Nippon Life to buy stake in Reliance Life for Rs.2,265 crore

Japanese life insurer Nippon Life Insurance will increase its stake in Reliance Life Insurance to 49 percent by acquiring 23 percent stake from Reliance Capital for Rs.2,265 crore, the two groups said.

In line with the new shareholding structure, the name of the company will also be changed to Reliance Nippon Life Insurance Company Ltd.

In a statement issued here, Reliance Capital said the transaction pegged Reliance Life Insurance's valuation at approximately at Rs.10,000 crore ($1.5 billion).

The valuation is amongst the highest valuations for any life insurance company in India despite the economic slowdown in the country.

Nippon Life Insurance's investment also represents an implied Embedded Value (EV) multiple of over three times for Reliance Life Insurance, the highest for any private insurer in India till date, Reliance Capital said.

"We are delighted that the outstanding relationship between our two companies has now grown into an equal partnership, with NLI (Nippon Life Insurance) increasing their stake - first, in our asset management business, and now, in our Life Insurance business - to 49 percent," Anil D. Ambani, chairman, Reliance Group, was quoted as saying in the statement.

"Life Insurance is one of Reliance Capital's major businesses, and we believe Nippon Life's experience of over 125 years will accelerate our growth in this space," he added.

"Ever since our initial investment in 2011, we have developed a mutual understanding and built more than just a financial partnership but an interactive relationship based on solid trust," Yoshinobu Tsutsui, president, Nippon Life Insurance, was quoted as saying in the statement.

"This additional investment represents not only the past efforts and initiatives, but also the good relationship between both companies going forward, and we are pleased to be able to further strengthen this partnership in various fields. We believe our past and future ties will become a great role model for India - Japan business partnerships," he added.

The Boards of Directors of both the companies - Nippon Life Insurance and Reliance Capital - have approved the increase in stake by the Japanese partner, subject to regulatory approvals.

The stake hike is expected to be completed within the current fiscal.

According to Reliance Capital, the Japanese insurer would have invested a total of Rs.5,327 crore ($819 million) for acquiring 49 percent in Reliance Life Insurance with this transaction.

Nippon Life Insurance has also committed an investment of Rs.3,303 crore ($508 million) in Reliance Capital Asset Management taking the total investments by the Japanese company to Rs.8,630 crore ($1.3 billion), the largest foreign direct investment (FDI) in the financial services sector.

For the quarter ended September 30, 2015, Reliance Life Insurance has logged a new business premium of Rs.601 crore ($92 million), renewal premium of Rs. 673 crore ($104 million).

Net of reinsurance outgo the total premium stood at Rs.1,263 crore ($194 million) and the funds under management stood at Rs.15,524 crore ($2.4 billion), Reliance Capital said.