ICICI Lombard-Bharti AXA deal seen a leg-up for bancassurance sector

Combined entity will be third-largest non-life insurer

ICICI Lombard’s deal with Bharti AXA General Insurance is expected to increase the market share of the company in the motor insurance segment. It will also enhance its business through the bancassurance and corporate agency tie-ups that Bharti AXA had formed in the recent past.
 

Currently, ICICI Lombard has around 10 per cent market share in the motor insurance business. After the merger, it will command 12 per cent market share. Furthermore, the consolidated entity will have a market share of 8.7 per cent in the non-life business, making it the third-largest non-life insurer in the general insurance business. The first two spots are now held by state-owned insurers.
 

In conversation with Business Standard, Bhargav Dasgupta, managing director and chief executive officer, ICICI Lombard General Insurance, said, “This partnership will accelerate our journey and help us consolidate our market leadership position. In the motor insurance segment, it will enable us to increase our penetration across original equipment manufacturers. Further, it will give us the opportunity to explore growth through the bancassurance and corporate agents’ platforms, given their significant presence in these channels. Some of these partnerships are relatively new, so we believe there is a lot of runway for growth.”
 

After the transaction, ICICI Lombard will have tie-ups with most of the leading banks in India, which it will leverage to push indemnity health products, fixed benefit products, OPD products, and other small-ticket products.
 

Bharti AXA General Insurance has almost 6,700 agents in the agency network, which, so far, has largely focused on motor and small and medium-sized enterprise segments. After the fructification of the deal, the company will look to leverage this agency force to cross-sell other products. “On the agency front, we would like to cross-sell other products, such as indemnity health policies. Within motor also, there are sub-segments that we are strong in.”  

“On the cost side, there are many synergy benefits we believe we can get. While their expense ratio is at 42 per cent, the loss ratio is at 78 per cent and they are well reserved,” added Dasgupta.

 

 

After the merger, Bharti AXA will hold 7.3 per cent in ICICI Lombard in a 51:49 ratio. The deal will also see ICICI Bank’s stake in ICICI Lombard fall below 50 per cent. The deal will not dent the solvency ratio of the company, the management said in a call with analysts.
 

Apart from revenue and cost synergies, the deal also presents the company with a strong proposition to partner Bharti Group, one of India’s leading business groups, and AXA, a large foreign reinsurer.
 

“The payments bank that Bharti Group has, which we believe has a lot of potential in the long run, and their telecom vertical is something we would like to pursue, in terms of finding business synergies,” said Dasgupta.
 

The deal has been structured in a way that Bharti AXA’s general insurance business will get demerged into ICICI Lombard through a scheme of arrangement under which the shareholders of Bharti AXA will receive two shares of Lombard for every 115 shares held by them.
 

ICICI Lombard, the largest private-sector general insurer, 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.
 

Shares of the private non-life insurer closed at Rs 1,275.30, down 1.36 per cent on the BSE.