However, the market is yet to wake up to the tremendous value in the general insurance business, which may be at least three years behind the life business.
KOLKATA: The life insurance business in India is sure witnessing a scorching growth these days and valuations seem to be on an upswing. So much so, Indian insurance companies could soon become the most expensive in the Asian region.
However, the market is yet to wake up to the tremendous value in the general insurance business, which may be at least three years behind the life business.
Macquarie Research has upgraded the value of insurance businesses for ICICI Bank, HDFC Bank, Kotak Mahindra Bank and has also valued SBI Life for the first time.
The best play on the sector is ICICI Bank, with the imminent transaction in ICICI Holdings.
In a recent report, Macquarie Research has revised the valuation of ICICI Holdings, which is a mezzanine subsidiary for ICICI’s insurance businesses and mutual fund subsidiary, by 73% to Rs 37,800 crore.
“We continue to see strong growth for ICICI Pru’s life business and expect a CAGR in weighted new business premiums of 56% between FY3/07 and FY3/10E based on ICICI Pru’s continued investment in distribution and strong product profile,” the study pointed out. The value per share of ICICI Bank is Rs 225, taking into account the valuations of ICICI Holdings Ltd.
Revising its estimates for HDFC Standard Life, the research firm expects a strong comeback from the company
“The company management attributes the slip in market share to a slower growth in tied distribution, a defocusing on insurance by its partner banks and some unforeseen problems resulting from new IRDA (Insurance Regulatory and Development Authority) guidelines. The value of the life business is raised by 29% to Rs 265,” Macquarie said.
The study has valued SBI Life for the first time at Rs 14,100 crore, implying Rs 192 per share to the parent. It noted that SBI Life was able to move its market share in the last two years and the key catalyst was the company’s efforts to leverage parent State Bank of India’s branches for distribution.
Estimates for Kotak Mahindra Old Mutual, the life insurance subsidiary of Kotak Mahindra Bank has also been increased from Rs 3,200 crore to Rs 5,200 crore, and the subsidiary’s valuation to the parent by Rs 31 per share.
“We see Kotak Old Mutual changing tack from FY3/08. There is a belated concentration on tied distribution, with less reliance on the group network. Having said that, Kotak OM also hopes to ignite some under-utilised segments of the group network such as Kotak Securities. Finally the doubling of the number of Kotak Bank branches should also provide a strong fillip,” Macquarie Research pointed out.
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