Bajaj Finserv Ltd. (BAJAJFINSV) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Bajaj Finserv Limited Q4 FY '25 Earnings Conference Call hosted by JM Financial Institutional Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ajit Kumar from JM Financial. Thank you, and over to you.

Thank you, Yashasvi. Good afternoon, everyone, and welcome to the conference call of Bajaj Finserv Limited to discuss 4Q FY '25 results. First, I would like to thank the management of Bajaj Finserv Limited for giving us the opportunity to host the call. As always, we will have the opening comments from the management team, post which we will open the floor for Q&A. From the management side today, we have Mr. S. Sreenivasan, President, Insurance and Special Projects Bajaj Finserv Limited; Mr. Ramandeep Singh Sahni, CFO, Bajaj Finserv Limited; Mr. Tapan Singhel, MD and CEO, Bajaj Allianz General Insurance Company Limited; Mr. Tarun Chugh, MD and CEO, Bajaj Allianz Life Insurance Company Limited; Mr. Anckur Anil Kanwar, CFO, Bajaj Allianz General Insurance Company Limited; Mr. Vipin Bansal, CFO, Bajaj Allianz Life Insurance Company Limited; Mr. Ashish Panchal, Whole-Time Director and CEO, Bajaj Finserv Direct Limited; and Mr. Devang Mody, MD and CEO of Bajaj Finserv Health Limited. With that, I would like to hand over the floor to Mr. S. Sreenivasan for his opening comments. Thank you, and over to you, sir.

Good morning, everyone. Thank you, and this is the conference call to discuss the results of Bajaj Finserv Limited for Q4 FY '25 and the year ended FY '25. I will now hand over to the Group CFO, Ramandeep, who will take you through the highlights of the performance.

Thank you, Sreeni. So good afternoon, everybody. We welcome everyone to the conference call to discuss the results of Bajaj Finserv Limited, BFS for quarter 4 FY '25. As before, in this call, we will largely be concentrating on the consolidated results as well as the results of our insurance operations through Bajaj Allianz General Insurance, BAGIC and Bajaj Allianz Life Insurance, BALIC and where material, the stand-alone results of Bajaj Finserv. Bajaj Finance, BFL and Bajaj Housing Finance, our other material subsidiaries have already had their conference calls, and hence, we would pursue only high-level questions on BFL and BHFL. To start with some of the hygiene points, as a word of caution, we affirm that the statements that may look forward-looking statements are just estimates and do not constitute any assurance or indication on any future performance results. Let me just start by giving an update on the basis of accounting first. As required by the regulations, Bajaj Finserv prepares its financials on Ind AS basis. However, the insurance companies are currently not covered under Ind AS. So they prepare Ind AS financials only for the purpose of consolidation. Accordingly, the BAGIC and BALIC stand-alone numbers reported are basis non-Ind AS accounting standards referred as Indian GAAP as applicable to insurance companies. I also confirm that our results, press release accompanying the results and our investor deck have been uploaded on our website last night. Now let me start by giving a brief update on the status of the Allianz's exit from the joint venture agreement. BFS and the insurance companies are currently in the process of getting regulatory approvals from both CCI and IRDAI, and there is no further update on the matter as we stand today. Let me now give a high-level update on the consolidated financial results for quarter 4, which we have also put in a press release issued yesterday. To start with, the consolidated total income for BFS grew at 14% to INR 36,596 crores, up from INR 32,042 crores for the same period last year. Similarly, the consolidated PAT has also grown by 14% to INR 2,417 crores, up from INR 2,119 crores for the same period last year. In terms of BAGIC, the gross written premium degrew by 13% to INR 4,326 crores versus INR 4,962 crores for the same period last year. Excluding the bulky crop and government health businesses, the GWP for BAGIC for the quarter was flat at close to INR 3,800 crores. The profit after tax degrew by 4% to INR 363 crores versus INR 380 crores for the same period last year. The ROE is at about 12.5% versus 14.5% for the same period last year. Combined ratio at about 104.8% versus 101.6% for the same period last year. Moving to BALIC. The gross written premium grew 13% to INR 9,237 crores up from INR 8,184 crores for the same period last year. For BALIC, the profit after tax degrew by 61% to INR 41 crores, down from INR 106 crores last year. The value of new business registered, however, has grown 14% to INR 549 crores, up from INR 480 crores for the same period last year. And finally, on BFL, the consolidated total income grew 23% to INR 11,917 crores, up from INR 9,714 crores for the same period last year. The consolidated PAT grew 17% to INR 4,480 crores from INR 3,825 crores for the same period last year, and ROE is stable at close to 19%. So this was just a summary of the results, which were published in the press yesterday. Now I'll deep dive into each of the companies to give you further texture on the performance of each of the companies. To start with on BAGIC. Effective 1st of October '24, as was mandated by IRDAI, the premium on long-term products was to be accounted on 1/N basis, where N is considered to be the contract duration. So as compared to the earlier philosophy of recognizing premium upfront, from long-term contracts perspective, the law required us to amortize the premium over the contract duration. And hence, quarter 4 and FY '25 numbers are not comparable with prior years. The change in the accounting, however, has no bearing on the underwriting profits and PAT for the year, but it impacts the gross written premium and combined ratio for the period. As highlighted earlier, the GWP for BAGIC decreased by 13% during the quarter to INR 4,326 crores, down from INR 4,962 crores for the same period last year. The degrowth is largely impacted by two elements, one being the timing variance on the booking of the bulky crop and government health business. And the second one is what I referred earlier, the change in the accounting on long-term products. If we exclude the impact of volatility in the tender-driven crop and government health business and the impact of 1/N regulations, the growth, in fact, for BAGIC is about 8% for the quarter as compared to the reported degrowth of 13%. Similarly, on a full year basis, the growth excluding crop and government health and the impact of 1/N regulation for BAGIC is 12%, which is about 3% higher than the industry growth of 9%, again, industry compared both on ex crop, ex government and 1/N basis. Further, it is heartening to see that the growth on core business lines of BAGIC such as commercial lines, including fire, marine, engineering and liability and on motor and retail health, the growth for BAGIC has been far better than the industry for both the quarter and the full year. Group health, however, continues to be a tactical play with pricing continuously under pressure. The underwriting loss for BAGIC for the quarter stood at a nominal INR 3 crores as against a loss of INR 76 crores for the same period last year. This underwriting result, we believe, will be by far the best in the industry. The combined ratio, however, stood elevated due to the accounting anomalies, which I explained a little while earlier at about 104.8% in quarter 4 versus 101.6% for the same period last year. However, if we exclude the impact of 1/N regulation, the combined ratio stood at 103.1%. The elevated combined ratio is attributable to the degrowth in GWP, which we discussed earlier, and uptick in motor business during the quarter. While elevated, we believe that the combined ratio reported by BAGIC will still be amongst the lowest in the multiline market. The profit after tax for the quarter stood at INR 363 crores, down from INR 380 crores last year, a decline of 4%, but this was primarily attributable to realized gain on investments, which was lower in this quarter because of market conditions compared to the same period last year. However, if we eliminate the impact of the mark-to-market changes on investments, the PAT has actually grown at a healthy 21%. The AUM for BAGIC, which represents cash and investments as of 31st March '25 stood at INR 33,115 crores as against INR 31,196 crores for the same period last year, an increase of 6% in spite of paying a very healthy dividend in FY '24 and on account of market volatility. BAGIC continues to deliver superior ROE on an annualized basis at about 16% versus 15.2% last year. And if we exclude the impact of surplus capital, which is taking solvency at 200%, the ROE is supposed to be even healthier at upwards of 22% for BAGIC. On the customer front, BAGIC relentlessly drives the theme of "caringly yours" on the foundation of customer obsession through innovations in customer experience. And accordingly, BAGIC continues to have the lowest grievance ratio in the industry and the highest NPS consistently year-on-year. In a market which is intensely price competitive, this operating result, we believe, displays BAGIC's commitment to a balanced and profitable growth on back of deep and broad distribution and prudent underwriting while focusing on best-in-class customer service. In summary, despite market constraints, a decent result from BAGIC in terms of growing higher than industry on core retail business lines and commercial lines and maintaining strong profitability metrics. I will now move to BALIC. During the quarter, BALIC's new business growth was muted, which is in line with the industry, largely impacted by the new surrender regulations and the stock market volatility. During the second half of the year, BALIC launched BALIC 2.0 with focus on sustainable and profitable growth, while restructuring products to comply with revised product regulations. Simultaneously, it restructured most of the other products as well, focused on balanced product mix and focus on cost for operating leverage. The early results from BALIC 2.0 are visible through three outcomes for the quarter. The VNB growth -- the first one being the VNB growth of 14% from INR 480 crores to INR 549 crores despite the individual rated premium being flat and despite group protection degrowing by 4% during the quarter. The second one being retail protection growth of 84%, also backed by increase in share of higher protection ULIPs and focus on riders. And the third and the most important being the NBM expansion by almost 4% at a strong 22.1% for the quarter as against 18% reported for the same period last year. On the back of continued strong renewal premium growth of 29%, BALIC GWP grew 13% during the quarter. The consistent growth in renewal premium reflects the improvement in persistency over the last 5 years. Overall, on individual rated new business basis, the mix of business for quarter 4 stood at par at 21%, non-par savings at 27%, term at a very healthy 6% annuity 6% and ULIPs at about 40%. BALIC has been increasingly enhancing focus on protection business and hence, retail protection grew by 63% to INR 393 crores in FY '25 versus INR 241 crores of premium in FY '24. BALIC is also building on the data and analytics for direct sales through upsell and cross-sell initiatives. It has led to BALIC's presence in 407 cities with dedicated verticals for various customer segments. On the institutional business side, the company continues to expand its network of partners and grow existing partnerships. BALIC now has reasonably large number of bancassurance tie-ups, which should help it reduce any concentration risk. On the persistency front, we have largely maintained position in line with the previous year. The profit after tax for quarter 4 stood at INR 41 crores versus INR 106 crores in the same quarter last year. This is lower due to lower realized gains as we saw for BAGIC as well and on account of higher tax provisioning. BALIC ended the quarter with an AUM of INR 1,23,734 crores. Overall, a mixed quarter for BALIC, but on the right trajectory of sustainable and profitable growth year on. Finally, both insurance companies are financially among the most solvent in the industry, BALIC with 359% solvency and BAGIC at 325% solvency. And hence, both the companies are well poised to weather any external adversity. I must, however, reiterate that insurance is a long-term business, and we remain steadfast in our commitment to drive profitable growth, create sustainable value and always prioritize interest of the policyholders. Let me now move to our lending businesses, BFL and BHFL. To start with on BFL, a very good quarter on all metrics, including business volumes, AUM, OpEx and credit costs. The number of new loans booked in quarter grew 36% to over INR 1 crore as against INR 80 lakhs in the same period last year. BFL added about 47 lakh new customers during the quarter with customer franchise now standing upwards of INR 10 crores. The company's diversified business model has enabled it to record a strong AUM growth of 26% at INR 4,16,661 crores as of 31st March '25 as compared to INR 3,30,615 crores as of 31st March '24. The net interest income grew by 22% to INR 9,800 crores as against about INR 8,000 crores in the same period last year. The OpEx to total income improved to 33% as against 34% in the same period last year. Net loan losses and provisions for the quarter were about INR 2,300 crores. The company made an additional provision of about INR 360 crores on account of ECL model redevelopment in quarter 4. Adjusted for this, the loan losses and provisions for the quarter were about close to INR 1,970 crores. In quarter 4, net increase in Stage 2 and Stage 3 assets was only about INR 289 crores. Stage 2 assets increased by INR 784 crores and Stage 3 assets decreased by INR 495 crores. The company has indeed started seeing improvement in early vintages across all portfolios. The GNPA and NNPA stood at 96 and 44 bps, respectively, as of 31st March '25 as against 85 bps and 37 bps as of 31st March '24, which we believe is amongst the lowest in the industry. Profit after tax grew 17% during the quarter from INR 3,825 crores to about INR 4,480 crores. Both the return on assets and return of equity remained steady. The capital adequacy remains strong at 21.93% as of 31st March '25 and Tier capital -- Tier 1 capital was at about 21.09%. Bajaj Finserv app has now 7 crore net users and the FinAI transformation is progressing well for Bajaj Finance. You would have also heard about the corporate actions declared by Bajaj Finance last evening, which include a share split, bonus shares and a special interim dividend. The bonus issue and special interim dividend reflects the company's strong financial position, robust reserves and a positive growth outlook. Moving now to Bajaj Housing Finance, the mortgage subsidiary of Bajaj Finance, a very good quarter on an overall basis. AUM grew by 26% to INR 114,600 crores at March '25, up from INR 91,370 crores from the same period last year. Growth was very well distributed across all the business segments of Bajaj Housing. The home loans AUM grew by 22%, loan against property grew 28%, lease rental discounting grew 24% and developer finance grew by 49%. The net interest income grew 31% to INR 823 crores as against INR 629 crores for the same period last year. Operating efficiencies improved significantly with OpEx to net total income at only 21.7% in the quarter as against 27.1% in the same period last year. The loan provision was a INR 30 crores in the quarter as against INR 35 crores for the same period last year. Healthy asset quality was maintained with a GNPA and NNPA of 29 bps and 11 bps, respectively, at March '25 as against -- as against, sorry, 27 bps and 10 bps for the same period last year. Profit after tax grew by 54% to INR 587 crores for the quarter as compared to INR 381 crores for the same period last year. Both ROE and ROA were steady. Capital adequacy remained strong at 28.24% as of March '25, and Tier 1 capital was at 27.72%. In summary, another very strong quarter for both our lending companies, Bajaj Finance Limited and Bajaj Housing Finance Limited. Now let me give you an update on our platform companies, which is Bajaj Finserv Health Limited, also referred as eBH and Bajaj Finserv Direct, referred to as Bajaj Markets and Bajaj Finserv Asset Management Company. Let me start by Finserv Health. The numbers for the previous year are not comparable here due to the acquisition of Vidal Healthcare in quarter 1, '25, Hence, the previous numbers have not been provided in the investor deck. In quarter 4 FY '25, Bajaj Finserv Health carried out 28 lakh health transactions versus about 23 lakh in the immediately preceding quarter, which is quarter 3 of '25. Bajaj Finserv Health continued expansion of provider network, which includes about 87,000 doctors, about 4,500 lab touch points, about 15,000 hospitals. Utilizing this network strength and its tech platform, eBH is able to offer integrated OPD, IPD and wellness experience to both our retail as well as corporate customers. Moving to Bajaj Markets. During the quarter, Bajaj Markets attracted about 8.5 lakh consumers on its digital platforms. Bajaj Finserv -- sorry, BFSI lending disbursed, including secured, unsecured and both through BFL and outside partnerships for the quarter stood at INR 1,865 crores of lending for the quarter as against INR 1,636 crores for the same period last year. Bajaj Markets has been achieving new milestones regularly, some of the highlights of which are 6 new partnership additions during the quarter, taking the overall unique partnership count to 96 in number. Bajaj Markets has also have been achieving cash profits consecutively now for 2 quarters. There has been no capital infusion in the company since March '22, showing capital efficiency of the company. Now an update on the Bajaj Technology piece. The vertical closed a new GCC deal and two deals in the Middle East during the quarter. It has also published two solutions from the cloud practice in AWS Marketplace, which demonstrates the AWS expertise the company has built over a period of time. Now moving to the Asset Management company. The asset management company ended the year with an AUM of upwards of INR 20,000 crores, which was up from -- which is up 17% from the immediately preceding quarter, which is quarter 3 of FY '25. We believe the Bajaj Finserv AMC is the fastest to cross the INR 20,000 crore mark, which is in less than 2 full years of operations. The non-group share of AUM stood at a very healthy 84% of the total AUM. This was the update on the performance of all our companies. Before we open the questions, considering the paucity of time, I would request the audience to kindly keep their questions brief so that we can cover more questions during the call. With this, I invite questions from the audience.

[Operator Instructions] Take our first question from the line of Avinash Singh from Emkay Global.

Two questions. The first one on BAGIC. Now your capital position is very, very strong. And also, there have been some changes regarding the cross-border reinsurance regulation and all. Do you see, I mean, your retention strategy changing from here? Because I mean, if I see typically, of course, you have been writing crop and all that, you're also partly explaining that, but your retention has been lower despite the fact that your capital position is very, very strong. And now there is kind of at the margin, some changes required to this cross-border reinsurance and all. So do you see yourself kind of changing your retention strategy or increasing your retention going forward? That's my question on BAGIC. And on BALIC, now a lot of, I mean, regulatory changes are already kind of behind in terms of your surrender regulations or [ AUM ] regulations. Going forward, I mean -- and also that the markets are now more sort of, I would say, balanced than the had in last year. What kind of product mix and corresponding the trajectory of VNB margin you see from here onwards?

I'll request Tapan to take the first one on retention, please.

Thank you. So I think in your question lies the answer. You mentioned that with the CBR, no rules changing, and you also mentioned our strong capital, which is there and strong solvency, which we have. So I think that is where the answer lies, a strong capital, a strong solvency. It doesn't really matter if the CBR changes, if the fact gets more difficult, we have enough to be able to retain also and we have enough underwriting competence and which we demonstrated over so many years to write good risk. I think the retention, if it makes sense, then it's good. But if you look at the overall results, I think it is perfectly fine as of now, the balance is pretty good in terms of what we retain and what we outsource. But as you rightfully said, if there is a shortage of capacity because of strong capital base, Allianz will still continue doing good and we'll be able to handle this very well.

Avinash, I'll just add to that. I think see our retention, if you see in the past, has been on the lower side vis-a-vis the others in the market because of the bulky businesses we've been writing. So especially in the last 2 years, we've written a lot of crop and government health. That is one reason. The second is we write a lot of commercial business also. And there, you see that the growth we've been registering on commercial lines, which are some of the large risk, there also because of the risk being very large, our retentions are on the lower side. So that's one reason you see some anomaly vis-a-vis others in the market.

Avinash, just to add to what Raman and Tapan said, basically, the aggregate retention for a composite insurance company is just a summation of the parts. We have multiple lines of business, the product mix changes, and we have always been strong in the larger corporate and the commercial lines. Therefore, line by line, if you see, I don't think our retention has lowered at any time. But the mix of multiple businesses, somewhat lower, high retention will eventually determine what the net retail premium is.

We'll move to Tarun for the product mix and the margins question.

Yes. Thanks, Raman. So, Avinash, you're right. Regulatory change is largely behind us. In terms of product mix, you'll see more in line with what you saw in Q4 higher growth in protection and the other part of the retail business, largely remaining -- product mix remaining stable in the direction that you saw in Q4. As far as group protection is concerned, I think we are all waiting and watching how the interest rate change impact happens and whether we have higher growth in lending. And that is what is going to decide how credit life really grows and that will impact the industry equally. We are now well positioned because we are well diversified, not just dependent as we used to be a couple of years back in any one segment. So that should help us. In terms of VNB margin trajectory, I think that's a good point. You saw the change expansion already in Q4. Beyond what you heard Raman talk about, we have also taken significant calls on cost structures, looking at more productive investments, removing wastage, inefficiency and some places, significant cost cuts. This is helping us leverage to an extent, you saw that operating leverage show up in Q4. We expect hence the VNB margin trajectory to be far more steeper and hence, a high growth in VNB margin versus what you would see in the revenue side. I hope that answers your question.

I'll just add to what Raman said, Avinash. I think one is obviously structurally like doing motor or group is margin positive on an aggregate basis. But we are confident from a BFS level that the actions that BALIC has taken also structurally improve the margins of the other lines of business. Therefore, that may fully play out only in FY '27, but you should start seeing the benefits by second half of next year. So more than margins, we continue to concentrate on improvement in VNB and the growth in VNB being better than the growth in the [ written ] premium.

We take our next question from the line of Swarnabha Mukherjee from B&K Securities.

For BAGIC, I just wanted to understand the combined ratio outcome. So first of all, the loss ratio looks very benign this quarter, but I see that the motor and the loss ratio has...

Swarnabha, I'm sorry to interrupt. Can you use your handset mode, please? Your audio is not very clear.

Yes. Is it better?

Yes, please go ahead.

Yes. Sure. Thanks. So I just wanted to understand the combined ratio outcome because loss ratio, while it has been benign, you can see that motor TP and fire loss ratios are lower. So just wanted to check about the reserve releases there, which -- I mean, where you felt the need to reduce the reserve, particularly looks from the triangle that in accident year '24, there has been a bit of a [indiscernible] So if you could give some comments on that. And on the expense side, again, there has been quite a increase. So is this primarily coming due to the fact that most of the growth this quarter has come from the broker segment and hence the outgo has been higher. So if you could just break down that, that would be very helpful for BAGIC. And BALIC, sir, first of all, congrats on the VNB outcome, I think very strong numbers which you have reported compared to what you reported historically. I wanted to understand right now how much of cost overrun is baked into the margin [indiscernible] if we were to absorb later on, what could be the possibility, if you can give some color on the structural nature of the margin for our product mix? And second, if you could call out the reasons for the operating variance and assumption changes in the [indiscernible]. So these are for BALIC. And just a small question on Bajaj Health. There is a segment where I think a lot of large share of claims are coming. Just wanted to understand our nature of offerings here would be the customers? If you could give some color and whether the claims outcome is unfavorable in this segment? Yes, that's all.

So we'll start with BAGIC first. I'll just try to answer that and hand over to Tapan or Anckur thereafter. I think what's relevant and what I mentioned earlier also, if you look at the underwriting loss for the quarter is very, very low at only about INR 3 crores. So it's almost close to zero. So what you're seeing as elevated combined ratio is actually an outcome of GWP not being there in the quarter because of the one by regulations and an in the crop and government health distribution of premium during the year. So I think that's causing a stress on the expense ratio for the quarter because that's the way the combined ratio is calculated. But I think when you see the underwriting loss, it's up missile INR 3 crores. That's why I thought I'll just highlight that before I hand over to Tapan or Anckur.

No, Raman, I think you have covered it very well.

Right. So just a follow-up. I mean in terms of commissions, et cetera, there is nothing very incremental even due to the channel mix change.

No. So I think what has changed and what I highlighted earlier also was that the growth on motor and retail health has been on the higher side both for the quarter -- for the quarter actually. And there, obviously, on new sales, you know that the commission is on the higher side. So that's -- the mix of new has moved up, and that's why the commission is looking higher. So it's only a mix variance. There's no incremental payouts which we are doing. This should get normalized when you look at the whole year numbers.

And the overall AUM is well below the regulatory allowance. So BAGIC has the leeway subject to market conditions and the businesses they want to pursue and if things start improving, I think they have the levers available to them to go back into growth into the preferred segments.

Okay. We'll move to BALIC, Tarun or Vipin on the...

Vipin, if you can answer that, please.

Sure, sure. So I think Mr. Mukherjee, first question on overruns. So all the overruns are accounted when we report our VNB margin. So I didn't understand the question. But all that we incur, even if there are overruns, all of them are accounted for and they are reflected in our VNB margin. In terms of operating variance, there were fewer new segments that we started writing year, 1.5 years back, and some of them have produced a little lower persistency than what we had generally experienced. While they are still profitable to similar other products, these are new segments that we have been testing. And on ULIP side also, beyond 61st month, we have seen some surrenders and all of that coming. Maybe that's because of market upside. I think those are the reasons. purely on mortality, if that was your intent. On mortality side, our experience is in line with expectations. So there are no variances there.

Okay, sir. Understood. If you could highlight on the health segment.

On the international piece, Devang is here. He'll speak to. I could not hear the question very correctly. He just wanted a flavor on the international business.

So I think on international side, see, our stated strategy is India has a lot of volumes, and we handle considerable volume. And our aim will be to convert that transaction volume into capabilities, which we can probably offer to international insurers. In that direction, we already have two customers internationally. As we speak in last quarter, we have serviced those two insurers. Our focus just now is less on business development, but to harden our capabilities, which is -- which can be utilized by international insurers. We do a fair bit of transactions there. But because in international markets, OPD is 70% of total value disbursed by insurers. And we have, obviously, over a period of last 6 years, created a lot of capability around OPD. That's why the number of transactions are very, very high internationally. But we are just scratching the surface as it is widely known, while India is 16% of global population, India is less than 1% of health care spend of the world. Now while these statistics are very colorful, we are very optimistic that given that we process a lot of volumes in India, our competency set in technology, in AI would create a proposition for international market as we continue to create this capability and service our customers, we will be able to actualize the benefit of these revenue streams. I hope I have explained what you are looking at, unless you have any clarification on this.

Yes, sir, just one small query was that in terms of the profitability, if I were to think about the domestic versus the international piece, how will it stand?

No. So in terms of profitability, obviously, international is significantly higher. But actually, it's not a very apple-to-apple comparison. The investments in creating capabilities is completely absorbed by domestic business. So it's not an apple-to-apple comparison. It's like international business for us is -- it's actually cream part of the overall business architecture. So -- and international, the profitability in longer term also will always remain higher in international business. All of us know that India is an extremely cost conscious as well as competitive market. So going forward also, we believe that international will be higher on profitability -- significantly higher on profitability. But the market size there is tremendous. So it's not that we are pricing ourselves too high. It's just that those markets have ability to pay more. The key for us is how do we create capabilities what we internally call is whatever we sandbox in India, how are we able to convert that into capability, which can be sold internationally. The profitability will always remain higher internationally.

I think just to add to what Devang said, the 2.8 million claims that we service, it's a fairly sizable number. That kind of volume you will never get internationally in some of the countries. Therefore, this is the bread and butter of our business. That is the one which helps us as it grows, we'll continue to invest in capability, and we want to make a gold standard product in terms of technology service, in terms of integration, digital, AI, all of them linked together with the data science built in for handling abuse management and various other things in terms of medical understanding the medical field better and better as we do more transactions. I think it's a very long-term business. Over the next 15, 20 years, we believe this is going to be a very large play in India. Today, we have a lot of fintechs, some hospitals, there are insurance companies, there are people and all of them doing bits and pieces of these. But as we see the next 15 years, we see the size of the opportunity being very large. And once we build the capabilities over the next few years, we think we should probably be in a better position than many others because we have the brand to them as well.

We'll take our next question from the line of Madhukar Ladha from Nuvama Wealth Management.

Just had a couple of questions. First, on BALIC, the margin improvement has been very good. Congratulations on that. But in terms of growth, I see that growth is slowing down, which is as per what we had discussed earlier as well. But moving on into FY '26, '27, how do you see APE growth and VNB growth panning out? Some sort of sense of there will help us. Second, on the variances, operating variance and assumption change, I understand all of this is related to persistency? Or is there any other element of mortality or expenses also? So those are my questions on BALIC. On BAGIC, the underwriting performance has been quite good this year. However, if we look at GWP growth, it's a little bit slower. So we are -- I'm guessing, losing out on market share in a few segments. Any comments around how do you look at that? And I have sense that growth in motor also has been a little lower than the industry. So some color around market shares would be helpful.

Vipin or Tarun, do you want to take the first one?

Yes. So maybe I'll start off. Yes, thanks. I think the VNB margin, I know this is the second time we're getting this response from these questions. Yes, the VNB margin is looking good. And honestly, that was to be expected. We have been saying this as a guidance in our last two calls that we will be making a significant strategic shift, which we did make. And we have ensured that our VNB margin is now moving up in the direction. But as Sreeni said, while we look at margins, there is a lot of noise in the margins from the group business. Hence, the VNB is what we'll be focusing and talking about more. In terms of growth, BALIC has been in the last 5 years, the fastest-growing private sector, fastest-growing company in the country. We've had a CAGR of 30%. And we consciously took a pause when the entire sector just changed the traditional plans only. We looked at every plan that we had, ULIPs, ULIPs which is a term, ULIPs that we have nowadays and traditional plans as well. And we looked at redesigning, restructuring our products entirely. So while 50% of the products change in the market, we changed all. We changed 100% of our products. This walls to result, and I think it was a call which on hindsight has gone correct because we did foresee that with so much of surrender value changes happening and all 50% of the products changing, 3 million advisers having to undergo training, all bancassurance branches having to undergo training, there will be a slowdown in the sector for the second half, which is exactly the way it panned out. We, hence, kindly chose this time to plan more on a far more significant onetime structural change, which we've done. Now that change on anything that we had to do on margins is behind us. Now we have to work on frugality, ensuring that we are cost efficient. And that will ensure that the direction of VNB margins remain high. So your question -- your second part of the first question is on will the margins be growing or will the top line be growing. As far as the top line is concerned, the -- if I just get a little bit more detail, the bancassurance business has picked up from where it left and it's -- the transition has been a lot more smoother. Proprietary sales has taken a little bit more time because we changed all the ULIP plans as well, which nobody else changed. So -- and that was a significant part of their product mix, which has, of course, resulted in them going a little slower, although it remains still the fastest-growing business for us. The agency side has required to have a lot more discussions with advisers because we changed the compensation. And that, I think, will be taking a little bit more time to settle in. So the growth we expect, which has been muted for particularly agency, shall remain slightly muted even in Q1. But having said that, for us, it is unique because we were one of the fastest growing last year H1 as well. We grew by 31%. And while our peer set was far, far lower. So that high base effect will also come in. So we'll have to look at it and put it in perspective from that. And as Sreeni mentioned, H2 onwards, you will see growth for top line also starting to come up significantly. But you should expect overall for us a higher growth in VNB in this coming year. And I think that's the message I'd like to leave you with. Your second question is on variances. Although very clearly, Vipin has touched on it, but I just mentioned because he was specific. There is no impact of mortality on our expenses on the variances.

Okay. Great. Thank you for the detailed answer. And on BAGIC?

On BAGIC, if you look at the year numbers, we're a bit surprised on your comment that you would have lost market share. So if you look at your [ ERR ] number, and Raman explained the one by, that is why this is, and we have a disproportionate higher share of the market or long-term business. So I think that is what gives you this perception. Otherwise, if you look at segment-wise, I don't know if I does probably segment-wise number. If you look at it, then I think be it commercial lines, be it motor, be it retail health, be it government health, it will be only two lines of business where our share would be lower than the market. One would be crop insurance. which we had mentioned earlier that if you look at this time in crop, and I remember a couple of years back, everybody was shying away from crop and the question I was answering is that crop business, we understand and we will do it and we continue doing it. And then when people saw that we did it well, everybody is into the crop business currently. And obviously, when we see a lot of intensity in some business and pricing is not what we feel is appropriate, then we go slow a bit. So crop insurance, I think we would have a lower market share. And in miscellaneous, it is because of the cattle business that we had, which we have gone slow because the lending has gone slow, not because that we have slow intensity, but lending on that business has gone slow. Manage that, I think we would have been ahead of market in all lines of business. And if you pick up the yearly number, we actually ahead of the market. It is the 1/N which is playing out in spite of letting go of some crop business and letting -- not letting go because of lending being less in the cattle business. that being a bit less. So that is where the actual question is. Anckur, do you want to add something or Raman, you want to add something?

Maybe I can just talk about -- I think one thing which is playing out is the proportion of long-term business for us versus the market has been on the higher side. So on an average long-term business, which is impacted by the 1/N regulation for us was 7% of our GWP. For the market, it's been 3%. That's why the numbers look a little odd. But -- so if you, Madhukar, like Tapan highlighted, if you look at the full year numbers, the industry growth on GWP has been about 5%, both for us and the industry. Now if I exclude the impact of government health and crop, we have grown at about 8%. Industry has grown at about 7%. We've grown 1% higher. Now if I actually negate the impact of 1/N, we have grown at about 12% and the industry has grown at 9%. Now if I break that further into retail segments, which is what you were referring to, on motor, in fact, our growth has been in line with the industry. Industry has grown at 7.9%. We've grown higher at about 8.5%. Retail health industry has grown at 8%. We've grown at about 13%. Commercial lines, which is a summation of fire, marine, liabilities, all of that put together, industry is flattish. It's grown only 1%. We've grown at 8.5%. So what Tapan highlighted, actually, the stress is looking only from the 1/N part and also the loss of some business on crop, which we mentioned earlier, we will do that business only if it makes commercial sense. And we know most of the people are doing it only to get an arbitrage on AUM today. So to answer your question, I think from a top line perspective, I think we've outperformed the market almost in all segments this year.

We'll take our next question from the line of Manish Dhariwal from Fiducia Capital Advisors.

So my question was at two levels. One, that the organization, the group has taken this decision of buying the 100% of the two insurance businesses. Now your approvals and all, I mean the 3-year earlier, it was that it's going to happen sometime. Now it's happened. Now your insured execution part is happening. I wanted to understand how over, say, over a period of about 3 to 4 or, say, 5 years, it's a long-term question. How would the favor of these two businesses undergo a change. Like you did mention about some international forays, which I'm sure earlier, there was maybe some restrictions, Allianz being a partner, already being a global player. So if you could just give us some long-term perspective on both the insurance businesses that you run.

Sure. I think I'll take that question. I'm Sreeni here. I think when we look at the opportunity spectrum in both the insurance spaces, it is very large. While both the businesses continue to remain very competitive, and we expect more competition to come in the future. In the long run, it is a game of balance sheet size, capital and brand. We have already done the hard work over 20 years. And if you see most of the people who are coming in recently are finding it more difficult because of the level of competitive intensity to get to the minimum scale that is required for a viable insurance business. As far as the decision of Allianz to exit is concerned, it is a decision of Allianz to exit, and we have executed the SPA. And it does give us the opportunity now to use the Bajaj brand and the capabilities that we have at the Bajaj Group to play the opportunity spectrum in insurance business. Clearly, in a joint venture, there are always restrictions. There are shareholding patterns and there are difficulties in dilution. There may be difficulties in various strategic initiatives that you may want to take, if it is not viable for both the shareholders to go ahead with that. We think there are three, four things that we mentioned. The first is it can -- we now have at 100%, a lot more leeway to look at strategic opportunities, which may involve dilution, maybe we can look at other business initiatives, including, for example, in the big city, we can look at the pension business. Potentially, we can look at international foray as well because this is a sign of a very large amount being put up as domestic capital, and we have fair confidence that this capital will yield the shareholders a very good return over the years to come. So there are many levers that will play out. And we are not short-term players. We are more than 100-year-old group. And therefore, we have the patience and the resilience to be able to play it with the aid of the surplus capital and the power of the brand that we have. While we lack a little bit in flexibility, we get that as well now.

Yes. And some bit of flavor on the health business, the way like the number of transactions are increasing, Vidal acquisition happening, [ SOP ] steps are happening, like more and more hospitals and the footprint is expanding. How -- when are you seeing this to emerge and a meaningful business, say, 3 years, 4 years, 5 years, where the numbers actually make an impact on the balance sheet?

Yes. Let me take that first before I pass it on to Devang. As I said earlier, we believe health care, health care services, the entire spectrum of health care from tooth to tail is going to be a significant industry in India. We have a significant proportion of the population, which require government schemes to be able to support health care. We also see that the insured population is much smaller because of the higher price and the fact that insurance today covers only the hospitalization. And there is a missing middle. And all of these are continuing to grow. Therefore, we believe there is a long-term opportunity. We already have made the most difficult part of building the network for the OPD services. It is easier said than done because it is a very small, I mean, it's a significant amount of effort, capital and time. And then you have to then build a model out of it with the TPA, with our insurance company in BAGIC and the OPD capability and the initial foray into international business that we already have. We believe we have all the tools available now, but we need the volumes to be able to further sharpen our capabilities. So we are very confident as BFS. The value may or may not come from the traditional way of measuring profit in terms of profit and equity. But in the long run, value will emerge because of the size of the opportunity and how long we remain invested in the business, and we have all intention of remaining invested in the business. Devang?

I think your question was about relevant for numbers. Of course, we are...

Yes, meaningful. Meaningfully -- meaningful numbers.

Yes. We are very proud to have very large companies in the group, which contribute a substantial portion of consolidated revenue. And so, see, our view as a group about health businesses, health remains one of the largest spend item for Indian consumers, and it will only grow further in percentage spend of Indian households in coming years, point number one. Point number two, health has ripe for disruption in our view with ingestion of new technologies, specifically AI because there are certain nuances of health business, which are very suitable for usage of AI. Globally, health thrives on unstructured data because every patient is different. And third point is India has tremendous population and hence, in technology world, if I say, humongous training data. This can be put to use to service Indian consumers and also to monetize those capabilities globally. But it is a health has longer gestation. So number relevance is a matter of spreadsheet work. What we are focused on is that we add value to Indian ecosystem and take those capabilities globally to add value to some of our international customers. So it's a longer journey. But as a group, we are -- in my view, we are extremely suitable because we are long-term players in anything we do to add -- to solve this problem over a period of time. So it's a very contextual question. Number answer would require a lot of spreadsheets. And we are not focused on that relevance on spreadsheet.

[Operator Instructions] We'll take the next question from the line of Umang Shah from Banyan Tree Advisors.

Sir, just one question on BALIC. What would be -- how much of our APE would be coming from the largest banker partners that we work with?

This was for BALIC or BAGIC?

BALIC, BALIC, sir.

So the largest one contributes to about 22% of our business.

Sure, sir. And sir, with that player now looking to acquire an insurance company that we compete with, would you be looking to reduce your presence there? Or would that business be coming at a lower profit than other channels?

See, we're talking of Axis very clearly here, right?

Yes, yes, yes.

I had the player -- has had an investment already. And they have been and they were declared promoters of that company, which was the intent, I guess, from them for a long time. And they were very clear when they added us that they would be as a partner that they would be going ahead and adding a lot many partners in the bank itself or life insurance. And despite the fact that they already have their own company, we are still maintaining 25% plus/minus 1% here and there margin -- sorry, margin as in the market share in the bank.

Counter share, yes.

And as far as margins are concerned, we don't talk about margins individually for players. These are bilateral transactions.

We'll take our next question from the line of Sanketh Godha from Avendus Spark.

I have two, three questions on BAGIC first. Sir, if you look at our tender-based business is almost 25% of our total GWP. See, obviously, the predictability of the growth of this particular number looks very difficult for us to estimate. So just wanted to understand how confident you are that this business, which is 25% of your business will repeat again next year. And suppose if you don't win, then you have a game plan probably to substitute that business with some other line of business. Just want to understand the thought process on the continuity on growth given tender-based business is 25% of our total GWP. That's one thing. And second, on reinsurance acceptance because the rates are a little better. So there are a couple of insurance companies which have already alluded that they might be a little aggressive with respect to accepting as a reinsurance business, which could help in GWP growth. So have you -- do you have any thoughts on those lines of the business? And lastly, on data keeping on BAGIC, can you give 2, 3 figures, advanced premium number, duration of our bonds and yield to maturity on the bonds? Yes, that's on BAGIC. Maybe I have two questions on BALIC, sorry.

Okay. So just look at -- when we talk of bulky business, tender-based business, whether it comes, it doesn't come. You understand the nature of the insurance business, it comprises of two, three parts. And it is inherent part of business. One is retail. Second will be tender-based. Tender is not only in terms of when you talk of government or you talk of crop, it's also in commercial lines of businesses. A lot of large risks also are tender-based in the market bases, commercial lines also. And if you look at the segmentation, the tender-based business in the total industry portfolio would also be close to about, if I'm not wrong, about 30% or so or more 35%. That is there. Now if you're a large company, if you're a company with among the largest number of customers in India, if you're a company which is top 3, including government companies in India in terms of top line, if you're a company which is among the best combined ratio company in India, you will reflect what the market is. If the market tender business is close to about 30%, 35% business and you have a 25% tender-based business, I think it's perfectly fine because you can't be a large company and say that I not have tender this business at all. Now the second part of the question is that how will it play out. Now we have been doing it for so many years. I don't think that something is new. Some tenders we win, some tenders we lose. It's inherent part of business. Over at goes. And sometimes if we lose a lot of tenders, then obviously that part of business market share may drop for some time. That -- we didn't crop this time and we found our tenders being very aggressive in terms of the pricing, which was about 30%, 40% lower. We reduced our presence. We never exit any business, and we're always there. We still have -- we are still one of the leading crop insurers in even today. And we still are there will be there, and we'll keep on participating in that. But it has no bearing in terms of that we feel that it will just disappear, become zero or no, it will become like 100. It doesn't work like that. As a large player, you would be present in all lines of businesses. You would be having a substantial market share in all lines of businesses. And what makes sense in terms of our underwriting principle, that is where we will be disproportionately higher. Where it doesn't make sense, we'll be lower in the market. And this keeps on changing. It is not like written stone that this year, this will be next year, the same will happen. It keeps on changing. But this is inherent nature of business. I don't think there's something which one has to really be surprised about. And we look at each line of business separately, each product separately. And each we should write well and serve the customers very well. If you look at our grievance ratio, and these are publicly available data at IRDAI, we have been the least -- among the least grievance ratio in the country for so many -- it's over a decade now, every quarter, every time I publish have been there, serve the customer well. This is the principle of the business. So I don't think that is something which we have to really be very worried about or taking a stride what happens if we lose a tender or gain a tender. It's part of the business. That was your first question. Second question was what on BALIC?

I was asking about a couple of companies are doing more reinsurance acceptance compared to what they were doing in the past. So...

What people are talking about is not reinsurance acceptance. It is about writing commercial lines of businesses. See, reinsurance companies they make treaties and they make. That is just kind of a plan way of protecting the balance sheet. There are no question of acceptance by companies. Now they will look at commercial lines of businesses. But as Raman mentioned in his talk, if we look at last year, the industry was growing at about 1% or less than 1%. We are growing at 8%. 8x the industry growth in commercial lines of businesses. And we have been doing that. So why would we slow down? I think whenever the pricing is right and where we can serve the customers well, we understand the risk, we would have a disproportionate market share there... [indiscernible] should happen.

Got it. And the data keeping question, actually, advanced premium, duration of bonds and YTM.

As for advanced premium, Sanketh is closer to INR 2,500 crores.

Okay. Okay. And duration of our bond?

It is around 5.5.

And current YTM?

So the realized rate is 8%.

8%, you said, right, Anckur?

Yes. The realized rate is 8%, slightly in excess of 8%, 8.2%, 8.3%, yes.

Okay. Perfect. Perfect. And maybe on this -- one question on BALIC. See, this strategic shift probably impacted meaningfully the agency channel, as you alluded. So -- and that's almost till first half, it was more than 40% of our APE. So you are fairly confident that the reset is already done or it will take some bit of more time and therefore, the growth probably in this channel will be a little back-ended or you take -- or you believe that in FY '26, agency might be a little muted because of the strategic shift what we have done on BALIC side. So just one question on that side. And if you can give your contribution of Axis Bank. That's the second one.

Yes, I'll answer the second first, which I just did. Axis is 22% of our business. And overall, if you notice that most of our peers set their largest bank is upwards of 40% to 50% to 60% as well. And it was a studied strategy that we shall not be dependent on one banker partner. And I think that's how the banker partner also wants it. So I think that strategy has played out quite well. And we'd like to have all businesses to grow at their healthy pace. and not be overdependent on one. Coming back to Axis -- sorry, to agency. The agency, we -- agency is a 150,000 agents business. And we've been looking at changing the product mix for some time. And finally, we ended up doing it in the second half of the year. It required a lot of reset and that reset is in place. We are seeing positive green shoots come in, in terms of activity, productivity, which are the usual bits of first indicators. Engagement from agents has been reasonably on the uptick. We added about 57,000 agents last year. And we opened 60 offices. Largely, these offices are used by agency itself. We are continuing to grow in the way we are hiring more agents. So that is only going to be a positive as we go ahead in time. In terms of growth rate, I did mention that we did have a significant growth in the first half last year. In fact, even agency in H1 grew by 23%. So that higher base is going to impact I'd say, mathematically, the expected growth rate from agency, which is obviously going to be muted in the first half. And second half, you should see a significant climb back in, again, because mathematically, it was bad for the entire sector. But even otherwise, my indicators will be more on number of agents getting active, the segment of agents getting active, how many policies are they doing, whether they're consistent or not, all the usual distribution parameters which you look at. And they are all in, I'd say, the green shoots are visible. And directionally, we are feeling a lot more confident because don't forget agency has been our mainstay all this while, and agency shall remain a very strong part of our growth engines.

Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to Mr. Ajit Kumar from JM Financial for closing comments. Over to you.

Thank you to all the participants for joining the call, and special thanks again to the management team of Bajaj Finserv for giving us the opportunity to host the call. Anything else, Sreeni, sir, you want to add?

No, nothing else. I think we are -- the first half, we still believe the geopolitical and external environment will continue to be -- we need to watch. It can be volatile. But we are looking -- we are very cautiously optimistic about H2 of the coming year when we should come back to growth. So we are using this opportunity on FinAI in BFL in looking at our OpEx costs in BALIC and the margin profiles, restructuring the business on the surrender charges. And in the case of BAGIC, we are waiting for the -- to continue our calibrated growth with a focus on strong underwriting performance. Our platform businesses, we want to see them achieve more scale in terms of number of transactions, both Finserv Direct and the health business. The mutual fund can be depending on how the market is, the AUM growth can be a bit volatile, but we believe that we continue to differentiate in terms of each of our funds, and we'll continue to build on distribution and grow the business from here. So this is largely what we are looking at over the next 12 months.

Thank you, sir. On behalf of JM Financial Institutional Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.