HDFC to buy out Chubb from insurance JV

Housing Development Finance Corporation (HDFC) plans to buy out Chubb Global Financial Services Corporation of the US (Chubb Global) from its general insurance joint venture and seek a new overseas partner.

HDFC had expressed its intention to end its joint venture with Chubb Corporation a year ago, following differences over the style of running business.

HDFC owns a 74 per cent stake in the five-year-old company, while Chubb Corporation owns the remaining 26 per cent, the maximum foreign direct investment permitted by insurance laws. 
 

NON-LIFE LEADERS Gross premium underwritten of major players
INSURER	2006-07	2005-06
New India	5024.15	4791.51
Oriental	3940.53	3527.13
National	3810.88	3523.67
United India	3509.95	3154.78
ICICI-Lombard	3003.45	1592.00
Bajaj Allianz	1804.60	1284.57
IFFCO-Tokio	1150.32	896.11
Reliance General	912.23	162.33
Tata-AIG	741.56	612.39
Royal Sundaram	600.03	459.35
Cholamandalam	314.59	222.21
HDFC Chubb	190.16	205.77
GRAND TOTAL	25002.45	20431.82
Source: IRDA, compiled on the basis of data submitted by the insurance companies

Keki Mistry, managing director of HDFC, said it would run the company on its own for some time. "However, if there is a foreign partner that can bring sound underwriting skills and reinsurance tie-ups to the business, we will consider a partnership."

Sources said several global players like Prudential of the US and Ergo, a part of Munich Re Group, have approached HDFC in the last six months.

Mistry said HDFC would look "at a judicious mix of different kinds of insurance products, with a focus on commercial lines of insurance."

Though the price of the buyout has not been disclosed, sources close to the developments said as HDFC Chubb has been a loss-making company, the valuation will not differ from the face value of the capital.

The joint venture's capital is currently Rs 125 crore, which prices the 26 per cent buyout at Rs 33-35 crore.

The bone of contention between the two companies was their different risk appetites.

HDFC is among the leaders in all its businesses "" home loan, banking and asset management and life insurance "" but has lagged behind in its general insurance business owing to Chubb's low appetite for risk in the Indian market.