Saturday, December 29, 2007

Indiabulls, SocGen arm form life insurance JV

MUMBAI: Indiabulls Financial Services (IBFSL) and Sogecap, the insurance arm of Societe Generale (SocGen), have formed a 74:26 joint venture to enter the domestic life insurance market. IBFSL had short-listed German insurance major Ergo and SocGen for its proposed insurance foray and talks were on with both foreign firms during the last four months. Senior IBFSL officials said the life insurance venture will be initially capitalised with Rs 300 crore, of which SocGen has contributed Rs 150 crore for its 26% stake.

Sogecap will own 26% of the paid-up capital of the new insurance joint venture named Indiabulls Societe Generale Life Insurance while the remaining stake will be held by the Indian firm. Indiabulls has already got permission from the Reserve Bank of India (RBI) for investing in the JV. The JV has also initiated the approval process with IRDA. AK Shukla, former chairman of LIC, has been appointed as the non-executive chairman of the JV company.

SocGen has a very strong India presence through a JV with SBI in SBI Mutual Fund in which it owns 35%. SocGen had recently also bought out Apeejay Finance, a Kolkata-based NBFC, and is looking at retail financing opportunity in India. Sogecap is currently running the life insurance business in over 10 countries and is the third-largest insurance company in France.

Gagan Banga, CEO, Indiabulls Financial Services, said his company has been focusing on the insurance sector and has built a very scalable distribution set-up. “Thanks to a strong partner like SocGen, who already understands the Indian landscape because of their long-standing JV with SBI, we will be among the top three life insurance players within three years,” said Mr Banga.

SocGen ranks among the top 10 banks in Europe and is also planning to enter the Indian retail banking space subject to regulatory approvals. “Given the fact that IBFSL is one of the largest retail financial services companies with over a million customers, the life insurance foray marks a natural step forward in its quest to diversify beyond mortgage and consumer financing and stock broking,” another IBFSL official said.

IBFSL has a pan-India presence through its 600 offices in over 200 cities and this distribution network will help the life insurance company to start operating at scale very quickly. Sources close to the deal said the company expects to capitalise the life insurance company to the tune of Rs 2,000 crore over the next three years and is targeting to start collecting first year premium of over Rs 5,000 crore by 2010.

Indiabulls is already the largest corporate agent for Max New York Life and will collect premium exceeding Rs 100 crore in the current financial year for Max New York Life. Sogecap has currently contributed to 50% of the capital for 26% stake and has undertaken to continue to contribute to 50% in all capital infusions for the next three years.

IBFSL will now represent the financing business and will also hold the various new initiatives like life insurance, asset management and the proposed multi-commodity exchange in JV with MMTC, at a subsidiary level.

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