IAG sells stake in India’s SBI for over $640m
IAG is selling its 26pc stake in Indian joint venture SBI General Insurance for more than $640m.
Insurance Australia Group has ended its decade-old Indian adventure after selling its 26 per cent stake in SBI General Insurance, a joint venture with State Bank of India, for more than $640 million.
The move marks a broader retreat from offshore markets by the nation’s biggest insurer as insurance regulator takes a tougher view on the way capital is assessed in offshore subsidiaries.
IAG initially entered into the insurance venture with State Bank of India in 2009, with an eye to getting access to the nation’s rapidly emerging middle class.
The Australian insurer initially invested $100 million for the 26 per cent stake and through the years had been open to investing its holdings in the venture. In financial 2019 IAG generated an operating profit of $27 million from India, up from $10 million a year earlier.
At one point IAG was eyeing about 10 per cent of its business from its Asian investments although has since scaled back the ambition. Despite the exit IAG still has a sizable investment in AmGeneral in Malaysia.
“IAG has enjoyed a strong and successful relationship with the State Bank of India since establishing the SBI General joint venture in 2009,” IAG chief executive Peter Harmer said.
“With our sharpened focus on our core territories of Australia and New Zealand, now is the right time for IAG to exit its investment in SBI General,” he said.
The Indian exit will be done through two deals, selling an interest of just over 16 per cent in the venture to Napean Opportunities and a 9.99 per cent stake to an affiliate of Warburg Pincus.
The sales, which are subject to regulatory approvals, are expected to complete during the 2020 financial year and IAG said it expected to see a lift of more than $400 million in its regulatory capital and a net profit of more than $300 million.
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