Was Allianz's Exit Profitable?

Bajaj Finserv and Allianz SE established the insurance JVs, BAGIC & BALIC, in 2001, each holding a 74% and 26% stake respectively. Now in March 2025, Bajaj Finserv has acquired Allianz’s 26% stake for a total consideration of INR 24K Crore, thereby valuing the combined Non-Life and Life entities at 92k crore.

While the exact reasons for Allianz’s decision to exit the venture is not available for now, public sources inferred several factors for this decision from the German giant including:

• Strategic Realignment: Allianz indicated the decision to align with their global strategic priorities.
• Pursuit of New Opportunities: Allianz expressed a continued commitment to the Indian market with possible entry through alternative approaches, such as 100% FDI route, majority stake in a new partnership etc.
• Financial considerations and valuation: This exit has allowed Allianz with a payout of INR 30K crore which can be redirected to other markets.
• Performance of the JV: While the growth rates and opportunity seem lucrative, the penetration at 1% in non-life is still low. Possibly this may not have met Allianz’s expectations for profitability or scale relative to other Allianz’s markets.
• Indian Partner Dominance: Bajaj Finserv, the Indian partner has been effectively managing the JV since inception and like many previous/existing Foreign JVs in the insurance industry, Allianz’s role might have been largely limited to board representation, with reduced strategic influence.

While it is difficult for us to determine in detail on most of the reasons mentioned above, but least we can go into detail on financial considerations.

Financial Considerations and Valuation:

Calculating the exact Return on Investment (ROI) for Bajaj Allianz and benchmarking it against Allianz’s global markets requires detailed financial data, including initial investments, operating costs, and profits over time. However, we can make an estimated of an informed analysis based on available data, market performance indicators, and industry trends to approximate ROI to ascertain if financial considerations of the exit were lucrative for Allianz.

Let’s consider only the non-life entity considering my limited understanding of the Life insurance business:

Available Financial Data

As per the public disclosure forms:

• NL- 8- Share capital schedule mentions the paid-up capital of BAGIC is 110 crores.
• NL-2 – P&L account – For the period ending 31st Dec 2024, BAGIC reported a PAT of INR 1,469 crore – growth of 25%. Even for the previous financial year, PAT growth was 14% for 2024.
• NL-26 – Solvency margin for BAGIC for FY 2024-25 as on Dec 31st, 2024, is 300%. Although the solvency ratio reduced by 14% for FY 24 compared to FY 23, it was still a high 340%.
• If we further browse the key metrics of their performance for FY 2024, GDPI growth at 33.5% as against the industry growth of 14.2%; Market share increased to 8.3% in FY2024 from 7.1% in FY2023; Although the claims ratio increased for FY2024 (73.8% as compared to 72.9% in FY2023), the increase was profound in Fire LOB due to NATCAT impact of 118 crores; Combined Ratio moved from 100.5% in FY2023 to 99.9%
• EPS increase by over 25% in FY 2024 over prior year again suggests significant improvement in profitability due to a combination of rising premiums, better investment returns and improved operational efficiency. Also, a rising EPS signals BAGIC was generating more value to shareholders as the number of shares remained constant.

Valuation:

The agreed purchase price for Allianz’s 26% stake in BAGIC is reported to be around INR 13,780 crores, with a potential market value at 53k crore.

Estimating ROI

ROI is typically calculated as:

Net Profit (or Gain from Investment) – ((Cost of Investment) / (Cost of Investment)) * 100

Initial Investment: The authorized share capital at inception as per IRDAI guidelines is INR 100 crore, so Allianz’s share would be INR 26 crore (26%).  Although, the paid-up capital as per NL-8 disclosure is INR 110 crore with no substantial investment over the last 24 years of operations, but foreign insurers entering India at that time typically committed a higher initial investment.

Assuming Allianz invested between $50-75 million (~₹350 crore at 2001 exchange rates of ₹47/USD), adjusted for inflation and additional capital infusions, the cost might approximate ₹500–700 crore in today’s terms. This might be an over optimistic number.

Gain from Investment: Allianz sold its 26% stakes for INR 13,780 crore, and the Net gain = (INR 13,780 crore - ₹500–700 crore) = ~ 13,280 -13,080 crore.

Annualized ROI: Over 24 years (2001–2025) translates to a compounded annual growth rate (CAGR) of approx. 14%.

Let’s benchmark this performance with Allianz global performance

• Revenue and Profit: In 2024, Allianz SE reported total revenues of €180 billion and an operating profit of €16 billion across property-casualty, life/health, and asset management.
• Solvency II ratio was 209%. BAGIC is at 300%.
• The property-casualty segment (comparable to BAGIC) grew by 8.3%. BAGIC grew in FY 2024 by 33%
• The combined ratio was better for Allianz at 93.4 percent (93.8 percent). BAGIC COR is 100.5%
• Operating profit growth of 9% (BAGIC for FY 2024 over FY 2023 was 14%)
• GWP for P&C business for 3-year period 2021-2024 at 10%. BAGIC CAGR for 3-year period (2021-24) was 8%
• Allianz’s global Return on Equity (ROE) was 15.6% in 2023.

A Look at Bajaj Allianz vs. Allianz: Comparative Analysis

• India’s insurance penetration (4% of GDP) lags global average (7%), but its growth rate (8% in general insurance Q3 FY25) outpaces Allianz’s mature markets (e.g., 2–3% in Western Europe). Bajaj Allianz’s performance reflects this high-growth environment.
• Exit Valuation: The €2.6 billion sale implies a price-to-earnings (P/E) multiple far higher than Allianz’s typical global P/E of 10–12x, suggesting India’s premium valuation due to growth prospects.
• Bajaj Allianz outperforms Allianz’s mature markets in revenue growth and market share gains, capitalizing on India’s underpenetrated market.
• Bajaj Allianz’s ROI in India has been exceptional, with an estimated annualized return of 14% over 24 years for Allianz, driven by strong growth and a lucrative exit. Benchmarked against Allianz’s global markets, it stands out as a top performer in growth and exit value.

PS: While Allianz, as a global giant operates on a much larger scale, BAGIC has shown strong financial performance within India’s evolving insurance market. This is a comparative analysis based on data from sources and is intended to foster industry discussion and does not reflect any specific endorsements.

Is it safe to suggest that Allianz gained significantly considering the multifold increase in their financial considerations?

 Date sources: BAGIC public disclosures, Allianz Investor presentation.

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