Bajaj Finserv Ltd’s managing director Sanjiv Bajaj said two months ago that the worst seemed to be over for the firm’s life insurance business. The life insurance subsidiary has backed him up, at least as far as the June quarter performance goes.
New business premium collections rose 28% year-on-year (y-o-y) to Rs 484 crore. New business in the life insurance firm has grown after a gap of six quarters.
Sanjiv Bajaj, MD, Bajaj Finserv Ltd.
What’s more, the profit allocable to the shareholders’ account of the life insurance business rose 40% y-o-y to Rs 74 crore. Of course, only a minuscule portion of the profit of the life insurance business is reflected in the shareholders’ account. This is because more than 90% of the profit of the life insurance firm is designated as profit in the policyholders’ account. This will get transferred to the shareholders’ account at the end of the fiscal. But the fact that profit currently allocable to the shareholders’ account has grown suggests an improving trend.
Renewal premium collections, however, fell 28% to Rs 727 crore, leading to a 13% drop in gross premium collections. Bajaj explains the drop in renewal premiums is a function of the weak trend in new premium collections in the past two years.
If new business continues to grow, as it did in the June quarter, renewal premium collections will start to look up after 18-24 months. Needless to say, the company isn’t fully out of the woods. And even with its new business, it’s too early to come to conclusions. Considering that investor sentiment isn’t very good currently, attracting new fund flows won’t be easy.
The markets, however, seem to believe Bajaj Finserv has a bright future. Its shares have risen more than 60% this year. The insurance business (including general insurance) accounted for more than 80% of consolidated revenue and 70% of profit at Bajaj Finserv.
Most of the remaining revenue and earnings are derived from the company’s share in Bajaj Finance Ltd, a non-banking financial company. In the June quarter, this business did well on the back of retail demand for its loans. Its total income rose 56% to Rs 703 crore and net profit jumped 53% to Rs 139 crore. Deployments rose 32% to Rs 4,728 crore y-o-y and total assets under management stood at Rs 14,485 crore, increasing 10.5%.
The lending subsidiary’s non-performing assets stood at 0.1% on a net basis, the lowest level for the firm in five years. The general insurance unit also did well to grow net profit by 66% to Rs 65 crore.
In sum, Bajaj Finserv’s main subsidiaries did well in the June quarter and, to some extent, justify the sharp rise in the company’s shares earlier this year. But it’s still early to say the recovery will be sustained.
Riding high (PDF)
Quarterly performance (PDF)