PB Fintech Ltd

NSE:POLICYBZR

Q4-2025 Earnings Call

[Rasleen Kaur, executive]

Good morning. A very warm welcome to PB Fintech Limited Earnings Call Quarter 4 Financial Year 2024, 2025. Today, we have with us Mr. Yashish Dahiya, Chairman and Group CEO, PB Fintech; Mr. Alok Bansal, Executive Vice Chairman, PB Fintech; Mr. Sarbvir Singh, Joined Group CEO, PB Fintech; Mr. Santosh Agarwal, Chief Executive Officer, Paisabazaar; Mr. Mandeep Mehta, Group CFO, PB Fintech and I'm Rasleen. I hand over to Mr. Yashish for his introductory address.

[Yashish Dahiya, executive]

Thank you, Rasleen. Good morning, all. So just sharing our update for the last quarter and the year. So our total insurance premium for the quarter was at INR 7,030 crores, up 37%, led by growth in new health. With this, the total insurance premium for the year, was INR 20,486 crores with a growth of 45% in the new core online insurance premium and 48% in the new health and life insurance premium. I just wanted to make a little comment here.

As I look at our insurance revenue over the last 5 years, in 2021, we were INR 619 crores, '22, we were INR 984 crores, and I won't tell the -- go through the whole list, but we are now at INR 2,373 crores, and I do the CAGR for 5 years. I'm talking about just the core insurance premium. Our CAGR for 5 years is 43%. The new insurance core premium for the quarter is up 21% year-on-year. And we don't feel very happy about that. However, if you exclude savings now for the last 9 quarters, we have been between 35% to 45%. And yes, this is lower because it's been pulled down by savings in this quarter and savings has come in below our expectation that we had at the beginning of the quarter also. And the health business has surprisingly continued to grow. By now, I would have expected it to slow down a little bit, but now it's been 9 quarters and it's been growing very, very strongly.

And we have seen other parts of our business like motor, 2-wheeler and travel returning to the above 30 percentage growth, which it wasn't for some time. We continue to improve our customer onboarding and claim support, the insurance area, and our CSAT is now consistent at above 90%.

To be clear, it's actually 92.1%, but we are saying just 90% right now because we are revalidating that 92% because it just has gone up quite a bit. And so we're doing some more assessments around it. Our consolidated operating revenue grew at 38% to INR 1,508 crores for the quarter. The core insurance revenue is up 46% year-on-year, and the core credit revenue is down 21%. This brings our total operating revenue to just shy of INR 5,000 crores, it's INR 4,977 crores for the year, which is 45% up.

I just want to take 1 second to remind people the year we went public, this INR 4,977 crores at that point was about INR 890 crores. The company is about 6x larger in the last 4 years or so from '21 to '25. And just to kind of keep that in mind what we used to do in the whole year, we're now doing in every 2 months. Our trail revenue is now at INR 817 crores from INR 577 crores last year in the same quarter, a 42% growth. This is at an ARR of INR 817 crores. And this is a key driver of long-term profit growth, as we've always said.

And the delta between 4 consecutive quarters has consistently been increasing. And that this will keep going up. And I think we have that number in our presentation. You can see how it's been going on. Our credit revenue for the quarter is INR 115 crores. We also had a management change during the quarter, and that is why you are seeing Santosh. And disbursal is at INR 2,368 crores for the core online business.

Do appreciate beyond the INR 115 crores, there's another INR 55 crores of revenue, which is coming from essentially a PoSP type business in the credit side, which is more focused on the secured side. We continue to strengthen our leadership in new initiatives, which have been doing really well with a growth of 50% year-on-year, at an adjusted EBITDA margin moving from minus 10% to minus 6% within the year, and there is now a 4% positive contribution.

PB Partners, our agent platform is now standing head and shoulders above any of the competitors and continues to lead the market in both scale and efficiency. We have moved the business increasingly towards smaller and higher quality advisers. So we are working a lot on that, and it's showing a very decided move in that direction and consistently so. We have the most diversified business across the various lines of business, and we are now present pretty much everywhere, 99% of PIN codes we have a presence in.

Our UAE insurance premium has grown 76% year-on-year, and there is a bit of a positive surprise there. That business has both turned profitable. And I feel confident it's turned profitable kind of forever because you usually can't react to 1 month or 2 months, but now it's kind of steadily moving in that direction and I don't think it will ever go back into the red again. And that's a very interesting phase when a B2C business goes from because that means it's kind of started making enough revenue to cover its fixed costs. And from there onwards, life should be a lot better. Our consolidated PAT for PB Fintech grew from INR 64 crores to INR 353 crores, which is quite interesting.

But again, it was quite anticipated as well. And our margins have moved from 2% to 5% in full year -- for the full year. Our closing cash balance was INR 5,400 crores. And I think we've spoken about various things, and you can see how the growth has been. There's a CAGR of 52% for the last 4 years from '22 -- 3 years from '22 to '25. And the PAT margin has moved from minus 58% to 7%. But once more, while these numbers sound very good, minus 58% to 7% and they are, they were pretty much as planned. The only thing I would say which we think we should start to deserve some credit for. This is a management that is delivering as per its plan or as per -- and that's quite hard to do over a multiyear period. So now you've seen about 3, 4 years of us saying this is what will happen, this is what will happen and actually go ahead and do that.

But with that, I'll open up to questions. Thank you very much.

[Rasleen Kaur, executive]

[Operator Instructions] We'll take the first question from Sachin Dixit, JM Financial.

[Sachin Dixit, analyst]

Congratulations team on a decent set of results. My first question is with regards to the contribution margin expansion. Obviously, you have guided towards it. So credits to you to having -- to have delivered on that. The jump was quite sharp, right, Q-o-Q 5 percentage points. Obviously, we could understand some of the drivers. .

What I needed you to do probably is if you can break down those drivers maybe between, let's say, how renewals, how much of the impact would have come from there, roughly or maybe the change in new business premium with savings being lower, health continuing to sustain the growth. So if you can break that 5 percentage points jump between different segments, that will be helpful.

[Yashish Dahiya, executive]

See, if you think about it, we have margins coming from 3, 4 different angles, right? And if you business, we try to break it down, and I'm not talking just last quarter. But if you look at our business in general, there is not much change in take rates of any one business line. We have broadly 3 or 4 kinds of businesses. One is our core fresh health. Second is our core health renewals business. So kind of keep these 2 in 2 buckets or let's even call it all renewals business, right? And of course, the fresh health business comes and, we were getting sharper and sharper at defining this, comes at a negative margin. It's a negative margin of whatever 15%, 20%. And the renewals business comes at a fairly profitable clip.

On the other hand our overall -- if you think about our overall core business that operates broadly. If you leave out renewal and if you leave out fresh health, that operates broadly a 20% kind of margin, okay? So these are the 2 areas and you have a Paisabazaar, which is doing its things and the new largely at 0 to a few percentage points margin.

So a lot of things depend on how these move, now the structural shift is the renewals keep growing on a consistent basis and as they keep growing your margin somewhat keep expanding. However, the core business, the core online business, without renewals and without fresh health is not without profits. That also has a 20% margin and that also as it keeps growing, also keeps driving profits up. So if you ask me about half and half is driven by -- of the profits and the margins are driven by these 2, core online business and your -- and that includes Paisabazaar as well as your renewals growth. Now the margin depleting part is actually your fresh health. And look, we struggled to explain this in many ways. Whenever fresh health grows, that's a cause of celebration, not a cause of worry, but it will dampen your profitability.

And it will dampen it quite sharply. So a lot of the things have to do with those mixes. Now we have also -- we are at a stage where, for the last 3, 4 quarters, we have been somewhat investing with an expectation of growth on all business fronts. And today, if you think about it maybe on the savings business front, we have invested, but we haven't reaped the rewards of that in the last 1 or 2 quarters. And we're thinking hard about it.

We are not at a stage where we think we will not have growth. We're certainly not. And it is just 1 quarter, and you don't make a strategy basis 1 quarter. But we are certainly thinking about diversification of products and figuring out how we do better in an ongoing basis in that area. So I think those are the pieces that are driving it. We haven't got specific to -- yes...

[Sarbvir Singh, executive]

So I think, Sachin, apart from what Yashish explained, sequentially, I think your question perhaps was about the sequential improvement in the margin. That is because we were being investing in the call center side for -- in Q2 and Q3, especially. And that investment obviously came down in Q4 because we maintained the scale of our call center. So that is the other reason why the margin has expanded because now the growth in call center cost was lower this quarter as compared to the first 3 quarters.

And I would encourage you to look at it on a full year basis because these things move up and down depending on what one is doing in any one given quarter.

[Yashish Dahiya, executive]

The best way of our business is -- I agree a full year is a great way. But it's always a 12 months rolling is a beautiful way of looking at our business. Because that takes away any form of seasonality. And that's why we specifically give that breakup of just look at it on a 12 months rolling at every given point.

[Sachin Dixit, analyst]

Just a quick follow-up on this one, earlier you guys used to mention in your presentation that renewal is 85% contribution margin. This quarter we noticed like you've change the language to being 80% plus contribution margin. Any particular reason for that?

[Yashish Dahiya, executive]

Yes, we are also getting -- look, there is a science to it, and of course we -- there's a lot of allocation of costs, right? So I'll explain what that means. Initially what we were looking at was the cost of doing the renewal in terms of payment gateway costs, our calling costs and creating that sale because if you look at our cost base, there is marketing cost, there is sales cost, there is a call center cost, and the sales cost has got a loading of management, et cetera, right? However, there are costs beyond that also. There's customer service cost, there is claims management cost, and we've been investing in those very heavily over the last 2, 3 years.

So some of those costs, now there is no difference between the claims cost on a fresh business and renewals business. And if you actually get smart about it, actually, the renewals come more in the renewals business than in the fresh business. So -- sorry, the claims support comes a little more. So we're just getting smarter and smarter around these allocations. And I think at this point, what I would say is it's somewhere between 77% to 80%, that is where we are. Of course, some streams like life might be at 93%, but overall, it comes around at that point. So as we learn more, we communicate more. But it's just getting smarter around the allocations and a little more what you call ABC kind of allocation.

And we are doing it now, Sachin, what we are doing internally just to explain, Internally, we are moving all our businesses to a fresh and renewals P&L kind of review. Earlier, we did not do it to that extent because, of course, that has an implication because the moment you get to that, the internal people force these allocations a lot sharper, and that's what we're bringing out in the outside world as well. .

[Sachin Dixit, analyst]

Makes sense. My second question is on the OCF side. While we noted that the company turned OCF positive last year, last fiscal year, this year, we seem to have reverted back to being negative with receivables being a major factor, will be great to have some light on that as well?

[Yashish Dahiya, executive]

So receivables have got multiple things, but one of the big shift that's going to drive over the next few years, and we should all keep that in mind, is going to be the one by end, which essentially means that while the business is happening, there is a shift in how the money is being collected and that is because the one by an accounting of insurers. So this is something that will play out over a couple of years' time, especially, for the first 12 months.

[Sarbvir Singh, executive]

Yes. So this is one by end and the second thing is that in health, we are selling a lot more plans on monthly mode. Till last year, our business was largely on annual mode. Now we are selling a significant amount of our business monthly mode. And that also, obviously, as you can imagine, the collection happens over a period of time. It will take about another 2, 3 quarters for this to kind of normalize.

[Yashish Dahiya, executive]

One last thing I wanted to add, while our Q4 call center cost, we did not grow it, but also in our annual -- the way we do most of our accounting, we have some volume-based targets and some volume-based incentive targets, et cetera. We don't account for them until they are hit, And so what that implies is a lot of them get backloaded towards the Q4. So you'll see some benefit coming from that also every year and it depends. This year, to be brutally honest, we missed some of our targets in the savings thing. And actually, our revenue from savings would have been a lot higher than it was. So that's fine. You missed some, you get some. That's the way life is here. You can't predict growth too sharply.

[Rasleen Kaur, executive]

We'll take the next question from Madhukar Ladha from Nuvama.

[Madhukar Ladha, analyst]

So a couple of questions from my side. We're seeing a lot of changes in the health segment with IDI saying one by end, the whole method of reporting. And also there's a lot of pressure and talks on deferring commission payouts for long-term health. So I wanted to understand from your viewpoint. How is that played out in those negotiations with insurance companies. Second, given the pressure, I was also hearing that there is probably going to be some reduction on renewal commissions as well. .

So that's the -- some comment even on that if there are any talks going on? And if you felt anything on that side? And Lastly, just on the expense structures, if you can just spell out how the expenses have been bifurcated, the employee advertising and the other expenses between direct, indirect and existing and new initiatives for sort of our modeling purpose going forward? Yes. These would be my questions.

[Yashish Dahiya, executive]

No, thank you very much for that question. I think, first of all, we should not miss the wood for the trees, right? I think health insurance and health, it's a very simple area where the customer essentially pay a certain amount of money and he basically expects his claims to be settled.

Policybazaar is in a phenomenal position there because we have done very good disclosure assessment at the beginning, and it's always competitive, right? I'm not saying we are perfect, but we are much better than many of the channels in terms of disclosure assessment. And what that implies is our claims book is standing strong. And what that means is the insurers are not getting surprises as much as they may be getting in some other channels. And thus, we feel lesser pressure than maybe the market feels on both the claims settlement side as well as some of our payouts, et cetera, right? And I think one of the things is because over the last 3 years, we have worked so hard on ensuring customers get their claims. Some of our own renewal claims ratios will also start to move upwards, right?

Because obviously, we were not able to put as much effort in that, and we will be getting in the same range or maybe just lower, a tad lower than other channels. Because we are putting in that effort, but that is coming at a much higher claim settlement than many other areas. And that is what is, in my opinion, allowing us to attract more and more customers along with our better sales training and better advertising, et cetera. So no, we are, at this point, not seeing -- I'll kind of get not defer that to Sarbvir to get an answer on those 2, but that's how I think about it.

[Sarbvir Singh, executive]

No, I think Yashish covered most of the points. The only thing I would say which is probably not a surprise to you all is that clearly now health insurers like any other general insurers are focused on the combined operating ratio. And I think on that basis, our channel -- I mean if I were to summarize what Yashish said, our channel comes out in a fairly attractive end of the spectrum. And because of that, I think the pressure, obviously, will always be there for everyone.

But I think those pressures are much more manageable. And at least so far, we don't see a change in our economic structure. And the second thing I'll just add is that we are actively working on this subject. So it's not like we don't understand what these issues are, how to make sure that long-term renewal claim ratios are controlled, what else can we do, how do we segment the customer base better, et cetera, et cetera. So we are working with our partners on these issues. So I feel quite confident that this whole economic model will continue for us.

[Yashish Dahiya, executive]

I think the conversations have got very evolved around how do you maintain claims ratios into the future, whether that means add-on products, whether that means like a higher cross-sell, whether that means you work with different cohorts differently. And as Sarbvir said, we're taking on a lot of effort and responsibility in that area. So we are clearly maturing. We are not where we were 3 years ago in terms of our processes for both fresh and renewal. Now you asked about the different costs and the contribution margins, et cetera, see, our -- if I look at last year, our core -- this whole year, our core margin is about 43%, that is very similar for both insurance and credit. It's not very dissimilar.

And it has stayed the same for both for a very long time. Now new initiatives, of course, have a very different -- they were at -- at the beginning of the year, they were at minus 1%, and they kind of moved up a little bit last quarter, they were at 4%. But overall, they were a 2% positive. So I think that is the way it is. And if you look at the core business, the EBITDA is about 14% positive and it's a 16% positive for the year, has started at 14%, ended at 22%. But again, for the whole year, it's about 16%. And again, at the EBITDA level, if you look at new initiatives, we are at about minus 9%, started at minus 12%, ended at minus 6%, but I don't think if you should look at either minus 12% or minus 6%, you look at it always at rolling basis, right now, the 12-month rolling is minus 9%. So right now, the 12-month rolling situation is core is at 16% and new is at minus 9%. But both are inching upwards clearly, and I think that is what is important.

[Alok Bansal, executive]

Madhukar, it's Alok here. Just on your insurance company and now they look at consolidated channel. For insurance company, there are 3 basic costs at a very, very high level in health. Claims, which is roughly 70% of the cost, decision which is roughly 20% of the cost and OpEx is roughly 10% of the cost and on a blended level as an industry.

Now 20% is obviously a big part, but it has to be seen in the context of the other 80%. Then any company works with Policybazaar because of a very deep tech integration and all the OpEx requirements are very low relative to any other channel. Similarly the claims on a blended book continues to be lower because we provide a lot more new customers to them. So overall, this is the most profitable and fastest-growing channel for all of these insurance companies.

And the way our discussions happen with them in terms of new product introductions, all the innovation that we can do for the customer, the claim servicing part, everything continues to be very, very strong. So practically, short term, don't see any specific issue on these.

[Yashish Dahiya, executive]

Yes, very simple data point. There is the industry, I believe, is at 23% -- retail health industry is at 23% fresh, 77% renewals. Our fresh is still bigger than our renewals.

So I think that is a very clear indicator. And it's -- if you really look at the claims ratio of the entire industry, forget us, if you look at the claims ratio of the entire industry, the fresh claims ratios are about 1/3 to 1/4 of where the future years lie. So we are obviously important in the profitability of the industry and driving new volume to the insurers, which is what the game is, I guess.

[Madhukar Ladha, analyst]

Understood. No, this is helpful. Just a follow-up. Now given that our base has increased significantly and our market share also in this health fresh premium is pretty high now. I know there's no sort of -- it's a difficult question to answer. But if you were to talk about sort of growth going into FY '26 and '27 maybe in the near term, then how should we sort of think about that? Any changes over there?

[Yashish Dahiya, executive]

See, if I look at our last 5 years now, our -- as I said, our core business has been growing at a CAGR of 43%, which is ahead of my expectations, honestly. I thought we would be here from a revenue perspective. If you asked me in '21. I thought we would be here maybe 6 months to 12 months later because I always think the revenue CAGR should be about 30% or so.

And that's what we've always thought. From a long-term perspective, we believe 30% is the right CAGR for us to sort of plan for. However, we are -- like I'm honestly being surprised by health. But at the same time, let me kind of put it to you another way. We have a term business, we have a health business. And I think term as an industry is between -- it's about 1/3 of health. And for us, our fresh businesses in term and health are very comparable still. Of course, health is bigger but they're still comparable. So I think within our own setup, health has at least a doubling to go to catch up with term.

And if you -- I shouldn't say this, but if you brutally ask me that, look, which of your teams do you think is actually sharper between term and health. I actually feel looking at the last 3 to 4 years, our term team was actually sharper. And that's a very -- by the way, our health team is catching up very, very quickly and is becoming better and better, but we have a way to go.

And I think in health, we have a natural right to win, which actually in term is far harder because in term, can't differentiate a huge amount in terms of claims settlement, but in health, you can and we are doing that. So I think in health our right to win from a distribution standpoint is pretty, pretty clear. Actually, I shouldn't say that. I almost asked my team, why are there other channels?

[Alok Bansal, executive]

So see, one more thing here. We have always maintained that our growth rates will usually be about 2 to 3x of the industry growth rate, generally. That's what we maintain. But in health, we seem to be growing at roughly 4 to 5x of the industry growth rate on an overall basis for new business acquisition.

Now see, the real win for perfect helping that the customers come to us. Now customers come to us when they see any incidents happening in their circle, whether it's friends, colleague, family, and the reality for a lot of young people, the incidence of hospitalization is much, much higher, and a lot of people are coming to ask for these products now. And we actually feel that this actually serves a very big need at that stage of their life when they're 30, 35, 40, sort of age group. So yes, health has done much, much, much better compared to other channels. And our growth rate, as we said -- I mean, we always expect it 2 to 3x, but this is short of going 4 to 5x.

[Yashish Dahiya, executive]

Yes, if you were just looking for some kind of broad direction on various things. See, our health continues to do well, and we're feeling confident. In fact, I feel confident this will be so for the year or for a large part of the year at least. I think our savings business at this point is very challenged. We are struggling to grow, and we're thinking very hard on that, how do we grow. Of course, there's a pensions area, there is a child insurance area.

We are working hard at it. I think the good news is a lot of our -- if you look at the last 5 years, our motor, 2-wheeler growth was a bit subdued, various reasons, that is solidly back. So we are feeling confident. And if you really look at Policybazaar over the last, I would say, even 10 years, it's always, 3, 4 of our businesses are firing, 1 or 2 are always struggling, that is the way life has been here, but those 3, 4 do enough to kind of keep us above the 30% on a regular basis.

And I think that's what you should think about when you kind of look at it on a -- and then the good news is now we are also confident that the credit side is going to grow. We're seeing good month-on-month growth. So we feel very confident that we should have a good future in the credit side.

[Rasleen Kaur, executive]

We will take the next question from Dipanjan Ghosh from Citi.

[Dipanjan Ghosh, analyst]

Just 2 small questions from my side. One, obviously, in the answer to your previous participant's question, you mentioned that savings is challenged. But if you can give us some color on the savings contribution either to premium or top line? Or how should one think of it for FY '25 or fourth quarter? That would give us some color on the trajectory that we should kind of forecast or think of going into the next year.

Second, you have kind of given some slides on PBMoney, and it looks quite encouraging. So I just wanted to understand your overall strategy from the next 3 to 4-year perspective on the PBMoney side and how you can leverage that to maybe further build the customer or achieve a better cross-sell sort of ratio out there?

[Yashish Dahiya, executive]

Sorry, Sarbvir will answer the savings question and then we'll move over to Santosh for the PBMoney question.

[Sarbvir Singh, executive]

So I think on the savings side, if you see the industry also, there was a sharp slowdown in the industry, especially in February and March with negative growth on the retail side. Our business, to some extent, reflects that in Q4. And we think that based on what we can see that it will take a few quarters for this to move up or move away from where we are. So we are planning that probably the first 2 quarters of the new financial year will also be quite slow on savings. .

As Yashish mentioned, we are focused on building new segments like pension, we are focused on bringing back products that have done well for us in these kind of market conditions like our capital guaranteed solution, et cetera. But I think it will take some time. But x of savings, as we've showed you, we stay in that 35% to 40% kind of corridor. And I think that should continue for this -- for the rest of -- or for the new financial year as well.

[Yashish Dahiya, executive]

Santosh?

[Santosh Agarwal, executive]

On the PBMoney side, see there are 2 reasons for why PBMoney is, I think, critical from business like credit. One, it allows deeper understanding of our customers' risk because of course, over and above Bureau, you start getting data about the income of the customer and you can do sharper underwriting. And we rapidly acquired customers on the PBMoney side. That allows, of course, for more curated products and better risk. The other bit to this is that I think savings is a large area. We do a lot of savings through insurance on the policy side. There is an opportunity to do savings on the Paisabazaar side through bonds, fixed deposits, mutual funds. So that opportunity exists. I think PBMoney will be the backbone to use the data to advise customers on how to manage money better, and that should be a rapid area of growth for us this year.

[Dipanjan Ghosh, analyst]

Got it, just one small follow-up. I mean, what would be the monetization strategy? I mean it will be more product cross-sell or driving higher engagement and then trying to sell your existing product book, I mean, what would be the monetization strategy?

[Santosh Agarwal, executive]

So monetization largely will come from selling, this year, largely bonds and fixed deposits. And of course, it also helps indirectly in monetization because we have a better understanding of customers' credit. And hence, it will lead to growth in some of our unsecured areas, lending areas. So that is, I would say, a shadow way of monetization. But of course, direct monetization on bonds and deposits will exist.

[Dipanjan Ghosh, analyst]

Just one final question before I kind of drop the mic. Any plans to go into broking or sort of entities?

[Yashish Dahiya, executive]

We are -- okay, so not in the way you are thinking about it. But what we just said, bonds, fixed deposits, these kind of things, pension products, NPS, not in the traditional trading sense, that is not how we are thinking about it. But yes, from a licensing perspective, there may be some context to that. There's no decision there. But yes, there are conversations internally. So just in fair transparency, yes, there are conversations. But again, not from a trading perspective, it is much more from a long-term investment, long-term savings perspective.

[Rasleen Kaur, executive]

I will take the next question from Shreya Shivani, CLSA.

[Shreya Shivani, analyst]

Congratulations on a good set of numbers. Thank you for sharing your views on what's happening in the Savings segment and health insurance segment. I wanted to get back to the protection segment. So the industry, as such, has been seeing very strong growth for the past 2 years straight. Now we -- the monthly data, the monthly sum assured data indicates there was some moderation, not slow down, but after 2 very strong years, there was some moderation in growth in March on the protection sum assured front.

So how -- what is our understanding of how things are moving? Is the -- I'm not talking about you being slower, but is the industry sort of moderating after 2 very strong years. That's my first question.

Second, on your health care business, if you can give us what has been the update. We've seen the disclosures on the exchanges. How has our thought process evolved? And third, I'm not sure if you've given your breakup of premium across -- okay, you've given those numbers. But if you've given it across PoSP and corporate, I know Dubai is 76% growth. But yes, that will be my last question.

[Yashish Dahiya, executive]

Sarbvir, why don't you answer that?

[Sarbvir Singh, executive]

So I think Shreya, the sum assured that you are reading in the industry data is actually not directly reflective of term insurance, in the sense that a lot of the sum assured growth for the industry has come from attaching riders on ULIPs to make ULIPs more attractive as the last couple of years have been about that.

So actually, what you are seeing the reduction in sum assured growth that you're seeing in Q4 is actually a reduction in the growth of ULIP rather than the growth of term. Term has largely both last 2 years in our opinion, has been growing or -- not opinion based on the numbers that we know, has been growing in a very similar-ish, I would say, 12% to 15% kind of range only. So from a protection perspective, we are obviously growing multiples of that growth rate. But we do and we are through this, I'm appealing to the industry also that all of us need to focus on driving demand for protection and growing the term market.

[Yashish Dahiya, executive]

On the breakup you had asked for it, you can make a note. So our core business is INR 16,144 crores for the year. PoSP is about INR 5,000 crores, corporate is INR 1,000 crores, Dubai is a little more than INR 1,100 crores. And also, I'm sure this question will come. Next, on the core new is -- new and our renewal continue to get about 50-50. They are about half and half.

[Shreya Shivani, analyst]

Yes. And the health care, your thought process now, et cetera?

[Yashish Dahiya, executive]

What I would request on health care, it is a very long drawn project. It will take a long time. And I would give it enough space. The strategy will not change on a daily basis. The strategy is very, very clear. As I said, I think these are just nomenclatures who's an insurance company, who's a broker, who's hospital.

Eventually, if we think from a consumer's perspective, he's saying a very simple thing. Give me INR 10,000 -- I'm giving you INR 10,000, whatever happens to me take care of it. That's what the customer is saying. The customer has a lot of pain in that process, right? So I always say when you think long term, things simple. And the customer has a lot of pain in that whole sequence and we try to solve that sequence with all our efforts.

So Policybazaar is doing some work at the disclosure front, and the hospitals will do some good work at aligning with the consumer outcomes. And in terms of -- yes, we've had the round, we've had the money come in. We've acquired 1 asset. We are looking at -- a quarter in a sense, we paid for it, we've taken it over. And we are looking to do the same with maybe 3, 4 other assets. And I think what you should see is we'll probably buy -- if you look at the 5 hospitals that we are looking at in NCR, we'll probably buy 2 or 3 operating ones and 2 or 3 more like shells, which we are going to convert rapidly into operating hospitals, it will be a combination of existing revenue and profits and new from scratch builds. We've started bringing on doctors, we started bringing on people who know how to build hospitals.

There's -- but even today in our team, there is more tech people and product people than health care people, and that is also a reflection of some of the things we're going to do in terms of wellness, in terms of -- basically what all -- you think of yourself as a customer. You've paid INR 10,000. Now you also said I'll pay INR 20,000, take care of everything, take care of OPD, take care of every damn thing, don't ask me for a bill, don't ask me for a claim. Just -- if something goes wrong, just take care of it, and I shall have no pain whatsoever in this process, right?

Of course, the physical pain will be there, but shouldn't have financial pain in this process. That's what we're trying to solve at a fundamental. This is a big project. And that's why I said don't expect sort of any rapid changes. Of course, we are reviewing everything on a weekly basis, but don't expect any material changes in a very rapid manner.

[Rasleen Kaur, executive]

We'll take the next question from Manas Agarwal, Bernstein.

[Manas Agrawal, analyst]

I actually wanted to ask 2 things on a medium-term/long-term strategy perspective. One is you're talking about propping up savings in various ways. One clear way to do it is power and nonpower where you don't operate in a large market in terms of TAM. So one is thoughts on that. The second is slightly more philosophical on AI.

It can affect both customer servicing and customer acquisition. Acquisition side, we've seen Google say search is changing,SEO will change as a function of that, how you guys are thinking about it? And on the servicing side, we've started seeing some start-ups operate collections for banks using voice bots, replacing call center operations. So is that a threat? Is that an opportunity? I wanted thoughts on that.

[Yashish Dahiya, executive]

Sure. So I will request Sarbvir to answer on the savings aspect. And of course, we have a view on this. And I think our view -- I'm quoting somebody else. I think our view is very aligned to Mr. Sandeep Bakhshi's view, sell good products, and we have a view on that, and I have a huge amount of respect for the men. And sorry for bringing his name into it. But I think when he changes his views, we'll also probably change our view. But I would say -- Sarbvir, do you want to answer that more specifically. And also the AI question because I know we've been having this debate, so we're on the same page on this.

[Sarbvir Singh, executive]

Yes. So I think the best way to think of it is that every channel and every distribution platform has its own set of, I would say, characteristics. Our characteristic is that we get customers who come, these are informed customers in general, and they are looking, they understand the difference between products and they're looking for transparent comparison. .

So actually, if you will see Slide 41 in our deck, we've actually shown that the ULIPs that we are selling today are better than most mutual funds that are sold in the market. If you are willing to stay for the 10 years or the 20 years that the ULIP is meant to be. So what the products that we are selling today actually are extremely good products from a long-term saving perspective, which is the role, I think, of these products.

And we believe that as the middle class grows, consumers will need to save for their goals, right? The goals would be children's education, general retirement, their own personal sort of leisure that they want to save for. And of course, finally, there's a whole pension area where after you stop earnings, you need to have enough money to live. So I think if you think about it, we are more focused on the goals rather than just the products.

And we believe that we have to sell efficient products because if we don't sell efficient products, then the customer who comes to us will be -- will see through the issue and will be disappointed and will not buy more products from us. So at this point, we are very clear. I don't want to go into par, nonpar, et cetera. I think the main issue is products that make sense. And as long as the product makes sense, we continue to offer them. Right now, obviously, we are largely a ULIP platform. We do sell non-par because in our capital guarantee solution, one part is the non-par and the other part is a ULIP.

So I think that's how that will continue. And we feel quite confident. See couple of months here and there. I mean, in the first half of last year, we grew at over 100% in savings. So I think we should not forget. I mean, a few months here and there is par for the cause and will -- our team is creative enough and we will figure it out again.

As far as AI is concerned, I think we are right at the forefront of all these use cases that you spoke about. We do a lot of our collections through AI bots, agents, et cetera. And we continue to, I would say, sort of stretch the boundary on this. We still believe that for sales, it is especially in life and in health insurance. It is important to have a person explain the whole product in a very systematic and logical manner because you also want to elicit disclosure because if you don't elicit disclosure, I think you will go down the wrong path. And I think that's what we continue.

But I can assure you that we have enough experiments going on in every area to look at what is the cutting edge, what are people doing and how can we leverage that. And we firmly believe that in AI, what we call man in the middle is the right format where AI helps to improve the productivity and effectiveness of the person. And that's what we've done on the risk side. I mean I won't go into all of that. But if you see our last couple of years, I think a lot of work has been done, which is leveraging the latest AI technology.

[Yashish Dahiya, executive]

And just to kind of add to what Sarbvir said, already, we are -- we have got what you call AI agents, if you would, who are doing initial warm up, initial calling kind of across the group that's starting to happen. And when you think about AI, you want to think of it from what are we doing to protect the supplier? What are we doing for ourselves? What are we doing for the consumer? If you look at these 3 kind of buckets in a triangle, at least from a supplier's perspective, risk is a very big area that we are working on. We are trying to understand risk and we are also -- when you talk about ourselves, a big amount of the effort is both in terms of sales efficiency, reducing the non-top time because there's a huge amount of time that -- and at the same time, empowering the agent with a lot of information, which is coming in terms of prompts or supports. That is what largely is being worked upon. .

[Santosh Agarwal, executive]

And just to add, our technology teams are now using a lot of AI to do their jobs. A lot of, I think, technology costs can be saved in the future.

[Rasleen Kaur, executive]

We'll take the next question from Srinath, Bellwether Capital. The next question from Rahul Jain, Dolat Capital.

[Rahul Jain, analyst]

Yes, most of my question has been answered. Just 2 questions. Firstly, if you could share your thoughts on the increased receivable for this year. So any color on that and going forward basis, what is the sustainable level of investment that can go in the business?

Secondly, which is just an extension of the previous question around AI. So what kind of headcount optimization purely from a call center perspective, one should see is it safer to assume that irrespective of the scale of the business, the headcount growth would be much at a lesser clip than what has been the last few years growth on that part? Those are my 2 questions.

[Yashish Dahiya, executive]

I think it will take -- I'll just answer your last question. I think things will happen. It will take time, which quarter nobody can say. But if you look at it on a year-on-year basis, if I look 3 years out, a lot of things would have happened, and I see no reason why that wouldn't happen. The receivables is largely one by end thing, which we explained will have some impact for the next -- it's already started having some impact.

And now it will have some impact for maybe a few more quarters and then some limited impact, which will be limited to the multiyear policies and all that stuff. So this is a cycle that will play out. We're not too fast about it. In a sense, of course, we would wish it wasn't the case, but it is the case, and we have to kind of live with that.

[Alok Bansal, executive]

Also, Rahul, when it comes to the deep tech, as we mentioned, there's a efficiency part and there is a risk part. But within the efficiency, see, as a company, anything that we do can have 3 type of impacts, right? Either we can work on improving the revenue or becoming efficient on the cost or better customer service. The biggest impact of deep tech for everyone, including us is on customer service because that can be automated to a large extent as we look for next 1 to 3 years.

This includes renewals, claim support, all sort of endorsement, all sort of service elements. Sales, specifically in insurance, is a very involved process. There are some parts of it, which can be automated over time. But broadly, that will remain very, very close physical contact with the customer all the time. If you look at the cost of sales operations as a total NPV revenue for us, it is roughly somewhere around 20%, 25%. It's not a very big bother.

Yes, we do whatever it takes in terms of becoming more efficient. But I think the bigger impact will come on the service side before it comes on the sales side.

[Yashish Dahiya, executive]

So we all have our own opinions and like my opinion is over a 3-year period, you will see a lot of impact in sales as well. But my other opinion is I think consumer brands are very important in this. And so AI -- okay, so my view is AI is commodity and basically consumer brands are going to be the differentiator because the human mind is still limited. And of course, we'll have some impact stemming on this. But as you hear, all of us have somewhat different views, and that's the way to carry on that.

[Rasleen Kaur, executive]

We'll take the next question from Nidhesh Jain, Investec.

[Nidhesh Jain, analyst]

My question is on credit business. We have been extremely well on the insurance side. On the credit business with the change in management team, how are we thinking on this business from a longer-term perspective? And how are we trying to build a right to win in this business over the medium to long term?

[Yashish Dahiya, executive]

Santosh, please.

[Santosh Agarwal, executive]

See, on the credit side, I think last year was a year of, I would say, moderation based on what happened in the industry. See, as we now scale back up, there are 3 aspects around this. One that we will go deeper in the secured area. Secured, we started in the last 5 months, and it was -- it built up very rapidly. This year, we will expand the secured area, and we will do home loans, loan against property, loan against cars. So these are the areas we will expand in. We will also start savings area to deepen our understanding about the consumer.

And that also allows a better understanding of our customers' risk and means sharper underwriting, which would be able -- which will then help in scaling our unsecured lending. And the third area is collections. Collections is something that we will focus on and collections, deep collection, capability, especially tech lead, will help us in, again, scale our unsecured side because that is -- as in we work with a lot of new NBFCs and fintechs. That capability is required. So that should also help us expand our supply side on the unsecured lending.

[Nidhesh Jain, analyst]

Sure, on collections, will we be investing in physical collections also or?

[Santosh Agarwal, executive]

Largely, right now, tech-led and tele-based collections, a lot of AI is going to get used in that area. We are not thinking of field on -- feet on street at the moment. But again, as we get deeper into it, that may change. .

[Yashish Dahiya, executive]

If you kind of think about, Santosh from the last 10 years perspective, one of the things we've done is built a huge amount of risk capability in the Policybazaar because our franchise, specifically on the life insurance side. And outside in it may or may not be visible, but within the industry, it's quite respected.

And I think that allows our partners and our channel to be a little more profitable and a little more long lasting than many others. I think -- I believe that's one of the things that Santosh also brings to this area. And so she is quite serious about thinking around risk and making sure that the right risk is picked up by the right organizations that they have decided to do.

And one of the things in that is you understand risk better than you are yourself collecting as well. So that's one of the reasons we want to move into that area. And especially some of the early fintechs may not have a lot of collection capability. And eventually, in this business, if your money is not being collected, then there is an issue.

[Nidhesh Jain, analyst]

And we have also been experimenting with FLDG in the past, in the last few quarters. Is there any thought process on that?

[Yashish Dahiya, executive]

See, when we started FLDG. We started from giving some kind of guarantee, but we did not really get into how we are differentiating on risk, I think that is what we are starting to do now. I don't know if Santosh, if you want to answer specific.

[Santosh Agarwal, executive]

Yes, absolutely. I think FLDG, I think our confidence on doing some of these FLDG partnerships will go up because we are starting will -- I think we are starting to understand risk better, and that means responsible lending. And wherever we need to have skin in the game to really go deep in this area. So there, we are comfortable in doing these arrangements. And I think that should be the right way of scaling our unsecured business.

[Yashish Dahiya, executive]

And just to kind of explain our accounting policy on that because that can be a cause of worry. Our accounting policy is very clear. Whatever FLDG we take on, we write it off on day 1 itself. And we provide for it -- sorry, not write-off, it's called provide. So we provide for it on day 1 itself. And then as and when we eventually come out of the woods, we kind of start considering it. But we start with a zero base.

[Rasleen Kaur, executive]

We'll take the next question from Neeraj Toshniwal, UBS.

[Neeraj Toshniwal, analyst]

So my question is on the contribution margin. The expansion contribution margin is quite decent. So I wanted to understand, has there been any reduction in incentive pay for the PoSP agents in this quarter and which is the health increase in contribution margin. That is first question.

Second question is on the cost. Employee cost has gone down. So is advertisement while other expenses have increased significantly. If you can throw some light over there, that will be helpful.

[Yashish Dahiya, executive]

See. Sarbvir can answer more specifically. I would just say, please don't look at anything quarter-on-quarter because we just look at it on a 12-month rolling basis, that will give you a much better picture. Otherwise, sometimes you will see the impact of incentives from other places, et cetera, playing up. And that's what I've always said, but Sarbvir, you want to specially answer that.

[Sarbvir Singh, executive]

Yes. I think Neeraj, explained in the beginning of the call that we have been growing our call center capacity or our sales capacity over the year. And in Q4, obviously, we kept that flat. So that is one of the reasons why our contribution margin, apart from some extra money, et cetera, that you may get at the end of the year. So I think that is the main reason. I would again encourage you to look at it on a rolling basis, as Yashish explained.

As far as the PoSP part is concerned, I understand there was some media article on the issue that you were referring to. But the facts of the matter are at, we have always been very consistent in offering a very attractive opportunity to PoSP agents. But the real trick is not in terms of trying to reduce the margin. The real thing is to work with smaller agents whose incomes are getting enhanced by working with PB partners. And I think that is the journey that we are on and that journey is getting better and better. And because of which the overall mix will also improve and our contribution will improve. So it's not really about reducing payouts. It's about optimizing payouts and the right set of agents to work with. And I think that's really where this whole thing has come from.

[Neeraj Toshniwal, analyst]

Sure. So this is structured. This will continue in the coming quarters as well.

[Yashish Dahiya, executive]

I'll explain Neeraj. There is some structural aspect to it. There is some quarter aspect to it. But when I -- when we speak about the PoSP business per se, there is an easy way of doing PoSP. There is a hard way of doing PoSP. The easy way of doing PoSP is you work with large PoSP people who are themselves in a way, PoSPs and you get bulk volumes right? And that's why if you notice that, the one way to check for it is how many employees do you have for every business done. And you do require people to manage agents also, however, tech-driven you maybe, et cetera, you do require people to recruit agents, manage them, et cetera, right? And that ratio is quite telling.

The second way is to actually get small, small, small agents and get them to do more business for you and more types of business for you, and that is hard. It actually is not something you can do just through remote control. You do need to -- you can only manage -- a person can only manage a certain number of agents, and those people also need to be trained hard and trained well to do it.

And we are very clear, we are down that part. So we can't answer for the whole industry. But for us, we are -- we only value that part, that's the only thing we kind of look at. Now on the various things, just look at 12-month rolling and you should be fine. I don't think you should see any material change from a 12-month rolling perspective. Like whole structural changes are there. As I said, renewals growing. See, our health fresh if I take a 5-year view, cannot keep growing at this rate, but our renewals can. And so obviously, the margin will come at some point. I'm saying 5 years.

[Rasleen Kaur, executive]

We'll take the next question from Sanketh Godha, Avendus Spark.

[Sanketh Godha, analyst]

Just the way I understood it, just a clarification. If you have sold a 3-year long-term plan on health, though the insurer is paying commission spreading over 3 years, you are recognizing 3-year commission upfront, and that's the reason why the receivable number has gone up. That's the understanding, right?

[Sarbvir Singh, executive]

Is that -- that's the understanding?

[Yashish Dahiya, executive]

Yes. You're right.

[Sanketh Godha, analyst]

Yes. And just to follow up on that point. Out of the total health, whatever we do, how much portion would be contributed by long term?

[Sarbvir Singh, executive]

I think we would not like to disclose that publicly.

[Yashish Dahiya, executive]

But it's a pretty steady number. So all I wanted to say was, it was similar last year and with a little higher than that -- the multiyear plans was a little higher than that 2 years ago. So it's not -- our growth is not explained by that. That's what I'm trying to explain. So don't get the wrong impression. But yes, we don't want to disclose that number.

[Sanketh Godha, analyst]

And the second question was the contribution margin of the new initiatives, which improved, is it fair to say that as you highlighted in the initial comment that UAE turned profitable. And that contributed to the margins to improve or -- means biggest delta came from there or the PoSPs and the corporate segment also did relatively well?

[Yashish Dahiya, executive]

See, from profit perspective, at this stage, I just want to be very specific at this stage. UAE is quite not that material in the whole scheme of things, right? UAE from a loss or profit perspective would probably explain 10% of the entire or maybe 20% at best of the entire piece. So I wouldn't go there. Now it has the potential of. I would say if you take a 3-, 4-year view, then it does have the potential of being a big determinant of profitability because that is actually like a core business. There's nothing noncore about the UAE business. It is exactly what we do in Policybazaar.

Our corporate business and our PoSP business, on the other hand, are somewhat different. And what we're hoping is in the next 2 years, they get -- again, we don't plan for these things. But we believe they should come to somewhere around 0 in the next 2 years, like from a breakeven perspective. And that's a journey. And it may happen 1 quarter later. But yes, we are constantly on that journey slowly. So -- and I don't think there's any very quick aberration in that. Yes, UAE has surprised positively with the profitability, but it's not having a material impact on the overall piece yet.

[Sanketh Godha, analyst]

And one data keeping question. On the credit side, the if you can break up that INR 7,652 crores and INR 20,460-odd crores into new initiative disbursements and the core, that would be useful. And lastly, if you can spell out the adjusted EBITDA margin for the credit business in the quarter. .

[Santosh Agarwal, executive]

See, on the new initiatives, I think this is a scale up of the last 5 months for the year, roughly, new initiatives contributed to 40% and core is 60%. That is for the year. For the quarter, [indiscernible]. And see, I think new initiatives is largely pass-through kind of business from a revenue perspective. So that is why you would see that though year-on-year, the disbursals went up by about 38% the revenue shrunk by about 14%, and that's what it is.

[Yashish Dahiya, executive]

Just to be clear, our new initiatives in Paisabazaar is at a very, very early stage right now. And it is largely lumpy, in a sense, what I said right now, right, easy PoSP, hard PoSP. Right now, it is the easy PoSP, right? We want to be clear about it. So don't assume we've got a hard PoSP done in Paisabazaar yet. We're starting that journey now.

The journey we started in Policybazaar maybe 2 years ago. Initially, in the first year, we also has easy PoSP there. But after the journey took on 2 years ago and there's been constant shift towards more and more granular agents. That is a journey we just starting out right now. Right now, it is almost zilch on that front.

[Sanketh Godha, analyst]

Understood. And lastly, if you can spell out the adjusted EBITDA margin of the credit business?

[Sarbvir Singh, executive]

What is the adjusted EBITDA margin of the business?

[Yashish Dahiya, executive]

It's 7% for the year.

[Rasleen Kaur, executive]

We'll take the last question from Srinath from Bellwether Capital.

[Srinath V., analyst]

Just wanted some qualitative feedback on persistency of the health renewal books. If you can give some qualitative understanding as to how the older cohorts are doing and the newer cohorts are doing over a year-on-year basis or 6-month basis. Any qualitative feedback you can give on persistency of renewals, that will be great.

[Yashish Dahiya, executive]

So the qualitative answer is always well, but Sarbvir will answer in a more specific manner.

[Sarbvir Singh, executive]

Yes, I think we are really proud that we are at all-time highs. And we look at persistency in 2 ways. One is -- I mean, I think we look at it always on an NOP base because that is the most important thing, the number of people who stay with us. The first year renewals we call R1, our R1 persistency is at all-time highs. We have never been at these levels. And it's largely structural because it's driven by the nature of the products that we have been introducing.

So over the last 2 years with our insurance partners, we've introduced products that have very high no claim bonus. So every year, we have claim bonus increases dramatically. So when you come for renewal, your comparison with the outside market becomes very different. Your current product looks very superior compared to anybody else because of the sum insured that you have.

So our first year persistency has increased a lot, and we are at all-time highs. R2+, which is second year and beyond is very consistent. It has largely been very steady over the last few years. So overall, if you see our persistency is at all-time highs, both in terms of number of policies and even in terms of premium. But I think the most important thing is the number of people who stay with us.

[Srinath V., analyst]

Congratulations again, guys. Great set of numbers.

[Yashish Dahiya, executive]

Thank you very much. With that, we will close today's session. And thank you very much for attending and look forward to interacting with some of you over the next few weeks. Thank you. Bye now.