MUMBAI: ICICI Lombard and Bharti Axa General Insurance are exploring a proposal where the latter will merge with the former.
The proposed transaction marks a continued recent consolidation in the sector, which began with the acquisition of Apollo Munich Health by HDFC Ergo and the sale of DHFL General Insurance and Raheja QBE to Sachin Bansal and Paytm, respectively.
According to industry sources, if the merger goes through, ICICI Lombard stands to gain from the accumulated losses of Bharti Axa General. ICICI Lombard had reported a net profit of Rs 398 crore for the first quarter of FY21. Bharti Enterprises had been looking to sell its stake in its insurance ventures for some time. It had earlier entered into a deal with Reliance Industries to sell stake in both life and non-life companies. However, the deal fell through as both parties were unable to reach an agreement.
The proposed merger is understood to value Bharti Axa at Rs 2,600-2,800 crore. Both ICICI Lombard and Bharti Axa did not respond to requests for comments.
Bharti Axa did a business of Rs 509 crore in the first quarter of FY21 and has a 1.3% market share. The company had a capital base of over Rs 2,000 crore as of June 2020. ICICI Lombard recorded a premium of Rs 3,302 crore during the same period and has a 5.3% market share. The company is listed on the stock exchanges and has a market cap of Rs 59,000 crore.
Although non-life insurance companies have weathered the Covid crisis better than others in the financial sector, several business segments have taken a severe beating. Motor insurance, the cornerstone of the non-life industry, has taken a hit with the collapse of new auto sales, coupled with many commercial vehicles skipping renewals because of the lockdown. Also, the expected hike in third-party premium did not materialise this year.
Several other lines of business have also taken a hit because of the fall in economic activity. DHFL General Insurance has been rebranded as Navi General Insurance. Paytm is planning to do the Raheja QBE acquisition through QorQL, a startup that uses AI and big data in the health space. Bharti Axa is a joint venture with 51% stake from Bharti and 49% stake of AXA. The company has a pan-India presence through its 152 branches and offers insurance solutions for motor and two-wheeler, health & critical illness, property and student, individual & family travel.