Japan’s Nippon Life Insurance said Monday it had bought a 26 percent stake in billionaire Anil Ambani’s Reliance Life Insurance for $680 million, the largest foreign investment in India’s insurance sector.
The transaction values Reliance Life Insurance — part of Reliance Capital, which in turn is part of Reliance ADA group — at $2.6 billion, a statement by Ambani’s firm said.
The deal, which awaits regulatory clearance, marks the latest move by Japan’s largest private insurer to expand overseas as its own traditional life insurance market shrinks with an ageing population.
Shares of Reliance Capital ended up 9.72 percent, or 49.75 rupees, to 561.8 at the Bombay Stock Exchange after the deal.
India is seen as an under-insured and attractive market for foreign firms, analysts say, where booming economic growth could mean expansion of financial services and products into smaller townships and rural parts of India.
Under Indian law, foreign firms can buy only up to 26 percent of the local insurer.
“India has a huge untapped potential which provides a large opportunity to foreign insurers,” said Sachin Sondhi, senior director with Deloitte India, as only one-fifth of India’s population are estimated to have an insurance policy.
Reliance Life, India’s largest private insurer in terms of individual policies, has sold seven million policies in the country. The firm manages assets in excess of $3.7 billion.
“Nippon Life will bring vast experience and expertise” in the areas of product development, underwriting, investment and risk management, said Sam Ghosh, chief executive of Reliance Capital, in a statement.
Nippon Life Insurance has sold over 14 million policies in Japan.
It had revenues of $72 billion for the fiscal year ended March 2010. India, which opened up the insurance sector to private and foreign players in the year 2000, has 47 insurance companies, where 23 offer life insurance and the rest general (non-life) insurance.
Earlier this month, US billionaire Warren Buffett’s Berkshire Hathaway announced starting operations in India through a local subsidiary.
India’s parliament is still to approve a long-pending government proposal to hike foreign investment in local insurance firms to 49 percent, facing stiff opposition from other political parties.
Mumbai, March 14, 2011 (AFP)
