Bajaj, ICICI, HDFC – Insurance Subsidiaries Adding Value

Many Indian companies like ICICI, Bajaj Auto, HDFC, Aditya Birla Nuvo etc ventured into Life and General insurance business incorporating a wholly owned subsidiary to grow beyond their core business. Withn 3-5 years of operations, subsidiaries are now ready to be hived off as individual business entities. The insurance industry is expected to grow at 21% CAGR between 2007 and 2011 and private operators are all set to grab a big slice.

1. ICICI Ltd
ICICI Prudential is the market leader amongst the private life insurers with a market
share of 9.5% the second largest life insurer after LIC. It is the largest private operator with a market share of 30% amongst private companies. It has PAN India presence with 472 branches and 176,000 advisors. Per share value of life insurance for ICICI Bank, INR 219.

2.Bajaj Auto Ltd
Bajaj Allianz is the second largest private insurance company in India with a total market share of 5.3% and 17% amongst private operators. It has 900 offices in India and derives 70% of its business from agents while the other 30% from alternative channels like GE Money, Syndicate Bank etc. Valuation of Bajaj Allianz is pegged at Rs143 billion. This amounts to an estimated Rs686 per share or 25% of Bajaj Auto’s current market value.

HDFC has tied up with Standard Life and has conservatively operated till now. It is the third largest operator amongst private players. It has around 500 offices for sales leads and 52,000 financial advisors to promote various insurance products. HDFC Standard Life Insurance Co. is valued at Rs83bn or US$1.9bn on a 12-months forward basis implying Rs149 per share of its parent HDFC.