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), picking up 25 per cent stake of IDBI Bank for Rs 580 crore.

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

In the non-life segment, it was Italy's financial services major Generali which raised its stake in Future Generali India Insurance to 74 per cent in May this year.

Last fiscal, the Indian government allowed foreign players to raise their stakes in Indian joint venture insurance firms up to 74 per cent from 49 per cent earlier as a move to attract investment as well as to increase insurance penetration in the country.

"Ageas completes the acquisition of a majority stake in the Indian life insurance joint venture Ageas Federal Life," Ageas said in a release.

The global insurer said it has acquired the additional 25 per cent stake (from IDBI Bank) for a total cash consideration of Rs 5.8 billion (EUR 73 million).

"With this transaction, Ageas increases its interest in the joint venture that it has operated to date together with IDBI Bank and Federal Bank to 74 per cent."

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

Domestic lenders IDBI Bank and Federal Bank along with Ageas had formed the life insurance joint venture named -- IDBI Federal Life Insurance Company --in 2007 and commenced operations a year later in 2008. Their original stakes in the company stood at 25 per cent, 26 per cent and 49 per cent, respectively.

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

Federal Bank continues to hold a 26 per cent stake in the joint venture which was renamed as Ageas Federal Life Insurance in December 2020. IDBI Bank exits as a shareholder but remains a distribution partner, said both the joint venture partners.

Vighnesh Shahane, MD & CEO, Ageas Federal Life Insurance, said: "Despite the various challenges due to the pandemic as well as the prior uncertainty around the stake sale, we have consistently delivered superior results, achieved new milestones, and declared profit for ten consecutive years."

Ageas Federal recorded profit for ten consecutive years beginning FY13. The company's total premium rose by 13 per cent to Rs 2,207 crore in the fiscal year ended March 2022. It posted a net profit of Rs 94 crore during the year.

Ageas said from Q4 2022, AFLIC will enter into the consolidation scope for both IFRS and solvency II.

Under IFRS, this transaction is considered a step acquisition, hence the previously held interest of 49 per cent is treated as if it had been disposed of and generates a non-cash capital gain of EUR 50 million, it added.

International Financial Reporting Standards (IFRS) refers to global accounting rules. The financial statements under IFRS are consistent, transparent and easily comparable around the world.

"The impact of the transaction on the Group's solvency position is neutral," Ageas said further.

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