Reliance Capital, Nippon Life to explore broader tie-up

 Reliance Capital and its Japanese partner in life insurance, Nippon Life Insurance, will explore strategic tie-ups in finance, initially in the asset management and private equity businesses of the Indian group.

Any strategic collaboration would boost Nippon Life's presence in India, while giving Reliance Capital better access to capital and expertise, analysts said.

Reliance Capital, controlled by billionaire Anil Ambani, manages assets of over $23 billion across mutual funds, pension funds, managed accounts and hedge funds. Its other businesses include insurance, broking, consumer and commercial finance.

The two firms will also explore possibilities for a distribution tie-up in India for Nippon Life's funds. Japanese companies are stepping up the pace of their overseas expansion after the devastating March 11 earthquake provided another spur to escape a moribund domestic economy.

Reliance Capital's net profit in the June quarter more than halved with income across its core businesses dropping.

Last month, brokerage ICICI Direct said it expected the firm's asset management business to improve due to a greater focus on the retail segment while Citigroup said stiff competition, sluggish inflows, and weak recovery prospects would hurt in the near-term.

In March, Nippon, the world's No.7 life insurer, agreed to pay $680 million to buy a 26 percent stake in Reliance Life Insurance, valuing the business at $2.6 billion.

Indian rules bar foreign firms from owning more than 26 percent in insurance joint ventures with local firms.

Reliance Capital saw a 59-percent fall in its annual premium equivalent in its insurance business for the quarter to end-June, but analysts expect the fund infusion by Nippon to boost its valuation.

Shares of Reliance Capital have fallen about 43 percent in 2011 so far, but analysts see this as a good opportunity to buy.

Shares in Reliance Capital closed up 1.8 percent at 384.2 rupees in a firm Mumbai market on Tuesday. Indian markets remained closed on Wednesday and Thursday for religious holidays.

http://economictimes.indiatimes.com/personal-finance/insurance/insurancenews/reliance-capital-nippon-life-to-explore-broader-tieup/articleshow/9825186.cms 

IRDA releases norms for merger of general insurance cos

 More than 10 years after opening up of the insurance sector, regulator Irda today proposed to allow mergers and acquisitions in the general insurance business that requires consolidation among the 24 industry players, most of which are loss-making.

To protect the interest of policyholders, they must be given right to exit from the insurer, which is on the block for acquisition, Irda said in its draft guidelines. An acquirer will need approvals from Irda, the Reserve Bank and the finance ministry, in case it has foreign direct investment.

Most of the 22 players in the private sector have foreign investment, which is capped at 26 per cent. Irda has also said that the intent of the acquirer should be clearly spelt out. The regulator has retained with itself the power to vet the valuations arrived at by the companies involved in M&As.

According to industry players, most of the private sector general insurance companies require fresh infusion of capital which may come from foreign partners, who have been constrained by the FDI cap. The Bill to raise the FDI ceiling is pending in Parliament.

The general insurance business has remained loss making for want of capital, which is constrained due cap on foreign capital infusion.

At present, the Insurance Act provides for the M&As only for life insurance companies.

The fast growing general insurance space has many entities looking for M&A opportunities. There have been reports of Reliance General Insurance looking to buy majority stake in its rival Royal Sundaram.

http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/irda-releases-norms-for-merger-of-general-insurance-cos/articleshow/7477713.cms