Reliance Life Insurance Company Limited, a subsidiary of Reliance Capital Ltd, and the shareholders of AMP Sanmar Life Insurance Company, on Sunday signed an agreement for the sale of 100 per cent equity in the Chennai-based life insurance firm.
Reliance Capital's acquisition is, however, subject to the regulatory approval. Reliance Capital had already applied to the Insurance Regulatory and Development Authority for the renewal of its life insurance licence under Reliance Life Insurance Company. It had received the IRDA R2 clearance in early 2001.
Highly-placed sources disclosed that the deal was struck for about Rs 400 crore (Rs 4 billion), making it Anil Ambani's biggest acquisition to date, since Adlabs was acquired for Rs 360 crore (Rs 3.6 billion).
It is not yet known whether there will be any change in the name of the company, though Graham Meyer, CEO, AMP Sanmar Life said this would have no bearing on policy holders.
AMP Sanmar Life, a 26:74 joint venture between the Australian AMP group and the Chennai-based Sanmar, has a capital base of Rs 217.5 crore (Rs 2.17 billion). This acquisition will give Reliance Capital an immediate entry into the growing life insurance business. AMP Sanmar has over 90 offices, a 9,000-strong agency force and an employee base of 900.
"With private players doing well, we see the acquisition of AMP Sanmar as a great opportunity to tap the huge potential in the Indian Market," said Reliance executives on being asked why the company chose to enter the business today, having obtained an in-principle IRDA licence in 2001.
Since the split between the two Ambani brothers, Anil Ambani has been "a man in a hurry, wanting to achieve things and strengthen his presence where ever possible," said top industry sources. The acquisition of AMP Sanmar, as in the case of Adlabs, will be funded by his own personal wealth, they added.
Reliance Capital buys AMP Sanmar InsuranceReliance Capital has already successfully forayed into the non-life insurance business through Reliance General Insurance Company.
The younger Ambani hopes to capitalise on the synergy between Reliance Infocomm and Life Insurance by cross-selling to the 1 crore (10 million) subscriber base. Executives compared the synergy with that of bancassurance as Reliance Infocomm hoped to tap its 1500 outlets and 100,000 channel partners.
Today's development marks the first true sale of a life insurance company in India. There had been a host of suitors for AMP Sanmar, which of late had seen phenomenal growth in its business despite the announcement of both the shareholders exiting. The Australian partner has declared its intentions to focus on its core home markets last year having exited the UK operations.
Following the finalisation of the deal, speaking to Business Standard, AMP Sanmar managing director Graham Meyer said, "The shareholders decided that Reliance was the most appropriate suitor in view of its strength, commitment and determination." He said the strong Indian corporate house offered security to the life insurance business.
Aviva and ICICI Prudential were among other life insurance companies in the race till the end, said industry sources.
Meyer said the decision to sell was driven purely by a strategic decision taken by AMP's CEO and the board, and had nothing to do with the performance in India.
The operations' break-even point would come after six to seven years, he added. The company began operations in January 2002.
The biggest challenge in managing AMP Sanmar was to deal with the pace of growth, said Meyer. "The speed was extraordinary," he added.
The company earned an aggregate premium of about Rs 200 crore (Rs 2 billion) in 2004-05, a growth of over 300 per cent over the previous year. In February 2005, the partners pumped in another Rs 57.10 crore (Rs 571 million) into the life insurance company to take the total capital in the business to Rs 217.10 crore (Rs 2.17 billion).
Meyer said AMP Sanmar was second or third in terms of size in the southern states, its stronghold. On an all-India basis, AMP Sanmar's ranking is lower.
AMP Sanmar has over 100 branches spread across the four southern states and parts of Gujarat and Maharashtra, and has covered over 225,000 lives in the course of its operations.
Meyer said the existing management would work through the transition period, the duration of which depended on the insurance regulator.
The Sanmar Group announced that it had entered the business at the invitation of AMP and the decision to sell its stake was triggered by AMP's decision to exit.
In a statement, N Sankar, chairman of the group, said, "I am happy that the sale is to an Indian entity committed to the life insurance business in India."
