The merger between HDFC life insurance and Max life insurance which was being seen as a major breakthrough in the consolidation among the private insurers in the country has been called off. The potential merger would have resulted in an entity larger than ICICI Prudential which currently enjoys 8% market share, making it the numero uno private insurance provider. The insurance industry in India has an Asset Under Management base of Rs 22.4 trillion, out of which the private sector insurers have just Rs 4.61 trillion. Life Insurance Corporation of India is the sole public sector insurance provider, and accounted for more than 73% of the country’s insurance market, in March 2017, as per data from India Brand Equity Foundation. In 15 years time, the share of private sector has grown from 2% in 2003, to more than 29% in the life insurance segment. This merged entity would have had a combined market share of nearly 9%, as per data from IBEF.
Max Financial Services came into existence after a proposed merger with Max Life fell apart, as IRDA did not approve the structure. The regulator found the proposed structure to be in violation of Section 35 of the Insurance Act, which prohibits the merger of an insurance company with a non-insurance company. The quality of the Max Life business, its superior performance in the market, and the unique position of Max Financial Services as a listed entity with sole focus on the life insurance business, made Max Life and Max Financial Services attractive potential merger partners for HDFC Life.
“The confidentiality, exclusivity and standstill agreement dated June 17, 2016, entered among the parties is not being extended further. The proposed scheme and the applications filed in this regard with stock exchanges should be kindly treated as withdrawn,” Max India said in a BSE filing today.
Meanwhile, HDFC Standard Life insurance had decided to come out with an IPO. Amitabh Choudhry, the MD and CEO of HDFC Standard Life Insurance said in conversation with ET Now, “We cannot have a situation where while we are doing an IPO, we have merger discussions going on because we have to be clear to the market. In the future if this opportunity still there and if Max Group is willing to engage in a conversation, we will be very happy to engage with them in that conversation but that applies to lot of other opportunities that might also come up.” Amitabh summed up the interview by saying that Max represents the best opportunity available, and indicated that the talks may resume, once the IPO is out of the way.