Munich Re to buy additional 23.37pc stake in Apollo Munich
German reinsurer Munich Re will purchase an additional 23.37% stake in its joint venture insurance business, Apollo Munich Health Insurance Co. Ltd, for Rs.163.5 crore in a transaction that will value the company at Rs.703 crore.
Munich Re is hiking its stake in the health insurance firm nearly 10 months after the Union government increased foreign direct investment (FDI) cap in the insurance sector from 26% to 49%.
Munich Re's move to increase shareholding in the joint venture mir- rors moves by other foreign insurers to up their stake in the world's second most populous country where insurance penetration (3.9%) is well below the global average of 6.3%.
"India's population structure, increased life expectancy and positive economic development will usher in a steep rise in medium-term healthcare spending," Doris Höpke, member of Munich Re's board said in a statement. "With the increased stakeholding, we are strengthening our position for sustainable and profitable growth in this region."
Munich Re will purchase an additional stake from Apollo Energy Co. Ltd, a subsidiary of its joint venture partner, Apollo Hospitals Group. The transaction will bring down Apollo's stake to 51.1% in Apollo Munich from existing 74.47%, according to Monday's late night statement.
If the transaction successfully concludes, Munich Re's shareholding in Apollo Munich will increase to 48.75%. Subject to regulatory approvals, the stake sale is expected to close in the first quarter of 2016, Munich Re added. About 0.2% of shares will be held by employees.
"We are delighted that Munich Re has decided to increase their shareholding in our insurance venture. The transaction highlights the strong position of Apollo Munich as one of India's leading and most trusted stand- alone health insurance company," Shobana Kamineni, director at Apollo Munich and executive vice- chairperson of Apollo Hospitals Enterprise Ltd, said in the statement. "It also demonstrates the commitment of both the partners to further expand the operations of Apollo Munich."
Apollo and Munich Re joined hands in 2007 to start the health insurance company for the Indian market. In November, Japan's Nippon Life Insurance Co. bought 23% in Reliance Life Insurance for Rs.2,265 crore, while Canada's Sun Life Financial Inc. spent Rs.1,664 crore for 23% additional stake in Birla Sun Life Insurance. AXA SA, the French partner of Bharti Enterprises, spent an undisclosed amount to increase its shareholding in life insurance and general insurance joint ventures, Bharti AXA Life Insurance and Bharti AXA General Insurance, respectively. UK-based Bupa Plc purchased 23% additional stake in Max Bupa Health Insurance Co. Ltd for Rs.191 crore in November.