Nippon Life acquires 26-% in Reliance Life Insurance

Nippon Life's acquisition of a 26-per cent stake in Reliance Life Insurance for Rs.3,062 crore is the largest foreign direct investment (FDI) in the Indian insurance sector.

Reliance Life Insurance Co Ltd, a fully-owned subsidiary of Reliance Capital Ltd (part of the Anil Dhirubhai Ambani Group), on Monday signed an agreement with Nippon Life Insurance – the world's sixth-biggest life insurer and Asia's largest private sector insurer – relating to the acquisition of the 26-per cent stake in the firm.

Reliance Capital has been looking for a strategic partner to expand its insurance business. Post stake sale, Reliance Life is expected to come out with an initial public offer, Japanese newspaper reports had said (See: Nippon Life set to buy 26 per cent in Reliance Life for $724 million).

Reliance Life Insurance is the only private sector life insurer not to have gone in for a tie-up with an international major.
 
In fact, group chairman Anil Ambani had made a pointed reference to this at the annual general meeting of Reliance Capital last year. ''Remarkably, while many of the 'giants' of India's financial services market have grown on the back of tie-ups with large foreign partners, our growth is totally organic and made in India,'' he had said. ''I see our spectacular success as a vindication of my enormous faith in the power of Indian investors, Indian financial markets and Indian entrepreneurship.''

The deal with Nippon values Reliance Life at Rs.11,500 crore. The company, India's fourth-largest private insurer, managed assets of over Rs.17,000 crore as on December 31, 2010 and reported an annual premium income of Rs.6,600 crore. Nippon Life posted revenues of Rs.3,24,000 crore ($72 billion) and earned a profit of Rs.11,700 crore ($2.5 billion) last fiscal.

According to Sam Ghosh, chief executive, Reliance Capital, Nippon life ''as a strategic partner will bring expertise and global best practices.''