Belgium’s Ageas first to pick up majority stake in Indian life insurance joint venture; pays Rs 580 crore to IDBI Bank

Belgium-based Ageas Insurance International has completed the acquisition of a majority stake in its Indian joint venture Ageas Federal Life Insurance (AFLIC), acquiring 25% stake from IDBI Bank for Rs 580 crore.

With this, it has become the first foreign partner in the Indian life insurance sector to hold a majority stake of 74 percent.

In the non-life segment, it was Italian financial services major Generali that increased its stake in Future Generali India Insurance to 74% in May this year.

Last fiscal, the Indian government allowed foreign players to increase their stakes in Indian joint venture insurance companies to 74% from 49% earlier as a move to attract investment and increase the penetration of insurance in the country.

“Ageas completes the acquisition of a majority stake in Indian life insurance joint venture Ageas Federal Life,” Ageas said in a statement.

The global insurer said it has acquired the additional 25% stake (from IDBI Bank) for an all-cash consideration of 5.8 billion rupees (73 million euros).

“With this transaction, Ageas increases its stake in the joint venture it has operated so far along with IDBI Bank and Federal Bank to 74 percent.”

Ageas Federal Life Insurance said that with the completion of the majority stake by Ageas, it is the first life insurer in India in which the foreign partner has acquired 74% stake.

National lenders IDBI Bank and Federal Bank along with Ageas had formed the life insurance joint venture company named — IDBI Federal Life Insurance Company — in 2007 and started operations a year later in 2008. Their holdings original to the company were 25 percent, 26 percent and 49 percent, respectively.

In May this year, LIC-controlled IDBI Bank had announced an exit from the JV and entered into a pact with Ageas Insurance International NV to sell its entire 25% stake for Rs 580 crore.

Federal Bank continues to hold a 26% stake in the joint venture which was renamed Ageas Federal Life Insurance in December 2020. IDBI Bank is exiting as a shareholder but remains a distribution partner, the two partners said of the joint venture.

Vighnesh Shahane, Managing Director and CEO of Ageas Federal Life Insurance, said: “Despite various challenges due to the pandemic and previous uncertainty around the stake sale, we have consistently outperformed, achieved new milestones and we have declared profits for ten consecutive years”.

Ageas Federal posted profits for ten consecutive years as of FY13. The company’s total premium rose 13 percent to Rs 2,207 crore in the fiscal year ending March 2022. It posted a net profit of Rs 94 crore for the year.

Ageas said that from the fourth quarter of 2022, AFLIC will enter the scope of consolidation for both IFRS and Solvency II.

Under IFRS, this transaction is considered a step acquisition, so the previously held 49 percent stake is treated as if it had been disposed of and generates a non-cash gain of €50 million, he added.

International Financial Reporting Standards (IFRS) refer to global accounting rules. Financial statements under IFRS are consistent, transparent and easily comparable worldwide.

“The impact of the transaction on the Group’s solvency position is neutral,” Ageas said.

Solvency II is a harmonized, sound and robust prudential framework for EU insurance companies. It is based on the risk profile of each individual insurance company in order to promote comparability, transparency and competitiveness.

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