Bharti AXA, ICICI Lombard ink definitive pact to merge non-life businesses

The combined entity, with an expected market share of 8.7 per cent in the non-life business, would be the third-largest non-life insurer in the general insurance business

Private-sector general insurers ICICI Lombard and Bharti AXA general insurance have signed definitive agreements to combine their business. The latter’s business is to be demerged into the former’s through a scheme of arrangement under which the shareholders of Bharti AXA would receive two shares of Lombard for every 115 shares held by them.

The combined entity, with an expected market share of 8.7 per cent in the non-life business, would become the third-largest non-life insurer in the general insurance business. The first two spots at present are held by state-owned insurers.

In a statement to exchanges, ICICI Lombard said Bharti AXA’s existing distribution partnerships should help it increase its distribution strength. “The combined entity shall also benefit from continued partnerships with Bharti Enterprises, and AXA,” it said

The company further said that the transaction was expected to result in value creation for all stakeholders through meaningful revenue and operational synergies. And, policyholders would gain from an enhanced product suite and deeper customer connect touch points.

The financial details of the deal have not been revealed so far.

While both the companies have signed definitive agreements, the deal is subject to regulatory approvals from the Insurance Regulatory and Development Authority of India (Irdai), Competition Commission of India (CCI), Securities and Exchange Board of India (Sebi), Reserve Bank of India (RBI), and National Company Law Tribunal (NCLT), besides shareholders of both ICICI Lombard and Bharti AXA.

ICICI Lombard MD & CEO Bhargav Dasgupta said: “We are excited by the capabilities and strengths that Bharti AXA will add to our franchise”. Bharti AXA General Insurance Chairman Rakesh Bharti Mittal said: “We are confident that the proposed amalgamation of our business with ICICI Lombard will bring greater business synergies and create value for all stakeholders.”

The demerger of Bharti AXA into ICICI Lombard is expected to create greater economies of scale for Lombard, thereby lowering the average costs and enhancing profitability. It is also expected to bring in greater efficiency in fund management and unfettered access to cash flow generated by the business which could be deployed more efficiently to fund organic and inorganic growth opportunities.

Bharti AXA is a joint venture in which Bharti Enterprises currently owns a 51 per cent stake and France-based AXA owns the rest. So far in FY21, Bharti Axa has collected gross premiums to the tune of Rs 810.85 crore — 5.17 per cent lower than the Rs 855.10 crore collected in the same period last year. Currently, it has a market share of 1.44 per cent.

ICICI Lombard, the largest private-sector general insurer, on the other hand, has underwritten premiums to the tune of Rs 4,391.29 crore in 2020-21 so far — 2.86 per cent lower than the Rs 4,520. 40 crore in the same period last financial year. Based on premiums, it has a market share of 7.8 per cent in the non-life insurance business.

For the present deal, EY was the merger & acquisition advisor and AZB & Partners legal advisor to ICICI Lombard. Cyril Amarchand Mangaldas acted as legal advisor to Bharti, and Talwar Thakore & Associates acted as the legal advisor. BDO Valuation Advisory LLP and MKSA & Associates recommended the share-exchange ratio for Bharti AXA’s demerger into ICICI Lombard.