Max New York to sell 4% stake to Axis Bank

Max New York Life Insurance has received regulatory approval to dilute 4% stake to its bancassurance partner Axis Bank.

“This would be a fresh equity sale. Max will reduce its stake in the company,” said Prashant Tripathy, director, strategic planning, business development & health & retirement, Max New York Life.

Financials details of the deal were not disclosed.
Max India, which is promoted by Analjit Singh, holds 74% in the private life insurer while US-based New York Life holds the remaining.

This dilution agreement, which will further strengthen the capital requirement of the insurance company, is for 10 years with an option to review equity after three years, Rajesh Sud, Max New York Life managing director and CEO, said.

Sud said the embedded valuation of the deal will be disclosed by the end of this month or June.

Axis Bank, the third-largest Indian private bank, and Max New York Life have a 10-year bancassurance agreement, under which the bank helps sell the insurer’s products through its distribution channels in the country.

Axis Bank contributed 20-25% of the company’s business since last June. “This roughly comes to about 400 crore,” said Tripathy.

According to experts, the move to sell stake is to compensate Axis Bank for the business it has been generating for the insurer.

Since the bancassurance partnership is not on a large scale, the deal is to compensate them by selling them a part of their stake, they said.

Max New York Life’s net profit for the financial year ended March 31 rose 12 times at Rs283 crore over the previous fiscal while gross premium increased 20% to Rs5,812 crore. The company’s assets under management rose 37% to Rs13,836 crore year on year.

Axis Bank, however, refused to comment on the deal. The insurer has alliances with nearly 20 small and large banks including Yes Bank.

When asked if they would look at another such dilution in future, Tripathy said, “A stake sale is a very strategic move. We will decide as and how it happens.”

Sud said there are no immediate plans to hit the capital markets as the insurer has enough capital required for the business.

“We have 322% capital against the mandatory requirement of 150%,” he said.

The insurance sector is already grappling with new guidelines on unit linked insurance plans, which were put in place by the Insurance Regulatory and Development Authority recently to curb mis-selling of these plans.

Experts predict that this financial year may well prove to be troublesome for most insurance companies.