Aegon : to up stakes in growing Indian market

Subject to final approval from the FIPB, Aegon plans to increase its stake in its India business interest from 26% to 49%. This is the highest possible share permitted by a foreign investor under the country's recently amended governme

Aegon, which entered the Indian market through a joint venture in 2008, is one of the first companies to take advantage of amended legislation on foreign direct investment, which has seen a significant rise in the permitted investment cap for insurers and other industries.

Douglas Henck, chairman and CEO of Aegon Asia, says Aegon's uptake of the increased investment opportunity further demonstrates its commitment to Asia. According to Henck: "Asia and India are very important markets for Aegon. In India, we are not big enough and need to be bigger."

With Aegon upping its share, media company Bennet Coleman and Company Limited (BCCL) has also increased its stake in Aegon India's venture to take a 51% stake. BCCL will be the sole joint venture partner with Aegon in India. The former minority shareholder Religare will divest its interest in the insurance business as part of the transaction.

Aegon Religare Life Insurance (ARLI) will be renamed, but Doug says the transition will otherwise be seamless from a customer perspective. Operations, service and office locations will remain unchanged.

"The way we are operating the company today will not change the way we are operating it tomorrow. The name will be changed in due course. Only the shareholding pattern will change once Religare exits and BCCL takes up their stake."

Aegon entered the Indian insurance market seven years ago, after the country entered a period of economic liberalization, initiated in 1991. Growth prospects for the insurance sector in the country, which has a population of 1.2 billion, are promising. Since it was opened up to competition in the late 1990s, India's insurance sector has been growing at approximately 25% a year.

Aegon currently operates through 67 branches in over 52 cities across India. It employs 1,670 people and serves more than 35,000 customers. According to Doug, Aegon's growth in India during the past seven years has been substantial and is set to continue.

"Though we were late entering the market, we have already established ourselves as the first digital insurance company and the first online company," he said, adding that the digital sphere will continue to be important in India, as elsewhere for Aegon.

"What we are doing in India will also help us in more mature economies, as we continue to establish best practice. No one is close to us with respect to the range of products we offer or the quality of products and services that we offer. We have well over 90% persistency rates in the online space, because these customers stay with us," he said.

Doug added: "If you look at GDP and your population, there are still a lot of people who are not as actively engaged in the economy as others. As people start moving up the ladder as their income levels rise, the first insurance that will be brought would be general insurance. Life insurance will come in later."

Commenting on the initiative to pass an Insurance Act, which enables greater investment in the country, Doug congratulated the Modi government. He said a management control provision stipulating a minimum requirement for Indian nationals to be represented on the board was not an issue for Aegon, pointing out that six of the nine members of the board of directors are Indian. "In our company, too, we have only one Westerner among the 1,000-plus employees."

Aegon's application to increase its stake in the Indian insurance sector was approved by the Competition Commission of India (CCI) and regulatory authorities last week. A decision by the Foreign Investment Promotion Board (FIBP) and the Insurance Regulatory and Development Authority (IRDAI) are anticipated in the very near future.