Nippon to hike stake in Reliance Life for $341M

Nippon Life Insurance Company, Japan’s largest life insurer, said on Tuesday it will raise its stake in Reliance Life Insurance to 49 per cent for Rs 2,265 crore ($341 million).

This would mark an extension of the existing partnership under which Nippon recently said it will raise its holding in the Indian group's asset management unit.

Nippon, which already held 26 per cent stake in the Indian life insurance firm, will buy 23 per cent more, valuing Reliance Life at around Rs 9,850 crore ($1.48 billion). When it had originally acquired a stake in the firm four years ago, it had valued Reliance Life at over Rs 11,500 crore ($2.5 billion then).

While the decline in valuation of the Indian life insurer in dollar terms is largely to do with the sharp depreciation in Indian currency, what is notable is the decline in the company's value even in local currency.

Nippon has separately committed around $480 million in Reliance Capital Asset Management.

With the latest investment, it would have pumped in over $1 billion in the Indian insurance JV. It had originally committed around $680 million to buy 26 per cent in Reliance Life.

Reliance Capital entered the life insurance business by acquiring AMP Sanmar, four years after it was started in 2001. The company which operates with 898 branches and 12,580 employees, was renamed after the acquisition.

For the year ended March 31, 2015, Reliance Life clocked premium income of Rs 4,592 crore with new business premium of Rs 2,070 crore and net profit of Rs 135 crore.

It is the seventh-largest player among 23 private life insurers in the country, as per data collated by IRDA for the six months period ended September 30, 2015.

“Nippon Life Insurance’s investment also represents an implied embedded value (EV) multiple of over three times for Reliance Life Insurance, the highest for any private insurer in India till date,” the two firms said in a joint statement.

Nippon Life would become the co-sponsor in Reliance Life and the firm would be renamed Reliance Nippon Life Insurance Company as part of the deal.

A mad rush in life insurance

With the government allowing foreign investors to increase their stake from 26 per cent to 49 per cent in life insurance, the sector has seen a sudden spurt in investment.

On Monday, British health insurer Bupa Plc said it will increase  its stake in its Indian joint venture with Max India Ltd for about Rs 191 crore ($29 million).

UK insurer Aviva Plc has said it was planning to increase its stake in Aviva India, its local JV with Dabur Group, to 49 per cent while Australian insurer QBE Group has said it would buy more in Raheja QBE General Insurance Company Ltd.

Japan's Tokyo Marine has said it had sought to raise its holding in Edelweiss Tokio Life Insurance from 26 per cent to 49 per cent and Axa hiked its stake in Bharti Axa.

Also, Aegon raised its stake in Aegon Religare Life Insurance to 49 per cent as part of a larger deal where Religare sold its stake in the firm to media house and existing investor Bennett, Coleman & Co. Ltd.

Also, Australia's Insurance Australia Group Ltd has said it would increase its stake in a general insurance joint venture with India’s largest lender, State Bank of India, to 49 per cent.

Last week, ICICI Bank said it will sell 6 per cent of stake in its life insurance joint venture ICICI Prudential Life Insurance to PremjiInvest and Singapore-based investment company Temasek.

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