Kotak bank’s insurance stake sale to Zurich group a signature Uday Kotak deal

livemint.com:

₹117 crore in FY23 and has a market share of 0.5% in the crowded Indian non-life insurance market. Exiting a business whose performance has been underwhelming for about a decade is sensible. In an industry with more than 30 players, of which about a dozen control 90% of the market, Kotak General Insurance Company has been a laggard.

With Zurich investing $488 million or Rs. 4,051 crore for a 51 % stake in the company, with the option to buy another 19% over the next three years, the Kotak group’s worries about infusing funds to grow the insurer will ease. More importantly, the foreign investment (the biggest in the Indian non-life segment) will be put to better use – bolstering the promoter bank’s capital base of over 21.7 % of of the end of September, cutting its losses in the general insurance unit, and helping to drive growth in the banking business, where the returns are far more promising.

Zurich group’s entry into the Indian market, which it has been eyeing for long, comes at a time when its earnings growth, capital position, return on equity and solvency ratio have been strong in the first half of this year. The foray into the Indian insurance industry fits its ambitious growth plans over the next few years. The group reported a $3.7-billion gross business operating profit in the first six months of 2023, an indication of the financial muscle and organisational strength that the group can use to stay invested in an under-penetrated insurance market in a growing economy for the medium to long term.