Q3FY24 Review: Bajaj Finserv: Continued strength in insurance!

2 Feb 2024 , 11:28 AM

Bajaj Finserv (BJFIN) reported strong Q3 profit growth of 21% YoY (per Ind AS). BALIC’s IRNB grew at a robust 24% YoY, led by strength in Par and ULIPs, while group business remained flat due to weakness in the group protection business. BAGIC saw 19% YoY growth in premiums. Loss ratios increased by 80bps YoY driven by natural calamity claims. Overall, both insurance businesses continue to grow profitably and above industry average. Analysts of IIFL Capital Services believe the stock is coming out of the shadows of BAF, with its insurance subsidiaries performing well, while also offering optionality from investments in its fintech and health platforms. The implied holdco discount on BAF is now at 19%. Analysts of IIFL Capital Services 12-mth SoTP-based TP reduces to ₹1,930 (was ₹2000) on lower target price for the finance business. Maintain BUY. 

BAF – Continuous growth amidst management changes: 

Analysts of IIFL Capital Services banking team bakes in an AUM Cagr of 27% over FY24-26, as BAF continues to expand into new segments while simultaneously expanding distribution for existing products. BAF has been amongst the early adaptors of new tech, enabling it to grow at scale. The elevation of Mr. Anup Saha to Deputy MD and the appointment of 3 COOs provide visibility into succession planning with Rajeev continuing to be at the helm at BAF. During Q3FY24, BAF reported an AUM/NII/profit growth of 35%/29%/22% YoY. 

BAGIC – Calamities impact loss ratio; motor segment normalises: 

BAGIC’s gross premium grew by 19% YoY, as Group Health Segment continued its strong performance. Retail Health also reported healthy Q3 numbers, witnessing a GDPI growth of 15% YoY, while motor was muted. Loss ratio increased by 80bps YoY to 72.9% for Q3, on account of natural calamity claims. As a result, combined ratio increased to 102.9% with 260bps YoY increase. Excluding the impact for natural calamity claims combined ratio for Q3 stood at 99.5%. 

BALIC – Strong growth in retail APE led by Par: 

Strong growth of 24% YoY in IRNB (led by momentum in Par, +~108% YoY) was offset by weakness in group business (flat YoY), due to weak group protection premium. BALIC’s direct channel (+62% YoY) led growth in APE, while Agency and Institutional business vertical continued to remain strong. VNB grew by 19% YoY even as margins for Q3 declined by 30bps YoY to 14.5%.