State Bank of India has decided to dilute its stake in SBI General Insurance from 74 per cent to 51 per cent in favour of joint venture partner Insurance Australia Group (IAG).
Currently, IAG holds 26 per cent stake in SBI General Insurance. Subsequent to the stake dilution by SBI, IAG will hold 49 per cent stake in the general insurance JV.
In a notice to the BSE, SBI said: “The Executive Committee of State Bank of India’s Central Board has decided to initiate the necessary action as per JV agreement for dilution of SBI’s stake in SBI General Insurance from 74 per cent to 51 per cent with corresponding increase of stake of IAG from 26 per cent to 49 per cent, including appointment of a valuer to facilitate valuation and price discovery.”
The Insurance Laws (Amendment) Act 2015 provides for enhancement of foreign investment cap in an Indian insurance company from 26 per cent to an explicitly composite limit of 49 per cent with the safeguard of Indian ownership and control.
In addition to the provisions for enhanced foreign equity, the amended law will enable raising capital through new and innovative instruments under supervision of the Insurance Regulatory and Development Authority of India.
“Greater availability of capital for the capital intensive insurance sector would lead to greater distribution reach to under/un-served areas, more innovative product formulations to meet diverse insurance needs of citizens, efficient service delivery through improved distribution technology and enhanced customer service standards,” the Finance Ministry said in a statement in March.
Following passing of the amended insurance law, many Indian promoters are seen diluting their shareholding in their insurance joint ventures in favour of their foreign partners. Currently, there are 28 non-life insurance companies, including five standalone health insurance companies, and 24 life insurance companies in India.
SBI General closed the financial year 2013-14 (fourth year of operations) with a gross written premium of ₹1,188 crore, registering a growth of 54 per cent. During 2013-14, SBI General, in association with State Bank of India, covered over 1.5 crore savings bank account holders of the bank with a personal accident insurance cover.
SBI General follows a multi-distribution model encompassing bancassurance, agency, broking and retail direct channels. .