Integration of Bharti Axa General with ICICI Lombard gains speed


By Venkatachari Jagannathan

Chennai, Sep 6 (IANS): Work on integrating Bharti Axa General Insurance Company Ltd with ICICI Lombard General Insurance Company Ltd on multiple fronts has gained speed with the insurance regulator's final nod for the scheme of arrangement between the two players, said senior officials.

In August 2020, ICICI Lombard announced the acquisition of the general insurance business of Bharti Axa General by way of a demerger.

"During the last one year, while applying and getting the regulatory approvals for the deal, we had engaged external consultants for integration of the business, people, and technology. We are on a path to see seamless integration on multiple fronts," ICICI Lombard's Chief Financial Officer Gopal Balachandran told IANS.

He said the action plans that were drawn during the past one year on integration will be put into action.

From September 8 onwards, ICICI Lombard General will be in-charge of Bharti Axa General's business. And from the second quarter onwards, ICICI Lombard will be reporting the consolidated numbers, Balachandran said.

He said that ICICI Lombard will be informing all stakeholders - policyholders, agents and others - of Bharti Axa General informing about the change of ownership and that they would be serviced by ICICI Lombard now.

"The combined ratio (claims plus expenses divided by premium income) of the merged entity stands at 103 per cent. We have to look at bringing that down to 100 per cent in a couple of years time," Balachandran said.

According to him, there will be synergies in productivity, claims operations and other areas so that the combined ratio comes down to 100 per cent.

The 42 per cent operating expense of Bharti Axa General may seem to be high. The expense has been incurred upfront in tying up distribution channels and the benefits will start accruing now.

About the customer churn since the announcement of the deal, Balachandran said Bharti Axa General had retained a large part of its customers.

The general insurance contract is a one year contract and ICICI Lombard will try to retain the customers of Bharti Axa General in its fold and also honour its commitments.

"ICICI Lombard was cautious on crop insurance. Whatever crop insurance Bharti Axa General has underwritten will be taken care of by us," he said.

According to him, retaining the talent of Bharti Axa General is also on the top of the agenda.

"ICICI Lombard is on a growth path. Its market share is about seven per cent and the market share of the combined entity will be about 8.7 per cent. There is good growth potential for the company and also for the employees," Balachandran said.

As many of the about 2,200 employees of Bharti Axa General were earlier with ICICI Lombard and the cultural as well as professional fit is there.

On the integration of the distribution channels, ICICI Lombard will get two major and new bancassurance partners - HDFC Bank and Axis Bank - apart from other corporate agents.

"We had talks with HDFC Bank and Axis Bank. They are interested in continuing with ICICI Lombard as both have an open architecture model," Balachandran said.

In addition, ICICI Lombard will also add Bharti Axa General's 7,700 agents to its fold.

Post integration, ICICI Lombard will mine deeper for more business.

On the product side, both the companies have similar and different products and they have to be synergised.

"Lot of products are common between the two companies. We will look at the products of both the companies and decide which one to retain. In some products the pricing differs. Unique products of Bharti Axa General's will be continued," an official not wanting to be named told IANS.

Balachandran said about Rs 5,500 crore will accrue to ICICI Lombard. The appointed date for the scheme is April 1, 2020.

The demerger and transfer of general insurance business, as envisaged in the scheme, shall be effective within three days from the date of the final approval.

As per the deal, the shareholders of Bharti Axa General will receive two shares of ICICI Lombard for every 115 shares held by them.

Under the terms of the agreement, AXA and Bharti will receive a total of about 35.8 million shares of ICICI Lombard on closing, which would represent 521 million euros, at current market value of the closing price of ICICI Lombard shares on August 21, AXA, the French insurance group, had said in a statement then.

Post the deal, the promoter holding in ICICI Lombard will be 48.11 per cent and public holding will be 51.89 per cent. Both Bharti and AXA will be public shareholders and hence there is no lock-in period.

According to Balachandran, ICICI Bank - the promoter - will bring its holding in ICICI Lombard to 30 per cent in a couple of years time.

(Venkatachari Jagannathan can be contacted at v.jagannathan@ians.in)

 

 

  

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Title: Integration of Bharti Axa General with ICICI Lombard gains speed



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