Insurance is a great business. The master (Warren Buffet) made his money by converting an old textile company (Berkshire Hathway)into an Insurance major. Some piquant features about the Insurance business is:

1) Money comes first and payments are made later

2) No debtor problems

3) Free cash flows

4) No capex cycle

5) No replacement of fixed assets

Insurance is all about probabilities and all Indian companies have made foreign collaborations. these foreign partners would help in bringing their skills to the table.

The best way to play insurance is through the focused players like:

Max India – MaxNew York Life

Aditya Birla Nuvo – Birla Sunlife

Sundaram Finance – Royal Sundaram

Kotak Mahindra - Om Kotak Life

Except for Max none of the players are focused but if insurance their grows the contribution to the company's bottom-line could be significant.

The other players like HDFC and ICICI have a very small percentage of their income coming through insurance so any growth in this business will not adequately reflected in their EPS.

A very surprising choice could be Pantaloon retail. Their JV with Italia Generali could become huge. Generali is ranked 21^st in the list of 500 companies and generates close to 20% of its revenues from sale of policies at Malls. They have tested this concept in  The best part with the Generali venture is that while Pantaloon paid Rs 100 crores for a 74% stake Generali paid the same amount for a 26% stake.

In Fy 08 Pantaloon expects to have 300 million visitors at its malls. Even if the company is able to convert 0.5% of them it should sell around 1.5 million policies. At an average premium of Rs 15,000 this would work out to Rs 2250 crores of insurance premium. That would place it among the top five insurers in the country. The market cap of the company is Rs 4000 crores.

There are a lot of ifs and buts in the above statements but errors should cancel out each other suppose the conversion rate is lower then maybe the annual premium will be higher and so on. Like all other companies these are additional kickers that set in once business rolls through and the company is also not dependent on this business .But this is a niche way of selling policies and should gather steam.