Max, Birlas in talks for merger of life insurance businesses

The Analjit Singh-led Max Financial Services is in talks with the Aditya Birla Group to explore a merger of their life insurance businesses, Birla Sun Life and Max Life Insurance, with the aim to create one of the top three private life insurers in the country, reports The Economic Times citing multiple sources aware of the discussions.

In parallel, the Delhi-based Analjit Singh – often referred to as a serial entrepreneur - is also believed to be negotiating with UK-based Northern Trust, which manages a trillion dollar of assets, and PE firm Apax Partners to sell his promoter stake of 30 per cent in Max Financial Services, according to the ET report.

These negotiations are at an early stage and the various groups are examining the regulatory contours, but talks gathered momentum after HDFC Standard Life Insurance Co Ltd and Max Life Insurance Co Ltd called off their proposed merger end July, failing to win regulatory approval, the report further says.

The newspaper's sources warned that these discussions may not necessarily result in a transaction.

The key rationale for exploring a merger is that Birla Sun Life does not have large bank partners, which Max has in Axis Bank and Yes Bank. Even though in the last one year Birla Sun Life has managed to tie up with six banks, they are all much smaller.

"Birla-Max discussions are ongoing at a shareholder level to work out the correct structure. It has not yet reached a board level," said an official in the know on condition of anonymity as the talks are in the private domain. "Increased scale can potentially yield to benefits of cost synergies as well as multi channel distribution, through agencies, brokers, direct marketing and bancassurance," he added.

Cyril Amarchand Mangaldas is believed to be involved as a legal advisor in the ongoing Birla-Max negotiations.

Spokespersons of Max Financial, Aditya Birla Group declined to comment on what they called speculation. Mails sent by ET to Apax Partners and Northern Trust failed to elicit a response.

Birla Sun Life is a 51:49 joint venture between Aditya Birla Capital Limited (ABCL) and Canada's Sun Life.

Max Financial Services was formed in January 2016, as the result of a three way demerger of Max India. MFS is the holding company for Max Life, India's largest non-bank promoted private life insurance company.

MFS currently holds 69 per cent stake in Max Life, its Japanese partner Mitsui Sumitomo owns 25 per cent and with Axis Bank owns 4.9 per cent. The remaining 1 per cent is held through management ESOPs.