Bajaj Finserv Ltd. (BAJAJFINSV) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Bajaj Finserv Limited Q3 FY '26 Analyst Conference Call hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Raghvesh. Thank you, and over to you, Mr. Raghvesh.

Thank you, Ranjiv. Good morning, everyone, and welcome to the Q3 FY '26 Earnings Conference Call of Bajaj Finserv Limited. First, I would like to thank the management of Bajaj Finserv for giving us the opportunity to host this call. As always, we'll have opening comments from the management team, post which, we'll open the floor for Q&A. From the management side today, we have Mr. S. Sreenivasan, President Insurance and Special Projects, Bajaj Finserv Limited; Mr. Ramandeep Singh Sahni, CFO, Bajaj Finserv Limited; Mr. Tapan Singhel, MD and CEO, Bajaj General Insurance Limited; Mr. Tarun Chugh, MD and CEO, Bajaj Life Insurance; Mr. Avais Karmali, CFO, Bajaj General Insurance; Mr. Vipin Bansal, CFO, Bajaj Life Insurance; Mr. Ashish Panchal, MD and CEO, Bajaj Finserv Direct; Mr. Devang Mody, MD and CEO, Bajaj Finserv Health; and Mr. Ganesh Mohan, MD, Bajaj Finserv Asset Management Limited. With this, I would hand over the floor to Ramandeep sir for the opening comments. Thanks, and over to you, sir.

Thank you. Good morning, everybody. We welcome you to the conference call to discuss the results of Bajaj Finserv Limited, BFS, for quarter 3 FY '26. As before in this call, we will largely be concentrating on the consolidated results of BFS, the results of our insurance operations through Bajaj General Insurance Limited and Bajaj Life Insurance Limited; our emerging companies, which include Bajaj Finserv Health, Bajaj Finserv Direct and Bajaj Finserv Asset Management Company. And lastly, where material, the stand-alone results of BFS. Bajaj Finance, BFL and Bajaj Housing Finance, BHFL, other major subsidiaries of ours have already had their conference calls. And hence, we would pursue only very high-level questions on BFL and BHFL. To start with a few hygiene points as usual. As a word of caution, we affirm that any statements that may look forward-looking statements are just estimates and do not constitute an assurance or indication of any future performance result. Let me also give you an update on the basis of accounting, which we follow across the group. As required by the regulations, Bajaj Finserv prepares its financials in compliance with Indian Accounting Standards, Ind AS. The insurance companies, however, are not covered under Ind AS. They prepare Ind AS financials only for the purpose of consolidation. Accordingly, for Bajaj General and Bajaj Life, stand-alone numbers reported are based on non-Ind AS accounting standard referred to as Indian GAAP as applicable to insurance companies. I'll start by giving you an update on our joint venture with Allianz. I'm happy to confirm that on 8th January '26, Bajaj Finserv Limited, along with its promoter group companies, namely Bajaj Holdings and Investment Limited and Jamnalal Sons Private Limited successfully completed the acquisition of 23% equity stake held by Baja -- sorry, by Allianz SE in the 2 insurance subsidiaries. Consequent to this transaction, Bajaj Group collectively holds 97% equity stake in each of the 2 insurance subsidiaries and the JV between us and Allianz SE stands terminated. As regards the remaining 3% equity stake held by Allianz SE in each of the insurance companies, the Boards of the respective companies have approved to offer a buyback to its shareholders subject to applicable law and necessary approvals. This buyback, on one hand, will conclude the buyout of Allianz stake and on the other hand, will also strengthen the ROE and ROEV of both our insurance subsidiaries going forward. Post the buyback, the holding of the insurance subsidiaries by the Bajaj Group is expected to be as follows: 77.33% by Bajaj Finserv, 18.1% by Bajaj Holdings and the remaining 4.57% by Jamnalal Sons Private Limited. I will now jump into the high-level update on the consolidated results for the quarter. The same has also been put in our press release dated 4th February '26. Before we get into the results, we would like to call out on 2 exceptional items which color the results for the quarter. The first one being the onetime impact of the new labor code, which impacts the bottom line by close to about INR 380 crores at a gross level across all our companies. However, this has a net consolidated PAT impact for BFS of about INR 167 crores. The second one-off is the accelerated ECL provision made by Bajaj Finance during the quarter to enhance its balance sheet resilience by implementing a minimum LGD floor across all its businesses. This has an impact of about INR 1,406 crores on BFL's results on gross basis with a net consolidated PAT impact of about INR 540 crores for Bajaj Finserv. As for the results now, the consolidated total income grew 24% to about INR 39,708 crores versus INR 32,042 crores for the same period -- for the same quarter last year. The consolidated profit after tax before accelerated ECL provision of BFL and the onetime charge of new labor code grew by 32% to about INR 2,936 crores versus INR 2,231 crores for the same quarter last year. The consolidated profit after tax before the accelerated ECL provision, the onetime charge of the new labor code, excluding the MTM gains and losses and including the realized equity gain booked under OCI by the insurance companies, the PAT grew by 13%. Let me now deep dive and give you further texture on the performance of each of our subsidiaries. To start with Bajaj General, for the quarter, Bajaj General ranked first amongst private players on GDPI basis while maintaining its market share. The GWP for the quarter 3 increased by 11.5% to about INR 7,389 crores versus INR 6,626 crores for the same quarter last year. Excluding the bulky tender-driven crop and government health business, the GWP increased by 17.2%. In terms of GDPI growth, the growth was a healthy 17.7%, largely in line with the industry growth. The growth is largely attributable to the motor and health segments, partially offset by degrowth in crop insurance, largely arising from pricing pressures, which we've discussed in the past. The underwriting loss for the quarter was at about INR 137 crores versus a loss of INR 43 crores for the same period last year, largely impacted by the one-off impact of labor wage code of INR 42 crores and higher acquisition costs during the period attributable to focus on preferred business segments being written by the company. The combined ratio stood at a very, very healthy 97.9% for the quarter as against 101.1% for the same quarter last year. We believe that this combined ratio for Bajaj General will be amongst the lowest in the multiline market with ROE reasonably above 22%, excluding the surplus capital at 200% solvency. The adjusted PAT before the impact of new labor code for the quarter stood at INR 430 crores versus INR 400 crores for the same period last year, a growth of about 8%. AUM for BAGIC stood at about INR 36,417 crores versus INR 32,633 crores for the same period last year, an increase of almost 12%. In summary, these operating results, including combined ratio and ROE underscore Bajaj General's disciplined focus on delivering balanced and profitable growth, supported by strong risk selections, robust distribution capabilities, prudent underwriting and a continued emphasis on exceptional customer service. I'll now move to Bajaj Life. Bajaj Life 2.0 was initiated in the second half of Life last year with a focus on sustainable and profitable growth. Happy to confirm that the financial outcomes are as planned in the course of Bajaj Life's 2.0. The impact of change in strategy is now reflected in the third quarter results, wherein Bajaj Life registered the highest ever value of new business and the new business margins on YTD basis over the last decade. The retail weighted received premium growth has now been reinstated with a growth of 19.9% from INR 1,549 crores last year for the quarter to about INR 1,856 crores, largely in line with the industry growth. This was backed by a retail protection contributing to 9% of the overall retail business with a growth of 47% for the quarter. Group protection has also registered a healthy growth of about 29%. The VNB for the quarter grew at a healthy 59%, up from INR 254 crores for the same quarter last year to about INR 405 crores during the quarter. The new business margin, NBM is up at 19% for the quarter as against 15.1% for the same quarter last year. On the back of continued strong renewal premium growth of 20.9%, Bajaj Life's GWP grew 23.5% during the quarter. Persistency dips were, however, observed across a few cohorts in line with the industry, which are being worked upon by the company. On overall retail, vehicle received premium basis, the product mix for the quarter was well balanced and stood as follows: par was at 23%, non-par savings at 14%, term at 9%, annuities at 11% and ULIPs at 44%. The profit after tax was impacted during the quarter, largely by the new labor code to the tune of INR 43 crores and the loss of input tax credit from the GST change, which we saw during the last quarter. Bajaj Life ended the quarter with an AUM of INR 1,38,000 crores, up at about 13% from the same period last year. The company is also in the process of setting up a pension's fund management business and a branch in the GIFT City for which a process of regulatory approvals has been initiated. Overall, the quarter for Bajaj Life is in line with the expectations and on the right trajectory of sustainable and profitable growth. Finally, both the insurance companies are financially amongst the most solvent in the industry, Bajaj Life with 333% solvency and Bajaj General with about 344% and hence, are well poised to weather any external adversity. We 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 the interest of our policyholders. I'll now move to our lending businesses, Bajaj Finance and Bajaj Housing Finance. To start with Bajaj Finance, the core performance remained robust across business volumes, AUM, OpEx, credit cost and profitability. Number of new loans booked during the quarter was at about INR 1.39 crores as against INR 1.2 crores in the same period last year, a growth of 15%. The company's diversified business model has enabled its AUM to grow at a strong 22.1% at about INR 4,85,883 crores. The net total income grew by about 19% to INR 13,817 crores as against INR 11,673 crores for the same quarter last year. The profit after tax before the impact of the new labor codes and the accelerated ECL provision grew by a very healthy 23.3% during the quarter from about INR 4,246 crores to INR 5,227 crores. The OpEx to net total income improved to 32.8% as against 33.1% for the same period last year. The net loan losses and provisions for the quarter before the accelerated ECL provision of INR 1,406 crores was at about INR 2,219 crores in the quarter as against INR 2,043 crores for the same quarter last year, an increase of only about 9%. In quarter 3, net decrease in Stage 2 and 3 assets were at about INR 93 crores, reflecting a significant improvement in portfolio quality and a positive outlook on credit cost year on. The GNPA and NNPA stood at 1.2% and 0.5%, respectively, as of the December end as against 1.12% and about 0.48% for the same period last year. Capital adequacy remained strong at 21.4% as at 31st December with a Tier 1 capital of about 20.6%. Moving now to Bajaj Housing Finance Limited, the mortgage subsidiary of BFL. It was a stable quarter with AUM growth of 23.2%, driven by good momentum and disbursement amidst higher portfolio attrition. Growth was very well distributed across all the business segments. The home loans AUM grew 18%, loan against property grew 32%, lease rental discounting grew 39% and developer finance by 18%. Net interest income grew 19% to INR 1,153 crores as against INR 933 crores for the same quarter last year. Operating efficiencies continued with OpEx to net total income at healthy 19% as against 19.8% for the same quarter last year. Healthy asset quality was maintained with the GNPA and NPA at about 0.27% and 0.11% as of December 31. PAT before impact of new labor codes grew 23.2% to a healthy INR 675 crores for the quarter. Capital adequacy ratio stood at 23.15% as at December end, with a Tier 1 capital of 22.69%. In summary, another very strong quarter for both our lending companies, BFL and BHFL. Now I'll quickly give you an update on our emerging companies. To start with Bajaj Finserv Health, in quarter 3, carried out about 6.2 million healthcare transaction as against 2.1 million transactions for the same quarter last year. Bajaj Finserv Health continued to expand its provider network, which includes about 134,000 doctors, about 16,000 hospitals and upwards of 6,300 lab touch points. Utilizing this network strength and its tech platform, Bajaj Health is able to offer integrated OPD, IPD and wellness experience to both retail as well as corporate customers. During the quarter, the revenue from operations of Bajaj Finserv Health grew at a healthy 22%. Moving to Bajaj Markets. During the quarter, the lending of -- in the BFSI space, the disbursement -- in the form of disbursements stood at about INR 1,800 crores for the quarter as against INR 1,549 crores for the preceding quarter, which was quarter 2 of FY '26. The company ended with a total unique partner count of 101. Top line for the company was impacted during the last few quarters and was down from about INR 156 crores for the same quarter last year to about INR 94 crores in the current quarter. This was due to a planned transition of a software where we are moving to SFDC for frontline sales. Now with the migration likely behind us during the quarter 3, we are likely to see the growth resume year on. And from quarter 4 onwards, we are hopeful that the revenue growth should get reinstated. There has been no capital infusion, however, in the company since March of '22, showing capital efficiency of the company. Moving to Bajaj Finserv Asset Management Company Limited. The AMC company continued its good run, recording AUM of upwards of INR 30,000 crores as of 31st December and moving to the 26th spot amongst all the mutual fund companies in India in terms of AUM. We believe that Bajaj Finserv AMC is the fastest to cross the INR 30,000 crores mark in about 2.5 years of operations. The equity mix of the AUM stands at about 56% and the non-group share of AUM constitutes about 87% of the total AUM. This summarizes the performance on all our companies. That's from my side on the performance. Before we open for the questions, considering the paucity of time, I would request the audience to keep their questions brief so that we can cover more queries during this call. With this, I invite questions from the audience.

[Operator Instructions] The first question comes from the line of Nischint Chawathe with Kotak Securities.

Just maybe to begin with on the Life side, there has been a fairly strong and impressive growth in the institutional business. If you could give some color and texture in terms of which are these partners? Or is it addition of new partners? Is it faster growth in the existing one, which has contributed to this growth? Secondly, I think on the agency side, after multiple quarters, we are able to see some positive growth there. So is it fair to say that now we have bottomed out? I have some more questions but this is on the Life side.

Thanks, Nischint. You track us too closely, man. Institutional. The specific questions, so specific answers. I'd say that the growth in institutional is a widespread. It is not necessarily coming from the -- it is not necessarily coming from the big partners. We were possibly the first ones to experiment with a bevy of smaller partners. And that strategy is paying off well for them and us. And I must say that the couple of new partnerships that we've got significant size, medium significant, if you may say. And -- which is largely AU, Fed. And yes, I think there's a lot more yet to be seen. So those should give the median -- much more than the median that you will see in terms of growth for various partnerships. For agency, yes, while the growth has been good, I think the one thing I'd like to point out to all the analysts on this call is that we've seen something even better in agency. We've seen a doubling of their VNB in this 9-month period. As you all know that we took some significant calls on agency in terms of commissions, in terms of efficiencies, in terms of tweaking on the models, in terms of cost, in terms of the hierarchy cost, a lot many things that we've been doing there in terms of how we add our branches and all of that. We are very encouraged, and we may not necessarily focus just on growth on agency. And this is just -- the strategy is getting cooked as we go. As you know, agencies are very involving and very training-intensive, relationship-intensive business. We will continue to work on the bottom line more than the top line. Hence, the growth on agency is not necessarily something I shall be saying. We'll just buckle up and start popping up from next quarter. It is really a little bit more number of quarters as we continue to work on some more parameters of agency to set it right directionally on VNB once and for all. You don't have to do this too often in your history with an agency channel. And hence, growth is not -- top line growth is not going to be the key thing, the bottom line growth is what is going to be the key thing in agency. I hope I've answered you, Nischint.

That's perfect. And just extending from here in terms of product mix, is it fair to say that agency will probably be more traditional and protection-heavy and the institutions will be banca heavy? I think that's a trend we have seen in some of your other peers.

No, not necessarily. Not necessarily. Our agency is unique. When we moved -- and I've said this earlier as well, when we move from a mass to mass affluent base of customers in the last 6, 7 years. We used ULIP products significantly. The ULIPs we used to sell earlier weren't necessarily very profitable. Now our ULIPs themselves are looking quite healthy. And that is what the agency team has done brilliantly, I would say. The pickup of term has been wholesome, systematic and I'd say something that can only just give us more and more confidence in the future. Par remains a healthy mix for agency as well. As far as institutional is concerned, it really is bank by bank. And every bank is uniquely positioned and I always say that we are the possibly among the top 5, 6 companies, the only one which is truly diversified. And that remains core of our strategy. It's been a consistent method. You've possibly been hearing from us the last 3 years. And we drive business based on our -- what is good for our partner and for us. And hence, is -- that may still, yes, be in line with what you see for other bancassurance businesses. Only thing, please account for the fact that we don't have one bank, which would take 50% of our business. And that ratio would hence not be akin to the ratio you see with other bancassurance-led companies.

Got it. I got it. And just quickly on VNB margins, if you would want to kind of re-highlight your guidance, because I think mathematically, as I see it, your VNB margin would have been closer to around 23%. But for the -- sorry, 21% but for the GST hit. And a, how do we see this going forward? And probably the GST gets continues or neutralize and hence, where did the margin settle?

Yes. So I guess you are asking for more details, but I'll just answer -- give you the top line message and ask Vipin to continue with a little bit more details so that we can be transparent to everybody because I know the GST is something that everybody worries about. But I must say that this is a reset of the VNB and the NBM margin from earlier something we weren't very proud of, but I think now you see the trajectory is positive. And this one has been more a huge bump up. I don't think this kind of bump up is going to be there in the future, but yes, the trajectory will be positive because as a company, we -- as I said, moved on this journey of efficiencies, cost corrections, tailor-making products, tailor-making our commission rates way before anybody else because being a multi-distribution company, we are sensitive to these matters, and we have to get more and more efficient far sooner than others. On the GST bit, I'll just pass it on to Vipin so that he can transparently answer.

Sure. So you would recall that last quarter when we spoke, our estimation was that we'll have about 4.5%, 450 bps impact of GST. I think that number largely holds good. What is reflected in this quarter's P&L is a mitigation of about 1.75%. What we know today, what we have executed, decisions taken, I think as we exit next quarter, another, we would have mitigated close to about -- so on an aggregate basis, we would have mitigated by about 325 bps -- 3.25% as we exit March against 450 that we had. I think thereafter, we believe that delta of 125 is a reset 1st April new year. I think that will be part of our base, and we continue to work on that. I think that's how we look at it. In terms of guidance, I think while we don't give guidance, but Tarun called out, I'll reiterate. Last 4 quarters, quarter 4 last year and first 3 quarters this year, we have seen margin expansion of 4% to 6%, 6.5% consistently, VNB growth close to -- I mean, on an average of about 50%. I think having done here, the base effect does start to kick in. So obviously, the kind of margin expansions and VNB growth will definitely taper down from here on. I think that's the way to look at it. Having said that, our strategy on 2.0 is still WIP. We continue to exit that -- execute that. And I think GST just moved that back by about 2 to 3 quarters, I must say. Had that not been there to the point you made, yes, the numbers would have been a bit different. But I think that's the reality. So I think it's a pushback of 2 to 3 quarters, but I think we are confident that we will be on track to execute in line with the strategy that we have called out.

Got it. Got it. Just one tiny question on the General Insurance business. If I look at motor OD loss ratio, it remains sort of elevated this quarter as well. Now in this backdrop, why really grow at 21%?

Avais, you want to take it?

Sure. Overall, if you look at the situation, the elevated loss ratio is not something that is just experienced by our organization. It is something that is experienced across the industry. Now this can be broken down into multiple parts. But one of the leading, I would say, leading indicators is the pricing pressure. And of course, due to GST, there has been a certain impact as well on the IDVs. Both of these -- the pricing pressure is something that is being corrected and we continue to do so as a daily operations. Within this backdrop, we continue to grow with our long-term view, which is sustainable growth. And hence, you see that is something that we endeavor to do going forward as well.

But fair to say that in this environment, you might just mellow down a bit given the loss ratios are trending? I mean for the industry not for you, I'm saying.

If you look at it in terms of how the loss ratio is trending, it always corrects in its own way, the point you said. The industry will also react to it, and it corrects as it progresses. So this is -- in the generation business, it's always cyclic. You'll never -- like if you look back now 25 years for us, you'll never find that it remains the same forever. It goes up for the whole industry, like Avais mentioned, right and look at motor loss ratios, I think for everybody would have moved up. And then I think correction happens, it comes on its own. These are part of our business model. This is something that we have been doing for so many years, and we'll do that. We'll see that how it balances out that it progresses.

Next question comes from the line of Satvik with Jefferies.

Just on Bajaj General, I wanted to get a sense on how competition is actually playing out in motor and both the group and retail health segments. And second, could you please help us with your retail health loss ratios for 3Q versus 3Q last year? And the last one, how is the motor TP release being this year versus last year? And how has the experience been?

Okay. So I'll just give you first thing, we don't talk of competition. We respect all our competitors, and I believe they're all doing very good. So we don't get into how -- but we'll talk on the industry as a whole. Industry as a whole, if I look at it, it is intense right now. The combined ratio for the industry actually has moved up. If you look at -- for the third quarter, if I just picked up the multiline insurance companies, both public and private, it will be touching close to 128%. Now in that combined ratio, if you look at the performance of Bajaj General, it has a combined ratio, which is close to 100%. So it's a phenomenal performance in terms of delta to the industry. And still, as Raman mentioned in the call in the beginning, we are the largest private player in terms of total volume business for this quarter. I think that is what the industry perspective is. And that is why I was so confident when I mentioned earlier that this -- sustainable level of this combined ratio for the industry is not there. Industry would move to a correction mechanism to bring it down. But Bajaj General in that context, continues its philosophy of a combined ratio, which is much better than industry. And this time, it's true about 20 -- upward of 20% better in terms of being -- also not losing market share and being there. That is the industry perspective. Second, on the retail health perspective, we don't give exact loss ratios, but we'll tell you that it is better compared to what it was in the same period last year. So it has improved on that basis. On the TPV, I think we give the triangle and it is in line with the reserving and the way it has progressed further. Avais, you want to add something to this?

No, I think you've covered it primarily structurally. If there's any other detailed questions, I'm happy to take it.

No, no, that covers it. Congrats on a good share.

[Operator Instructions] Next question comes from the line of Uday Pai with Investec.

A couple of questions on the General Insurance side. First, if I look at your motor TP loss ratios, they have been on a on -- for the first 3 quarters, it is comparatively very low compared to the last year same 3 quarters. So is there any impact of reserve releases? Or this is the normalized loss ratio for motor TP going forward? That's the first question. The second question is on the underwriting profit. While our combined ratio has improved both on a Y-o-Y and a Q-o-Q basis, but our underwriting losses have actually increased. And I believe that is because our NAP growth is slower. Is that the correct understanding, first of all? And how do we think about the absolute underwriting losses going forward? So these are the 2 questions from me.

Okay. Now if you look at TP, and I think this question keeps on coming. The way to look at TP businesses, what is the release per claim settlement. So let us say, when you do reserve it, it is based on all the current judgments, which is happening. And on that you reserve on the past record also. But when the claims get settled and if the settlement happens much better than what the claims reserve, there's a release, which happens. So it's a continuous process. The TP release is not something that would have happen, the quantum of it varies in terms of how the claim trends is happening, how the settlement is happening because it's a long book. And that is why this happens. If let us say, if you start seeing strengthening of our reserves, then there's a worry because that means that the claim reserves which were kept was at a lower pace and the settlement happened at a much higher pace. But as long as release is happening, it's a good sign. That means the company has been adequately reserved in terms of the claim, which should be there. And that's why you would see that on a continuous basis happening. But let us say, if there is certain judgment, which comes in, in which it changes the way the court decides a TP claim. And we have had this [indiscernible], Palak, Sarla varla, we have a lot of judgments. We decide. When that decision changes then certain things happen based on all the past based on what the judgment comes into picture. So this is how TP would move going forward. In terms of your NAP, it is because we have a whole account treaty. And I think if you want details, Avais can take it offline and explain to you. And because of that, the NAP looks low. It is not about any structural issue. It's about reinsurance treaty that we have on that basis. And for the combined ratio, as said, we always maintain that we would be close to 100 is our ambition. That is what we have been doing for so many years while maintaining or growing the market share. And that is how we have organically grown. And a point I always mentioned that Bajaj General from that first -- we look at compared to some of our peers is a complete organic growth company built brick by brick over time. And we continue to do that structurally what we have been doing for so many years. Avais, do you want to add something to this?

No, I think you got it as well. The point on the underwriting profit, I could just add one point is that we've had -- the company has experienced quite a bit of market share increase on motor side, specifically on the 2-wheeler side. And therefore, as you know, that business comes with a certain amount of acquisition costs. And therefore, you would see the underwriting profit at the level that it is. Overall, we still believe and we continue to believe, as we've mentioned earlier, this business is good from a long-term perspective, hence, we do it. That's the only thing I'd like to add.

Also the underwriting loss for the quarter will have an impact of the labor wage code onetime hit of about INR 42 crores. That's also adding to the loss. So in all, if you actually see the underwriting loss moving up, I'll just summarize from what Tapan and Avais said. One is the impact of the new labor code, INR 42 crores hit coming from there. The other is also we are writing more and more of fresh, 2-wheeler and 4-wheeler business, which is the new cards. And there, if you see our market share, both for the quarter and 9 months has moved up significantly in new motor sales. And like Avais said, that the commissions are upfronted for 3 years and 5 years and hence, it gives a big hit on the underwriting result. But on a combined ratio basis, it evens out. So that's the way we look at it. The other issue also is that for the quarter, the NEP is looking a little depressed is because there was a change in the ceding percentage on the government health business, which we did last year for the same period versus this year same period. If we actually exclude the impact of that, the underwrite -- NEP growth actually improves for the quarter to about 5%, 6% is what I recall. So there are a few of these elements, which are leading to, reflecting a higher underwriting loss, but the combined ratio is operating at a very healthy level.

[Operator Instructions] Next question comes from the line of Shobhit Sharma with HDFC Securities Limited.

Congrats to the Life team on a phenomenal set of numbers. So my first question is on your product mix. This quarter, we have seen a very sudden spike on the annuity mix. So what has led to this? Have you done some product interventions on this side? And like your peers have seen a significant growth on the retail protection side, but we have seen this growth hasn't been kind of muted, I would say, 18%, 19% for you for this quarter. So what has led to that moderation? And lastly, on the general product mix, if you can help us understand what's our product and general specific strategy to understand on that. And I will have a question on the [indiscernible] side, I will ask later.

Thanks for that question. So I think on the product mix, I would say, if you look at our mix for last 5 to 6 quarters, it's largely stable. Obviously, there'll be some noise depending on the quarter that you are looking at, but it's largely stable. And that is something we also called out as part of our 2.0 strategy. And I think we are directionally heading there. So yes, you will see annuity going up. That was the case even last quarter as well. I think what we need to understand is we were the ones who started deferred annuities about 4, 5 years back. This market tends to be intentionally competitive. And when the pricing was not right, we actually retreated back. And then, hence, our annuity would hover around 4% to 5%. Last quarter, we actually changed our product proposition on annuity, brought in newer products, and that actually increased annuity mix to about 9% to 10% is what you are seeing now. So I think on your question on annuity reflected in last quarter and that continues this quarter. In respect of retail protection, I think there is a small difference. Look, GST has helped everybody. It helps us also because retail production does become cheaper. But in our case, as part of our strategy, we have been actually focusing on retail protection for almost last 2 years. So if you go back last 2 years, every quarter, our retail growth on protection has been significantly high. Now obviously, once the wave kicks in, the growth will obviously come down. And I think that's where it has reflected that. Does that answer your question?

Sure. And Vipin on general and product-specific strategy, if you want to highlight anything on that?

So I mentioned that in the Shobhit, in the first answer, that agency has got a fair good mix now. They've got term in an up and center now. ULIPs, which are profitable, help us with our the very high HNIs, wealth customers. We are present in the mid-segment and Tier 2, Tier 3 cities, a lot more than our peers in Agency, having 600 branches and still our top 10 cities would not be the same top 10 cities of the, let's say, the top 5 companies in the Life sector, largely because of our agency spread. That makes it more pertinent for having power plants. We are -- there are some states we are particularly big. So that it's a lot more strategy to -- if you get the width of the direction I am going, it's largely driven by the market as well, which we operate and hence, the customer segment. In the case -- in agency, and proprietary sales largely has -- it remains ULIP-heavy. It is ULIP-heavy, but profitable ULIP-heavy now and selling a far higher premium bank term now, which is exceedingly helpful is going to be transitioning more to term and riders as we go ahead. Overall, as a company, our enhanced risk cover. So term and riders put together, contribute between 44% to 47% of our customer base, depending upon which month you look at this. This used to be 19% the same time last year. So that is a huge transition that we've made. As far as the institutional business is concerned, I answered the first one that Nischint had asked where we are largely tailor-made to the partnership because we wanted to be mutually beneficial to both players. And the customer segment for each of these partners is extremely difficult and -- different, I would say, different is the word. And hence, to be able to predict difficult. But largely, as you see where we are today, you should consider this on aggregate settled as a product mix because we've got everybody to the right percentage of contribution, which we wanted. And the diversification has now kind of stabilized. So what you see is what you have, and that's how it will remain in the institutional business. Did I answer that?

Sure, sir. Sure. Now coming to BAGIC. On motor OD loss issue now. If I see, you mentioned that for the peers also, motor OD loss ratio has been rising. So is there an industry-wide phenomena? Or is there something which has changed all across the industry, which has contributed to this spike? And should we expect this to be a new normal now? And is it primarily because of the pricing environment, which is there on the OD side?

I think Avais mentioned it earlier, if you look at with the GST correction, IDV dropped and motor OD is calculated as a percentage to IDV. And that drop happens. So obviously, that leads to lower premium realization for the same vehicle, which would have been there earlier. Also with inflation, the cost of repair goes up. So the only difference this year has been compared to previous year has been the drop in IDV because of the GST. So the value of car comes on. And because the premium is as a percentage of the value of car, so that obviously has a lesser realization coming to that. And as I mentioned that the industry would look at correcting it as it progresses.

So is pricing is the only metric because of which we will be able to correct this, sir?

Let us look at a loss ratio, how do you -- what exactly defines the loss ratio. You have premium collection and you have claim outgo. That is loss ratio. It's as simple as that. Now if the premium collection goes low, your loss ratio will go up. Second, if your claim outgo is more, your loss ratio will grow. And claim outgo, as I mentioned, which happens because of inflation, the repair cost, the spare part cost, that moves up. When that move up, then the claim ratio go up or if the premium drops -- both have happened simultaneously at a point of time, then the loss ratio moves up. That's why it moves up for the industry, which has happened. Now if you have to correct loss ratio, what do you do? There are only 3 steps: one, either increased premium; two, negotiate better and claim outgo; and three, start making your underwriting mix stronger to get in that range, which is what companies would be doing. So it is this process which corrects the loss ratio going forward. So it's not very complicated. It's very similar. But the reason that you've asked why the industry move up, it is because this reason.

[Operator Instructions] Next question comes from the line of Divij Punjabi with Banyan Tree Advisors.

I had one question on the General Insurance side. What does the pricing intensity look like on the fire and the other commercial lines of business? And how is it expected to be going? I just wanted to get a better understanding on that.

So India is a free market, minus motor third-party price, which is regulated by the government. Every other pricing is dependent on the company's underwriting understanding, and they would calculate that. And then the movement of price which goes up. So in a price-free market, the movement will happen, sometimes the price gets stiffer, loss ratio goes up, then the price again starts correcting itself. But as said this is the nature of the General Insurance business or P&C business globally, you'll hear this word market softens, market hardens. It's cyclic in nature. So this is, as I said earlier also, this is a part of our business. So right now, to answer your question specifically, on the fire portfolio, it's -- the price has softened, which is there because, again, if you look at the results earlier, the commercial line of business had a better loss ratio. And if you look at this year, there has not been a major Nat Cat event. There has not been something which has led to huge losses for the industry. So when the loss ratio comes down, the prices come down. As I explained to the motor, the loss ratio goes up, prices starts moving up. It moves in sync with how the industry is moving. So because of good loss ratios and no major catastrophe event this year, obviously, the prices are right now moving down. But as they move down, the loss ratio starts moving up and then the prices are correcting. So when you look at this scenario, you should also see it is a cyclical nature. It will happen. It's a continuous process. And right now, if you see past, if you look at the good loss ratios, it means that the pricing starts correcting. If the loss ratio goes bad, the prices are correcting the reverse side. So right now, fire, the loss ratios have been good. So the price has come down, to answer your question specifically.

[Operator Instructions] Next question comes from the line of Raghvesh from JM Financial.

I had a couple of questions. First, on the General Insurance side. So OpEx to NWP has materially cooled off as compared to all the peers who have actually based our estimates on -- street estimates. So do we think of it as maybe you are going slow on the new business and focusing more on the older business because we have also seen on the motor side, the OD loss ratio go up? So how do we see this trend? The OpEx getting controlled, but the claims ratio are pretty [indiscernible]?

No. If you look at the issue for the industry broadly has been most companies not complying with the regulations in terms of the 30% cap. But Bajaj General has been complying with it very well. It has managed its cost. I think it's one of the lowest costs in terms of the companies put together in the private space consistently for quite some time. So growth business and costs are the 2, 3 levers that are there, and we have been managing that very well, and we have been in compliance with the regulations comfortably compared to most of the players in the private space.

Also, just to answer the question you indicated, see on new versus existing business, we've been growing heavily on the new sales, both on retail health and motor. Motor, I already articulated that on 2-wheeler and 4-wheeler, we have indeed gained market share for the quarter and 9 months both. And even on retail health, our new sales have been very, very healthy growth compared to last year. So that's not the reason. I think the real reason is what Tapan articulated. We've been conscious on controlling costs, and that's why our OpEx ratios look better than the others in the market.

So the commissions have gone up for us as well in line with the [indiscernible]?

No, again, if you look at it, why do we look at commission. The regulation -- I would say a very progressive regulation which came in, in which it said that we don't worry on commission expenses. Put together, you should be below 30%. Why this progressive? Because, let's say, earlier times, the model of doing business was one, agency dependent, direct, you open branches. So everybody has the same model. So fixed commission makes sense. In this time, you can decide whether you want to be high variable or you want to do businesses also with low cost or you want to go direct. And this fungibility allows people to experiment with the business models. So what should be seen is the total number, not stand-alone that has commission moved up or come down -- expenses come down. This fungibility allows business models to be created. And that's why I always mentioned that it has been a very progressive regulation. And globally, the number is around this number, expense and commission put together. If you Google search and just put this -- that for U.S. market, how much does it come, you'd be surprised. So this is -- I think this -- I saw in the media these kind of questions coming up. But the question is that you have to put the 2 together to see where does it stand. And then to see globally where does it stand. And if it is close to the global benchmarks, then I think the industry and the regulations have been in the right place.

Just a final question on the AMC, please. So that we are at a scale of around INR 30,000 crores a year. Are we still looking to be focused on the mutual fund space? Or are we looking at alternates SIP and all of these asset classes to grow incrementally?

Yes. So first, we -- in the last couple of years, we've actually been focused on building out the mutual fund product suite and we still have a little bit more work to do over there in terms of additional products that we launch. So we'll be certainly continuing on that path. But there's also additional opportunities that come up, particularly with regard to SIS, EMS as well as GIFT City. So these are on our plan for this coming financial year, and you'll see us active on these fronts as well. .

If I can add to that, I'm Sreeni here. We have also now set up Bajaj [indiscernible] as a separate company. And that company now has been staffed. We will be looking sometime towards the end of FY '27, subject to, of course, regulatory approvals to start up a set of 1 or 2 alternative funds and possibly a PMS operation targeting that segment of the market, which is where the minimum required for an AIF is INR 1 crore and above. So this is currently under plan. And it's our hope that -- we hope that it will commence by end of FY '27. It's separate from the mutual fund because mutual fund will handle the retail market and the higher end of the retail market through their distribution channels. This will be a separate holding.

Thank you. Ladies and gentlemen, as there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to management for closing comments.

Thank you for your time, everybody.

Thank you. On behalf of Bajaj Finserv Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.