Chennai, July 14 (IANS) The Reliance Anil Dhirubhai Ambani Group (ADAG) is planning to snap up the city-based non-life insurer, Royal Sundaram Alliance Insurance Company, according to sources close to the development.
The sources said Reliance General Insurance Company, part of the ADAG, and Royal Sundaram have submitted a merger proposal to Insurance Regulatory and Development Authority (IRDA).
‘Once the green signal is obtained from the regulator, the Reliance General Insurance and the shareholders of Royal Sundaram would sign the deed and make a formal announcement,’ the sources told IANS.
Royal Sundaram is a 74:26 joint venture between Sundaram Finance group and the Britain-based Royal Sun Alliance.
As per the merger plans, Royal Sun Alliance will be a shareholder in the merged entity.
With the abolition of administered pricing mechanism for non-life insurance products, the market is witnessing severe rate war in the fire insurance segment, a major source of revenue and profit for the insurers.
Most of the non-life insurers in the country are posting underwriting losses – premium minus claims outgo.
Asked about the company exiting non-life joint venture, Sundaram Finance Managing Director T.T. Srinivasaraghavan had earlier told IANS: ‘We have not spoken to anybody about selling our stakes. I can’t say that about our partner – RSA, UK. A stage has not been reached where we have to take a call to be present or exit the insurance business.’
With the plans for Reliance General Insurance taking over Royal Sundaram Alliance now filed with IRDA, Sundaram Finance seems to have taken the final call.
Srinivasaraghavan, however, was not available to clarify on the latest development, despite several attempts made by IANS.
Sundaram Finance holds just a tad below the 50 percent stake and with group outfits the total holding comes to 74 percent and the balance is held by Royal Sun Alliance.
The merger when it happens will be the first one in the domestic non-life insurance market that is witnessing newer entrants despite the existing competition.
ADAG got into life insurance business in 2005 by acquiring another city-based company, AMP Sanmar Life Insurance.