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Bajaj FinServ Limited 1. Overview of Financial Service Industry Table of Contents Bajaj FinServ : Objective & Performance Bajaj Auto Finance Overview.

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Presentation on theme: "Bajaj FinServ Limited 1. Overview of Financial Service Industry Table of Contents Bajaj FinServ : Objective & Performance Bajaj Auto Finance Overview."— Presentation transcript:

1 Bajaj FinServ Limited 1

2 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 Overview of Indian Insurance Industry Bajaj Allianz Life Insurance Bajaj Allianz General Insurance 2 Performance Summary Bajaj Auto Ltd Bajaj Holdings & Investment Ltd 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

3 INDIA – One of the fastest growing economies Bajaj FinServ Limited 2 nd 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 Opportunities 3

4 Immense market potential for financial investments Bajaj FinServ Limited Under-penetrated market Low Insurance density with penetration under 5% 4

5 Consumption Boom Bajaj FinServ Limited Low Debt to GDP and Savings largely invested as deposits 5

6 Lending Investments Protection Bajaj FinServ Limited An entire range of financial products and services covering individuals entire life cycle To grow for, and with, India Vision Cover Offer Bajaj FinServ 6

7 Conceptual structure of BFS Distribution Company - Advice and Distribution of all financial products Cons. FinanceInsuranceAMC3 rd Party Group Shared Services opportunity One Face to customer Consolidated Backend activities Focused Product companies Bajaj Financial Services Group Structure Existing businesses customers Products and risk Process Bajaj FinServ Limited 7

8 Bajaj FinServ Ltd Financial Results Bajaj FinServ Limited 8

9 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 million Q1 / FY09 Q1 / FY08FY 08 Key Business Statistics Gross Written Premium Bajaj Allianz Life Insurance18,47110,59997,253 Gross Written Premium Bajaj Allianz General Insurance7,3355,73725,780 Funds DeployedBajaj Auto Finance6,3227,43230,363 Wind energy generatedBajaj FinServ Ltd11871348 Other revenues164142731 Consolidated entities 9

10 Consolidated segment financials Rs in million Q1 / FY09Q1 / FY08FY 08 Segment revenue Insurance - Net premium earned22,49513,414111,275 Investment & O.Income(13,252)6,6419,949 subtotal9,24320,055121,224 Windmill11870348 Investments & others157142682 Total9,51820,267122,254 Segment Profit / (Loss) Insurance - General - Life 115 (698) 354 (404) 1679 (2139) Windmill20( 25)( 27) Retail financing121683 Investments & others122135628 Profit before tax(429)76224 Profit after tax & minority interest(362)( 48)(327) Bajaj FinServ Limited 10

11 Financials - Standalone Bajaj FinServ Limited 11

12 Insurance Industry 12

13 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 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

14 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 Non life Life GWP INR Bn 14

15 The great Indian middle class Source Mckinsey Global institute 15

16 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 on IT-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 company 1 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

17 Bajaj Allianz Life Insurance Co. 17

18 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 LifeHDFC Std Life Others Pvt (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 SLOthers Pvt (12 cos) LICs market share is 38% for YTD May 08 as compared to 48% as on 31 st March,2008 18

19 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 Premium 19

20 Performance Summary Rs. In billion Q1/FY09Q1/FY08FY 08 INR Bn Gross written premium18.410.597.2 New business premium8.27.267.0 Net earned premium18.410.597.1 Total income5.4911.91107.1 Annualized premium equivalent * 7.66.660.0 Policyholder surplus/(deficit)0.660.701.98 Shareholder Profit/(Loss)(0.69)(0.40)(2.13) Profit / ( Loss )(0.03)0.30(0.15) Net contribution to policy holders account 20 *APE = 10% of Single Premium + 100% of Regular Premium

21 Shareholders funds & Investments overview Rs. in million as on June 08 as on Mar 08 INR Mn Share Capital1,507 Share premium10,600 Sub-total 12,107 Balance in P & L account (5,596)(4,899) Total6,5117,208 Total capital infused during the year – Rs. 5,101 million Rs. in million as on June 08 as on Mar 08 INR Mn Shareholders10,04311,459 Traditional Policyholders17,04314,687 Unit Linked Policyholders103,922109,542 Total131,008135,688 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

22 New Business Achieved Profit (NBAP) trend Period APE**NBAP INR Mn 2008/09 Q1 7,640 1,487 2007/08 Q1 6,5811,468 FY 2007/08 59,95312,029 FY 2006/07 32,3307,036 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 Premium 22

23 Bajaj Allianz General Insurance Co. 23

24 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

25 Performance Summary Rs. in billion Q1/FY09Q1/FY08FY08 Gross written premium7.345.7425.8 Net earned premium4.062.8414.1 Net Insurance Income0.600.632.9 Underwriting profit excluding pool losses(0.24)0.030.2 Underwriting profit including pool losses(0.36)(0.06)(0.2) Profit before tax0.120.261.7 Profit after tax0.070.131.1 Loss ratio72.2%69.9%66.7% Combined ratio excluding pool losses105.8%98.9%98.5% Combined ratio including pool losses108.7%102.1%101.5% Retention ratio71.9%65.9%69.1% 25 Focus on cash flows, growth in invested surplus. Rs. in billion As on June 08 As on March 08 Cash and investments22.6220.48 Other assets4.444.20 Insurance reserves18.5316.36 Other liabilities2.732.58 Net worth5.805.75 Free cash flow2.165.04 Free cash flow = increase in invested surplus net of financing cash flows

26 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 2008/092007/082006/07 Others Health Motor Corporate Business Mix-MarketBusiness Mix- Bajaj Allianz 26

27 Capital Efficiency – FY08 Rs. in million Share capital Share premium Total capital brought in GWP FY08 GWP/ Equity Return on Equity ICICI 377459339707334473.4510.2% Bajaj Allianz 110216662768240438.6821.5% Reliance 107249986070194643.21Negative ITGI 22003002500123584.942.4% TATA 22500 81343.626.4% 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 website 27

28 Bajaj Auto Finance – Retail Financing Bajaj FinServ Limited 28

29 Vision Bajaj Auto Finance Develop a Unique Business Model focused on delivering range of consumer lending products to Indian Middle Class serviced by best in breed specialists Bajaj FinServ Limited Strategy Build and launch innovative products Offer full product suite Leverage existing gaps of service differentiation in the market Innovate to grow – Product and services Plug & 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 loans New business lines ~ Securitization ~IPO financing ~ Loans against shares ~Loans against property (to launch) ~ Personal loans >Cross-sell >Small business loans 29

30 Business Performance Rs. in millionQ1/FY09Q1/FY08 2007 – 08 Automobiles 2,0723,58414,844 Consumer Durables 1,3272,3446,307 Personal Computers 6121,3984,628 Personal Loans 9151061,627 Securitized retail asset pool --2,597 Total Disbursals 4,9267,34230,363 Rs. in millionQ1/FY09Q1/FY08 2007 – 08 Total Income 1,2821,0525,027 Interest & Finance charges 4353781,704 Other Expenses 7926092,975 Depreciation 10548 Provision for tax 151899 Profit for the year 3041201 Financial Performance Bajaj 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

31 Thank 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

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