MUMBAI: On a day when the insurance regulator invited all companies, both domestic as well as foreign, to set up more insurance ventures in the country, the Allianz group of Germany, which has two joint ventures with the Bajaj Group in the life and general insurance spaces, said it wants to exit them. The official announcement comes after years of simmering differences between the two over a stake increase that the German group was interested in but the Pune-based group wasn’t.
While this is bad news for the sector as a whole from an FDI/foreign ownership point of view, it may force both Bajaj Allianz Life and Bajaj Allianz General to go for a public share sales to give their partner an amicable and easy exit route.
“Discussions regarding Allianz’s desire to exit the JVs are at a preliminary stage and there is no proposal before our board or our insurance subsidiaries in this regard,” said Bajaj Finserv, the holding company of the privately held companies, in an exchange filing Tuesday.
Allianz has indicated it is "actively considering an exit from the life and general insurance joint ventures in India", the statement said.
The latest impasse that has come out in public finally is about the German firm’s interest in increasing its stake from the present 26 percent at a discounted price and the local partner’s unwillingness to accept the same. They have been partners for more than two decades now as Allianz was one of the first foreign players to enter the country when the sector was liberalized allowing 26 percent FDI way back in December 2000.
Though in December 2021, the FDI rule was amended to allow up to 76 percent stake, only one company has done it so far—the Generali of Italy by upping its stake in the JV with the Future group in 2023.
Bajaj Allianz General is the third-largest private sector non-life player in the country by gross written premium, while Bajaj Allianz Life is one of the fastest-growing with assets under management of over Rs 1 trillion as of March 2024.
Industry sources say Allianz wants to scrap the two joint ventures with Bajaj over the differences about the direction of the partnerships.
The main dispute is about Bajaj’s reluctance to allow the German firm to raise the stake in the JV from the present 26 percent at a discounted price. Also, the German company is not being allowed any strategic say in the JVs, according to a Bloomberg report.
After the exit, the Munich-based Allianz is reportedly looking to buy stakes in newly established insurance companies to retain a presence here, a Bloomberg report said quoting sources.
"The Bajaj Group, through the 74 percent equity stake held by the company (Bajaj Finserv), has built two solid businesses in life and general insurance, as joint ventures with Allianz SE which holds the balance 26 percent stake," the group said.
"Allianz, in case it exits the joint venture, has committed full support to Bajaj in ensuring a smooth transition to the Bajaj brand keeping in mind the interest of policyholders, business partners, employees and other stakeholders of the insurance companies," Bajaj Finserv added.