Sanjiv Bajaj, MD, Bajaj Finserv is confident of the general insurance business growing above 20 percent in the fourth quarter of FY17 and the life insurance business also growing in double digits.
The whole general insurance industry has seen a very healthy growth in the last few years, he said in an interview to CNBC-TV18. The Company is most profitable in the general insurance entity in India, he said.
When asked if the house was looking at listing option, he said there were no plans to list either the life or the non-life insurance business. However, there will be quite a few other companies in the general insurance space that may list soon, he said.
In the general insurance business, the focus has been on retail health, said Bajaj adding that share of agri-insurance also has been increasing in that segment.
Bajaj Finserv Limited, a part of Bajaj Holdings & Investments Limited, is a financial services company focused on lending, asset management, wealth management and insurance. Its subsidiary Bajaj Finance Limited is a Non-Banking Finance Company engaged in consumer finance, SME finance, commercial lending, and wealth management.
The house said Bajaj is not dependent on one single channel for its business growth. The agency channels in life insurance business are performing ahead of expectations, he added.
Below is the verbatim transcript of the interview.
Anuj: How do you see the valuation re-rating in the sector going forward?
A: If you see the general insurance industry, it has grown quite healthily over the last few years. However, the problem is, in a race for size, most companies are losing money in the underwriting and that is why their bottomlines are not healthy, they have burned up a lot of capital. We as Bajaj Allianz are an exception over here where we are not second largest in topline in the private sector, but we are the most profitable general insurance company over the last so many years in the private sector. This year, so far in the first three quarters, we are ahead of the public sector companies as well. So, I think it is going to be important for the companies to build a capability for prudent underwriting before they go and list themselves.
There are one or two companies that are close to doing this and they will probably be amongst the first that are ready for listing at least and the rest will follow through. We have seen in the last few months less intense pricing competitions, we have seen it being a lot more I would say rational from the PSUs as well as they have been told to consolidate and list. So, this is good for the industry; it is also good for the customer because the lowest price is not always the best thing. Eventually what a customer pays for premium is very low compared to what he expects when he gets a claim and hence products need to be priced correctly. So, I believe that a few companies could be ready for listing and others will still take time. As far as we are concerned, we are very profitable, we have enough capital, so, we have no plans to list in the short-term at least.
Sonia: Baja Finserv has been a compounding story for investors. With demonetisation aiding the insurance sector, what kind of growth can we expect in Q4 and in FY18?
A: When you look at the effects of demonetisation, you must separate out our rural side of our insurance from the urban side. The rural side did suffer to some extent, but because the urban part of our business is much larger, it got overshadowed. As far as urban India is concerned, since we saw a lot of money coming to people’s accounts, naturally those went into payments for premiums, whether for new policies or for renewals and that has helped us in the last couple of months. We have to see the impact of that in the coming quarters as well.
As you know, for life insurance especially, March is a very important month and hence I would not hazard a guess on growth for Q4 but I will say that it should be in the double digits. As far as general insurance is concerned, this is a far more smoother I would say spread of business across the quarters and I would expect for Q4 for us to grow over 20 percent. Based on how the actual growth turns out to be in Q4, we will then see what the full year growth numbers look like for the two companies.
Anuj: What kind of products are you looking for growth and also which channel of distribution would the growth be focused on?
A: If you look at the general insurance industry first, we had a large focus like the industry on motor, followed by corporate lines. In the last four or five years, there has been a significant focus from our side on retail health and we are building that up. We are in the process of creating a separate vertical within the company to focus on retail health because we believe that is very important. In addition to further diversify across products, in the last three years we have build capability on agri insurance and that has increased as well.
So, if I look at the year so far, about 45 percent of our business is motor, I would say another 15-20 percent is on the agri side, about 15 percent is health, and about 10-12 percent would be some of the corporate lines taking it to 92-93 percent of the total business. Now, we sell this through multiple channels, we don’t want to be dependent to any single channel, that is why the business is fairly spread across agency, across banker partners, as well as direct as well which is a focus area for us.
Moving to the life business, in the life business, over the last two years, we have spent a lot of effort including getting a few key people from the outside and redoing our agency channel. As a result, our agency channel in the last 18 months is growing exceedingly well. We are working with Bajaj Finance which is one of the main partners for our life insurance company in increasing growth over there across different product segments and also with our existing bank of partners, we are also working on a few new banker tie-ups. So, should some of them come through, that will help us further move business across different channels in more equitable manner.
Over here, the products as you know in the life business are either typical, traditional term products or they would be the unit linked products. The choice of this product really depends on the customer segment. There are those who prefer to have investments going through their ULIP products, within that as well, there will be those with lower risk that would focus on a return on premium versus others that would look more on an upside taking on more risk on their ULIP portfolio and then you have traditional product with guarantees and bonuses. So, the mix really depends on how channels grow and how different customer segments grow.
Sonia: On the general insurance business, any plans that you have to list it?
A: As of today, we have no plans of listing either our life or non-life business. Both businesses are adequately capitalised, so, the businesses don’t need that capital and neither does either of the shareholder. If there are changes down the line then we will take a look at it that time.
Anuj: What would you expect from regulators in terms of easing up business in the sector?
A: There is a lot of work that is going on between the life and the non-life council. We work with regulator on various different initiatives to improve efficiency, to make sure that for the lower end customers we have more simpler, more standard products so that customers can understand them easily, our agents can understand them easily and at the same time a lot of focus on anti-fraud as well as on digitisation. So, there are multiple ideas where we are working with the regulator and regulator has been quite proactive on a number of these issues as well.
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