DLF to exit life insurance JV

Sell its 74% equity stake in DLF Pramerica Life Insurance to Dewan Housing Finance

Realty major DLF on Thursday signed an agreement to sell its 74 per cent equity stake in its life insurance joint venture DLF Pramerica Life Insurance to Dewan Housing Finance Limited (DHFL).

DLF Pramerica Life Insurance is a 74-26 joint venture, where DLF owns 74 per cent and Prudential International Insurance Holdings Ltd (PIIHL), a subsidiary of Prudential Financial, Inc USA (PFI), holds 26 per cent stake. The financial details of the deal are not known. While the firm did not disclose the financial details, sources said the deal size was Rs 330-360 crore.

“This transaction is in line with our ongoing strategy to divest non-core businesses/ assets. We have had a very cordial relationship with PIIHL and wish them the best in their new partnership with DHFL,” said Ashok Tyagi, group chief financial officer, DLF.

This agreement is subject to regulatory approval, but sources said they expected the deal to be approved in the next two to three months by Insurance Regulatory and Development Authority.

DLF has been selling its non-core assets to cut its debt and focus on core property business. It started the process of non-core asset divestment in September 2011 with the sale of a 28-acre plot in Gurgaon to M3M, a real estate developer, for Rs 440 crore. It recently completed a Rs 325-crore deal to sell a 150 Mw wind energy turbine project in Gujarat to Bharat Light and Power. At the end of the last financial year, its net debt stood at Rs 21,731 crore.

Other transactions include divestment of stake in Aman Resorts to founder Adrian Zecha for around Rs 1,650 crore, National Textile Corporation land in Mumbai to the Lodhas for approximately Rs 2,700 crore and an information technology special economic zone in Pune to private equity firm Blackstone for Rs 810 crore. With the help of proceeds from the Institutional Placement Programme and the sale of its wind energy business and stake in luxury hospitality chain Aman Resorts, the company plans to reduce the debt to around Rs 17,000 crore by the end of the current financial year.

RECENT M&A IN INSURANCE

• 2011 Nippon Life buys 26 per cent stake in Reliance Life Insurance at an aggregate value of Rs 3,062 crore
• Apr 2012 Japan’s Mitsui Sumitomo (a unit of MS&AD Insurance Group Holdings) announces buying of 26 per cent stake in Max New York Life for Rs 2,731 crore. The life insurer re-branded Max Life Insurance Company, as the US-based New York Life exited the joint venture after nearly 10 years
• Jul 2012 Tata AIG rechristened as TATA AIA following exit of American International Group (AIG) from Hong Kong-based insurer AIA Group
• Sep 2012 Irda approved the 30 per cent stake purchase by Punjab National Bank in MetLife India Insurance
• Jan 2013 Exide Industries decides to acquire 50 per cent remaining stake in ING Vysya Life Insurance for Rs 550 crore, subject to regulatory approvals. ING exits venture
• Mar 2013 Pantaloon Retail enters into agreement with Industrial Investment Trust Limited (IITL) to sell 22.5 per cent of its stake in Future General India Life Insurance
• Mar 2013 Larsen & Toubro (L&T) and the Future Group sign non-binding term sheet for the merger of L&T General Insurance and Future Generali India Insurance. Post this merger, L&T will hold 51 per cent stake in the merged entity and 26 per cent will be held by the foreign partner

DHFL, in a statement, said the business of the current entity would continue without interruption and the management would continue to run the joint venture, under the stewardship of the shareholders.

DHFL is of the view that  PFI, with its life insurance expertise, coupled with DHFL’s knowledge of the Indian retail financial services market, would create a solid foundation for this life insurance JV company here in India.

Kapil Wadhawan, chairman and managing director, DHFL said, “This JV would help DHFL extend its philosophy of financial inclusion by broadening the range of products and services available to our customers as well as other customers, across India, especially in Tier 2 and 3 cities/towns. We believe this JV would generate long-term value for DHFL shareholders.”

Echoing a similar view, Tim Feige, senior vice president and international insurance group executive at PFI said this new partnership reinforces PFI’s commitment to building a strong presence in India, a country whose future growth over the long term, would enhance their 138-year history of providing financial security and peace of mind to customers around the world.

DLF Pramerica Life Insurance is a 74:26 joint venture with PIIHL, a subsidiary of PFI, and has been in operation for five years. These agreements are subject to regulatory approvals. DLF said the transaction consideration shall be disclosed post receipt of all such approvals. The life insurer's net loss widened to Rs 132.3 crore for the year ended March 2013, in comparison to Rs 128.2 crore for the financial year 2011-12.

The life insurer had seen a 27.4 per cent drop in new business premium for the two-month period ended May and collected new premiums of Rs 15.21 crore. New business premiums of life insurance companies saw a 4.07 per cent drop for the April and May period, as compared to the same period last year.For the year ended March 2013 however, DLF Pramerica collected Rs 236.7 crore, compared to Rs 167 crore premium for financial year 2011-12.

Life insurers collected new premiums of Rs 11,742.71 crore for the two month period, as compared to Rs 12,428.82 crore in same period the previous financial year. Private life insurers saw a 7.8 per cent drop in new premium collection and collected Rs 2,960.55 crore of new premium in this period.