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Reliance Life to offload 5% stake, scouts for partner

Reliance Life Insurance may offload 5% stake to banks while the insurer is in need of a partner to expand its base in bancassurance channel.

Reliance Life Insurance may offload 5% stake to banks while the insurer is in need of a partner to expand its base in bancassurance channel. Even as the company is already in talks with a few banks, it is scouting for a single partner of ?critical size?.

Reliance Life Insurance, a part of Anil Ambani-led Reliance Capital, wants to cap the stake of the banking partner at 5% as it aims at maintaining the relationship between the principal and agent with the bank.

Last year, Reliance Life Insurance entered into a joint venture with Japan?s top insurer and one of the world?s largest institutional investor, Nippon Life Insurance, which acquired 26% stake in the company for Rs.3,062 crore.

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?We are open to stake sale when it is a token equity sharing. All banks put together will not be more than 5%. We can consider this as distributor stock option,? Malay Ghosh, the executive director and president of Reliance Life, said.

Bancassurance started in India after 2000 when the government allowed Indian banks to enter insurance distribution. It gathered pace after the Insurance Regulatory and Development Authority passed the corporate agency regulations in October, 2012. At present, bancassurance accounts for 25-30% of premium income for the private insurers in the country.

?Our distribution gap can be served by one bank of critical size. But if we do not get the bank of that size we can go for more than one,? he said.

Meanwhile, Reliance Life Insurance is careful of not structuring its deal with the banks based on the future commission income. According to industry sources, the deal between MetLife India Insurance and Punjab National Bank, Birla Sun Life Insurance and Syndicate Bank, and Aviva Life Insurance Co and IndusInd Bank faced scrutiny from the regulator as the cash component of that was partly set off in the form of future commission income to be earned by the respective banks.

?We will not get into the kind of deal between PNB and MetLife, Birla Sun Life and Syndicate Bank which are yet to get regulatory approvals,? Ghosh said.

Reliance Life recorded 140% increase in the net profit for the quarter ending June, 2012 to R19 crore against R8 crore for the similar quarter the previous fiscal.

(The correspondent?s trip was sponsored by Reliance Life Insurance)

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