Bajaj Finserv Limited (BAJAJFINSV) Q2 FY22 Earnings Concall Transcript

Bajaj Finserv Limited  (NSE:BAJAJFINSV) Q2 FY22 earnings concall dated Oct. 29, 2021

Corporate Participants:

S. Sreenivasan — Chief Financial Officer

Tapan Singhel — Managing Director & Chief Executive Officer – Bajaj Allianz General Insurance Co. Ltd

Tarun Chugh — Managing Director and Chief Executive Officer – Bajaj Allianz Life Insurance

Bharat Kalsi — Chief Financial Officer – Bajaj Allianz Life

Analysts:

Sameer Bhise — JM Financial — Analyst

Prakash Kapadia — Anived Portfolio Managers — Analyst

Hasmukh Gala — Finvest Advisors — Analyst

Avinash Singh — Emkay Global — Analyst

Nischint Chawathe — Kotak Securities — Analyst

Nidhesh Jain — Investec — Analyst

Anuj Narula — JM Financial — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Q2 FY ’22 Earnings Conference Call of Bajaj Finserv hosted by JM Financial Institutional Securities. [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 — JM Financial — Analyst

Thank you, Margaret. Good morning, everyone, and thank you for joining this Second Quarter FY ’22 Earnings Conference Call of Bajaj Finserv. I would like to thank the management of Bajaj Finserv for giving this opportunity to us to host this call. From the management team, we have Mr. S. Sreenivasan, Chief Financial Officer, Bajaj Finserv; Mr. Tapan Singhel, CEO, Bajaj Allianz General Insurance; Mr. Ramandeep Singh Sahni, Chief Financial Officer, Bajaj Allianz General Insurance; and from the Life Insurance business, Mr. Tarun Chugh, CEO, and Mr. Bharat Kalsi, CFO, of Bajaj Allianz Life. Without much ado, I would want to transfer this call to Sreenivasan sir. Over to you, sir, on the call. Thank you.

S. Sreenivasan — Chief Financial Officer

Thank you. Good morning, everybody. Let me welcome all of you to this conference call to discuss the consolidated results of Bajaj Finserv Limited for Q2 FY ’22 and the first half of the financial year FY ’21, ’22. I hope all of you are safe and vaccinated. 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’s General Insurance BAGIC and Bajaj Allianz Life Insurance BALIC, and where material, the stand-alone results of our company. Bajaj BFS, which is our company. Bajaj Finance BFL, which is another major subsidiary of ours, has already had its conference call. However, if there are any high-level questions on BFL, we would be glad to take that as well.

We will not be taking any questions on the status of Allianz’ stake in our insurance company. 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 like forward-looking statements are just estimates and do not constitute an assurance or indication of any future performance result. Remarks on Ind AS, as required by regulation, BFS has adopted Indian accounting standards from FY ’19. The insurance companies, however, are not covered under Ind AS. They have prepared Ind AS financials only for the purpose of consolidation. Accordingly, for BAGIC and BALIC, the standalone numbers reported below are based on non-Ind AS accounting standards for 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 today evening.

At first, let me start with an update on the performance for Q2. After the disruption caused by the second wave of COVID-19 in the first quarter of this year, recovery gathered momentum in Q2 on the back of reopening of the economy in more states, rapid vaccinations and continued policy support. Under these improved conditions, our businesses have shifted focus to growth while closely monitoring these parameters.

The company and its subsidiaries took the initiative in arranging vaccinations for employees and their families, apart from ensuring well-being of our employees and their near and dear ones. This also ensures better preparedness for us, and our businesses in the event of a third wave. I will now touch upon each of our major businesses. Let me start with BAGIC. Overall, an excellent quarter for BAGIC on growth and profitability. Gross domestic premium income of GDPI grew 21% in Q2 FY ’22 versus the industry growth rate of 10.7% and a private sector growth rate of 13.7%. After excluding bulky tender-driven businesses like crop insurance and government health businesses, GWP grew by a healthy 14.4%.

During H1 FY ’22, the growth rate was 16.8% versus the industry growth rate of 10.9% for the composite companies. BAGIC continues on its approach to calibrated growth, that is seeking to grow in preferred segments, which are private cars, two-wheelers, commercial lines and retail health, while remaining cautious yet opportunistic on group health, prominently the employer employee group.

To give some more details, growth in quarter two was driven by motor, 7.6%, fire 30%, marine 52.9%, travel and government health schemes. During the quarter, despite the auto industry showing declining trend on account of shortage of semiconductor chips and tepid new sales of two-wheelers, BAGIC has shown growth in the motor segment. It was heartening to see the commercial vehicle segment starting to recover growth and we see it trending towards pre-pandemic levels in the coming few quarters.

Overall, BAGIC had an industry-beating motor growth both in Q2 FY ’22 and H1 at 7.6% and 7.4%, respectively, which is about — the industry growth was about 6.3% and 4.9%. While it is expected that the auto industry will continue to face supply side constraints in the near term, the performance in Q3 will also depend on how the demand shapes up in the festive season and beyond. In commercial lines, with the aid of its strong bank assurance and agency channels, as well as underwriting and reinsurance capacity for covering large risks, BAGIC continued its strong performance across retail, commercial and industrial risk categories.

Fire & Marine segments continued their growth momentum, while engineering, which is depending on new projects or some slowdown and liability growth was flat. Overall commercial lines continue to do very well with Q2 FY ’22 and H1 FY ’22 growth of 20.9% and 16.8%, respectively, against the industry growth rate of 17.4% and 12.9%. Within health, retail health has seen a muted growth on account of higher base from Q2, which was boosted last year by strong demand for corona coverage policies.

Overall, in H1 of this year, retail health growth of 8%, is in line with the multiline composite insurance growth of 8%. While BAGIC continues to be cautious on group health, growth is driven at right pricing for each relationship. During the quarter, BAGIC underwrote government health business of 753 crores of Gujarat government under the PM Jan Arogya Yojna scheme.

So recovery from the second wave of COVID-19 led to significant quarter-on-quarter reduction in COVID-19 cases and severity. There has been an increase in severity of non-COVID health claims. With the economy opening after lockdowns, motor-only claims frequency, own damage, claims frequency and severity are almost back to pre-COVID levels.

Moreover, heavy rains in Maharashtra witnessed in this quarter had some negative impact on claims. These factors did impact results for the quarter, but notwithstanding these, the combined ratio increased only marginally to 98.5% as against 97.4% in Q2 of FY ’21, and it is well below 100%, on account of lower expense ratios. In a market which is intensely price competitive, this result we believe is highly encouraging.

Just to put these in perspective, last year, when there were lower claim frequencies, we had indicated the need to strengthen reserving for potential interest on third-party claims and higher expected ultimate losses for the health portfolio arising out of COVID. We are also sounded caution on group health employer employee businesses, which seem profitable in the short term at that time, but turned out to be that we are losing business when the second wave of COVID-19 emerged, as more employed people got affected. The general insurance business is dynamic and volatile, and tactical decisions are as important as strategic initiatives in preserving the opportunity for long-term profitable growth. In short, BAGIC has had an excellent quarter with a 28% growth in profit after tax, which was also boosted by higher investment income and realized gains. The non-annualized ROE for the quarter at about 5.5% is in line with a 20% plus ROE on an annualized basis. BAGIC is cautiously optimistic on growth as it enters H2 of FY ’22. In summary, it has been a very positive balanced quarter for banking.

Coming to Life Insurance next. After the slowdown witnessed in May and June on account of strict lockdowns, the industry is now back on its month-on-month growth trajectory. Q2 was a good quarter for the life insurance industry as a whole with individual rated new business growing by 21%, with private players growing by 35% on the back of lower base for the industry. BALIC had a relatively high base given the industry building growth in every quarter of FY ’21. Nevertheless, BALIC continued the strong performance of FY ’21 and delivered an individual rated new business growth of 52% in Q2 of this year.

BALIC was the second fastest-growing life insurer among the top 10 players in H1, the growth of 51% in terms of individual rated premiums. When compared to the pre-pandemic period, by taking a 2-year CAGR for the quarter two, individual rated new business BALIC has delivered a CAGR of 34%, which is the highest in the industry. The annuity product launched by BALIC in Q4 of FY ’21 continues to be very well received in the market. During the quarter as well as in H1, 12% of the individual rated NB was from the annuity segment. In line with the industry, demand for retail — in line with the industry, demand for retail protection continues to be sluggish. And hence, contributed only 3% and 5% of the product mix in Q2 and H1, respectively.

Given the steady equity market, the risk appetite for the retail savers seems to be higher as evidenced by the strong demand for units. BALIC’s unit contribution to product mix was 38% in the quarter versus 36% in Q2 FY 21. Net inflows into AUM have been positive, offsetting an increase in challenges. If you recall in Q4 of last year after the budget, there was a little bit of uncertainty, whether the new tax changes in the effect units. But in hindsight, it seems to be — it seems to us that — that is not the case. The demand continues to be strong and is more driven by demand for equity as an asset class.

Guaranteed [Indecipherable] savings had some slowdown with contribution to mix in IRNB terms or individual rated NB terms dropping to 25% versus 36% in Q2 FY ’21. The Q2 contribution was high given the low — last year, the Q2 contribution was high given the low fixed deposit rate uncertainty due to COVID and volatile equity market. And therefore, the customer’s preference was for guaranteed products such as the non-par savings. While contribution to the mix has come down, in absolute terms, the non-par savings has grown by 5% during the quarter.

Despite the steady equity market, which typically 1 would feel is not a very favorable 1 for the participating or the par segment. It continues to maintain contribution in the mix at 22% versus 23% last year. In absolute terms, though, par segment has shown solid growth of 45% and 75% in Q2 and H1.

Group Protection business continue to display a strong growth of 46% QoQ. That is compared to Q1 of this year, which was 338 crores and 494 crores in the last year. Overall group new business grew by 62% from 830 crores in Q2 of last year to 1,345 crores in Q2 of this year. You may recall that Group business was muted in H1 of FY ’21 as lending by banks and NBFCs that slowed down considerably. During the quarter, growth was driven by all our main channels with Agency, Institutional business and BALIC Direct growing at 56%, 37% and 51%, respectively.

Renewals we saw a strong growth of 22%. And on the back of strong new business growth and renewal growth, the GWP grew by 42% to 3,813 crores. One point I would like to highlight here, the strong year-on-year increase in persistency across vintages. 13-month persistency increased by 5% to 82%, while 61st month persistency increased by 4% to 45%. The effort of the management to increase contactability, enhanced digital offerings and focus on customer value have been key to delivering this increase.

On the claims front, during the quarter, BALIC in line with industry trends experienced deviation in expected mortality across the businesses on account of COVID-19. In the group protection and on the retail side, stress was observed with the surge of claims from May till August on account of some segments having some delayed reporting. However, we witnessed gradual month-on-month improvement in claim experience during Q2. By September, the tail factor seems to have dropped off considerably.

On the retail side, BALIC has settled around 2,800-plus claims pertaining to COVID-19 amounting to 146 crores on a gross basis in Q2 alone. BALIC has reserved for probable future claims and the results for the same as at 30th September stands at 105 crores net of reinsurance. The total impact of COVID claims in Q2 on the shareholders’ PBT was INR60 crores as against INR288 crores in Q1 of FY ’22 and INR15 crores in Q2 of FY ’21.

Similar to the previous quarter, we have continued making quarterly disclosures of NBV. In addition to the NBV for the quarter, we have also indicated the new business value for the 12 months ended 30 September, 2021. Due to high variations in seasonality of business across quarters, I would advise investors to exercise caution by reading into Q2 NBV and margins. We had mentioned in our earlier call, the quarterly NBVs and NBMs may not reflect the possible year-end results. Investors may be aware that a significant portion of the life insurance business comes in the second half and especially in Q4. And therefore, most of the fixed cost burn during the year gets absorbed in the second half.

Please note that NBV on a rolling 12-month basis, which we have indicated, does not indicate a forecast or expectation from us for FY ’22 as it is only intended to show what a 12-month trend with seasonal variations looks like. New business value, net of expense overruns, the key metric of profitability increased by 82% from INR75 crores in Q2 of last year to INR136 crores in Q2 of this year. For the 12 months ended September 2021, the NBV was INR461 crores as against 258 crores for the 12 months ended September 2020, and 361 crores for the whole of FY 21.

Salix profit after tax for Q2 FY ’22 at INR104 crores were 6% higher than Q2 of FY’21 of INR98 crores, largely because of the additional cost of the COVID claims and the new business trails cause by better than expected growth. In addition, as indicated in an earlier call, we continue to report embedded value for BALIC on a half yearly basis. From this quarter, we have also started reporting the embedded value movement on half yearly basis, and you’ll find these details in our investor deck uploaded on our website yesterday after our Board meeting.

The embedded value for BALIC as at 30 September, 2021 was INR16,616 crores, which is a 4.4% increase quarter-on-quarter over June ’21 and a 14% increase over September 2020. To summarize, overall, a very good quarter for BALIC. Finally, both the insurance companies are financially among the most solvent, BALIC with 626% solvency and BAGIC with 350% and hence, are well poised to weather any external adversity. All our businesses have further augmented their digital capabilities, which along with greater digital acceptance by customers should we hope, help overcome challenges and deliver a strong performance in the second half of this year.

Both BAGIC and BALIC have seen an increase in the utilization of their digital properties by customers and intermediaries. BAGIC has also started the initial phase of the implementation of their core policy administration system with the new maximus platform being launched on retail health towards the end of Q2. Further details regarding BAGIC and BALIC’s digital capability are covered in the investor deck uploaded on the website.

Let me move to our lending businesses, BFL and BHFL, that is Bajaj Finance and Bajaj Housing products. BFL already had its investor call. And therefore, we’ll only broadly touch upon the BFL results. In the second quarter, we witnessed a sharp revival across risk, debt management and financial metrics after witnessing a slight drop in the number of new loans booked in Q1, on account of the second wave, the number of new loans booked have increased to 6.33 million in Q2. This is more than Q4 of FY ’21, but only marginally below the pre-COVID time. That is Q2 of FY ’20 and 75% increase from Q2 of FY ’21. The company’s diversified business model has enabled it to record a strong AUM growth as seen from the total AUM standing at INR1,66,937 crores as at 30th September of this year versus 1,37,090 crores as at 30th September of last year.

In absence of the third wave, BFL expects quarterly AUM growth rate for the second half of the year to be strong. To support this growth stance, BFL increased employee strength by over 2,000 during the quarter. While last year’s approach was to staffing was to strengthen collections. This year, it is moving to supporting growth and new capability building. In Q2, BFL made loan loss provisions of 1,300 crores as compared to 1,700 crores in the same quarter of last year. It has increased its management overlay provision by 349 crores to 832 crores as of 30th September as a protection from a potential third wave.

During the quarter, the company saw strong improvement in debt management efficiencies across all products. It expects that in absence of a third wave, loan losses and provision should normalize to pre-COVID levels by Q3 of FY ’22. BFL continues with its estimate of total credit cost for FY 22 to be around INR4,300 crores. Gross NPA and net NPA recognized as per RBI prudential norms and provisions using the expected credit loss by third prescribed under Ind AS, as of 30th September 2021 stood at 2.45% and 1.10%, respectively.

For Bajaj Housing Finance, a 100% market subsidiary of BFL, it continues to do well. AUM grew by 33% to 44,429 crores as of 30 September, 2021. The profit after tax grew by 100% to 166 crore in Q2 on account of higher net interest income. The capital adequacy ratio for Bajaj Finance continues to be strong at 27.6% as against — out of which the Tier 1 capital itself is 24.9%. BHFL also has a high capital adequacy ratio, including Tier 2 capital of 20.3%.

In summary, we believe BFL is well positioned to navigate any temporary stress. And I would request investors wanting to add more information to please go through the BFL’s investor presentation uploaded on their website. A few other developments you mentioned herein in Q2 FY ’22, BFS has received an in-principle approval from SEBI to set up an asset management company to enter the mutual fund business. In this regard, the Bajaj Finserv Asset Management Company Limited and the Bajaj Finserv Mutual Fund Trustee Company Limited have been incorporated for taking this forward.

Also during H1 FY ’22, we has incorporated a wholly owned subsidiary, Bajaj Finserv Ventures Limited, which will focus on alternative investments, including investments in start-ups and limited real estate. These are only the first stages of setting up these ventures, and it may well be 12 to 18 months or more before the first products are launched by the AMC and these scheduled to operation.

The consolidated results and the financial numbers are already indicated in my — in our press release and therefore, I would not [Technical Issues]. I will now conclude my opening remarks with some final comments. The gradual reopening post second wave of COVID-19, we are witnessing a return on growth and steady economic recovery. Even though risk of a third wave is this, the future outlook remains positive. Under these circumstances, our businesses have shifted focused to regaining growth while continuing to manage risk. Backed by strong solvency, well above the required capital supported by healthy liquidity, continued focus on risk and collections, digital processes and improved cost structures, we are confident that we are in a strong position to maneuver through these difficult times.

I now open the floor for questions and answers. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Prakash Kapadia from Anived Portfolio Managers. Please go ahead.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Yes. Thanks for the opportunity. A couple of questions from my end. On the health side, we’ve seen increase in GDP. You mentioned about the government scheme from the Gujarat government. So what excites us in this segment over the long run? And also on the retail side, what are we doing differently to scale this business? Obviously, post COVID, the awareness has increased and there is room for penetration. But what are we trying to do differently to scale this business?

And lastly, on life insurance, any major claims in terms of backlog, which is pending and are the reserves of 1.05 billion enough for any future claims?

S. Sreenivasan — Chief Financial Officer

I will just take the question on the reserves first. We have an extensive method of tracking. This is on the life side. We have an extensive method of tracking the delays on claims. And death claims, as you know, do not — there’s not much of a gap between the date of death and the reporting. It only happens largely on some of the group side where the partners where also we have a very robust system of tracking the claims closely with the partners. So as of now, based on those trends, this seems to be adequate for the second wave. But if there is a third wave, we do not know. It depends on how it evolves, we will keep reviewing that. The same applies to BAGIC as well.

The question on government health and retail health and retail business, I would pass on to Tapan, who will take it.

Tapan Singhel — Managing Director & Chief Executive Officer – Bajaj Allianz General Insurance Co. Ltd

Thank you, Sreeni. I think if you look at it as one of the large companies in the Indian market, we are present in all segments of business. And government health also in the segment of business. So — and you also watch that we are not either overweight on any particular business or underweight in any particular business. So that is what our philosophy has been. And as per our overall market share, close to that, in most of our lines of business, we would be either a bit above or a bit lower in what it is. That’s how we grow the business holistically.

So it is not about getting excited. We want and we will do all businesses to understand better over time and get better with a holistic picture. Government health business is an important part of business if we look at it. I think government’s focus on governmental business is pretty high. It’s good for the country also. And so where is it a tender-based business. So wherever we get at a pricing, we are happy to do that.

On the retail health also, if you watch, I think it is predominantly in terms of product offering that you look out at BAGIC. We’ve been all products and segments that you could think of. We also very exciting products like unlimited some insured for our customers, again, unique to the country. So we have a lot of exciting products from that perspective for all segments of customers, be it HNls, be it the middle lung or be it for below poverty line. So it would be having a huge spectrum. And we would keep on focusing on growing our retail health business in a manner which is spread across the country into different geographies and different segments which is there.

So it’s a very simple strategy, and ensure the business of large numbers spread evenly across. And that’s what we keep on doing, and we’ll focus and do that as we progress with them. We also have been aware of the approval from regulator in terms of wellness being part of the product. So you look at one of our companies in Bajaj Finserv, EVH. So we also have a product now launched, which is wellness as part of the product launch be for retail of our group. So from that perspective, you’ll look and scan our product portfolio, you’ll find that at all segments. And whatever approvals we have from regulation in terms of [Technical Issues] you’ll find us in that space.

In a Sandbox, you’ll find us that we are using trackers, devices in terms of how do people live healthier. That is our strategy. It’s holistic. It’s all across, and that’s what we’ll continue doing forward.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Okay. And on the retail health side, is there a room to upscale existing customers because post COVID, the awareness seems to be very high for having a higher sum assured or higher policy or a family floater. So is that one area also which we are focusing on?

Tapan Singhel — Managing Director & Chief Executive Officer – Bajaj Allianz General Insurance Co. Ltd

Yes, upscaling not only post COVID. I think it’s a philosophy which most companies would do because see, sum insured for health, let’s say, if I take you back 7, 8 years, maybe a 2 lakh sum insured would have been very reasonable for a normal person. Today, 2 lakh doesn’t make sense, know. You have an inflation in health, which is about 14% to 15% per year in terms of health treatment. So if you are not upscaling your sum insured and we’re not insured and we are not advising you. I don’t think — on both sides is the right thing to be done. So that’s a normal business philosophy, which I think all good companies will be falling.

S. Sreenivasan — Chief Financial Officer

Let me just add something on top — to supplement what Tapan said. While scale is important in retail health, then are also customer segments. So the March or the lower end of March segment, as we call is largely done through group business through the government schemes or through other schemes. Really, our products are mostly into the — our middle class and the mass affluent and above segments. And in terms of servicing, that is something BAGIC is reputed in the market for, and that is something we will not give up. If you take the way the claims are handled or the demand ratios or any ratio by which you would want to measure those.

I think BAGIC’s reputation in the market is very strong. So we believe that in the long run, that is a better strategy to approach group health, not mindless top line. And secondly, a combination of employer, employee health, retail, health and government health gives us payment volume to the hospitals. India as a market is still not reached a level where insurance companies have enough clout together to actually get reasonable rates from all the hospitals. So each company has to build its payment capability. And we believe that Bajaj Allianz General, along with our Bajaj Finserv Health, which is still in a nascent stage and this are growing fast.

We would be able to, over the next few years, become a strong payer in the market, which should enable us to control this have a better handle on this business related to competition.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Understood. That is very clear. Thank you. I’ll join back the queue if I have more questions, and wish you a very happy Diwali and a prosperous New Year.

S. Sreenivasan — Chief Financial Officer

Thank you for the question and a very happy Diwali to you too.

Operator

Thank you. [Operator Instructions] The next question is from the line of Hasmukh Gala from Finvest Advisors.

Hasmukh Gala — Finvest Advisors — Analyst

Yes. Good morning to everybody. And congratulations for a really good set of numbers for both BAGIC as well as BALIC. Bajaj Finance, of course, we have already provided. With the formation of this new subsidiaries like Bajaj Finserv Health Limited, etc., do you think that eventually the health-related business will get transferred from say BAGIC or BALIC, wherever it is getting into this particular subsidy or future business? That is my first question.

S. Sreenivasan — Chief Financial Officer

Yes. Is that it? Hello?

Hasmukh Gala — Finvest Advisors — Analyst

Yes.

S. Sreenivasan — Chief Financial Officer

No, Bajaj Finserv Health Limited is not an insurance company, and that predominantly in the health care space and the health care ecosystem, where they connect providers of health care, which includes hospitals, doctors, pharmacies, diagnostic centers, laboratories, with the users of health care, which are the patients through a digitized platform and also provide financial solutions to those who need it. Today insurance covers predominantly only hospitalization, there is a whole gamut of health care services that people use, including finding a doctor, for their outpatient treatment, for their regular smaller types of accidents or illnesses. And through their products, they will eventually address a holistic solution for our customer, that whether I want to find a doctor or whether I want a second opinion or do I want — I mean, if I have hospitalization, I need insurance or if I’m uninsured, I need a loan, the entire thing will be provided under this platform. That’s a long-term goal.

Today, we have just started that business. I think it will be at least another year or two before we start talking about it. But together with BAGIC that we see a tremendous amount of synergy because the issue of health care supply demand mismatch is very much there that quality health care is in short supply in India. And access to quality health care is also not easy with [Technical Issues] and the population increase. We believe it’s a very good long-term bet, and that’s why we have invested in that.

Hasmukh Gala — Finvest Advisors — Analyst

Okay. Okay. That’s very clear. My second question is all the companies in the group have been taking a lot of digital initiatives, development of apps, etc. So can you just give us a brief overview of where exactly do we stand? And once the apps etc. are launched, maybe the merchant app, what they told will be done in probably next year, etc. How much incremental business can we expect to get because of all these initiatives?

S. Sreenivasan — Chief Financial Officer

Broadly, I will say that I’ll give — pass it over to Tapan and Tarun to talk about their companies. Each company has got its own in our business. I mean the way lending business is done is not the way insurance business is done or the way the customers buy insurance even today or in the foreseeable future. Lending is a transactional business. You buy an asset, and therefore, you need to borrow money, and therefore, you go to a lender. If you’re not buying any assets, you probably won’t borrow money. Whereas insurance business is a journey, it’s a lifelong journey that you is not something I need today and say tomorrow, I don’t need it, a health insurance or a car insurance.

So therefore, the digital initiatives are different for each of these companies. The Bajaj Finance initiative is largely related to the lending business, where they are giving customers multiple options in terms of do you want to now first take the loan and then go and find out and you want to go to the store, buy the product and then get the loan, whichever the way the customer wants to come, whether coming directly or through a store. I think it is across all challenges at the same holistic experience through a single app and the preferred customer segment, which for different segments of business, they will be able to buy any of the products, which is loans or any cross-sell product with 3 clicks. That is the goal which Bajaj Finserv is able to drive.

Now I’ll hand it over to Tapan to talk about BAGIC and then Tarun about BALIC.

Tapan Singhel — Managing Director & Chief Executive Officer – Bajaj Allianz General Insurance Co. Ltd

Thank you, Sreeni. I think on a digital initiative, when we look at insurance, you have to broadly look at 3, 4 big parameters. First is how do you look at the core. I think all insurance companies would have legacy systems in which [Indecipherable] beyond premise service. At BAGIC, I think we are among the first, if not the first in the world in generation company, which decide to shift the entire core and do a transformation taken to cloud. And we’re very happy to say that this journey is going very smooth, and we have shifted quite a bit on to that.

So why you shift to cloud, the core? If you look at all innovations happening, all start-ups on a cloud-based applications coming through. And the volumes now shifting when you have partners, big partners in e-commerce space. So someday, you have policies which run into millions and someday it may drop again. An on-premise server would not be serving that kind of solutioning and innovation capability, which would be there. So we have done that. And as I mentioned, that it’s going good. And that gives us a lot of capabilities for innovating faster, giving solutions faster and also handling any amount of load irrespective of what the transition would be, and we have very powerful partners who deliver that kind of load also. So I think we would be first in the industry to do so.

The second, which comes to all the touch points. Insurance companies are distribution based, largely distribution based and very strong there. So the initiative on the distribution front in terms of the ease of not being able to either issue a policy or in COVID times to do a touchless sale over a video call or in terms of claims settlement, touchless settlement on the spot. So we look at BAGIC has been the forefront of these innovations for a motor claim, you can actually get down, click pictures, upload, get your claim on the spot of our health also, we have CDC or if we look at mobile claims. So anything to think about on retail I think most of our settlement would happen at the consumer end, completely touch free and will be completely through. So — and this would be, again, what you’re doing with some of — most of it with the industry first that we have done.

Then comes from a consumer perspective, he should — and she should have always had the choice. So we have modular products, they can go to the web, decide what they want to buy, what price range they’re looking at in terms of what combination they can have. Then you have the fraud analytics which should happen because the insurance company are subject to a lot of fraud. So we have a strong usage of fraud analytics, which we have set up. Then you would be doing no [Indecipherable] it’s a huge plethora of initiatives. It is not that know, there’s a single point focus or one thing. A combination of all this is what gives a cutting edge position to the company.

And as I mentioned that if you look at most of our initiatives and go through detailing of it, you will see that most of it is the industry first in terms of what we are delivering and in terms of redefining the customer experience and even redefining how the customer should be getting his experience and his transparency, his simplicity and as I said, completely touch-free as it can happen. And luckily, the regulator has allowed the dissolutions of policy and all that also is making it very convenient for us to be in that direction.

It would take a lot of time for me to explain the entire detail of it because there’s huge plethora of initiative. But to give you some idea, at all touch points, you would find we’ll be innovating and redefine the customer experience in terms of using distributors. Tarun, over to you.

Tarun Chugh — Managing Director and Chief Executive Officer – Bajaj Allianz Life Insurance

Yes, yes, thanks, Tapan. So I think Tapan touched on a few critical points and maybe I’ll [Technical Issues] and add further. So the way I look at technology and it’s not just digital, it’s digital and data, which becomes very critical in terms of our strategy. And that’s what the BFS Group has been known for, and that’s exactly what the two insurance companies including us are clearly focusing on. So let me just split this up into two, three parts on the digital side and data side.

So the digital largely, Tapan, touched upon the BAGIC core system and similarly in our sales as well the policy admin system, which is the core — it’s like equivalent to our banking, the core banking system of — you can call it the core banking system of life insurance. It is a punky legacy-based system present all across the industry. So we took the, I’d say, the initiatives of implementing an entirely fresh cloud-based agonized system. This doesn’t exist anywhere in India.

And I would also dare say globally, fully implemented yet. So we’ve had — we tied up with Infosys and Systems Call Engine. It is a company that they had bought called McCamish in the U.S., which is working on this system, and we have a launch of our unit-linked plans entirely through this cloud-based system, somewhere around the first quarter of next year. That should be changing the entire way the policy admin systems who work in the industry. So nobody else has done it. We’ve taken the call. But if your policy admin system remains a clunky system, that itself is usually a problem. Typically, a project like this would take 3 to 4 years to implement. We’ve undergone about 2 years of work already.

On this sits a lot of — so this is like the core and this, like I said, the process is already 50% underway, and then there is a huge transformation. The second is on the mid-office layers, which is the CRM layer and — which is the customer relationship management layer, so we had invested in CRM next a few years back, and that is already becoming a lot already showing up in terms of our customer service.

The other piece is on customer communication management. Today, we have lots of communication that go to customers. That mid-office system, which provides the backbone of how customers get serviced. And could there be an element only channel possible in that becomes a critical set the CCM goes live somewhere early next year, and that is when we’ll have the mid-office getting ready to be an agile life insurer, which I don’t think yet exists in India.

The — all of this has to eventually show up in the front end with the customer. And there are about 3 elements which become very critical, and I’ll just broadly touch on them. One is the front-end onboarding of the customer.

Second is the use of data and being able to profile and upsell smoothly to existing and maybe get more data more around the prospect database. And third is the digital culture of the organization, which usually, if you ask me, proceeds or rather in terms of importance, the other two but of course, without the first two, you can’t do the third. So that is the process by itself. Turning a legacy company into an agile digital company is the way we are looking at things. And I’d say we are committed strongly like the rest of the BFS book and pretty much moving in that direction.

I’ll quickly touch on the two core bits on the front end. So as the debt cut trees sent forward in any case, you see the approach has been the front-end approach has been more doing context to innovation, which makes sense. And touches lives of customers in solves career problems. We’re not doing digital for the COVID. So you see three initiatives that were clearly mentioned. WhatsApp is we’ve had a significant growth. This is launched February of 2020. And we’ve only just seen significant traction.

Now this is — today, you don’t need any other platform, but WhatsApp to deal with. So we do not invent new pipe, but we use existing WhatsApp pipe. The Smarts, which has been a inverse co-browsing, it’s been an innovation of its first kind in the world, I would say. That has gone quite well. I know your question was around what percentage business and this and that becomes very difficult, of course, for us to say because these are in tests technology, process, culture, our incestuous to each other.

Having said that, I’d say I give a lot of credit to the way we’ve been able to perform during COVID as Sreeni said, on a CAGR, 34% growth. I would give a lot of credit to the way we handle the front-end innovation. The smartest, for example, allowed us to get form filling done, whether we were sitting 5 meters or 500 meters of 5 miles or 5,000 miles of it from a customer.

So the face-to-face challenge, which was there and everybody was facing it, to this contextual innovation and very unique by itself, we were able to handle it quite well. So you see a lot of these things. In terms of the data side, there’s a lot of profiling, smoothen easy processes on onboarding, upselling. I can go on and on.

And as Tapan said, this is like a never-ending exercise. And we just have to take slivers of the company and keep on transforming them because all of us have been largely long-term legacy driven companies. So that transition is well underway.

Hasmukh Gala — Finvest Advisors — Analyst

Correct. I understood. So basically, what we are trying to say that if we ease the transactions and improve the relationship with customers, etc. And I hope that it helps both BAGIC and BALIC to be more innovative in launching the new products which the market wants. And at the end of the day, I think it should reduce in the expense ratio, which we currently have. Do you think these two objectives also can be achieved because of all these initiatives?

S. Sreenivasan — Chief Financial Officer

This is not both companies, I will take that. See, the objective of all this is to build a capability which is future ready. To provide a platform in which customers can actually buy and own an insurance policy over a number of years and make a claim as well. So the customer making a claim on a company is unique to the insurance customers. And therefore, we believe that creating these are very important and essential, and we have to be ahead of the market in terms of innovation, and both companies have demonstrated that, as explained by Tapan and Tarun.

So in terms of new products, that is not — in this industry, any product has a shelf life of less than three months before the competition catches on and launch a me too product. What the real product means is your ability to settle claims in certain cases, the kind of reinsurance support available, the kind of tech platform you have — and of course, the kind of distribution strategy, you have to distribute that product to the particular segments for which the product appeals.

And I think in terms of product, neither of our companies are wanting in terms of products for any type of customer, any type of customer need, and many has been, I think, innovative as well in the market. If you look at BAGIC, particularly for the first to launch a cyber crime product for individuals. Now they have a pet dog insurance program. There are many like that. Similarly in the case of Life, the return of mortality charges, whether industry first, so I don’t think either of our companies are any way behind in terms of launching innovative products. The only thing is there has to be long-term sustainable visibility of growth and profitability from that product.

Hasmukh Gala — Finvest Advisors — Analyst

Okay. Thank you very much. Wish you all the best.

Operator

Thank you. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead.

Avinash Singh — Emkay Global — Analyst

Hi. A couple of questions. So firstly on BAGIC. So on BAGIC two questions. First, that with this sort of a new generation of players coming in with a different kind of objective and funding structure where do you see competition in the motor segment heading?

So secondly, related to BAGIC-only. In terms of the customer acquisition and owning the customer and your relationship building, of course, I mean you are omnichannel,but you would have certain sort of preference of our strategy around channel. And in that context, I mean what sort of strategy do you have towards the web aggregators class online broker platform where, I mean, it’s a lot about being just a price taker.

And post BAGIC, on BALIC, my question is particularly what sort of current situation or your experience is with your reinsurance on the term plans? I mean you have been growing in terms strongly in years only. I mean so far, I mean, relative basis, you are not being that bigger in term space, but you’ve been growing quite well there. So what sort of [Indecipherable], what sort of updates you have on that pricing and your early arrangement part. Thanks.

S. Sreenivasan — Chief Financial Officer

Tapan, would you like to take that?

Tapan Singhel — Managing Director & Chief Executive Officer – Bajaj Allianz General Insurance Co. Ltd

Yes. Okay. So when — let’s say, when you talk of new players and what impact does it have? I think what we should think is two things. One, for a country like India, and there’s room for more players. It is not that limited because India, before nationalization of insurance company in the year 1970 had over 100 insurance companies, just in the generation space. Look in trash me also like will be a 500, insurance company in our country in India still has about 30, 40 currently.

So I don’t think that is a major issue. I think the more players, the merrier, the better. I always have felt that the more players are there in the industry, the better is for customers because the option increase, choices increase. So on that perspective. That is it. Now if you look at it on a strategic perspective, one should look at what is it that the new players are doing, which is what would be existing in BAGIC. And we do a scan, you’d actually find that BAGIC would be cutting edge and everything, be it digital. I think our entire agency onboarding is 100% digital policy issuance would be over 90% completely straight through digital. Our claims settlement is completely digital, simplification, the TAT, grievance ratio is the least, among the least in the industry, if we look at. And it’s all our idea figures with claim settlement ratios among the best.

So even if you scan the market and see that do you find if new players have been able to do something differently from what a company like BAGIC is doing. As of now, you’ll find that BAGIC would be way ahead in terms of the delivery, which you would be doing in terms of what is happening in the market. So one, more players, very good for customers, good for the industry. So India should have more players. Two, if I look at the company like BAGIC, which is always like we talk about digital initiatives, always pushing ourselves to the next level or user data lake or data management or simplification or to the delivery customer. And there is definitely NPA scores. If you look at NPA score is on the highest in the industry. If you look at our grievance lowest settlement ratio, the best that is there.

When it comes to price point, that’s the next question you asked. And I asked this question of many people. If I ask [Technical Issues].

Operator

Ladies and gentlemen, we lost his line. So I’ll just connect them back. We have Mr. Singhel back in the conference. Sir, you may go ahead.

Tapan Singhel — Managing Director & Chief Executive Officer – Bajaj Allianz General Insurance Co. Ltd

Yes. Sorry. Sorry, I got dropped out. So the other thing, if I look at price point, and I this question of many people that who amongst us would say that whatever we were, whatever we eat, wherever we go to is the cheapest in the market. And my answer is not a single thing that we actually do is the cheapest market. I think somewhere the obsession of the cheapest is not right. Obsession is of the value that we give to the customers, and value has a price point which the customer feels at this point, this is the best value that I’m getting.

And that is why even aggregators we look at, and we have partnered with them, and we don’t want to be the cheapest in the market with the value that we give to the customer. In terms we don’t want to be a company which offers the cheapest product and has the highest payment ratio. I don’t think that is an option, then we are not delivering to the customer. The promise that we have made that we stand by the customer seems to go wrong. And that is why we are in the aggregator space also, and we have a good market share there also. It’s not that know. I think whenever we ask the question, the cheapest will also be there. It’s not so, I think a company like us also has a good market share in the aggregator space.

And I said it early on, with any lines of business, be it any geography, be it any channel, be it in distribution or be it any levy, you’ll find Bajaj Life Insurance company to be one of the major players in that. And the web aggregator space also are major. And we’re not a price cutter, we are a value giver to the customer, and that we are very, very clear. I hope I have answered your question.

Avinash Singh — Emkay Global — Analyst

Yes. So I mean you answer is positioning. But somehow, I mean the web aggregator platform is something that is considered to be that, okay, we have to — it’s the [Indecipherable] that, okay, you’re not going to sort of a cut your prices [Indecipherable] particularly asked this question.

Tapan Singhel — Managing Director & Chief Executive Officer – Bajaj Allianz General Insurance Co. Ltd

Okay. I said in the web aggregator space also a good market share. And if you look at it, people prefer value. And that’s why in a platform in which you have a transparent price display also, people prefer to buy business spread with the value that we give to the customer. And the value is reflected in data and statistics, which is in our regulatory website.

As I mentioned, if you look at the grievance ratio, you’ll find it’s not lowest in one quarter, consistently over years, you pick up a debt for any quarter, any year, you’ll find balance as a least grievance ratio. You look at the settlement ratio on the best, which is the which clearly demonstrates the value to the customer and the customer respects that. And that’s why in our platform, on a web aggregator also, we have a decent market share, with our position there.

So I think — so when we look at different channels also, I think it’s wrong to classify them as only a place where people would go for the lease price, people value value. And that’s why if all of us will look at — if I ask this question, who among us is wearing the cheapest shirt in the market right now? Or who among us is going to cheapest restaurant in the city for food, know. I’ve yet to be a person who would say, yes. So we don’t pay with cheapest. We always buy what we feel is valuable for the price that we feel is right and that is definitely in issuance also.

S. Sreenivasan — Chief Financial Officer

See if I can just add to what Tapan said, in the risk business, especially where there is financial risk and long-term solvency that I’m not aware of any company where it has disrupted the market by discounting prices and taking losses consistently over the years. That may have happened in distribution businesses where some businesses online, they have disrupted the distribution where distribution inefficiencies have been exploited.

But in the risk business, even in the insurance industry where there is people coming with disruptive models, we have found that discounting as a model has not really worked anywhere in the long run, either they get taken over or they bring in some practices in terms of technology or cutting out processes which are needless, which anyway, the larger companies like us will adopt, if you see any good practice, we will adopt.

So discounting as a way to gain market share is clearly we do not think in the long term if the insurance company can do that without seriously impairing the solvency.

Avinash Singh — Emkay Global — Analyst

Okay. Thank you. And my question on BALIC. I still have that part.

Tarun Chugh — Managing Director and Chief Executive Officer – Bajaj Allianz Life Insurance

Yes, I’ll just come to that. So yes, it’s a, of course the term business and the reinsurance situation is at a little of a loggerheads, I would say. We’re just talking about the retail term market here. The reinsurers have been facing losses from various companies. And as a result, they’ve gotten stricter in underwriting. They have — it’s become like a changing goal post. So every month or two, we do have new prescriptions coming in underwriting, which is actually causing a lot of pain to the customer and to the distributor as well.

Since we’ve taken a little bit of a calibrated approach. So you would have seen that our term plans have come down in terms of mix. And I expect it to remain low. And in a way that serves us well because we are trying to understand the market, we’ve been one of the late entrants. But we did shoot up in terms of our term percentage like everybody else last year. But this year, with the second wave, and we’re just being cautious until the end of the third wave, and then we will be coming out with a lot more, I say, clarity in terms of how the prices are going to stabilize.

Currently, we’ve been one of the lowest prices with tight underwriting among the bigger brands. And that’s the cohort we intend to belong in, in the bigger brands. Will be increased by this? Yes, we will. I think we are very clear we will. We’ve had mixed marks, mix things coming from everybody else, but these will be increasing prices because we are — we have headroom. And we are currently low price anyway, and we do expect that the reinsurer we’ve already got a letter. So there is going to be an increase in pricing from reinsurers as well.

But for the short term, we remain cautious on term and underwriting shall remain strict. It’s the mid and the long term that is we are keen and confident. And I would say COVID has brought in addition to health the term business right in the midst of the decision, reckoning of the customers’ portfolio, we shall be appropriately responding to the market. But I’m not going to be overly cheap, and I’m not going to be overly risk averse, we’ll have to take a calibrated approach. I think more clarity on the future will come after the third wave if there’s any.

Avinash Singh — Emkay Global — Analyst

Yes. So on this, a quick one. I mean, particularly on the medium ticket size, retail term, I mean, they get sort of that when it comes to the medical it’s likely the cost involved, cost, time and all. So — but at the same time, the risk understanding of risk becomes very different. I mean what sort of a strategy we will be following and going forward here. I mean it’s going to definitely medical underwriting on like tele medical or like for some small ticket retail going out medical. So there is a sort of element of cost and term sort of a very cost sensitive. So what kind of underwriting medical even falling so far on that?

Tarun Chugh — Managing Director and Chief Executive Officer – Bajaj Allianz Life Insurance

Yes. No, that’s a very good question, but I’ll respond to your last one first. See, I think Tapan also and Sreeni also kind of addressed this to some extent. I think this obsession of low price is I think sometimes more in our mind than the customers. Yes, aggregators do play to customers who want and that’s — there is a significant market there, I agree, who would just want low price. But I mean, would you want to work with? Would you want to work with a large company who’s a lot of surety and comfort from the brand. Or would you — or the other way around. So I think that becomes a pretty critical part because you are not just doing retail term for — it’s a longer term. It’s not like group term. It’s not like something that is going to be there for a year or two. This is going to be there for the next 30, 40 years with you. And there the — it becomes a little bit of a high involvement product, if I can just use that jargon. So that’s one thing I’d like to bring in.

At the same time, India is various Ind AS. There is India, which wants to go for low price there is India which wants to go for value and go for the right price to brand. So that’s my first response to your last point. But see, the way we’ve been looking at it is we also believe from a risk perspective, the various India. So what we — our data analytics comes in very handy in this. So we have a lot of profiling that we have done based on which – We’ve seen some good success and then we’ve segmented into four segments, where the first two segments, we find that despite COVID, we’ve had a good response in terms of various markets that we’ve taken on here.

And then we feel fairly confident that for these buckets, there is not going to be any miracle. And that’s why you want to build up volume. Usually, these are salaried employees, and they are working in multinationals or large companies like ourselves and so on and so forth. And the process has to be smooth and her medical is not important because the volume gain kicks in here.

But for live, which are maybe requiring medical appropriate medical have to be done and that we are very clear of and we do not shy away because you are talking about a 30-to 40-year product. In terms of the cost of the medical, it is an element for sure, but we get the benefit of using bulk and that benefit is passed on to the customer. At the same time, usually, the NBV of a product like term for medical products usually medical policies comes out far better than nonmedical because experience is more important sometimes in the medical cost. So that balancing act one has to get right. And it’s — I think that’s the way to [Technical Issues].

Operator

Sorry about that. Someone has placed the call on hold.

Tarun Chugh — Managing Director and Chief Executive Officer – Bajaj Allianz Life Insurance

Sure. So I think I’m probably done with the answer. So that’s what I wanted to say.

Operator

Thank you. The next question is from the line of Mr. Nischint Chawathe from Kotak Securities. Please go ahead.

Nischint Chawathe — Kotak Securities — Analyst

Hi, a couple of questions from my side. To begin with, in BAGIC, Sreeni, you mentioned in the opening comments that you are cautiously optimistic on the business for the next six months. So I was wondering what could be probably the reason for this? I know we discussed competition from new players at length, but any other points that are there in your mind.

S. Sreenivasan — Chief Financial Officer

See, Nischint, the real cautiously optimistic is because even after two years, I think they’re only looking at businesses where things are trending towards pre-pandemic levels. There are certain segments where we are seeing solid growth like life insurance, auto sales are being hit by this. There is some concern on inflation. And more importantly, I think the risk of a third wave is still there. Like yesterday one was hearing there in Germany and Russia, there has been a slight increase in cases and they are going to look at it seriously.

In Singapore, we are seeing that some restrictions have started again. So the efficacy of the vaccinations and whether you need boosters is always there at the back end. So as the market evolves, we will look at it. And therefore, we have put the word cautiously optimistic. We’re optimistic on growth. If the economy grows, we will definitely participate in it, but we see there is an underlying risk both on the macro side as well as from the third wave. And that is why we have used cautiously optimistic.

Nischint Chawathe — Kotak Securities — Analyst

Sure. This is actually a question for Bajaj Finance. Bajaj Auto in their call yesterday said that they’re setting up a separate subsidiary for captive, captive financing of two-wheelers. So we were wondering whether — how should we really think of it? I mean, is it something that both Bajaj Finance and their subsidiary will coexist? Or is it kind of a sign for us to lead that Bajaj Finance will gradually move out of financing Bajaj auto vehicles?

S. Sreenivasan — Chief Financial Officer

No, I think they will coexist because Bajaj Finance historically has predominantly financed only Bajaj vehicles. But now they will be free to finance other vehicles if they choose to. And Bajaj Auto will also use that to further their sales and their subsidiary. So it is not that it will have both ways. Claim both ways.

Nischint Chawathe — Kotak Securities — Analyst

Why do you need two companies in that case?

S. Sreenivasan — Chief Financial Officer

It is — Bajaj Auto is an independent company is an auto manufacturer. We are a financial services company. And we will have to go — I mean, look at it differently, right? Because we are purely a lender. We have only to see whether the loan will get repaid or not, whether we get actually margins or not. Bajaj Auto will also have to look at the sales of 2-wheelers. So the two we will have to look at it. Secondly, Bajaj Auto has got a lot of money with them. So they are looking to invest. I mean that’s the call of that company.

Nischint Chawathe — Kotak Securities — Analyst

Sure. On – again, on BAGIC, we saw the motor loss ratios in motor third-party going down on a quarter-on-quarter and year-on-year basis. And what is the outlook out here, given the fact that we’ve not really seen a tariff hike for the last two years?

S. Sreenivasan — Chief Financial Officer

Tapan, would you like to take that?

Tapan Singhel — Managing Director & Chief Executive Officer – Bajaj Allianz General Insurance Co. Ltd

So let me take that, Sreeni. If you look at the third party when COVID hit us, and we had mentioned that in the call that we have stringent results because you’re not sure how this is going to be from a third-party perspective. So the COVID hit towards less use of car. OD, yes, there was a significant drop then on third party, the courts were closed, some months were not coming. So you were not sure in terms of what is lying, which is you’re not aware about on how things are going. Uncertainty was very high.

And it’s a long time, the courts are closed, even now, it’s not fully open. And the second thing which we also realized is that there are a lot of judgments are coming through, which in the existing cases also, we had core judgments, which we’re redefining that. So we strengthened our provision. And as time progressed, we are seeing that what is — as the court opens up as the summer starts coming through, as you’re seeing what the cases are going through, obviously, that is getting calibrated.

So we added post spending or reserves for the new judgments are there. And we had also tracked in uncertainty in the earlier level, and that uncertainty is getting now more and more clarified. So that’s why you see this shift happening. Now having said that, the other thing which is also happening good is if you look at on the highway and you must have read all the reports, the frequency is also coming down as it progresses.

So it’s a reflection of that. I think this would stabilize more as courts completely open and the judgment starts coming through. And that is why you see this new shift happening.

Nischint Chawathe — Kotak Securities — Analyst

Sure. Perfect. Just one last data keeping question. This is on BALIC. If you could give us a number of gross and net COVID claims for the first half.

S. Sreenivasan — Chief Financial Officer

Bharat, you can take that.

Bharat Kalsi — Chief Financial Officer – Bajaj Allianz Life

Yes. So Nishant, if you look at that, our total specifically for COVID claims, what we have taken in Q2. So in the beginning of the quarter, we were carrying at INR284 crores of reserves. What we have got an extra hit in Q2 is around 254 crores. but we have released only 194 crores from those reserves. So we have taken a hit of 60 crores extra in the books in quarter two, and we are still carrying a 90 crore number. These all numbers are without par, because par is obviously, as you know, it’s 90-10, and this is net of RI. So on a gross basis, this 90 crore is good enough for 115 crores and with par of 105 crores, this is good enough for 131 crore kind of claims.

Nischint Chawathe — Kotak Securities — Analyst

And what was the gross and net claim quantum and number, if you could share?

Bharat Kalsi — Chief Financial Officer – Bajaj Allianz Life

So in terms of gross claims overall, we saw the — so I’ll just cover the complete numbers. In H1, we have taken a gross claim of 1,128 crores and net claims were 897 crores. And in Q2, the number is 642 crores and 528 crores. This is the total claims, as the number earlier which I showed was only for the COVID impact.

Nischint Chawathe — Kotak Securities — Analyst

Got it. Thanks.

Operator

Thank you. We’ll take our last question, which is from the line of — sorry please give me a moment. The next question is from the line of Nidhesh Jain from Investec. Please go ahead.

Nidhesh Jain — Investec — Analyst

Thanks for the opportunity. Firstly, in the general insurance, there has been a decline in the expense ratio in this quarter, versus our normal run rate in the previous quarters that we have been seeing. So is it a structural decline that we have seen our cost ratio? Or do we expect that to reverse in the future?

S. Sreenivasan — Chief Financial Officer

Tapan, would you like to take that?

Tapan Singhel — Managing Director & Chief Executive Officer – Bajaj Allianz General Insurance Co. Ltd

Yes, I’ll take it. Yes. So if you look at our cost ratios, I think over the last six quarters, they have been going down. And as we’ve mentioned in the past, there are some structural changes, which we had made on manpower and infrastructure, especially because that constitutes about 70% of our cost. We had taken a lot of initiatives, especially last year, and you’re seeing an annualized impact of that flowing through this year. And as we had mentioned in the previous calls, there were a lot of curtailment on manpower deployment, which we had done given the stress we were seeing on the bottom line. So a result of that also is flowing through on an annualized basis this year.

However, to answer your question whether it’s structural and will it continue? I think what you’ll have to understand is that while we did a lot of curtailment in the last 1.5 years, I think if things start stabilizing now, we will start investing a bit more on expenses because like I mentioned earlier, we were curtailing costs to protect the bottom line. But if we see a turnaround in top line, we will now hear on start investing. So that’s where we stand.

Nidhesh Jain — Investec — Analyst

Secondly, can you share product per customer in Bajaj Life and Bajaj General, because what I see that there is a significant cross-sell opportunity with existing customers, but at least the experience from some of the other insurance companies doesn’t indicate that companies have been able to successfully cross-sell a customer — a same product for the customer, especially within the life insurance side.

S. Sreenivasan — Chief Financial Officer

That’s a number, we do not disclose. But in general, both companies have separate verticals driven by analytics and cross-sell, which focuses on two things. The general insurance business, renewal is very important because every renewal is a new business, we have separate initiatives for cross-sell and upsell. It’s a bit different in general insurance from life insurance. Life insurance has got far too many products. There are small sachet products right up to expensive products or full indemnity products, there are cash benefit products and the same customer, they buy multiple products through multiple channels as well.

So it’s a little bit more complex in general insurance. In life insurance, clearly, it is more — there is clearly the opportunity for upsell and cross-sell. And we are very much on top of that. And we have separate — I mean, that’s why the BAGIC direct is a very good example, channel which did not exist for five years ago. Today, it is a very strong contributor to our top line. It’s a proprietary channel. And almost all of their business is majority — a large — chunk of the business is cross-sell as well.

Nidhesh Jain — Investec — Analyst

And what percentage of business in the life insurance came from Axis Bank, if you can share that percentage this quarter.

S. Sreenivasan — Chief Financial Officer

Tarun, do you want to share that?

Tarun Chugh — Managing Director and Chief Executive Officer – Bajaj Allianz Life Insurance

Yes, I can. So give me a second — let me just, Bharat, do you have the number, handy?

Bharat Kalsi — Chief Financial Officer – Bajaj Allianz Life

Yes. Nidhesh, it is 19% for Q2.

Nidhesh Jain — Investec — Analyst

And sir, lastly, on the Bajaj Finserv Direct, the EMI store that we have on the Bajaj Finserv Direct is the same store that Bajaj Finance also has? And how the economics will work [Indecipherable] if we acquire a customer on our direct and he buys our product on EMI store.

S. Sreenivasan — Chief Financial Officer

[Speech Overlap] is evolving. As of now, they create a platform for EMI Store for Bajaj Finance. So in that sense, they are present in all the stores, they will also be selling new EMI cards to those customers. But over time, they will create their own alternate products, which maybe Bajaj Finance is not offering today as well. So the EMI store will evolve differently going forward for Bajaj Finance and Bajaj Finserv Direct, but the platform and the technology and the capabilities will be provided by Bajaj Finserv.

Nidhesh Jain — Investec — Analyst

And lastly, one request that if you can share some customer data on the Bajaj Finserv Direct and Bajaj Finserv Health.

S. Sreenivasan — Chief Financial Officer

As of now we are not ready to share it because the business is still evolving. And it has not reached a scale or a stability where we feel we can do that. As and when it reaches, we would be disclosing. But that’s probably a year, 1.5 years away, but you will have to wait. We’ll keep monitoring that every quarter and discussing that before we decide to disclose that.

Nidhesh Jain — Investec — Analyst

Sure. That’s it from my side.

Operator

Thank you. Ladies and gentlemen, due to time constraint that was the last question for today. I now hand the conference over to Mr. Anuj Narula for closing comments.

Anuj Narula — JM Financial — Analyst

On behalf of JM Financial, I would like to thank Sreeni sir, the top management of the insurance businesses and all the participants for joining us on the call today. Thank you, and have a good day.

S. Sreenivasan — Chief Financial Officer

Thank you all, and happy Diwali to everyone. Thanks a lot.

Operator

[Operator Closing Remarks]