A few days ago, the Bharti group confirmed that it plans to exit from its joint venture with AXA by selling 74% stakes to the Mukesh Ambani-led RIL group.
Reliance Industries Limited (RIL) and its associate Reliance Industrial Infrastructure Limited (RIIL) will take over the general insurance as well as the life insurance business from Bharti.
RIL will own 57% and RIIL will own 17% stakes in the new partnership. AXA will continue to hold its 26% stake which is the maximum foreign direct investment (FDI) allowed in India. Once the proposed deal gets finalized, there are bound to be some changes in the venture between RIL group and French partner AXA.
Dr. A Ananthanarayanan, Managing Director and CEO of Bharti AXA General Insurance said that there would be a joint planning session on business targets with the new promoters in July. Post this session, there might be some changes in the numbers.
Bharti AXA Life appointed new CEO Sandeep Ghosh to replace the interim CEO Milind Chalisgaonkar. The company announced this change in hierarchy yesterday while the deal between Bharti and RIL is still in process.
In the life insurance business, Bharti AXA Life’s market share is less than one percent. As on December 2010, Bharti AXA Life had accumulated losses of Rs 1,496 crores. In FY 2010-11, Bharti AXA Life managed to collect premiums of Rs 790 crores while Bharti AXA General managed to accumulate gross direct premiums of Rs 550 crores. Bharti AXA General Insurance reported a loss of Rs 33.71 crores at the end of the first quarter of 2010-11.
For general insurance companies, motor insurance and health insurance has been loss-making business. Bharti AXA General is tightening its underwriting practices in both motors as well as health policies.
The total capital deployed by the life insurance and general insurance sector is close to Rs 35,000 crores. Around Rs, 9,000 crores of this amount are contributed by foreign players. Companies are waiting for the FDI norms to be increased from the existing 26% to 49% as the insurance industry is a cash-intensive business.
AXA, the world leader in Financial Protection and Wealth Management, has an understanding with RIL that allows it to increase its stakes as and when the FDI limits are increased.
