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Bajaj Finserv Ltd
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Ladies and gentlemen, good day; and welcome to Bajaj Finserv's conference call Q1 FY 2022 results, hosted by JM Financial Institution Securities Limited.[Operator Instructions] Please note that this conference is being recorded.[ I now want to turn ] over to Ms. Bunny Babjee from JM Financial Institution Securities Limited. Thank you.And over to you, ma'am.
Thank you. Good morning, everyone. And welcome to Bajaj Finserv's earnings call to discuss the first quarter FY '22 results.To discuss the same, we have on the call Mr. Sreenivasan, [ sir ], CFO, Bajaj Finserv Limited; Mr. Tapan Singhel, [ sir ], CEO of Bajaj Allianz General Insurance Limited; Mr. Tarun Chugh, CEO of Bajaj Allianz Life Insurance Limited; Mr. Ramandeep Singh Sahni, CFO, Bajaj Allianz General Insurance Limited; and Mr. Bharat Kalsi, CFO, Bajaj Allianz Life Insurance Limited. May I request Mr. Sreeni, [ sir ], to take us through the financial highlights, post which we can open the floor for Q&A session. Over to you, sir.
Thank you, Bunny. Good morning, everybody. Welcome to the conference call to discuss the results of Bajaj Finserv Limited for Q1 FY '22, which is the financial year '21/'22.As before, in this call we will largely be concentrating on the consolidated results; as well as the results of our insurance operations, Bajaj Allianz General Insurance and Bajaj Allianz Life Insurance; and where material, the stand-alone results of our company. Bajaj Finance Limited, BFL, which is another major subsidiary of ours, has already had its conference call. However, if there are any high-level questions on BFL, we would be glad to take that as well. We will not be taking any questions on the status of Allianz' stake in our insurance company, except to state that the status has remained the same as at the end of the previous quarter and there is no change.Any statements that may look like forward-looking statements are just estimates and do not constitute an assurance or indication of any future performance result. A few remarks on Ind AS to clean up the hygiene disclosures: As required by regulation, BFS has adopted Indian Accounting Standards or Ind AS from FY '19. The insurance companies are not covered under Ind AS. They have prepared Ind AS financials only for the purpose of consolidation. Accordingly, for BAGIC and BALIC the stand-alone numbers reported below are based on non-Ind AS accounting standards or Indian GAAP as applicable to insurance companies. Our results, the press release accompanying the results and our investor deck have been uploaded on our website yesterday evening.Let me now give you an update on the performance for Q1 of FY 2022. After a brief recovery in Q4 of FY '21, the economic conditions, as you are aware, worsened in Q1 FY '22 as the second wave of COVID spread across the country. This led to localized strict lockdowns in many states. Under these challenging times, our business is focused primarily on managing risk with a calibrated approach to growth. Despite external challenges posed by the second wave in the form of provisions for loan losses and COVID claims affecting health and life insurance claims, we saw many positives as well in this quarter. BFL was able to grow its AUM quarter-on-quarter and further increased -- continued its -- continued the acceleration of its business transformation plan which was announced late last year.The bounce rates were significantly lower than Q1 of FY '21 and only 8% higher. Bajaj Housing Finance recorded good growth in its AUM and profit after tax. BAGIC recorded an underwriting profit while growing better than market in most preferred segments. BALIC had an excellent quarter [ and was then able ] to increase its new business value year-on-year.Let me now touch upon each of our businesses. While April started off reasonably well for the general insurance industry and for BAGIC, the second wave of COVID resulted in localized lockdowns in many states across India. This led to a slowdown in the economy and, in turn, lower sales of motor vehicles and creation of assets in the economy. In contrast to the complete lockdown in Q1 of FY '21, localized lockdown in Q1 FY '22 led to positive growth. However, as compared to Q4 of FY '21, growth was lower.BAGIC growth of 9.1% during the quarter was marginally lower than industry which grew at 11.1%. Excluding government business, which is predominantly crop and health, BAGIC's GWP grew by 10.8%, as against an industry growth of 11.6%. BAGIC continues its approach to calibrated growth. That is seeking to grow in preferred segments, which are private cars; two-wheelers; commercial lines, which are property, engineering; and retail health, while remaining cautious on group health. BAGIC has done better and growing faster than market on most of these preferred segments.To give some more detail. Growth in Q1 was driven by motor two-wheeler and motor four-wheeler reporting growth of 23% and 10.3%, respectively, while commercial vehicles continued to be stressed on growth. Given the fact that the Insurance Information Bureau or IIB-based premium rate hikes for property was -- started in Q4 of FY '20, the base for Q1 FY '22 was already at a higher rate. Notwithstanding this, BAGIC's commercial lines growth of 14% was very satisfactory and higher than the industry growth of 8.2%. Within the commercial lines, property fire grew by 11%. Engineering grew by 26.9%, and liability insurance grew by 21.3%. The 2-year CAGR, which compares the growth with pre-COVID base, for commercial lines was 26.9%. BAGIC's wide and deep bancassurance targets, direct corporate, strong broker relationships and dedicated multiline agency force were large contributors in this substantial level of growth.On the retail health insurance [ end ], BAGIC continued the momentum from previous year as increased COVID positive [indiscernible] heighten the need for protection. BAGIC registered a growth of 30.8%, slightly lower than the overall industry despite lower sales of corona-specific products, as compared to Q1 of FY '21. During wave 2, COVID claims hit the industry much harder than wave 1. While in wave 1 majority of the mortality and morbidity cases were in the 50-plus segment, in this wave, lower age groups were also severely [ impacted ]. This caused more claims on group health segment and also in the group and individual life segments, in addition to retail health.I will give you some flavor of the impact of wave 2. The second wave resulted in much higher frequency with 27,000-plus claims reported in Q1 FY '22, as against a total of 32,000-plus claims reported during the whole of FY '21. That is to say over 80% of the claims reported in FY '21 have already been reported in Q1 FY '22. This has resulted in increase in COVID claims cost to the tune of INR 283 crores in Q1 FY '22, while in the previous year, the same quarter, it was just INR 14 crores. However, by June, the cases have started tapering off. Secondly, on the motor OD claims frequency, which was very low in Q1 FY '22, it had picked up to near-pre-COVID levels by Q4 of FY '21. In this quarter, Q1 FY '22, the frequencies were much higher than Q1 of FY '21 since we did not have a complete lockdown and we had mostly localized lockdown. And vehicle movement had not come to a standstill. Overall, frequencies were slightly below pre-COVID levels. Then the impact [ of claims ] from 2 cyclones, Tauktae and Yaas, while the amounts were relatively much lower than the other 2 factors of COVID claims, we still had the modest impact in this quarter.As a result, the claim ratio for Q1 FY '22 increased to 75.9%, as against 68.1% in Q1 FY '21. On account of higher claim ratio, the combined ratio for the quarter ended slightly above 100% and stood at 103.4%, which we hope will still be among the best in industry during this challenging quarter.Despite these negative factors affecting the industry, BAGIC was able to record an underwriting profit of INR 15 crores. BAGIC's profit after tax for Q1 FY '22 ended at INR 362 crores, and this is a non-annualized return on equity of about 5% for the quarter. To summarize: A tough quarter and BAGIC did very well.Let me now come to life insurance. During the quarter, on account of lower base and strong growth seen from December 2020, the industry in April continued to show excellent growth, but with wave 2 of COVID-19 [ taking ] in May and resultant strict lockdowns, there was a slowdown in May and in early part of June. Despite these challenges, BALIC continued to do well both in absolute terms and relating to the industry.In Q1 FY '22, BALIC, with individual rated new business growth of 49%, was the fastest growing among the top 10 private players, who grew by 26%. As a result, BALIC's market share increased from 5.7% to 6.7% in Q1 FY '22 on this metric. In addition, BALIC's individual rated new business 2-year CAGR, [ where the base is of ] pre-COVID levels, stood at 22% versus private players' 2-year CAGR of minus 1%. And that is the highest in the industry.The annuity product launched by BALIC in Q4 FY '21 was very well received by the market. During the quarter, approximately 12% of the individual rated NB was from the annuity segment. Demand for retail protection was higher than in Q1 FY '21, was much higher. In Q1 FY '22, on account of higher prices, the demand had tapered off, but it had already started tapering off by second half of last year. The contribution of protection to the mix has sequentially quarter-on-quarter improved and is better than Q4 of FY '21. The risk appetite of the retail [indiscernible] seems to have increased, as evidenced by the strong demand for ULIPs. BALIC's ULIP contribution to product mix was 39% in the quarter.Guaranteed non-par savings were muted in the quarter with a small degrowth. The par segment, which had degrown quite substantially in Q1 of FY '21, has picked up and recorded a year-on-year growth of 165%; and a 2-year CAGR, comparing to the pre-COVID levels, of 24% per annum. All our main channels, agency; institutional business, which includes bancassurance; and BALIC Direct recorded excellent growth.Let me come to group business of the life insurance company. As compared to wave 1, group protection business was less impacted in wave 2, as it grew by 268% in Q1 FY '22. This was mainly on account of the lower base. In absolute terms, the business was slightly still below pre-COVID levels. And it's about 56% lower than Q4 of FY '21, as a major portion of the group protection business, as you are aware, is from group credit protection and which is largely dependent on disbursement of loans by banks and NBFCs. Due to the wave 2, such disbursements had also come down, and therefore this business will follow that metric. Overall, group new business grew by 92% from INR 397 crores in Q1 FY '21 to INR 762 crores in Q1 FY '22, which is above the pre-COVID levels. Renewals registered a strong growth of 27%. And as a result of these factors, BALIC's GWP grew by 48% to INR 2,516 crores.I will now [ call ] claims, especially COVID claims, as affecting the life insurance business. As mentioned before, the morbidity and mortality impact of wave 2 was felt across all age groups, more so in the 30 to 50 age group this time. Like the GI industry's health claims, BALIC and the life insurance industry too recorded significantly higher [ death ] claims on account of COVID-19 in the quarter. On the retail side, BALIC has settled around 1,600 claims pertaining to COVID-19. As a result, the overall COVID claim costs resulting for BALIC in Q1 FY '22 was INR 288 crores versus a [ mere ] INR 1 crore in Q1 FY '21. BALIC has adequately provisioned for probable future claims as things stand today and the best estimates available as on 30th June. And the total reserve as on 30th June stands at INR 304 crores. The reserves as of 31st March were INR 98 crore. The INR 304 crore is the net reserve.As mentioned before, we have declared our new business value in our investor presentation. From now on, we will be making quarterly disclosures of NBV. In addition to the NBV for the quarter, we have also indicated the NBV for the 12 months ended 30th June 2021. Due to high variations and the seasonality of business across quarters, I would advise investors to exercise caution while reading into Q1 NBV and the margins. We have mentioned in -- earlier in our calls that quarterly NBVs and NBMs may not reflect the possible year-end results. Investors may already be aware that, as a significant portion of life insurance business comes in H2 and especially in Q4, most of the fixed costs borne by the life insurance company during the year gets absorbed in the second half of the year. Please note that NBV on rolling 12-month basis does not indicate a forecast or expectation of FY '22.The new business value, net of expense overruns, the key metric of profitability for life business, increased to INR 25 crores in Q1 FY '22 from a negative of INR 14 crores in Q1 FY '21. For the 12 months ended 30th June 2021, the NBV was INR 400 crore, as against INR 212 crore for the 12 months ended 30th June 2020; and INR 361 crore for financial year 2021. A good news from the life side is that the 13-month persistency, which was somewhat lower in Q1 FY '21, has rebounded and has reached 82%, 5% higher than the previous year. Through initiatives such as driving auto payment, digital payments and collection of high-value nonpersistent cases, the persistency has improved not just for the 13th month but also across all cohorts.BALIC's PAT for the Q1 at INR 84 crores was lower than INR 130 crores of Q1 FY '21 on the back of higher COVID claims and reserving. INR 255 crore post tax is the impact, as well as the new business [ change ] because of the strong growth, which were partially offset by the reversal of income tax provision of INR 161 crores on account of favorable assessment order received for assessment years 2012, '13 and '14. These orders were received by us in the last week of June. Overall, an excellent quarter for BALIC both on the top line and on NBV.Finally, both insurance companies are financially among the most solvent, BALIC with 648% and BAGIC with 340%, [ and then ] well poised to weather any external adversity that might affect solvency. Both BAGIC and BALIC continue to utilize their digital properties and continue to emerge stronger through the crisis. We have seen a substantial increase in digital penetration across several parts of the distribution and service chain across both our insurance companies. Further details regarding BAGIC's and BALIC's digital capability are covered in the investor deck uploaded on the website yesterday.Let me now come to BFL. BFL has already had its investor call and hence we will only broadly touch upon the results. Quarter 1 was significantly impacted by the severe second wave. Both business and debt collection efficiencies were affected due to strict lockdowns across many parts of India. Despite this, AUM grew by 15% Y-o-Y to 1 lakh 59,000-odd crores. And in the absence of a third wave, the company expects quarterly AUM growth [ result ] to almost the pre-COVID levels. Core AUM accretion in Q1 FY '22 was approximately INR 4,100 crores. That's the absolute amount of accretion to the AUM, as against a reduction by INR 9,000 crores in Q1 of FY '21.The second wave caused a marginal increase in EMI bounce rates in Q1 FY '22 over Q4 FY '21. Average bounce rates in Q1 FY '22 were approximately 1.08x of Q4 FY '21. During Q1 of FY '21, the investors may recall that BFL's bounce rates have increased to nearly 2.5x to 3x the pre-COVID levels. On account of regional lockdowns, 4.63 million loans only were booked by BFL during the quarter. It's slightly less than 5.47 million loans booked in Q4 of FY '21. However, 1.88 million new customers were acquired during the quarter. And they are in line with the company's general guidance of new customer acquisition of 7 million to 8 million for the whole year.In Q1 FY '22, BFL recorded a pre-provisioning operating profit of INR 3,116 crore; and made loan loss provisions, including expected losses, of INR 1,750 crores, as compared to INR 1,686 crores. The second wave resulted in significantly subdued collection efficiencies, leading to higher stage 2 and stage 3 assets. BFL continues to balance growth vis-a-vis risk and collections while maintaining strong liquidity and capital adequacy. BFL carries a management overlay of INR 483 crore as provision for expected credit loss, as against INR 840 crore as at 31st March 2021.The gross NPA and net NPA recognized as per extant RBI prudential norms and provisioned, applying the expected credit loss method prescribing in Ind AS, as of 30th June 2021 stood at 2.96% and 1.46%, respectively, compared to 1.79% and 0.75%. As investors may be aware, BFL and other NBFCs are required to provide for expected credit losses over the life of the loan under Ind AS. We understand Ind AS is not yet applicable to banks. In their call, BFL has given the estimates of credit costs for the year to be INR 4,200 crores to INR 4,300 crores for the whole year. This compares with approximately INR 5,900 crores for the whole of FY '21. Overall, BFL's pre-provision profitability remains strong and at the moment, based on the available estimates, adequate to cover expected losses.PAT for Q1 FY '22 increased 4% to INR 1,002 crores versus INR 962 crores in Q1 FY '21. The capital adequacy ratio as of 30th June '21 was very strong and stood at 28.5%. And the Tier 1 capital also has crossed 25%. For Bajaj Housing Finance Limited, the mortgage subsidiary of BFL, the capital adequacy ratio stood at 22%.Finally, BFL's business transformation is on track for Phase 1 to go live by end of September or early October 2021. In summary, BFL is well positioned to navigate any temporary stress. And I would request investors wanting to have more information to go through BFL's investor presentation and transcript of their investor call.Before I close, I'll come to the highlights of our consolidated financial results, which have been put up in our press release yesterday: Consolidated total income, INR 13,949 crore for the quarter compared to INR 14,192 crore in the same quarter of last year, marginally lower; consolidated profit after tax, INR 833 crore versus INR 1,215 crore; Bajaj Finance consolidated profit after tax, INR 1,002 crore versus INR 962 crore; general insurance profit after tax, INR 362 crores versus INR 395 crore; and life insurance shareholders' profit after tax, INR 84 crore versus INR 130 crore.A point to note [ then ] is under Ind AS the insurance subsidiaries [ have ] chosen to hold a large part of the equity securities portfolio fair value through profit and loss account. Therefore, the unrealized mark-to-market gain on investments included in consolidated profit was only 25 crore for Q1 of FY '22 versus 330 crore for Q1 of FY '21. This is one of the reasons for the larger drop in the consolidated profit after tax, but I must emphasize that these are unrealized losses. During Q1 of FY '21, as you may be aware, equity markets have recorded a stellar growth after a steep fall in Q4 of FY '20. Therefore, year-on-year, this unrealized gain has reduced INR 305 crore on the post-tax profit. This does not affect the core operating profits of our businesses, as it is market linked.Final comments. With signs of the second wave [ ending ], all our businesses will pursue opportunities to grow while maintaining focus on risk. At the same time, we remain cognizant and vigilant of a possible third wave. Our companies have been spearheading vaccination for all employees. Learning from each wave, our companies have strengthened their digital and touch-free offerings to their customers and intermediaries. Backed by strong solvency well above the required capital; supported by healthy liquidity, continued focus on risk and collections, digitized processes and improved cost structures, we are confident of being able to maneuver through these difficult times.That's all for me from the opening remarks. I will now open the floor for questions and answers. Thank you.
[Operator Instructions] The first question is from the line of Ravi Mehta from Deep Financial.[ And sir ], there's no response. [ I'll move to the next ]. The next question is from the line of Prakash Kapadia from Anived Portfolio.
A couple of questions. On the life insurance side, [ GP ] growth has been fairly strong for us. So is it low base of last year? Is it some specific product demand or some specific channel where we are seeing traction? And what kind of momentum can we see for the rest of the year on the life insurance side?
Yes, I'll just briefly give an overview before I pass it on to Tarun. I think, if you see, in last few years, they have been engaged in a transformation process. This is a fairly intensive process of planning and execution, and in the process we have rebuilt our channels. We have expanded our banca partnerships. We have remodeled our agency force. We have focused on costs. We have significantly digitized, taking a lot of actions. More importantly, we have also launched products. And some product lines we were not present have also been launched during this period, like term life and annuity. And in all these, I think our products remain among comparable to the best in class. So overall, when -- the growth, obviously, year-on-year also reflects the more subdued conditions in that same quarter of last year. Relative to market, I think we are growing very strongly on the back of all these factors, strong performance across all channels, which is we cannot pick any one channel [ going ] that has performed better than the others but it's a combination of good product mix, strong channel performance and good execution. Tarun?
Yes. I think Sreeni -- has, directionally, I think, answered it. Let me just add a little bit more. So you are talking about whether it was only versus last year or the year prior. And has -- is it sustainable?
Right, right.
Right. So see, last year, of course, was muted for everybody. And most insurance companies degrew last year, same quarter. We actually did not. We had a flat first quarter FY '21. Last year, we grew by about 28% overall as a company, and this quarter, we've grown at about 49%. The reason is largely on the lines of what Sreeni has talked about. So all channels, and particularly [ I would say a lot of agency ] channel, have shown some good growth because this year we've been able to sustainably [ just calendar it ]. We've been able to hire advisers, which was a little of an issue last year because of the typical lockdown. And second, we've come to a situation as a company where our product mix has largely directionally stabilized, where we have a [ good sprinkling of par term ]. And if you look to last year, as Sreeni mentioned, the transformation was massive over a period of time and particularly showed some sign of stabilization, particularly last year, where our product mix and channel mix was changing constantly. So in 2015, we used to be 92% agency, but now we are around 44% to 45% agency. This year, this quarter, we were 48% agency. So I think this transformation is [ over ]. We were -- I mean we are now on a foundation for growth.What will it be like? I can't make any forward-looking statement, but I must say that the culture change, the change around business dynamics and large business calls that we had to take are behind us now. Our product mix is also very well stabilized, and we are now into all the buckets of need buckets that we look at. Our last entry to -- in need buckets was in the pension space, which was missing till, I would say, last quarter. Last year, we had -- Q4 FY '21 is when we launched it. And this quarter has -- we've been able to, of course, use that quite well. And because this product did not have any medical requirement, we have been able to [indiscernible] who weren't comfortable going into [ medicals ] take benefit of that. So we'll -- we've been able to -- tactical in that way and taking benefit of this product. So I think you should see good growth going forward, but that's all I can currently say.
Sure. That's helpful. Secondly, on the TP side on general insurance and motor, any update on pricing by [ IRDA ] [indiscernible] this year also months ago. Any updates from the regulator on the pricing?
You're talking about third-party pricing.
Yes, third-party pricing.
Yes. Tapan, would you like to take it?
Yes. Thank you for the question. I think that is something that you'd ask the regulator from the industry side. We have been asking for it. I think it is there and they have to come back on it. We don't have any information on that as yet.
Yes. And lastly, any update on the mutual fund license which we [ applied for in SEBI ]? It's been some while.
No. We have applied and we have a process of sitting with our regulators. Then because of COVID, things are moving a bit slowly. They have conducted their on-site inspection also. We are hoping to get the license soon.
The next question is from the line of Sanketh Godha from Spark Capital.
Sir, I have a couple of questions. One is the -- just wanting to -- wanted to understand the strategic reason why Bajaj Finserv [ sale ] 20% stake in terms of marketplace to Bajaj Finance. So just I wanted to understand the overall logic behind also that deal. That's first question. And the second question is -- maybe I can go one by one, if you can answer this. Then I have a couple of more questions on BAGIC and BALIC. [indiscernible].
Okay, okay. Let me take that question. See, Bajaj Finserv is not selling any stake to Bajaj Finance. Finserv direct, as you know now, as we told last year, we were fairly clear about the path of Finserv direct as a neutral, open-architecture marketplace. However, on the platform side, there is a lot of linkage between BFSD and Bajaj Finance, and Bajaj Finserv Direct is actually helping Bajaj Finance build its platforms as well. We believe there is a lot of advantages there, where Bajaj Finance, while they build this platform which supports its core lending business, will also require a strong, stable, long-term partner who can deliver what they want. Otherwise, it can get diffused in the market. And at the same time, as of now, Bajaj Finserv markets have already started dealing with others. So from a customer acquisition point of view, Bajaj Finance will be just one more partner for Bajaj Finserv Direct. And as time goes on, as more partners get added, obviously their share of the total pie may come down.On the platform side, Bajaj Finserv Direct will continue to support Bajaj Finance for some more time. And we believe this linkage between the two is very positive for both to deliver their own individual business goals. Therefore, as we grow, the incremental capital would be contributed by both Finserv, Bajaj Finserv; and Bajaj Finance. By the end of that period, we expect that the stake will come down to 19.9% for Bajaj Finance.
Okay, sir, got it, but...
It's more like strategic and financial investments in a significant platform provider.
Got it, sir, got it, yes. That's useful. And...
Okay. In fact, I must hasten to add that, over time maybe 3, 5 years from now, even this platform, we may offer as a product to other partners.
Okay, okay. So basically other industries or banks can also tie up with Finserv marketplace, offering the same solutions to them. That's the way [indiscernible], [ right, sir ]?
Yes, over time, yes, as they build their business and when they get to a [ reasonable ] number of customers and more partners. And they have already started adding partners, and over time, they will continue to add more partners because the risk appetite of each lender is different. And as they want and depending on the segment of customers, they could offer differential products. The idea is people come to us, and they can also compare products of others through our own ecosystem. And they can choose what they want, so eventually it will become a free marketplace where customers choose. And hopefully, our manufacturing entities Bajaj Finance, BAGIC, BALIC will end up getting a higher share of the profit pool if they compete very well, but they have to compete in this marketplace.
Got it, sir, fine. Sir, other question is on -- one is on life and -- actually it's one life and one on general. So on life insurance I just wanted to understand, [ I think ], the gross impact of INR 288 crores which we have taken with respect to COVID in the current year. Will the -- how much -- I mean it will be the number net of tax. Is it flowed through EV as a negative mortality experience? Is my understanding right? And second, I just wanted to understand these INR 304 crores of outstanding provisioning with respect to COVID. How much is IBNR? And how much is -- or is it complete? I mean, is IBNR only for the claims which are COVID [ claims reported ] in June or expected to be reported in June? Or you have provided anything beyond June also in this INR 304 crore number. That's the first question on BALIC.And second question on BALIC. I just wanted to understand the banca channel mix, yes, if you can provide Axis -- and especially with the new banca relationships like RBL, IDFC, KVB, how much they are contributing on incremental basis.
I think, the first question, I will give it to Tarun. And the second question, probably Bharat can give you a flavor on [ paid versus ] reserving, plus how the general approach towards reserving is adopted by BALIC.
Actually, conversely, Bharat could answer the second one...
[indiscernible].
[ Yes, Bharat. So yes ]. So basically, this INR 288 crores number, the net impact on the PAT is INR 255 crores for the quarter. And we will be declaring our EV on a half yearly basis, what we have agreed. So that will also flow to the EV, the [ network ] change. With respect to the overall [ clear ] outstanding of INR 304 crore, this is the net amount which we are carrying, out of which INR 98 crore was as of March '21. And in this quarter, we have created a INR 206 crore of additional COVID reserves. So that extent, INR 304 crore is a net amount, which broadly in terms of the gross claims can support up to around INR 425 crore to INR 430 crore of claims. So those are the 2 numbers. In case of any specific, I can answer that also.
So sir basically, given [ we issued ] around gross claims of INR 117 crores in the current quarter, so -- we can safely assume that around 3.5x to 4x kind of a number could be sufficient to come from that INR 304 crore number, but we don't want to put it in the balance sheet. That's the way I should read it...
Yes. So the -- basically what we have done, we have looked at our quarter, the past experience for this quarter, what Sreeni also mentioned, that during the May and June, we saw second wave impact. So we have kind of looked at various segment data, whether it is [indiscernible] retail, and this is our estimate like how much claims can come. So technically it can cover a claim up to maybe July, August, September, October but, as a lot of things, comes with a delay, so there is a projection which we have taken. So to that extent, it is, as on date, what we think that the potential claims can come. Obviously, it does not include anything on the wave 3, potential wave 3, if it comes.
Got it, sir. That's -- sir, can you break down that INR 117 crores or -- if possible, on individual business, group business and, say, maybe [ credit protect ] business? I mean if you are okay to give that data. [ And I just ] wanted to understand the [indiscernible].
Sure. Basically the breakup of the actual claims -- that INR 117 crores, that's a gross number. On the net basis net of [ RI ], the number was around INR 112 crore, INR 101 crore for retail. And the balance was for the group. So total claim is INR 112 crore which has come into the books. And if I remove the par element and the UL fund value option, then the net impact is INR 96 crore for the quarter. So we have INR 96 crore of actual claims; and another INR 192 crore, net of par COVID reserves, so hence total number is INR 288 crore of -- the total number. And net of tax, it's INR 255 crore for the quarter.
Got it, got it, sir. Perfect. And if you can answer that on, I mean -- or banca relationship with respect to new banks and [indiscernible].
Tarun...
Sure. Let me just step in on that. Yes, now we are into a lot more diverse set of relationships. And maybe next time, we will bucketize these separately and give more details out, but just to mention: Axis is about 18% of our top line. And after that, we've got a few partnerships actually over the last few years. This includes core small finance banks IDFC, RBL, Karur Vysya Bank; and of course, some small [ trade banks ] as well. So we will bucketize them in 2 parts: emerging bancassurance and partnership distributions. Put together, this segment has about 10% now with us, with various banks contributing [ too ], because, I think, as emerging in terms of the relationship, we've just started putting resources in the last 2 quarters of last year. They've now [indiscernible]. And we -- certainly we do want to move to a highly diversified distribution.
Got it, sir. Sir -- okay. So sir, out of 42 percentage of the total [ industry ] business, you are saying, 18%, this is Axis Bank in the current quarter, right, sir?
Correct.
Okay, perfect, perfect. All right, that answers my questions. And finally, on BAGIC, just one point, wanted to -- really to understand why there is such a gap between [ NPW ] and [ NEP ] in the current quarter given the growth has come back. Maybe if it's a slowing year, the -- I understand, but we reported 9% growth. Still, [ NPE ] number -- I don't know. It seems to be substantially higher compared to [ NPW ] number. Is it just contributed by [ 1 by 365 rule ]? Or something else which we need to understand the difference between [ NEP ] and [ NPW ].
Raman, would you like to take that? It's about [ NEP ] growth compared to last quarter.
So Sanketh, there is no change we've done. It's simply [ 1 by 365 ]. So it's basically what is written in the past. So no other reason beyond that.
Well, I think business mix also changes. Some are low retention, like high-end corporate business. So that -- as the business mix changes, the earning rate also changes. This is [ learning part for the course. I think, across quarters ], this will get normalized. [indiscernible].
Got it, got it, sir. Sir, finally, on the 2-wheelers, we saw very strong growth. I just wanted to understand the mix of -- how it is moved to 2-wheelers given that we have probably ended up reporting very strong growth. And related item, what could be the likely advance premium accretion which has happened because -- the way we are seeing strong growth in two-wheeler segment?
So the total advance premium outstanding is about 1,100 crores as we stand today.
Okay. And to the mix, is that okay to say, sir?
See, we've not been disclosing that, Sanketh.
The next question is from the line of Bharat Shah from ASK Investment Managers Limited.
I continue to be delighted by structural improvement in life insurance part of our business. And on the general insurance, our prudent and wise approach continues. So those are both most pleasing aspects in the way insurance business -- both the businesses are shaping up. My core question is why general insurance, given the nature, is a shorter-term [ pull back ]. And especially, some segments like automobile are more closer to commodity. And therefore, this [ probably is more push shortly ] in trade, but life insurance and some of the segments of the general insurance should be more [ pull orientated ], and life insurance in particular being a longer-term contract, where solidity, reliability of the insurers are very important issues from the perspective of the customer.On the other end, when I see the brand-building effort and brand-building advertising, mostly by aggregators, we -- you'll see [indiscernible] some policy reserves. [ And other go with the times ], so which somehow -- [ this is a comment ] of the industry in general, not just Bajaj Finserv, but it gives an impression that aggregator seems to be coming [ a brand ], while the actually underwriters of the insurance contracts are [ kind of into the discount ]. So I was curious to understand the brand building. [ Did it pull ] sector relationship-creating nature of insurance rather than being pushed as a commodity and where the power again over the period [ then shifts ] to the aggregator?
Yes. I mean I...
I heard that, Bharat. Your point is valid, but if you'll see across the world largely, life insurance is a push business, heavily -- I mean basically distribution is a very important component. While some segments of non-life tend to become pull businesses over time, especially motor insurance because it's bundled with -- and it's statutorily required. It just -- there is some amount of pull. And health insurance, in certain times when there is a scare factor, it becomes a pull business, but in life insurance it's a long journey. Over time, I think, if you compare what, I mean, life insurance businesses are doing now with what is happening 5, 7 years ago, they have made significant improvement in customer experience, significant improvement in disclosures to customers in terms of the ease of buying, in the ease of owning, in terms of digital processes. I think it is not comparable at all, what was happening 7, 8 years ago and what is happening now. Even if you [ see them sending complaints, I mean, they've ] come down quite substantially. So over time, retention is very important, how much you are able to retain in terms of persistency of the existing contracts. Plus are you able to get more money from the existing customers? Because that is the ultimate sign of a pull business.I think, on all these fronts, for example, BALIC Direct, which is a channel we set 3 years ago, is working quite hard. I think their persistencies are very high. We are working on portfolio management type of structures there, and we believe that we'll continue this effort. Over time, we will be able to acquire more customers, keep them and also get more money from them. Unfortunately, in the case of life insurance, the role of bancassurance is very high. People tend to keep a lot of money with banks in terms of wealth management, [ PMS ] and various other things. And therefore, banks have the data edge. They already have customers. They already know about them. They know their spending habits, their saving habits, so they tend to have an edge; and therefore, that channel of distribution is very important. Having said that, the banks are not going to [ give ] it cheap either. They have a choice of 23-odd life insurers and they have a chance to play with them. So I think this will evolve. That is my take on this.In terms of the aggregators in life insurance, I think largely, on term life and all, they will do much higher. Their share of the total market is still not very significant. It may be under 3% or 4%. In terms of general insurance, yes, in motor insurance we have seen in U.K. and all that aggregators do tend, over time, to dominate the new car purchases, but in India it is still dominated by OEMs and we have a very strong presence there. Tarun, Tapan, would you like to add anything to that?
Let me just step in. So Bharat, it's an interesting question, and brand building is particularly close to my heart in the life sector. And you are right that it is a very critical component particularly of the life sector because a building of a brand requires lots of elements that come in. And I think that's where the nuances also play out versus the aggregator and the various manufacturers. So for example, the best way of building a brand is like experience one customer gets with you with the transactions. Now unlike banks, NBFCs and the GI business, LI is not very heavy on transactions, so experience is what you see on a lesser action basis. Every interaction, whatever little they have with us, is -- has to be spick and span, has to be really convenient. And as Sreeni therefore said, that -- therefore the investment in marketing platforms becomes critical.The difference between what you're talking about, aggregators and the manufacturers -- and I've answered it for manufacturers [ in a generic way, and maybe a little bit for us ]. It's that the aggregators usually want to go on mass media; and there, [ there's always comparisons, right ]? So they're just comparing. They just want eyeballs coming. The moment the eyeballs come in, then the brand of the manufacturer comes into play. And of course, there is a pricing element given the fact that it's a very narrow product that is at play. The difference between us and the aggregators is that our spends are quite wide into channel marketing; into multimedia, which could be a lot more digital. It could be a lot more specific, the segments we want to get into. So for example, in BALIC we've been -- we've actually been spending a lot on marketing. It may not be [ available ] in general to everybody, but it is -- I believe we are making impact in the segments that we want to. As an example: In this quarter, and I talked about it a little bit, we were largely focused on building the brand on the annuity side of the business, which we introduced in the last quarter of -- as a product, last quarter of last year. And this has really paid off. It's 12% of our -- this quarter, the business, so actually we got a good ROI on that investment. And we've been investing in platforms. We've been building in experiences that customers get. We've been building on the data management behind it. And as a result, in fact, we've been spending a lot on marketing, whether it is on mass media and all, that usually is the media mix that we intend to play with. Usually, for us it is -- the first quarter is not the best time to get onto the mass media. We believe it's not justifiable on the number of transactions you see, while as you know, the aggregators may actually be looking for various -- they may have various reasons. They may also be going for listings, so -- which may not be the case for us. So the reasons are different.Our overall underlying [indiscernible] is that, when somebody looks at a life insurance product, we should be present at that very moment with the right channels, with the right motivation or the right product with the distributor, right knowledge with the distributor and the right offering for the customer. That takes a -- that's a 360-degree way of looking at service marketing, which is very different from what you see play out in the mass media. So it is classical service marketing.
Tarun, I'd just like to highlight the life goals approach that we took a few years ago [indiscernible].
Yes. Maybe I can talk about that as well. I think we -- yes. So we changed our entire stack to life goals and life goals enablers. That requires a very systemic investment over a period of time, and we've only been increasing that investment. And what we've been focusing on is product marketing, particularly, for various life goal segments. We've -- like I said, we've -- into all the relevant segments, with the annuity business falling in place. And that is what we will intend to do for the next 5 to 7 years. We're very clear about that. And our platforms are going to do the speaking a lot. The other bit, if I might add, is also how we go with pre-approved offers to existing customers. That's possibly the most efficient to keep our costs of acquisition low. And that is something -- if you're not a customer of us, of course, you'll need to buy a policy, Bharat. And then you'll see us more often. So these are very targeted marketing plans. I hope I've answered your questions.
Sure, but if I take each of those elements. I mean 3 critical elements: [indiscernible] distribution [ and if you need them ]; customer experience and service [indiscernible] enhanced by digital journey; and brand building and pull sector. So customer experience part, I understand what you are seeing, yes. I also understand the platform-building efforts to widen and deepen distribution capability, but I'm seeing [ softest aspect ] of building the brand. We -- not just the existing customer, but a potential new customer is favorably inclined towards insurance brands rather than being just machinery [ basis ] sold only through the distribution mechanism. That brand-building [ second ] effort, that whenever a particular prospective customer is ready, he kind of thinks of first name of recall -- let us say Bajaj, a life insurance solution. That brand-building effort, I am seeing, seems to be not visible and not just for BALIC and portions of the business of BAGIC. In general for the insurance industry, it seems to be kind of handed over on later to the distribution channel. Well, that is the impression I'm having, may be wrong...
No. So I think there is nothing right or wrong in this, Bharat. It's all I would say is, if you -- there is an X amount of money to be spent and Y amount of output to be taken out of that, so we have to balance out over the year and over the life of our offerings how we play this. So this, [ we'll wary ], but if you are seeing it as a trend for all life insurance companies and lots of life insurance company are setting up pots of money and they're not maybe investing -- there must be some logic behind it. That's what I will only, I guess, allude to...
Okay, this is Tapan here. If you look at -- so Bharat, in terms of brand for BAGIC and all the brand reports you'll watch. The BAGIC brand is rated as the best brand in the general insurance market, way above some other brands. So -- by independent reports. Whenever you get a hand on that, you'll be watching that. One of our philosophy has been, because -- if you look at the general insurance industry, claims happen. The frequency of claims is high. Our obsession has been that we should be the best claim players in the Indian market. And if you see, over time, all the awards that we've won or all the ratings that we get, we are rated as one of the best claim payers in the Indian market. And that is what our obsession has been. For us, [ our products is not ] that we are selling a policy [indiscernible] we're settling claims in the best possible manner to our customer, in the fairest possible manner. And the best claim experience should be there. And we've been doing it consistently, and that is why our brand has a very strong recall in terms of where we are.And that is the point when you say, even if you have aggregators in the market, aggregators can only sell policies. And they can do a price comparison, but the experience of the policy when a claim happens is up to the manufacturers, and that is where the difference comes in. And that is where -- as [ a Bajaj general insurance company ], we are focused very high on that. And if you look at all brand reports and all, you will find that Bajaj general insurance companies is way above any of the brand in terms of the general insurance industry. And if you look at our claims settlement and the positioning in the market, as far as claim settlement is concerned, and we look at any kind of survey reports, [ all you're going to do is ] find us among the best in terms of doing that. So it's a combination of it because in general insurance you have claims. You have experiences, and the moment of truth keeps on happening. It is how you focus on that. And that is precisely why it's a good claims settler -- and do it very fairly. I don't think there's a major threat from aggregators [indiscernible] because they maybe will sell a policy cheaper -- at a much cheaper rate, but when an experience of a claim happens, that is a moment of truth happens. And that is where good companies get differentiated from average companies.
Sure. No, I appreciate. Just one last small point I'll make: So from all that I heard, what I surmise is that brand-building effort is part of our conscious recognition and it is something that we are focusing on. And brand building is not something left as an accidental happenstance, but it will be a long-term kind of a conscious strategic choice. And secondly, the brand-building spends and the efforts are in sync with the return on investment or ROI equation compliant. Is that a fair way to summarize what we -- what I heard?
Yes.
Yes.
Bharat, I think you hit it spot on. BALIC has chosen life goals as their main plank on which they will deliver all this. BAGIC has chosen care as the main plank on which they will do that. In the short run -- customers will take time to appreciate it, but investment into these brands will continue, not just through the traditional means. I mean you may not see too much on the above-the-line TV and all those video advertising, which are very short recall nowadays, but we spend a lot on digital marketing, on mobile apps, through multiple channels. So I think it's fair. Anything to add, Tarun, Tapan on this?
[indiscernible]...
[indiscernible]...
I think you summarized it quite well actually, Bharat.
Yes. You actually summed up well, Sreeni, [ the initiatives. Also what is -- Bharat said is also right ], but insurance brand building is something which is very interesting, so unlike maybe an FMCG brand building. An insurance brand building requires trust, and trust does not happen like in a micro second. It is led by demonstration over time of what we have said and how we stood for it. And it -- over time, it gets built. So if you look at powerful insurance brand across the world, you will find most of them have stood the test of time and delivered to customers over time. I think this is where that is relevant. And if we look at what Tarun said or what I spoke about, I think, if you try to look at that angle, that comes out very clearly, that building long-term trust, staying true to our commitments, delivering on the ground and being with the customer in times of need and ensure that they have a very good experience is what builds a long-term brand, along with obviously the activities that we do for marketing which is there. And digital is what we have been focusing on, on a pretty high note simply because, if we look at customers today -- I think they watch more digital views than on television. I think that is what the research also is showing. And we -- it's a combination also. We also use television. So we will keep on building up. Insurance brands, over time, become very, very powerful if the commitment to what they've been promising has been there.
Yes, right. So I'll just maybe -- I think all of us have added significant to that. And Bharat, it's a very interesting question as well, which is why you see the answers coming in from everybody. Maybe I'll just close with just 2 statements here. So services, a number of times, your brand is as good as your last interaction. That is 1 statement, which is where -- what Tapan has made -- said is very important in the way we play [ our claims ]. The second is the Bajaj brand. I think there is enough trust behind that in any case, so I think we ride on both.
The next question from the line of Hasmukh Gala from Finvest Advisors.
My question was pertaining to the digital initiatives which are being taken by the group. Now what I see is that individual companies have done [indiscernible] digitization, automation and things like that. BALIC has done separately. BAGIC has done separately. Bajaj Finserv has done separately. Bajaj Finance has done separately. And now you are, I think, probably trying to put everything in Bajaj Finance direct. That is what I would like to know.
Okay, let me get this clear on this aspect. One is you see there is a fundamental difference between some of these businesses. If you look at insurance business as compared to, say, the lending business: The lending business is largely -- I think customers come to -- there because they need money. So you buy a house. You take a home loan. And therefore when the customer comes in, the rest of the entire investment goes into how to keep the customer there, how to make them use Bajaj Finance when they need money again. And now the new transformation will also ensure that, while they are in our ecosystem, they'll keep getting engaged through the acceleration of the payments and other platforms that we are building. In the case of insurance, it's a journey. Once a customer comes, he can't say that, "I don't need insurance tomorrow." They have to stay -- most of the insurance, they have to stay through the -- through their life, whether it's health insurance, life insurance or even car insurance for as long as they own a car. Therefore, the approach has to be different. Insurance continues to be heavily intermediated businesses. And there's no need to look down about intermediated businesses, whether it is agency or bancassurance. We have some fantastic intermediaries who actually deliver substantial value to both the customer and the insurance companies. Therefore, the approach has to be different. At the back end, we do have at the group level, through the efforts of Finserv, councils where -- technology partners, where they discuss technologies that are happening, where we also share best practices across the technology teams. So therefore, given that the -- while we allow companies a certain amount, I mean a substantial amount, of freedom in doing what they want, at the back end they also collaborate quite a lot in terms of the platforms and the resources that they use. The individual strategies and delivery is obviously left with the companies.Finserv market is not a digital platform for the group. Initially when we set up the company, there was a thinking like that, but it is an open marketplace. To the extent that there is some commonality with Bajaj Finance, they are providing the platform to Bajaj Finance, but in terms of insurance, they will just be dealing in APIs. And I mean the insurance company's role is largely to provide the APIs, the risk algorithms, the products. And the customer insight will remain with Bajaj Finserv Direct. So it is not a technology platform for the group. It is a front end of a digital marketplace. So I hope I got that clear.
Yes, yes. We said in our press release that we are contributing 342 crore, and Bajaj Finance 284 crores. So all the initiatives, to take them to the logical conclusion, how much more capital we will have to provide and whether you will go down below 20% or 19.9%.
See, that, over time, we have to see [ how actually this ] business is still a start-up. The next 2 to 3 years are very critical. Whatever numbers we have seen in our stock exchange communication indicate this is the expected amount of capital that we feel will be required for this year and the next year for Bajaj Finserv Direct. Now there are 2 segments to it. In this business, we have to continue to invest in new capabilities, new investments, new partnerships. At the same time, the existing customers who come in, they need to be in the ecosystem and transact with us across the entire marketplace, whether they want to -- so it is like a supermarket. You can buy and get loans. You can get a credit card. You can get insurance. You can buy investments and even participate in the e-store. So this is a marketplace. So you'll have existing customers. And so they will look at it both differently. As customers come in, they -- we'll increase the engagement levels with existing customers, offer them greater choices and campaigns and whatever is needed to do that. And there will be a new investment required when we reach a scale and what we call a normalized level of growth.So as of now, this amount that we have mentioned should be sufficient for us in -- for the next 2 years. And once -- because even now it is, I would say, about 50% R&D and 50% business because we have seen green shoots which are quite substantial. And we like this business quite a lot. We will continue to invest. Now in the future, all possibilities are open. Will there be other kind of partners entering this? Maybe. What type of partners? What capability they bring, what purpose they are coming in. We have not taken a decision at all on this, but I think our mind is open. This will remain an [ internal ] marketplace and we will build it up with a scale that we think is good. Obviously, as a business, there are a lot of risks, and we will play it as it go along. So you have the manufacturers as -- at the back end. You have this marketplace at the front end, and underlying all this is the Bajaj brand and long-term value.
Okay, okay, okay. That's fine. My second question is on margin. Do you have any rethinking on crop? Because we didn't write any crop. It's -- in this quarter.
No. First quarter, there is no crop. It's basically kharif season starts in July, and rabi is in January. So I think Tapan can give a flavor on that, yes.
Yes. So if we look at crop insurance. It -- this quarter, the next one, we will see a pickup here happening. It depends on how the [ vendors ] gets done, how the announcements happen at the government. Like Maharashtra came in later this time. Earlier, they were not planning to come in. Obviously [indiscernible] a bit later. So you'll see the booking happen this quarter.
The next question is from the line of Nidhesh Jain from Investec.
Firstly, on the life insurance, 2 questions. One is our margins have improved quite significantly over next 2 -- over last 2 years, around 12%, 13% VNB margins, but some of the companies which are having bancassurance partners are operating at around 25% margin. So do we think that, over next 5 -- 3 to 5 years, that the bridge between -- the gap between our margin and some of the larger players' can reduce, over a period of time, given that our product mix has now already been stabilized quite a bit? Some of the high-margin products like protection and annuity have already been forming decent share [indiscernible] mix. So do you expect the VNB margin gap between [ us and our peers ] bridging? And what could be the drivers of that?
This is directionally what we would like. Now we can't compare exactly number to number because part of the margin is highly volatile, especially on the non-par segment where there is an element of interest rate, while a lot of us are -- hedge rate and try to reduce that volatility. I think the margins will fluctuate depending on your business mix. Obviously, as part of our first level of transformation, as Tarun said earlier, that's more or less complete, but if we continue to grow like this over time, our fixed costs will get absorbed over larger volumes. And we should see that the net margin should improve. At a gross margin level, we are already very close to the top 4, 5 players. The pure captive banks with single partnerships have -- definitely have an edge because they are not offering multiple companies. And they have an arrangement between their own group companies, but other than that, I think, if you compare with any other multilevel which do not have a composite partner and who are dealing with independent banca tie-ups or building up their own agency for their direct channels like we are doing, we think we are already on the right track. Tarun?
[indiscernible] I think largely answered by Sreeni. I'll just maybe take a minute more to say a few things. I think Sreeni touched on the fact that, as we grow faster, which implies scale, there is still a significant scale that we can fill. And that's the gap. Scale also has an underlying [ benefit of as well activities ] getting better, which show up in bottom line. Product mix, we are largely there, but now we have to figure out how can we take more out of this. The other movement is on the customer segments because customer segments do have an impact on persistency and on ability of customers to be -- to invest and buy more. And that is something we still have to work on and we'll continue that part. So it's a journey. And I think, the more and more we get in the details, the more we will get better. And every company is working to its strengths. And that's all I will say.
Sure. Secondly, what will be the provision for future claims from COVID? So the provision that we have provided -- entirely IBNR? Or we are -- also made some provisions for the future claims after Q1, which may come on account of...
Yes. As of now -- I think Bharat has already clarified in great detail in an earlier question. Maybe you missed that, but it includes a provision for all the actually reported claims. It also has what we believe -- using our analytical models, what we expect from the current wave of COVID. We have not planned for -- because nobody knows whether there will be a third wave, whether that will be intense, how intense it will be. These are anybody's guess, and therefore as it evolves, we will be looking at those. Having said that, I think one of the great strengths that we have is our surplus solvency. These are difficult times when capital is king, and we have enough of that. And we hope that, that will help us provide the right sort of cushion for this.
Sure. And that's -- on the general insurance business, in the motor segment specifically, if I look from a longer-term perspective on last 7, 8 years data: We have lost a bit of market share in the motor segment. And within motor segment, the market share loss is more pronounced in the [ mobile holding ], while I think in motor third party we have gained market share. So any particular reason why in that segment we have lost market share over last 7 to 8 years?
There is no specific answer to that question because motor is not very simple because motor has got many, many segments. There are geographies. There are risk policies of different companies. There are smaller players who will get into motor business in a big way because it's the most visible and easier to sell, among all others, for a start-up company. So competition will be more intense there. However, we have been growing in the segments that we like. Yes, last couple of years, commercial vehicles have been a bit slow on the segments that we like, particularly passenger vehicles, but I can add -- ask Tapan to actually add flavor to that, yes.
So one way to look at it is that, if you look at it in the GI business, any company which just start new would start with a motor [ base ]. So we look at all the new companies. You will see that motor [ base ] is significantly very high in their portfolio because, as discussed earlier, that's the easier business to acquire and move forward. So if you see a number of players move up in the insurance industry, the motor market share will get distributed over time. So not only for us, across, you will see this happen. The smaller players would gain more market share. And since it's a limited pool, you will see a shift in market share happening. Now that is not important. The important thing is to see that -- is the shift happening in businesses which the company prefers to have or not. So we look at BAGIC. We have been a strong four-wheeler player over time, and there we have a strength. And you'd actually be seeing that, over time in the years, quite a few years, we've gained market share. Some, we will have lost. Mostly, we'll have gained. If we look at this quarter, our [ target ] market share, four-wheeler, we have gained substantially.Then the other part was that we were pretty good in the commercial vehicle space, in an area in which we have a substantial market share. And obviously we've made good profits there, which the markets have observed, and so more players have come to that space. So when you have more players coming to the space, the market share will get distributed. So it's a normal phenomena which will happen for motor business as you progress and go forward. If the market, the overall motor, keeps on moving up, I think the industry would keep on gaining from that perspective, but I don't think that is something that would be not what we have thought through or seen through. So when you have limited players, the same market [ shall be ] divided. And BAGIC has been a strong retail player from the very beginning compared to its peers which came to retail later. So obviously our retail presence was much, much higher. [ And in the same pool ], other players will also try to move into this. So that should be the way to look at this. Did it answer your question?
Yes, yes, yes. And then the health insurance, what I see, that SAHIs are growing at almost 40%, 50%. Some of the SAHIs have become 10x of our size in terms of retail health insurance, while they have been there for 20 years. [ They have been in the industry ] for 10 years. So why do you think multiline insurance companies have not been able to scale? I know there is a regulatory arbitrage in terms of agency channels, but I don't think that completely explains the differential in scale that they have been able to achieve [ as to this ].
No. I think your answer -- question has the answer itself. So if you look at the scale of SAHI in terms of -- and look at the AMC portfolio, you will see a substantial amount of life insurance in the SAHI agency, if you look at the application of that; and the health insurance space. So I think the arbitrage that they have of being able to sell health through any, yes, agent is a very powerful arbitrage. We should not underestimate it and not say that it is not substantial. It's very substantial because, see, to build an agent, you acquire an agent. You train the agent. You teach products. You get the agent license. It's a task and a journey. And then as the agent matures -- and then they start selling. So it's a journey when you have an agency. And that's why agencies are a pretty intense channel to build.Let's say if your arbitrage is pick up any agent and start selling your products. And especially, let's say, if I look at the SAHI group of companies -- and there a major agency force comes [ from the life from ] agency and that they can do without the requisite infrastructure, putting it up, that gives a huge boost.So if we look at number of agents of some of the big-size groups, it's that runs into like 2 lakhs, 3 lakh agent. And look at any general insurance companies, the largest ones, like [indiscernible], they would have like 50,000, 60,000 agents, which take a lot of time to build this force. So that arbitrage is a big arbitrage, and that does give a huge push to business which will be there.
One more angle to this is that we are composite insurance companies. We -- I mean, ultimately in the long run, general insurance is a business of risk. And therefore, having property and casualty in the right mix is what composite companies do. So we're likely to have catastrophe and fire. You could make money in motor. Or when you have -- both motor and fire, there are issues, you could have health growing. And we saw that last year.A monoline will have to achieve a much higher scale to achieve the same level of profitability. Most of the health insurance business is low float like motor third party. That kind of benefit, you don't get. So therefore, the float benefit is also much lower, but they are specialized. It is like comparing a composite player with a niche player because they will be selling only one type of -- one group of products. In that, they will get more specialization, no doubt, but in our case we will have to continuously manage our risk. And that is what gives us more profitability. If you have seen our combined ratios or profitability or ROEs of the top 2 or 3 insurance companies, we are really up there.
It is the last question, from the line of Mr. Nischint Chawathe from Kotak Securities Limited.
Two questions from my side. Maybe you've touched a little bit upon it, but on the same point about...
[ We seem to have lost you ].
Am I audible?
Yes. Now you're audible, yes.
Yes. On the same point on the health side, did you consider setting up a health subsidiary separately to kind of capitalize on the arbitrage? Or you have kind of -- [ or probably had like -- it looked like there's too much of products ] because it's a stand-alone [indiscernible].
No. We -- I think, at the BFS level -- because as of now, [ IRDA ] is not very clear whether an existing insurance company should set up a subsidiary or not. So if you know, some of the mergers have happened also. I think even the stand-alone company has been merged into the other company. At a BFS level, we have considered that, but the arbitrage and all is not a long-term thing. At some point, it will go away. And if you see, last few years, the composite companies have also been growing their health portfolio quite well. So it is something we considered. And obviously we do have a joint venture arrangement with Allianz. And those partners, we do discuss this, but we have not taken a decision to set up another company yet.
Yes. And just pertaining to Finserv direct, [ where ] Bajaj Finance is kind of it's -- I mean the company is working closely with Bajaj Finance. And I think now Bajaj Finance is also of -- investors in that company. If this is a kind of an open-access platform where you expect other lenders to come in, on the face of it, wouldn't it be like that Bajaj Finance will always have an upper hand over you?
Why would they have an upper hand? See, a 19.9% stake does not give them any upper hand. It is only because of the strategic nature of the platform they are building for Bajaj Finance that they will share. On the customer acquisition, Finserv direct does its own decisions. They will build more on this thing over time. Obviously, as the company started, they would have the advantage of some things like e-store [ and all. ] They did borrow on Bajaj Finance's network, but as time goes by, they will start adding more partners to every line of their business. You can see already in insurance they have other partners. Some of them are not partners of Bajaj Finance as well. There are limitations on the insurance side because of the regulation that they can't become a broker, that they will go with a corporate agent model only. Similarly, on investments, they will build.So yes, it's a completely different thing. I don't think a stake means that they are not independent. I mean, if you see mutual funds, every distributor is open market, right? And nobody is pushing any particular mutual fund. So the stake is not to control Bajaj Finserv Direct. It is only to ensure that continuity of support is there. And the future is they are -- in terms of the technologies, the platform, they will be collaborating.
And even in case of future partnerships, you might want to kind of -- or the banking partner might kind of consider or you might kind of consider on the -- an investor as a banking partner or an industry partner.
As I said earlier, it is not -- as of now, we cannot take a call because, until this company reaches a scale, we may not consider that, but it is not ruled out. That's all I can say now, yes.
Thank you. That was the last question. I would now like to hand the conference over to Ms. Bunny Babjee for closing comments.
On behalf of JM Financial, I would like to thank Sreeni, [ sir ]; the staff management of the insurance businesses; and all the participants for joining us on the call today. Thank you and have a good day.
Thank you all. It's been our pleasure.
Thank you. On behalf of JM Financial, that concludes this conference. Thank you, everyone, for joining us. And you may now disconnect your lines.
Thank you.