Allianz SE in talks to exit both insurance joint ventures with Bajaj Finserv
- Allianz has said that given its strategic priorities, it is considering an exit from the life and general insurance joint ventures, Bajaj Finserv told the exchanges on Tuesday, adding that Allianz has said it remains “committed to the Indian insurance market”.
Mumbai: Allianz SE, the world's largest insurer, is in early discussions to exit its long-standing joint ventures (JVs) with Bajaj Finserv after battling with the Indian insurance company to increase its stake in these ventures.
Allianz has two JVs with Bajaj Finserv – Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance – dating back to 2001. It holds a 26% stake each and Bajaj Finserv holds the remaining 74%. The two companies are market leaders in their respective sectors.
“Allianz has indicated to Bajaj that given its strategic priorities, it is actively considering an exit from the life and general insurance joint ventures,” Bajaj Finserv told the exchanges on Tuesday, adding that Allianz has said it remains “committed to the Indian insurance market”.
“Discussions are at a preliminary stage and there is no proposal before the board of the company or its insurance subsidiaries in this regard. Allianz, in case it exits the joint venture, has committed full support to Bajaj in ensuring a smooth transition to the Bajaj brand, keeping in mind the interest of policyholders, business partners, employees and other stakeholders of the insurance companies,” it added.
Looking for alternatives
Bajaj Finserv’s comments followed a report by Bloomberg that said that Allianz was looking to exit its JVs with Bajaj to pursue alternatives in the Indian insurance market.
An industry source told Mint, “Bajaj Finserv has had the controlling stake from day one. They have controlled everything from business strategy and management to operations and on-ground sales because it knows the Indian retail financial markets and the regulatory landscape very well.” The source added that Allianz's exit should not materially impact Bajaj since it has been running the companies from the start.
While Allianz has said the growth of the JVs so far has exceeded its expectations, it has been keen to increase its stake in the companies as it feels recent regulatory changes present better opportunities in the Indian market. However, the Bajaj Group has been reluctant to dilute its stake and wants to continue to hold majority stakes in both companies.
“Allianz has been appreciative of the growth so far and relations have been cordial between the partners. But in light of the Indian growth story, it would have liked to increase its exposure to India,” the source added.
The Bloomberg report suggested that Allianz may re-enter the Indian market though a new partnership, one in which it has bigger stake or even a majority stake. The world’s largest insurer may also choose to enter the market on its own.
On the other hand, cash-rich and debt-free Bajaj Finserv is in a comfortable place to acquire Allianz’s entire stake in both companies even though they will amount to substantial investments. However, its final share will depend on how comfortable the Insurance Regulatory and Development Authority of India (IRDAI) is the insurance companies becoming wholly-owned subsidiaries of Bajaj Finserv, an industry analyst said.
A spokesperson for Bajaj Finserv declined to comment on a query regarding the plan for acquisition of stake by Bajaj Finserv.
Strategic decisions off the table
The Bloomberg report had also said Allianz was looking to exit because it was not allowed to make strategic decisions. However, given Allianz’s long-term strategic view, these likely pertain to investments in the insurance companies rather than business decisions, which are typically made by the boards of both the companies, another source said.
With three members each on the boards of Bajaj Alliance Life Insurance and Bajaj Allianz General Insurance, Allianz's representatives currently comprise 42% of the board of the life insurer and 38% of the general insurer, according to available data.
Renate Wagner, Ritu Arora and Sanjay Kishan Kaul are Allianz’s representations on both boards, while Bajaj Finserv is represented by managing director Sanjiv Bajaj, Niraj Bajaj, S Sreenivasan and N Srinivasa Rao. The board of Bajaj Allianz General also includes Nilesh Sathe.
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Business NewsIndustryAllianz SE in talks to exit both insurance joint ventures with Bajaj Finserv
First Published:22 Oct 2024, 07:26 PM IST
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