Apollo Hospitals Group In A Health Insurance Joint Venture

HDFC Ltd, India’s largest mortgage financier, has agreeing to acquire the entire 50.8% stake of Apollo Hospitals Group in a health insurance joint venture with German reinsurer Munich Re Group as part of its strategy to tap this potential growth market.

But the total deal size of 1,347 crore for the entire 51.2% stake values Apollo Munich Health Insurance at 1.2 times the gross written premium for fiscal 2019, Deepak Parekh, chairman of HDFC; HDFC will pay 1,336 crore to Apollo Hospitals for the deal. It will pay an additional 10.84 crore to employees of Apollo Munich Health Insurance Co. Ltd to purchase their 0.4% stake in the company.

Health insurance joint venture

But in a 2 stage transaction; HDFC will first acquire the 51.2% in Apollo Munich; subject to approvals by the National Housing Bank; insurance regulator and Development Authority of India (Irdai) and the Competition Commission of India. Thus, Apollo Munich will be held as a subsidiary of HDFC.

But however in the second stage; there will be a merger of Apollo Munich with HDFC Ergo; subject to the approval of the National Company Law Tribunal and final approval of Irdai. Post the scheme of amalgamation, HDFC Ergo and Apollo Munich will merge into one entity under the HDFC Ergo brand; a joint venture with Ergo International AG, the primary insurance entity of Munich Re. Separately; Munich holds a 49% stake in Apollo Munich Health Insurance.

General insurance space

But over the years, Munich Re Group has enjoying an excellent relationship with the Apollo group, in building a powerful franchise in health insurance. With this transaction, we are very much looking forward to further strengthening our ties with HDFC Group and consolidating our presence in India.

But in In the general insurance space, it is expected that the share of accident and insurance will rise from 30% currently to 39% in the next five years. This growth means that accident and health will have a larger share and overtake motor insurance; which currently accounts for the largest component in general insurance. The merging entity will have a gross premium of 10,807 crore and a market share of 6.4% in India’s non-life insurance market. In the accident and health insurance space, it will be ranked number two with an 8.2% market share.