Mitsui increases stake in India insurance joint venture
Mitsui Sumitomo Insurance (MSI) Co. Ltd on Friday said that it has increased its stake in Cholamandalam MS General Insurance, its joint venture with the Cholamandalam Group in India. Mitsui will increase its stake from the current 26% to 40% for an additional investment of Rs.880 crore, the company said in a statement.
“Upon the easing of regulations on foreign investments in March 2015, MSI will additionally acquire 14% of the outstanding shares of Chola MS for approx. Rs.8.8 billion rupees to raise its ownership to 40%,” said the statement.
“MSI will send executive director in charge of enterprise value enhancement of overall management and also send staff taking charge of corporate planning, underwriting and claims handling. Through the above, MSI will intensify its involvement in the management of Chola MS, enhance customer service and contribute to the further development of India’s insurance market,” it added.
In March, the government notified a hike in the foreign investment limit for the insurance sector, raising it from 26% to 49%. Since then, several transactions have been seen across the sector with foreign partners choosing to raise shareholding in their insurance joint ventures. Close to Rs.11,000 crore in deals have been announced, according to data compiled by Mint. The largest such transaction saw Nippon Life Insurance Co. investing Rs.2,265 crore to raise its stake to 49% in Reliance Life Insurance Co. At least 12 more deals have been closed since the start of this fiscal.
According to a report by India Brand Equity Foundation, between April and September 2015, the life insurance industry recorded a new premium income of $8.4 billion, indicating a growth rate of 14.45%. The general insurance industry recorded a growth of 12.6% in gross direct premium underwritten in fiscal 2016 till October, at $8.23 billion. The life insurance sector is expected to grow at a compounded annual growth rate of 12-15% over the next five years, the report added.“…by 2022, as it (India) will have the largest population in the world and the demographic bonus is expected to continue in the long term, insurance needs are expected to rise against the background of accelerated economic growth and the expansion of the middle class,” said MSI in its press release.