Generali announced it has signed agreements to become the majority shareholder in both its Life and P&C joint ventures in India from Future Group. Both transactions are subject to the approval of relevant regulators, it said in a press statement.
Future Group announcement
Future Group had announced that it would sell its 25 per cent equity in Future Generali India Insurance Company Limited (FGIICL) to its JV partner Generali for a cash consideration of Rs 1,252.96 crore as part of its asset monetisation plans to pair debts.
GIICL is a joint venture between Future Enterprises and Generali Participations Netherlands NV (Generali).
''FEL has agreed to sell a 25 per cent stake in its General Insurance Joint Venture, FGIICL, to its Joint Venture partner Generali for a cash consideration of Rs 1,252.96 crore, plus an additional consideration that is linked to the date of the closing of the transaction,'' the regulatory filing by the Future Group firm said.
'It is also exploring options for the sale of its 33.3 per cent interest in the life insurance JV and expects to complete the exit of its holding in the insurance joint ventures in a time-bound manner to meet its commitment under the One Time Restructuring (OTR) Plan implemented under a August 6, 2020 circular issued by the Reserve Bank of India in relation to the Resolution Framework for COVID-19 related stress,'' it said.
Generali acquisition
In the P&C business, Generali has agreed to acquire from Future Enterprises Limited 25 percent of the shares of Future Generali India Insurance (FGII) for a consideration of around €145 million. After closing, Generali will hold a stake of around 74 percent in FGII. FGII is among the fastest growing general insurance companies in the market with a diversified product and distributor portfolio; as of March 2021 (fiscal year end for Indian insurance companies), it reported around € 450 million of premiums.
Regarding the Life business, an agreement has been signed to acquire the entire stake (around 16 percent) held by Industrial Investment Trust Limited (IITL) in Future Generali India Life (FGIL) for a consideration of around €26 million. FGIL reported around €150 million of gross written premiums as of March 2021. In addition, Generali will subscribe to a preferential allotment of shares in FGIL (around €21 million). As a result, following the closing of the transaction and completion of the preferential allotment, Generali will hold a stake of around 68 percent in FGIL, which may increase further to 71 percent by the end of 2022, following further preferential allotment of shares.
Generali is the first player among international insurers to step-up to a majority stake in both its Indian insurance Joint Venture companies since the new foreign ownership cap came into effect. Following the completion of all the components of the transaction, the total estimated impact on the Group’s Regulatory Solvency Ratio will be approximately -4 p.p. in 2022.
Jaime Anchústegui Melgarejo, CEO International, Generali Group, said: “Increasing Generali’s stake in our Indian Life and P&C insurance businesses represents a further step ahead in our growth journey in this high potential market. With an expected double-digit annual growth rate, India’s insurance market offers considerable opportunities, and we look forward to deepening our presence in this geography, becoming Lifetime Partners to an increasing share of Indian customers.”
Rob Leonardi, Regional Officer, Generali Asia, said: “We’re excited that we are now able to consolidate our position in our Life and P&C insurance businesses, as it has always been our intention to increase our presence in India. Once the transactions are completed, we plan to do so in a way that will create more value for our more than 4 million customers, agents, partners and distributors.”
India is one of the fastest growing insurance markets in the world, with nominal GWP growth at 10 percent+ CAGR over 2022-20301,2. It is uniquely attractive, thanks to its high real GDP growth (8% YoY growth expected in 2021-20222, among the highest of south-eastern Asian countries), low insurance penetration levels (with GWP representing only 4.23 percent of GDP as at 20203) and private consumption and disposable incomes (expected to grow around 7 percent over the next 5 years).
Citigroup and Alvarez & Marsal acted as financial advisors to Generali on the transactions.
