Bajaj Alliance General Insurance Company Limited

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I C R A Limited (An Associate of Moody’s Investor Service) FOR IMMEDIATE RELEASE February 15, 2012 ICRA reaffirms iAAA claims paying ability rating assigned to Bajaj Allianz General Insurance Company Limited ICRA has reaffirmed iAAA (pronounced as I triple A) rating, indicating highest claims paying ability of Bajaj Allianz General Insurance Company Limited (BJAZ). The rating indicates fundamentally strong position and prospect of meeting policyholder obligations is the best. The rating takes
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    I C R A Limited (An Associate of Moody’s Investor Service)   PRESS RELEASE Page 25  ICRA has classified various instruments based on their complexity as Simple , Complex and Highly Complex .The classification of instruments according to their complexity levels is available on the websitewww.icra.in    Disclaimer: ICRA Ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRARatings are subject to a process of surveillance, which may lead to revision in ratings. Please visit our website (www.icra.in)or contact any ICRA office for the latest information on ICRA Ratings outstanding.   FOR IMMEDIATE RELEASE  February 15, 2012 ICRA reaffirms iAAA claims paying ability rating assigned toBajaj Allianz General Insurance Company Limited ICRA has reaffirmed iAAA (pronounced as I triple A) rating, indicating highest claims paying ability of BajajAllianz General Insurance Company Limited (BJAZ). The rating indicates fundamentally strong position andprosp ect of meeting policyholder obligations is the best. The rating takes into account BJAZ‟s strong parentage, its position as the second largest private sector general insurer in India, consistently strongfinancial performance, and prudent risk management practice & reinsurance strategy. Despite the favourablelong-term growth prospects, the Indian general insurance industry is challenging given the rapidly changingoperating environment, along with regulatory changes impacting the business and financial profile of the insurance companies. Nevertheless, BJAZ‟s focus on achieving underwriting profitability and competitive cost structure places it in a favorable position to compete in the challenging environment. Further, demonstratedstrong support from its promoters, Bajaj Finserv and Allianz, in the form of capital infusion, systems andprocedures coupled with its reinsurance strategy provides strong cushion.Over the past few years, Bajaj Allianz has been underperforming as compared to the market in terms ofgrowth in order to be profitable. As a result, the market share of the company has been declining over the pasttwo years from 8.5% in FY09 to 6.6% in FY11 and further to 6.0% in 9M 2011-12. In FY10, the business wasalso impacted due to loss of HDFC bank as bancassurance partner. Presently, the company has tie-ups withseveral banks and bancassurance has become a very strong channel for BJAZ. Going forward as well, thecompany is expected to grow at a slower pace than market. In terms of portfolio composition, motor segmentcontinues to be the biggest segment for the company. BJAZ has been very strong in the private car segmentand as a result, share of Motor OD is much higher as compared to the market. Given the high losses in theMotor TP segment, share of this segment has been maintained in line with the market. Apart from Motor,Health & travel is another key focus area for the company now. While the overall growth will be lower ascompared to the market, the growth in the health segment is expected to be higher than the market (ignoringthe government business). BJAZ has posted consistent strong underwriting performance owing to tight underwriting discipline and management philosophy of striving for underwriting profits. BJAZ‟s claims ratio 1 at79% in FY 2011 is among the lowest in the Industry and together with competitive expense structure,combined ratio of the company stood at 111% in FY11. There has been marked improvement in theunderwriting performance with the company reporting an underwriting profit of Rs. 60 crore during H1FY12 asagainst loss of Rs. 233 crores in FY11. The improvement in combined ratio is contributed by lower loss rates,along with maintaining strict control over costs. Underwriting profits, along with healthy investment income hasresulted in BJAZ reporting strong net profit of Rs. 102 crore for H1FY12. On the back of strong financialperformance, the company has not required capital infusion from the promoters even after considering highlosses on Third Party (TP) Motor pool. The regulatory solvency ratio for BJAZ remained comfortable at 1.73times as on 30-Sep-11 and is expected to remain above regulatory requirement despite higher provisioning onTP Motor Pool. Company Profile Bajaj Allianz General Insurance Company Limited (BJAZ) is a joint venture between Bajaj Finserv Limited andAllianz SE, with the former presently holding 74% of the paid up capital of Rs 110 Crores. While Bajaj group isa major player in the domestic two wheeler industry, the Allianz group is one of the strongest players in theglobal insurance industry, with an established presence in the property and casualty (P&C), life andreinsurance businesses. Allianz SE presently carries an Aa3/P- 1 (stable) rating from Moody‟s for senior  unsecured debt and insurance financial strength. Apart from the general insurance venture, Bajaj Finserv Ltd.    ____________________________________________  1 Net incurred Claims/ Net Premium Earned    I C R A Limited (An Associate of Moody’s Investor Service)   PRESS RELEASE Page 26  ICRA has classified various instruments based on their complexity as Simple , Complex and Highly Complex .The classification of instruments according to their complexity levels is available on the websitewww.icra.in    Disclaimer: ICRA Ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRARatings are subject to a process of surveillance, which may lead to revision in ratings. Please visit our website (www.icra.in)or contact any ICRA office for the latest information on ICRA Ratings outstanding.   and Allianz have also joined hands for a life insurance joint venture. Further, the Allianz group is alsoproviding very strong and direct reinsurance support to BJAZ, at conditions which compare quite favorably,both in terms of coverage and commission structures, with the reinsurance treaties entered into by itscompetitors. Recent Results During H1 2011-12, BJAZ wrote Gross Written Premium of Rs. 1,609 crore (growth of 13.3 % over H1FY11)with earned net premium of Rs.1,067 crore (Rs. 932 crore for H1FY11) and reported an underwriting profit ofRs. 60 crore (loss of Rs. 5 crore for H1FY11) and a net profit of Rs. 102 crore (Rs. 66 crore for H1FY11). January 2012 For further details please contact: Analyst Contacts:  Mr. Karthik Srinivasan ( Tel. No. +91 22 3047 0028)   karthiks@icraindia.com Relationship Contacts:  Mr. L. Shivakumar ( Tel. No. +91 22 3047 0005)shivakumar@icraindia.com
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