Mumbai: Reliance Life Insurance on Monday said Japan’s Nippon Life Insurance Company is buying a 26% stake in it for $680 million. Shares of the Reliance Life Insurance’s parent firm Reliance Capital, controlled by billionaire Anil Ambani, rose nearly 7% on stake sale news.
The deal values Reliance Life Insurance at $2.6 billion, the company said in a statement, adding the transaction is subject to regulatory approvals.
The stake purchase by Nippon Life, Japan’s largest private life insurer, is the latest move by a Japanese insurer to expand overseas. It has over 14 million policies in Japan and posted revenues of $72 billion for the fiscal year that ended 31 March 2010.
Indian rules do not allow foreign companies to own more than 26% stake in an Indian insurance joint venture.
Shares in Reliance Capital, which has a market value of about $3 billion, gained nearly 7% to Rs547.65, their highest level in one-and-a-half months after the stake sale announcement. The BSE Sensex was up 0.9%.
“Nippon Life will bring vast experience...in areas of product development, underwriting, investment management, distribution, customer relationship management and risk management,” said Sam Ghosh, chief executive of Reliance Capital.
Reliance Capital has said in the past that it was looking to bring in a strategic investor for its life insurance unit ahead of a possible initial public offering (IPO).
Life insurance penetration in India is about 4% of the gross domestic product (GDP), in terms of total premiums underwritten in a year, compared with 2.4% in China and about 13.5% in Britain.
Industry executives say the outlook remains bright in an under-insured, booming economy that is expected to grow at 8.6% in the current fiscal year ending in March.