HDFC, India’s leading housing finance institution, announced on Tuesday it was buying Chubb Corp out of their general insurance joint venture. HDFC will buy the 26 per cent Chubb stake in the insurance venture, which has a capital base of Rs 125 crore.
The value of the deal had not been disclosed as HDFC made a formal application to the Insurance Regulatory Development Authority on Tuesday and had to await its clearance, said Conrad D’Souza, senior general manager, treasury, at HDFC. “Talks for separation have been on for a few months now. Basically, we had different views on the business model for the joint venture,” he added.
HDFC, which also has a life insurance joint venture with Britain's Standard Life, wanted a strategic partner with experience in general insurance, a company source told Reuters on condition of anonymity. "There are people who are interested in partnering with us," the source said. "We will try to do it as quickly as possible."
"The preference would be for someone with an insurance background," the source said. "We need the expertise."
HDFC-Chubb, which began operations four years ago, has lagged behind its peers. For the year ended March 2007, it had a gross written premium of Rs 190.6 crore, a fall of 7.59 per cent from the previous year, and the profit after tax was Rs 2 crore.
“Chubb changed its view on areas of business we should be in,” said D’Souza. For instance, the venture did not leverage the expertise HDFC has in the area of real estate. Chubb was a conservative partner and was not too keen on property insurance where it perceived several areas as risky, particularly earthquake and flood-prone zones, said industry observers.
HDFC's other businesses include HDFC Bank and back-office firm Intelenet Global Services Ltd, a joint venture with Barclays. There is some market speculation that HDFC may sell its stake in Intelenet.