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Informist, Friday, Jan. 31, 2025

NEW DELHI – The Insurance Regulatory and Development Authority of India's new rules to change the accounting of gross written premium are likely to hit the revenue of Bajaj Finserv Ltd.'s general insurance arm, but may be neutral for its profit after tax, the company's senior management told analysts in a conference call after its Oct-Dec results. Bajaj Finserv is the holding company of unlisted Bajaj Allianz General Insurance Co.

"Previously, all long-term policies...were accounted as premiums on the assumption of the risk. As of this quarter (Oct-Dec), as per regulations, gross premiums are to be deferred over the life of the policy," the management said. Net written premiums and the general insurers ratios may also be impacted by the move. Both general and life insurance arms' senior management were also present on the call.

In Oct-Dec, Bajaj Allianz General Insurance's gross written premium was INR 66.26 billion, against INR 45.36 billion a year ago. Due to new norms on gross premiums on long-term products starting Oct. 1, the two numbers were not comparable, the holding company said. Without the impact of volatile elements and the new accounting guideline, the gross written premium would be only 6% higher on year.

Bajaj Finserv declared its results on Thursday. The consolidated net profit attributable to owners of the company grew at its slowest pace in 12 quarters, up 3.4% to INR 22.31 billion, dragged by a large net loss on fair value changes. Without the unrealised mark-to-market losses, the consolidated net profit would be up 23% on year, the earnings release said.

"So overall, the core operating results of the company, we believe, has been very satisfactory for the quarter," the management said Friday. Bajaj Finserv is the non-operating holding company of Bajaj Finance Ltd., Bajaj Allianz General Insurance Co. Ltd., Bajaj Allianz Life Insurance Co. Ltd., and Bajaj Finserv Asset Management Ltd. Bajaj Finance, in turn, is the promoter of Bajaj Housing Finance Ltd. and Bajaj Financial Securities Ltd. 

As for the life insurance business, Chief Executive Officer Tarun Chugh said Bajaj Allianz Life Insurance Co. was seeking profitable growth after achieving a significant portfolio size over the last few years. The life insurer would focus on value of new business growth, and had brought down the share of low-margin unit-linked insurance plans in its product mix. The focus would be on the value of new business growth, instead of necessarily the margins, the management said.

Growth of assets under management would remain slow in the coming quarters after the life insurer rejigged its distribution network and product mix due to regulatory changes, the management said. The Insurance Regulatory and Development Authority of India in December 2023 issued a master circular asking insurance companies to increase the surrender value of life insurance policies, specifically for non-participating products. Surrender value is the total payout given by insurance companies when a policyholder exits the policy before maturity. These guidelines came into effect from Oct. 1.

While the bancassurance segment had largely recovered from the changes, the agency distribution network had taken a significant hit and the channel would take some time to recover, the management said. Bajaj Allianz Life's assets under management grew 17% on year to INR 1.22 trillion as on Dec. 31, but were down sequentially. In Apr-Jun and Jul-Sept, the assets under management had grown 23% and 25% on year, respectively.

The management also said it had no immediate plans for further changes in the senior management personnel in Jan-Mar. There were several candidates constantly being groomed for profiles within the group's financial companies.  The chief financial officer of the general insurance arm, Ramandeep Singh Sahni, will take over as CFO of Bajaj Finserv on Saturday from incumbent S. Sreenivasan.  End

Edited by Deepshikha Bhardwaj and Ashish Shirke

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