Zurich Insurance Group, headquartered in Switzerland, has reached an agreement to purchase a 70% stake in Kotak Mahindra Bank’s general insurance division for an immediate payment of 55.60 billion rupees (approximately US$671 million). This acquisition deviates from the initially planned staggered purchase, which was intended to involve a smaller sum.
Initially, last November, Insurance Business reported Zurich’s intention to secure a 51% share in Kotak’s insurance arm for 40.51 billion rupees, with plans to gradually increase its stake over several years. However, this revised agreement represents a significant investment by an international insurance firm in India’s non-life insurance sector.
The decision is influenced by the Indian government’s move in 2021 to raise the Foreign Direct Investment cap for insurers from 49% to 74%, sparking heightened interest from major carriers eyeing opportunities in India’s US$4.1 trillion economy.
India’s insurance market already boasts a substantial number of carriers, with additional players like Ageas awaiting government approvals. Notably, it’s estimated that approximately 35% of total savings held by Indian nationals are invested in life insurance.
Despite the substantial sums involved in this deal, Zurich appears well-positioned to pursue further mergers and acquisitions in 2024. The Swiss insurer reported record-breaking financial performance for the fiscal year ending December 31, 2023, with a business operating profit (BOP) of US$7.4 billion, marking a 21% increase from the previous year and the highest level in the company’s history.
This exceptional growth has propelled Zurich to its highest-ever return on equity at 23.1%. Additionally, the insurer reported a 12% rise in earnings per share in dollar terms, a 20% increase on an adjusted basis, and a 10% increase in net income attributable to shareholders to US$4.4 billion.
The remarkable results were driven by substantial growth across all business sectors, including a 7% increase in P&C BOP to US$3.9 billion, a record Life BOP of US$2.1 billion, and a 10% growth in its US-based Farmers Insurance Group BOP to US$2.3 billion. Zurich’s robust financial health is further underscored by an 8% dividend increase to CHF26 per share and the initiation of a share buyback program of up to CHF1.1 billion.
Investments in technology and digitalization have significantly enhanced operational efficiency and customer experience for the carrier, with 89% of retail quotes now being digitalized.
