Oct. 16--Bajaj Finserv Ltd's September quarter numbers have been boosted yet again by its general insurance and consumer financing businesses. Like the rest of the industry, its life insurance business continues to struggle as a revival gets pushed back further.
In the September quarter, Bajaj Finserv's life insurance premium fell about 10% from a year ago, slightly better than the 27% decline in the three months ended June. New business premium actually grew 1.2% while renewal premium fell 17.6%. This segment's earnings before interest and tax grew at 17.4% compared with 55% growth in the June quarter.
Secondly, policyholder's surplus (difference between an insurer's liabilities and assets) also fell from a year ago as some charges came off from old policies and with the fall in new business premia. With the insurance regulator extending the deadline for filing new products to the end of this year and a slowing economy where people are not parking enough savings in financial instruments, a revival in the life insurance segment looks unlikely in the next couple of quarters.
In that context, the contribution from the general insurance and retail financing business look all the more impressive. These segments boosted Bajaj Finserv's profit after tax 28% from a year ago.
The general insurance business reported a 48.2% increase in Ebit (earnings before interest and taxes). As Bajaj has paid up most of the amount it has to provide towards the common industry kitty for third party motor pool losses, the profitability of this segment should likely sustain.
Although it continued to do well, the retail financing arm showed the strains of operating in a poor macro environment. It posted Ebit gains of 31.1% from a year ago. Deployments increased 20% in the September quarter compared with 32% growth in the three months to June. With the current quarter being the festive one, there will likely be sequential spurt in deployments but increasing inflation which is denting consumer wallets could play spoilsport.
These overhangs on Bajaj Finserv's core business are the reason why the stock has shed close to 28% this year compared with 2% for the S&P BSE 200. However, given that the company is a contender for a banking licence -- the first of which should be announced in January -- and the fact that it is better placed among its peers in the insurance business, the stock could see some volatility in the next couple of months.