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June 17, 2011updated 13 Apr 2017 8:48am

Axa to get new partner in India

Ending its five-year partnership with French insurer Axa, Indian conglomerate Bharti Enterprises is to sell its 74% stakes in their life and general insurance joint ventures (JV) to Reliance Industries (RI) and its subsidiary Reliance Industrial Infrastructure (RII) for an undisclosed sum

By LII editorial

Ending its five-year partnership with French insurer Axa, Indian conglomerate Bharti Enterprises is to sell its 74% stakes in their life and general insurance joint ventures (JV) to Reliance Industries (RI) and its subsidiary Reliance Industrial Infrastructure (RII) for an undisclosed sum.

On the deal’s closing, RI will have a 57% stake of Bharti Axa Life Insurance and Bharti Axa General Insurance and RII stakes of 17% in each insurer.

Bharti said the sales were in keeping with its strategy of focusing on areas “where it is making a deeper impact”. Bharti’s other interests include India’s biggest mobile phone service provider.

A feature of the deal between Axa, RI and RII is Axa’s option to increase its stake in the JVs if maximum foreign ownership of Indian insurers is lifted from 26%.

The option would enable Axa to up its stakes to 50% with RI’s and RII’s stakes falling to 45% and 5%, respectively.

In RI Axa will have a partner that on all key metrics is India’s largest private company. RI’s core operations are in oil and gas and as at 31 March 2011 its turnover was $58bn and net profit $4.5bn.

RI’s entry into the insurance market carries with it an element of sibling rivalry. RI was founded in 1983 by the late Dhirubhai Ambani and is now controlled by Mukesh Ambani, one of his sons.

Mukesh Ambani’s younger brother Anil Ambani controls Reliance Anil Dhirubhai Ambani Group which has among its subsidiaries Alliance Capital which controls Indian insurers Alliance Life and Alliance General.

Japanese insurer Nippon Life is awaiting regulatory approval to buy 26% of Reliance Life for $680m, the largest foreign direct investment yet in India’s financial services industry.

Alliance Life is one of the top-four among India’s 22 private life insurers and has a market share of about 10% in the private life sector. In its year to March 2010, Alliance Life reported premium income of $1.46bn.

Bharti Axa Life is a far smaller player than Alliance Life. In in the 12 months to March 2011 it reported premium income of about $195m.

Bharti Axa General reported premiums of about $136m.

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