Fin, life & general insurance boost Bajaj Finserv results

Sanjiv Bajaj, MD, Bajaj Finserv explains to CNBC-TV18 that the performance of the finance, life and general insurance arms of the company has helped strengthen results. Below is an edited transcript of interview on CNBC-TV18. Q: Could you explain the key results in this quarter?
A: On a consolidated basis, the total revenues are up about 13 percent at Rs 3,721 crore. The consolidated profit-after-tax (PAT) is up 37 percent at Rs 217 crore. So the bottom-line results have been very strong.
The main contributor of this surge is our lending business Bajaj Finance where deployment is up 29 percent to Rs 4,334 crore while the PAT has gone up sharply by almost 50 percent to Rs 129 crore. The other contributor is the insurance businesses - as far as our general insurance business is concerned - the gross premium is up about 20 percent at Rs 976 crore, while the PAT is up 22 percent at Rs 78 crore. The last contributor is our life insurance business.
The flow of premium in the life insurance business, which was muted over the last four to five quarters, has started to improve. Gross premium is down by only 5 percent to Rs 1,592 crore. New business premium is up 15.5 percent at Rs 651 crore which is a sign of very strong growth after the last few quarter of slowdown.
The combined profit for the company has gone up about 5 percent to Rs 308 crore while the shareholders’ profit is up over-50 percent to Rs 88 crore. So, a stellar performance from each of the three main subsidiaries of Bajaj FinServ has resulted in the consolidated results turning very strong. Q: What kind of a sustainable rate do you think you can post going ahead because the growth of 68 percent registered in net profit this time for Bajaj Finserv is quite stellar?. What is the rate of growth you target for FY13?
A: The reason I do not disclose targets is because I do not want to fall flat on my face. Yes, we have had very strong results in the first two quarters. The external economic situation till a few weeks ago was fairly dire. There has been, over the last one month, positive news and we have to see how this plays out on the ground.
The festival season in Q3 will be very important especially for our lending business, but our life insurance business is also showing strong growth. So I will not hazard a guess on our growth in profit in the coming quarters. However, Q3 will provide us with a strong signal, not only for the quarter, but for the rest of the year as well. Q: What is the update on the life insurance business in terms of the gross premium? Can we expect the life insurance business to start showing some growth by the end of the year?
A: There are two parts to the gross premium; the new premium generated during the year and renewal premium, which is renewal on business conducted in the past. Since in the last two-to-three years, the new premium was lower than in the earlier years, our renewal premium will also stay low this year and next year.
And that's why for the whole year I do hope we can bridge the gap of 5 percent. But we will see how we are at the end of Q3, because we plan to write a lot of business in the life insurance arm in Q3 and particularly, Q4.
So I am hopeful of that that we will at least get to last year's results. More importantly, the growth in renewal premium, not only for this year but for the future, is how the new business premium grows. With a growth of over-20 percent in the first quarter, growth was maintained at 15.5 percent in the second quarter which is normally slow.
So we are slowly starting to fire on all cylinders across our different distribution channels and we clearly hope, not only to maintain, but to grow this in the coming quarters. Q: What about the general insurance segment? What kind of an improvement do you hoping to see in terms of disbursements?
A: The general insurance business actually has grown in a very stable manner over the last few years. In this year, it grew at 20 percent. We have marginally increased market-share while maintaining profitability. I think that is very important.
Our combined ratio for the quarter before motor-pool losses was around 92 percent and with the motor-pool losses, it is at about 100.8 percent, which means the underwriting on insurance itself is making money. I think that is a very strong sign for the business.
So, 20-percent growth assuming the current situation in the economy continues or gets even better and very strong rebound on profitability, is what we are hoping for in general insurance. Q: The IRDA had proposed to change the method of allocation of third-party pool losses with effect from FY13. Earlier you said that that this would help considerably reduce the drag on profitability. Can you give us an update on that?
A: As per the options that the IRDA has provided, we have taken losses upto March 31, 2012 over three periods. A part of it was taken in 2011-12 and portions of about Rs 120 crore each are going to be taken in this year and next year.
So, the first two quarters already reflect the amount for a part of this year. Now, the new business that is being written from April 1 is according to the new decline -pool guidelines which we expect to be much less loss-making than the earlier pool.
I think it will still be loss-making for some time, but IRDA has taken prices up as well in premiums which is a very positive move and that’s why the net effect of this on our bottom-line will be far less severe than it was in the past.
Now, we do have to watch through the past loan-losses on this third party motor pool, this year and next year, but the numbers we have currently reported are after taking the share for the first two quarters.