Max Life, Max Financial to merge with HDFC Standard Life

HDFC Standard Life Insurance will merge Max Life Insurance and Max Financial Services with itself to create an entity with assets worth over Rs1,00,000 crore, making it the biggest consolidation in the country's private insurance sector.

The boards of HDFC Standard Life Insurance, Max Life Insurance Company and Max Financial Services at separate meetings have decided to enter into a confidentiality, exclusivity and standstill agreement to evaluate a potential merger

''The board of directors of HDFC Standard Life Insurance Company, Max Life Insurance Company Ltd and Max Financial Services Ltd... approved entering into a confidentiality, exclusivity and standstill agreement to evaluate a potential combination through a merger of Max Life Insurance Company Ltd and Max Financial Services Ltd into HDFC Life by way of a scheme of arrangement,'' HDFC said in a NSE filing.

The merged entity will have a combined premium of nearly Rs26,000 crore and assets under management (AuM) of over Rs1,00,000 crore. Among private life insurers, only ICICI Prudential Life Insurance had reported AuM of Rs1,00,000 crore.

Edinburgh-based Standard Life Plc holds a 35-per cent stake in HDFC Life, in which HDFC owns 61.63 per cent.

Since the two companies have different holding structures, it is not clear what the final holding pattern would be. Max Financial owns 68.01 per cent of Max Life and has a market value of Rs11,700 crore. Axis Bank owns 5.99 per cent and Mitsui Sumitomo owns the remaining 26 per cent.

In HDFC Life, HDFC owns 61.63 per cent and UK's Standard Life 35 per cent. About 1 per cent is owned by Azim Premji.

Total premium of HDFC Life for the financial year ending 31 March 2016, was Rs16,313 crore and AUM was Rs74,247 crore.

Max Life is a joint venture with Mitsui Sumitomo Insurance Co Max Financial owns 68 per cent stake in Max Life, while Mitsui Sumitomo owns 26 per cent.

Max Life's total premium collection for year ended March 2016 was Rs9,216 crore and AUM was at Rs35,824 crore.

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.

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.