ICICI Lombard to acquire Bharti AXA General Insurance; to become 3rd largest player

In a major consolidation move in the insurance space, ICICI Lombard General Insurance has announced signing a definitive agreement to acquire Bharti Enterprises-promoted Bharti AXA General Insurance in all stock transaction.

The proposed Rs 4,600-crore deal will propel ICICI Lombard General Insurance to become the third largest player among non-life insurers.

The board of ICICI Lombard General Insurance "at its meeting held on August 21, 2020, considered and approved a 'scheme of arrangement' amongst Bharti AXA General Insurance (demerged company) and former company and their respective shareholders and creditors", the ICICI Bank promoted non-life insurer said in a late night filing on Friday.

Bharti Enterprises currently owns 51 per cent stake in Bharti AXA General Insurance, while French insurer AXA has 49 per cent.

Post demerger, Bharti AXA General Insurance will cease to be a going concern and both Bharti and AXA will be public shareholders.

After the acquisition, the annual premium on a combined basis will rise to Rs 16,447 crore with market share of about 8.7 per cent.

During July, ICICI Lombard earned a premium of Rs 1,089.07 crore while Bharti AXA General garnered Rs 276.78 crore, as per IRDAI's latest number.

Based on the share exchange ratio recommended by independent valuers and accepted by the respective boards of ICICI Lombard and Bharti AXA, the shareholders of Bharti AXA shall receive 2 shares of ICICI Lombard for every 115 shares of Bharti AXA held by them as on the date on which the 'scheme of arrangement' is approved by the board of ICICI Lombard and Bharti AXA, a joint statement said.

Under the terms of the agreement, Bharti and AXA will receive a total of 3.5 crore shares of ICICI Lombard which at the current market price is valued at about Rs 4,600 crore.

Shares of ICICI Lombard General Insurance closed at Rs 1,294.80 per unit, down 0.27 per cent on the BSE on Friday.

At present, promoter ICICI Bank Ltd holds 51.89 per cent stake in ICICI Lombard, while the rest is with the public. After the proposed deal, promoter stake will come down to 48.11 per cent.

The proposed deal is announced at a time when the general insurance industry is impacted due to the disruption caused by the Covid-19 pandemic.

The existing 25 general insurers excluding standalone health insurers witnessed a 6 per cent decline in premium in the first quarter of current fiscal due to a steep slowdown in sales of non-life policies in the wake of a prolonged lockdown that led to a temporary halt in most commercial activities, the statement said.

It further said the consolidation is beneficial for and in the interest of the policyholders as the demerger creates a more robust and financially strong insurer that can offer a wider product suite, more access points and comprehensive services to customers post completion of the scheme.

"The proposed transaction provides a meaningful opportunity for ICICI Lombard to consolidate its market leading position in the non-life insurance sector, becoming the third largest non-life insurer," the statement said.

The board approved the proposed scheme of demerger subject to all applicable statutory and regulatory approvals including from Insurance Regulatory and Development Authority, Competition Commission of India, stock exchanges, SEBI, shareholders and creditors of the companies involved in the scheme and the relevant jurisdictional benches of the National Company Law Tribunal, the filing said.

"We would also like to reassure Bharti AXA's policyholders and channel partners of seamless business continuity and maintaining highest standards of customer service," ICICI Lombard CEO Bhargav Dasgupta said.

Bharti Enterprises has been trying for a long time to exit its financial services business. In 2016, Bharti Enterprises' talks with Reliance Industries to sell its 74 per cent stake in Bharti AXA Life Insurance and Bharti AXA General Insurance could not reach a logical conclusion.

For the fiscal year ended March 2020, Bharti AXA General Insurance reported a 38 per cent increase in its gross premium collection to Rs 3,157 crore as against Rs 2,285 crore in 2018-19.

As of Q1 FY21, Bharti AXA General's solvency or minimum capital requirement stood at 1.77 as against the regulatory requirement of 1.5.