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Last Updated : Jun 20, 2019 07:56 PM IST | Source:

HDFC: The new buyout brother in insurance

After the merger, HDFC ERGO General Insurance will have a 6.4 percent combined market share of the non-life insurance industry, with 308 branches across the country.

M Saraswathy @maamitalks
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Mortgage lender HDFC was among the earliest entrants to the insurance sector when it was open to private players in 2000. Being a large player in the financial services sector, finding a joint venture partner was also relatively easier for them. Now, 19 years later, they have been the only group that has found two merger candidates in the insurance industry.

On June 19, HDFC announced that it will acquire a 50.8 percent stake of the Apollo Group in Apollo Munich Health Insurance for Rs 1,336 crore. After the transaction, Apollo Munich Health Insurance merge with HDFC ERGO General Insurance.

After the merger, HDFC ERGO General Insurance will have a 6.4 percent combined market share of the non-life insurance industry, with 308 branches across the country. This also makes the combined entity the second largest private insurer in the accident and health segment with a market share of 8.2 percent.


What makes Apollo Munich a good buy?

The standalone health insurance segment has seen the highest rate of growth in the non-life sector. These insurers have seen a 36.7 percent year-on-year growth in gross written premiums amounting to Rs 11,366.22 crore.

On the other hand, other general insurers saw a 12.7 percent YoY growth to Rs 1.50 lakh crore. Of this, Rs 34,694.89 crore came from the health insurance segment.

In FY19, Apollo Munich had a gross written premium of Rs 2,194 crore, up by 27.7 percent on a YoY basis. The company had an overall market share of 4.4 percent and 9 percent among private sector players in health insurance.

Apollo Munich is a joint venture between the Apollo Hospitals Group, one of Asia’s largest healthcare group, and Munich Health, Munich Re’s health business segment, which offers global health insurance and reinsurance.

On the other hand, HDFC ERGO has a gross written premium of Rs 8,612.86 crore with a YoY growth of 18.2 percent.

An addition of Apollo Munich Health Insurance into the portfolio would mean that HDFC ERGO would not only get access to 186 offices of the former, but also get specialised product offerings into its portfolio.

L&T deal

In June 2016, Larsen & Toubro (L&T) had divested its 100 percent stake in L&T General Insurance to HDFC ERGO General Insurance. The Rs 551 crore deal was the first such consolidation in India’s general insurance sector.

HDFC ERGO had then said that it expects significant cost synergies from its business, technology optimisation and the rationalisation of offices.

The HDFC-Max deal that was called off

HDFC Life and Max Life had announced their merger in July 2016. The proposal was that Max Life would merge with its holding company Max Financial Services, which would subsequently merge with HDFC’s life insurance arm. Here, the Insurance Regulatory and Development Authority of India (IRDAI) had raised objections to the deal, invoking Section 35 of the Insurance Act, 1938. The deal, if approved, could have been made the combined entity the largest private sector life insurer.

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First Published on Jun 20, 2019 07:56 pm
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