Zurich Insurance eyes $400-million stake in Kotak General Insurance

Zurich Insurance Group is in talks to buy up to 51 percent of Kotak General Insurance, a deal that will mark its first major bet in the Indian insurance market, two sources with direct knowledge of the matter said.

Sources said early-stage negotiations, backed by Asia’s richest banker Uday Kotak, valued the Indian company at about $800 million, and Zurich Insurance has expressed interest in a 49 percent minority stake or a 51 percent majority stake. .

They said the share the Swiss insurer wanted to secure would be worth around $400 million.

The first source said Kotak was still evaluating offers, including from other investors, but would prefer to retain “control of the company” after selling the stake.

“As a matter of principle, we do not comment on market rumors and speculation,” said a spokesman for Zurich, one of Europe’s largest insurers. Kotak General Insurance Company is a wholly owned subsidiary of Kotak Mahindra BankHe did not respond to Reuters inquiries.

While the Kotak insurance unit was reported to be interested in selling a stake earlier, its talks with Zurich, the size and valuation of the potential deal are being reported for the first time.

More than 30 companies operate in the local general insurance market, CareEdge Ratings said in a report, as annual premium collections grew by 11 percent to $26.7 billion in 2021-22, supported by rising levels of financial literacy and income.

Health insurance, for example, is still seen by many in India as a tax saving tool. CareEdge added that India remains a largely unpenetrated market with non-life insurance penetration of 1 percent in 2021, compared to the global average of 4.1 percent, highlighting the “potential of the industry”.

Already, foreign companies such as Allianz in Germany and Lombard in South Africa have general insurance partnerships with Indian banking or financial groups.

Kotak, a relatively smaller general insurance company, is in talks to sell stakes because it hopes to get an investor who can help them “turn around business and grow faster,” the first source said.

The Kotak unit posted a loss of $10 million and posted stellar income of $91.35 million in 2021-22, when larger competitor HDFC Ergo earned $1.66 billion.

One industry executive in Europe, who is not aware of the current deal talks, said Zurich has for several years assessed the India market, where companies are generally more profitable and have better profit margins than those in Europe.

In 2017, Zurich said it wanted to increase its presence in markets like China and India, where it could “compete without being a dominant player”. The company operates in more than 200 countries and provides life, health and auto insurance.

India in 2021 relaxed foreign investment rules for the insurance sector, allowing companies to acquire majority stakes of up to 74 percent, from 49 percent earlier.