The insurance regulator has given an in-principal approval for the stake sale in IndiaFirst Life Insurance Company, by the UK-based Legal and General Group to private equity firm Warburg Pincus LLC, two sources confirmed the development.
IndiaFirst is a joint-venture between Bank of Baroda (44 per cent shareholding), Andhra Bank (30 per cent) and Legal and General. In June this year, Legal and General announced that they would sell their 26 per cent stake in the life insurer to Warburg Pincus for Rs 7.1 billion.
A source in the knowledge of the matter confirmed the receipt of the in-principal approval from the Insurance Regulatory and Development Authority of India (IRDAI) for the share transfer, stating that, “The final approval will come in time once the special-purpose-vehicle (SPV) is set up. Under the guidelines for private equity investments in the insurance sector, the company needs to set up an SPV to complete the share transfer. This is not a condition in other cases where a company buys a stake from another in the insurance space.”
Business Standard sent an email query to Warburg Pincus and will update the article as and when replies are received.
The source cited above added that this is the first private equity deal in the insurance sector to have been filed with the regulator after the guidelines were introduced in December 2017.
The other major private equity deal in the insurance space is the Rs 65 billion acquisition of a 93.99 per cent stake in Star Health and Allied Insurance Company, by a consortium of investors, including WestBridge Capital, billionaire Rakesh Jhunjhunwala and Madison.
Between FY2010 and FY2014, IndiaFirst had posted consistent losses, but that was until RM Vishakha took over as managing director and chief executive officer.
After taking over the company’s net profit boomed from a net loss of Rs 250 million in FY2014, to Rs 352 million at the end of FY2017. At the end of FY2018, IndiaFirst’s net profit grew by 45 per cent, year-on-year, to Rs 512 million.
“From a premium perspective, we’ve grown from collecting Rs 24.6 billion APE (annualized premium equivalent) in FY2015 to nearly Rs 40 billion at the end of FY2018. As we speak, if I took it up FY2019, it would be double the business. For our shareholders, even they have other issues, we have given them a 5x growth in their initial investment, which is not a small amount in less than ten years” Vishakha told Business Standard.
The company’s asset under management have nearly doubled in the last three years from Rs 76.5 billion in FY2015 to Rs 126.22 billion at the end of FY2018.
At the end of the last financial year, the company covered one million lives and 3.75 million lives through its individual and group life insurance policies, respectively. In nine years IndiaFirst has paid a total of Rs 8.9 billion in claims. Total claims paid stood at 10,205 claims worth Rs 2.3 billion at the end of FY2018, from 3,962 claims worth Rs 71.6 million at the end of FY2015.
“As I have said before micro-insurance is the future and the ‘insurance in a sachet’ model is the only way we can improve penentration of life insurance. I want to do with insurance what FMCG companies have done with the market,” she says.
The company has already begun making strides in the micro-segment having launched a microinsurance plan called ‘Khata Plan’ using government-run Common Service Centres last November. Further, this year it tied up with Oxigen Services, a payments company, to distribute insurance through point-of-sale (POS) outlets.
As a result IndiaFirst caters to the three segment namely, micro, middle and high net worth (HNI), through its ticket-sizes which ranges from Rs 500 to Rs 20 million.
During the first seven months of FY2019, total premium grew by 91.96 per cent from Rs 5.6 billion at the end of October 2017 to Rs 10.74 billion at the end of October 2018.
The majority of the growth came from the Group insurance segment, which has grown 175 per cent, year-on-year, to Rs 7.6 billion at the end of October 2018.
“We continue to be focused on our targeted 20 per cent growth for the financial year. While individual premium has been flat, in the month of October we’ve seen it jump. Large part of the growth has come from group term policies,” she said.
Vishakha declined to comment on the proposed merger of Bank of Baroda with Dena Bank and Vijaya Bank, stating that the life insurer has not had any discussions with its primary shareholder on the matter.