Sanmar finds a buyer for the stakes of its two promoters,
while Anil Ambani's Reliance Life, without ever having
sold a policy, acquires a running business. Venkatachari
Anil Ambani's Reliance Life Insurance Company Limited,
a subsidiary of Reliance Capital Limited, has concluded
a much awaited deal in the life insurance sector.
before selling a single life insurance policy, Reliance
Life, a part of the Anil Dhirubhai Ambani Enterprises,
has snapped the Chennai-based private life insurer AMP
Sanmar Life Insurance Company Limited. AMP Sanmar is a
26:74 joint venture between AMP, Australia and Sanmar
only recently, the Reliance Life had approached the Insurance
Regulatory and Development Authority (IRDA) to revive
its business licence that had been cancelled by the regulator
for non commencement of business.
Though the three parties to the deal Reliance Capital,
AMP and Sanmar are keeping the deal size secret,
figures ranging between Rs225-400 crore are being talked
about as being the final price.
is clear is that Reliance Life has clearly outbid other
suitors like Aviva, ICICI Prudential Life Insurance Company,
etc. This acquisition makes Reliance Life the first private
sector life insurer to start business without a foreign
deal gives Reliance Life a jumpstart as AMP Sanmar has
around 90 branches, 900 staff and 9,000 agents. Further,
AMP Sanmar is doing relatively good business even after
the sale announcement. Till this July the company has
earned a premium income of around Rs35 crore.
to sources, in July the company earned a fresh premium
income of Rs10 crore far exceeding its own expectations.
Going by this trend, officials say the company would complete
its nine months targets by August / September itself.
distress sale to desperate purchase
industry circles feel that the price is on the higher
side as they had estimated AMP Sanmar's value below Rs200
crore, much less than the company's Rs217 crore equity
ago the CEO of a large private insurer told domain-b,
"Given the size of AMP Sanmar's operations and the
kind of business they have done, I will not pay more than
Rs136 crore which is nearly 1.5 times their last year's
fresh premium income of Rs91.18 crore." (See: )
AMP had valued downwards its equity investment of Rs56.55
crore (A$17.29 million) to less than A$10 million.
price in excess of Rs217.50 crore would be a bonanza for
AMP and Sanmar and a jackpot if the sale price is over
Rs400 crore, says an insurance sector analyst.
Sanmar keeps its numbers close to its chest. The company
declined to share numbers like the amount transferred
from shareholder's fund to policyholder's fund to declare
dividend, the company's total liability under unit and
non unit-linked policies and, finally, the assets available
for the new shareholder.
from distress sale by the two partners, the deal has morphed
into desperate purchase by Reliance Life, feel some industry
for Sanmar's insurance plans
the sellers are not complaining. Says Sanmar group chairman,
N Sankar, "The group entered the life insurance business
at the invitation of AMP. To facilitate its exit and the
100 per cent sale, Sanmar has agreed to cooperate with
AMP in selling its own interests in the venture as well."
AMP Sanmar's chief operating officer B Natraj, "Though
having the first right of refusal to AMP's 26 per cent
stakes, Sanmar didn't exercise the same."
As Sanmar is cashing out its holdings now, it did consider
other options. With the initial investment phase getting
over, Sanmar was open to the idea of remaining invested
in the life insurance company by partnering with another
foreign life insurer or a group of investors who would
buy out AMP's stakes. It is learnt that one overseas life
insurer and a private investor were keen on such a partnership.
Reliance Life's bold bid dashed any such hopes. If Sanmar
wanted to continue with the venture either on its own
or with potential partners, it would have had to match
Reliance Life's bid. Perhaps the prospective partners
felt that it was wiser to start from scratch and incur
lower overheads rather than buy an existing company.
the sale agreement with Reliance Life does not bar Sanmar's
re-entry into the life insurance segment, Sankar discounts
any such possibility. "The business is capital intensive.
The group needs capital for its other projects. At least
in the near future the group has no plans of getting into
life insurance sector again."
to AMP Sanmar's managing director, Graham Meyer, the next
step is to discuss the deal with IRDA and get it cleared
and also iron out other transitional issues. According
to him, AMP's presence in India will mainly be in asset
management through AMP Capital Investors.
AMP Sanmar's policyholders and agents can heave a sigh
of relief with Reliance Life's entry, the employees of
AMP Sanmar have started worrying about their status under
the new dispensation.
industry watchers, the days ahead will be more interesting
as there will have to be a new CEO for AMP Sanmar and
the head office will be shifted from the Sanmar group
the life insurance operations would continue to be headquartered
in Chennai or be shifted to Mumbai will have to be seen.
also see : A
story of twists and turns
eyes are on Sanmar