bfsl analysts presentation aug 09

8/3/2019 BFSL Analysts Presentation Aug 09

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Bajaj FinServ Limited

1



Bajaj FinServ Ltd.


Bajaj Allianz Life

Insurance(BALIC)

Bajaj Allianz

General Insurance(BAGIC)

Bajaj Auto

Finance(BAFL)

Others(3)

plus plannedinvestments

74%(1) 74%(2) 42%

Business:Business: Life InsuranceLife Insurance General Insurance

(property, motor, travel,

General Insurance

(property, motor, travel,Auto and Consumer

Finance (~20% of Bajaj

Auto and Consumer

Finance (~20% of Bajaj

Investments, Windmills,

Asset Management

Investments, Windmills,

Asset Management

2

FY 2009 Revenue

(Rs mm):

FY2009 Pre-Tax

Profit (Rs mm):

Capital Employed

(Rs mm):

FY 2009 Revenue

(Rs mm):

FY2009 Pre-Tax

Profit (Rs mm):

Capital Employed

(Rs mm):

75,941

(707)

6,312

75,941

(707)

6,312

21,419

1,496

6,561

21,419

1,496

6,561

5,994

511

10,887

5,994

511

10,887

1,606

607

9,520

1,606

607

9,520

Note: 1) Allianz has option, till July 2016, to increase stake to 74% at a price per share determined on an agreed formula

2) Allianz has option, till April 2016, to increase stake to 50% at a price per share determined on an agreed formula

3) Includes Windmills, Investments, Asset Management, Bajaj Allianz Financial Distributors Ltd, Bajaj Financial Solutions Ltd,……….



Demerger process

Current Shareholders

Bajaj Holdings and

Investment Limited

100%

Investments & Cash

Current

Shareholders

Current

Shareholders

Auto Business

Consumer Finance

Insurance Businesses

Bajaj Finserv LimitedBajaj Auto Limited

Wind-farm ProjectCash

Rs.

8 bln

Cash

Rs.

15 bln

70% 30% 70%

3

30%



Rationale for de-merger

Greater management focus on :

Auto business

Financial Services

Investment Company


Enable investors to hold focused stocks and participatein pure play auto and / or financial services

More transparent benchmarking with peers in their respective industries.

4



Executive Summary

One of the leading financial services business in India with a focus on:• Life and General Insurance• Consumer Finance• Asset Management and Financial Product Distribution planned

Only listed financial services company with pure play private sector insurance exposure

Part of one of the leading business houses in India - the Bajaj Group:

• Amongst the top business houses in India with business interest spanning across- -


,

appliances, consumer electrical, iron and steel, insurance, travel and financialservices

• The group's flagship company, Bajaj Auto, is ranked as the world's fourth largest two- and three- wheeler manufacturer and the Bajaj brand is well-known across several

countries in Latin America, Africa, Middle East, South & South East Asia

Strong relationship with Allianz Group of Germany

• Second largest financial services provider in the world• Core business and focus is insurance – second largest in the world• Top five global active investment manager with €970 billion of AUM•

5



Bajaj Finserv Limited – Results Highlights Bajaj FinServ Limited

Quarter ended Quarter ended FY

(Rs in million) 30.06.2009 30.06.2008 2008-09

Revenue:

General Insurance 4903 4434 21419

Life Insurance 67708 4809 75941

Insurance (subtotal) 72611 9243 97360

Investment & Others 321 157 948Windmill 106 118 416

Total Revenue 73038 9518 98724

Profit / (loss): Pre-tax

6

General Insurance 421 115 1496Life Insurance 102 (698) (707)

Insurance (subtotal) 523 (583) 789

Investments & Others 183 122 608

Retail financing 64 12 140

Windmill (37) 20 7

Profit Before Tax 733 (429) 1544

Provision for taxation (including

deferred tax) 219 98 767

Net profit / (loss) for the year 514 (527) 777

Less: Minority Interest in Net

Income of subsidiaries 93 (165) 64Net profit / (loss) for the period 421 (362) 713



Bajaj Allianz


Life Insurance Co.

7



Indian Life Insurance Industry Overview

Opportunities• One of the lowest life insurance penetration levels in the world

– 4.7% of GDP – Insurance per capita of US$47

• Low penetration of life insurance, pension and provident funds – 26% of gross household financial assets – Bank deposits represent 57%

• Increased awareness of insurance products


• Increased life expectancy and favorable demographics – 60% of population is working and between 15-64 years

• Increased product innovation

8



Life insurance market(Rs in billion)

430

159

300

350

400

450

500

I N R

B n )

564

293

525

309

550

600

Market CAGR = 30%

Pvt. Life Insurers CAGR = 71%


141

220

165

YoY 17% YoY 34%

YoY 95%

*Source: IRDA website.

*APE = 10% of Single Premium

+ 100% of First Premium

271

142121120

2144

78

-

50

100

150

200

2003/04 2004/05 2005/06 2006/07

A P E

(

Private

LIC

Fiscal year ending 31 March 2009

Private insurer’s share on APE basis increased

from 15% to 59 % in 5 years

2007/08

271

YoY 31%

2008/09

216

YoY (7)%

9



Indian Life Insurance Industry Overview

Challenges

• General slowdown in the economy during 2008-09

• Sector driven by unit liked products

• High lapsation and lower persistency ratio(1)

• Ability of insurers to raise capital


• Agent productivity

10Note: 1) Ratio showing the percentage of policies that continue paying premiums rather than cancel policies. A higher ratio is better than a lower ratio



Bajaj Allianz Life Insurance Overview

• Owned 74% by Bajaj FinServ and 26% by Allianz SE

• Third largest private life insurer in India with a market share of 10.6% of privatesector (by APEs)

• 5 year APE CAGR of 83% compared to market CAGR of 30% and private insurer CAGR of 71%


58

B n )45

50

5560

41

• Slowdown in New Business premium in FY 09 and Q1 FY 10 primarily due to uncertaintyin stock markets

• GWP grew by 8% in Q1 FY 10 and 9% in FY 09 (table in next slide) 11

25

14

2003/04 2004/05 2005/06 2006/07 2007/08

A P E * ( I

N R

1015

20

25

3035

2008/09



Bajaj Allianz Life Insurance Overview

• Total Premium underwritten – Comparison

Premium In INR Million Q1 FY10 Q1 FY 09 FY 09 FY 08

New Business Premium 5,775 8,288 44,914 66,745

Growth rate -30% 14% -33% 55%Renewal Premium 14,233 10,182 61,331 30,508

Growth rate 40% 208% 101% 193%

Gross Written Premium 20,009 18,471 106,245 97,253

Q1

FY10

Q1

FY09FY 09 FY 08

New Business

Commission ratio 22% 23% 19% 21%

Operating Exp /GWP

19% 21% 18% 21%

12

• Best in class capital and operating efficiencies

as reflected in the premiums/capital and

operating expense ratios• BALIC’s focus is on improving profitability by

changing the product mix and reducing

operating and commission expenses

Growth rate 8% 74% 9% 82%



• Balance growth with fair return for all stake holders

• Diversify product mix and reduce dependence on any single product

• Control commission costs and operating expenses

– New Business commission for Q1/FY10: 22% (Q1/FY09 : 23%)

– Operating expenses for Q1/FY10: 19% (Q1/FY09 : 21%) to GWP

BALIC’s Focus and Initiatives Bajaj FinServ Limited

• Separate renewal vertical to focus on improving persistency – Operations consolidated through 7 regional hubs, to improve service

• Focus on higher visibility through brand building -

Sponsored the IPL tournament ( season 1 ) Sponsored the National elections 2009 program telecast on prominent

business channels ( CNBC )

Sponsored the Femina Miss India contest 2008

13



• 3rd largest private life insurer with 10.6% of private sector market share for Q1/FY10 (by APE)

• Strong growth in the past 5 years while maintaining best in class capital and

operating efficiencies• Focus on improving profitability and not aggressively pursuing market share

―Favorable product mix and focus on rationalizing operating and commission

BALIC’s Strategy and Strengths Bajaj FinServ Limited

• Superior capital efficiency

―Reflected in leading Gross Written Premium (GWP) to capital ratio

• Diversified distribution network with agency sales accounting for 55% of sales

(12% from bancassurance and balance from alternate channels and corporate)

―Focus on improving agency & channel productivity

• Wide geographical reach through 1,165 offices in 650 locations

―

Presence in Tier-I, Tier-II and most Tier-III centers 14



Rs. in billion Q12009-10

Q12008-09

FY2008-09

Gross written premium 20.0 18.5 106.2

New business premium 5.8 8.3 44.9

Renewal premium 14.2 10.2 61.3

APE * 5.2 7.6 40.6

Polic holder sur lus/ deficit 0.6 0.7 1.2

BALIC – Performance Summary Bajaj FinServ Limited

Shareholder Profit/(Loss) 0.1 (0.7) (0.7)

Profit / ( Loss ) 0.7 (0.0) 0.4

Net contribution to policy holders account 0.1 0.9 1.6

* Annualized Premium (APE) = 10% of Single Premium and 100% of First Premium

• Reported a profit of Rs. 683 million during Apr – Jun 09 as against loss of Rs. 29 million during Apr – Jun 08

• Number of policies underwritten – 0.36 million during Apr – Jun 09 as against0.50 million during Apr – Jun 08

• Number of policies in force – 7.61 million as at 30th June 09 15



New Business Achieved Profit (NBAP) trend

Period

NBAP

INR Mn

Q1 FY 2009/10 829


,

Q1 FY 2008/09 1,487

FY 2007/08 12,029

NBAP Comparison with other Life Companies might not be very relevant as actuarial

Assumptions & methodology used are likely to vary from Company to Company,

in the absence of any common agreed process. 161616



Bajaj Allianz


General Insurance Co.

17



4.7%

3.6%

3.0%

2.4%2.1%

1.6%

1.1%

0.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

US Germany UK Russia Japan Brazil China India

General Insurance Industry Overview Bajaj FinServ Limited

General Insurance PenetrationPremium (US $) to GDP

2,164

1,428 1,383

203

736

10726 6

0

500

1,000

1,500

2,000

2,500

US Germany UK Russia Japan Brazil China India

Insurance DensityPremium (US $) to Population

18

Fire11%

Marine7%

Motor OD27%

Motor TP

17%

Health20%

Others18%

155.0 161.0175.4

205.6

252.4

280.5306.0

3.9%8.9%

17.2%

22.8%

11.1%

9.1%

0%

5%

10%

15%

20%

25%

-

50

100

150

200250

300

350

400

FY03 FY04 FY05 FY06 FY07 FY08 FY09

GWP - (LHS) Rs. In bn Growth

GWP – Industry growth over FY03-09

Rs bn

Product Segmentation

2008-09

Source: IRDA Source: IRDA

Source: IRDA



General Insurance: Industry OverviewOpportunities

• Market is still in its infancy

– General insurance premium to GDP of 0.6%

• Deregulated operating environment

– Focus on expanding product lines and creating customized risk solutions

• Intense competition has led to industry to innovate post deregulation

– New products, channel development, policy holder servicing undergonesignificant evolution


Challenges• General slowdown in economy during 2008-09

• Challenging market conditions:

– High discounts on corporate business

– Increasing level of discounts in retail business – Slow-down in asset acquisition, reflection of economic activity

• Aggressive strategy to gain market share has not paid dividends

• Major competitors slowing to reduce losses while smaller players seeking market share

• Losses from third party pool have increased 19



Bajaj Allianz General Insurance Overview

• Owned 74% by Bajaj FinServ and 26% by Allianz SE• Second largest private general insurance company in India, with 8.6% market

share

• Premiums have grown at a 5 year CAGR of 41% vs. 14% for industry and 41%

for private players• The Company has been profitable from the first full year of its operations in 2002-

03 and is the most profitable private general insurance company

•


insurance) segments, which accounted for 66% of its premiums.• The Company’s investment surplus consist entirely of fixed income securities

20

Rs. in million



• In this challenging environment, the company seeks toconcentrate on – Preserving profitability

– Maintaining market share

– Efficiently utilizing capital

• Key focus areas: – Push renewal ratios – renewal monitorin centralized

Focus and Strategy Bajaj FinServ Limited

– Improve operating efficiency through regional operating hubs – Slow down loss making business - mainly group health insurance and other

corporate lines

– Improve risk selection– focus on customers, channels and risks which meet

benchmark of profitability – Maintain high standard of customer service

– Focus on higher visibility through brand building –

Business leader for 2008 ( NDTV Profit )

Most trusted service brand (rated 30th amongst top 50 by Pitch magazine) 21



Summary Results - BAGIC

Rs. in million

Q1

2009-10

Q1

2008-09 FY 2009

Gross Written Premium 6,347 7,335 26,491

Net Earned Premium 4,321 4,064 16,960Underwriting results excluding losses

from Motor Pool6 (235) (196)


22

e oss rom o or oo

Underwriting loss including losses fromMotor Pool

(159) (355) (727)

Recurring investment/other income 544 465 2,061

Capital gains 23 (11) 164

Profit before tax (PBT) 421 115 1,498

Profit after tax (PAT) 268 66 952

PBT excluding Motor Pool losses 586 235 2,029Gross and Net written premiums exclude premiums from Motor Pool




.

23



BAFL product portfolio Bajaj FinServ Limited

24

Cross sellPersonal loans

Insurance services



Q1 / FY10 overview

• Macro Environment continues to be challenging. Some improvement visible

in Q1 / FY10. Need to wait and watch

• Strong momentum in durable financing & mortgages despite a tough

economic environment

• Started acquiring portfolios in related businesses to leverage capital,


Positioning towards profitable growth 25

acquire quality assets and pace growth

• Maintained high vigil over ALM

• Operating cost to NII on a downward path - 46 % to 39 % QoQ

• Holding credit ratings at FAA+, P1+ and FAAA

• Strengthened management teams across businesses



Summary Income Statement

(Rs Lakhs, except EPS) Q1’ 10 Q1’09 %▲

Income from operations 16486 10372 58.95%

Other operating income 2470 2414 2.32%

Total Income 18956 12788 48.23%Interest & other finance charges 4163 4344 4.17%

Net interest income 14793 8444 75.19%


pera ng expenses .

Recovery commission 1265 1160 9.05%

Provision for doubtful debts & bad debts 5364 2967 80.79%

Profit from ordinary activities before tax 2333 451 417.29%

Tax Expenses (including Deferred Taxes & FBT) 812 150 441.33%

Net Profit/(loss) from ordinary activities after tax 1521 301 405.32%

Paid up Equity Share Capital 3660 3660

EPS before and after Extraordinary item

a)Basic(Rs) b)Diluted(Rs)4.16 0.82 407.32%

Operating expenses as a % of NII 39% 46% 26



Snapshot - Q1 / FY10

Revenues up by 47.83% QoQ

12823 13736

1580017580

18956

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

R e v e n u e s

( R s . L

a k h s )

Revenues(Rs.Lakhs) 2 per. Mov. Avg. (Revenues(Rs.Lakhs))

Disbursements up by 71.39% QoQ

57384 5194542465

62969

98350

D i s b u r s e m e n t s

Disbursements(Rs.Lakhs)

2 per. Mov. Avg. (Disbursements(Rs.Lakhs))


NII up by 74.47% QoQ Operating Expenses % of NII

27

QuarterQ1'09 Q2'09 Q3'09 Q4'09 Q1'10

Quarter

8479 9442

11623

1396014793

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

N I I ( R s . L

a k h

s )

Quarter

NII(RS.Lakhs)

46%42%

37% 37% 39%

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

Opex as a % of NII 2 per. Mov. Avg. (Opex as a % of NII)



Snapshot – Q1 / FY10

Pre-tax profit up by 417.29% QoQ. Net NPA Reducing NPA

451711

1628

2314 2333

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

P r e - t a x p r o

f i t ( R s . L

a k h s )

Pre-tax profit(Rs.Lakhs)

2 per. Mov. Avg. (Pre-tax profit(Rs.Lakhs))7.05

6.38 6.165.45

4.5

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

N e t N P A

( % )

Net NPA(%) 2 per. Mov. Avg. (Net NPA(%))


28

Quarter

Loss Prov + Recovery commission

41274736

56726451 6629

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

L o s s p r o v i s i o n +

R e c o v e r y

c o m m i s s i o n ( R

s . L

a k h s )

Quarter

Loss provision + Recovery commission(Rs.Lakhs)

2 per. Mov. Avg. (Loss provision + Recovery

commission(Rs.Lakhs))

ROTA(%) Increasing ROTA

0.460.72

1.78

2.282.00

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

R O A ( % )

Quarter

ROTA(%) 2 per. Mov. Avg. (ROTA(%))



Snapshot – Q1 / FY10

Capital adequacy increasing leverage

41.35 41.95

40.11 38.41

34.98

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

C a p i t a l a d e q u

a c y r a t i o ( % ) Capital adequacy ratio(%)

2 per. Mov. Avg. (Capital adequacy ratio(%))

Book Size increasing book size

261300 254200 254350 266036

311481

B o o k s i z e ( R s

. L a k h s )

Book Size(Rs.Lakhs) 2 per. Mov. Avg. (Book Size(Rs.Lakhs))


29

Portfolio Mix Earnings per share up by 407.32 % QoQ.

0.82

1.25

3.08

4.12 4.16

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

E a r n i n g s p e r s h a r e ( R s )

Quarter

EPS(Rs)

41%

23%

36%

AF Secured CF Unsecured CF

QuarterQ1'09 Q2'09 Q3'09 Q4'09 Q1'10



Summary

• Manage current cycle in a safe and responsible way

– Keep a gradual pace of organic growth

– Manage credit cycle through efficient collections & stricter credit screens

• Expand product line strategy

– Launch Construction equipment finance business


30

• Explore portfolio acquisitions to leverage capital, acquire quality assets and

fast pace growth

– Buy portfolios in product lines where we are present

– Cross sell on the portfolio to improve ROA significantly

• Continue to keep a tight control on operating costs

• Continue to maintain vigil over ALM

Growth plans in 2009-10 to be of cautious optimism.



ThankThank youyou


No part of this presentation is to be circulated, quoted, or reproduced for any distribution without prior written approval from Bajaj FinServ Limited, Mumbai-Pune Road, Akurdi, Pune-411 035, India.

Certain part of this presentation describing estimates, objectives and projections may be a “forward lookingstatement” within the meaning of applicable laws and regulations. Actual results might differ materially fromthose either expressed or implied. Undue reliance should not be placed on such statements & values becauseby their nature, they are subject to known and unknown risks and uncertainties and can be affected by numerous factors that could cause actual results to differ materially. This material was used by Bajaj FinServ Limited during an oral presentation; it is not a complete record of the discussion.

31



Appendix –


Life Insurance

32



Capital Position – Private Players

InsurersGWP

Apr – Mar 08

GWP

Apr – Mar 09

Capital as at

31st Mar 09GWP to Capital

ratio (Apr – Mar

09)

ICICI Prudential 135.61 153.56 47.80 3.21

SBI Life 56.22 72.12 10.05 7.18

Ba a Allianz 97.25 106.25 12.11 8.78

( Rs. In billion )


33

Reliance Life 32.25 49.15 27.40 1.79

Birla Sun life 32.57 44.14 20.00 2.20

HDFC Std Life 48.59 55.65 17.96 3.10

Max New York Life 27.15 38.57 17.82 2.16

Bajaj Allianz ranks the best in GWP to Capital RatioSource – Websites and Press Releases of Respective Companies

33



Market ShareRs. in million New Business Premium (NB) * Individual (APE) **

S.

No.INSURER

Apr –

Jun 09

Market

Share

Apr –

Jun 08

Market

Share

Apr –

Jun 09

Market

Share

Apr –

Jun 08

Market

Share

1 SBI Life 10,727 7.4% 11,487 8.0% 4,935 6.4% 4,723 5.6%

2 ICICI Prudential 8,071 5.6% 15,903 11.1% 5,446 7.0% 11,736 13.8%

3 Bajaj Allianz 5,777 4.0% 8,292 5.8% 4,336 5.6% 7,431 8.7%

4 Reliance Life 5,050 3.5% 5,573 3.9% 4,354 5.6% 4,138 4.9%


*Source: IRDA website.**APE = 10% Single Premium + 100% First premium Individual APE does not include Group premium

5 Birla SunLife 4,404 3.0% 5,015 3.5% 3,694 4.8% 4,806 5.7%

6 Max New York 4,348 3.0% 5,012 3.5% 3,842 4.9% 4,253 5.0%

7 HDFC Standard 4,126 2.9% 4,904 3.4% 3,601 4.6% 4,322 5.1%

8 Other Private 11,774 8.1% 11,770 8.2% 10,182 13.1% 10,094 11.9%

Total Private

Insurers54,277 37.5% 67,956 47.5% 40,390 52.0% 51,503 60.6%

9 LIC 90,286 62.5% 75,246 52.5% 37,222 48.0% 33,497 39.4%

Industry 144,563 100.0% 143,202 100.0% 77,612 100.0% 85,000 100.0%

34



ShareholdersFunds

Rs. in million

As on

Jun 09

As on

Mar 09

As on

Mar 08

Share Capital 1,507 1,507 1,507

Share premium 10,600 10,600 10,600

sub-total 12,107 12,107 12,107

Balance in P & L account (5,518) (5,606) (4,899)

Total 6,589 6,501 7,208


No fresh capital infused during the period Apr to Jun 09

35

Investments Rs. in million As on

Jun 09

As on

Mar 09

As on

Mar 08

Unit linked investments196,058

140,653 109,542Policyholders investment 27,084 23,217 14,687

Shareholders investment 8,221 7,695 11,459

Total 231,363 171,565 135,688



Appendix –


General Insurance

36



Rs in Mns

Rs. in million

As on

30-Jun-09

As on

31-Mar-09

As on

31-Mar-08

Investment in shares NIL NIL 399

Bonds, cash, mutual funds etc. 25,958 24,786 20,084

Total Cash and investments 25,958 24,786 20,483

Share Capital + premium 2,768 2,768 2,768

Total shareholders' equity 6,993 6,725 5,773

Keyhighlights


Key

Ratios

, . ,

Exposure to equity “NIL” as at 30 th June 2009

No fresh capital introduced after March 2008

37

Q1/FY10 FY 2009 FY 2008

Retention* 73.1% 69.2% 66.8%

Loss Ratio* 67.6% 66.0% 63.0%

Combined Ratio* 99.9% 101.2% 98.5%

Combined Ratio including pool losses 103.7% 103.8% 101.5%

* Excluding pool losses



Market Share

FY 200811.9%

8.5%

6.9%

4.4%

8.2%

ICICI Ba a Allianz Reliance IFFCO Others

11.2%

8.6%

6.3%

5.0%

10.0%

ICICI Ba a Allianz Reliance IFFCO Others

2008-09 Apr-FebFY 2009


• Private sector share increased from 40 % to 41.1%

• Bajaj Allianz market share maintained

Lombard

TOKIO private

38

Lombard

TOKIO Private

Based on GWP excluding specialised companies



2008-09 Apr-Feb

Bajaj FinServ LimitedCapital efficiency

• Bajaj Allianz continues to be the most efficient utilizer of capital amongst top privatecompanies

• Bajaj Allianz is the only company to increase capital efficiency during 2009 – no new

capital raised in 2009

39Capital efficiency measured as GWP for the year divided by capital infused including share premium at year end



Profitability compared to peers2008-09 Apr-Feb

Rs. in million

PBT

2008 - 09

PBT

2007 - 08

ICICI Lombard 3 1,302

Reliance General (loss) (502) (1,628)

Bajaj Allianz 1,498 1,679


40

Source: Analyst presentations of companies.

Bajaj Allianz continues to be the most profitable company amongst its peers under

extremely difficult and challenging conditions

bfsl analysts presentation aug 09

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