Capitaline

Insurance 22-Sep-22

IDBI Bank sells entire stake in Ageas Federal Life Insurance

Belgium-based Ageas Insurance International has acquired majority stake in its Indian joint venture Ageas Federal Life Insurance (AFLIC), picking up 25 percent stake of IDBI Bank for Rs 580 crore.

With this, it became the first foreign foreign partner in the Indian life insurance sector to own a majority stake of 74 percent.

In the non-life segment, Italian financial services giant Generali increased its stake in Future Generali India Insurance to 74 percent in May this year.

Last fiscal, the Indian government allowed foreign players to increase their stake in Indian joint venture insurance companies from 49 percent to 74 percent in a move to attract investment and increase insurance penetration in the country.

"Ageas completes the acquisition of a majority stake in the Indian life insurance joint venture Ageas Federal Life," Ageas said in a release.

The global insurer said it has acquired the additional 25 percent stake (from IDBI Bank) for a total cash consideration of Rs 5.8 billion (EUR 73 million).

"With this transaction, Ageas increases its interest in the joint venture that it has operated to date together with IDBI Bank and Federal Bank to 74 percent."

Ageas Federal Life Insurance said, "with the completion of the majority shareholding by Ageas, it is the first life insurer in India in which the foreign partner has acquired 74 percent stake."

Domestic lenders IDBI Bank and Federal Bank along with Ageas had formed the life insurance joint venture named -- IDBI Federal Life Insurance Company --in 2007 and commenced operations a year later in 2008. Their original stakes in the company stood at 25 percent, 26 percent and 49 percent, respectively.

In May this year, LIC-controlled IDBI Bank had announced exit from the JV and entered into a pact with Ageas Insurance International NV to sell its entire stake of 25 percent for Rs 580 crore.

Federal Bank continues to hold a 26 percent stake in the joint venture which was renamed as Ageas Federal Life Insurance in December 2020. IDBI Bank exits as a shareholder but remains a distribution partner, said both the joint venture partners.

Vighnesh Shahane, MD & CEO, Ageas Federal Life Insurance, said: "Despite the various challenges due to the pandemic as well as the prior uncertainty around the stake sale, we have consistently delivered superior results, achieved new milestones, and declared profit for ten consecutive years."

Ageas Federal recorded profit for ten consecutive years beginning FY13. The company's total premium rose by 13 percent to Rs 2,207 crore in the fiscal year ended March 2022. It posted a net profit of Rs 94 crore during the year.

Ageas said from Q4 2022, AFLIC will enter into the consolidation scope for both IFRS and solvency II.

Under IFRS, this transaction is considered a step acquisition, hence the previously held interest of 49 percent is treated as if it had been disposed of and generates a non-cash capital gain of EUR 50 million, it added.

"The impact of the transaction on the Group's solvency position is neutral," Ageas said further.

Solvency II is a harmonised, sound and robust prudential framework for insurance firms in the EU. It is based on the risk profile of each individual insurance company in order to promote comparability, transparency and competitiveness.

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