The Hindu Business Line : HDFC parts ways with Chubb

Splitsville
HDFC Chubb will now become a 100 per cent subsidiary of HDFC
The buy out is pending approval of IRDA
It has not ruled out having a partner for its venture
The company will use its own funds to purchase the stake

Mumbai May 15 The over four-year old marriage between Housing Development Finance Corporation Ltd and Chubb Global Financial Services Corporation, US, has ended in divorce.

HDFC has acquired 3.25 crore equity shares of Rs 10 each held by Chubb Global, in HDFC Chubb General Insurance Company, representing 26 per cent of the paid-up share capital of the company, said a Bombay Stock Exchange notice. HDFC Chubb will now become a 100 per cent subsidiary of HDFC.

HDFC has not ruled out having a partner for its venture. "If we do have a partner, it will be an international name," said Mr Conrad D'Souza, Senior General Manager, Treasury, HDFC.

The value of the stake was not disclosed, as the buy out is pending approval of the Insurance Regulatory and Development Authority. HDFC will use its own funds to purchase the stake.

"Broadly, the two companies had different mindsets about running the business. HDFC Chubb has not grown the way other companies in the industry and our other businesses have," he said.

"Chubb was conservative about property insurance while HDFC's skills lie in the area of real estate," Mr D'Souza added.

In the first few years of its operations, HDFC Chubb did not insure properties in the major metros as they were thought to be `unfavourable risks', vulnerable to catastrophes such as floods and earthquakes.

Motor insurance, which is considered to be a loss-making proposition in the insurance industry, contributed around 75 per cent to its total premium income.

"We would now like to grow all lines of the non-life business," said Mr D'Souza.

The company has seen negative growth of 7.59 per cent in gross written premium at Rs 190.16 crore in 2006-07 against Rs 205.77 crore in the previous year. The capital base of the company stands at Rs 125 crore. Other non-life players have registered a growth of 8 per cent to 400 per cent during the same period. HDFC Chubb made a profit of Rs 2 crore in 2006-07.

The uncertainty had taken a toll on the staff with the company seeing high attrition in the last fiscal; a number of senior officials had put in their papers.

The split marks the end of months of negotiations between HDFC and Chubb on who would finally keep the business.

Sources said the disagreement between the partners also escalated because the Chubb senior management, which had finalised the joint venture in 2002, underwent a change.

HDFC Chubb has 263 employees and 27 branches. Sources said Mr Srirang Samant, CEO of HDFC Chubb General Insurance, originally from Chubb has quit the group. However, Chubb would like to stay in India is some form or the other, they added. The shares of HDFC ended at Rs 1,670.85 on the BSE, lower than the previous close at Rs 1,680.

Our Chennai Bureau reports:

HDFC Chubb has been the smallest company besides being the worst performer in the general insurance industry in the country.

Last fiscal, when the industry as a whole grew 22 per cent and the private sector companies grew 60 per cent, HDFC Chubb was the sole company to post a decline in premium income. Its premium income was down 7.60 per cent to Rs 190 crore in 2006-07.

Its market share in the general insurance industry was less than one per cent. The company posted a profit of Rs 2 crore for the fiscal against Rs 4.41 crore in 2005-06.

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