XL Group to buy 20% in Mahindra Insurance; LeapFrog to exit
Photo Credit: Shah Junaid/VCCircle

Multinational insurance firm XL Group will acquire a 20% stake in Mahindra Insurance Brokers Ltd via a transaction that will let private equity firm LeapFrog Financial Inclusion Fund exit the target company.

The two-stage transaction will involve LeapFrog, through unit Inclusion Resources Pvt. Ltd, first increasing its stake in Mahindra Insurance to 20% from the current 15% and then selling the entire stake to XL Group, the broking firm’s parent Mahindra & Mahindra Financial Services Ltd said in a statement.

The insurance broking arm of the diversified Mahindra Group will sell the 5% stake to LeapFrog for Rs 65 crore. The deal values the company at Rs 1,300 crore ($200 million), the statement said.

The transaction is subject to satisfaction of customary closing conditions by all stakeholders.

LeapFrog, a financial services-focussed impact investor, had invested $15 million (about Rs 100 crore) in Mahindra Insurance for a 15% stake in 2012. In November 2015, VCCircle reported that LeapFrog was looking to exit Mahindra Insurance and that the broking firm was also looking for a new investor who could help it expand.

Mahindra Insurance was set up in 2004 and primarily works in rural and semi-urban areas. Mahindra Group’s flagship company—Mahindra & Mahindra Ltd—sells utility vehicles, tractors, commercial vehicles and two-wheelers, and has a wide network in rural areas. Mahindra Finance provides loans to low-income groups through its network of branches spread over 1,100 locations.

XL Group, which operates under the XL Catlin brand, has a shared service operation presence in India, at Gurugram and Bengaluru. It provides business and underwriting support, claims administration, actuarial services, finance and accounting, and more. The group also has a fully licensed reinsurance branch office in Mumbai.

Greg Hendrick, president, property and casualty insurance and reinsurance at XL Catlin, said this investment is part of its commitment to support insurance penetration in developing economies.

“It will also provide us a chance to better understand the primary retail insurance and distribution landscapes in the rapidly developing Indian market,” he said.

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