Life Insurance Corp of India (LIC) is finalising terms to buy a significant minority stake in Ranjan Pai-led ManipalCigna Health Insurance, people familiar with the matter said.
It marks the state-owned giant’s entry into the rapidly growing standalone domestic health insurance market. The move will allow LIC to tap a segment that accounts for 37% of the country’s ₹3 lakh crore general insurance market, industry executives said.
Given LIC’s distribution strength and balance sheet heft, the move is set to disrupt the health insurance market once the deal is completed, they added.
The state-run insurer, with ₹4.97 lakh crore market capitalisation, will acquire 40-49% of ManipalCigna, valuing it at ₹3,500-3,750 crore, making it a three-way partnership with Pai’s Manipal Education & Medical Group and Cigna Corporation of the US.
The latter two are currently 51:49 partners in the venture.
LIC will be primarily infusing fresh capital, diluting the two existing shareholders. The transaction will also involve a smaller chunk of secondary share sales by the two, said the people cited above. “LIC already has an in-principle board approval to buy a minority stake in the company. The exact quantum of stake sale is still getting thrashed out,” said an executive in the know. “There are government representatives in the LIC board, so the final approval process should not take much time. Earlier, funds like KKR were interested but with LIC, it became a strategic conversation and not a financial investment.”
All three are expected to have board representation proportionate to their shareholding.
“It will be a board-run company. That’s increasingly being the business model of Pai across most of the sectors he operates in, including flagship healthcare, where Singapore’s Temasek is the single largest shareholder,” said another executive. “Here too, LIC may end up becoming the single largest shareholder among the three, although it has not yet been sealed.”
LIC managing director and chief executive Siddhartha Mohanty recently said the state-owned company was looking to enter the health insurance space and expected to finalise a deal by March-end. He did not elaborate. “LIC is in the final stages of discussions on a health insurance proposal, as it sees the sector as a natural expansion opportunity,” he had said on the sidelines of the Global Conference of Actuaries earlier this month.
Pai and an LIC spokesperson did not respond to queries.
ET was the first to report that LIC was eyeing a 50% stake in the venture on November 28.
Experts said LIC’s entry into health insurance will intensify competition in the sector, which is growing at 20% annually, and accelerate market growth by leveraging its 1.4 million agents and a vast distribution network.
Standalone health insurance is already the fastest-growing non-life insurance segment, outpacing motor, fire, marine and travel insurance. The segment’s share of gross direct premiums has expanded from 24.6% in FY18, to 37.1% in FY24.
It marks the state-owned giant’s entry into the rapidly growing standalone domestic health insurance market. The move will allow LIC to tap a segment that accounts for 37% of the country’s ₹3 lakh crore general insurance market, industry executives said.
Given LIC’s distribution strength and balance sheet heft, the move is set to disrupt the health insurance market once the deal is completed, they added.
The state-run insurer, with ₹4.97 lakh crore market capitalisation, will acquire 40-49% of ManipalCigna, valuing it at ₹3,500-3,750 crore, making it a three-way partnership with Pai’s Manipal Education & Medical Group and Cigna Corporation of the US.
The latter two are currently 51:49 partners in the venture.
LIC will be primarily infusing fresh capital, diluting the two existing shareholders. The transaction will also involve a smaller chunk of secondary share sales by the two, said the people cited above. “LIC already has an in-principle board approval to buy a minority stake in the company. The exact quantum of stake sale is still getting thrashed out,” said an executive in the know. “There are government representatives in the LIC board, so the final approval process should not take much time. Earlier, funds like KKR were interested but with LIC, it became a strategic conversation and not a financial investment.”
All three are expected to have board representation proportionate to their shareholding.
“It will be a board-run company. That’s increasingly being the business model of Pai across most of the sectors he operates in, including flagship healthcare, where Singapore’s Temasek is the single largest shareholder,” said another executive. “Here too, LIC may end up becoming the single largest shareholder among the three, although it has not yet been sealed.”
LIC managing director and chief executive Siddhartha Mohanty recently said the state-owned company was looking to enter the health insurance space and expected to finalise a deal by March-end. He did not elaborate. “LIC is in the final stages of discussions on a health insurance proposal, as it sees the sector as a natural expansion opportunity,” he had said on the sidelines of the Global Conference of Actuaries earlier this month.
Pai and an LIC spokesperson did not respond to queries.
ET was the first to report that LIC was eyeing a 50% stake in the venture on November 28.
Experts said LIC’s entry into health insurance will intensify competition in the sector, which is growing at 20% annually, and accelerate market growth by leveraging its 1.4 million agents and a vast distribution network.
Standalone health insurance is already the fastest-growing non-life insurance segment, outpacing motor, fire, marine and travel insurance. The segment’s share of gross direct premiums has expanded from 24.6% in FY18, to 37.1% in FY24.
