PB Fintech Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from PB Fintech Ltd (POLICYBZR) Q4 FY24 Earnings Concall

• Growth and Performance
  • Core insurance business, health and life, saw 53% year-over-year growth in new premiums..
  • Total insurance premium for Q4 was INR 5,123 crores, with an annualized run rate of INR 20,000 crores.
  • New insurance premiums grew 47% in Q4, driven by strong health insurance performance.
  • Online insurance premiums, including renewals, grew 40%, and core insurance revenue grew 36%.
  • Achieved full-year PAT breakeven ahead of target, with a PAT of INR 64 crores.
  • Revenue for FY24 grew 34% to INR 3,438 crores, and core business revenue grew 39% to INR 2,375 crores.
• Credit Business and New Initiatives
  • The credit-linked Paisabazaar business slowed down as expected, growing 22%.
  • The credit business reached an annualized run rate of INR 14,000 crores in disbursals and INR 6 lakh crores in credit card issuance.
  • The credit score consumer base increased to 43 million, with 75% of cards processed digitally and disbursals from existing customers.
  • New initiatives grew 15% year-over-year but 50% quarter-over-quarter, with strong performance from PB Partners.
  • The UAE premium business grew 2.3 times, continuing its strong performance.
• Margins and Profitability
  • Adjusted EBITDA margin for core businesses improved from 6% to 14%, with adjusted EBITDA of INR 324 crores.
  • Trail revenue grew to INR 577 crores from INR 388 crores, contributing significantly to profits.
  • Disproportionate fresh health business growth impacted margins due to lower initial margins.
  • New initiatives broke even on a contribution basis during the year.
• Health Insurance
  • PB Fintech’s health insurance persistency is higher than previous years, with a 1-2% increase compared to the past.
  • The percentage of ported policies in fresh business is around 20%, which is half of the overall market level.
  • This indicates PB Fintech is successful in bringing new customers to health insurance rather than relying on portability.
• Credit Business Outlook
  • The regulator is favoring secured loan products over unsecured, prompting PB Fintech to explore secured categories.
  • Currently, secured disbursals account for 13-15% of total disbursals but only 4% of revenue.
  • The company is exploring loan against securities and other secured categories to increase their contribution.
  • However, there is an expected 0-10% growth in the credit business for the next quarter due to a process-based slowdown, not quality issues.
• Unsecured Loan Business
  • PB Fintech is confident in the unsecured loan business and does not see it as a concern.
  • The current slowdown in the credit business is temporary and expected to last for the next quarter only.
  • The slowdown is attributed to a process-based issue rather than a quality-based issue.
• Marketing and Branding Spend
  • Does not operate with a fixed marketing/branding budget in mind.
  • Spending decisions are tactical and ROI-driven, focused on capitalizing on growth opportunities when they have effective creatives.
  • Overall, marketing spend is expected to grow but at a lower rate than revenue growth.
• Offline Channel Contribution
  • The offline channel (branches, feet-on-street) contributes around 20-22% of total premiums collected.
  • Proportion is gradually inching upwards as PB Fintech expands its offline presence by adding more centers and people.
• PoSP Business
  • The PoSP business operates at an 80-20 ratio of motor to non-motor premiums.
  • While premium growth continues to outpace the market, PB Fintech’s focus is on quality, smaller agents, and geographic expansion.
  • The PoSP growth trajectory is expected to remain strong, around 2-2.5x the overall market growth rate.
  • Reinsurance Broking
  • PB Fintech recently obtained a reinsurance broking license and is working on building this business.
  • The protection segment is seen as an initial area of focus for reinsurance broking activities.
• EoM Regulations
  • PB Fintech’s low commission rates of 16-17% in health compared to the EoM cap levels 30-35% provide ample headroom.
  • As a low-cost supplier, PB Fintech would be among the last to be impacted by any EoM-related expense cuts by insurers.
  • The online model reduces fixed costs compared to other channels by offering services like claims assistance and customer support.
• Leveraging AI and Technology
  • Actively exploring ways to leverage AI, machine learning, and generative AI across various areas.
  • Key focus areas include risk assessment, improving call center productivity, enhancing customer service, and transforming customer interactions.
  • Generative AI holds potential for breakthrough changes in how customers interact with digital assets.
• Tax Implications
  • The company has around INR 2,100 crores of carry-forward losses that can be utilized against future profits.
  • However, the utilization of losses depends on where profits are generated across different group entities.
  • Profits from investments cannot be offset by carried-forward operational losses, resulting in tax payments.
• Bima Sugam Platform
  • Optimistic about the upcoming Bima Sugam platform launched by insurers.
  • Expects this to expand the insurance market dramatically, potentially 20 times its current size.
  • While offering lower prices initially, PB Fintech expects to gain market share as volumes increase.
  • Open to adapting its business model, even operating at lower take rates if needed.
• Profitability and Growth Focus
  • Priority is growth over short-term profitability, which is viewed as an outcome.
  • Profits are expected to increase as the business scales and the existing book generates more renewals.
  • This year’s profitability will translate into higher profits in future years as the growth compounds.