 "Max Life, Max Financial Services agree to merger with HDFC Life, boards approve")
Max Financial Services and Max Life have entered into an agreement for a merger with HDFC Life. In a statement to the stock exchanges, Max Financial Services and Housing Development Finance Corporation (HDFC) said that their respective boards have approved entering into a confidentiality, exclusivity and standstill agreement to evaluate a potential combination through a merger.
The agreement provides for a mutually agreed exclusivity period for due diligence and discussions between the parties in relation to a proposed transaction. However, it has not been mentioned as to how much stake the foreign partner of Max Life will hold post the merger. No timeline has been given for the merger.
The combined entity would be the largest private sector insurer, both in terms of assets under management and new business premiums. Assets under management of the combined entity would touch Rs 1.10 lakh crore and new premiums would almost touch Rs 9400 crore.
HDFC Life is a joint venture between HDFC and Standard Life Plc, a provider of financial services in the UK. While HDFC holds 61.65 per cent in it, the foreign partner holds 35 per cent. Max Life Insurance, is a joint venture between Max Financial Services Ltd. and Mitsui Sumitomo Insurance Co. Ltd. The foreign partner holds 25 per cent in the insurer. Max Financial Services is already listed on the stock exchanges and is the holding company of Max Life Insurance.
For HDFC, this will be the second such merger announced in this month. Earlier in June, HDFC Ergo General Insurance, the general insurance arm of mortgage lender HDFC, said that it will acquire L&T General Insurance for Rs 551 crore, which if completed would be the first ever merger in the insurance industry.
| How the two insurers stack up | ||
| HDFC Life | Max Life | |
| New premiums for FY16 (in Rs crore) | 6,487.66 | 2,881.93 |
| Assets under management for FY16 (in Rs crore) | 7,4247 | 35,824 |
| Net profit for FY16 (in Rs crore) | 818.4 | 439.1 |
| Current foreign direct investment (%) | 35 | 25 |
| Solvency ratio (%) | 196 | 343 |
| Source: Public disclosures by companies, IRDAI | ||
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HDFC Life which is the third largest private life insurance company with respect to new premiums for FY16 collected premiums of Rs 6487.66 crore for the year ended March 31, 2016. It saw a growth of 18 per cent, according to data from Insurance Regulatory and Development Authority of India. Max Life on the other hand collected premiums of Rs 2881.93 crore for FY16 and is among the top five private life insurance players.
Started in 2000, HDFC Life was the first private life insurance company to be granted a licence to operate in India.
This announcement comes at a time when HDFC is planning to list HDFC Life on the stock market. In April, HDFC had said that oday informed the exchanges that it has in-principle agreed to sell up to 10 per cent of its stake in HDFC Standard Life through offer for sale. HDFC Life’s board of directors have approved taking steps to initiate the initial public offer (IPO) process.
HDFC Life's foreign partner recently hiked its stake up to 35 per cent from 26 per cent in HDFC Life. The value of the 9 per cent stake was Rs 1705 crore valuing the company at Rs 18951.4 crore.
HDFC Life is a joint venture between HDFC and Standard Life Plc, a provider of financial services in the UK. Standard Life (Mauritius Holding) Ltd holds 26 per cent stake in the joint venture.
As per a company statement, HDFC Life posted net profit of Rs 818 crore for the year ended March 31, 2016, showing a growth of 4.2 per cent compared to previous fiscal. Its new business premium grew by 18.1 per cent to Rs 6487 crore in FY16 compared to Rs 5492 crore collected in previous fiscal. HDFC Life’s total premiums collected grew by 10 per cent to Rs 16313 crore in FY16 from Rs 14830 crore in in FY15.
Max Life, collected Rs 2881.93 crore of new premiums for the year ended March 31, 2016. Its profit stood at Rs 439.1 crore for FY16.