FIPB to take up stake hike proposals of Standard Life, Aviva on 29 December; Mitsui Sumitomo increases stake in Cholamandalam to 40%

Foreign partners are keen to raise their stake in Indian insurance joint ventures, with the Foreign Investment Promotion Board (FIPB) expected to consider stake hike proposals of Standard Life Insurance and Aviva Life Insurance at its meeting on 29 December.

At its 228^th meeting on 27 November, 2015, the FIPB had deferred a proposal by HDFC to transfer its shares so as to raise Standard Life's (Mauritius Holdings) stake in HDFC Standard Life Insurance from the existing 26% to 35%.

The FIPB also set aside Aviva Life Insurance Company India's proposal to increase the foreign shareholding in the venture from 26% to 49% by Aviva International Holdings, UK, by transferring 23% stake being held by the Indian partner, Dabur.

In the recent past, many foreign partners of Indian insurance companies have either increased their stake or have planned to do so, ever since the Modi government increased the foreign direct investment (FDI) limit for such foreign associates from 26% to 49% in March this year.

The aim was to increase insurance penetration in India and enable the companies to raise adequate capital for expanding operations.

On 17 December, Ergo International AG, the German insurance company that had 26% equity stake in HDFC Ergo General Insurance Company, increased its stake to 48.9% by acquiring 123 million shares in the joint venture, representing 22.90% stake.

The shares were acquired at a price of Rs 90.97 per share, translating into a consideration of Rs 1,122 crore, HDFC said in a regulatory filing to the BSE.

Pursuant to the deal, which will be subject to regulatory approvals, HDFC's stake will come down to 50.7% from 73.6% held earlier.

HDFC Ergo General Insurance's gross direct premium for the first half of the current fiscal was Rs 1,593 crore. The company earned a net profit of Rs 68.9 crore during the period. In 2014-15, the company had earned a net profit of Rs 104 crore and its gross written premium was Rs 3,257 crore.

HDFC Standard Life Insurance's total premium collection was Rs 6,590 crore for the first six months ended 30 September, 2015.

There are 24 life insurance companies, including LIC, operating in India. The total amount collected by way of premium was Rs 7,553 crore in November this year and Rs 74,550 crore till November this year, marking an increase of 17.03% for the nine month period over last year, according to Life Insurance Council.

While state-owned LIC is the biggest player in the business, other prominent companies include SBI Life Insurance (JV with BNP Paribas Assurance), ICICI Prudential and HDFC Standard Life.

On 25 December, Tube Investments of India said it had approved the sale of 14% equity stake in Cholamandalam MS General Insurance to its joint venture partner Mitsui Sumitomo Insurance Company, Japan, for Rs 882.67 crore. The transaction, which will be subject to regulatory approvals, will increase Mitsui's stake in the joint venture to 40%.