NEW DELHI, Dec 28: Within days of government allowing more overseas investment in insurance sector through an ordinance, Anil Ambani-led Reliance Group has initiated a process for inducting foreign partners in its general and health insurance ventures with up to 49 per cent stakes.
Besides, the group’s financial services arm Reliance Capital would soon begin “active discussions” for Japanese giant Nippon Life hiking its stake in Reliance Life Insurance Company (RLIC) to 49 per cent, from 26 per cent at present.
“Initial discussions have already been held with Nippon for additional stake in our life insurance venture, while preliminary talks have taken place with some prospective partners for health insurance and the rest of general insurance businesses as well,” Reliance Capital CEO Sam Ghosh told PTI in an interview.
The discussions could not move to advanced levels earlier, as the investors were waiting for clarity on foreign investment policy for the sector. Active discussions would now begin as the government has allowed up to 49 per cent foreign investment by promulgating an ordinance.
While Nippon Life is interested in hiking its stake in Reliance Life to 49 per cent, Reliance Capital may bring in a new foreign partner for up to 49 per cent stake in its general insurance venture as well, Ghosh said.
Besides, the company plans to hive off its health insurance business into a separate company and would look at bringing in a strategic partner there as well with up to 49 per cent stake, he added.
“While initial discussions have been continuing with some prospective partners in these areas, they were awaiting clarity on policy front and active discussions are likely to start now pursuant to the promulgation of the insurance ordinance,” Ghosh said.
Health insurance accounts for 25 per cent of total general insurance business and this business has strong growth potential in the long term, he added.
Health insurance industry is currently estimated at around Rs 20,000 crore and is growing at a CAGR of 30 per cent.
The overall general insurance industry is today estimated at around Rs 78,000 crore and it is expected that in coming years health insurance would be at least equal to the size of the rest of the general insurance industry, if not bigger. Worldwide also, health insurance businesses are kept separately from the rest of the general insurance industry.
On Nippon Life hiking its stake in life insurance venture with the government promulgating an ordinance to facilitate up to 49 per cent stake in the insurance sector, Ghosh said that Reliance Capital would soon begin active discussions with the Japanese partner in this regard.
“The work is already on with regard to Nippon hiking its stake in mutual fund venture and the companies are currently awaiting CCI approval for their recent agreement wherein Nippon Life is hiking its stake from 26 per cent to 49 per cent in phases,” he said.
Nippon currently holds 26 per cent stake in Reliance Life
Insurance and has previously expressed its intention to raise it to 49 per cent as and when the government permits higher foreign investment in this sector.
Ghosh said the hike in Nippon’s stake in Life Insurance venture may also happen in phases.
Asked specifically if the deals can go through with the ordinance itself, rather than waiting for the relevant bill getting passed from the Parliament, Ghosh said that the Ordinance itself serves the purpose.
A financial conglomerate, Reliance Capital has interests in asset management and mutual funds, life and general insurance, commercial finance, equities and commodities broking, among others.
Nippon Life had acquired 26 per cent stake in Reliance Life Insurance Company for Rs 3,062 crore. This deal was completed in October 2011 and it had valued the Indian insurer at over Rs 11,500 crore at that time.
Financial services major Reliance Capital last month reported 20 per cent rise in its second quarter net profit at Rs 217 crore, helped by robust growth in mutual fund, commercial finance and general insurance businesses. Total income rose by 12 per cent to Rs 2,084 crore for the quarter ended September 30. (AGENCIES)
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