Max Financial Services is in talks to collaborate with HDFC Standard Life Insurance Company, creating the country's biggest private life insurer.

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The companies have confirmed saying board has approved entering into agreement to evaluate merger of Max Life & Max Financial into HDFC Standard.

Interestingly, it needs to be seen whether Axis Bank, will be happy with this merger or no. Will the bank continue its equity ownership and bancassurance partnership with the newly formed entity?

At present, Axis bank holds 5.99% stake in Max Life, and also is a bancassurance partner with exchanging 58% of  individual policies.

In terms of distribution,  HDFC Life’s 70% of individual business are sold through HDFC Banks, whereas for Max Life bancassurance is 67 percent (of which Axis Bank is 58 percent).

"If the merger were to happen then it needs to be seen if Axis Bank continues with its equity ownership and also if Axis Bankcontinues to be a bancassurance partner for the new combined entity," Deutsche Bank says in Money Control reports.

Both the companies follow different holding structure, and it is unclear what would be the final holding pattern.

For now, HDFC Life’s product portfolio is majorly linked unit and that of Max Life has higher non-linked portfolio. For FY16, HDFC Life product mix for unit stands at 55%, participating at 30% and non-participating is around 15%. While for Max Life was ULIP (28 percent), participating (58 percent) and non-participating (14 percent),’ the report said. 

Axis bank said, “We have a very productive relationship with Max Life over the years and look at this development positively. As a Bancassurance partner we are committed to deepening life insurance penetration in the country and would continue to be associated in distributing life insurance products. At an industry level, Bancassurance is in the process of transitioning to the Open Architecture regime. The Bank will continue to do what is beneficial, and of value, to our growing customer base."

As per Economic Times report, if the merger happens, it would be among the first life insurers in over decades to create a firm with market value of about Rs 50,000 crore, ahead of ICICI Prudential. However, it will be still the second after LIC who hold Rs 25 lakh crore industry with 70% share.