HDFC Standard Life Insurance, Max Life Insurance and Max Financial Services have approved to evaluate a potential merger of Max Life and Max Financial Services into HDFC Life.
This combined entity of two of the big players in the insurance industry will have a 25 percent market share, which will be next only to LIC of India. Max Financials owns 65 percent of Max Life and has a market capitalisation of Rs 12400 crore.
The said merger will allow HDFC Standard Life to get a listing in the stock market. The ownership structure will be based on the swap ratio, which still has to be determined and discussed with the regulators.
HDFC Life was the first private life insurer to launch operations in FY 2001 and has since grown steadily over the years and crossed the half million customer mark in FY 2007. The total premium income crossed Rs 100 billion in FY 12 when the company declared a profit for the first time. In FY16, total premium income crossed Rs 160 billion and Assets Under Management were over Rs 700 billion. Both HDFC Life and Max LIfe have strong new business margins at 19.8 percent and Max Life is 17.9percent, respectively.
India remains the fastest growing major economy with a GDP growth of 7.6 percent for FY16 yet insurance penetration is very low. Life insurance penetration in India stands at only 2.6 percent of GDP. With 66 percent of India’s population being below 35 years of age, the favourable demographic provides great potential for the life insurance industry. India’s insurable population is expected to be 750 million by 2020 and over the next 5 years, the total life insurance premium market is estimated to touch US$ 100 billion.
For FY16, the total insurance premium growth on a 5-year CAGR basis stood at 6 percent. However, FY16 was a watershed year as the combined market share of private life insurers in the individual segment stood at 52 percent, which for the first time, was higher than the share of LIC. The top 4 private insurers today constitute 65 percent of the private insurance market, while the remaining 19 private insurers have a combined market share of 35 percent.
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