Money & Banking

Nippon Life to take 26% in Reliance Life for $680 m

| Updated on: Mar 14, 2011

Reliance Life Insurance, a wholly-owned subsidiary of Reliance Capital Ltd, has decided to rope in Nippon Life Insurance Company as a strategic partner with 26 per cent stake. The Japanese insurance major will invest Rs 3,062 crore ($680 million) for acquiring the stake.

Nippon Life on Monday signed an agreement with Reliance Capital to acquire stake in Reliance Life.

Valuation

The transaction pegs the total valuation of Reliance Life at around Rs 11,500 crore ($2.6 billion), according to a joint statement issued by Reliance Capital and Nippon Life.

Reliance Capital, however, did not disclose how the deal has been structured — whether it will disinvest 26 per cent stake to Nippon or as a combination of partial disinvestment and issue of fresh shares.

The financial services company has interests, among others, in asset management and mutual funds; life and general insurance; commercial finance; stock broking; exchanges; private equity.

Japan's biggest

“Nippon Life is the largest insurer in Japan and has been in operation for 121 years. As a strategic partner, it will bring vast experience, expertise and global best practices in areas of product development, underwriting, investment management, distribution, customer relationship management and risk management,” said Mr Sam Ghosh, CEO, Reliance Capital.

Reliance Life's strengths

The disinvestment by Reliance Capital comes at a time when the insurance industry is keenly awaiting guidelines on initial public offers from the Insurance Regulatory and Development Authority. According to industry officials, the regulator is unlikely to allow life insurers that have been in business for less than 10 years to come out with an IPO.

Reliance Life started its operations in 2005 after acquiring Chennai-headquartered AMP Sanmar Life Insurance company.

The company recorded an aggregate business premium of over Rs 6,600 crore ($1.46 billion) as on March 31, 2010 and managed assets of more than Rs 17,000 crore ($3.7 billion) as of December 31, 2010. It has a distribution network of nearly 1,250 offices and over 215,000 advisors.

Of the 22 private sector life insurance companies in India, Sahara India Life Insurance is now the only company that does not have a foreign partner and continues to operate as a standalone company.

Shares of Reliance Capital rallied on the BSE on Monday, closing at Rs 561.80, up 9.72 per cent (or Rs 49.75) over the previous close of Rs 512.05 on expectation that a chunk of the proceeds from sale of 26 per cent stake in Reliance Life to Nippon Life will boost the bottomline.

Published on April 01, 2011

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