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Foreign partners go for more stakes in insurance JVs

AIA Group hikes equity stake in Tata Life to 49%; more stake sales in the offing.

By: ENS Economic Bureau | Mumbai |
December 8, 2015 1:19:02 am

The insurance sector is finally buzzing with activity with more foreign partners coming forward to hike their stake in Indian joint ventures to 49 per cent, the maximum permissible stake allowed in an Indian insurance firm as per the amended Insurance Act.

AIA Group Limited is the fourth foreign insurance major to hike the stake in Indian firms with the foreign firm announcing that it will increase its shareholding in Tata AIA Life Insurance Company, a joint venture company by Tata Sons and AIA, from the current level of 26 per cent to 49 per cent through the purchase of another 23 per cent stake in the company. Earlier, foreign partners in Aegon Religare, Birla Sun Life and Reliance Life Insurance also hiked their stakes to 49 per cent while ICICI sold small stakes in its insurance ventures. Another three or four companies, including SBI Life and HDFC Life, are likely to announce a hike in foreign stakes in the coming weeks, insurance sources said.

AIA and Tata Sons did not disclose the financial details of the deal. “This transaction remains subject to securing all necessary regulatory and governmental approvals and proceeding to completion. The transaction is subject to confidentiality obligations and therefore, no transaction details shall be provided,” Tata Sons said.

Tata AIA Life Insurance Company Limited was licensed to operate in India on February 12, 2001 and started operations on April 1, 2001. Tata AIA Life offers a wide variety of life insurance solutions that cover protection, savings and wealth creation needs for its customers. For the financial year ended March 2015, the company recorded total premiums of Rs 2,122 crore and profit after tax of Rs 264 crore. While 13th month persistency touched 76 per cent, claims settlement ratio reached 94 per cent.

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AIA Group and its subsidiaries comprise the largest independent publicly listed pan-Asian life insurance group. It has a presence in 18 markets in Asia-Pacific. The business that is now AIA was first established in Shanghai over 90 years ago.

Meanwhile, Aegon Religare Life Insurance Company has been renamed as Aegon Life Insurance Company Ltd after Aegon NV increased its stake in the company to 49 per cent. The company is among the first Indian life insurance joint ventures to do so post the changes in the country’s foreign direct investment regulations. Sun Life Financial of Canada has increased its stake in Birla Sun Life Insurance (BSLI) from 26 per cent to 49 per cent at an investment of Rs 1,664 crore, valuing BSLI at Rs 7,235 crore.

Nippon Life Insurance (NLI) of Japan had agreed to increase its stake in Reliance Life Insurance (RLIC), part of Reliance Capital of the Anil Ambani group, from the existing 26 per cent to 49 per cent at a cost of Rs 2,265 crore. The stake purchase pegs Reliance Life Insurance’s valuation at around Rs 10,000 crore ($1.5 billion).

Standard Life, which has an insurance joint venture with HDFC is seeking to raise its stake in the JV to 35 per cent from 26 per cent. BNP Paribas Cardif, life insurance JV partner of State Bank of India is also in talks to lift its stake to 36 per cent. ICICI Bank recently agreed to sell a 6 per cent stake in ICICI Prudential Life Insurance Company in two separate deals to billionaire Azim Premji and Singapore state investor Temasek for Rs 1,950 crore which put the valuation of the company at Rs 32,500 crore. ICICI Bank recently announced that it was selling 9 per cent stake in its general insurance arm, ICICI Lombard, to Fairfax Financial Holdings, promoted by Canada-based NRI Prem Watsa. The sale will bring down the bank’s stake in the insurance venture to 64 per cent and bring in Rs 1,550 crore.

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