HDFC, Max Life echo 'cultural fit' after pact

Combined entity eyes double-digit growth in business; since both are among top-5 players, they stand to gain from each other strengths

Private life insurers HDFC Life and Max Life, which have entered into an agreement for a proposed merger, have said the cultural fit between the two led them to come together.

Deepak Parekh, chairman, HDFC Ltd, said while they are strong in certain product segments, their counterpart Max Life is strong in the other.

Parekh said, “We have two big banks (HDFC Bank and Axis Bank) and apart from them, we also have smaller banks as well. So, we hope that the growth of the combined entity will be much higher. They do not have a bank in their stable, so their distribution network is far stronger than us.”

Max Financial Services and Max Life have entered into an agreement for a merger with HDFC Life. Under this arrangement, Max Life will first merge with Max Financial Services which will in turn merge with HDFC Life. Since Max Financial Services is already listed, the combined entity would automatically be listed, without the need for HDFC Life having to go to the market separately for an initial public offer (IPO).

In a statement to the stock exchanges, Max Financial Services and Housing Development Finance Corporation (HDFC) said their respective boards had approved entering a confidentiality, exclusivity and standstill agreement to evaluate a potential combination through a merger.

The joint venture partners Mitsui Sumitomo Insurance of Japan and Standard Life of UK have also given the nod for the proposal.

The combined entity is expecting double digit growth with respect to business. Both HDFC Life and Max Life being among the top five players stand to gain from each other strengths.

HDFC Life, a large player in the online space, has a slew of products under its banner including segments like retirement, protection, unit-linked insurance (Ulip), savings and health plan. Offline, too, the insurer is strong in segments like Ulips. Max Life, on the other hand, is a strong player in long-term savings product. The insurer also sells online in segments like pure term and pension.

Senior sector experts said that the combined entity would become a formidable force especially due to the agent reach. With Max Life and its branches and HDFC Life and its bank network, customer retention and acquisition would be an advantage. “Those who already have bank partners will specially face the heat and would face stiff competition from the combined entity,” an insurance consultant said.

Getting together, the combined insurance entity will have more than 45 products. As on March 31, the company had 28 individual and eight group products in its portfolio, along with seven optional rider benefits catering to a diverse range of customer needs. Max Life will have 18 individual and four group products in its portfolio, according to data from Life Insurance Council.

Bancassurance would also be a distinct advantage for the combined entity with banks like Axis Bank, HDFC Bank, Lakshmi Vilas Bank, YES Bank, IDFC Bank among others.