Max Life Insurance disinvests 5% stake from Mitsui Sumitomo

The Insurance industry has started showing the first sign of reaction to the proposed decision of increasing the FDI limit to 49% from the existing 26%. Earlier this year in April 2012, Mitsui Sumitomo had acquired New York Life Insurance’s 26% stake in Max New York Life Insurance (Then a joint venture between Max India and New York Life Insurance). Since then the Insurance Company has be renamed Max Life Insurance. The deal was estimated to be around Rs 2700 Cr.

However unlike New York Life Insurance, Mitsui Sumitomo doesn't enjoy the privilege of increasing the stake from 26% in case the FDI limit was relaxed (as proposed now to 49%). Now when the Government has decided to increase the FDI limit, Max Life Insurance has disinvested 5% stake from Mitsui Sumitomo.  With Indian promoters having invested Rs 21,000 Cr and foreign investors putting in Rs 7000 Cr in the past decade in the segment, the new FDI cap raise is expected to draw in another Rs 30,000 Cr in the next five years, given the approval in the parliament.

Max India and Max Life Insurance chairman Analjit Singh stated that the disinvestment is a move aimed at unlocking the valuation from their life insurance business and that the decision is purely commercial. However with the above mentioned figures in terms of proposed FDI investment, can this stake disinvestment be also seen as a planned move for welcoming further foreign investments?

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Mitsui Sumitomo Insurance to buy 26% stake in Max New York Life Insurance

Tokyo based insurance holding company, Mitsui Sumitomo Insurance, is all set to buy the 26% state in Max New York Life Insurance from New York Life Insurance Company. With this the ten year old joint venture between Max New York Life and Max India Limited would come to an end. This joint venture came during the time when companies were spearing their wings in order to be a part of the globalization movement. Along with India, New York Life had also invested in other Asian markets.

The joint venture had kicked off well and it has been profitable since its inception. They offer long term savings and protection plans for individuals as well as groups through agency distribution. They evolved to become one the four large private life insurance companies in India. However its profits mark only a minor addition to New York Life’s overall earnings. Therefore New York Life has decided to expand on Mexico operations as it currently holds out to be the strongest international market for the insurance giant. The sale would also result in some capital collection but the real strategy is to shift focus on the more lucrative market of Mexico.

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