharat Kalsi, CFO of Bajaj Allianz Life Insurance; as well as Mr. Devang Mody, who is the CEO of Bajaj Finserv Health Limited.
As usual, we will have opening comments from Mr. Sreenivasan, post which we'll open the floor for Q&A. Over to you, sir. Thank you so much.
Good morning, everybody. I welcome all of you to the conference call to discuss the results of Bajaj Finserv Limited for the quarter ended 31st December 2023. As before, in this call, we will largely be concentrating on the consolidated results as well as the results of our insurance operations and our other digital businesses, Bajaj Finserv Health and Bajaj Finserv Direct, while the conference call for Bajaj Finance Limited as a major listed subsidiary, has already happened on 21st -- 29th of this month.
However, if there are any high-level questions on BFL, we would be glad to take that as well. We will not be taking any questions on the status of Allianz' stake in our insurance companies. The status has remained the same as at the end of the previous quarter, and there is no change.
Any statements that may look like forward-looking statements are just estimates and do not constitute an assurance or indication of any future performance result. As you may be aware, prepared its financials in compliance with Indian accounting standards. The insurance companies are not covered under Ind AS as yet. They prepared Ind AS financials only for the purpose of consolidation.
Accordingly, for BAGIC and BALIC, the stand-alone numbers reported and what we will be talking about are based on the Indian GAAP as applicable to insurance companies.
Our results, press release accompanying the results and our investor deck have already been uploaded on our website on Tuesday.
Before I get into the performance update for the quarter, let me briefly explain the acquisition of Vidal Healthcare Services Limited and its key subsidiaries by Bajaj Finserv Health, I will refer to it as Finserv Health going forward, which is our wholly-owned subsidiary.
Yesterday, on 30th January, our Healthcare subsidiary, Finserv Health announced that it has entered into an agreement to acquire Vidal Healthcare Services, Vidal for short. It is one of the top health services management companies in India and among the largest third-party administrators.
And the third-party administration business, which is licensed by IRDA, is carried out through its subsidiary Vidal Healthcare TPA. Through another subsidiary, Vidal Medicare Private Limited, it provides health and wellness offerings to its customers.
Vidal also has an international business, which offers KPO services to a few clients in the Middle East. Finserv Health will acquire 100% of the company at an enterprise value of INR 325 crores for cash. Vidal TPA serviced over INR 5,000 crores of insurance premiums to claims in FY '23, spread over 130 million lives across corporates, SMEs and some government schemes as well.
The strategic rationale for this is that this acquisition will provide Finserv Health with access to inpatient hospitalization payments, which is predominantly covered by insurance and is the largest segment of health care payments.
To summarize the acquisition, provides Finserv Health the opportunity to offer integrated outpatient and wellness services combined with inpatient or IP to retail and corporate customers, thereby providing continuum of care.
It effectively fills a gap in the entire payment space, which is what Finserv Health is trying to develop its business on. It enables superior digital customer experience platform access for Vidal customers. It complements IP network of Vidal with a well-established OPD network developed by Finserv Health and it opens up management of government scheme as a potential opportunity for the combined entity, some of it is already being carried out by Vidal. The core management team of Vidal led by their Managing Director, Mr. Girish Rao, will continue to lead Vidal post the acquisition, and we welcome all Vidal employees to the Bajaj Finserv family.
This acquisition we expect will accelerator Finserv Health quest to become one of the largest players in the healthcare payments spectrum. The CEO of Finserv Health, Devang Mody, is with us on this call to take any questions you may have on this acquisition on Finserv Health strategy. If there are any questions related to the overall ecosystem of Bajaj Finserv, I would be glad to take that.
Let me move on to the business update on the performance for Q3 FY '24 now. Macro conditions overall were favorable during the quarter with a higher level of business confidence. And in this conducive environment, our companies have once again delivered strong operating performance.
Let me start with BAGIC, Bajaj Allianz General Insurance. BAGIC continued its growth momentum, recording above market growth in Q3, while headline profit after tax were the modest increase, the core profitability, excluding claims from a series of natural catastrophic events was stronger.
Headline gross domestic premium income, GDPI, this is what we report to the General Insurance Council. It includes -- a small amount of inward reinsurance that some companies do. During the quarter, it grew by 18.7%, which is well above the industry, including private and public multi-land players growth of 11.2%. Excluding the tender-driven multi-government health and crop lines, the growth for BAGIC was even better at 19.6%, which was more than twice the industry growth of 9.4%.
On the bottom line, the industry has been significantly impacted by a series of nat cat events this year. While we call it nat cat, these are not one significant very large event, but we experienced 8 floods fronts, including floods in North India, Sikkim, Tamil Nadu, apart from cyclone event such as Biparjoy and Michaung during the 9 months.
In fact, when events which are of medium size like this happen, the impact on the for that quarter can be somewhat higher because a lot higher proportion of the losses tend to be within the retention limits of the company.
Accordingly, the combined ratio for the quarter was higher at 102.9% as against 100.3% in Q3 of FY '23. Excluding the impact of nat cat events, the combined ratio would have been 99.5% on account of robust risk selection and prudent underwriting.
BAGIC also continued to grow ahead of industry on all profitable commercial lines. Current investment income for BAGIC grew at 21.7%, backed by higher yields and 30% growth in advance premium. Our capital gains on the investment side were lower in this quarter at INR 10 crore as against INR 36 crore in Q3 of FY '23 on account of timing of booking gains.
At the same time, the unrealized gains on equity grew from INR 298 crore to INR 595 crores. The profit after tax growth for Q3 FY '23 was accordingly impacted by the lower capital gains and the nat cat losses, as highlighted earlier.
PAT growth for the quarter was 3.3%, up from INR 278 crore in Q3 of FY '23 to INR 287 crore in Q3 of FY '24. Excluding the nat cat losses of INR 79 crore during the quarter, the profit after tax would have been higher by 24%. The INR 79 crore is the pretax number. While growth in motor insurance was muted at 5% due to BAGIC's tight focus on writing only preferred categories of business and a somewhat of a slowdown, which was in line with the industry. In particular, BAGIC continues to be conservative in writing large volumes of commercial vehicle insurance purely for reasons of risk.
Overall, growth was strong in commercial lines, 19%; group health, 36%; and miscellaneous lines such as warranty and rural packages, which was up 145% Y-o-Y. This was partially offset by a decline in crop insurance of 17%, which again is seasonal because crop insurance is mainly in 2 quarters of the year.
The loss ratio during the quarter was 72.9% as against 72.1% in the same quarter of the previous year. Excluding the effect of nat cat claims, the claim ratio would have been lower at 69.5%.
Now the loss ratio has increased during the quarter for health, PA, Fire and Engineering, while Motor business reported a decline in loss ratio. As we highlighted earlier, the premium takes time to catch up when growth is very strong.
The NAV growth for this quarter was 13% as against a single-digit growth in the first quarter -- the first 2 quarters. The higher premium recorded in 9 months should hopefully continue to get earned over the next couple of quarters.
BAGIC's AUM, including cash, crossed INR 30,000 crore during the quarter, growing by 17% to INR 30,296 crore as on 31st December '23 versus INR 25,977 crore as on 31st December '22. The advanced premium from long-term policies was INR 1,778 crore at 31st December 2023, which is higher by 30% over the same figure a year ago.
As we mentioned before, many of the new initiatives which BAGIC has invested in over the last 18 to 24 months, including focus on smaller tier towns, distribution expansion, doing more with bancassurance partners and increasing presence in large-ticket corporate segment have resulted in this performance.
BAGIC was further able to capitalize on a strong presence in smaller towns and rural areas through its virtual banca -- what we call the virtual satellite banca office. In a market where assets insurances are intensely price competitive, this operating result we believe displays BAGIC's commitment to a balanced and profitable growth on the back of a deep and broad distribution and prudent underwriting while focusing on best in class customer service. In summary, strong growth, excellent underwriting performance, core underwriting performance excluding nat cat claims, strong investment income and core profitability increasing, but headline numbers lower due to nat cat claims and timing difference of capital gains.
Let me move BALIC. During the quarter, BALIC continued its strong market-beating growth trajectory and reported an individual rated new business premium growth of 24% against the industry and private industry growth of 6% and 9%, respectively.
So it's about 4x the industry growth. Balance IRNB growth of 24% in Q3 is highest among the top 10 private players in the industry. The growth was broad-based and driven by all key channels with agency, institutional business and BALIC Direct, growing at 22%, 18% and 62%, respectively.
BALIC's market share in IRNB or the individual rated business terms increased from 7% in Q3 FY '23 to 8% in Q3 of FY '24. This market share is among the private players. BALIC continued to maintain its sixth position on IRNB basis. But in terms of number of policies, it is under fourth position.
BALIC's group protection new business, however showed a decline of 8%, mainly due to lower MFI presence where there was less lending happening during this period. On the back of strong renewal premium growth, BALIC's GWP grew 21% during the quarter from -- whereas GWP, excluding the low-margin group fund business has grown by 22%.
The total number of policies NOP for BALIC grew by 20% to 4.92 lakhs in 9 months of FY '24 and a strong growth in Q3 of 16%. I'm pleased to say that BALIC ended the 9 months with the fourth highest number of new business policies.
During the quarter, the BALIC new business value grew by 19% from INR 201 crore to INR 251 crore. To some extent, the NBV was affected by a lower group protection business. But over the next few quarters, we hope this should get corrected as well.
After a relatively lackluster Q1, as we mentioned earlier, when we have focused more on launching low-margin products like unit-linked. BALIC has reported strong NBV growth for the last 2 quarters with a strong focus on getting the right product mix.
Overall, the IRNB mix for Q3 FY '24 stood at 32% participating, 20% nonparticipating savings business, 4% of individual term business, 5% of annuity business and 39% of unit-linked insurance business.
BALIC has continued to focus on scaling up the agency and direct channel through investing in people, processes and also institutionalizing its variabilization of agency costs through lower cost models.
It has led to the BALIC building of one of the largest agency channels in the private life insurance space with over 1.43 lakh agents. BALIC is also building on the data and analytics for direct sales through upsell and cross-sell initiatives apart from new acquisitions.
It has led to BALIC's presence now in 313 cities with dedicated verticals for different customer segments. During this year, the 9 months of FY '24, BALIC has started activating several of the recently signed corporate agency tie-ups, which include Karnataka Bank, AU Small Finance Bank, South Indian Bank, The Development Bank of Singapore DBS, City Union Bank, Tamil Nadu Mercantile Bank, Punjab Sindh Bank, and Jammu & Kashmir Bank.
BALIC now has a reasonably large number of bancassurance tie-ups and over the next couple of years should help it reduce any concentration risk. For the 9 months ended 31st December 2023, the 13-month and 37-month persistency stood at 83% and 66%. And the 61st month persistency has also improved to 51%.
Profit after tax grew 34% from INR 81 crore to INR 108 crore, supported by higher profit realized from par business, higher charges from unit-linked due to increased AUM and better claim experience, partially offset by higher new business driven by strong growth. I'm also happy to share that BALIC has crossed INR 1 lakh crore of AUM during the quarter.
To summarize, strong market-leading growth, growth across all channels, activation of new tie-ups in banca space, growth in NBV and 4TH position in number of policies issued. Overall, a good balanced quarter for BALIC.
Let me move to our lending business, BFL and BHFL. I would broadly touch upon these companies because they already had their call. It was a good quarter for BFL on all growth metrics: customer acquisition, new loans booked and AUM. Profit after tax grew strongly by 22%, although it was affected by higher credit cost and lower NIM due to higher cost of funds.
The reason have already been explained by BFL in its investor call on 29th. BFL acquired 38.5 lakh new customers in Q3 of FY '24, the highest ever till date in any quarter. Total customer franchise on 31st December stood at INR 8.04 crore, while cross-sell franchise stood at INR 4.93 crore.
The total number of new loans booked in Q3 FY '24 increased 26% from 78.4 lakh in Q3 FY '23 to 98.6 lakh in Q3 FY '24. Further, in Q3, BFL added 158 new locations and 9,500 distribution points.
Geographic presence stood at 4,000 locations -- or a little over 4,000 locations and achieved over 1.9 lakh distribution points on 31st December '23, as against 3,714 locations and 1.44 lakh distribution points on 31st December '22.
The Bajaj Finserv app now has 4.9 crore net users as against 3.1 crore a year ago. The company's diversified business model has enabled to record strong AUM growth as seen from the total AUM growing by 35% to INR 3,10,968 crore.
The gross and net NPA, recognized as per RBI prudential norms and provisioned applying the expected credit loss methodology prescribed in the Indian Accounting Standards as of 31st December '23 stood at 0.95% and 0.37%, respectively, as against 1.14% and 0.41% as on 31st December '22.
I must highlight here that NBFCs are under Ind AS, which requires ECL provisioning and deferment of some fees and charges on effective annualized yield basis. BFL holds the management and macroeconomic overlay provision of INR 590 crore as on 31st December '23.
It has released INR 150 crore from the overlay in Q3. BFL have ended the quarter with a consolidated profit after tax of INR 3,639 crore, which was 22% higher than the same quarter of the previous year. The capital adequacy ratio as of 31 December '23 remained strong at 23.87% as against the required minimum of 15%.
The Tier 1 capital stood at 22.8%. The impact of higher risk weight for certain categories of business announced by RBI impacted BFL's capital adequacy by 2.9%, but this has been made up with the fund raise and profits.
Bajaj Housing Finance, the 100% mortgage subsidiary of BFL, continues to do well. AUM grew 31% to INR 85,929 from INR 65,581 crore a year earlier, and the profit after tax grew 31% to INR 437 crore in Q3 FY '24 as against INR 337 crore in the same quarter of the previous year.
Again, Bajaj Housing Finance's capital adequacy ratio stood at 21.92%, and the GNPA and NNPA stood at 0.25% and 0.10% which is more or less similar to what it was a year ago. Again, to summarize, strong growth from both Bajaj Finance and BFHL across all metrics slightly higher credit costs, which is in line with what it was pre-COVID and a lower NIM by about 11 basis points due to higher cost of funds.
Now to give us some update on our platform company, Bajaj Finserv Direct, Bajaj AMC and Bajaj Finserv Health. Bajaj Market or Bajaj Finserv Direct attracted about 84 lakh customers on a digital platform, of which 1.9 lakh became customers.
This is against 1 crore consumers and 2.3 lakh customers in Q2 of FY '24. The numbers are lower because in line with the Bajaj Finance's -- the RBI's order on Bajaj Finance to temporary stop the issuance of digital cards, Bajaj Finserv Direct has voluntarily taken up in the spirit of the order to stop the lending until the deficiencies pointed out by RBI cleared. As mentioned by BFL, these divisions they have mostly been cleared. And as soon as that is done, and RBI allows, Bajaj Finance will start disbursing again, and should also start lending soon.
Therefore it sold 36,603 cards as against 82,828 cards in the last year. And during the current quarter -- now coming to the AMC, during the current quarter, the Bajaj Finserv AMC, it is just under 6 months since the AMC launched it first fund. It launched new funds, the banking and PSU fund and the Balanced Advantage Fund and it attracted an AUM of INR 882 crore during this quarter. Both these funds were available for part of the period, not for the full quarter. Overall AUM stood at INR 6,375 crore as at 31 December, of which about INR 3,000 crore is in equity or equity-oriented funds like arbitrage and balance funds.
In Q3 -- now coming to Bajaj Finserv Health. In Q3 FY '24, Bajaj Finserv Health or EBH carried out 13.45 lakh health transactions versus 9.13 lakh in the same quarter of previous year, which is almost a 50% increase. And it has 2.89 lakh-plus monthly active users. And for the quarter, Finserv Health had 18.55 lakh paying users versus 9.74 lakh in the Q3 of FY '23, with about 5.5 lakh users having renewable products, whereas vis-a-vis 3.11 lakhs in Q3 of FY '23. Finserv Health is also expanding the provider network, which includes 1,07,324 doctors, 5,368 lab touch points and 2,110 hospitals.
Utilizing the network strength, EBH is able to offer and service differentiated product plan for both the retail as well as to corporates for employee health benefits management.
Let me now conclude with the highlights of our consolidated financial results. Consolidated total income, up 34% at INR 29,038 crores. Consolidated profit after tax up 21% at INR 2,158 crore. The consolidated profit after tax includes the mark-to-market adjustments on equity investments held by and shareholder funds. And if we were to exclude the impact of that, the profit would still have been higher by 18% in Q3 of FY '24.
BFL recorded top line growth of 26% in net total income, consolidated profit after tax up 27% for the 9 months and ROE of 21.95% for the 9 months as against 23.98% in the same 9-month period of last year.
For the 9 months, gross written premium was up 34% at INR 15,668 crore. The profit after tax up 14% at INR 1,171 crore and the ROE at 11.8% versus 11.6% in the same period last year. The combined ratio was 99.3% versus 101.5%.
In the same 9-month period, BALIC recorded gross written premium increase of 14%, 14,860; profit after tax higher by 26% at INR 457 crores; and the NPV increase of 11% at INR 581 crore versus INR 535 crore.
Overall, for the 9 month, the consolidated total income for BFS increased 34% to INR 78,341 crores and the consolidated profit after tax increased 30% to INR 6,029 crore.
Before we open for questions, concern the paucity of time, I would request the audience to kindly keep their questions brief so that we can cover more queries during the call.
With this, I invite questions from the audience. Thank you.
[Operator Instructions] The first question is from the line of Sanketh Godha from Avendus Spark.
I have questions with respect to general insurance and life insurance. First on general insurance. See, my question is more on growth. I understand that your growth has been pretty strong in the current year. But if I look at third quarter growth in motor, there is a sharp slowdown in the numbers, both in OD and TP. Just wanted to understand that the 2-wheeler market share gain study, which played out [indiscernible] one half, now the base effect getting kicking in, and that is leading to a bit of moderation in the motor growth or the competition has intensified and therefore, you have taken a conscious decision to slow down to protect your combined ratio in that particular piece? That's 1 part on growth. And second thing, I'm just asking from FY '25 perspective. If I look at your crop business, last year, you did INR 2,700 crores, it seems to be difficult to achieve in the current year that number. And in FY '25, maybe with OEM roles that might be much more competitive. So crop, how do you see that to play out?
And second is on government health you did almost INR 2,500 crores of business in the current year. To what extent it is sticky and it can repeat in the next year, so that there might not be a significant decline in the top line growth for That's largely on growth in general. Maybe life I will ask after you answer on general.
Tapan, would you like to take it?
Okay. Thank you for your questions. I think the question you have asked is mostly strategic in nature. So I can give you broad answers, not very specific on that basis. The first one, if you look at overall our retail growth, and Sreeni mentioned in his opening remarks, it's much over the industry, even when it removes crop, he removes government health.
So if you look at it, I think overall, we are growing much over the industry in terms of retail growth. When you come to micro segmentation, those will vary over time. Sometimes when you see an opportunity, we will be aggressive in some segments. Sometimes we don't see an opportunity, we will slow back. And that is what we have been doing for 22 years now.
This is something that as a company, we always pick up where we see good opportunity to get aggressive. Where we don't see opportunities, we slow down. That will keep on happening as we see. So if you look at in the quarter before this, we were growing aggressively. This quarter, motor has come down.
Next quarter, it may again pick up depending on how we see the market. The market is very agile. It is not static like in a year you can decide as we move like this.
On crop, if you again see if I take you back 6, 7 years back, when you're writing crop, most of the questions was that nobody writing crop, why are you writing crop? And if you look at results, I think we did pretty good in terms of our profit in terms of our growth.
And now everybody wants write crop, which is fair. So again, where we see an opportunity, we are there in crop. And I think we still are 1 of the largest present crop insurance now that we are small, but -- we got a lot of players there. Obviously, when more players enter, the market gets divided in a lot of players, which is fair, but we will remain as a key play in the crop insurance.
We have invested a lot. We understand the business well and we serve the customers well on that perspective. If you look at government health also, not the first time we have done government health. We've done Gujarat the year before that also, we have done J&K before that also. So it is something that we keep on looking at the business strategy.
So this, we shall continue doing as we move forward. So as a company, our focus is very clear. We upsell customers, innovate, bring in new innovation to the market, look at all segments of businesses and ensure that we have healthy growth, and we also take care of our bottom line and solvency because in the insurance business, it's very critical that you are able to consistently look at your balance sheet and a very strong balance sheet, so we can serve customers well. I hope it answers your question.
Sure, Tapan. But my question was more on motor, honestly speaking. The moderation is because our market share gain strategy in 2-wheeler has incrementally not happened in the manner and that's why the slowdown? Or it is more tactical, as you explained right now, it's more tactical that we reduced a little in the market in the current quarter?
So as I told you in my answer that micro answers, I don't give because on a strategy basis as a philosophy, which I told you, this is what we keep on doing. And when we see an opportunity, you'll again see it's growing up. So you'll never see that it's something that we would continue doing even it doesn't make sense.
We will do what makes sense because strong companies and insurance is not a quarter-on-quarter business. It's a long-term business. You should look at insurance business for 100 years to see how to run a company in insurance because then only you can look at things.
So a very strong balance sheet. At the same time, acquisition of customers, being obsessed with customer service. If you look at our results and I think in the documents given, you see consistently, we have had the lease grievance ratio in industry for over a decade now.
Consistently, if you look at we've acquire more customers. Today, we are the largest in terms of customer base. Consistently, we are one of the top players in the industry, which is there. And -- but in the micro level, you'll see that there would be fluctuations in our line of businesses. Sometimes it is aggressive, sometimes it's close down, but that is our business strategy. That's how we run this company over a long period of time.
Got it. Got it. And lastly, on general insurance. I just wanted to understand that the motor TP and motor OD loss ratios have improved in the current quarter, are these numbers sustainable? Because last year in motorway TP we were -- last quarter, we were at 67. If it's a sharp improvement to 72 and OD is at 62 probably the best in the industry. Just wanted to understand these numbers are sustainable? And there is a sanity in the pricing with respect to -- in the market in general.
So if you look at the loss ratios, OD and TP. OD is a short term and TP the long term in terms of the loss ratio development because TP takes about 4 years to develop and OD short term. So if you look at OD loss ratios, at 62, it's a short term, it's an immediate result, and the provisioning in OD is very less because of it being short term in nature of loss development.
And I'm sorry, you're going a bit technical, but then you're going to stand this go. So when you look at our best industry best loss ratio, then it is -- you should be very happy that the company writes business in spite of being -- having a large book and does so well. TP being long term has a lot of play on reserves.
And if you look at our reserves, it's among the best in the industry again. So this company not only gives a good bottom line, not only acquires customers serves customers well, but also reserving is among the strongest in the industry. So that should give you a lot of comfort in terms of when you look at the results of the company.
Got it, sir. And my question on life insurance. On margin, 2 points. One, one is the natural impact of the surrender charges on the life insurance, the proposed norms, how do you see it? And if you can possibly quantify out of the total what we report, what is sourced probably from surrender pool in the non-ULIP business, if possible?
And the current margin pressure, if I see from 9 months point of view compared to the last year, should I attribute largely to product mix change? Or at product level also, we are seeing a margin pressure, either because of unfavorable market or intense competition on IRR either in annuity or non-par? Or is it largely attributed to product mix? That's my question, one on regulation and second, on the margin at the company level.
And second question probably is on -- a data keeping. How much contributes? What's our market share? And are you seeing any pressure with that the TAT being available on Axis Bank channel in that sense?
Yes. Sanketh, before I hand over to Tarun, I'll just take the first question. I think that is a draft proposal floated by the regulator, and that is being discussed at different levels. I don't think there is consensus yet as to whether that will happen or when it will happen or if at all, it will. So -- and the industry is collaborating and there are multiple options given back to the regulator to handle that situation. We do not, as of now, see a significant risk that it will happen in the near term, but it will depend on how the regulator views all the different discussions. Tarun?
Yes. I think you largely answered it, Sreeni. I think this is a little speculative if I might say, Sanketh is discussions are on. I think IRDA had limited more from a discussion perspective because quite rightly so the surrender values for customers gets to be an issue.
So having said that, there are ample products in the market which are long-term products and usually are structured a lot more tediously previously, I would say, surrender value perspective is concerned. They don't have any surrender value.
But we understand the -- with IRDA the customers' issues and we are working together with them. I think IRDA is also quite receptive. They understand that the long-term product and these discussions are going around quite actively. A lot more to be said in this area. And I'm assuming that this is just indicative in nature, what you will possibly be seeing is something which will be discussed a lot more before it comes out. So that's my response to the first one.
Your second question is on product mix and whether the impact is on product mix? Or is it squeezing out of margin in individual product segments? I think that's exactly what you're asking about, Sanketh?
Yes, yes, exactly. It's more due to the mix change or product level is also seeing the compression?
Yes. So see, the -- I'll answer the second one first because I'm sure you value that. So overall, there has been some squeeze versus last year. And I think that's been playing out in terms of what you see for various players, largely that happens when the rates of fixed deposits and the tend to narrow. And that is what has largely happened here.
As far as our margins are concerned, I think we've had a flattish margin, I'd say, for the 9 months and for Q3 also, we've been able to maintain our margins despite that. In fact, if I overall say we've gone quite better than what we expected to in terms of product mix. As you know, Q1, we have taken a clear decision, Sreeni mentioned in his as well today we wanted to wear out the load of the 5 lakh tax The strategy for this year has actually worked out perfectly. The margins are on offswing and I think you should expect more of that. Our product mix has also settled to somewhere where we would like it to be in the longer term. And that's the way I think it's healthy for all segments of customers.
We get to see customers who would want more power plants and more nonpower plants also, there is a separate segment for that. And ULIP, of course, that works well. So that's on the answer on the NBM question.
As far as Axis is concerned, the overall statement I've always been making for the last so many calls, and this is what I maintain in the Board and everywhere is that we intend to not being lopsided in any one relationship. I think that's been a strategic decision that we have taken, which is why we actively go ahead and sought out new bank partners and our agency channels and our direct channels have been fast growing.
In terms of specifics, I can answer. Axis Bank last year, this time, used to contribute 26% of our business. This year is 23%, despite the fact that we've been the fastest growing as a company. So what you should understand is that we are achieving a twofold objective.
One is a growth. Second of the fact that we would not want -- it's good for -- actually it's good for us that we are not dependent on 1 relationship to such an extent. It's not a healthy relationship then.
Our share broadly remains the same within the Axis Bank. So the good news there is that for us, also Axis Bank has grown in terms of business, and it is going healthily even this month. We expect as we've retained our share there, so Axis Bank has been able to add more customers and has been able to do better than its peers as a bank in terms of selling third-party products.
Perfect. Perfect. Okay. And sorry, last one, just an extension to it. Are you seeing any new partner that is Tata probably started selling in Axis, so any pressure from that side, just competitive pressure from that side?
I think this is something we should expect. IRDA has allowed from 3 to 9 partners. Directionally, now it's 4 in Axis. I dare say there could be more. And similarly, it's therefore, all other banks there, we haven't seen a squeeze as you -- the word you use because, as I said, we maintained our market share. So there's no squeezing of market share for us. But I think the overall gainer will be the bancassurance, the bank itself. And I expect more and more banks to add life insurance companies as partners because overall, it helps the competition on ground, the choice to customers, different companies have different strengths to make the best out of it. The fact that we've been able to add a lot many more partners, and this momentum has only just been healthy for the last 18 months, only just shows that we've been benefiting out of that.
Our next question is from the line of Nishanth Shah from MLP.
Congrats for the results. So just a couple of questions from me. First is on this acquisition of Could you talk about that a bit? Like how do you see this acquisition? Is it more for like internal consumption? Is it a new business line that you're kind of looking at like more favorably? And just general thoughts around that. So that's my first question. Second question is about -- you briefly mentioned about Axis Bank and the wallet share kind of coming down a bit on the life insurance business. Like now that like Axis is becoming more prominent as an investor in Max, do you worry that there is like a kind of like a decline in wallet share? Or do you think it kind of like stabilizes your the wallet share at 23-odd percent?
Okay. I will briefly cover the strategic rationale in my opening remarks. But I will let Devang Mody, the CEO of Bajaj Finserv Health articulate it how he sees the acquisition of Vidal Healthcare and Health TPA. And thereafter, then Tarun can take over. I mean, he already mentioned about Axis, but you can just add some flavor to it. Thank you.
See, we built out Bajaj Finserv Health with a purpose that we want to create a health management platform to provide access and financing to Indians. Now in health management platform, the largest spending pool is hospitalization. But we set out to first solve the harder problem of solving for OPD because there were very fragmented players on OPD side.
Having made some progress there that we have best-in-market network, we have created digital flow, it was logical for us to get into hospitalization, which is the largest spend pool the acquisition of Vidal, we get access to health care spend in hospitalization, as I told, it is the largest spend pool in health care ecosystem at this point of time in India.
So I think it's a strategically logical next step. With this acquisition, what we get access to is very deep domain knowledge of Vidal because they are amongst the first TPA in market for more than 18 years, and a very capable team who has rich domain knowledge.
So that's the strategic rationale that today, we are uniquely placed to be able to provide continuum of care. Nobody checks into the hospital without accessing the doctor or doing diagnostic tests, right? So having created OPD network as well as transaction capability and now having hospitalization service capability will be unique in unique position to service consumers, that's what we mean by continuum of care that you go visit a doctor, we have capabilities, you have to do diagnostic or radiologic tests, we have the capabilities. And now with Vidal's acquisition, if you need any hospitalization, we can service your need. So that's the strategic rationale. I hope it is -- it answers your question.
Yes, sir. Fair. And just a second question on Axis.
Yes. So I'll just answer that. So, I largely did answer. So there is no -- currently, there is no drop in wallet share. I actually mentioned that. But needless to say, this can be under threat. I think the fact that Max has always been there for the last 13 years, and they have already had clearly indicated the desire to increase equity, I think the bank and bank employees are well aware.
Despite that, the bank does is adding. And as you heard in my response earlier, added us as a partner 4 years back, and have added 1 more partner recently and could add furthermore. I think what 1 should look at is the growth overall whether the bank is able to achieve its objective, I think it is.
One of the reasons the bank is growing is largely because of the further partners like us that they've added. And strategically, I think they're going the right way, plus the product that is being made available is to the strength of each of the insurance companies. Hence, they're able to increase the pie and customer penetration.
As far as we are concerned, I repeat that we will not be dependent on one relationship. It is healthy for Axis, it's it's healthy for us. And our other businesses, which is the rest of the bank assurance relationships have only just been increasing, growing. So much has been agency also growing and has been growing significantly as well. And I think that's the way the company's long-term vision remains.
Yes. Let me just add some flavor to what Devang said, how we look at it from Bajaj Finserv. Clearly, health care is one of the megatrends that we believe is going to play out over the next several years in India. There is a big gap between supply and demand. And there are multiple pieces in this basin. There is the health care providers, which is the health care industry, we are not in it.
There are also multiple payers. We have seen the Ayushman Bharat, which is going to address the needs of the lowest income of the country. Then you also have the insured population with all kinds of P&C companies and health insurers there. And you will also see more and more convergence of the inpatient, OPD and wellness coming together over the next few years.
We're also seeing a significant digital drive kicked off by the National Digital Health mission. And if I look next 5, 10 years, we are looking at a significant expansion of all segments of the health care industry.
Now this is one industry where you need to continuously updates or expand your knowledge of the domain. It is different from, say, doing auto insurance or life insurance. There are different domains requiring different expertise. These 2 vehicles that we have in Finserv, one is the risk-bearing Bajaj Allianz General Insurance who is already a well-established player in all segments of health, which is insurance, which is your hospitalization, private insurance for retail, the government schemes and corporate employer employee.
And now this vehicle Finserv Health will create digital capability, it will create domain capability, it will provide servicing capability across the market because as the market expands, insurers will also demand more and more care services because a lot of it is indemnity based. You want to go and get treated. You don't want just a bit of cash from the payer, whether it's garment or -- so as it grows, you need people who can be in the entire ecosystem with sufficient knowledge, sufficient vision digital capability, we can deliver that.
So when we look at it over the long term, this we want to be in all segments of this. Today about last year, I think about INR 70,000 crore was the insured payment. But the total payment across healthcare industry, across government and uninsured is significantly larger. When that converges, this pie will increase. And as we participate in more and more and keep building our capability based on the digital analytics capability that we have, we think the game is pretty big going forward.
Perfect, sir. That's very comprehensive. Just 1 small follow-up on the Axis Bank point, and it's probably not related to Axis Bank specifically. More across your bancassurance partners, like any conversation with them? Because the liquidity is very tight right now in the banking custom as a whole. So is there any scope of like the banks trying to prioritize deposits over cross-selling insurance, like from -- in a more transient manner until like the liquidity issues ease a bit? Any conversations around that with any of the bancassurance partners?
Yes. Let me just answer that for you. I think the point is correct. The banks fundamentally have been always prioritizing the bancassurance, the bank's core products than third-party products all throughout. It's not just about Axis. It's a larger bancassurance industry level question and that does remain.
And yes, because of that, there will be pressure on the bancassurance side. And actually is always big. So I think the time has long been there, where the products have to independently coexist in the bank's ecosystem. And it's not like the first time we are seeing pressure on deposits and liabilities. It's been there for the last significant period of time, I would say, 18 months-or-so and maybe even there earlier.
So for that, it doesn't impact third party, maybe slightly, but has it impacted us more. Have it -- I mean you've seen a healthy growth in any case. And I think it's good that banks keep concentrating on increasing the customer base and third party is more like another product where they add to their customer relationship and that is only good for us if they are adding more depositors, yes? I hope that answers.
Yes. Fair, fair. No, I understand like the cycles have come and gone in the past, but like it seems like from the -- like what media reports, it's like the RBI is kind of like pressuring some of the banks who have like a higher ratio to [indiscernible] So just wondering whether like there's a transient phase of a few months where banks just like prioritize deposits over...
Like I said, they always do. And particularly, the every quarter end and more so in the year-end, the pressure on deposits has always been high.
Our next question is from the line of Swarnabh Mukherjee from B&K Securities.
Most of my questions have been answered. So I have 1 question in from the expense side. So the expense ratio looks a tan bit higher this quarter. Now what I -- even your growth has been, I think, largely by the commercial lines this quarter. So considering that in the acquisition costs because of that, how to look at the expense ratio? And how should we think about it going forward?
[indiscernible] on the loss ratio and expense ratio on the health business, right?
Overall, on the GI business.
Yes. Raman or Tapan, would you like to take that?
I'll take that, Sreeni. So on the expense side, I think if you look at the expense ratios on GWP terms, it's actually moved up slightly even on NWB terms, it's moved up by 1%. Largely, it's happened because if we compare 9 months versus quarter 3, 9 months, it had a lot of bulky businesses like crop and government health sitting in it.
Given that in quarter 3, that business was on the lower side. In fact, in crop, we had a degrowth. That's why the ratio looks a little skewed compared to 9-month period. The other reason is also our focus has largely been on driving some profitable motor businesses.
So there commissions are a little on the higher side. So temporarily, I think that's also looking a little higher on the acquisition side. But largely, I think we are well in control on our expenses. Overall, on a 9-month period, I think we're running at about 24% on NWP terms.
And I think close to that range is something which we are comfortable at. Having said that, we've also mentioned in the past that we will be expanding our sales force. And if you look at the headcount number, which is basically a wage cost is our largest cost driver. And if you see our head count last year, we were at about 9,500, we've already moved to 11,000 and this number is going up. So on a short-term basis, I think costs might go up a little but I think we are comfortable at these levels.
Okay. Understood. And also 1 question to Tapan, sir, you mentioned about the growth. So now even if you don't go into a lot of micro segmentation, but I think since commercial lines have been doing quite well this year and has been on the forefront of growth, marine or engineering and
Now if we have to think about next year, I understand that, of course, there would be a tactical element and you will capture opportunities in microsegment as you go ahead. But would we be -- since maybe commercial lines are also kind of might peak out in terms of the overall capacity in the industry, would we be considering that we will see a higher growth number in the retail lines maybe for FY '25 to compensate for any such kind of evolution in the commercial line so that we can broadly maintain a run rate of close to industry or above industry growth?
Thank you for the question. I think first and foremost, to understand GI business, look at the economy of the country. Because the GI business always follows the economic. So in the economy of the country, what is it that you hear when you look at the speeches by the Prime Minister or by ministers. You would hear a lot of investment in infrastructure, you would hear a lot of talk about creation of Make in India, you'll hear a lot of talk of creation of factories. . So which means that the commercial space saturation, I don't think is going to happen so soon in terms of the way the country is exploding. It has to become third largest economy, it has to keep on expanding the commercial activities in the country. As long as it keeps expanding, it will require companies to insure that. To require to insure commercial businesses, you should have a good strong balance sheet, you should have good RI capacities and you should be a player, a substantial book to able to do so.
General -- in the GI business, meets those criteria. So I don't think that we will be like slowing down on commercial or saturating that would not be happening. Now we don't try to make a one by pushing aggressively. If we can push aggressively today, we'll push aggressive today only. If we feel it is aggression not required, we will not do so. So we don't try to balance in terms of that if this is going down, so we push something aggressively at the cost of not writing business sensibly.
So we -- the way we look at business is that whatever we think is sensible in which we serve the customer well, we would push aggressively there. We would keep on expanding. But for your commercial vehicle -- sorry, for your commercial line of businesses answer, I don't think in the Indian context for the next at least a decade, I would see a slowdown in the commercial business in the country.
Okay, sir. Got it. If you could share some of your thoughts on retail like particularly motor even like one previous participant also highlighted that there has been tapering down in terms of growth. Now we have initiatives running like [indiscernible] initiatives which were kind of focused on giving the market share on the [indiscernible] So how is it that happening? And should we see some kind of reversion in terms of growth rates going ahead?
I missed the point. Which initiative did you talk about, sorry?
Sir, you had earlier mentioned that there is a initiative for running.
Yes. Right, right. So those initiatives are still going strong because, as I said, our country -- wealth creation in the country is happening. And as I mentioned, GI business follows the economic growth of the country and wealth creation as it happens. So obviously, if you look at the smaller towns and they are getting much better.
And we also have the ambition of reaching to every household in India. Now if you look at Bajaj Allianz in the current context, we would be in at least 1 in 4 households we should already present that. So in that, our strategy of reaching out to the last mile will continue and the will continue. And that will have an impact on retail business, as you have rightly know, thought so and figure out.
So just to clarify, sir, would we then expect that in some time, maybe not in the coming quarter, but in 1, 2 quarters, we'll see some uptick in the motor growth as well? Because I mean why I'm just harping on that is that over the last 2, 3 quarters, that has been the bellwether in terms of driving growth in the retail line. And since that has tapered down, the marker is looking a little bit weak at this point of time. So...
It is just this quarter. No, I don't think it has tapered down. And that is why I say when you look at our businesses, if you start comparing quarter-to-quarter, you will have this kind of fluctuation in thought process. Our strategy, I don't think we are tapering down in any business or any growth. And as we expand, obviously, the motor business in those areas also will start picking up. But we are very cautious of 1, 2 things. And as I said for 22 years, we have done that. If the business does not makes sense, we don't pick it up. Now we only pick up business, which makes sense. And this making sense fluctuates over time. If you again look at if you -- again, let me take you back a couple of years when you're writing commercial vehicle, a lot of questions were coming in commercial vehicle again nobody is writing.
And we actually made good writing profit, and we did very well in commercial vehicles and now a lot of people have entered that space again. Then we entered 2 wheelers, then we entered 4 wheelers. So if we look at the pattern, you will see that wherever we see that it makes sense and we can serve the customer well, we would aggressively push that on.
There's no tapering of business. And -- so I don't think that is a right way. This quarter, if it has gone on a bit, there is certain I think in the market, we didn't find it good enough at that particular price point in which we feel it is good. But that market keeps on fluctuating very well.
So to understand how we operate, you should also, when you look at these questions, also look at the loss ratio movement in the market, look at reserving in the market. And then you will see that how our business fluctuates with that and how it picks up. So when you start seeing those patterns, then this will become clear to you. So it is not that we are tapering down something or we're going slow on something. You will see that it keeps on moving up.
The next question is from the line of Supratim Datta from AMBIT Capital. .
My question is, I'll start off with the business. On the retail health dhigh side, could you -- could you give me a split of the loss ratio between the retail and the group health business, you have clubbed it together? So that would be the first question. And secondly, on retail health, the growth when I see it in the third quarter was around 14.5%.
That is lower than what the are doing or other private players are doing. And this is investing in this business could be creating a separate vertical for retail health. So I just wanted to understand how you are looking at growing this business? What are the key investments you are making and then we should we see these investments play out? That's on the BAGIC side, I have a few questions on the BALIC side as well, but I will get to that later.
Okay. First and foremost, no, I don't think we give individual micro level splits on loss ratios. But if you look at the BAGIC health portfolio overall, we're one of the large heat player in Indian market. You combine the total health business that you do and you put a position of where does BAGIC stand, you'll find us among the top health insurance company in India put it together. Now when you get down to the segmentation and come to retail health segmentation, you would actually notice that our growth is not lower than the industry growth, GI industry growth. We are actually above the industry growth in retail health also. SAHI, yes, obviously, they grow faster because they're focused on health as a monoline of business, and this is a business model to be growing faster, which is good.
I think the [indiscernible] the more the always said, the country can have many more insurance companies, the more they are the better it is because it creates awareness, it pushes the market, and it takes it to the next level.
We are focused on health. And on health, I think the bigger issue is not about just looking at growing aggressively. The bigger issue is how you build a business model which is sustainable in a very long period of time. I think that is what is very, very critical.
How do you build a business model in which you are able to have customer delight? If you look at NPS scores, be it motor and Health, we would be on the top companies in India in terms of the customer delight, which is there.
So you can't build a model in which the customer delight goes down. So it has to be built very sustainably in a long-term basis as we take that on. And retail health, again, if you look at all the initiatives we are taking as an industry also, and you must have heard about the announcement of cashless for all, which is one. We're also looking at exchange with the government NHA in which we're putting the companies and you're also trying to get hospitals on board.
So a lot of initiatives have been taken in some, how the health servicing happens and how does it get to into picture. So we have our team. We have our health vertical. We have a health head. We have a very clear focus on health. And I said, if you look at overall health, we would be on the large -- one of the largest players in the health insurance space in India also currently [indiscernible]
Got it. Now moving to the BALIC business. Over the last 2 quarters, the growth in the direct channel has been fairly strong. I just wanted to understand what has changed in this business that it's delivering 40%, 60% kind of growth now? That's the first one. And secondly, you spoke about product level margins. I wanted to understand that when we look at the different channels, have the commissions in the different channels changed? Because some of the life insurance companies have indicated that in the multi-insurance channels commissions have increased and today you typically compete mostly in multi-insurance channel when it comes to banca partners. Just wanted to understand if there has been any shift in comissions in that segment. Yes, those are the 2 questions.
Tarun?
Yes. So I'll answer the first one on BALIC Direct and Bharat can answer the commission part. So on the BALIC Direct side, I think it's a good thing you noticed that the growth has been significant, and we are very bullish on this. The core reason has been really where we run this business, the quality of the team we've put together, the amount we've invested in this business. And the significant bit is the data and technology piece that is now finally breaking through. So this has been the strength of the Bajaj Finserv Group. We ourselves have been also riding the same piece of core competence.
I think it's finally coming up and showing its capability where we are able to upsell and cross-sell to our existing customers. And there is usually a learning [indiscernible] because ours is not an easy product to sell. I think we are now getting the learnings in and have been able to verticalize the business into various verticals that they are able to use the data appropriately, and we are able to work with our warmed up leads quite well.
We should expect that BALIC Direct shall be the fastest-growing business. It's not the largest yet, but shall remain the largest fastest-growing business for a few more quarters usually. Bharat, on commissions.
Yes. So thank you for the questions. First of all, specifically, there is no increase in any of the cost of acquisition because of the change in the regulations. And even if you look at our overall OpEx plus commission ratios percentage any metric, either we have improved marginally or it is there and thereabout. So there is -- net-net, there is no change because of this regulations.
The last question for today is from the line of Vishesh Jain from IIFL Securities.
I just have 1 question on the acquisition side. So TPA being 1 of the largest TPAs in India, and providing TPA services to many insurers. So is there any chance of potential conflict of interest? And how much of the current revenue of TPA business do we expect to maintain over a period of time?
Devang?
Yes. See, we have our group company Bajaj Allianz General, which is doing health insurance business. So is all [indiscernible] while we have same parentage in BFS, even before this acquisition, we were servicing other health and general insurance companies as well as life insurance companies, which are not our group companies.
Having said that, I think what our customers, mainly on Vidal side, that means insurers or corporates look forward to is how we as service providers to them able to solve their problem or rather service their customers a little better.
That's where we are focused on, and we have a reason to believe there would be no impact. Having said that, Bajaj Allianz General also processes their claim on their own. See, this market and the job to be done is so large, as Tapan was highlighting on the call earlier, that government is taking various initiatives, rapid transformation of health care ecosystem is happening led by NBHM blueprint of current government and regulator is driving initiatives like insurance for all and cashless anywhere.
There is a lot of work to be done by entire industry together. And there is a room for everybody to add value. So we feel very confident that we should be able to service all insurers and there should be no impact on that. I hope I have answered your question.
Ladies and gentlemen, that brings us to the end of our question-and-answer session. I would now like to hand the conference over to Mr. Sameer Bhise from JM Financial for closing comments.
Thank you, everyone, for joining this call today. And thanks to the management team of Bajaj Finserv for giving us the opportunity to host the call. Thank you so much. You may now disconnect.
Thank you all.
Thank you.
Thank you.
Thank you. On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.