Max Life, HDFC Standard In Pact To Create India's Biggest Private Life Insurer

Max Financial Services on Friday entered into a pact to explore merger possibility with HDFC Standard Life, the company said. The merger of HDFC Life and Max Life will create the country's biggest private life insurer.

Max Financial Services shares rallied as much as 20 per cent, while HDFC shares were among the top Nifty gainers today.

"Max Financial Services Ltd has informed BSE that the Board of Directors of the Company at its meeting held on June 17, 2016, approved entering into a confidentiality, exclusivity and standstill agreement to evaluate a potential combination through a merger of Max Life Insurance Company Limited and Max Financial Services Limited into HDFC Standard Life Insurance Company Limited by way of a scheme of arrangement," the company said.

According to analysts, the merger between Max Life and HDFC Life will create a behemoth with a market cap of around Rs 30,000 crore. Together, the companies will have a market share of 12.4 per cent, more than ICICI Pru's market share of around 11 per cent.

Gaurang Shah of Geojit BNP Paribas told NDTV Profit that given the low insurance penetration in the country, these mergers and acquisitions will help stronger players continue in business and at the same time those who are in business will have advantage of getting better market share.

"This is the beginning. There is a possibility of more mergers coming through subject to approvals... It is win-win situation depending on scale of business and with this deal Max will have the banking customer base, housing customer base and will have the positives of the diverse network of branches that both the HDFCs have," he added.

HDFC Standard Life is joint venture between HDFC and UK's Standard Life. HDFC owns 61.63 per cent in the joint venture, while 35 per cent stake is held by UK's Standard Life.

Max Life Insurance is a joint venture between Max Financial Services and Japan's Mitsui Sumitomo Insurance. Max Financial Services, a part of the Max Group, is the holding company for Max Life. Max Financial Services owns 68 per cent stake in Max Life Insurance.

Max Financial Services shares closed 10.28 per cent higher at Rs 472.80 and HDFC shares ended 2.20 per cent higher at Rs 1,227.3 compared to 0.19 per cent gain in the broader Nifty.