Japan’s largest life insurance firm Nippon Life Insurance Company has signed an agreement with Reliance Capital, to expand the scope of their existing business partnership in the Indian insurance space to other financial services, such as asset management, the companies said on Thursday.
This comes close on the heels of Nippon striking a deal to acquire 26 per cent in Reliance Life Insurance, a part of Anil Ambani Group’s Reliance Capital, for Rs 3,062 crore ($680 million), valuing Reliance Life Insurance at approximately Rs 11,500 crore ($2.6 billion).
Reliance Capital and Nippon Life signed a memorandum of understanding (MoU) in Tokyo on Thursday to expand their strategic partnership in India across all Reliance Capital-promoted financial businesses.
Reliance Capital has interests in asset management and mutual funds, life and general insurance, commercial finance, equities and commodities broking, investment banking, wealth management services, distribution of financial products, exchanges, private equity, asset reconstruction, proprietary investments and other activities in financial services. It is also believed to be looking for a banking licence.
The most significant synergy can be in the asset management business. Reliance Capital Asset Management (RCAM) is the largest AMC in India and manages over $23 billion across mutual funds, pension funds, managed accounts and hedge funds, and has over seven million investors.
It has also been chosen to manage both the public funds sponsored by the Indian government – the Provident Fund and the Pension Fund. Incidentally, earlier this week, a parliamentary panel recommended allowing foreign investment of up to 26 per cent in the pension fund sector.
Nippon Life is a 122-year-old global Fortune 100 company, seventh largest life insurer in the world and the largest private life insurer in Asia and Japan. Nippon Life Insurance posted revenues of $80 billion and a profit of $3 billion for the fiscal year ended March 31, 2011. The company sold around 1.2 million policies, taking the total number of policies in force to more than 14.5 million as on March 2011. In addition to selling life insurance products, the company offers various other products, such as defined contribution pension plans and medical coverage plans.
Earlier this year, Reliance ADA Group’s chief Anil Ambani’s elder brother Mukesh Ambani, who runs India’s most valued company Reliance Industries, had also struck a similar partnership with DE Shaw to foray into the financial services sector.
This came after the two brothers ended a non-compete agreement that stopped them from entering into each other’s business domain.
Although Reliance Industries has not provided too many details regarding its plans, it is reportedly looking to enter energy trading, private equity, mutual fund, financial service distribution and infrastructure funding, as well as equity and debt funding for the corporate sector.
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