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Hindustan Times, CGU insurance tie-up off

India's Hindustan Times has pulled out of a life insurance venture with Britain's CGU Plc after reviewing its strategic objectives, a senior industry source said on Saturday.

The venture was one of several poised to enter a sector opening to foreign and private firms after decades of state control.

"It's not going to go ahead now," said the source, who asked not to be named because the break-up of CGU-Birla Life Insurance was not due to be officially announced until Monday.

"For some time The Hindustan Times had been trying to work out if insurance did fit with its business. A review was carried out and it was concluded that in terms of capital and payback this was a fairly big investment."

The Hindustan Times is one of India's main print media firms and part of the K K Birla Group.

CGU is part of holding company CGNU Plc, whose formation in June created Britain's largest insurance group.

The industry source said that CGU, which has had a representative office in India for five years, was determined to go ahead with a life insurance venture and was now scouting around for another partner.

CGU-Birla estimated in September that the total premium income in India from new life insurance policies was likely to be Rs 1.7 trillion to Rs 2 trillion ($36.4-42.8 billion) over the next 10 years.

Last year, India's Parliament passed a law allowing foreign companies to hold up to 26 per cent of an insurance firm's equity and one more or local partners to hold the rest.

Several joint ventures like HDFC-Standard Life, American International Group-Tatas and New York Life Insurance-Max India, along with local firms like Reliance Industries had applied for licences.

Last month, India's insurance regulator issued permits to Reliance General Insurance Company Ltd, HDFC Standard Life Insurance Company Ltd and Royal Sundaram Alliance Insurance Company Ltd to launch insurance businesses.

The Reliance firm is an affiliate of the Reliance group, and HDFC Standard Life is a joint venture of the Housing Development Finance Corp (HDFC) and Britain's Standard Life Assurance Group.

Royal Sundaram Alliance is a venture involving Sundaram Finance and Britain's Royal & Sun Alliance Plc.

The CGU-Hindustan Times venture is not the first to have broken up.

Allstate Corp of the United States pulled out of a life insurance venture with herbal medicine maker Dabur India Ltd last month, citing a change in its international strategy.

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