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.