PB Fintech Q4 FY25 earnings call

What moved the numbers, as management explained it

• Renewals keep growing (now ₹817 cr trail revenue, +42% YoY) and structurally drive margin expansion as renewals business operates at much higher margin than fresh health.
• Fresh health runs at -15% to -20% margin, dampening reported margins whenever health grows strongly; health has grown for 9 consecutive quarters.
• Call centre capacity was held flat in Q4 after Q2/Q3 investments, lowering the call centre cost growth rate and supporting sequential margin expansion.
• Savings business underperformed in Q4 and management missed volume-based targets, reducing savings revenue below potential and pulling down new core premium growth.
• 1/n commission accounting on long-term health plans plus a shift to monthly mode in health inflated receivables and turned OCF negative this year; expected to normalize in 2-3 more quarters. (accounting)
• Volume-based sales incentives are not accrued until targets are hit, back-loading benefits to Q4; this year savings team missed targets, reducing the Q4 benefit. (accounting)

The numbers management led with

• Total insurance premium Q4 FY25: ₹7,030 Cr, up 37% YoY
• Total insurance premium FY25 full year: ₹23,486 Cr; new core online +45% YoY; new health and life +48% YoY
• Trail revenue / ARR: ₹817 Cr for the quarter, up 42% YoY from ₹577 Cr
• Consolidated PAT FY25: ₹353 Cr (up from ₹64 Cr); margin moved from 2% to 7%

Guidance on this call

By business

Balance sheet, capex and funding

• Closing cash balance ₹5,400 cr at FY25 year-end.
• Receivables increased materially this year driven by 1/n commission accounting and shift to monthly health plans; expected to normalize in 2-3 more quarters.
• OCF turned negative this year vs positive last fiscal year, mainly due to receivables expansion.
• Healthcare capex planned: 2-3 operating hospital acquisitions plus 2-3 shell-to-operating conversions in NCR.
• FLDG policy: company provides for all FLDG on day one, then releases as collections come in.

The industry, as management sees it

Retail health insurance industry: claims ratios will rise as fresh cohorts age, but Policybazaar believes it is positioned to grow 4-5x industry rate. Savings/ULIP industry saw sharp negative retail growth in Feb-March 2025; recovery likely to take multiple quarters. Term protection industry has been growing at a steady 12-15% for the last two years; the push is on to grow the overall term market.

Risks management named

• Savings business growth has been below expectations; 1H FY26 expected to remain weak
• OCF reverted to negative due to 1/n accounting; 2-3 more quarters to normalise
• 1/n accounting shift in insurer payouts will impact cash collection over next 12 months
• Long-term renewal claims ratios expected to rise as Policybazaar claims quality normalises
• Fresh health business comes at negative 15-20% margin and dampens profitability

Not answered directly

• Long-term share of health premium mix (Sanketh Godha — declined to disclose publicly)
• Exact contribution margin delta attribution across segments (Neeraj Toshniwal — directed to 12-month rolling view)
• Specific FY26 quantitative guidance (multiple analysts — no quantitative guidance given)

Asked for a number, answered without one

• Long-term health plan share of total health premium: Said it is a pretty steady number, similar to last year; declined to publicly disclose the specific number.
• Sustainable level of receivables investment: Explained the 1/n accounting and monthly health plans; said cycle will play out and then be limited to multi-year policies; no specific investment number given.
• Q4 margin uplift drivers by segment: Gave qualitative margin ranges for renewals, fresh health, core ex renewals/fresh health, and new initiatives but no specific Q4 segment EBITDA or contribution numbers.

Every question, with its answer

1. 1. Contribution margin expansion

   Sachin Dixit, JM Financial

   Question. Congratulations on results. My first question is on contribution margin expansion. You had guided towards it, so credit to you for delivering. The QoQ jump was 5% — can you break down the drivers between renewals, change in new business premium mix (savings lower, health sustained) and other segments?

   Answer, Yashish Dahiya, Chairman & Group CEO. We have margins coming from 4 angles. Fresh health is at -15% to -20% margin; renewals at a high profitable cliff. Core business ex-renewals and ex-fresh-health operates at ~20% margin. Paisabazaar does its thing; new initiatives are 0 to a few percentage points. Half of the profit/margin is driven by core online (incl. Paisabazaar) and renewals growth. Margin-diluting part is fresh health. We've invested in savings but haven't reached the rewards in last 1-2 quarters — we are rethinking diversification. Alok added that Q4 call centre cost was not grown (it was scaled in Q2/Q3) which also expanded margin. Yashish emphasised looking at it on a 12-month rolling basis.

   Follow-up. You earlier mentioned renewals at 85% contribution margin; this quarter the language changed to 80%+. Any particular reason?

   Answer. We are getting smarter with cost allocation — claims management cost and customer service cost, which are heavier in renewals, are now being allocated more accurately. It's between 77-80% overall (life is at 93%). We are moving all businesses to a fresh/renewals P&L review.

2. 2. OCF reversal and receivables

   Sachin Dixit, JM Financial

   Question. On OCF — while the company turned OCF positive last fiscal year, this year we have reverted to negative with receivables a major factor. Can you shed light on that?

   Answer, Sarbvir Singh, Joint Group CEO. Two factors: (1) The 1/n accounting shift by insurers — money collection timing will change over the next few years, especially the first 12 months. (2) In health, we are selling significantly more plans on monthly mode vs largely annual mode earlier; collection happens over time. It will take another 2-3 quarters to normalise. Yashish added that Q4 call centre volume-based incentives were not hit (we missed savings targets), creating some back-loaded benefit.

   Partly answered.

3. 3. Health insurer negotiations, renewal commissions, cost bifurcation

   Madhukar Ladha, Nuvama

   Question. Three questions: (1) With IRDAI's 1/n and pressure on long-term health deferring commission payouts, how has this played in your negotiations with insurers? (2) Any talks on reduction in renewal commissions? (3) Can you bifurcate expenses — employee, advertising, other — between direct/indirect and existing/new initiatives?

   Answer, Yashish Dahiya, Chairman & Group CEO. Health insurance is simple — customer pays and expects claims settled. Policybazaar has a phenomenal position due to strong disclosure assessment; our claims book is standing strong, so insurers don't get surprises. So we feel less pressure on claim settlement and payouts. Our renewal claims ratios will start moving upward because we hadn't put as much effort there; we will be in same range or slightly lower than other channels. Sarbvir added that insurers are focused on combined operating ratio; our channel comes out on the attractive end of the spectrum — we don't see a change in economic structure. Yashish then said full year core margin is 43% (similar for insurance and credit), new initiatives at +2% for the year; core EBITDA at 16% (started 14%, ended 22%) and new initiatives EBITDA at -9% (12-month rolling). On insurer view: claims 70%, distribution 20%, OpEx 10% of cost. Policybazaar is the most profitable and fastest-growing channel for insurers. Fresh/renewal mix for retail health is 23%/77% industry-wide; we are still tilted more to fresh.

   Follow-up. Given your base has increased significantly and market share in health fresh premium is high, how should we think about growth into FY26 and FY27?

   Answer. Last 5 years core business has grown at 43% CAGR. Long-term we believe 30% is the right CAGR. In health, we seem to be doing 4-5x the industry growth rate (we usually do 2-3x). In health, we have a natural right to win because of claims settlement differentiation. Savings is very challenged; we are thinking hard about how to grow (pensions, child insurance). Motor/two-wheeler is back solidly. Always 3-4 of our businesses are firing and 1-2 are struggling. We are also confident credit will grow.

   Partly answered.

4. 4. Savings business outlook and PB Money strategy

   Dipanjan Ghosh, Citi

   Question. Two questions: (1) You mentioned savings is challenged — can you give some colour on savings contribution to premium/topline for Q4 and the trajectory we should forecast for FY26? (2) On PB Money, what is the overall 3-4 year strategy and how can you leverage it for cross-sell?

   Answer, Sarbvir Singh, Joint Group CEO. On savings: industry also saw sharp slowdown in Feb/March with negative retail growth. Our Q4 reflects this; first two quarters of FY26 will likely be quite slow on savings. We are focused on building new segments like pension and bringing back products like capital guarantee solutions. Ex-savings we stay in 35-40% corridor, which should continue. Santosh on PB Money: it allows deeper customer risk understanding (income data over and above bureau) and supports sharper underwriting. There is opportunity to do savings on Paisabazaar side through bonds, FDs, mutual funds. PB Money will be the backbone to use data to advise customers. On follow-up monetization: largely from selling bonds and FDs this year, plus indirect via better credit understanding supporting unsecured growth. No plans for traditional broking/trading; from licensing perspective there may be context — conversations internally but no decision.

   Follow-up. What would be the monetization strategy for PB Money — product cross-sell or higher engagement? And any plans to go into broking?

   Answer. Monetization will largely come from selling bonds and FDs this year; indirect monetization via better credit understanding leads to unsecured growth. No plans for broking in the traditional trading sense; conversations exist internally on licensing and long-term savings perspective.

5. 5. Protection term industry trends, healthcare strategy, premium breakup

   Shreya Shivani, CLSA

   Question. Three questions: (1) On protection segment, industry sum assured data shows moderation in March after two strong years — is the industry moderating? (2) On healthcare, what's the thought process now? (3) Breakup of premium across POSP, Corporate, Dubai?

   Answer, Sarbvir Singh, Joint Group CEO. On protection: industry sum assured growth reduction is actually reduction in ULIP growth (riders attached to ULIPs) rather than term. Term has been growing at 12-15%. We grow multiples of that. We appeal to the industry to focus on driving demand for protection and growing the term market. On breakup: core ₹16,144 Cr for the year, POSP ~₹5,000 Cr, Corporate ~₹1,000 Cr, Dubai a little more than ₹1,100 Cr. New:renewal in core is 50:50. Yashish on healthcare: a long-drawn project, strategy won't change daily. Customer's ask is simple — pay ₹10,000, take care of everything, no financial pain. We've acquired one hospital; looking to do 2-3 operating ones and 2-3 shells in NCR. Bringing on doctors and people who know how to build hospitals. Team has more tech/product people than healthcare people today — reflects wellness direction. Don't expect rapid material changes.

6. 6. Savings product strategy and AI impact on sales/servicing

   Manas Agrawal, Bernstein

   Question. Two questions on medium/long term: (1) On savings — par and non-par is a clear way to prop it up and a large TAM; any thoughts? (2) On AI — Google has said search/SEO will change; AI is also replacing call centre collections. Is that a threat or opportunity?

   Answer, Sarbvir Singh, Joint Group CEO. On savings: we get informed customers looking for transparent comparison. We sell efficient products; if we don't, customers will see through and won't buy more. We are largely a ULIP platform but also sell non-par as part of capital guarantee solution. In H1 last year we grew over 100% in savings; few months here and there is part of the course. On AI: we are at the forefront of these use cases. We do a lot of collections through AI bots. For life and health insurance sales, a person is important to explain the product and elicit disclosure. We have experiments going on in every area. We believe in 'man in the middle' — AI helps productivity and effectiveness. Yashish added that AI agents are already doing initial warm-up and initial calling across the group. AI will protect supplier (risk), help us (sales efficiency, non-talk time reduction), and consumer (service). Tech teams are using AI to do their jobs; tech cost savings possible.

7. 7. Receivables increase and AI headcount impact

   Rahul Jain, Dolat Capital

   Question. Two questions: (1) Any colour on the increased receivable this year and what is the sustainable level of investment that can go in? (2) On AI, what kind of headcount optimization should we see from a call centre perspective — is it safe to assume headcount growth would be less than last few years?

   Answer, Yashish Dahiya, Chairman & Group CEO. On receivables: largely 1/n thing already started impacting; will have impact for a few more quarters and then limited impact for multi-year policies. A cycle that will play out; not too fussed. On deep tech: biggest impact over 1-3 years will be on customer service (renewals, claim support, endorsements, service elements) which can be automated. Sales in insurance is involved; some parts can be automated over time but close physical contact will remain. Cost of sales ops as % of total NPV revenue is ~20-25%, not a big bother yet. Yashish's view: over 3 years you will see a lot of impact in sales as well, but consumer brands will be the differentiator since AI is commodity.

8. 8. Credit business long-term strategy and FLDG

   Nidhesh Jain, Investec

   Question. On credit business — with the change in management team, how are you thinking longer term and how are you building the 'right to win' in this business over medium to long term?

   Answer, Yashish Dahiya, Chairman & Group CEO. Three aspects: (1) Go deeper in secured — home loans, LAP, loan against cars this year. (2) Start savings area to deepen customer understanding and risk for sharper underwriting on unsecured. (3) Build deep tech-led collections capability to scale unsecured with new NBFCs/Fintechs. Yashish added that Policybazaar franchise has built huge risk capability in life insurance — respected within the industry. That's what Santosh brings to credit — she is serious about risk. On collections follow-up: largely tech-led and Delhi based currently, not thinking Feet on Street. On FLDG: confidence on FLDG partnerships will go up as we understand risk better; need skin in the game. Accounting policy is clear — FLDG is provided for on day one.

   Follow-up. On collections, will you invest in physical collections also? And any thought process on FLDG given you have been experimenting in the last few quarters?

   Answer. Right now, largely tech-led and Delhi based; not thinking Feet on Street but that may change. FLDG: we started with guarantee but didn't differentiate on risk — now starting to. Confidence on FLDG partnerships will go up as we understand risk. We provide for FLDG on day one and start with a zero base.

9. 9. Contribution margin drivers and cost structure

   Neeraj Toshniwal, UBS

   Question. On contribution margin expansion — has there been any reduction in incentive pay for POSP agents in this quarter that helped? Second, on costs — employee cost has gone down, advertisement also down, but other expenses have increased significantly. Can you throw light?

   Answer, Sarbvir Singh, Joint Group CEO. Please look at 12-month rolling basis. Q4 kept call centre capacity flat (after growing in Q2/Q3); extra money at year end also helped. On POSP: there was a media article on the issue. We have been consistent in offering attractive opportunity; real trick is working with smaller agents whose incomes are getting enhanced by working with PB Partners. Not about reducing payouts; it's about optimising payouts and right set of agents. Yashish added: structural + quarterly aspects. The easy way of POSP is bulk volumes; the hard way is small agents doing more business (people-intensive, trained). We are down the hard path. On a 12-month rolling basis you should not see material change. Health fresh cannot keep growing at this rate over 5 years, but renewals can — and that's where margins will come.

   Follow-up. Is this structural — will it continue in the coming quarters as well?

   Answer. There is structural and quarterly aspect. The ratio of employees per business done is quite telling. Hard POSP cannot be done through remote control. We are very clear we are on the hard path. From 12-month rolling perspective, no material change expected.

   Partly answered.

10. 10. Receivables from long-term health, new initiatives margin drivers, credit breakup

    Sanketh Godha, Avendus Spark

    Question. Three questions: (1) Clarification: on a 3-year long-term health plan, insurer pays commission over 3 years but you recognize upfront — that's why receivables have gone up, correct? (2) How much of total health is long-term? (3) On new initiatives margin improvement — is it fair to say UAE turned profitable and contributed most to the delta, or was POSP/Corporate the bigger driver? (4) On credit — can you break up the ₹7,652 Cr and ₹20,460 Cr into new initiatives vs core, and adjusted EBITDA margin for credit in the quarter?

    Answer, Yashish Dahiya, Chairman & Group CEO. On (1) yes, that's the understanding. On (2) — we would not like to disclose publicly; similar last year, multi-year plans were a little higher two years ago, growth is not explained by that. On (3) UAE is not that material — explains 10-20% at best. UAE has potential to be a big determinant of profitability over 3-4 years. Corporate and POSP are somewhat different; we believe they should come to ~0 in next two years. On credit breakup: new initiatives contributed ~40% and core 60% for the year; Q4 was 70:30. New initiatives largely pass-through; hence disbursals +38% YoY but revenue shrunk 14%. Paisabazaar new initiatives is at very early stage, largely lumpy, currently easy POSP — hard POSP journey just starting (started in Policybazaar two years ago). Credit business adjusted EBITDA margin: 7% for the year.

    Follow-up. Can you confirm the adjusted EBITDA margin of the credit business?

    Answer. Adjusted EBITDA margin of the credit business is 7% for the year.

    Partly answered.

11. 11. Health persistency

    Srinath v, Bellwether Capital

    Question. Some qualitative feedback on persistency of the health renewal book — how are older and newer cohorts doing on a YoY or 6-month basis?

    Answer, Sarbvir Singh, Joint Group CEO. We are at all-time highs (NOP basis). R1 (first-year renewals) is at all-time highs, driven structurally by products with very high No Claim Bonus introduced over the last 2 years with insurance partners. When customers come for renewal, comparison with outside market makes their current product look superior due to sum insured. R2+ (second year and beyond) is very consistent. Overall persistency is at all-time highs in both number of policies and premium. The most important thing is the number of people who stay with us.

Topic by topic, in the order it was spoken

In their words