Firm to sell 26 per cent to Nippon Life.
The Insurance Regulatory amd Development Authority (Irda) has given in-principle approval to Reliance Life for its proposed 26 per cent stake sale to the Japanese life insurer, Nippon Life.
In March, Nippon Life Insurance Co, the largest life insurer in Asia, signed an agreement to acquire the Reliance Life stake for Rs 3,062 crore, making this the largest foreign direct investment in the sector. Reliance Life is part of Reliance Capital, the financial service arm of the Anil Dhirubhai Ambani Group.
The deal went through after the finance ministry clarified last month that insurance companies were allowed to dilute stake even before completing 10 years of operation. Prior to this, it was feared the deal could be delayed, as the Insurance Act mandated that a company had to complete 10 years operation before divesting any stake. Reliance Life would be completing 10 years in January 2012.
“We are delighted to receive the Irda approval, and expect to conclude this transaction within the next few weeks. Nippon is the largest life insurer in Asia and Japan, and brings its invaluable experience of 122 years in the life insurance space,” said Sam Ghosh, CEO, Reliance Capital.
Reliance Life managed assets of Rs 17,000 crore ($3.7 billion) as of December 31, 2010. It started operation in 2005, after acquiring AMP Sanmar Life Insurance Company, and has collected Rs 2,171 crore by selling new policies in the current financial year.
“Nippon Life is keen to work with Reliance and establish a long-term relationship that is mutually beneficial for both companies,” said Yoshinobu Tsutsui, president, Nippon Life Insurance. The company posted revenues of Rs 3,49,834 crore and a profit of Rs 12,199 crore ($2.5 bn) for the year ended March 31, 2011.