ICICI forms holding co for insurance, MF biz

Bank to float ICICI Holdings to manage insurance, mutual fund business.

ICICI Bank, the country's second largest bank, has decided to transfer its holdings worth Rs 1,950 crore in insurance companies and a mutual fund to a new company, which will be listed after six months.

The board, at a meeting held at Jodhpur over three days from March 1-3, has approved the incorporation of a wholly owned subsidiary, ICICI Holdings. The bank would transfer to ICICI Holdings its 74 per cent equity holdings in ICICI Prudential Life Insurance Company and ICICI Lombard General Insurance Company and 51 per cent in Prudential ICICI Asset Management Company and Prudential ICICI Trust, the bank said in a statement.

The decision to incorporate a holding company was prompted by the Reserve Bank of India (RBI) regulation that banks can invest a maximum of 20 per cent of their net worth in subsidiary companies.

"ICICI Bank's investments in its subsidiaries are already at the 20 per cent cap, which meant the bank could no longer infuse more capital in its insurance subsidiaries (at the current level of its net worth)," said Kalpana Morparia, the bank's joint managing director. Morparia, who will retire this month-end, will take over as the managing director and CEO of ICICI Holdings from June 1

The insurance business needs a huge amount of capital infusion and ICICI Bank could not have met the capital demands without having to go for another equity issue. "The transfer of stakes to a holding company was done with the idea of providing insurance companies greater access to capital," said Shikha Sharma, managing director of ICICI Prudential Life Insurance.

The book value of ICICI Bank's investment in ICICI Prudential Life is Rs 1,300 crore, ICICI Lombard General Insurance Rs 600 crore and in ICICI Prudential Asset Management Company and the trustee company is about Rs 50 crore.