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Max, HDFC Life call off merger of insurance business

LiveMint logoLiveMint 31-07-2017 Staff Writer

New Delhi: Close to a year after announcing the merger of Max Life Insurance with HDFC Life Insurance, both the companies have called off the deal failing to get the requisite regulatory approval. In a statement on Monday, Max Financial Services (MFS), Max India and Max Life confirmed that the proposed merger with HDFC Life has been called off.

The company said that the exclusivity agreement with HDFC Life was valid till 31 July 2017, and will not be renewed.

“The prospective partners had evaluated several alternate structures over the last month. However, the inordinate time associated with finalization and approval of these structures led to this decision,” the company said.

Max Financial Services was created in 2016, after a demerger of the erstwhile Max India. Both companies had initially proposed the merger of Max Life with Max Financial Services.

However, the structure was not approved by the insurance regulator IRDA as it was found to be violating Section 35 of the Insurance Act which prohibits the merger of an insurance company with a non-insurance company.

Mint reported in June that both companies had begun working on an alternate structure, while HDFC Life had also simultaneously begun working on its proposed IPO.

In July, HDFC Standard Life Insurance Co. Ltd’s board approved a proposal to sell as much as 20% of the insurer through an initial public offering (IPO) even as it reiterated its commitment to a potential merger with Max Life Insurance Ltd at a later date.

HDFC Life and Max Life had announced their merger plans in August last year, seeking to create an insurance giant with Rs1.1 trillion in assets.

The potential merger would have created India’s largest private sector life insurer, surpassing ICICI Prudential Life Insurance Co. Ltd, second only to state-run Life Insurance Corp. of India (LIC), which has a 70% share of new business premiums in the country.

The merger was being seen as first signal of a long-awaited consolidation among private insurers in an industry with assets under management of Rs22.4 trillion, of which the share of India’s 23 private sector insurers is only Rs4.61 trillion, according to IRDA.

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