HDFC Life Insurance, Max Life Insurance and Max Financial Services have entered into discussions for a possible merger of Max Life with HDFC Life, a move that could create the country’s largest private sector life insurer.
“The board of directors of HDFC Standard Life Insurance Company, Max Life Insurance and Max Financial Services at their respective meetings held today, approved entering into a confidentiality, exclusivity and standstill agreement to evaluate a potential combination through a merger of Max Life and Max Financial Services into HDFC Life,” the companies said on Friday.
The financial terms of the potential deal were not disclosed by the companies. If the deal is successful, it could create the country’s largest private insurance firm with a market value of close to Rs 50,000 crore.
Currently, ICICI Prudential Life Insurance is the largest private life insurer in the country, and it was valued at Rs 32,500 crore as per its last deal, where it sold 6% stake to PremjiInvest and others.
“The agreement provides for a mutually agreed exclusivity period for due diligence and discussions between the parties (HDFC Life, Max Life and Max Financial) in relation to a proposed transaction,” HDFC added.
Mortgage lender HDFC holds 61.6% stake in HDFC Life Insurance and Standard Life holds 35%. For the year ended March 31, 2015, HDFC Life’s total premium income stood at Rs 16,313 crore, and it reported a profit of Rs 820 crore. Its total assets under management (AUM) stood at Rs 74,247 crore as of March 31, 2016.
Max Financial Services holds 68% stake in Max Life Insurance, while Mitsui Sumitomo holds 26%. Max Life Insurance reported a profit of Rs 516 crore for fiscal 2016 on total premiums of Rs 9,216 crore. Max Life Insurance had total AUM of Rs 35,824 crore end of last fiscal.
HDFC recently hired investment bankers for the planned initial public offering of HDFC Life Insurance, which could raise $500 million (over Rs 3,000 crore).
Earlier this month, HDFC’s general insurance arm HDFC Ergo said it was acquiring L&T General Insurance for Rs 551 crore.
Max Financial Services’ shares surged near 12% and were trading at Rs 479.10 in afternoon trade, after hitting a high of Rs 514.40. HDFC shares were up 1.8% at Rs 1,222.40.