Global giant makes huge bid for non-life business

Global giant makes huge bid for non-life business | Insurance Business Asia

Mergers & Acquisitions

Global giant makes huge bid for non-life business

Record-setting purchase of over half a billion dollars secures a majority stake in booming market

Mergers & Acquisitions

By
Matthew Sellers

Swiss-headquartered Zurich Insurance Group has agreed to acquire a 70% interest in the general insurance division of Kotak Mahindra Bank for an immediate payment of 55.60 billion rupees (approximately US$671 million). Although a purchase may be no surprise, the original deal was supposed to be a staggered purchase, for a small amount.

When Insurance Business reported last November that Zurich intended to secure a 51% share in Kotak’s insurance arm for 40.51 billion rupees, the plan had been to acquire a larger stake over several years.

This revised agreement marks the most significant investment by an international insurance firm in India’s non-life insurance sector.

There are already a substantial number of carriers established in the market, with others such as Ageas awaiting government approvals. It is estimated that around 35% of the total savings held by Indian nationals is in life insurance.

Which foreign insurance companies have insurers in India

Bajaj Allianz General Insurance Co. Ltd. with Allianz SE of Germany
ICICI Lombard General Insurance Co. Ltd. with Lombard Canada Ltd.
IFFCO-Tokio General Insurance Co. Ltd. with Tokio Marine of Japan
TATA AIG General Insurance Co. Ltd. with American International Group of the US
HDFC ERGO General Insurance Co. Ltd. with ERGO International AG of Germany
Star Health and Allied Insurance Co. Ltd. with ETA Ascon Group of Oman Insurance of West Asia
Apollo Munich Health Insurance Co. Ltd. (now HDFC ERGO Health Insurance) with Munich Health of Germany
SBI General Insurance Co. Ltd. with Insurance Australia Group (IAG) of Australia
Max Bupa Health Insurance Co. Ltd. with Bupa Finance PLC of the UK
Future Generali India Insurance Co. Ltd. with Generali Group of Italy
Universal Sompo General Insurance Co. Ltd. with Sompo Japan Nipponkoa Insurance Inc of Japan
Bharti AXA General Insurance Co. Ltd. with AXA Group of France
Raheja QBE General Insurance Co. Ltd. with QBE Insurance Group of Australia
Cigna TTK Health Insurance Co. Ltd. with Cigna Corporation of the US
Aditya Birla Health Insurance Co. Ltd. with MMI Holdings of South Africa

Although the sums announced in this deal are huge, it’s likely that Zurich is still flush with cash and can handle even more M&A in 2024. The Swiss insurer had a record-breaking financial year ending December 31, 2023, achieving a business operating profit (BOP) of US$7.4 billion, (a 21% increase from the previous year), marking the highest level in the company’s history.

This remarkable growth has propelled the company to its highest-ever return on equity at 23.1%. The insurer also reported a 12% rise in earnings per share in dollar terms, a 20% increase on an adjusted basis, and the net income attributable to shareholders increased by 10% to US$4.4 billion.

The record-breaking results were propelled by substantial growth across all business sectors, including a 7% increase in P&C BOP to US$3.9 billion, a record Life BOP of US$2.1 billion, and a 10% growth its US-based Farmers Insurance Group BOP to US$2.3 billion. Highlighting its robust financial health, Zurich also announced an 8% dividend increase to CHF26 per share and initiated a share buyback program of up to CHF1.1 billion.

Investments in technology and digitalisation have significantly improved operational efficiency and customer experience. The carrier now claims that 89% of retail quotes are being digitalised.

A timeline of insurance in India

1818: India gets its first insurance company. Oriental Life Insurance is established in Calcutta (Kolkata). Targeting Europeans living in India, the company still exists today and employs over 8000.

1870: Bombay Mutual Life Assurance is launched as the first truly Indian insurance provider.

1907: The Indian Mercantile Insurance Ltd. is set up as the first company to transact all classes of general insurance business.

1912: The Life Insurance Companies Act and the Provident Fund Act are passed making it necessary to publish premium rates and actuarial valuations of insurance companies.

1938: The Department of Insurance under the authority of Superintendent of Insurance was established for the administration of the Insurance Act.

1956: The Government of India nationalises the life insurance sector and establishes the Life Insurance Corporation. 154 Indian insurance companies, 16 non-Indian companies, and 75 provident were operating in the country at the time.

1972: It’s nationalisation time again. The General Insurance Business (Nationalisation) Act, 1972 nationalised all general insurance businesses.

2000: IRDA is established, and by August that year has opened the market to foreign insurers who can now own up to 26% of an Indian insurer.

2015: The ownership cap is raised to 49% and government approval is not necessary in most cases. Take-up, however, is slow as foreign investors realise that they won’t get any more control of the JVs they might invest in as they will still be minority shareholders with strict control legislation.

2021: Foreign companies may now own up to 74% of a JV insurer in India. Most of their board of directors, key management personnel and at least one of its chairpersons, managing director or CEO must be resident Indian citizens.