HDFC Standard Life and Max Life and Max Financial Services merger, which was announced today, will create the largest private player in India’s insurance sector, Chairman of Housing Development Finance Corporation (HDFC), Deepak Parekh said.
The proposed merger between HDFC Standard Life and Max Life and Max Financial Services with itself will create an entity with assets worth over Rs 1 lakh crore.
We take a look at five facts about the merger talks between Max Life and HDFC Life:
1) Boards of HDFC Standard Life Insurance Co, Max Life Insurance Company Ltd and Max Financial Services Ltd 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 Ltd said in a statement.
2) What Deepak Parekh said: The macro environment in India is very conducive. Favourable demographics provide a big opportunity for insurers. I expect new business premium to grow at 15% over the next 5 years. HDFC Life shareholders are keen to list the company.
HDFC Life & Max Life have strong margins & synergies. Product mix of the combined entity will be well diversified. Merger will lead to eventual listing as Max Financial is already listed. Swap ratio of merger, ownership structure of new entity will be decided later. The deal is subject to regulatory, shareholder approvals. Do not foresee need for open offer in Max Life merger.
3) What Max Life Executive Chairman Analjit Singh said: Max Life will be merged with Max Financial & then merged with HDFC Life. We are a non-bank led company. Valuation to come in 2 months, will take 10 months for entire process.
We intend to retain top management in both companies. The entire transaction will be done via share-swap. We have not seen effective consolidation in life insurance industry in years.
4) The total premium of the merged entity would 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.
5) Edinburgh-based Standard Life Plc holds 35% stake in HDFC Life, in which HDFC owns 61.63%. Total premium of HDFC Life for the financial year ending March 31, 2016, was Rs 16,313 crore and AUM was Rs 74,247 crore.
Max Life is a joint venture with Mitsui Sumitomo Insurance Co. Max Financial owns 68% stake in Max Life, while Mitsui Sumitomo owns 26%. Max Life’s total premium collection for year ended March 2016 was Rs 9,216 crore and AUM was at Rs 35,824 crore.
India currently allows 49 per cent foreign investment in the insurance sector.
There are 24 life insurance companies in the country, including state-owned LIC with a market share of over 70 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.
(With inputs from PTI)