Shriram General Insurance scouting for Asian acquisitions

Shriram General Insurance (SGI), the non-life insurance arm of the Rs 65,000-crore Shriram Group, said it was looking at acquisition opportunities in Asia. SGI, along with its South African partner Sanlam, is eyeing deals in the range of $50-75 million.

SGI had recently acquired Monarch Insurance, a Philippines-based non-life insurance firm, becoming the first Indian insurer to acquire an insurance company outside India.

While Sanlam, a leading financial services group, is open to investing up to $50-75 million per deal, Shriram may not go beyond $5-10 million as it wants to keep its investment size under 10 per cent of what Sanlam invests, said Shriram Group’s Gdroup Director G S Sundararajan, who is also on the board of Sanlam Emerging Markets (SEM), responsible for Sanlam’s financial business services in emerging markets outside South Africa.

“To validate our hypothesis, we thought we should experiment with a small investment and that is why we supported SGI's investment in Monarch Insurance. If this is successful, we will look at more such opportunities,” said Sundararajan.

He added this was the company’s first step towards foreign foray in into non-life insurance. “Sanlam is our strategic partner, who has interest in Asia for such opportunities and we will be collaborating with them if they want us to.”

The company is looking at Malaysia, Indonesia, Vietnam, and Myanmar for possible acquisitions.

He noted Shriram had never managed a foreign investment and that was why the company decided to go for a small investment. SGI has infused Rs 25 crore to meet capital requirements of Monarch Insurance, Rs 10 crore was already invested through an overseas subsidiary of Shriram Capital.

“We don’t see any reason why we will not be successful, as we have the domain knowledge, as well as experienced people who have managed this business in India quite well,” said Sundararajan.

Sanlam, which was established as a life insurance company in 1918, invested around Rs 2,500 crore in Shriram Group’s financial service businesses last year for a 26 per cent stake.

SGI's strength is in motor insurance, Sundararajan added. Allied services (insurance broking, loss assessment and risk management) are the foundation for the group to get into non-motor business. According to Sundararajan, Shriram is the only insurance group with a comprehensive set of allied services.

He noted it was not viable for the company to do business with corporates, because of high discounts involved. Insurers that do corporate business are those owned by banks, which manage to get business at lower discounts. Stand-alone insurers including public sector companies are giving 85-90 per cent discount with very little left to cover even basic administrative costs.

For SGI, captive business (from Shriram Transport customers) contributes around 50 per cent of the business and the company continues to achieve low claim ratio in a difficult business like motor insurance. These factors together have made SGI profitable and the company is expected to continue in this trajectory in the coming years as well.

“We expect a 20-30 per cent growth on the top line in SGI,” said Sundararajan.