UAE – Abu Dhabi Investment Authority (ADIA) is in talks with Aditya Birla Group for an investment of nearly Rs 1,200-1,500 crore (US$150 million-US$187.6 million) in its health insurance arm as growth equity, the Economic Times reports.

The discussions for ADIA taking a minority stake in Aditya Birla Health Insurance Co Ltd (ABHICL) are ongoing and expected to gain pace in the coming weeks, people aware of the matter told ET.

The final amount and quantum of stake are not finalized yet, the report said.

Based in India, ABHICL is a 51:49 percent joint venture between Aditya Birla Group and MMI Holdings.

The firm was incorporated in 2015 as a standalone health insurance company and started operations in October 2016.

According to data from the Insurance Regulatory and Development Authority of India (IRDAI), ABHICL is one of five active standalone health insurance companies with a 14 percent market share of the gross underwritten premium in Q1FY22, ET reported.

Aditya Birla Health Insurance Co Ltd’s (ABHICL’s) total insurance premium collection in FY22 increased by 33 percent to Rs 1,470 crore, (US$183.9 million) out of which, 66 percent was from retail segment.

This move comes as ADIA, one of the major sovereign wealth funds (SWFs) in the world, is looking to double down in India’s fast-growing financial services space, ET said.

The Abu Dhabi firm last month bought a 20 percent minority stake in IIFL’s home finance arm for Rs 2,200 crore (US$275.2million).

ADIA has also taken bets on various leading listed banks and NBFCs, such as HDFC Bank, Reliance Capital, Kotak Mahindra Bank, and KKR India Financial Services.

Meanwhile, ABHICL’s total insurance premium collection in FY22 increased by 33 percent to Rs 1,470 crore, (US$183.9 million) out of which, 66 percent was from retail segment.

At the end of fiscal 2022, Aditya Birla Health Insurance’s gross written premium, or total insurance premium collected by it, increased 33% year on year to Rs 1,740 crore (US$217.6 million).

The firm has a presence in over 2,800 cities through branches and partner offices, partnerships with eleven banks in over 16,000 locations and over 51,000 agents selling their policies, according to its website.

The investment, once concluded, would underscore the growing ties between the Abu Dhabi sovereign fund and Kumar Mangalam Birla.

Health insurance deals in India

Despite regulatory caps, health insurance has seen deals perking in the last few years. Kedaara Capital bought into Religare Health Insurance Co Ltd in June 2020.

The previous year, mortgage lender HDFC Ltd announced acquisition of a majority stake in Chennai-based Apollo Munich Health Insurance Company Ltd for Rs 1,495.81 crore (US$187 million).

Also, in 2019, TTK Group exited from Cigna TTK Health Insurance joint venture by selling its 31.5% stake to Manipal Group for Rs 500 crore (US$62.5 million).

Similarly, Max India sold its 51% stake in Max Bupa Health Insurance Company to private equity firm True North.

Rakesh Jhunjhunwala-backed Star Health & Allied Insurance Co Ltd, the market leader in the category with close to 50% share, or Rs 950 crore (US$118.9 million) of gross premium underwritten this fiscal until June.

It listed in the local stock market in December 2021 and is now valued at Rs 35,721 crore (US$4.5 billion) even though the share price is now down to Rs 620 (US$7.8) each from the top band of the IPO price of Rs 900 (US$11.3) per share.

Low penetration of health insurance, increasing costs of hospitalization and higher awareness due to Covid-19 means that there is big potential for health insurance in India.

Premiums from the health insurance has become an important revenue line for general insurance companies.

Health insurance is the fastest-growing segment, growing close to 35%. Innovations like offering coverage for outpatient or clinic expenses and insurance for specific diseases also have big scope in India.

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