Insurance sector likely to witness more mergers and consolidations

With mergers of public sector banks, many of which own stakes in insurance companies, divesting stake and consolidations in the insurance space could see more activity.

The proposed merger of Bharti AXA’s non-life insurance business with that of ICICI Lombard General Insurance is just one of the latest in the insurance sector, which has seen quite a few such developments in recent months.

The general insurance segment has seen two such big-ticket announcements in as many months while the life insurance segment too has been witnessing hectic activity. According to analysts, with a large number of players in both sectors, more such mergers and consolidations could take place in coming months.

Noting that the country’s general insurance industry has 34 players in 2020 as against 26 in 2010 and 29 in 2015, a note by ICICI Securities said, “Only 14 out of 34 playershave both healthy combined ratio (less than 110) and comfortable solvency (greater than 180). As such, the industry is ripe for consolidation.”

Earlier in July, Paytm had announced plans to acquire Raheja QBE General Insurance. In the life insurance sector too, there has been a move towards acquisitions and stake sales.

IDBI Bank had earlier this month said it had executed an agreement to sell up to 27 per cent of its stake in the life insurer to its joint venture partners – Ageas Insurance International and Federal Bank. While 23 per cent stake would be sold to Ageas, Federal Bank would acquire up to four per cent stake, leaving IDBI Bank with 21 per cent stake.

Similarly, Axis Bank and Max Financial Services had in April announced the signing of definitive agreements to become joint venture partners in Max Life Insurance.

With mergers of public sector banks, many of which own stakes in insurance companies, divesting stake and consolidations in the insurance sector could see more activity.

Source: The Hindu Business Line