Bajaj Finserv Ltd

NSE:BAJAJFINSV

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, -- good day, and welcome to the Q1 FY '24 Earnings Conference Call of Bajaj Finserv Limited, hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Sameer Bhise from JM Financial. Thank you, and over to you, Mr. Bhise.

[Sameer Bhise, analyst]

Thank you, Michelle. Good morning, everyone, and welcome to the 1Q FY '24 earnings conference call of Bajaj Finserv Limited. First of all, I would like to thank the management team of Bajaj Finserv for giving us the opportunity to host the call. From

Bajaj Finserv, we have Mr. S. Sreenivasan, CFO; Mr. Tarun Chugh, CEO of Bajaj Allianz Life Insurance; Mr. Ramandeep Singh Sahni, CFO of Bajaj Allianz General Insurance; Mr. Bharat Kalsi, CFO of Bajaj Allianz Life Insurance; Mr. Ashish Panchal, CEO of Bajaj Finserv Direct; and Mr. Devang Mody, CEO of Bajaj Finserv Health.

I would like to now hand over the floor to Mr. Sreenivasan for his opening comments, post which we will take the Q&A. Over to you, sir. Thank you.

[S. Sreenivasan, executive]

Good morning, everybody. Well, I welcome, everyone, to this conference call to discuss the results of Bajaj Finserv Limited for Q1 FY '24. As before, in this call, we will largely be concentrating on the consolidated results, as well as the results of our insurance operations through Bajaj Allianz General Insurance and Bajaj Allianz Life and their material is a stand-alone results of our company, BFS, which is another major subsidiary of ours.

Bajaj Finance 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 also have with us Devang and Ashish from Bajaj Finserv Health and Bajaj Finserv Direct. And if you have any specific questions on those businesses, they will answer those.

We will not be taking any questions on the status of Allianz and the state of our insurance companies. The status has remained the same as at the end of the previous quarter, and there is no change there.

Any statements that may look at forward-looking statements are just estimates and do not constitute an assurance or indication of any future performance as such.

Remark on Ind AS, while BFS required its tranche and is compliant with Ind AS, the insurance companies are not yet covered under Ind AS. We have prepared Ind AS financials only for the purpose of consolidation. Accordingly, for [indiscernible] stand-alone numbers reported are based on non-NDA accounting standards as applicable to insurance companies.

Our results, the press release accompanying the results and our investor deck have been uploaded on our website yesterday. And I hope most of you would have had a chance to go through that.

Let me first put in a word on Bajaj Finserv Asset Management Limited which launched its first mutual fund during the quarter. It filed for its first of its 7 products with SEBI in March '23 and April '23. And the first 2 funds, the Liquid Fund and the Overnight Fund, were launched by the end of June '23, while the money market fund, NFO, was launched in July '23. The NFO is its first. And it has recently opened on 24th July, the Bajaj Finserv Flexi Cap Fund with a mega trend strategy. That is currently ongoing.

Over the next few months, BFS-AMC will be launching other categories of funds, including balanced, large and mid-pricing PSU and other Trust Funds.

Let me now move to the update on performance for Q1 of FY '24. Macroeconomic conditions were stable during the quarter with a higher level of business confidence and overall business conditions were very conducive. Our companies have once again delivered very strong operating performance.

Let me start with BAGIC. BAGIC regained retail growth momentum with broad based growth across products and channels. New initiatives, including the geo expansion initiated in FY '23 started yielding results. For the quarter, BAGIC reported a strong growth of 22.2% in growth direct premium income, GDPI has taken the private sector growth of 21.2% and then industry growth of 16.5%. Excluding the tender-driven business, which are crop insurance and environment health schemes, the GDPI growth for the quarter was a very healthy 26.7%.

In Q1, BAGIC continued its momentum with growth in motor business recording strong performance of 26% Y-o-Y growth in private cars and 2-wheelers. Growth held and BAGIC recorded a 100% loss ratio in FY '23, continue to grow strongly with a 43% growth. Commercial line fire, engineering, marine and liability continued the growth momentum of earlier years, recording 22.1% growth. The growth in commercial lines was aided by BAGIC's strong bank insurance network and multiline agency channel supported by strong underwriting and large reinsurance capacity for covering large risks. BAGIC was able to capitalize on its strong presence in smaller towns and rural areas through its bank virtual satellite offices.

In terms of retail health, BAGIC grew 11.9%. However, in terms of fraud and reimbursement plan BAGIC continues to be cautious and is focusing on strengthening the use of analytics and processes to control fraud and focus on growing in profitable areas.

Note on earned premium. As you may be aware, when growth is strong, the earned premium grows less than the gross premium as premiums are deferred across the tenure of the policies, while costs are returned upfront. As a result, the earned premium grew only 5%, but this unearned premium is expected to get mostly earned in the subsequent quarters of the year.

For Q1 FY '24, the loss ratio was lower at 74.3% as against 77.9% in Q1 of FY '23. The improvement in loss ratio was attributable to lower claims in motor and commercial segments, and this after absorbing losses of INR 10 crores from Cyclone Biparjoy and its catastrophic losses.

As a result, the combined ratio for Q1 FY '24 was a healthy 100.7% as compared to 104.6% in the same quarter of the last year. We expect this will be around the best when compared with our composite general insurance companies.

The market remains intensely price competitive. This result, we believe, displays BAGIC's commitment to a balance and profitable growth on the back of strong sourcing, risk management and controlling relapses.

The profit after tax of BAGIC was INR 415 crores in Q1 FY '24 versus INR 411 crores in Q1. The muted track growth was attributable mainly to lower realized gains from sale of equities, which is offset by higher current income and lower combined ratio. Excluding the effect of realized gain, the core operating profit before tax would have been increased by over 40%.

BAGIC's AUM grew 13% to INR 28,611 crores as of 30th June 2023 versus INR 25,362 crores on 30th June '22. The floor generated, which is represented by the increase in AUM was INR 3,249 crores during the last 12 months, which includes advanced premium as at March 2023, which was INR 1,678 crores. Strong growth in 2-wheeler and EV business helped in this growth.

Another key highlight of this quarter was the contract of the first ever general insurance festival of India in Pune, which won an entry in the Guinness Book of World Records for the largest attendance at an insurance conference with over 7,000 agents attending the event. The event, which is one of a kind, also reiterated a significant connection that BAGIC has with the agent community. Going forward, we would hopefully want to make it an annual event.

In summary, it was a quarter with intense competition and BAGIC has performed very well with solid growth supported by strong underwriting performance.

I'll go to BALIC next. During the quarter, BALIC continued its growth trajectory and reported individual rated new business premium growth of 15%. Again, the industry and private player growth of 2% and 8%, respectively. The market share in IRNB terms, therefore, increased from 8.3% in Q1 FY '23 to 8.8% in Q1 FY '24 among private players, leading to BALIC improving its ranking on IRNB basis from 6th to 5th position. BALIC's 2-year IRNB CAGR of 44% in Q1 is among the highest in the industry.

BALIC's 15% growth is to be seen in the backdrop of an [ 18% ] plus growth in Q1 of FY '23, which resulted in a very strong base. The total number of policies sold by BALIC grew 18% to 1.44 lakhs in Q1 FY '24.

Overall, IRNB mix for Q1 FY '24 stood at par 13%, non-PAR at 33%, protection 5%, annuities 6% and ULIP 42%. In absolute terms, we have seen a significant growth this quarter in retail term segment of [ 128% ] as compared to Q1 of FY '23, although it is on a small base in the same quarter of the previous year.

After the uncertainty initially followed by very strong growth in Q4 due to the tax changes and since business in the first quarter, where [ life ] is usually muted, BALIC decided to use this period to strengthen its unit product, the launch of new and innovative products. As a result, there was a lower share of our business, which the company expects to correct in the coming quarters.

During the quarter, growth was driven by all the main channels with the agency, institutional business and BALIC Direct growing at 22%, 8% and 18%, respectively.

During the quarter, BALIC started activating several of the recently signed corporate agency tie-ups with DBS, City Union Bank, TamilNad Mercantile Bank, Punjab and Sind Bank, and Jammu and Kashmir Bank. Moreover, with the opening of a rep office in Dubai, BALIC looks to further strengthen their institutional business.

Another point I would like to highlight here is the various initiatives undertaken by BALIC to improve persistency across most cohorts, especially in the major buckets. 13-month persistency stood at 83%, 49- and 61-month persistency has improved to 63% and 50%, respectively. The increase in persistency over the last few years has delivered a very strong growth of 31% in renewal premium in Q1 FY '24. New business value, net of expense overrun grew by 31% from INR 135 crores in Q1 to INR 94 crores in Q1 FY '24. This is mainly due to a low level proportion of PAR in the product mix, as I explained earlier. And also the effect of interest rate movement on the guaranteed non-PAR businesses. The profit after tax grew 26% from INR 124 crores to INR 155 crores supported mainly by higher shareholder income, lower debt claims, partially offset by higher new business strain on account of business growth. Overall, a good balanced quarter for BALIC with a strong focus on retail distribution growth.

Finally, both insurance companies are financially among the most solvent, BALIC which was 475% solvency and BAGIC with 388% and hence we are well poised to weather any external adversity.

Let me move to our lending businesses, BFL and BFSL. BFL has already had its investor call and then we will only broadly support BFL's results. Q1 FY '24 was another excellent quarter for BFL with the company delivering on all its long-term financial guidance metrics, AUM, profit growth, return on assets as well as [ equity gross and net ]. Continuing its growth story, BFL acquired 3.84 million new customers in Q1 FY '24. Total customer franchise stood at INR 7.3 crores or 73 million while the cross-sell franchise stood at $44 million. Building on this customer franchise, the number of new loans booked in Q1 FY '24 increased by 34% from 7.44 million to 9.94 million.

The company's diversified business model has been able to perform a strong AUM growth as seen from the total AUM standing at 2 lakh 70,000 crores as on 30th June, 32% higher than the 2 lakh 3,000 in the previous year. 61.4% of BFL's customers are repeat customers.

BFL loan losses and provisions were INR 995 crores on 30th June end of Q1 of FY '23. It has a management overlay provision of INR 840 crores at a consolidated level as of 30th June. The company released INR 120 crores from the overlay in Q1. The gross and net NPA continues to be -- or which is organized as for the expected credit loss method to start in Ind AS continued to be exceptional with -- at 0.87% and 0.31%, respectively.

In the same quarter of last year, it was 1.25% and 0.51%. It is worth mentioning here that this -- that during this quarter, BFL has had its lowest ever GNPA over a number of years.

We have presented the quarter with a PAT of INR [ 4,551 crores ], which is 30% higher than the same quarter of last year. The capital adequacy, including Tier 2 capital, was very strong at 24.6% and Tier 1 capital was again very strong at 23%.

Bajaj Housing Finance Limited, 100% mortgage of BHFL continues to do well. The AUM grew 29% to INR 74,000 crores as on 30th June, and the profit after tax grew [ 23% to INR 526 ] crores in Q1.

Capital adequacy ratio stood at 22.52% and GNPA and NNPA were again quite exceptional at 0.23% and 0.08% as against 0.27% and 0.11% in the same quarter. In summary, a super quarter for the BFL and BHFL.

Now to give some update on our newer companies, Bajaj Markets, [indiscernible]. During Q1 FY '21, Bajaj Markets attracted about 88 lakh customers on its digital platform out of which 2.2 lakh were new customers. And BFSD lending unsecured and secured with both BFL and external partnerships, recorded a disbursement of INR 1,427 crores at against INR 1,314 crores in the same quarter of last year. 74,000 order cards were sourced as against 65,000 in the previous quarter.

In Q1 FY '24, Bajaj Finserv helped carry out 10.36 lakh health transactions. That is crossing 1 million transactions versus just 4.86 lakhs in Q1 of FY '23, having 3.22 lakhs plus monthly users.

For the quarter, Bajaj Finserv had 1.14 million paying users versus 8.55 lakhs in Q1 FY '23 with 3 lakh users having renewable products. Bajaj Finserv Health is also expanding the provider network, which includes 1 lakh-plus doctors, 5,000-plus lab touch points, 1,950 plus hospitals. Utilizing the network, BFH is able to offer and serve differentiated product plans for both retail as well as to corporates for Employee Health Benefits segment.

You will find more details about these in our presentation, which is uploaded on the website. For those of you who have not seen our press release, I will just summarize the consolidated results.

Consolidated total income, 47% increase at INR 23,280 crores versus INR 15,888 crores. Consolidated profit after tax, a 48% increase at INR 1,943 crores versus INR 1,309. The consolidated profit after tax includes the unrealized mark-to-market gains and losses on investments of the insurance companies on account of the adjustments required under the Ind As. If you exclude the volatile impact of the MTM losses and gains, the core profit after tax would have increased by 24% in Q1 FY '24.

Before we open for questions, considering the limits of time, I will request the audience to keep their questions brief and preferably not repeat questions that have already been asked or covered, so that we can cover more queries during this call. With this, I now invite questions from all of you. Thank you.

[Operator]

[Operator Instructions] We have the first question from the line of Prakash Kapadia from Anived Portfolio Managers Private Limited.

[Prakash Kapadia, analyst]

Motor has been doing well for us. So is it some OEM market share gains, what we've done? Is it some new geographies which we have now targeted? What is driving this growth? And is this growth sustainable for us because we've grown pretty well. Secondly, on expenses on management, what impact does it have on the industry as we move forward? Will it lead to better consolidation, better pricing? And what impact would it have as we move forward? And on BALIC, what is the unwind rate we should look at given the current interest rate cycle? These are my 3 questions.

[S. Sreenivasan, executive]

I'll first give a high-level response before passing on to Raman. I think in BAGIC, what we are seeing is that last 1.5 years, we have been investing quite a lot in expanding our distribution outside of even the OEMs in terms of smaller towns. We have digital offices, digital bank, we have virtual satellite offices. And last year, we were doing a lot of correction there because we have to get the people, you have to get the strategy right. I think that has started falling in place.

My own assessment is that it has been broad-based growth across OEMs as well as the agency and other channels in motor. On the OEM and the rest of the -- to give a more detailed flavor on the motor business, I now hand over to Raman.

[Ramandeep Sahni, executive]

Thanks, Sreeni. So I think it should be articulated to summarize the way the motor business has been operating for us. One of the big levers for growth has been the 3-wheeler business. As we've discussed in the past, we were from an OEM perspective, used to be a handicap for us because there were many OEMs who then want to work with the Bajaj brand because we look at it as competition given the great level of branding on the cars from the driver perspective. But over the last 15 to 18 months, we've been able to kind of break us in. So BAGIC, I think we've been now able to tie up with all the OEMs on the space. And hence, if you see for the quarter, the growth on CV loan has been up and that's been the trend for last 2, 3 quarters now. So that is the biggest lever of growth in our overall motor number. If you look from a channel contribution perspective also, that is motor dealer where we've been seeing a gain of market share. To give you some flavor of the market share numbers on 4-wheelers or new car market share last year same quarter was about close to 7%, and in this year, the first quarter, it moved close to 9%. We have the 2 years back used to be up 4%. Last year, we had already moved up to that 6% and now in quarter 1, we see that 11.5%. So we have also very healthy number of up to 25% market share. The motor dealer channel seems to be contributing significantly to the growth. But like Sreeni said, the growth is more balanced across all the channels. If you also recall a past discussion, we have thought that we will try to penetrate more as a strategy, we try to penetrate more into the smaller towns of the country and we currently [indiscernible]. So that's something the numbers have started to reflect some decent growth. And that's one of the other levers for the growth.

Also on the more established channels like agency here also, we've added a lot of manpower and agents, which is leading to the growth. And overall, if you recall with this foundation we have kind of consolidated our manpower and so forth. And we have said that there will be some stress on the bottom line as we start expanding. And I think some of the expansion, which we've done in the last 12 months have started to show the results. So that's the reason -- these are the reason for the overall growth in the motor side.

Now obviously, because we've done the expansion, we've seen the growth and we'll continue to expand for at least for another year or so. So maybe in the medium term, you will see the growth soon as we believe. Now obviously, it's also somewhat tied to how the market moves. And as you know, it's a very, very dynamic market in terms of accounting and commercial -- that is something which we'll have to wait and watch for. As things stand today, maybe the growth in the medium term at least is sustainable.

There is something as we've discussed in the past, given that most of the -- at least half of the industry is noncompliant. And hence, you would have to agree that there should be some clarity which should come in the way that commercials have moved over a period of time. It's too early to say that because it's only been 1 quarter. As of now, we are not seeing any outcome of that because I think people are just getting aligned to the new regime. Maybe another quarter or so will be required to figure out the real impact. But what we are clearly seeing is that -- on the bulky businesses like [ crops ] and so on and so forth, the level of engagement from many other private players has accelerated. The competition is becoming even more intense in [indiscernible] business because as we know that was [indiscernible] on the ratio. But also, anything I would like to comment at this stage. And let's certainly wait for another quarter or so to the figure out what is the real outcome of regulation.

[S. Sreenivasan, executive]

I'll just add to what Raman said. On the [ OEM ], I think it is now that the regulator has given a budget, 30% of your gross [ to complete ]. Now different companies will have to evaluate where do they want to pitch more because there are no individual limits on product level or intermediary level. But if they pay more somewhere, then they've left somewhere. So clearly, I think it is for each company to decide some people might want to pay a motor company or pay more to go to banks, which are the channel more productive want to pay for.

So this will evolve and will keep changing as companies keep changing the strategy because of a very competitive market. So I think we will keep watching, but we were -- we were below the limit and we do have very significant solvency. So we have the strength to play out any of the combinations that might -- one might see in the market.

Now I'll hand it over to Bharat to take the question on the unwinding rate on the Life business.

[Bharat Kalsi, executive]

Yes. So the unwinded it basically depends on the market yield of the assets which we are holding and as well as what are we expecting in terms of return. But if you see that consistently, it has been between 8% to 8.5%, and I think be hovering around there only. That's what the number is.

[Operator]

The next question is from the line of Supratim Datta from Amber Capital.

[Supratim Dutta, analyst]

So I'll start up with BAGIC. So the loss ratios on the commercial lines have improved this quarter despite the reinsurance rate hardening, and the fire pricing being reached by the regulator. So just wanted to understand how have you achieved this improvement in loss ratio despite the headwinds? That would be the first question. I have a few more, but I'll pause before I go to those.

[S. Sreenivasan, executive]

Commercial business, the loss ratio has been seen across the cycle because they're also exposed to catastrophe. Raman, would you like to explain?

[Ramandeep Sahni, executive]

Yes. So if I just look at the movement like you rightly highlighted from last year same quarter; last year, remember in the same quarter, there were some large gains, which were reported in quarter 1. And hence, in some of the lines, the loss ratio has moved up, I remember that before engineering was higher. Fortunately, that's not the case in this quarter. And like Sreeni said , cyclical at times you have some calamity and, because of this, things happen. Now given the fact that in the quarter 1, there has been the tight load that we've seen [indiscernible] of INR 10 crores, while the gross premium is a little higher amount of close to INR 50 crores. But the net impact for that has been lower at INR 10 crores. But just a word of caution, these are quarter 1 numbers and we've seen the rate later has been creating [indiscernible]. I think this was in India, and we have been keeping up India for us to see how this plays out because of the -- [ the rainfall ] most part of the country has been experiencing because just a word of caution, while further one has been good, we've just seen a small impact of INR 10 crores because they're [indiscernible] but the other 2 is something which we'll have to [indiscernible] but otherwise, to your question, I think like Sreeni said, this quarter was been better compared to last year where we had some [indiscernible].

[Supratim Dutta, analyst]

What kind of impact -- if you could give us some color on what kind of claims that you're getting or...

[Technical Difficulties]

[Avinash Singh, analyst]

So what I was saying is my second question was on the North Indian floods. So I wanted to understand what kind of claims...

[Ramandeep Sahni, executive]

Yes, understood. So as of now, nothing material has been reported. Obviously, on the motor side, there are many claims which have got reported. But I think maybe in a few weeks' time from now, we will really have the right assessment. So maybe a quarter 2 call is when we will really be able to give the right picture. But the claims, like I mentioned, has gone up. Fortunately, at this stage, on the retail ones, we have been having them reported, nothing significant on the commercial side so far. So maybe you'll get a better picture in the quarter 2 call.

[Supratim Dutta, analyst]

No, that's very helpful. And last question on BALIC. So if you could quantify what was the impact of the interest rate move on the VNB margin? That would be very helpful. I just wanted to understand what is the hedging strategy when it comes to non-PAR?

[Bharat Kalsi, executive]

Yes. Sir, I'll take that. So first of all, let me just cover the hedging strategy part of it. See, all our non-PAR book and annuity and a good extent of term book, which has a long tail also is being effectively hedged through Part B paid bond. And obviously, we look at other hedging strategies, including a cash flow matching and duration management. So to that extent, the comfort is at 90%, 95% of the book is hedged through the relevant instruments. And wherever it is an unhedged portion left, something which is beyond EUR 40 of a liability, we assume a very minimal rate of interest to make sure that there is no interest risk. So from a hedging perspective, it's completely in control.

As far as your question on the margin concerns, as I see, compared to previous year, if you look at quarter 1 versus now, the yield curve has actually changed. And it is not just a shift in the curve, the slope of the curve has also changed significantly. But if I broadly put, 2 things can be done. One is that you immediately react in terms of customer IRR change, or there could be a little bit of a lag because when you decide by the time you make a change, there could be a lag of 2 weeks, 3 weeks or a month. That could have an impact on the margins. In our case, that would number be around 1.5% or so compared to previous year quarter 1 number. The other dent in the margin is basically because of the product mix change as Sreeni in the beginning also mentioned that you wanted to pick up the quarter 1 on a high momentum. So those are the 2 broad breakup in terms of change in margin versus previous year.

Other thing just I wanted to update is that, as I said, if the margin has dropped around 3.5%, maybe give and take 2% because of the product mix change, 1%, 1.5% because of the yield curve change. But both the corrective actions in terms of product mix as well as in terms of changing the IRR in line with the yield curve has already been done, executed in the month of July itself. So this was just a quarter 1 where the momentum was the strategy for us, and the corrective action has already been taken. Tarun, in case if you want to add anything?

[Tarun Chugh, executive]

No, I think you've largely answered. There's some further questions.

[Operator]

The next question is from the line of [ Nidhesh ] from Investec.

[Unknown Analyst]

Because we have not seen such margin trends for other insurance companies. So is it primarily because that we have not repriced our guaranty product when interest rates have changed, that is the main reason for margin decline. And also the product mix because the PAR has declined, but at the same time, protection has gone up and non-PAR has also gone up. So product mix, 200 basis points, what explains product mix change impact of 200 basis point of margin? And then how should we look at margins for the full year basis?

[S. Sreenivasan, executive]

Bharat, would you like to take it?

[Bharat Kalsi, executive]

Okay. As I said, one is because there has been a little lag in terms of reducing the customer IRR. It's just a timing difference, not that it's structurally a drop in the margin. So to answer your question whether this is just because of the time lag of 2, 3 weeks or a month is what is reflecting in the non-PAR side of the world. Otherwise, if you look at ULIP has gone up compared to last year. ULIP, as we know, is a very low-margin business. And power obviously helps us in terms of the overall cost being managed in terms of the total policyholder funds. So I think those 2 working in the negative, like ULIP going up as well as PAR going down has a double impact in terms of the margin. which is where we have already corrected it. So if you look at it in the beginning of the July only, we have dropped IRR of our key products, which is [ AWG ] and others. And similarly, our ULIP mix has also dropped and power mix has gone up. What we have done is we have launched our new car product that is helping us.

Secondly, in Q1, the call was that because the market was also showing positive results, and after the Q4 euphoria of being a high quarter for the industry, we didn't want to lose the momentum and we went with the approach of what the customer would as of now wants to buy in terms of the, say, the preferences, which is more linked to the market. And hence, we launched a very specific product in the month of May, which has kind of took an initial euphoria of taking ULIP higher. And now all that has already been settled. Our product mix is already back to what we were last year. Even if you look at last year till YTD December because last quarter was not the right mix for the industry. We are back to the YTD December mix already. So it's just a quarter where we have seen it. And given this quarter is a small for the industry and for us also, we could take some calls at this quarter, whatever plus/minus comes in, we can cover it up in the 9 months.

And in the deck, you would see that our rolling 12-month margin is steady at 14.8% compared to last year also. So this quarter doesn't take away the margin directionally up or down. The numbers are hovering around 15%.

[S. Sreenivasan, executive]

Just to add to what Bharat said, see, quarter 1 is when life companies can afford to try different tactical strategies. And therefore, because it's the lowest quarter in the whole year. And every year, you will see that the first quarter back at least last couple of years, I've been noticing they have been doing something different. But as the second quarter comes, I think things will start falling in line and the distribution gets aligned to what is required.

[Unknown Analyst]

Secondly, on the BAGIC, we have seen a sharp improvement in market share on the motor pooling side, but we keep on hearing that the compete intensity in that segment is quite intense, specifically on the private car side, the competitive intensity is quite intense. So how are we able to gain market share? And how should we look at the profitability from a combined ratio perspective, given the competitive intensity will remain intense in the motor segment.

[S. Sreenivasan, executive]

We have broadly started off going back in motor, while competitive intensity is largely price driven and therefore, there is price competition. I think the way BAGIC selects the business, grows the distribution, mixes of OD and TP and the different ages of vehicles do worst of all, all have variable losses. Raman, would you like to expand on it?

[Ramandeep Sahni, executive]

Thanks, Sreeni. Yes, I think I think on the rate selection perspective, nothing has really changed for us. it's only about getting deeper into the market with the dealer side or otherwise. That's the only change. Like I mentioned, the result of the expansion and the penetration which from a risk selection perspective, we've been quite healthy regarding the rest of the market, and I think rarely changes there. So it's not that we relaxed some of our norms and then got into some lines of business which we could have done earlier. That's not the case. It's largely coming from the fact that we've done some amount of expansion on power and geographies in terms of infrastructure and added many more agents and because of the this, [indiscernible]. Otherwise, nothing really changes on the quality of the portfolio.

[Unknown Analyst]

Sure. And just lastly, another question. One is what is the advance premium for budget? And secondly, the disbursement number, I think you have shared widely those numbers for the [indiscernible] markets disbursement for the quarter, and then credit cards originated for the quarter.

[S. Sreenivasan, executive]

I already tell you the disbursement number, which is in the first quarter was INR 1,427 crores and we sourced 74,000 cars. INR 1,427 crores. Last year was NR 1,313 crores the same quarter.

[Ramandeep Sahni, executive]

On the advanced [indiscernible] side -- sorry, on the advance payment side, the number for June 30 was about INR 1,678 crores, which has moved up by almost 44% from INR 1,168 crores on June 30 last year. And like I mentioned earlier, it happened largely because of the 2-wheeler business, where the advance payment has really grown by 58%. And also [ 4-wheeler ] business growing by 21%.

[Operator]

We have the next question from the line of Sanketh Godha from Avendus Spark.

[Sanketh Godha, analyst]

The first -- I have 2 questions on BAGIC and a question on BALIC. So on BAGIC, just wanted to understand that our retention strategy seems to have changed meaningfully compared to what we made 2 years back. Even in the retail lines like motor, we seem to be retaining less compared to what we do in the past and given our solvency is very strong, just wanted to understand the entire logic of having a strategy very different from what we were 2 years back on retention across the product segments. That's point number one. And the second question, what I had is that with respect to OEM basically, that we are the market leadership the crop business. And OEM in my view, we, in fact, most of the crop business, if a company wants to change that particular product. So given you have already might have bidded for [indiscernible], sir, I just wanted to understand what you are picking up at the ground level, whether OEM is impacting the pricing or anything on crop where we are always market leader, and it has been a profitable product for us. Just on BAGIC, maybe afterwards on BALIC.

[S. Sreenivasan, executive]

On the reinsurer, while we can't disclose the complexities of the strategy that BAGIC follows, there are very many layers. We have a base 3T. We have catastrophe treaty, excessive loss, we have sectors of loss for certain lines and proportional treaties for majority of the lines, and we continue to increase capacities as and when the reinsurance market allow us. Having said that, within our retention, which are fairly high because of our large spread of bank card business and our large retail spread, we do have several sub-treaties specifically for certain products for certain periods of time. And that is how the retentions can vary across years as well, even on the retail lines. Raman, would you like to add on to that as anything on the OEM on crop insurance?

[Ramandeep Sahni, executive]

Yes, I think you've is articulated the retention part is too much of [indiscernible]. I think the only additional point I'll make in some of these businesses you know have been assessed. And if you have mentioned that also that there are some parts of motor because of the [indiscernible]. So that's 1 of the parts we are trying to manage by managing our retentions in a particular area and particular portfolio. But like Sreeni said, that's a diverse strategy, but that's something which we are working on. On the crop business, we are absolutely right in that what I mentioned a little while earlier. We are seeing a lot of stress on the crop business, especially from some of the private players. We've been facing some stress and regulation and also from some the [ TSA ]. So the level of activity has indeed gone up significantly and it has a bearing on the pricing. But some of the vendors have already been closed. And from our perspective, I think while this year may pass through this similar levels of numbers which we've done in the past. But year on, I think it is going to be a successful situation because that 1 [indiscernible] really have clearly identified and started to focus on. So we'll have to wait and see what happens here. But at least from our perspective this year, maybe we will see similar numbers because some of the tenders that would indeed come close -- but year on, we are absolutely right that there is likely to be stress even on our numbers.

[S. Sreenivasan, executive]

There will be a bit of paradox again on this crop business because a lot of the players who are traditionally keeping away from that will now do it for top line to increase their OEM expense allowance. But in the crops, they will bring down the prices as well the premium will drop. So all in all, many sales have already gone with the 1x model, which means that the premium anyway will have to grow. So overall, the benefit they expect may not come through, but people like us who are in the crop business, we'll wait and watch and keep centering on where we feel the better opportunity. For us, I think as of FY '23, even including crop, we were well below the OEM level. So hopefully, that will [indiscernible]. And hopefully, BAGIC will continue that [indiscernible] among the cost leaders.

[Sanketh Godha, analyst]

I understand that point, Raman, but the only reason I was asking this question is that the geographic diversification was the biggest for us to be profitable in this particular line. And given the OEM, whether we will be able to achieve that geographical diversification of the intense competition, which we achieved in the past. That's the reason I was asking this question.

[S. Sreenivasan, executive]

I think Raman already answer that. Next year will be a better time. This year already closed, and we have got reasonable alternate.

[Sanketh Godha, analyst]

Got it. Got it. And on BALIC, see, the obvious question is again on the margin and related growth. So margin compressed, maybe you kept IRR on the higher side, maybe to achieve the growth. Even despite that, our growth and launching the unit was 15% growth reported in the quarter. So if you are taking a cut in IRR and given incrementally Axis Bank will be a bigger base, and if you intend to refocus EBIT on ULIP, then the growth what we have delivered in the last few years could come down is the point you wanted to check on. What exactly you are thinking on growth and how it will be delivered.

[S. Sreenivasan, executive]

Before I pass it on to Tarun, I will just give 1 comment there that the first quarter contribution to NBV is hardly 15% last year. So out of that, it was, as I told you, because it is a quarter where you can try different things. And as Bharat mentioned earlier, a lot of actions have already been taken and on a YTD basis are already bringing back to where it was. Tarun, would you like to take the rest of it on whether its impact on growth and profitability balance.

[Tarun Chugh, executive]

Absolutely, absolutely. See, Sanketh, Q1 has to be seen in the light of an 81% growth of Q1 last year. Right. On the CAGR, we remain the highest in the industry on IRNB at 46% and GWP of 34% over 3 years. So I would not worry about growth. Our standard answer on this and more than that, the delivery has been -- will be easily growing more than double of the private sector. So I think that I want to allay your worries.

You've gotten specific on a few bits, but let me just say more. The intent this quarter really was to widen our product offerings. And as non-PAR in March and power as well had reached a certain peak, it was a challenge the entire sector saw and you've seen it in the growth of the sector as well. It's been quite muted. I'm trying to get people back in the market, talking to their customers, which they are kind of -- they felt that they already met their non-PAR requirement. And you see the impact on the overall growth of the sector. Some companies may have grown because of various base impact, share and debt. For us, the objective was, hence, to pretty much launch an offering. -- which widened our offering spree every month. So we launched like 4 offerings, and we've largely done significant there. So you've seen the launch of our unit plan in April; in May, the small cap funds, which were ULIP. And then the [indiscernible] term plan which we're getting some significant reviews, positive reviews and experience has been very encouraging.

And in July, as we are -- I mean I can disclose that the A plan, which is our power plan has had a good takeoff, so far is kind of right up there and is settling back to that. I think Sreeni already talked about the fact that Q1 is a good time to reengineer and relook. So that we've achieved. We've become the third largest in the private sector in terms of number of customers that have been added in Q1, softer 2 bank-owned significant #1, #2 companies. And we're very happy with that. Honestly, I've achieved what we wanted immediately.

In terms of distribution, which we've been adding a lot, many bancassurance partners, albeit not as big as Axis. Actually, we have grown by about 8%. Our contribution to our business is down from 25% to 23%. And if you remember in the previous calls, I've always been saying, our endeavor would be never to depend on 1 bank, unlike other companies. and we would want it to be in the range of 20%, 25%. So versus the company growth rate, actually Axis growth rate for us has been slow. But having said that, we will, of course, want our customer penetration to be far higher in the Axis array. And that fact shall remain.

Our base is getting higher, so I don't expect the growth like last year and the CAGR that you've seen over the last 3 years, which has been the highest in the industry at 36% and thereabout. But given the width of our other businesses, other than this Axis, there has been -- PSF has -- is expected to grow near double of the company growth rate. Our agency has beaten the trend year-on-year. We are expanding our branch network for the -- even in our institutional business, the kind of partners and the area of partners with this 3 to 9 gives us a good platform to extend further. And the engine, getting all this moving is really our focus on data and technology. So that remains. And with that now, the product innovation that is kicking in as well. I'd say it as a successful last quarter because we've seen significant takeup of each of these. So already these offerings like within a very short time has already been a significant part of our product mix. So that the distribution gets more and more things to go and get a higher share of the customer wallet. I hope that answers your question.

[Operator]

[Operator Instructions] The next question is from the line of Swarnabha Mukherjee from BNK Securities.

[Swarnabha Mukherjee, analyst]

So a couple of questions on BALIC. First of all, the margin, the 12-month number that you have shared in the presentation, so that being stable, I just wanted to understand what would be the role of expenses in this number? So maybe some color on how we would have moved pre-cost overrun versus costs over. And because I felt that since the scale has gone up, there might be some benefit that might be coming out of the expense ratio. So some of your thoughts on that.

Secondly, in terms of the non-PAR category, if you could highlight if any impact you are seeing because of the taxation on [ 5 lakh ] policies, how that has been hanging, and whether you're seeing some amount of sales like earlier that happened in the non-PAR category will move to other categories because I think in terms of proportion, the number is fairly steady. And also wanted to understand what is happening in the annuities in the individual business because the number looks a bit for this particular quarter. So that's on BALIC. I have 1 question on BAGIC and then I'll come back.

[Tarun Chugh, executive]

So let me take the last 2, and then I'll ask Bharat to come on adding on the expenses and any further things that you might have. So on the annuity side, I think it's the natural flow of business. The base has been in the 5% to 8%. And it will remain broadly there. We don't see a big shift in any form whatsoever. Of course, annuities are getting now relatively given the tax equality now. All across, maybe relatively more attractive versus the others.

Now we were the first one to launch the deferred annuity, and we shall remain focused on that segment. It is also a nonmedical product, which makes it quite easy to sell. That shall remain, but I do not expect this to significantly change from what -- where we are to ballpark 5% to 8%, maybe sometimes 10%, but that's the whereabouts.

On the 5 lakh and above, yes, there is an impact there for the entire sector. And this is exactly why we chose to widen our proposition base, and we've successfully done that. There are some exciting thoughts we have and things we are going to be rolling out in the next 3 to 4 months to be able to take benefit of that. Because although 5 lakh and above, the taxation is put on life insurance companies, both PAR and non-PAR, for the customers there. But having said that, still the ability to structure that in the customers' favor through products is significant. And our power product, for example, allows that quite well. Because we can actually structure when the tax is going to be coming in.

So I do see an impact on the sector. But I think the sector has enough tools available with itself to get that sorted. The good thing is that now above 5 lakh, we remain possibly the only product range, which does have the capability of helping the customer in their tax planning versus any other product in the entire financial services side. So that should -- finally, I think you should assume this year is a year where the base will get settled in and it will sink in with a customer HNI customers as well. And then should sort itself out after this year.

Bharat, on the expenses or anything else you'd like to add?

[Bharat Kalsi, executive]

Yes, thank you, Tarun. See, the question was on the overall margins and the overruns. Just to be clear, so what happens with the overrun, like as we are adding new partners, as Tarun and Sreeni also mentioned, we recently added 5, 6 banks and they are in the early stage or even early months of the operation. They will always produce an overrun. So technically, overrun is also like a rolling number. As we add more partners, initial period, they will give over and by the time they become a concrete number. But on the overall basis, if I take steady state, that where we are, maybe the overrun could be in the range of 5% to 6%, which is already there. But this can improve significantly even in the next quarter, next year or it can be there if we start adding more partners. So I think having any number of overrun to me does not hold a business like BALIC, which is as of now adding, growing and adding new channels, not only on the third-party side. But if you look at our agency side, we are expanding. We are getting into new territories, we are getting into new self-channels. All they are in the initial stage will always add to an overrun. So I think it's just a way of looking at what is overrun. To me, it's not the best metric to see as of now for a company like BALIC, which is adding on to the partners.

[S. Sreenivasan, executive]

Just add to that, you asked about the 12-month holding margins. And the reason we report 12-month holding is precisely because the life insurance is very seasonal. The fixed expenses are pretty constant, but the top line is varying from Q1 to Q4. And last year, specifically, Q4 was very high. Therefore, the rolling 12 months is you're on a rolling basis, on an annualized basis where we are moving, without annualizing in terms of assumptions about future margins. This is the disclosure we started doing just to give the benefit of this.

Secondly, the company's goal is to grow its NBV. See this business has got multiple lines with different capital requirements, different levels of risk, different levels of profitability. And 1 margin internally for us does not indicate what it is. But NBV does because that is the absolute amount of money you're making. So the company has the flexibility to grow certain high-margin business or low-margin business, high volume business or channels, focus on something more, less. But end of the day, we should grow our margins at least at the same rate as IRNB or better if we can. Historically, last year, we have been doing better with the growth in the IRNB. So this will continue.

We have transformed the company from where it was from a negative margin to a fairly healthy double-digit margin. We have some ways to go. And over the next few years, we will see this playing a lot more effectively.

[Swarnabha Mukherjee, analyst]

Understood, sir. So if I were to think about the margins for the full year, how will your guidance -- did we have a similar level to last year? Because I think for...

[S. Sreenivasan, executive]

Guidance on margin, as I told you. But you can assume a sudden growth in NBV, you know what a past trend is, but we normally try to avoid giving any guidance on profit.

[Swarnabha Mukherjee, analyst]

Understood.

[Bharat Kalsi, executive]

As Sreeni rightly said, we do not give NPA margin. What we look at is NBV an absolute value. Even if you look at our 12-month rolling NBV this quarter, if you look at on the 12 months to 12-month basis, has also gone up by 24%. So margin is a different way to look at it, but absolute NBV has grown by 24% on a rolling 12 month also.

[Swarnabha Mukherjee, analyst]

So just a clarification on that. So if I were to think only about the fourth quarter for this year, then it would it might not grow as much as what we have seen in first quarter, right, because of the...

[Bharat Kalsi, executive]

For the industry as a whole year.

[Swarnabha Mukherjee, analyst]

Okay. Understood. A couple of queries on the general insurance side, if I may -- so first of all, your loss ratio number for the health insurance segment has worsened compared to last year. So just wanted to understand what is causing them because first quarter is generally more benign in terms of gains that come about and is generally from second quarter onwards with monsoons, et cetera, it starts to increase. And if you could also split out how the experience has been in retail. That is one. And secondly, in terms of the [indiscernible] initiative, if you could quantify what proportion of your premium right now comes from this initiative? And any kind of quantification on what additional growth in it will be.

[S. Sreenivasan, executive]

Raman?

[Ramandeep Sahni, executive]

Sorry, I didn't understand the second question.

[S. Sreenivasan, executive]

I don't think we want to disclose that number because it's just a general initiative on a geographical basis of expanding rural and semi-urban areas.

[Ramandeep Sahni, executive]

Yes. I think this is right, we just started to expand. And like we said earlier, we are adding many people and infrastructure in these locations. Just now, we just started the journey. I think it's only been 2 quarters, and we are adding about 100-plus branches this year. So I think it's too early to even start the question with numbers. Once the numbers are good, and the growth is being early, but maybe too early this year. I think the foresight of the mix of the portfolio between retail and growth. So there are 3 parts. While we've not done any governmental business in this quarter, but there are 3 parts. One is the [ GMP ], then there is the nonemployer-employee more linked to our lending business, and then there is a retail health, absolute retail health. That ratio actually moved up in a few accounts in the [ GLC ] side. And they're still profitable, but it moves up compared to where it used to be, and we've seen some [indiscernible] happening there, which we have mentioned also last year. If you recall that the benefit of the [indiscernible] is probably going to be sustained for a short time, but the rate will come in due course. I think that's the reality of life.

And [indiscernible], while the last [indiscernible] have not changed too much, but they are on the higher side and something we do with the rate and the claims are being reported by the hospitals. And so we have the demand side delivering significantly in quarter 1. Every retail claim, whether it's cash [indiscernible] or reimbursement goes through an investigation process. And we are hopeful that we see some amount of fraud, which we are seeing on the retail portfolio, should start coming down. And I have made the candid comment last quarter also that while on the [indiscernible] side, the antifraud efforts were very, very robust. And given the mix we were seeing between hospitals, doctors and other parts of the ecosystem, it is very difficult to grab that growth. I think that's something which we've now started focusing on. And like I said, during the quarter, we played a change of every claim now that is all investigated, every admission in the hospital is being physically verified or done through a video call and so on and so forth. So hopefully, in the next quarter, we'll hopefully start seeing some benefited by [indiscernible].

[Swarnabha Mukherjee, analyst]

Understood. Would it be possible to just ballpark, give some idea about how the liquidity loss issue has affected your credit in the business?

[Ramandeep Sahni, executive]

Your voice is not very clear. Can you just repeat what you said?

[Swarnabha Mukherjee, analyst]

Yes. So I was asking that if you could give some color on how the loss ratios have been in retail versus the 2 group lines that you have mentioned.

Even in ballpark.

[Ramandeep Sahni, executive]

I like the numbers. These all indicate to you that the best benchmark of that is comparing with the [indiscernible] companies. You maybe on the higher side for 2 reasons. One I did mention. Second is the mix of our new business was on the lower side. As we all have seen that the growth of the sharing companies has been far better. And hence, the mix of new business has been on the better side. And that's 1 reason that should be mentioned. Our loss ratios are a little higher compared to the [indiscernible] companies. But like I said, we are working on that. And in due course, we should start seeing the results of that. And also just a recap that we've mentioned in the past is that we've now set up separate [indiscernible] which is headed by a very senior person coming from a [ solo ] unit -- and the entrant is leading the portfolio to include all aspects of health business, whether it's distribution or products or underwriting, claims and so on and so forth. So with the demand focus, we should see some benefits across on the retail side. While a lot of work has been done by the gentleman on the nonemployer-employee, which is the [indiscernible] and there, our growth is very healthy at upwards of 30%. [indiscernible] we did a great job. Retail is where we are now investing in. And hopefully, we should start seeing some results.

[Operator]

We have the next question from the line of Nischint from Kotak.

[Nischint Chawathe, analyst]

Most questions are answered. Just a continuation of the last one, what proportion of group health would be credit and what would be a broad employee?

[Ramandeep Sahni, executive]

So I'll not share too much of data admission, but the ratio would be [indiscernible]. That would be the number.

[Operator]

Ladies and gentlemen, with that, we conclude our question-and-answer session. I would now like to hand the conference over to Mr. [ Akshay ] Jain for closing remarks. Over to you.

[Sameer Bhise, analyst]

Thank you all for joining the call and the management of Bajaj Finserv Limited for giving us this opportunity to host this call.

[Operator]

Thank you very much. Ladies and gentlemen, on behalf of JM Financial, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.

[S. Sreenivasan, executive]

Thank you.

[Tarun Chugh, executive]

Thank you, all.

[Bharat Kalsi, executive]

Thank you, everybody.

[Ramandeep Sahni, executive]

Thank you.

[Operator]

Thank you.