Assets under management of the combined entity would touch Rs 1.10 lakh crore and new premiums would almost touch Rs 9,400 crore
HDFC Life, the first private insurer in India to launch operations in 2001, is set for a merger with Max Financial Services and Max Life to create country's biggest private insurance company.
Max Financial Services and Housing Development Finance Corporation (HDFC) said in a note to the exchanges that their respective Boards have approved entering into a confidentiality, exclusivity and standstill agreement to evaluate a potential combination through a merger. If this goes through, it will be the first merger in the life insurance sector.
Deepak Parekh, chairman of HDFC Ltd, said in a release, "The detailed merger and integration contours have not been decided yet. At this juncture, all we can say is that both the brands have a strong recall and trust factor across policyholders and stakeholders."
"The companies are contemplating a merger under the scheme of amalgamation under the Companies Act and hence we do not foresee any open offer. I wish to reiterate that at this juncture, all the respective parties are only evaluating this potential opportunity in further detail. We believe that the macro-economic environment in India today is extremely conducive," Parekh added.
Now the companies will enter a phase of diligence and the outcome of that exercise will have to be approved by the respective Board. The ownership structure will be based on the swap ratio, which still has to be determined and discussed with the regulators, Parekh added.
HDFC Life will also get listed in due course, he said.
Joydeep K Roy, partner & leader - insurance, PwC India, said in a release, "Both the entities have done their parent companies proud in consistency of delivery and service quality. The regulations in India are primarily focused on Policy Holder Protection, so individual policyholders need not worry of continuity of their products and the value accretion. This is the first merger in the Indian Life Insurance market, and may open the floodgates for some more to happen."
The agreement between the two groups allows for a mutually agreed exclusivity period to undertake the due diligence so the stake of the foreign partner is yet to be decided and no timeline has been given for the merger.
The combined entity would be the largest private sector insurer, both in terms of assets under management and new business premiums. Assets under management (AUM) of the combined entity would touch Rs 1.10 lakh crore and new premiums would almost touch Rs 9,400 crore. HDFC Life has premiums of Rs 16,313 crore, AUM of Rs 74,247 crore and market share of 14.7% while Max Life has premiums of Rs 9,210 crore, AUM of Rs 35,824 crore and market share of 9.3%.
HDFC Life is a joint venture between HDFC and Standard Life Plc, a provider of financial services in the UK. While HDFC holds 61.65% in it, the foreign partner holds 35%. Max Life Insurance is a joint venture between Max Financial Services Ltd and Mitsui Sumitomo Insurance Co. Ltd. The foreign partner holds 25% in the insurer. Max Financial Services is already listed on the stock exchanges and is the holding company of Max Life Insurance.
This is the second merger announcement from HDFC for its insurance subsidiaries. Earlier this month, HDFC Ergo General Insurance agreed to acquire L&T General Insurance for Rs 551 crore, which if completed would be the first ever merger in the insurance industry.
Life insurance penetration in India stands at only 2.6% of the GDP. This is considerably lower than other Asian peers which gives players like HDFC an opportunity to expand their business by both organic and in organic growth.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "UMBRELLA")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}