bajaj finserv limited 1. overview of financial service industry table of contents bajaj finserv :...
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Bajaj FinServ Limited
1
Overview of Financial Service Industry
Table of Contents
Bajaj FinServ : Objective & Performance
Bajaj Auto Finance
Overview of Indian Insurance Industry
Bajaj Allianz Life Insurance
Bajaj Allianz General Insurance
2
Performance Summary
Bajaj Auto Ltd
Bajaj Holdings & Investment Ltd
Page 3-7
Page 9-11
Page 13-27
Page 29-30
Page 31-33
Bajaj FinServ Limited
INDIA – One of the fastest growing economies
Bajaj FinServ Limited
3.7
10.7
6.8
2.0
2.8
9.2
5.5
2.2
5.9
5.0
5.0
2.8
3.3
0 2 4 6 8 10 12
Brazil
China
Colombia
France
Germany
India
Indonesia
Japan
Malaysia
South Africa
Thailand
United Kingdom
United States
Growth %
2005 2006
2nd fastest growing economy, after China Clocking an average growth rate of ~9% Expected to grow at ~8% over the next decade
Source: United Nations Statistics Division www.data.un.org
Opportunities
3
Immensemarket potential for financial investments
Bajaj FinServ Limited
Under-penetrated market Low Insurance density with penetration under 5%
Insurance Density
160.9
53.5
69.1
38.4
292.2
855.8
110.1
0 100 200 300 400 500 600 700 800 900
Brazil
China
Colombia
India
Malaysia
South Africa
Thailand
Per capita premium US$
Insurance Penetration
2.7
6.7
4.8
10.5
16
16.5
8.8
0 2 4 6 8 10 12 14 16 18
China
Germany
India
Japan
S Africa
UK
USA
Premium as a % of GDP
Size of Asset Management Market
3583
5652
1812
1038
127
0 1000 2000 3000 4000 5000 6000
Japan
UK
Germany
Australia
India
AUM $ Billion
Stock Market Capitalization
4459.48
1638.2
4535.08
1103.34
17773.05
0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000
China
India (BSE)
Japan
South Korea
United States
(US $ Bn)
4
Consumption Boom Bajaj FinServ Limited
Low Debt to GDP and
Savings largely invested as
deposits 5
Lending
Investments
Protection
Bajaj FinServ Limited
An entire range of financial
products and services covering
individual’s entire life cycle
To grow for, and with, IndiaVisionVision
CoverCover
OfferOffer
Bajaj FinServ
6
Conceptual structure of BFS
Distribution Company - Advice and Distribution of all financial products
Cons. Finance Insurance AMC 3rd Party
Group Shared Services opportunity
One Face to customer
Consolidated Backend activities
Focused Product companies
Bajaj Financial Services Group Structure Bajaj Financial Services Group Structure
Existing businesses
customers
Products and risk
Process
Bajaj FinServ Limited
7
Bajaj FinServ Ltd
Financial Results
Bajaj FinServ Limited
8
Ownership
All values in INR million unless specified otherwise
Subsidiaries & associates % holding
Bajaj Allianz Life Insurance 74.0%
Bajaj Allianz General 74.0%
Bajaj Auto Finance 40.5%
Bajaj Allianz Financial 50.0%
Distributors
Bajaj Financial Solutions 100.0%
Cost Market Value
Other investments 7,891 7,588
Bajaj FinServ Limited
Rs in millionQ1 / FY09
Q1 / FY08 FY 08
Key Business Statistics
Gross Written Premium
Bajaj Allianz Life Insurance 18,471 10,599 97,253
Gross Written Premium
Bajaj Allianz General Insurance 7,335 5,737 25,780
Funds Deployed Bajaj Auto Finance 6,322 7,432 30,363
Wind energy generated Bajaj FinServ Ltd 118 71 348
Other revenues 164 142 731
Consolidated entities
9
Consolidated segment financialsRs in million Q1 / FY09 Q1 / FY08 FY 08
Segment revenue
Insurance - Net premium earned 22,495 13,414 111,275
Investment & O.Income (13,252) 6,641 9,949
subtotal 9,243 20,055 121,224
Windmill 118 70 348
Investments & others 157 142 682
Total 9,518 20,267 122,254
Segment Profit / (Loss)
Insurance - General - Life
115(698)
354(404)
1679(2139)
Windmill 20 ( 25) ( 27)
Retail financing 12 16 83
Investments & others 122 135 628
Profit before tax (429) 76 224
Profit after tax & minority interest (362) ( 48) (327)
Bajaj FinServ Limited
10
Financials - Standalone Bajaj FinServ Limited
Rs in million Q1/FY09 Q1/FY08 FY08
Total Income 272 212 1,064
Employee cost 8 6 21 Depreciation 74 75 297 Other expenses 45 20 96
Total Expenses 127 101 414
Profit before tax 145 111 650 Provision for tax 48 38 210 Profit after tax 97 73 440
EPS (weighted average) 0.7 0.6 3.1
Dividend 20%
Rs in million as on
June 08 as on
June 07 as on
March 08
Sources of fundsShare capital 723 723 723 Reserves and surplus 11,185 10,891 11,088 Total shareholders funds 11,908 11,614 11,811
SICOM ( on windmill ) 3,108 2,900 3,108 15,016 14,514 14,919
Application of fundsFixed assets ( net ) 924 1,125 999 Investments at cost 13,532 13,286 13,469 Net current assets 509 136 425 Defered tax adjustment 51 (33) 26
15,016 14,514 14,919
Book value per share 82.3 80.2 81.6
11
Insurance Industry
12
20000
3000040000
50000
6000070000
80000
FY 0
3
FY 0
4
FY 0
5
FY 0
6
FY 0
7
FY 0
8 E
FY 0
9 E
FY 1
0 E
FY 1
1 E
Financial Year
GDP
INR
Bn
2.0%2.5%3.0%3.5%4.0%4.5%5.0%5.5%6.0%
Prem
ium
/ GDP
as %
GDP Premium / GDP
Low density, strong GDP growth and
growing penetration = favorable climate for
Life Insurance growth.
Low density, strong GDP growth and
growing penetration = favorable climate for
Life Insurance growth.
The life insurance opportunity
1 -Life insurance density – Swiss Re Sigma report 2006
2- Estimates by JP Morgan Associates
1USD = INR 43
1,419 1,462 2,580 8,127
63,64076,970
121,647 125,689
221,020
Ind
ia
PR
Ch
ina
Th
ailand
Malaysia
S.K
orea
US
Japan
Fran
ce
UK
Life insurance density (INR per Capita)
Penetration levels still lower than developed countries
• Premium/GDP is at 4% compared to 6%-9%
developed countries
• Premium per capita is INR 1,500
against an average INR 6,750 for Asia
• Only a third of the target population is
estimated to be insured
13
The Indian Insurance industry – past, present and future
1 – Swiss Re estimates extended by 1 year – ASSOCHAM estimates 2010 extended by 2 years
2 – Mckinsey estimate 2011 $ 80 Bn - $ 100 Bn – we have considered $80 Bn plus 12.5% growth in 2012
16% CAGR 07-12
20% CAGR 07-12
Fiscal year ending 31 March
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2003 2004 2005 2006 2007 2012
Non life
Life
GWP INR Bn
14
The great Indian middle class
Source Mckinsey Global institute
15
How it all started
Non-Life market Agency the only distribution
channel 90% of business done
directly through 4,000 offices of government companies
No product innovation No incentive for good
service Cashless claim settlement
was unheard of
Non-Life Focus on retail Pioneered several
innovative services Tie-up with non-traditional
channels for distribution of products like motor dealers and manufacturers, travel agents, banks
Non-Life Tie-up with motor dealers
and manufacturers to increase volumes
Leverage IT and focus onIT-enabled systems
Create image for transparency and innovation
OPEX (Operational Excellence) methodology (claims handling, customer service)
Insurance environment until 2001 Start of Bajaj-Allianz JV What we did differently
compared to our peers
1) Life insurance corporation (state owned company)
Life market Only one Life company1 was
operating till 2001 Products like unit linked
policies did not exist
Life Minimize set-up costs for
distribution e.g. Banyan tree
Fast roll out for pan-Indian presence
Life Fast and nationwide roll-out of
branches to leverage cross-sell/ up-sell
Focus not only on tier 1, but also on tier 2 + 3 cities
Building Bajaj Allianz
16
Bajaj Allianz Life Insurance Co.
17
Source: IRDA website.
** APE = 10% of Single Premium + 100% of Regular Premium
Bajaj Allianz Life - Market Share on APE** basis
2007/08
Fiscal year ending 31 March
13.7%
10.3%
6.2%4.1%
14.2%
ICICI PRU
Bajaj Allianz
SBI Life HDFCStd Life
OthersPvt (12 cos)
3.4%
Reliance Life
Q1 2008/09
ICICI PRU
Bajaj Allianz
SBI Life
15.4%
8.1% 7.8%
4.9% 4.6%
21.1%
Max NY life
Birla SL OthersPvt (12 cos)
LIC’s market share is 38% for YTD May 08 as compared to 48% as on 31st March ,2008
18
Bajaj Allianz Life
• Amongst private insurers … during FY08
Second largest in new business premium
First position on number of policies issues
• Gross Written Premium – 82% Rs. 97 billion v/s Rs. 53 billion in P. Yr
• Market share – 10.3% v/s 7.4% in P. Yr on APE* basis
• Number of policies – 3.7 million v/s 2.1 million in P. Yr
• Unit linked funds increased by 111%
• 12 new products launched during the current year
• Currently 32 individual products & 9 product groups on offer
*APE = 10% of Single Premium + 100% of Regular Premium19
Performance Summary
Rs. In billionQ1/FY09 Q1/FY08 FY 08
INR Bn INR Bn INR Bn
Gross written premium 18.4 10.5 97.2
New business premium 8.2 7.2 67.0
Net earned premium 18.4 10.5 97.1
Total income 5.49 11.91 107.1Annualized premium equivalent * 7.6 6.6 60.0
Policyholder surplus/(deficit) 0.66 0.70 1.98
Shareholder Profit/(Loss) (0.69) (0.40) (2.13)
Profit / ( Loss ) (0.03) 0.30 (0.15)Net contribution to policy holders account 0.9 0.5 2.9
20*APE = 10% of Single Premium + 100% of Regular Premium
Shareholders funds & Investments overview
Rs. in million
as onJune 08
as onMar 08
INR Mn INR Mn
Share Capital 1,507 1,507Share premium 10,600 10,600Sub-total 12,107 12,107Balance in P & L account
(5,596) (4,899)
Total 6,511 7,208
Total capital infused during the year – Rs. 5,101 million
Rs. in million
as onJune 08
as onMar 08
INR Mn INR Mn
Shareholders 10,043 11,459TraditionalPolicyholders 17,043 14,687Unit Linked Policyholders 103,922 109,542
Total 131,008 135,688
Bajaj Allianz Life
SBI Life
HDFC SL
ICICI Pru
Gross Written Premium to Share Capital 2007/08
8.04
5.62
3.66
3.60
Efficient capital management
21
New Business Achieved Profit (NBAP) trend
PeriodAPE** NBAP
INR Mn INR Mn
2008/09 Q1 7,640 1,487
2007/08 Q1 6,581 1,468
FY 2007/08 59,953 12,029
FY 2006/07 32,330 7,036
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
** APE = 10% of Single Premium + 100% of Regular Premium22
Bajaj Allianz General Insurance Co.
23
Bajaj Allianz General (Q1/FY09) Amongst private insurers, during FY08, maintained second position in
terms of GWP
GWP – 28%, Rs.7.3 billion v/s Rs.5.7 billion in Q1/FY08
Market share – 8.5% v/s 7.4% in Q1/FY08
Net premium earned– 43% Rs.4.1 billion v/s Rs.2.8 billion in Q1/FY08
Number of policies sold – 1.8 million v/s 1.4 million in Q1/FY08
Investible surplus – Rs. 22.6 billion
Strong retention ration – increased to 72% from 66%
Losses from Motor Pool estimated at Rs 120 million v/s Rs 90 million proportionately in Q1/FY08
Bancassurance, direct retail channels growing above 60%24
Performance SummaryRs. in billion Q1/FY09 Q1/FY08 FY08
Gross written premium 7.34 5.74 25.8
Net earned premium 4.06 2.84 14.1
Net Insurance Income 0.60 0.63 2.9
Underwriting profit excluding pool losses (0.24) 0.03 0.2
Underwriting profit including pool losses (0.36) (0.06) (0.2)
Profit before tax 0.12 0.26 1.7
Profit after tax 0.07 0.13 1.1
Loss ratio 72.2% 69.9% 66.7%
Combined ratio excluding pool losses 105.8% 98.9% 98.5%
Combined ratio including pool losses 108.7% 102.1% 101.5%
Retention ratio 71.9% 65.9% 69.1%
25
Focus on cash flows, growth in invested surplus.
Rs. in billionAs on
June 08As on
March 08
Cash and investments 22.62 20.48
Other assets 4.44 4.20
Insurance reserves 18.53 16.36
Other liabilities 2.73 2.58
Net worth 5.80 5.75
Free cash flow 2.16 5.04
Free cash flow = increase in invested surplus net of financing cash flows
To capitalize on the growing health and motor segments and with corporate pricing under pressure, Bajaj Allianz has increased its presence in retail business
Changing business mix
By 2012, it is expected that Motor and Health will constitute more
than two thirds of the market
0% 10% 20% 30% 40% 50% 60%
Others
Health
Motor
Corporate
2007/08 2006/07
0% 10% 20% 30% 40% 50% 60% 70%
Q1 2008/09 2007/08 2006/07
Others
Health
Motor
Corporate
Business Mix-Market Business Mix- Bajaj Allianz
26
Capital Efficiency – FY08
Rs. in millionShare capital
Share premium
Total capital
brought inGWP FY08
GWP/ Equity
Return on Equity
ICICI 3774 5933 9707 33447 3.45 10.2%
Bajaj Allianz 1102 1666 2768 24043 8.68 21.5%
Reliance 1072 4998 6070 19464 3.21 Negative
ITGI 2200 300 2500 12358 4.94 2.4%
TATA 2250 0 2250 8134 3.62 6.4%
Bajaj Allianz is the benchmark for efficient use of capital Highest return on equity in the private sector
Return on equity is on simple average equity. GWP as per IRDA website27
Bajaj Auto Finance – Retail Financing
Bajaj FinServ Limited
28
Vision Bajaj Auto FinanceDevelop a Unique Business Model
focused on delivering range of
consumer lending products to Indian
Middle Class serviced by best in
breed specialists
Bajaj FinServ LimitedStrategy
• Build and launch innovative products • Offer full product suite• Leverage existing gaps of “service differentiation” in the market
Innovate to grow – Product and servicesPlug & Play Model for accelerated growth
• Build partnerships with consumer databases• Leverage distribution & customers to build faster growth engines
Forging Business Partnerships
• Outsource Technology & Operations for variable cost structure• Own / Automate risk & underwriting process
• Sell more & more to each customer• Acquisition and operating cost advantage
Leverage CRM Capabilities
Scalable Operating Platform
Leading financer of …~ Two wheelers~ Consumer durables & personal computers~ Personal loansNew business lines~ Securitization ~IPO financing~ Loans against shares ~Loans against
property (to launch)~ Personal loans >Cross-sell >Small business loans
29
Business Performance
Rs. in million Q1/FY09 Q1/FY082007 –
08
Automobiles 2,072 3,584 14,844
Consumer Durables 1,327 2,344 6,307
Personal Computers 612 1,398 4,628
Personal Loans 915 106 1,627
Securitized retail asset pool - - 2,597
Total Disbursals 4,926 7,342 30,363
Rs. in million Q1/FY09 Q1/FY082007 –
08
Total Income 1,282 1,052 5,027
Interest & Finance charges 435 378 1,704
Other Expenses 792 609 2,975
Depreciation 10 5 48
Provision for tax 15 18 99
Profit for the year 30 41 201
Financial PerformanceBajaj FinServ Limited
Asset base of Rs. 27 billion Book value per share – Rs. 291 Capital adequacy ratio – 40% ( RBI norm – 12% ) Earning per share ( diluted ) – Rs. 0.82 in Q1/FY09 v/s
Rs. 1.12 in Q1/FY08 & Rs. 5.68 in P. Yr 30
Thank youThank you
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 looking statement” within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied. Undue reliance should not be placed on such statements & values because by 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.
Bajaj FinServ Limited
31