Irda ‘in principle’ nod to sell gen insurance stake
KOLKATA: It’s official at last. From HDFC Chubb to HDFC Ergo General Insurance.
The Insurance Regulatory & Development Authority (Irda) has ‘in principle’ approved the transfer of 26% stake in HDFC General Insurance, held by HDFC, in favour of Ergo International AG, part of the Munich Re Group.
HDFC will receive Rs 235 crore for the stake, and the transaction is likely to be completed during this month. The housing finance company has agreed to sell Ergo 3.25 crore equity shares of Rs 10 each, representing 26% of the paid up equity.
The shareholders agreement between the companies was signed on October 30 last year, between HDFC chairman Deepak Parekh and Nikolaus von Bomhard, chief executive of Munich Re, Ergo’s parent company.
Ergo is one of the largest insurance groups in Europe and Germany and is Europe’s market leader in health and legal protection insurance. In the business year 2006, Ergo had gross premiums collections of €16.8 billion and a net profit of €906 million.
“General Insurance has been one area where we have lagged behind... We need to gear up and focus our energies to become one of the prominent players of this fast growing industry,” Parekh said in a release.
HDFC and Chubb parted ways last year after almost five years of partnership and Chubb sold off its 26% stake to HDFC. The differences were said to have been caused by the companies’ varying risk appetites.
HDFC is now expected to become a more aggressive player in the general insurance segment, especially given its size and distribution strength. Parekh’s statement of the group lagging behind in general insurance is an indication of the company’s need to focus on this space.
Analysts feel that the company year will scale-up fast over the next one year.
The insurer had registered degrowth of 7.59% for the year-ended March 2007. Its total business premium was Rs 205.77 crore, one of the lowest in the general insurance industry.
The first nine months of the present fiscal saw a 18.73% growth in premium income to Rs 168.51 crore as on December 2007.
From here onwards, it might be a different growth story for the HDFC Ergo General Insurance Co.
g_nandini@dnaindia.net
