Bajaj Finserv Ltd

NSE:BAJAJFINSV

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Bajaj Finserv Limited Earnings Conference Call 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, sir.

[Sameer Bhise, analyst]

Thank you, Zico. Good morning, everyone, and thank you for joining this call today. First of all, I would like to thank the management of Bajaj Finserv Limited for giving us the opportunity to host this call.

From the management team, we have Mr. S. Sreenivasan, CFO of Bajaj Finserv Limited; Mr. Tarun Chugh, CEO of Bajaj Allianz Life Insurance; Mr. Bharat Kalsi, CFO of Bajaj Allianz Life Insurance; Mr. Ramandeep Singh Sahni, CFO of Bajaj Allianz General Insurance Company. And we are also being joined by leadership from Bajaj Finserv Direct, Mr. Ashish Panchal, the CEO; and Bajaj Finserv Health, Mr. Devang Mody, the CEO of the company.

Without much ado, I would want to hand over the floor to Mr. Sreenivasan for his opening comments, and then we open for Q&A. Over to you, sir. Thank you.

[S. Sreenivasan, executive]

Thank you, Sameer. Good morning, everybody. I welcome everyone to this conference call to discuss the results of Bajaj Finserv Limited for Q4 of FY '23 and the full year FY '23. Let me welcome my colleague from our newer ventures, Ashish Panchal, CEO of Bajaj Finserv Direct or Bajaj Markets; and Devang Mody, CEO of Bajaj Finserv Health.

As before, let me first clear up some hygiene points as before in this call, we will largely be concentrating on the consolidated results as well as the results of our insurance operations through Bajaj Allianz General Insurance, BAGIC Bajaj Allianz Life Insurance, BALIC and where material, the stand-alone results of our company, BFS. Bajaj Finance, BFL, is another major subsidiary of ours, has already had its conference call. Or 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's stake in our insurance companies, 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 experience or indication of any future performance result. Remarks on Ind AS, as required by regulation, BFS prepares its financials in accordance with Indian Accounting Standards or Ind AS. The insurance companies over are not yet covered under Ind AS. They have prepared Ind AS financials only for the purpose of consolidation. Accordingly, for BAGIC and BALIC, any stand-alone numbers reported below are based on the non-Ind AS accounting standards, 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 get to the main briefing on the results for the quarter and the year. I'll start with the disclosures on our investor presentation. During the year-end, we have enhanced the disclosures of EV, including the EV walk for Bali and the claims reserving triangle for badging. We have also increased the disclosures in respect of Bajaj Finserv Direct, and Bajaj Finserv Health. As mentioned in earlier calls, we had indicated that when the new businesses have reached some level of maturity and the path is clear, we would invite the respective CEOs to attend this call. Bajaj Finserv Direct has started its digital technology services business under the brand of scale-up, while my colleague, Ashish and I will be pleased to take any questions you may have on Bajaj Markets or Bajaj Finserv Direct.

In Bajaj Finserv Health, we have added slides indicating their business model and how their network and wellness stacks are building up. My colleague, Devang and I will be pleased to take any questions you may have on them. I must caution over that these are still in start-up mode, and you may see more frequent changes in business models when scaling up as we go forward. During this quarter, our AMC received the final approval for starting the mutual fund business. The Bajaj Finserv AMC is expected to launch their first suite of products during Q2 of FY '24.

Now coming to the update for the performance for the quarter and the year. Q4 of FY '23 has been a very good quarter with all our businesses performing very well. Robust discretionary spending, strong auto sales and very positive uptake of long-term savings combined to result in our business is doing exceptionally well. Let me start with BAGIC. For the quarter, BAGIC reported a growth of 14% in gross domestic premium income has again the private sector growth of 16.5% and industry growth of 16.2%. Excluding the tender driven businesses, which are crop insurance and government has seen GDPI growth for the quarter was 16.4% and for the full year was 15.1%. During the quarter, BAGIC signed up with Axis Bank as a bancassurance partner, thereby further strengthening their bancassurance channel. BAGIC also launched surety bonds in the quarter, the first company to do so in the Indian market.

Looking back at the year gone by, you may recall that we had a spike earlier in the year in the frequency and severity of claims in motor due to post-COVID increase in traffic density and in health claims that customers chose to undergo elective treatments, which were postponed due to COVID. BAGIC with its focus on strong underwriting and reviewed these businesses in detail and taken corrective action, the results of which have started showing up in Q4. As a result of these actions, we saw sequential quarter-on-quarter reduction in claim ratios. This approach of balancing growth with profitability is at the heart of broad [ battery start]. In Q4, BAGIC saw strong growth in both motor and retail health businesses. Growth in GDPI in Q4 was driven by Motor, 13.3%. Retail and Group held 16.4% and 29.8%, respectively. Commercial Lines, which is fire engineering, marine and liability 15.2% and travel or overseas medical claim at 54.5%.

Overall, in Q4 FY '23, BAGIC's motor growth of 13% was driven by 2-wheeler segment growing at 26%, private car segment growing at 18% and the CV segment growing by 1%. The growth in Commercial Lines was aided by BAGIC's strong bancassurance network and multiline agency channels, supported by strong underwriting and excellent reinsurance capacity for covering large risks. BAGIC continues its robust performance across retail, commercial and industrial risk categories. Fire, marine and liability segments continued their growth momentum from the previous quarter. Overall commercial lines continue to do well with Q4 and FY '23 growth of 15% and 15.2%, respectively, against the industry growth of 12.3% and 13.9%, respectively.

Health insurance performance has improved in Q4 as compared to the previous quarters of FY '23 Overseas medical travel insurance continued its momentum ending the year with a 54.5% growth, while BAGIC growth in retail health at 16.4% was better than the market of the private and PSU players growth of 11%. Similarly, in group health bag witnessed a growth of 29.8% in Q4 versus industry growth of 23.8%. For the overall industry, including standalone and insurers as in Q4 '23, retail health growth. So BAGIC has grown a bit faster than that, while group has growth stood at 38.1%. In Q4 of FY '22, that's about a year ago, BAGIC had launched the health prime rider, which is an OPD attachment to its health policies. I'm glad to report that during FY '23, BAGIC sold 8.8 lakh riders, much of this is serviced by Bajaj Finserv Health. For Q4 FY '23, the loss ratio was 66.4% as against 68.8% in Q4 of FY '22. The decrease was attributable to lower claims in motor health and some commercial lines. The combined ratio for Q4 was a healthy 97.3%. And for the full year, BAGIC ended with a combined ratio of 100.5%. We expect this will be among the best among the composite general insurance companies of comparable size. In a market which is intensely price competitive, this result, we believe, displays BAGIC's commitment to balance and profitable growth on the back of strong sourcing and claims management.

As a result, profit after tax of BAGIC grew 30% Y-o-Y and stood at INR 322 crores in Q4 FY '23. For the full year, BAGIC reported a slightly higher profit than FY '22 at INR 1,348 crores. BAGIC's AUM grew by 13% to INR 27,809 crores as at 31st March '23. The floor generated represented by increase in AUM was INR 3,176 crores which includes advanced premium at 31st March 23 at INR 1,448 crores. The increase in advanced premium was 30% Y-o-Y. One point I would like to highlight stage is that BAGIC continues to be -- contribute a significant proportion of the industry's profit. I would also like to mention that in respect of the claims triangles, which we have uploaded and which we do every year, we have seen that the revised ultimate expected losses for BAGIC is higher than the original expected ultimate losses by a reasonable margin, about 7.6%. This is higher than the 6.8% buffer that we had at the end of last year. Therefore, BAGIC continues to remain well reserved in terms of its IBNR and IBNER. In summary, it was a quarter with intense competition and BAGIC has chosen to hold its own with a very good combined ratio, not only for the quarter but also for the full year.

Let me go to BALIC. During the quarter, BALIC continued its month-on-month growth trajectory reported an industry-leading individual rated premium growth again, the industry and private player growth of 24% and 35%, respectively. Similarly, in FY '23, BALIC's individual-rated new business grew 41% against the industry growth of 1% and private players growth of 24%. In fact, in FY '23, BALIC was the second fastest-growing life insurer among the top 10 private players and BALIC's 3-year CAGR of 39% in FY '23 is the highest in the industry. BALIC improved its market share of IRNB from 6.7% to 7.6% among the private players in FY '23. The total number of [ qualities ] for BALIC grew a healthy 24% to INR 2.05 lakhs in Q4 FY '23. And the overall IRNB mix stood at par 15%, non-par savings 52%, term 3%, annuity 5% and unit 25%. So predominantly, it was nonpar savings followed by unit, far and then annuity and term. Most lines have shown growth in absolute terms. The business mix changes reflect only relative differences in growth and then are not a matter of concern for us in the short term.

During the quarter, growth was driven by all our main channels with agency, institutional business and BALIC Direct growing at 65%, 39% and 38%, respectively. Another point I would like to highlight is the various initiatives undertaken by BALIC to improve persistency across most cohorts, especially in the later buckets. 13-month persistency has now increased to 83% and the 49th and 61st month persistency has improved to 64% and 50%, respectively. The increase in persistency helped deliver a strong growth of 26% in renewal premium in Q4 of FY '23. The new business value met up can overrun. The key metric of profitability increased by 35% from INR 308 crore in Q4 FY '22 to INR 415 crores in Q4 of FY '23. For the year ended 31st March, the NBV was INR 950 crores, which is a growth of 53%. Overall, a good balanced quarter for BALIC with a strong focus on distribution growth with profitability.

Another point I want to talk about is the introduction of IRDA's revised regulations on the expense of management and commission. We believe this is a welcome change for the industry. with increased flexibility and long-term focus of the regulation that will help improve the insurance penetration as well as improve the ease of doing business in the country. Both BAGIC and BALIC are operating well within the prescribed guidelines as of the FY '23 numbers. And together with our partners, we shall continue to seek a strong balance growth in according to the framework that the IRDAI has provided.

Finally, both insurance companies are financially among the most solvent, BALIC with 516% solvency and BAGIC with 319%. And then the well poised to weather any external adversity. Needless to say, both BAGIC and BALIC are dividend-paying companies, and both have increased the dividend payout in this year from the previous year. All our businesses, insurance businesses have further augmented their digital capabilities, which, along with greater digital acceptance by the customer, should we hope, help create the foundation to deliver a strong performance in the coming year. both BAGIC and BALIC has seen an increase in the utilization of the properties by customers and intermediaries. Further details of BAGIC and BALIC digital capability are covered in the investor deck uploaded on the webcast.

A short word on our lending businesses, BFL and BHFL. BFL, as mentioned in the conference call had an excellent Q4 and the full year FY '22 was very good. As the company delivered on all its long-term financial guidance metrics, AUM, profit growth, return on assets, return on equity and gross and net NPAs. Continuing on our growth story, BFL acquired 31 lakh new customers in and 1.16 crore new customers in FY '23, which is the highest ever customer franchise addition in India for BFL. Building on this customer franchise, the number of new loans booked in Q4 FY '23 increased 20% from INR 62.8 lakh to INR 75.6 lakhs. The company's diversified business model has enabled it to record strong AUM growth as seen from the total AUM standing at INR 247,000 crores odd versus INR 192,000 crores on 31st March. It continues to maintain a management overlay provision of INR 960 crores at a consolidated level as of 31st March.

The gross and net NPAs have shown further improvement with gross NPA being below 1%. At 0.94, as again 1.6% last year. And the net NPA is 0.3%, 34 basis points as against 68 basis points in the previous year. As a consequence of these, BFL ended the quarter with a profit after tax of INR 3,158 crores, which is 30% higher than the same quarter of the previous year. The capital adequacy remains strong with a overall capital adequacies.

Bajaj Housing Finance, the 100% mortgage subsidiary of continues to do well. The AUM grew 30% to INR 69,228 crores. The profit after tax grew 52% to INR 407 crores in Q4. And for the full year, the PAT grew 77% to INR 1,258 crores. So welcome to the INR 1,000 crore club to Bajaj Housing Finance Limited. The capital adequacy ratio continues to be strong at 22.97% in strong and a very good quarter for both BFL and BHFL.

So to give an update on our newer companies, Bajaj Finserv Direct or Bajaj Markets and Bajaj Finserv Health. During Q4 of FY '23, Bajaj Markets attracted 1.06 crores consumers on its digital platform. These are people who visit our digital properties, of which 200,000 became customers, which is the growth against last year's numbers of 84 lakhs and 1.9 lakhs, respectively. DFSC's lending operation unsecured and secured, both BFL as well as outside partnership disbursements stood at INR 1,313 crores, a as against INR 1,175 crores. It saw 65,167 cards as against 61,027 credit cards in the same quarter of previous year. As of 31 March '23, BFHD has attracted 3.4 crore consumers on its digital platform, of which 7.5 lakh have become customers. The total revenue for FY '23 stood at INR 391 crores, which grew 89% Y-o-Y over FY '22.

Coming to Bajaj Finserv Health Limited. It carried out 11.5 lakh health transactions, having 3.34 lakh plus monthly active users. For the quarter, EBH had -- or Bajaj Finserv Health had 9.67 lakh paying users with 3.5 lakh users having renewable products. Magazine Health is also expanding its provider network, which includes 1.2 lakh plus doctors, 6,000-plus lab touch points and 1,800-plus hospitals and clinics. Utilizing the network strength, Bajaj Finserv Health is powering OPD services of BAGIC as well and recorded a gross premium of INR 82 crores for BAGIC in FY '23. I would like to point out that going to the strong performance of most of our major subsidiaries throughout the year, has recorded its highest ever consolidated PAT of INR 6,417 crores in FY '23 with a growth of 41% as compared to FY '22.

To summarize, consolidated total income for Q4, 25% increase at INR 2,625 crores. Consolidated profit after tax, 31% increase at INR 1,769 crores. And for the full year, the consolidated total income was up 20% to INR 82,072 crores and the consolidated profit after tax, 41% higher at INR 6,400 crores. Just to highlight, the consolidated profit is after absorbing mark-to-market gains and losses on the equity securities portfolio held by the insurance companies. which is required to be mark-to-market under Ind AS to the extent they are held through profit and loss account. And this -- the total impact were a loss of INR 328 crores in FY '23 and a gain of INR 2 crores in FY '22. Excluding this volatile impact of MTM losses, the profit after tax would have increased by 28% in Q4 FY '23 and 48% for the full year.

Before we open for questions, considering the limited amount of time, I would request the audience to kindly keep their questions brief. And I would also request please do not ask questions which have already been covered by an earlier participant. With this, I invite questions from the audience, and we have the full management team here to take any questions you might have. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Mr. Dhaval from DSP.

[Dhaval Gada, analyst]

So 3 quick questions. One is on BAGIC. So overall, we've seen combined ratio now settle between 19.5% to 100.5%. And historically, when the environment was more favorable, it was about 95% to 97% kind of combined. So when do you think we are at the peak and maybe in the next couple of years, we move back in that direction? So some sense around the landscape and how do you think about the combined ratio? So that's the first question. And the ...

[S. Sreenivasan, executive]

Mention your other questions as well, Dhaval.

[Dhaval Gada, analyst]

Okay. So the other quick ones on Finserv Direct. So if you could -- so last time I remember, you said 80-20 is the broad split between lending and nonlending revenues. So for the full year, if you could just provide a broad breakup between lending cards and others, that would be very useful. And in terms of what I observed was our visits and transacting customer base has been flattening over the last few quarters now. So any changes that we are doing in the operating model. So if you could talk a little bit around that would be useful. And the final question was on the Bajaj Health side. So I think what -- if I go to Slide 54. So basically, the growth rates have started to taper down in terms of active user engagement. So the [ mao ] has come down and even the prime retention seems to be tapering. So any comments around that would be useful, especially on the transacting user part?

[S. Sreenivasan, executive]

I'll take the first question first and hand it over to Raman briefly. Your question about combined ratio and where do you think it will taper I think the combined ratio that you see is actually a weighted average of multiple lines of business done across multiple channels. And the company, as you know, was on a very granular basis and there is a continuous activity of managing combined ratio by weeding out losing relationships and looking at profit pools and et cetera. If you recall, the first quarter, we had a pretty high combined ratio of 105%. And then quarter-on-quarter, we went into correction mode, and we have brought it back to about 100%. Raman will take it on. Raman? .

[Ramandeep Sahni, executive]

Yes. Thanks, Sreeni. So I'll just add to what Sreeni said, I think what's important here over to understand there are many moving parts at this stage. As you know, there is a big impact expected from the motor vehicle and if on the TP side, if we end up getting early reporting as you envisage, and things could look very different from where we stand today. The second one is the impact of the new regulation given that the industry is for 55% to 60% of the players above the 30% limit, if the commercials are also expected to come down. I think both of these could play a big impact on how the core is expected to emerge going forward. Superior point at this stage, maybe will be very difficult to predict because both of these work in the direction as we feel that reporting starts and people start getting more rational about commercial, then maybe going back to earlier levels of 97%, 98% may not be a big challenge. But if things continue the way they are, that obviously closer to 100% is where things could emerge. But like Sreeni rightly said, our endeavor is to always be below 100%. And in the worst of the scenarios, maybe this year could be one of them. We've been able to close at close to 100%, whereas the entire industry for 9 months was at 122%. It's moved up in fact compared to last year. So our endeavor will be to be less than 100 is where we stand today.

[S. Sreenivasan, executive]

Now I'll ask Ashish to take the next question. Your question was on whether the number of visiting consumers and active customers are slowing down. And you mentioned that as an 80-20 split of revenue, I think I have to make a small correction. What we mentioned last time is between the Bajaj Finance business and Open Access business, the spread was about 80-20 across cards and loans. I'll now pass it on to Ashish.

[Ashish Panchal, executive]

Thank you for the question. For Bajaj Finserv Direct, there are 2 lines of businesses. One is our open architecture marketplace and the other is -- we are also a technology services provider, both to some of the group companies and nongroup companies. So that's all it as Technology Services business. The revenue split between the marketplace and the technology services businesses was [ 76 ] is to [ 24. ] So out of INR 357 crores of total revenue of INR 273 crores came from marketplace businesses, which are lending, cards, insurance and investments and INR 85 crores came from technology services business. Further splitting the marketplace revenue. Out of the 76% of the total revenue that came from Marketplace, 66 percentage came from lending and 8% from cards and 2% from insurance and investments.

[Avinash Singh, analyst]

No, I'll give it to Devang for your question on Bajaj Finserv Health.

[Devang Mody, executive]

Thank you, Dhaval, for the question. And you're absolutely right that our mows started flattening. I'll give you the rationale of that. few things. We set up a network of providers, which is doctors, laboratories as well as hospitals. As we set up the network, it's imperative for us to give them transactions. Our product sales, either through BAGIC's health prime rider or other product sales catches up after our network is well equipped to service the transaction. And hence, if you see in last quarter, quarter 4 of last financial year, quarter 1, quarter 2, we had significantly higher traffic, primarily driven by paid profit. That we have started winning off rather, we are now not spending any money in getting paid traffic. What we are focused on, as far as the growth metrics are concerned, which is a very important attribute for us to build the ecosystem around is how many transactions we are doing. And if you see most of the category of transactions, which we have started publishing now, doctor transactions have become success diagnostic transactions have become 5x in last 1 year. So as we go forward, our focus is to get more transactions and rather than getting more traffic done. Most of these transaction happens from customers, which are our paying users. Our level of paying user was significantly less last year, so we had to complement it. we paid profit to drive some relevance with network, which we enroll. And hence, there is a drop in the mouth. I hope I have been able to answer your question, Dhaval.

[S. Sreenivasan, executive]

Dhaval, just to add to this, I think both these companies, I think there are 2 aspects to it. One is we continue to build capabilities, both on tax side, on people side and network and partner side. So that is going on. And as they grow, I think we expect more and more consumers will come to us. What is very heartening for us to see the number of consumers who are actually coming and spending time in our ecosystem, which is the sort of vision that we had when we set up this open architecture business and the health care business. And all these are potential customers or any of our manufacturing operations, whether it's insurance or lending or maybe in future the mutual fund as well. .

[Operator]

Our next question is from the line of Mr. Sanket Godha from Spark.

[Sanketh Godha, analyst]

Sir, my 2 questions on BALIC and a few on BAGIC. Sir, the first one is on BALIC. Basically, if you look at high-margin products, which is including nonpar protection and annuity, which was last year, 41% of the total individual AP. Today, it is 52%. But the margin expansion seems to be very limited from 14.2% to 15.5%. Just wanted to understand is even the spreads in the nonpar business has come up meaningfully. Or is the acquisition cost has been on the higher side leading to that margin compression, is my first question on margin. And the other question which I had was with respect to BALIC that if you can quantify the way you have quantified when the budget announcement came, how much high ticket [ non limit] contributed for FY '23, fourth quarter FY 2023 and March '23? If you can give the figures, it will be very useful. And last one, there seems to be some weakness in annuity and group protection business because -- despite very strong growth, these 2 businesses seems to be a little weak in FY '23 and fourth quarter. I guess just wanted to understand how you see these business to do going ahead. That's on BALIC.

[S. Sreenivasan, executive]

Yes. I will let Tarun and the team take the questions. Largely, your questions were on the non-par savings segment being significantly higher than last year and being a high-margin product, why the margins have not grown in proportion to business. And the second question was on why group protection and annuity, you think that have not done, could have done better based on what you see in the market in terms of loan growth and demand growth.

[Sanketh Godha, analyst]

Yes. And last one is how [indiscernible] ticket size, what are the contribution ...

[S. Sreenivasan, executive]

I don't know whether you want to disclose that or not, but I'll leave it to Tarun and team to take that question.

[Tarun Chugh, executive]

Yes. So we'll -- I'll ask Bharat to answer the margin question and I'll take the rest.

[Bharat Kalsi, executive]

Yes. See, Sanketh, there are 2, 3 things. One, if you look at that, what has changed in the margin as we always said that we look at more an NBV growth rather than in a margin growth. And we have a very strong growth of NBV of 53%. The margin is a factor of multiple things. So NBV has actually reflected the change in the product mix. Specifically to your high ticket size in the non-par savings, See, what happens when you sell a -- today, even if you look at our product of 5 lakh and above ticket size, the customer gets typically so anything between 10 to 20 basis points higher IRR, which in turn means the margin on a higher ticket size per unit is lesser. In this year, when higher ticket has actually gone up significantly, the same business because it is a significant portion was above INR 5 lakh, would have resulted in a relatively little lower margin. That is one that is reflecting in the NBNM per se. But as I said, NBV is still up by 53%. That's the first answer.

Secondly, if you look at our group protection, that has not grown in the quarter 4 or it has only grown 4% in the full year. What has happened as we have 2, 3 major large partners who we work with. Those are the banks and all that. Their own disbursement has not been growing as fast as the other industry players. And because it's a group protection is an attachment product, when their disbursement or credit offtake doesn't go up, our business also doesn't go up. And our group is typically a higher margin because of the 110 E&P logic. In absolute, it may be a 6%, 7%, 8% margin. But when it comes to NBM, it goes into 60, 70, 80. So if that doesn't grow, it also reflects in the NBM part. That was a question on the overall on the margins. If you still have any questions, I'm happy to answer.

[Sanketh Godha, analyst]

No, maybe if you can touch upon annuity, I don't know [indiscernible] ....

[Bharat Kalsi, executive]

I'll touch on that also. And just to add on to my previous thing on I'll further update you what has happened in that in the non-par saving in the higher ticket size See, typically, our average PPT on a non-par saving could be a range of 8 to 10 years. But in this period, people have went for a smaller tickets, smaller PPTs, like a 5-year, 6-year and 7. And as you know, the longer the product, the higher the margin. And because in this year, people have gone for a shorter PPT also, that also reflect in the margins. Again, it is all value accretive. 53% NBV growth is what it reflects in. That's the question. Can you just repeat your question on the annuity, what is exactly you wanted to know?

[Sanketh Godha, analyst]

There seems to be some weakness even because of the competition because the regulatory deferred annuity now is launched by every insurer company. We were past to introduce it. But since then, when the competition has launched, we have seen weakness in that particular product. So just wanted to know ...

[Tarun Chugh, executive]

Yes, I will take that. So thanks Bharat. Bharat answered your questions on margins, let me give you the data. I'm okay to keep sharing the data with you on the high ticket and the impact that is goes into your Excel sheets. And Sanketh, we really value the way you look at life insurance. So just to let you know that till the last year January, our high ticket above 500,000 is about 9%. February and March for those 2 months, it went up, okay? So yes, on the normal year, normal year, which was not last year, our -- the dynamic aquarium is in the range of 8% to 9%. If I look at FY '22, if I look at till January 23. Of course, we all know that last 2 months, of the year or more because of the tax benefits and hence, that's not going to be repeated. And we expect this to remain in the 8% to 9%. So I think the abnormal growth that we had because of high ticket to something with which the sector should not really be expecting any further. Now -- so that is just on the data itself. And just to answer that, we'll be in 8% to 9%, which is what we are comfortable with. In any case, Bharat has told you that we -- very clearly that when we go for high value, the margins also get to be lower because this is totally a customer who's looking at investments really more than the insurance cover. So that will stabilize. Group Protection, but is already answered from the past that, yes, we were -- we basically have 3 very large carriers. And because of them not growing much, their asset business. that kind of came down and didn't really grow 4% is hardly growth, I would say. I think we are back in expanding that business. We show on whatever is coming out in the UM guidelines. And based on that, we'll be take a call for this year. And going forward, we've always been in the past as well strong in the group production. We shall go back and wrestle our market share back and that remains. On annuities, too, you're right. We were -- we've been a leader. We've been the first deferred annuity plan with ours, the GPG, and it still has a lot of traction in the market. What has happened last year was that the -- given the 5 lakh and above benefit that was coming through in February, March, our share of panties particularly has come down to near single digits during the -- during the last quarter. We remain very bullish on the aunties. In fact, now with the 5 lakh and above market and particularly the 45-year and above customer. We expect to start getting back into the depot annuity space. It's a very good space to be in. The product also is beneficial in various ways. It is the every product the entire life insurance worth life insurance entire financial services, which handles the risk of longevity. And that is what India doesn't have. I think there's a natural market for it. you will see the share grow, and our focus growing that as well.

[Sanketh Godha, analyst]

Got it, sir. And probably, if I can ask on -- 2 questions on Bajaj General. Sir, on Bajaj General, the question which I had was that if you look at the exit loss ratios of Motor OD and Motor TP, which is 64% and 61% rate, respectively, seems to be very, very good compared to the kind of competition is there in the market. So you believe that you have already made all those kind of corrective measures and expect these kind of loss ratios to be demonstrated going ahead because full year numbers are very different from the fourth quarter. so just wanted to understand that part even better, how we see '24 with respect to motor of business. And last one on BAGIC is that the expense of management, it is believed to have a material impact of commercial lines because many companies as you highlighted 60%, 65% of the company are not compliant with 30%. They might try to chase commercial businesses to improve their expense ratios. And this business was the most profitable business probably I just wanted to understand that UAM guidelines and even the inset hardening, do you think commercial lines will see an image pressure in FY '24?

[S. Sreenivasan, executive]

I will briefly take the first question, and then I'll hand over to Raman to expand on it and also answer the second question. I think with the way BAGIC works, as you have seen, when things are going good, I mean the loss ratio is a function of sourcing as well as pricing. Pricing is desired by the market. Sourcing is controllable by the company. Now when you do an experience-based pricing or a selection underwriting as we see in insurance, you write a lot of business, you do it through partners. And when you write new cars, you are tied up with dealers and whatever are the right to try to cater share out of it, depending on where they are exclusive or not. Now later on, as you gain experience, you find out where you weed out and where you focus on. The same applies to all other channels like multiline agency or bancassurance, which do also do motor business. So this is the factor in Q1, we saw there was a spike in frequency and severity, which led to high claim ratio, high combined ratio. And then we announced at the time that now going into correction mode. And this is not the first time we have done it. You go back 4 years, you'll find the same commentary in our investor calls that Q1 was not good, so we have repaired. Commercial lines are different. Commercial lines loss ratios come from catastrophes and various other events also. But I will now let Raman expand on this as well as take the second question, which you had on the EUM.

[Ramandeep Sahni, executive]

So I think on the loss ratios like Sreeni similarly articulated, this year has been a unique year because quarter 1, we had a big spike coming because of the events travel as everybody called it. And so that really took up the loss ratios to upwards of for us and I think similar ratios for the industry. And we know that quarter 4 is normally an aberration because a lot of true-ups are that in quarter 4 assumption changes and so on and so forth. So maybe to answer your question, the level of 63% and 65%, obviously, are not sustainable. But I think in the long term, OD, as we believe [ 65 ] to [ 67 ] is what we've experienced, and that's where we will probably end up. One change. However, what we're seeing is, Sanketh as you know, our mix of 2-wheeler used to be low earlier, and there we are scaling up. So the impact of that on the overall motor loss ratio, we'll have to wait and figure out. But I think as we stand between [ 65 ] to [ 67 ] on OD is something, which is what we can expect. On TP, like I mentioned earlier to Dhaval also I think it's a big take from what happens in the outcome of the Motor Vehicle Act. As you all know, we are expecting early reporting to start. There are some green shoots, which we have seen but nothing significant at this stage to start with new benefit of that. If that was to really come then anywhere between [ 70 ] to [ 75 ] would be decent number to expect. Otherwise, I think as the industry we will stage because of the impact of inflation that we've seen in the past. That's where I believe the loss ratios will plan out to be. On the EUM, again, like I mentioned earlier and like you rightly articulated, 60% of the industry seems to be higher than 30%. So obviously, there will be a lot of plays on how the commercial starts playing out year on. At this stage, maybe it's too early to predict. Maybe after the end of first quarter, there'll be more clarity. But I personally believe that given the way the industry has been operating at 122% loss ratios and 60% of the -- sorry,[ 12% ] combined ratio. And the 60% of industry being upwards of 30% of GWP on cost, it has to get normalized. So I personally believe that the commercial will start coming down going forward. like I said, let's wait for quarter 1 to end and maybe we can then discuss in more detail.

[S. Sreenivasan, executive]

Just to add to what Raman said on the EUM. See basically, regulator has given a budget company has to decide how do I pay 70%, 30% and reach 100% combined ratio, 70% loss ratio expected losses. You never know what the actual road till we have actually experienced it or somebody might say that, okay, I will go for a 40% expense ratio. They can't do that. So they will have to either then look at us selecting customers with a higher loss ratio and say I will run with a higher combined ratio. So I think that math will play out over the next few months. And let us see how it goes.

[Operator]

Our next question is from the line of Mr. [indiscernible] with Investec.

[Unknown Analyst]

Just one question from my side. What was the share of Axis Bank channel in BALIC?

[S. Sreenivasan, executive]

Bharat? Tarun?

[Tarun Chugh, executive]

Yes. Sorry, I was talking on mute.

[S. Sreenivasan, executive]

Axis share in Q4 is the question.

[Tarun Chugh, executive]

Yes. So Axis share has been at 25% for us for entire business. And with the growth rate in other businesses growing faster, we expect this to remain in this broad range and not really go beyond that. And that's the way we were always comfortable. I have maintained for the last 3 years. And unlike our peers, we are very clear that there's not 1 bank 1 distributor who should have more than a certain percentage. Hence, the risk of the -- and it's even healthy for the banks, honestly, if that's the way the churn providers are. Good thing is we've added a lot many banks last year, and we expect them to drop up our business in the coming year.

[Operator]

Our next question is from the line of Shreya Shivani from CLSA.

[Shreya Shivani, analyst]

I have just take a question on BAGIC. I was trying to understand, while you've given us the growth in the private car, 2-wheeler and CV segment. If you can help us understand what is the mix of your motor book across these segments? And how has it moved over the years? And are you targeting 1 particular segment? Or how are you looking at this business segment-wise?

[S. Sreenivasan, executive]

Shreya, thank you for your question. I think in motor, the way outside it looks like 1 line of business, it is many, many lines of business. There is private cars, there is own damage TP, combination of the 2. There is 2-wheelers, which are new 2-wheelers, the older 2-wheelers, which have a higher proportion of TP premium because OD premiums are very low in 2-wheelers. And you have many types of commercial vehicles, where in some areas, BAGIC does not compete. Some of them, they compete more aggressively. So it's very difficult to put a target or a mix. If you have seen the commercial vacant growth has been low because we have been focused only on segments which historically have been profitable for us. Raman, would you like to expand on that?

[Ramandeep Sahni, executive]

Yes. I'll just try to summarize why we don't share so much of granular information because like Sreeni said, there are too many breakdowns, which are available. So what I can summarize is if you look at the overall motor segment, there are large parts, 2-wheeler 4-wheeler and CV as we know, to well, I'll just try to give you a flavor where we stand. So 2-wheeler, as you know, we used to have a handicap earlier and our market share on new 2-wheeler sales used to be sub-4%. And as we've highlighted in the recent calls, we have started tying up with the OEMs, the issue of the brand conflict seems to be behind us, except for Hero and almost all other tie-ups like Suzuki, TVS, Royal Enfield, [indiscernible], we've been able to break the ice there. And our market share has now moved up to close to 9%. Similarly, 4-wheeler, our market share on new sales is close to 9%. And these are 2 segments where we really focus a lot. It's a Maruti where we know that there is this issue of open market and high amount of discounting going up. So our endeavor is to focus more on the new 2-wheeler sales barring at that is issues there and try to garner a good share of the profitable business. is something which -- and just to give you a flavor, we've grown 26% on 2-wheeler, which is after a very long time, you've seen this kind of growth. And 4-wheeler also the growth is pretty healthy at about 18% for the quarter. CV is something which we are less focused on this year, as I don't know if you've been tracking us as a company. Last few years, we've been kind of leaders on the CV space because that was one of the profit pools we had identified for ourselves and we had garnered a great share of the school bus business, especially we is highly profitable. But after seeing the profit pools being exploited by us, I think now the market has got overcrowded and that's why we are diversifying away from that. And hence, our growth in CV this year has been marginal, I think, 2% as have been for last quarter. So that's where we stand. Just to summarize any more details, maybe we can take it offline.

[Shreya Shivani, analyst]

Yes, this is quite useful.

[Operator]

[Operator Instructions] Our next question is from the line of Mr. Nischint Chawathe from Kotak.

[Nischint Chawathe, analyst]

This pertains to the claims ratio in national in the health business. There has been a fair amount of quality and in fact a significant increase on a sequential basis. So maybe can help us understand the [indiscernible].

[S. Sreenivasan, executive]

Yes. Raman? See, one point I'd like to make is on group health. I think we are doing exceptionally well. We have always been saying that group has is not a business we are either aggressive or conservative, but we do business on our own terms where we see possibility of profit. and BAGIC has a combined ratio below 100% in group health, which is I think maybe more the best performance and despite growing at close to 30%. Raman, would you like to add on the volatility in claim ratios on health?

[Ramandeep Sahni, executive]

Yes. So I think this year, there has been a little stress pool as far as the health loss ratios are concerned. So actually, the first half of the year, we see a lot of increase on the severity of health claims and a lot of these were coming because of the impact of inflation. Now I think but it's trying to taper down. Also, we saw some amount of fraud getting reported, especially in pockets, some states in the country. And that is something which we've addressed very significantly in the second half of the year. While I must admit that while anti-fraud controls are very good as far as motor was concerned, but we were less focused on the other lines of business because the frauds were not that many there. But recently, after the pandemic, we've seen that the number of lots now getting reported on the health lines of business and not only retail health, even in the GMC side have gone up significantly. And fortunately, we got it early, and we've invested a lot in that team. So that is 1 reason is that our loss ratios were higher for some part of the year. But I think year on, they will start tapering down at least for retail health. Overall, I think they're looking a little higher this year also because our proportion of group health has gone up. As you would have seen, the growth is significantly higher there compared to -- and this is GMC I'm talking about there the growth is significantly higher compared to retail health. So that's why overall, you are seeing that the loss ratios are looking on the higher side. But I must admit that overall, GMC is looking profitable after a very long time, that is and you would have heard from us in the past that we had slowed down on GMC significantly because of the impact on profitability. But now whatever we are writing is only the profitable ones, and hence, the growth is pretty decent there. So that's where we are on health. So like this year, I believe, is the aberration, maybe quarter 1 onwards, you'll start seeing the real loss ratios emerge for retail health is where I will commit.

[S. Sreenivasan, executive]

I'll just add to what Raman said, Nischint, is that health is a very high level of engagement business and very service-oriented is not a business where people change insurers every year. And one of the things I will urge everybody to look at is the repudiation ratio, which is published every quarter in the public disclosures. For the market, this year has been varying from 5% to 20%. And we are at the lower end of that. And probably in claims servicing, we continue to take price that we are among the best. There is some news that in the industry, they have collaborated and the indications are that the incidence of rod are in double digits for the industry. These are suspected frauds and through the internal information bureau, further work will be done. But one of the downside to the pandemic was suddenly the fraudsters have also realized that this is one more area where we can now make a bit of money through reimbursement claims, various types of frauds I've been noticed there across the industry. I think we can check with many other participants also. I think they will also confirm this. But the industry is very seriously addressing this. The regulatory is very much on top of it, and we think not a year or 2, this will get sorted out. .

[Nischint Chawathe, analyst]

You somewhere mentioned that...

[Tapan Singhel, executive]

Just ...

[S. Sreenivasan, executive]

Yes, Nischint, sorry, sorry, go ahead.

[Nischint Chawathe, analyst]

Sir, you somewhere mentioned that inflation is controlled now. So is it mean that you're kind of -- the cost is going down? Or is it -- does it mean that [indiscernible]?

[S. Sreenivasan, executive]

Did you want to say -- sorry, Raman, you take it.

[Ramandeep Sahni, executive]

Yes. So I think the impact of inflation, the way after the bandaid emerged is, as you know, during the time to make everybody was charging much higher for not only the COVID-related treatments, but otherwise also. And that, I think, sustained for a period of time after the pandemic also. But we've gone back to the hospital, renegotiated quite a few of the rates put pressure on them to rationalize the rates. And because of that, we've seen that the severity has started coming down a little compared to what we had seen in the earlier part of the year. One more thing I did mention earlier, Nischint, is the other reason for volatility in our retail health loss ratio also is the fact of the proportion of fresh health business. As we know that the first half of the year, we were not doing as well. And specifically, when I had a discussion, and I told you that we will focus a lot more retail health. And you would have seen that now for the last quarter, retail health growth is higher than the rest of the industry. So with the proportion of retail health also going up, you will start seeing that the loss ratios will normalize further compared to some of the other players in the market.

[Nischint Chawathe, analyst]

And you would have raised target in the retails side?

[Ramandeep Sahni, executive]

Sorry, sorry. Can you just say it again?

[Nischint Chawathe, analyst]

Taken a tariff hike on the retail side?

[S. Sreenivasan, executive]

Tariff hike, no, we just took before COVID. We will be reviewing it towards the end of this year.

[Ramandeep Sahni, executive]

Yes. So we did it immediately before the bandage, as you would remember. And normally, we've -- our experience has been once in 3 years is what is largely acceptable to the public at large, and hence, we end up following that rate. So maybe sometime during the year or towards the end of the year is what we expect the next round of hikes to happen.

[Nischint Chawathe, analyst]

Sure. Sure. Just one small question on life. There is some increase -- sorry let me come offline, sorry.

[Operator]

Our next question is from the line of Mr. Dhaval from DSP.

[Dhaval Gada, analyst]

Just quickly on the return ratios for BAGIC. So maybe a question for Raman. Overall, when do you see the business move back to 17%, 18% full year ROE? And is that a sustainable level of return that we are targeting? Or is there a possibility we move back to 19%, 20% ROE as well. Any thoughts and broad sort of time line, that would be very useful.

[S. Sreenivasan, executive]

Raman, you want to take that?

[Operator]

Sir, the line for Mr. Ramandeep has...

[S. Sreenivasan, executive]

Okay. I would get that Dhaval. I think it used to be 20% plus for several years. thereafter, what we have seen is because of focus on profitability, we are generating capital over the last few years, although we are paying dividends. Our solvency margin is increasing quarter-on-quarter. So to that extent, the equity is somewhat high. And therefore, the ROEs have come down. Secondly, the business mix has also changed more commercial business. extensive price discounting in motor, which is the only the real flow generator is only from to third party. To that extent, the investment leverage has come down a little bit. So if you ask me today, we will be more comfortable with the 15% to 18% ROE range as compared to, say, earlier range of maybe 18% to 22%. The other point is the way we do accounting here on stand-alone Indian gap is we do not defer acquisition costs. We do -- so there is a big impact of that as your premium gets earned over time, but your costs are written off upfront. And secondly, we also have seen that we are somewhat conservative on reserving. If you look at our ULR triangle, it's pretty clear that we hold about 75% more than what the original ULR -- our original ULR [indiscernible] higher than our revised time loss ratios. So overall, I think these are some hidden things which are -- if you were to compare this to another company internationally, a 20% ROE. If you adjust for these, it would probably be closer to 20%, I presume they have not done the math but I think it will be higher than where it is anyway.

[Dhaval Gada, analyst]

Sure. And Sreeni, you expect this business to move to higher ROEs, let's say, a bottom has been made?

[S. Sreenivasan, executive]

BAGIC drops. See, we have to make investments in business also. There are a lot of binary changes happening. There is this a sum [ Bima ], Vistar, all these require investments. We're also investing into what we call our geo framework, which is GEO, not JIO. And we are investing in a lot of Tier 3, Tier 4 towns because we see that we have the brand strength, we have the expense allowance and we have the capability to deliver. We started that last year and this year, we expect that to grow very well as well. So there are investments required. We need to continue to invest in capability on the health side. whereas on the commercial and other lines, we have been doing very well, but there is an element of catastrophes and other sources of volatility in those businesses. Having said that, the reinsurance market is a bit hard this year. We still have come out with pretty good terms for the rest of the year. So FY '24 at least looks reasonable for the commercial side in terms of opportunity.

[Operator]

Our next question is from the line of Mr. Anand Bhavani from White Oak Capital.

[Anand Bhavani, analyst]

On Finserv Health, I see loss has widened in this year to INR 188 crores versus can give as a broad sense 3 to 5 years out, how are we thinking of this business? What's the potential here? And is there a thought process on breakeven here?

[S. Sreenivasan, executive]

See, last time, I think I mentioned that we had invested about INR 400 crores, INR 450 crores by end of the year. over the next 2, 3 years, we -- because this is a new business, and we will have to continue to invest. We think we will make an equal investment over the next 3, 4 years. Devang, would you like to add to that?

[Devang Mody, executive]

See, at this point of time, our focus is to get more health transactions done. So as you are seeing, what we have started publishing is cohort wise transactions, priority for the company at this point of time is to build out more and more service, like we are investing deeply in technology as well as network as far as dental network is concerned. And that's where you will see transactions going up in coming years and to create a product framework -- and after that, we have lined up more services to be covered. So at this point of time, our priority is to get more and more health transactions done and to play a larger and larger role in consumers' health care management. I think that is how we define success at this point of time. Obviously, we'll refine the spend as one of the participants asked question. Now we are not spending in getting traffic. We are just servicing our customers and getting transactions done. So we believe where we will invest where it is required, which is to build out network and to build out technology services.

[S. Sreenivasan, executive]

Let me give you one view from BFS side. If you see our record profit is after absorbing 100% of these losses because it's a wholly owned subsidiary. Therefore, we have businesses which have multiple levers. They behave differently under inflation, inflation is bad for BAGIC with a bit of lag. It is generally good for BFL, and it's pretty good for BALIC because the guaranteed rates do not increase with a lag. We also have this ecosystem, which has multiwave open architecture under Finserv markets. We have the health care ecosystem, which is a population business. So if I say, 10, 15 years, it's a business where you have to hang on and create the capability and become a player with a large brand, which can operate all over India with operational excellence. I mean that's what this business is about. And we have to get more and more customers to use our products and service and keep expanding the network and the products and services. So when you add up all these together is what you have as BFS. So it is -- it's not an investing holding company that we put in financial markets and carry a huge amount of surplus. It's a company where we continue to invest in the ecosystem of our customers, which today is largely middle class, mass affluent and above. But over time, some of the businesses like insurance and health will also go into the mass markets in a bigger way because the businesses are like that, and that's where the market is.

[Anand Bhavani, analyst]

Got it. And second question is on Bajaj Markets. There, we see a lot of traffic -- in terms of monetizing that asset, particularly on the insurance side, which is a push product. How are you thinking like there are dedicated players who have this pricing discovery platform and then they call the customers and push the insurance products? So do you think you would explore that kind of option having a dedicated call center to push through the insurance product from the leads on market share?

[S. Sreenivasan, executive]

Let me first take that and then hand over to Ashish. I think if you look at insurance, both companies or insurance companies have very solid distribution, very broad and deep distribution across channels, whether it is individual agents, whether it is banks, whether it is brokers. And Finserv market is an open architecture platform. And to start with the first few years, the focus has always been on loans. Therefore, I think as a group distribution, we are much bigger and better than what we were last year. Now in terms of products that they will sell, I think Ashish will expand on how they want to look at [indiscernible] from markets.

[Ashish Panchal, executive]

Sure. So answering specifically for insurance, while as I mentioned, loans and charges are the bigger revenue generators on the marketplace for us. As far as insurance is concerned, a, we have a corporate agency license as an entity. And therefore, we have tied up with insurance manufacturers on life, general and health side to offer their products. We have a marketplace insurance marketplace, that is embedded inside the overall app and web digital properties that we have where customers can choose products, they can compare and they can do end-to-end by journey, either assisted or unassisted in a DIY format. In Asia, we have about 400 innovative products, which are insurance stroke value-added products, which cover various aspects of life, both arising out of insurance needs as well as otherwise. And that is the entry point for the customer into the insurance for.

[S. Sreenivasan, executive]

Let me just add one more point here. I think when you look at Bajaj Finserv markets and open architecture and over time, we have now been able to demonstrate neutrality. So they will have multiple partners. The customer will make a choice. So it's a customer-centric organization. In that basic and Bali will participate in those businesses, which as a manufacturer, given their risk profile and their profitability needs, they feel they need to compete. But the other partners will also compete. And so we have the distribution revenue pool from all the partners and our own companies may compete on certain segments of the manufacturing profit pool where they feel comfortable. But in the process, I think there is a multistage thing. The first is to acquire customers the pocket products that Ashish talked about will bring us a lot of customers, many customers will buy it. They will use the app, they will find the value in the app, and they will also take other products from our ecosystem because they are in the ecosystem next time they want to buy something on some and let us out. I mean that is the first step. When they do that, over time, I think we will be able to grow these markets.

[Operator]

Thank you. That was the end of our question-and-answer session. I now hand the conference over to Mr. Akshay Jain from JM Financial for closing comments. Over to you.

[Unknown Analyst]

Thank you all for joining the call, and thank you for the management of Bajaj Finserv Limited for at to host this call.

[S. Sreenivasan, executive]

Thank you.

[Operator]

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