Axis Move to Sell Tata AIA Policies may Rock Max Life’s Merger Plan

HDFC Life may pitch for a revaluation for merger as Axis accounts for 60% of Maxsales

The proposed merger between life insurers HDFC Life and Max Life, which has hit a regulatory roadblock, may face yet another headache, this time over valuation.

Axis Bank, which accounts for 60% of New Delhi-based Max Life’s sales, is in talks with Tata AIA Life Insurance to sell the latter’s products, a person aware of the development said. Axis Bank currently sells insurance policies of only Max Life and market leader Life Insurance Corporation of India.

The development is likely to prompt HDFC Life to reconsider Max Life’s valuation for the proposed merger, said a person familiar with the merger negotiations.

The two parties are currently restructuring the merger deal after Insurance Regulatory and Development Authority of India (Irda) rejected the original proposal.

After the announcement of the merger between Max Life and HDFC Life, Axis Bank had tied up with LIC.

Axis Bank holds a small stake in Max Life Insurance. It would hold a lower percentage in the merged entity as per the proposed structure. The bank’s tie-up with LIC to sell the latter’s products, too, was finalised after Max Life and HDFC Life announced their merger plan.

“We are allowed to tie up with three companies,“ said Rajiv Anand, executive director at Axis Bank. “We are in talks with several companies for a tie-up in li fe insurance.“

Tata AIA at present sells its products through IndusInd Bank, Citibank and HDFC Bank. Tata Sons owns 51% in the company and AIA holds 49% through AIA International Ltd.

As per the present agreement, Axis Bank will sell products of Max Life till 2021.

The bank earned `997 crore in mutual fund and insurance distribution fees in the year ended March 2017, 18% growth from `889 crore earned a year ago.

The bank sees a huge potential for its business of selling life insurance.

Tata AIA Life Insurance has 3.7% market share in individual business income adjusted for single premium. It recently tied up with HDFC Bank for distributing its products through its branches. It is the sixth-largest life insurance company. It has gained around 100 bps market share in the last one year.

 

Source:-The Economic Times

Date:-5th July,2017

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