HDFC to acquire Apollo Munich Health Insurance for Rs 1,347 crore

After the acquisition, Apollo Munich Health Insurance will be merged with the non-life insurance arm of HDFC Ergo
Mortgage lender Housing Development Finance Corporation (HDFC) will acquire controlling stake of 51.2 per cent in Apollo Munich Health Insurance for about Rs 1,347 crore from Apollo Hospitals group and few employees who hold stake in the standalone health insurer.

After the acquisition, Apollo Munich Health Insurance will be merged with the non-life insurance arm of mortgage lender HDFC Ergo. The deal is subject to regulatory approvals and the entire process is expected to be completed in nine months.

“We had to do a two-step transaction since if HDFC Ergo had directly bought Apollo stake, it would have breached the 49 per cent cap on foreign investment in insurance for Munich Re,” Deepak Parekh, chairman of HDFC and HDFC Ergo General Insurance, said while addressing a press meet. 

Munich Re is already HDFC’s partner in the general insurance company.

Ergo International AG, which holds 49 per cent stake in HDFC Ergo, is a subsidiary of Munich Re and Munich Re also holds stake in Apollo Munich Health Insurance. After the amalgamation, Munich Re will continue to hold 49 per cent stake in HDFC Ergo and the combined entity will have a gross direct premium of Rs 10,807 crore.

To support the transaction with its material benefits for Apollo Munich, Munich Health will give Rs 294 crore to Apollo Hospitals Enterprises and Apollo Energy in connection with the termination of their joint venture.

The merged entity will have a combined market share of 6.4 per cent in the non-life insurance industry with 308 branches in the country. It will also be the second largest private insurer in the accident and health segment in the country, HDFC said in a statement.

Apollo Munich Health Insurance is a joint venture between Apollo Hospitals group and German reinsurer Munich Re where Apollo Hospitals holds around 10 per cent and Apollo Energy 40.4 per cent of Apollo Munich on a fully diluted basis and Munich Re holds 49 per cent. “The combined expertise of HDFC Ergo and Apollo Munich will result in greater product innovation, wider distribution and enhanced servicing capabilities, benefiting their 1.2 crore policy holders,” said Parekh. With this acquisition, three of the seven standalone health insurance companies have been acquired. Recently, Max Bupa Health Insurance was acquired by private equity firm True North. Similarly, Star Health Insurance was also acquired by private equity firms and Rakesh Jhunjhunwala.

“We are sure that the new shareholder will continue to nurture and scale the business to greater heights and confident that all stakeholders will be positively impacted. The funds from the divestment will enable us to focus on investing and growing our core healthcare business,” said Shobana Kamineni, chairperson of Apollo Munich Health Insurance.

In FY19, Apollo Munich Health Insurance collected premiums to the tune of Rs 2,194 crore and the profit after tax of the company was Rs 11 crore. The combined ratio of the standalone health insurer was 100.7 per cent. It has a market share of 4.4 per cent in the health insurance market and 7.6 per cent in the retail health insurance market.

The combined entity will have a portfolio mix of 39 per cent accident and health insurance, 28 per cent health insurance and the rest will be commercial and crop insurance.