Aditya Birla Health Insurance Co Ltd (ABHICL) is one of five active standalone health insurance companies with a 14% market share of the gross underwritten premium in the first three months of the current fiscal year, according to data from the Insurance Regulatory and Development Authority of India (IRDAI).
The discussions for a minority stake are expected to gather momentum in the coming weeks as ADIA, one of the leading sovereign funds (SWFs) in the world, looks to double down in India’s financial services space, people cited above said.
The final amount and quantum of stake are yet to get finalised, they added.
Last month, ADIA had bought into IIFL’s home finance arm with a 20% minority stake for Rs 2,200 crore.
An ADIA spokesperson declined to comment.
Mails sent to Aditya Birla Capital and Aditya Birla Group spokespersons on Saturday did not generate any response till press time Sunday.
ABHICL is a 51:49% joint venture between Aditya Birla Group and MMI Holdings based in South Africa. The company was incorporated in 2015 as a standalone health insurance company. It started operations in October 2016.
The investment, once concluded, would underscore the growing ties between the Abu Dhabi sovereign fund and Kumar Mangalam Birla. ET, in its October 22, 2021 edition, was the first to report that Birla was partnering with Hamed bin Zayed Al Nahyan, managing director of ADIA, to invest in Zand, the UAE’s first digital only independent bank. Initially, the plan is to deploy $50-100 million as a private investment of the Birla family, but the quantum may go up in future as the business scales up.
Earlier this month, Aditya Birla Group CFO Sushil Agarwal joined the high powered board of the bank that has been created ahead of the imminent launch.
India’s fast-growing financial services have always been a strong focus area for ADIA along with infrastructure. In the past, it took bets in several leading listed banks and NBFCs including HDFC Bank, Kotak Mahindra Bank, Reliance Capital, and KKR India Financial Services.
Despite regulatory caps, health insurance has seen deals perking in the last few years. Kedaara Capital bought into Religare Health Insurance Co Ltd in June 2020. The previous year, mortgage lender HDFC Ltd announced acquisition of a majority stake in Chennai-based Apollo Munich Health Insurance Company Ltd for Rs 1,495.81 crore. Also in 2019, TTK Group exited from Cigna TTK Health Insurance joint venture by selling its 31.5% stake to Manipal Group for Rs 500 crore. Similarly, Max India sold its 51% stake in Max Bupa Health Insurance Company to private equity firm True North.
At the end of fiscal 2022, Aditya Birla Health Insurance’s gross written premium, or total insurance premium collected by it, increased 33% year on year to Rs 1,740 crore. As much as 66% of it was from the retail segment. The company claims to cover 18 million lives, out of which over 14 million lives are through micro insurance products. It has a presence in over 2,800 cities through branches and partner offices, partnerships with eleven banks in over 16,000 locations and over 51,000 agents selling their policies, according to its website.
In its results presentation for the fourth quarter of FY22, the company claimed the business has seen a 51% CAGR over the last 13 years versus an industry growth of 17%.
Rakesh Jhunjhunwala-backed Star Health & Allied Insurance Co Ltd, the market leader in the category with close to 50% share, or Rs 950 crore of gross premium underwritten this fiscal until June, listed in the local stock market in December 2021 and is now valued at Rs 35,721 crore even though the share price is now down to Rs 620 each from the top band of the IPO price of Rs 900 per share. Aditya Birla’s health insurance business is the fourth largest standalone player in the segment.
Low penetration of health insurance, increasing costs of hospitalisation and higher awareness due to Covid-19 means that there is big potential for health insurance in India. Premiums from the health insurance has become an important revenue line for general insurance companies. Health insurance is the fastest-growing segment, growing close to 35%. Innovations like offering coverage for outpatient or clinic expenses and insurance for specific diseases also have big scope in India.
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