HDFC Standard Life Insurance has agreed with Max Financial Services and subsidiary Max Life Insurance Co Ltd to open exclusive merger talks in what could be one of the biggest consolidation moves in the Indian insurance sector. The total premium of the merged entity would be nearly Rs 26,000 crore and assets under management will top Rs 1 lakh crore.
The boards of HDFC Standard Life Insurance Co, Max Life Insurance and Max Financial Services at their respective meetings approved entering into a confidentiality, exclusivity and standstill agreement to evaluate a potential merger. They will explore a merger of Max Life and Max Financial Services into HDFC Life by way of a scheme of arrangement, HDFC said in a statement.
HDFC Chairman Deepak Parekh said both HDFC Life and Max Life have over the years, followed a strategy of consistent and responsible growth to create value for their respective customers and stakeholders. "We believe there are significant benefits of a potential combination and if this materialises, it could make the consolidated entity the largest private life insurer in the country. At this juncture, all we can say is that both the brands have a strong recall and trust factor across policyholders and stakeholders," Parekh said.
"The companies are contemplating a merger under the scheme of amalgamation under the Companies Act and hence we do not foresee any open offer," Parekh said.
Among private players, ICICI Prudential Life Insurance has reported an AUM of Rs 1 lakh crore. The total premium of HDFC Life for the financial year ended March 2016 was Rs 16,313 crore and AUM was Rs 74,247 crore. Max Life's total premium collection for year ended March 2016 was Rs 9,216 crore and AUM was at Rs 35,824 crore.
Standard Life Plc of the UK holds 35 per cent stake in HDFC Life, in which HDFC owns 61.63 per cent. Max Life is a joint venture with Mitsui Sumitomo Insurance Co. Max Financial owns 68 per cent stake in Max Life, while Mitsui Sumitomo owns 26 per cent.
The proposed arrangements would be subject to due diligence, definitive documentation and applicable board, shareholder, regulatory, respective High Courts/NCLT, and other third party approvals, as may be applicable, it added. There are 24 life insurance companies in the country, including state-owned LIC with a market share of over 70 per cent.