KKR, Temasek buy Indian insurer for $264m

Both investors will pick up equal stakes in India’s second largest life insurer, SBI Life Insurance.

Global private equity firm KKR and Singapore state investment fund Temasek Holdings have each invested $132 million in the life insurance unit of the State Bank of India, according to a company statement.

KKR and Temasek are acquiring a combined 39 million shares for INR 10 per share, representing a 3.9 percent stake in SBI Life Insurance, the second largest insurer in the country by market share, according to the India Brand Equity Foundation (IBEF).

The deal, which is equivalent to INR 17.9 billion ($264 million; €250 million), would value the insurer at INR 460 billion.

KKR invested from its 2013-vintage $6 billion Asia Fund II, which is around 70 percent deployed. Among its most recent investments in India include investment bank Avendus Capital, in which it invested approximately $105 million for a 68 percent stake, as well as a 10 percent stake in New Delhi-headquartered Max Financial Services for around $175 million. 

Commenting on the deal Sanjay Nayar, chief executive officer of KKR India, said the firm sees growth opportunities in Indian insurers stemming from increasing savings, a rising middle class and rapid urbanisation. “We look forward to supporting SBI Life’s long-term growth alongside these high-caliber partners, and are excited to enhance financial access for citizens across the country and promote the development of a more inclusive financial services industry.”

Following the completion of the transaction, which is still subject to regulatory approval, SBI will hold a 70.1 percent interest in SBI Life, while joint venture partner BNP Paribas Cardif will continue to hold 26 percent. 

The deal is in line with SBI’s announcement earlier this year that it would divest non-core subsidiaries in order to shore up capital.

SBI Life, whose assets under management grew by 12 percent to INR 798 billion as of March 2016, offers life insurance and pension products. The company earned INR 71 billion and INR 46.4 billion of new business premium during FY2016 and H1FY2017 respectively, it said in its latest annual report.

India’s $60.5 billion life insurance sector has been attracting private equity firms recently, buoyed by government reforms introduced last year that increased foreign ownership limits to up to 49 percent. 

In August this year, KKR-backed Max Financial merged with HDFC Life to become India’s third largest private life insurance player. In September, Singapore sovereign wealth fund GIC and Morgan Stanley bought shares in ICICI Prudential Life; Temasek bought a stake in the insurer in late 2015.

According to a report from IBEF, the country’s insurance market is expected to quadruple in size over the next 10 years from its current size of $60 billion to over $200 billion. 

In addition, a Willis Tower Watson study found that Indian private insurers outpaced state-owned life insurer Life Insurance Corporation of India, in FY2015 to FY2016, recording double digit growth of 14 percent in their weighted new business premium collection.