Belgian multinational insurer Ageas is likely to acquire 23 percent additional stake from IDBI Bank in IDBI Federal Life Insurance. According to sources, the transaction will be closed tomorrow.
The insurance company will be renamed Ageas Federal once this transaction is completed.
Post this deal, IDBI Bank will hold 25 percent stake in the life insurer, Ageas will hold 49 percent which is the maximum permissible limit under the foreign direct investment (FDI) rules.
IDBI Bank was also planning to sell a 4 percent stake to Federal Bank in the life insurance JV. This is subject to approval by the Reserve Bank of India. Currently, Federal Bank holds a 26 percent stake.
IDBI Federal Life has an embedded value of Rs 2,000 crore approximately. This means that the deal size with Ageas could be around Rs 460 crore.
IDBI Bank, which is now owned by Life Insurance Corporation of India (LIC), was in talks to divest its stake in the life insurer for close to two years.
The LIC-owned bank had informed the exchanges in August 2020 about a Share Purchase Agreement (SPA) with Ageas Insurance International and Federal Bank.
For November 2020, IDBI Federal Life saw a 12.14 percent YoY growth in new premiums to Rs 51.52 crore. The private life insurance industry saw a de-growth of 5.15 percent for the same period.
At present, IDBI Bank holds 48 percent in the life insurer, whereas Federal Bank and Ageas hold 26 percent each.
In an earlier interaction with Moneycontrol, Vighnesh Shahane, MD & CEO of IDBI Federal Life Insurance had said there is a need to get a bank distributor quickly, and that the insurer is on the lookout for a potential bancassurance partner.
Shahane added that IDBI Bank-led sales have now come down to less than 5 percent, compared to the peak of 50-55 percent about three years ago. The sale started to decline after Life Insurance Corporation (LIC) took 51 percent stake in the bank.
IDBI Bank now sells LIC policies too in its bank branches, affecting sales of IDBI Federal Life policies.