Ageas will acquire 40 percent in Royal Sundaram General Insurance from Sundaram Finance
Belgium-based insurance major Ageas is looking to expand its activities into non-life insurance segments, especially the health insurance segment, in India.
In an emailed interaction with Moneycontrol, Bart De Smet, Chief Executive Officer, Ageas, said that the company's investment in Royal Sundaram is in line with its strategic choice to expand in fast-growing markets in which it already operates, with a clear preference for non-life activities.
"The investment in Royal Sundaram in the Indian market ticks all the boxes. We will support the company in its diversification away from motor to other product lines, such as health," said Bart De Smet.
On November 14, Ageas Insurance International and Sundaram Finance said that the former will acquire 40 percent in Royal Sundaram General Insurance for Rs 1,520 crore. Currently, Sundaram Finance holds 75.9 percent in Royal Sundaram and has proposed to divest 25.9 percent.
The Euronext-listed Ageas offers retail and business customers life and non-life insurance products designed to suit their specific needs. Ageas concentrates its business in Europe and Asia.
Bart De Smet said that India is among the fastest growing economies globally. In 2018, India became the sixth largest economy in the world, and is expected to become the third-largest by 2020.
With regard to the overall general insurance industry in India, the CEO said it is expected to grow at a compounded annual growth rate (CAGR) of 15-20 percent over the next 3-5 years (and between 8-10 percent over the medium and long-term).
"Currently there is under-penetration of the Indian market. Premiums are expected to double between 2017 and 2022. Therefore we are convinced that there is a significant potential to grow," Bart De Smet said.
With respect to Royal Sundaram, the CEO said Ageas will evaluate the areas that can be optimised, such as product development, pricing, distribution, reinsurance and risk management.
Life insurance JV
Ageas is already present in the Indian life insurance market through IDBI Federal Life Insurance, in which it holds 26 percent stake.
"At the return of investment (ROE) level, the performance of our life JV is very satisfactory. We started a business from scratch in 2008 with a limited investment and ten years later it has grown significantly (28 percent CAGR FY15-FY17)," said Bart De Smet.
IDBI Federal Life has made it to the top 15 in individual new business premiums and has been profitable for several years now. However, the Ageas CEO said that its contribution to the group's results isn't significant as yet.In terms of investments in India, Bart De Smet said that they have been rather limited and (excluding Royal Sundaram) that they amount to approximately 30 million euro, including the initial investment and capital increases in IDBI Federal Life.