Generali will raise its stake to around 74 per cent in Future Generali India Insurance Company and 68 per cent in Future Generali India Life Insurance Company
Generali to acquire from Future Enterprises Limited 25 per cent of the shares of Future Generali India Insurance (FGII) for a consideration of around € 145 million(Rs 1253 core) and 16 per cent held by Industrial Investment Trust Limited (IITL) in Future Generali India Life Insurance for around € 26 million (Rs 200 crore)
Mumbai:
Italian multinational insurer Generali has decided to become the majority shareholder in two of its insurance joint ventures- Future Generali India Insurance Company Limited(FGIICL) and Future Generali India Life Insurance Company Limited(FGILICL).
Debt-ridden Future Group will exit from the insurance business in a time-bound manner.
Generali has signed agreements to become the majority shareholder in both its life and non-life joint ventures in India. Both transactions are subject to the approval of relevant regulators.
In the P&C business, Generali has agreed to acquire from Future Enterprises Limited(FEL) 25 per centof the shares of FGII for a consideration of around € 145 million(Rs 1253 core).
After closing Generali will hold a stake of around 74 per cent in FGII.
“The company is exploring options for the sale of its remaining interests in FGILICL and FGIICL and it expects to complete the exit of its holding in the Insurance Joint Ventures in a time-bound manner,” FEL said in a regulatory filing.
FGII is among the fastest growing general insurance companies in the market with a diversified product and distributor portfolio; as of March 2021 (fiscal year end for Indian insurance companies), it reported around € 450 million of premiums.
Regarding the life insurance business, an agreement has been signed to acquire the entire stake (around 16%) held by Industrial Investment Trust Limited (IITL) in Future Generali India Life (FGIL) for a consideration of around € 26 million(around Rs 200 crore).
FGIL reported around € 150 million of gross written premiums as of March 2021. In addition, Generali will subscribe to a preferential allotment of shares in FGIL (around € 21 million).
As a result, following the closing of the transaction and completion of the preferential allotment, Generali will hold a stake of around 68 per cent in FGIL, which may increase further to 71 per cent by the end of 2022, following further preferential allotment of shares.
Jaime Anchústegui Melgarejo, CEO International, Generali Group, said: “Increasing Generali’s stake in our Indian Life and P&C insurance businesses represents a further step ahead in our growth journey in this high potential market. With an expected double-digit annual growth rate, India’s insurance market offers considerable opportunities, and we look forward to deepening our presence in this geography, becoming Lifetime Partners to an increasing share of Indian customers.”
Rob Leonardi, Regional Officer, Generali Asia, said: “We’re excited that we are now able to consolidate our position in our Life and P&C insurance businesses, as it has always been our intention to increase our presence in India. Once the transactions are completed, we plan to do so in a way that will create more value for our more than 4 million customers, agents, partners and distributors.”
The transactions are fully in line with Generalis ‘Lifetime Partner 24: Driving Growth’ strategy, strengthening its position in fast-growing markets and confirms the group’s commitment to deliver profitable growth whilst creating value for customers,
Generali is the first player among international insurers to step-up to a majority stake in both its Indian insurance JVs since the new foreign ownership cap came into effect.
Presently, FEL holds a 49.91 per cent stake in the general insurance firm FGIICL and after the deal with Generali, it will come down to 24.91 per cent.
“Generali will become the controlling shareholder of FGIICL with an approx 74 per cent direct and indirect stake from its existing 49 per cent stake,” it said.
Besides, Generali would also have an option to buy out FEL’s remaining stake in FGIICL, said a late-night regulatory filing by the Future Group firm.
“FEL has agreed to sell a 25 per cent stake in its General Insurance Joint Venture, FGIICL, to its Joint Venture partner Generali for a cash consideration of Rs 1,252.96 crore, plus an additional consideration that is linked to the date of the closing of the transaction,” the regulatory filing said.
As part of the deal, Generali has also acquired an option to buy out FEL’s remaining interest in FGIICL, “directly or through a nominee”, at an agreed valuation, subject to applicable regulatory approvals, FEL said.
“The transaction is subject to applicable regulatory approvals and other customary conditions,” it added.
According to the company, it had received offers from various potential buyers for its remaining 24.91 per cent interest in FGIICL.
In the Life Insurance JV, FGILICL, FEL currently holds 33.29 per cent stake, while Generali is a controlling shareholder with 49 per cent stake and the balance 16.6 per cent is with Industrial Investment Trust Limited (IITL).
“It (FEL) is also exploring options for the sale of its 33.3 per cent interest in the life insurance JV and expects to complete the exit of its holding in the insurance joint ventures in a time-bound manner to meet its commitment under OTR Plan implemented under an August 6, 2020 circular issued by the Reserve Bank of India in relation to the Resolution Framework for COVID-19 related stress,” it said.
Generali has received approval from the Competition Commission of India to purchase a 16 per cent stake held by Industrial Investment Trust Limited in FGILICL.
It has also agreed to invest up to Rs 330 crore in tranches in FGILICL to fund its growth plans.
India is one of the fastest growing insurance markets in the world, with nominal gross written premium(GWP) growth at 10%+ CAGR over 2022-2030.It is uniquely attractive, thanks to its high real GDP growth (8% YoY growth expected in 2021-20222, among the highest of south-eastern Asian countries), low insurance penetration levels (with GWP representing only 4.2%3 of GDP as at 20203) and private consumption and disposable incomes (expected to grow around 7% over the next 5 years2).
The stake sale by FEL is to meet its commitment under the One-Time Restructuring (OTR) scheme for COVID-19-hit companies, which it had entered into last year with a consortium of banks and lenders.
As part of that, the Future Group firm has to repay the loan through asset monetisation.
As part of OTR, FEL has to pay around Rs 2,200 crore by March-end this year.