Promoters of Pramerica Life Insurance look to sell their major stake

Promoters of Pramerica Life Insurance are in talks with multiple insurers to sell their entire stake, amid losses and constraints on fresh capital infusion

Promoters of Pramerica Life Insurance, a joint venture between an arm of Piramal Finance and Prudential International Insurance Holdings, have approached multiple life-insurance companies for selling their entire stake, multiple sources told Business Standard.

 

The insurer, which has a 0.3 per cent market share in new business premium, posted losses in FY25 and FY24.

 

Sources said the promoters were looking for an exit after infusing capital into the company.

 

DHFL Investments Ltd (DIL), a wholly owned subsidiary of Piramal Finance, has 50 per cent in Pramerica while United States-based Prudential International Insurance Holdings, a fully owned arm of Prudential Financial Inc (PFI), has 49 per cent. The rest is held by Yardstick Developers. 

Neither Prudential International Insurance Holdings nor Prudential Financial has an affiliation with Prudential Plc, a company incorporated in the United Kingdom.

 

Prudential Plc is the joint venture partner of ICICI Bank in ICICI Prudential Life Insurance.

 

The insurer, which started operations in India in September 2008, was a joint venture between Prudential and DLF Realty, and has seen several changes in the ownership structure. In 2013, DLF Realty exited the 74:26 joint venture by selling its stake in the insurer to Dewan Housing Finance Ltd (DHFL).

 

In 2016, Prudential increased its stake from 26 per cent to 49 per cent. Piramal Finance acquired DHFL in 2021 for ₹34,250 crore, gaining 50 per in the life insurer through DIL.

 

“The insurer has some operational issues. It has not been able to scale up its business due to frequent changes in ownership and has disadvantages in its distribution mix. In life insurance, agents and banks are the major sources of business acquisition. Agency channels are captive channels, whereas despite the open architecture, banks support insurance companies which are promoted by the respective lenders,” said a source.

 

When contacted, a spokesperson for Prudential Financial said: “Prudential Financial regularly evaluates strategic opportunities for its businesses. We do not comment on rumours or market speculation.”

 

Emails sent to Piramal Finance and Pramerica Life Insurance did not elicit a response till the time of going to press.

 

Last year Piramal exited Shriram Life Insurance by selling its 14.72 per cent to Sanlam Emerging Markets for ₹600 crore. This move, to monetise its non-core assets, was in line with the company’s strategy to strengthen and streamline its balance sheet.

 

In its Annual Report, Pramerica has said among private insurers, bancassurance dominates distribution. The top 11 private life insurers have major bancassurance tieups or they are promoted by leading banks in the country.

 

Even among the life insurers set up after 2008, those promoted by banks or non-banking financial companies (NBFCs) have a strategic advantage over others.

 

“Life insurers not owned by a bank have a natural disadvantage in distribution. Pramerica has not been able to scale up its business due to its product structure and distribution pattern,” said an analyst.

 

“Agents and banks are the major source of business acquisition. The company has not been growing much and does not have much of an agency presence or bancassurance partnerships. It has to invest more in those channels,” the person added.

 

Pramerica Life Insurance has one small-finance bank and a few cooperative banks as partners for distribution. The life insurer has a pan-Indian presence through multiple distribution channels customised to address the needs of diverse segments.

 

The insurer largely caters to a niche segment through Prahri and Param, which are insurance products for the army and paramilitary forces. Apart from that, the insurer caters to credit life insurance and has a relatively small retail segment.

 

After the pandemic, the company increased its premium with new business premium (NBP) growing 11 per cent year-on-year in FY25 to ₹1,233 crore, with individual NBP growing 34 per cent, 2.5 times faster than the private industry.

 

Despite an increase in the limit foreign direct investment in the Indian insurance sector to 100 per cent, several foreign insurers exited in recent times.

 

Aegon exited the life insurance business by selling its stake to Bandhan Bank.

 

UK-based Abrdn (earlier known as Standard Life) exited its stake in HDFC Life Insurance through several tranches from 2017 to 2023.

 

Recently, Zurich increased its stake in Zurich Kotak General Insurance to 70 per cent in June 2024.