Reliance General, Royal Sundaram submit merger proposal to Irda

14-Jul-2010

Reliance General Insurance and Royal Sundaram Alliance have submitted a proposal to the insurance regulator to merge their businesses. The proposal will pave the way for UK insurer, the RSA group, acquiring a 26% stake in the second-largest private insurer and would also result in Sundaram making an exit from the business. When contacted, a Reliance Capital spokesperson refused to comment and Royal Sundaram Alliance MD Ajay Bimbhet said it was the company policy not to comment on market rumour and speculation. According to sources, Reliance Capital will not incur any expenditure for the acquisition as it will receive a substantial premium from Royal Sun Alliance for the additional stake.

Meanwhile, sources say Reliance Capital has been in talks with Nippon Life as well as a strategic investor in its life insurance business. The company was earlier reported to be in talks with Swiss Re. Company officials have, however, denied any plans for a stake sale and has said the focus was now on understanding the impact of new Irda guidelines on charges and the impact of these charges on profitability and valuations.

The UK-based RSA group was until recently known as Royal and Sun Alliance insurance. The group has been looking at expanding its operations in Asia after its exit from US in 2007. Reliance General Insurance has been substantially scaling down its business in its pursuit of underwriting profits. The merger would give it back the size and also a substantial motor insurance business.

Source : www.insuremagic.com