Anil-Ambani-led Reliance Capital has received in-principle approval from Insurance Regulatory Development Authority (IRDA) to sell 26 per cent stake in Reliance Life Insurance to Japan’s Nippon Life Insurance, according to the company statement on Wednesday.
Under the deal, Nippon Life Insurance will pay Rs 3,062 crore ($680 million) to acquire 26 per cent stake in Reliance Life Insurance and the transaction will be closed within a few weeks, the company has further added.
Nippon the largest life insurer in Asia and Japan values Reliance Insurance at an estimated cost of Rs 11,500 crore ($ 2.6 billion).
Earlier this year, RCap had signed a definitive agreement with Nippon Life, subject to regulatory approvals and the final approval for the proposed sale on receipt of RBI approval.
Shares of Reliance Capital touched Rs 417 per unit on the BSE during early-hour trading – a surge of nearly 4 per cent – and closed at Rs 413.30, up 2.77 per cent from the previous close.
“We are delighted to receive the IRDA approval and expect to conclude this transaction within the next few weeks. As strategic partners, we look forward to working closely with Nippon Life to further strengthen Reliance Life Insurance,” Sam Ghosh, CEO of Reliance Capital, commented on the deal.
“We hope we will be able to close the transaction in near future. Nippon Life is keen to work with Reliance and establish a long-term relationship that is mutually beneficial for both companies,” said Yoshinobu Tsutsui, president of Nippon Life Insurance.
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, financial products distribution, exchanges, private equity, asset reconstruction, proprietary investments and other activities in the financial services space.
In August this year, Reliance Capital signed an agreement with Nippon to expand the scope of their existing partnership in the Indian insurance space to other financial services, such as asset management. Although RCap has not detailed its expansion plans, the company is actively 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.
Nippon Life is a 122-year-old Global Fortune 100 company, seventh largest life insurer in the world and the No.1 private life insurer in Asia and Japan. It has posted revenues of Rs 3,49,834 crore ($80 billion) and a profit of Rs 12,199 crore ($3 billion) for the fiscal year ended March 31, 2011. The company has sold around 1.2 million policies, taking the total number of policies in force to over 14.5 million as of March 2011. Besides selling insurances, Nippon Life offers various products, including defined contribution pension plans and medical coverage plans.
Reliance Life Insurance Company Ltd, a part of Reliance Capital, is one of India’s top private sector life insurance companies with an aggregate business premium of Rs 6,600 crore ($1.46 billion) as on March 2011. The company has sold over 70 lakh policies and manages assets of Rs 18,000 crore ($4 billion) as of March 2011. The company offers a comprehensive range of innovative and need-based products, including protection, investment and retirement, targeted at individuals and groups.