CCI approves acquisition of general insurance business of Bharti AXA by ICICI Lombard

The Competition Commission of India (CCI) has approved the acquisition of General Insurance Business of Bharti AXA General Insurance Company Limited (Bharti AXA) by ICICI Lombard General Insurance Company Limited (ICICI Lombard) under Section 31(1) of the Competition Act, 2002. Earlier in August, ICICI Lombard announced its merger with Bharti AXA’s non-life insurance business. The combined entity is set to emerge as the third-largest non-life insurer in India. Post the proposed deal, ICICI Bank’s shareholding will come down to 48.1% while Bharti & AXA will together hold Rs. 7.3% stake in the merged entity. The exchange ratio for the same stands at 2 shares of ICICI Lombard for every 115 shares held by the shareholders of Bharti AXA General Insurance business. ICICI Lombard believes that there is significant headroom available for operating leverage and cost-effectiveness and that they do not require any capital raise at the moment given the solvency margins remain well above the regulatory requirements. Also, Bharti AXA has a stronger presence in motor insurance and hence, the combined entity will be able to garner 12% market share in this segment. CLSA has also maintained BUY with a target price of Rs 1560/ share. They add with a 120% combined ratio & 7.9% share dilution deal will be earnings dilutive but the scale & synergy will ICICI Lombard to optimise expense ratio in future. Note that ICICI Lombard is a general insurance company registered with the Insurance Regulatory and Development Authority of India (IRDAI) and is engaged in providing a comprehensive and well-diversified range of general insurance products, including motor, health, fire, personal accident, marine, engineering and liability insurance, through multiple distribution channels. Meanwhile, Bharti AXA is a general insurance company registered with the IRDAI and is a joint venture held by Bharti General Ventures Private Limited (51%) and Societe Beaujon (49%). It is engaged in providing general insurance products, including motor, health, travel, crop and home insurance to its customers. Pursuant to the proposed combination, the entire general insurance business of Bharti AXA would be transferred by way of a demerger to ICICI Lombard in consideration of issuance of shares by ICICI Lombard to Bharti AXA.