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Berkshire Hathaway Specialty Insurance
Berkshire Hathaway Specialty Insurance

IAG sells its India stake as Asia retreat continues

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IAG has reached agreement to sell its 26% stake in the SBI General joint venture in India for more than $640 million as the insurer continues to wind back its presence in Asia.

Napean Opportunities, part of Indian private equity firm Premji Invest, will acquire a 16.01% interest in SBI and an affiliate of Warburg Pincus is set to buy the remaining 9.99%.

“IAG has enjoyed a strong and successful relationship with the State Bank of India since establishing the SBI General joint venture in 2009,” IAG CEO Peter Harmer said today.

“With our sharpened focus on our core territories of Australia and New Zealand, now is the right time for IAG to exit its investment in SBI General.”

The deal is expected to deliver a net profit after tax benefit of more than $300 million, to be recognised this financial year, and will increase IAG’s regulatory capital position by more than $400 million.

IAG said last year it had agreed to sell its interests in Thailand, Indonesia and Vietnam.

Tokio Marine & Nichido Fire Insurance committed to pay about $525 million for a 98.6% interest in Safety Insurance in Thailand and for 80% of Indonesia’s PT Asuransi Parolamas.

IAG's results in February included a $200 million profit on the Thai deal, while the Indonesia sale was completed in September. The sale of the Vietnam stake is also set to be concluded this financial year.

Earnings from IAG’s Asian business reached $26 million in the 2016 financial year before falling to $10 million the following year amid increased competitive pressures and adverse claim cost trends in Thailand and Malaysia.

IAG said early last year that it was reviewing its operations in the region, with limited expansion opportunities thwarting its ambitions for growth through market consolidation and increased ownership.

The latest sale leaves IAG’s 49% stake in AmGeneral in Malaysia as its remaining significant equity holding in Asia, but the company has no immediate plans to pursue a sale, as the venture “continues to perform well”, a spokeswoman told today.

“Should this position change, IAG will advise the market accordingly,” she said. “IAG continues to pursue sale options for its relatively small residual interest in Bohai Property Insurance Company Ltd in China.”