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HDFC board gives green signal to HDFC Life-Max merger

The total premium of the merged entity of HDFC Life- Max is expected to be nearly Rs 26,000 crore and assets under management will top Rs 1 lakh crore. It will create the biggest public sector life insurer.

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Moving a step closer to form the country's biggest private sector life insurer, the board of HDFC on Monday approved the merger of Max Life and Max Financial Services with its insurance arm HDFC Standard Life Insurance Company.

The total premium of the merged entity is expected to be nearly Rs 26,000 crore and assets under management will top Rs 1 lakh crore. In the private life insurance space, only ICICI Prudential Life Insurance had reported AUM of Rs 1 lakh crore. "We wish to inform you that a committee of the board of directors of the corporation has at its meeting held today approved the entering into definitive agreements for amalgamation of business...through a composite scheme of arrangement," Housing Development Finance Corporation (HDFC) said in a filing to the BSE.

"As a part of the proposed transaction, the life insurance business of Max Financial, currently held through Max Life, would be finally amalgamated with HDFC Life and all other business of Max Financial would be finally amalgamated into Max India Limited," it added. Earlier, HDFC and Max groups had entered into an "agreement to evaluate a potential combination through a merger of Max Life and Max Financial into HDFC Life through a scheme of arrangement".

As per reports, insurance regulator IRDAI had expressed concerns over transfer of liabilities related to businesses other than life insurance to the merged entity, if Max Financial and Max Life were merged into HDFC Life in totality. HDFC also said that post-merger its shareholding in HDFC Standard Life would be 42.5 per cent and consequently the insurance firm would cease to be a subsidiary.
Edinburgh-based Standard Life Plc holds 35 per cent stake in HDFC Life, in which HDFC owns 61.63 per cent.

The shares of HDFC Life are proposed to be listed on BSE and the National Stock Exchange of India as a consequence of the scheme, it said. For HDFC, this will be the second merger announcement this month after HDFC Ergo General Insurance announced takeover of 100 per cent stake in L&T General Insurance.

Owing to the Max deal, which would involve swap of shares without any cash changing hands, HDFC Life has put on hold its proposed IPO. Max Life is a joint venture with Mitsui Sumitomo Insurance Company. Max Financial owns 68 per cent stake in Max Life, while Mitsui Sumitomo owns 26 per cent. 

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