Metlife plans to exit India insurance venture, here's why

US based insurer Metlife is planning to exit India insurance venture so it can concentrate on its home market where there has been a series of challenges for the company. The Indian venture has seen a tremendous growth in the past few years after Punjab National Bank became a 30% stakeholder in 2013.

But the US company is among the few overseas investors that didn't take advantage of the rise in the limit on foreign holding in insurance to 49% from 26%, a shift that has sparked consolidation in the industry. PNB Metlife is valued at about Rs 6,500 crore, said two people aware of the development, with an embedded value of Rs 2,100 crore.

"Metlife is planning to sell its (26%) stake in the Indian life insurance venture. Discussions have begun with global investment banks. Metlife is looking to globally restructure its businesses,” a person aware of the development told ET.

A Metlife Inc spokesperson said, "As a matter of policy, we do not comment on market speculation. India is a high potential market and we are pleased to see how it is developing. It's not clear whether other investors will look to exit. They include the M Pallonji group, which has a 17.15% stake, Elpro International (12.75%), IGE (8%) and J&K Bank (5.08%). Chintalapati Holdings exited in 2013 by selling its stake to PNB, which has a lock-in of five years or till a premium income of Rs 5,500 crore is generated, whichever is earlier. PNB has so far generated about Rs 1,600 crore of premium income.”

In a recent visit by Metlife’s senior management to India, it was decided that Metlife will exit the Indian Market. "Metlife's senior management visited India recently and they have decided to exit this market owing to the poor performance of the JV. They have hired an investment bank and are reassessing the market,” the person aware of the development told ET.

Metlife's India unit had share capital of Rs 2,128 crore at the end of March. Embedded value is equivalent to the share capital, which is half of what is required for a possible listing, said one of the persons cited above, thus ruling out that avenue. Embedded value is the present value of future profits.
(image: Indiatimes)