BAJAJ FINSERV
Current market price: Rs 322.30
Target price: Rs 377
Upside: 16.9%
Brokerage: IIFL Research
Bajaj Allianz Life Insurance (BALIC) has been following a concerted cost-control strategy, focusing on profitability and improving capital efficiency. This has resulted in slower new business growth and decline in market share. BALIC’s APE market share among private players declined to 10.9 per cent for five months of 2009-10 as against 13.1 per cent during FY09. While new business premium declined 27 per cent y-o-y, it was up 50 per cent q-o-q.
As the pace of business expansion slowed, expense overrun on account of new business strain has reduced, while income from in-force business has increased, leading to profitability. BALIC reported a net profit of Rs 7 crore for Q2 FY10 as against a loss of Rs 60 crore in the year-ago period. The rise in net profit is largely due to Rs 3,670 crore of revenues from investment and other income during Q2 FY10, which includes MTM gain on unit-linked portfolio of Rs 2,670 crore. Life insurance business reported a profit for the second consecutive quarter, while profit from general insurance business grew 8 per cent y-o-y and from consumer finance grew 4.4 times. The brokerage fair value estimate of stock was Rs 377 based on company’s 26 per cent economic interest in life insurance.
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