HDI to exit JV with Magma after a five-year marriage

Mumbai: HDI, the German insurer which partnered with the MagmaBSE -0.06 % group for general insurance, has decided to exit the venture after nearly five years of partnership as their joint venture failed to grow on expected lines.

Magma HDI General Insurance, a joint venture between Magma Fincorp LtdBSE -0.06 %, Kolkata, and HDI Global SE, Germany, offers a wide range of products from health to travel to motor insurance.

“HDI is looking to exit the joint venture with Magma as the business in India has not grown as per their expectation,” said a source close to the development. “Magma HDI is less than 0.5 per cent of the market share and is growing at a slower pace than the industry. This has been a concern for HDI.”

The company had reported profit after tax of Rs 6.3 crore in 2016-17 as against a loss of Rs 11.9 crore in the previous year. The company had even moved its leadership team to Mumbai headquarters to attract talent. The company has a 0.32 per cent market share in the generalinsurance sector, which is dominated by the four public sector insurers andlarge private sector companies like ICICI Lombard, Bajaj Allianz and HDFC Ergo. Magma said it cannot comment as it is in a silent period while HDI said it does not respond to market rumours. In 2016-17, Magma HDI had reported a 3.85 per cent growth in gross written premium to Rs 419.29 crore, up from Rs 403.93 crore in the previous year.

EXITS & BUYOUTS
Earlier this year, Fairfax had sold a substantial stake in ICICI Lombard to float another general insurance company. In 2015, Royal & Sun Alliance Insurance had exited a joint venture withSundaram FinanceBSE -0.40 % in this sector.

After the government raised foreign direct investment limit to 49 per cent from 26 per cent, several private equity investors and large corporates have shown interest in general insurance sector.
Star Health & Allied Insurance has seen interest from several existing and new investors to buyout the company, which is a market leader in standalone health insurance. Similarly, private equity investors including Warburg Pincus had bought stake in ICICI Lombard from Fairfax. Private equity fund True North, along with other funds, have expressed interest in buying into Religare Health Insurance. Narayan Murthy-promoted Catamaran has invested in Akko General Insurance, which received the final set of licence and will soon be starting business.

Source-The Economic Times

Date-13-11-2017

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