Zurich Insurance Eyes $400 Mln Stake in General Insurance Arm of India’s Kotak Mahindra Bank

Switzerland’s Zurich Insurance Group (ZURN.S) is in talks to buy up to 51% of India’s Kotak General Insurance, two sources with direct knowledge of the matter said. The deal would mark Zurich Insurance’s first major bet on the fast-growing South Asian insurance market.

The Swiss insurer already has a presence in the region through its joint venture with China’s New China Life Insurance Co Ltd, established in 2013. But the Kotak deal, if successful, would give it a much bigger footprint in the world’s fastest-growing insurance market.

India’s general insurance market is expected to grow 11% this year to $26.7 billion, according to research firm CareEdge Ratings. Rising income levels, financial literacy, and more excellent car or health insurance demand drive the annual premium collection. But competition in the sector is intense, with several Indian companies having partnerships with foreign banks or insurance firms.

With a market capitalization of $67 billion, Zurich is looking for a partner in Asia to expand its life insurance business. It is interested in the Japanese market as it seeks to capitalize on increasing longevity and changing demographics. It also sees growth potential in the fast-growing emerging markets of India and China.

The Kotak deal would help Zurich Insurance’s profit margin by expanding its presence in the country’s growing middle class. The Indian economy is expanding at about 7%, and the middle class is increasing spending, creating an increased demand for insurance.

The insurer has been reducing its costs by using technology to automate its operations and streamline processes. It has implemented Blue Prism’s software to enable robots to handle repetitive and low-value tasks, freeing up its operational teams to focus on high-value work. This has helped Zurich Insurance win a Paragon award for excellence in robotic process automation from Information Services Group last year.

Zurich is in talks with life insurance to buy a majority stake in Banco Santander’s Latin America insurance operation. The Swiss insurer expects to finalize the deal this year, which is aimed at increasing the contribution of new business from Asia and Latin America to 30 percent of its total life insurance sales by 2013, from 15 percent currently.

Santander’s insurance businesses in Brazil, Mexico, and Chile are valued at around $2 billion, the company said in a statement. Zurich will finance most of the payment with cash, while the rest is planned to be financed through hybrid debt issuance. The transaction is subject to the approval of regulators in the three countries.

Vox Weekly

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