The Indian insurance sector has, of late, been witnessing a spate of mergers and acquisitions (M&As) with many joint venture partners expressing their intent to look for new partners.

Over the past 18 months, there have been at least six instances of stakeholders in insurance ventures expressing their desire to exit. These included Exide Life Insurance, Future Generali India Life Insurance and DHFL Pramerica Life.

According to Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services, one reason why companies want to exit insurance is because leveraging has not been happening in the sector.

"When companies get into this business, especially those from the non-financial sectors, and realise there is no leveraging, they start rethinking of their decision after a few years," he said, adding that if the company's new business and trail business (renewal) is almost the same as the industry average, then there is no cause for worry.

M&A activity in insurance began to be noted from January 2013, after Exide Industries, India's largest producer of automotive and industrial batteries, decided to acquire ING Group's stake in ING Vysya Life Insurance. Exide, which had a 50 per cent of the equity capital of ING Vysya Life Insurance, decided to acquire the remaining stake in the insurance firm. This saw ING Group exit its insurance business in India. Later, in May 2014, ING Vysya Life Insurance Company Ltd was renamed Exide Life Insurance Company.

Similarly, in July 2013, realty major DLF signed an agreement to sell its 74 per cent stake in its life insurance joint venture, DLF Pramerica Life Insurance, to Dewan Housing Finance Limited (DHFL). DLF had then said this transaction was in line with its ongoing strategy to divest non-core businesses/ assets.

In December 2013, the deal was completed and the company was re-named DHFL Pramerica Life Insurance.

Some companies have also made decisions to divest a part of their stake to an external partner. In March 2013, Pantaloon Retail (now called Future Retail) decided to sell 22.5 per cent of its stake in Future Generali India Life Insurance to Industrial Investment Trust Limited (IITL).

In December 2013, Future Retail informed the stock exchanges that it has received the necessary regulatory and government approvals for the deal.

Now, Future Retail holds three per cent in the insurance venture, while 49 per cent is held by Sprint Advisory Services and 22.5 per cent by IITL.

With respect to foreign companies planning to exit the insurance space, while some have held back their decisions till the foreign direct investment (FDI) cap in the sector is raised to 49 per cent, the regulatory delays in approving the agreement have also been a factor to take a wait-and-watch approach. A prospective deal between a global reinsurer and an Indian corporate to begin a health insurance business was put on the back-burner due to delay in necessary approvals.

There has also been a case of a merger deal being called off. More than a year after Larsen & Toubro (L&T) General Insurance and Future Generali India Insurance announced a joint venture combining both the companies' businesses, L&T in April 2014 said the parties had decided to call off the venture. Sources had said this was due to valuation issues around the new venture.

In March 2013, L&T, Future Group and Generali Group had signed a non-binding term sheet for the merger of L&T General Insurance and Future Generali India Insurance. This was the first-of-its-kind merger that was proposed in the insurance sector. Were the merger to happen, L&T would have held a 51 per cent stake, Generali Group 26 per cent stake and 23 per cent was to be held by Future Group in the merged entity. This deal was to be approved by the Insurance Regulatory and Development Authority (Irda) and needed to have a nod from the court as well as the Competition Commission of India.

Parekh explained that while some exits have happened and some more may be on the anvil, unlocking has not happened in the industry.

Referring to the FDI increase in insurance sector from 26 per cent to 49 per cent, he said the Bill for this was pending in Parliament for a long time.

In the life insurance sector, there have been reports of some foreign companies operating in the financial services sector and having presence in India through joint venture agreements in insurance, have been planning to exit. However, these exits haven't happened owing to valuation issues and disagreement with partners.

Similarly, some non-financial sector companies that are partners in insurance companies had earlier made a re-think on their decision to continue in the venture.

Insurance sector officials said the gestation period in insurance is quite long.

"Players need to invest at least 8-10 years in a venture for it to become profitable. Making profits in a short duration is not a possibility. Hence, we are seeing more cases of exit intentions. Especially for foreign partners when the FDI incentive is not present, there is no major reward to stay invested if they are not cash-rich," said a senior life industry executive.

Jammu & Kashmir Bank and Religare Enterprises recently expressed their intent to exit from their respective life insurance investments.

In June 2014, J&K Bank informed the exchanges of its decision to sell out the entire stock of equity shares (five per cent) in PNB Metlife India Insurance, subject to the satisfactory valuations.

Similarly, Religare Enterprises expressed its desire to exit the joint venture AEGON Religare Life Insurance. Religare and Aegon have agreed that Religare will exit once a replacement shareholder is identified and is approved by the regulatory authorities.