Disclosure:I am market making in the shares of ICICI Pru Life
STANDARD Life is expected to use some of the financial firepower it has gained from the £2.2 billion sale of its Canadian operations to boost its presence in the Indian market.
The Edinburgh-based firm, which last week said investors were in line for a bumper £1.75bn windfall following the sale of its Canadian arm to Manulife, already has a 26 per cent stake in HDFC Life, one of India’s largest life insurers, and chief executive David Nish is keen to see that holding strengthened. After handing back the bulk of the Canadian sale proceeds to shareholders, the group will have about £450 million left over, which it said would be used for “general corporate purposes”.
Rather than seeking out a fresh takeover target, sources said that Standard Life was now more likely to focus on the organic growth of its UK business and lifting its stake in HDFC Life.
With Narendra Modi’s BJP sweeping to victory in May’s general election, the country’s government is planning to implement rules allowing foreign investors to own up to 49 per cent of local firms.
Nish has already said that he would “look positively” on any opportunity to increase the group’s holding in HDFC Life, which has more than 400 branches and almost 14,000 employees around the country.
Life insurance penetration in India is about 3.2 per cent of gross domestic product in terms of premiums a year, much lower than Japan’s level of more than 10 per cent and almost 6 per cent in Australia.
State-owned Life Insurance Corporation of India controls about 70 per cent of the life insurance market, but the Modi administration is “more open to inward investment and foreign ownership”, said Garry White, chief investment commentator at Charles Stanley.
The new regime could open up more opportunities for other companies with local joint ventures, such as the Dutch parent group of Edinburgh-based insurer Aegon UK.-from Scotsman
