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In pursuance of the proposed sale of a part of its shareholding in ICICI Lombard General Insurance Company (ICICI General) via an initial public offering, ICICI Bank on Tuesday said its general insurance joint venture agreement with Canada-based investment firm Fairfax Financial Holdings has been terminated.
This move is pursuant to a termination agreement signed on Monday, the bank said in a stock exchange notice.
“The termination agreement has customary provisions for protection of parties in the event of non-completion of the proposed initial public offering on or before a mutually agreed date,” it said.
As at March-end 2017, ICICI Bank had 63.31% ownership interest in ICICI General.
In May 2017, Fairfax Financial Holdings offloaded 12.18% in ICICI General to a clutch of investors, including Warburg Pincus, Tamarind Capital Pte and IIFL Special Opportunities Fund, for 2,473 crore.
Investments in multiple areas In 2015, Fairfax Financial Holdings had increased its stake in the Indian insurance firm to 35% by picking up an additional 9% stake in ICICI Lombard for about 1,600 crore.
Fairfax, led by India-born Canadian billionaire Prem Watsa, has been aggressive in India with investments across real estate, infrastructure and logistics sectors. In 1994, Fairfax had acquired Continental Canada and renamed it Lombard Insurance. In 2000, ICICI Bank and Fairfax floated ICICI Lombard.
Reducing its stake in ICICI Lombard could be part of a plan that will allow the Canadian firm to start a new general insurance joint venture in India.Under existing rules, foreign investors cannot own more than 10% of two insurance companies. The Insurance Regulatory and Development Authority of India (IRDAI) has already given its To be established along with Oben General Insurance, Fairfax will have a 49% stake in the venture.
According to ICICI Bank’s annual report, ICICI General became the first private general insurance company in India to cross 10,000 crore in premium income in FY17. Its gross domestic premium income (GDPI) rose to 10,725 crore in fiscal 2017, a growth of 32.6% over fiscal 2016.ICICI General Insurance’s profit after tax grew 38% to 702 crore in fiscal 2017 from 502 crore in fiscal 2016.Its return on equity increased to 20.3% in fiscal 2017 from 16.9% in fiscal 2016.
