In an effort to penetrate further in India, one of the fastest growing insurance markets of Asia, Sun Life Financial Inc. SLF has announced an agreement to increase its ownership in Birla Sun Life Insurance Company Limited ("BSLI").
Sun Life will increase its stake from the current 26% to 49% by purchasing additional BSLI shares from Aditya Birla Nuvo Limited for a total price of INR16.64 billion (approximately C$340 million).
BSLI which started operating in India in 2001 is a joint venture (JV) between Aditya Birla Group (“ABG”) and Sun Life. The JV is doing quite well, having garnered 1.6 million individual policyholders with an extensive distribution reach across 418 cities through a network of over 55,000 advisors in 489 branches.
Sun Life is not just restricted to life insurance business in India. It also operates mutual fund business in India via Birla Sun Life Asset Management Company Limited, which is another joint venture between ABG and Sun Life.
Sun Life’s mutual fund business in India is also very successful which is reflected in assets under management of INR1,387 billion (approximately C$28 billion). Sun Life owns 49% in the mutual fund business.
Based on the success of its existing businesses in India, SunLife has been motivated to strengthen its footprint in the region and the recent announcement is a step in this direction.
Sun Life has specifically chosen ABG since its is one of the most prestigious brand names in India. An association with this premier brand will give the company the ease to penetrate the Indian market.
Sun Life is also sanguine about the Indian insurance market which presents vast market opportunities on account of its growing middle class and huge population.
The acquisition, most likely to close by the end of first quarter of 2016, will be accretive to Sun Life’s 2016 earnings by C$0.01 per share. The acquisition will be financed using cash and is not expected to impact the Minimum Continuing Capital and Surplus Requirements ratio of Sun Life Assurance Company of Canada.
Outside India, the company is expanding in other Asian countries such as Vietnam and Malaysia.
Sun Life carries a Zacks Rank #3 (Hold). Better-ranked stocks in the space include American Equity Investment Life Holding Co. AEL, GWG Holdings, Inc. GWGH and Primerica, Inc. PRI. Each of these stocks carries a Zacks Rank #2 (Buy).
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