Warning: This quick analysis  deploys two quarters comparisons of new business to verify new conditions in the insurance businesses

Bajaj Finance has grown Sales/Total income q-0-q by 22%/20% and the company is paying a 40% higher tax, increasing profits by 40% , in line to close March at nearly double the March 2011 performance at over INR 6 bln. That would take full year sales to INR 20.2 bln or $400 mln

However, Bajaj Finance has a small capital base for its NBFC operations and EPS at 32.76 looks good for the coming investment parleys Full year EPS is 131. The low capital base is unlikely to turn into an argument with the regulator soon, company running at an exact 5:1 debt multiple till March 2011 the leased asset book must have grown with the growing sales from $1.6 bln in total assets (INR 72 bln leased assets at $1.4 bln) A likely figure is $2.4 bln in themarch 12 balance sheet unless the income expansion is from allowed rise in spread on current lease contracts. Nine month cons profit has grown 69% to INR 2.89 bln

Bajaj Finserv has two businesses Life and General of which General has grown profits to twice. Apparently Finserv also includes the consumer lending business and leasing reports a total sales of INR  bln for the quarter, of which LIC profits are more than half!! leaving Finserv the dominant looking family member while Bajaj Holdings and Bajaj Finance continue getting all the management attention. Finsv is adequately capitalised at 1400 crores or INR 14 bln for the three businesses

Bajaj Finserv consolidated profit has almost doubled for the nine months to INR 457 cr or up 89% while the comparison with the current quarter shows LIC growth shutting down again, still growing to INR 630 mln in shareholder profits. The company also discloses the higher general profit showing INR 2.2 Bln as surplus added to various LIC reserves incl the genral reserve

GIC premiums continue at a 1 bln higher clip in the 2nd and third quarters to 775 and 811 crores or 7.75 bln and 8.11 bln still underlining its small spread in distribution and market development required in the sector. Earned Premiums are even smaller at INR 5.41 bln but growing at the same clip. Combined ratios have come lower by 8-10% at 98.9% incl motor pool losses and loss ratios have improved to below 60% in the last two quarters The company is fighting IRDA for a charge of half of one quarters earned premiums at INR 3.29 bln as loss reserves on motor insurance

After the new provisions from the current motor pool closing, provisions may increase further as a charge on the GWP but pricing correction is correspondingly mandatory in the insurance business, which IRDA may like to postpone ( esp when lower provisions do not mean lower premium) GWPs have dropped 35% y-0-y to INR 16.75 bln in both quarters led by dropping of new business by half to INR 5 bln and renewal business has also dropped 15% and 30% in the last two quarters to INR 11 bln in the latest quarter (2q2012, 3q2012) LIC pool of investments has grown to INR 355.45 bln as of Dec 2011.

 

 

 

 

 

 

Posted via email from The India Investment Post