HDFC Ergo General Insurance Limited Unlisted Shares

(i) HDFC ERGO General Insurance Company Limited is a joint venture between HDFC Ltd. and ERGO International AG, a Germany-based company that is part of the Munich R Group. HDFC holds 51 percent, and ERGO the other 49 percent. The firm operates in 101 Indian cities with over 127 branches and 2,000 plus staff members.

It is a subsidiary of HDFC limited.

(ii) The company offers all lines of general insurance products including motor, health, personal accident, home, fire, marine, aviation, liability, crop insurance, etc.

(iii) Highlights of the FY2018-19

a) It is the 3rd largest General Insurance company in the private sector with Gross Written Premium 8722 Cr for FY19 and 5.1% shares as on March 2019.

b) Issued more than 8.5 Million Policy during the FY19.

c) Credit Rating of AAA from ICRA and CRISIL for the NCD issued in the market.

d) The solvency ratio of 1.75x as which is well above the 1.5x requirement of IRDA. An insurance company is considered to be solvent if its assets are adequate enough and liquid to pay off claims or liabilities as and when they arise. Thus insurance company solvency ratio indicates its paying claim ability. Higher the solvency ratio better the claim paying ability.

HDFC Ergo General Insurance Limited Unlisted Shares Details:

Total Available Shares:	NA
Face Value:	₹ 10 Per Equity Share
Lot Size:	NA Shares
Current Unlisted Share Price:	₹ NA Per Equity Share

Promoters And Management:

1. Mr. Deepak Parekh, Chairman 2. Mr. Keki Mistry, Director 3. Mr. Alexander Ankel, Director

Shareholding Pattern:

Shareholder's name	No. of Shares (FY19)	% of total shares (FY19)
HDFC Limited	30,54,09,988	50.48%
ERGO International	29,22,02,312	48.29%

Financials of HDFC Ergo General Insurance Limited Unlisted Shares:

(Figures in Cr)

Year	2019	2018	2017	2016
Gross Written Premium	8721	7401	2252	482
Net Written Premium	4372	3455	999	364
Net Earned Premium	3810	2994	989	297
PBT	467	513	121	-102
Tax	84.2	109.6	-3	0
PAT	383	403	124	-102
Equity	605.4221	605.0718	600.4659	705
EPS	6.33	6.66	2.07	-1.45

UZ Review 1. The most important metric in the insurance industry is Gross Written Premium, which means the total premium earned by the company in a year. The Insurance Industry in FY19 has received total 1,70,000 Cr of GWP. and among that, the HDFC ERGO market share is 5.13%( 8722/1,70,000). The HDFC ERGO GWP has shown an excellent CAGR growth of 162% in the last 4 years. 2. The PAT has gone down from Rs. 403 Crores to Rs. 383 Crores that is due to the provision of ILF&S taken on books by the company. The total provision taken on books is 157 Cr. 3. The company has issued a total of 3,50,250 shares to employees in FY19 due to which the equity has gone up from 605.0718 Crores to 605.4221 Crores.

Year	2016-17	2017-18	2018-19
ESOP Exercised Price	91	151	257

4. HDFC Ergo has given a dividend of Rs.2.25 in the year 2018-19. Valuation of the Company The insurance companies are valued based on Gross Written Premium. Peer Comparison a) ICICI Lombard is a General Insurance company listed in the stock market is used here for comparison. b) The Gross Written Premium of ICICI Lombard has gone up from 8200 Cr in FY16 to 14700 Cr in FY19 showing a growth of 22.48% in the last 4 years. c) The Mcap as on 04.08.2019 is 53000 Cr. d) So, ICICI Lombard is available at 3.60x on MCap/GWP ratio. HDFC ERGO has issued shares in ESOP at Rs.257 per share in FY19. If we take the price of Rs. 300 per share in the unlisted market, the Mcap/GWP multiple comes out to be 2.08x which is undervalued as compared to ICICI Lombard. Even if we give 2x multiple to HDFC ERGO, the Price comes out to be 288. So anything below 288 is undervalued in comparison to ICICI Lombard General Insurance. HDFC ERGO Annual Report 2018-19