Discussions For JV Insurance Co Taking Place Parallel To Talks About Possible Equity Participation In Reliance Life
RELIANCE Capital is in talks with Swiss Re for a proposed foray into health insurance. The discussions for a joint venture health insurance company are understood to be taking place in parallel with discussions about a possible equity participation in Reliance Life Insurance.
There have been news reports that Swiss Re would pick up a 10-15% in Reliance Life Insurance at around Rs 1,500 crore. A deal at this price would value the life insurance business at over $3 billion. Neither Reliance nor Swiss Re have commented on these news reports.
Swiss Re is a so-caller reinsurer, a seller of protection to insurance companies. Sources said that Reliance had been in talks with a couple of other potential partners. The company is learnt to be close to finalising a deal by next month. According to sources, where Swiss Re would soon be conducting due diligence.
In the past Reliance had indicated that it would first sell a strategic stake in its life venture. After the stake sale goes through the company is planning an Initial Public Offering where it will dilute another 10-15%. The dilution would be in such a manner that Reliance Capital would continue to hold close to 75% after both the stake sale and the IPO.
Reliance has the most headroom to raise capital for its insurance business since it does not have any foreign shareholders. Almost all insurance companies have a multinational partner holding the maximum permissible 26% and can therefore can sell stakes only to domestic investors.
In June '09, Swiss Re had entered into a non-binding agreement with Religare to develop a health insurance business.
The multinational was willing to pay a significant premium for the 26% stake but the two partners could not agree on a business plan and the joint venture was abandoned in September '09.
Following the split, Swiss Re said in a statement that it continued to be open to exploring a health insurance joint venture in India.
Swiss Re is already present in the Indian market through a 26% stake in TTK Healthcare Services, a health insurance thirdparty administrator. At present Reliance General Insurance — the non-life arm of the group sells health insurance. The group also has a stake in a third-party administrator — Family Health Plan.
Besides ADAG has investments in hospitals. Unlike its German rival Munich Re, which owns a large direct insurance business through its subsidiary Ergo, Swiss Re does not have a very large direct insurance business. Swiss Re has reported a profit of Swiss Franc 506 million for 2009 as against a Swiss Franc 864 million loss suffered in the previous year in the wake of the sub-prime crisis.
