HDFC’s 23 per cent stake sale in its general insurance business to joint venture partner Ergo Insurance Group is one of the many insurance deals in the last one year. ERGO will increase its holding in the insurance business to 48.7 per cent. At ₹90.9 a share, the total deal consideration works out to about ₹1,122 crore.

This will help HDFC unlock value in its insurance subsidiary by transferring shares in favour of their foreign partners.

In the general insurance space, the implied valuation of companies is at about 14-16 times their estimated one-year forward earnings, or at one-to-two times their one-year forward gross written premiums (GWP).

HDFC’s stake sale in HDFC ERGO is about 1.5 times its one-year forward GWP.

Max India’s 23 per cent stake sale in Max Bupa recently valued the health insurance business at ₹830 crore. This was close to 1.5 times its one-year forward GWP.

ICICI Bank’s stake sale in the general insurance business more than a month back valued the insurance company at ₹17,225 crore, over two times the FY15 GWP. In August this year, HDFC agreed to sell 9 per cent stake in HDFC Life to foreign partner Standard Life.

At ₹95 a share, the total deal consideration worked out to about ₹1,700 crore, and pegged the value of the life insurance business at about ₹19,000 crore. This is twice the embedded value of the life insurance business (as of March 2015).

Embedded value is a measure used to value a life insurance business which, among other parameters, takes into account the future earnings of the company.

Deals in the life insurance space happen at one-to-three times the embedded value of the life insurance business.

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