Nippon Life Insurance, one of the largest life insurers in the world, has agreed to increase its stake in Reliance Life Insurancem a part of Reliance Capital Ltd from the existing 26 per cent to 49 per cent.
The Japanese company will be investing an aggregate value of Rs 2,265 crore (US$ 348 million) to acquire an additional 23 per cent stake in Reliance Life Insurance to reach a 49 per cent stake.
The name of the company will also be changed to Reliance Nippon Life Insurance Company Limited. Reliance Life Insurance is amongst the leading private sector life insurance companies in India, in terms of new business premium.
Nippon Life will also increase the number of appointment of directors on the board of Reliance Life. It called the new relationship as one of “equal partners”.
“Nippon Life believes these efforts will increase its profitability over the medium to long term, and thus, contribute to expanded policyholder interest in it as a mutual company. With this additional investment, the cumulative total investment in Reliance Life and Reliance Capital Asset Management Limited is approximately JPY 150 billion, the largest Japanese direct investment in India,” the Japanese company said.
The transaction pegs Reliance Life Insurance’s valuation at approx. Rs 10,000 crore (US$ 1.5 billion).
Nippon Life Insurance’s investment also represents an implied Embedded Value (EV) multiple of over 3 times for Reliance Life Insurance, the highest for any private insurer in India till date, the Indian company said.
“We are delighted that the outstanding relationship between our two companies has now grown into an equal partnership, with NLI increasing their stake – first, in our asset management business, and now, in our Life Insurance business – to 49 per cent. Life Insurance is one of Reliance Capital’s major businesses, and we believe Nippon Life’s experience of over 125 years will accelerate our growth in this space,” said Mr. Anil D. Ambani, Chairman, Reliance Group.
“This additional investment represents not only the past efforts and initiatives, but also the good relationship between both companies going forward, and we are pleased to be able to further strengthen this partnership in various fields,” said Yoshinobu Tsutsui, President, Nippon Life Insurance.
The Boards of Directors of both the companies – Nippon Life Insurance and Reliance Capital – have approved the increase in stake by the Japanese partner, subject to regulatory approvals.
Nippon Life Insurance would have invested an aggregate of Rs 5,327 crore (US$ 819 million) for acquiring 49 per cent take in Reliance Life Insurance with this transaction.
NLI has also committed an investment of Rs 3,303 crore for acquiring 49 per cent stake in Reliance Capital Asset Management, thereby taking its total investment to Rs. 8,630 crore (US$ 1.3 billion), the largest FDI in the financial services sector.
Reliance Life Insurance has a market share of 6% of the private sector life insurance industry and had New Business Premium of Rs 601 crore, Renewal Premium of Rs 673 crore and Total Premium (net of reinsurance) of Rs 1,263 crore (US$ 194 million) for the quarter ended September 30, 2015.. Total funds under management was Rs 15,524 crore.