Axis Bank to Acquire 29% Stake in Max Life

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Axis Bank to acquire 29% stake in Max Life Insurance, a subsidiary of Max Financial Services (MFS), to raise its total stake to 30%. After the completion of this transaction, Max Life will become a 70:30 joint venture between MFS and Axis Bank.

Axis Bank to Explore Long-term Strategic Partnership with Max Life Insurance

Introduction

Axis Bank to acquire 29% stake in Max Life Insurance, a subsidiary of Max Financial Services (MFS), to raise its total stake to 30%. After the completion of this transaction, Max Life will become a 70:30 joint venture between MFS and Axis Bank.

Detailed Stock Analysis by Invest Yadnya
Stock Analysis by Invest Yadnya

Axis Bank to Acquire 29% Stake in Max Life Insurance

Max Life Insurance

Company Overview
  • Max Life Insurance is the sole operating subsidiary of Max Financial Services. Ans Max Life Insurance is the largest non-bank owned private life insurer in India.
  • Max Life has been at the forefront of the current buoyant phase in the Indian Life sector. It is the 4th largest Private Non-Bank Insurer in India with Asset under Management of Rs.69,000 Cr as on December 31, 2019.
  • It has a multichannel distribution architecture with a strong growth in both :
    • Proprietary (32%)
    • Bancassurance Channels (Axis Bank : 55%, Other Banks : 13%)
  • They are having a key focus on the E-commerce with the growing online protection business.
Key Performance Parameters (For 9M FY20)
  • Asset under Management (AUM) = Rs.69,000 Cr, 18% YoY
  • Embedded Value (EV) = Rs.10,077 Cr, 22% YoY
  • Operating Return on EV = 18.4%
  • Value of New Business (VNB) = Rs.576 Cr, 24% YoY
  • New Business Margin (NBM) = 21%, up 60bps YoY

Max Life Insurance – Shareholding Pattern

Shareholding Pattern of Max Life Insurance
Shareholding Pattern of Max Life Insurance
  • Max Financial Services currently holds a 72.5% stake in Max Life Insurance, while Mitsui Sumitomo Insurance (MSI) owns 25.5% stake.
  • Axis Bank held about 2% stake in Max Life Insurance, prior to the announcement of 29% stake acquisition in the company.

Share Swap Agreement with Mitsui Sumitomo Insurance

Share Swap Agreement Between Max Financial Services & Mitsui Sumitomo Insurance
Share Swap Agreement Between Max Financial Services & Mitsui Sumitomo Insurance
  • On March 4, 2020, the Board of Max Financial Services (MFS) has approved a transaction which will allow Mitsui Sumitomo Insurance (MSI) to swap 20.57% of its shareholding in Max Life insurance with 21.87% stake in MFS.
  • MSI is a part of the world’s 7th largest MS&AD Insurance Group Holding of Japan.
  • Max Financial Services and MSI are 73:25 joint venture partners in India’s fourth largest private Life Insurer Max Life Insurance Company.
  • Key Achievements through the Share Swap Agreement :
    1. Share swap will enable Max Financial Services (MFS) to simplify shareholding structure in its subsidiary – Max Life Insurance
    2. MFS to attain more flexibility to attract strategic investments in Max Life in the future and still can maintain a significant majority ownership in Max Life
    3. The transaction will also provide MFS the option to purchase from MSI its balance stake in Max Life at Rs.85 per share
    4. In accordance with this share swap, the equity stake held by Max Financial Services in Max Life will increase to 93.10%. (The share swap transaction is expected to be concluded by June 2020)

Axis Bank to Explore Long-term Strategic Partnership with Max Life

  • Max Life is having a successful Bancassurance Partnership with Axis Bank since a decade.
  • The CAGR growth of Max Life’s new business through its Bancassurance Channels, while the new business CAGR Growth Max Life-Axis Bank Bancassurance Partnership is shown in below graphs :
Max Life’s Bancassurance Partnership with Axis Bank
Max Life’s Bancassurance Partnership with Axis Bank
  • Almost 82% of the Max Life’s new business through Bancassurance Channels, comes only from Max Life-Axis Bank Bancassurance Partnership.
  • It shows how significant role the Axis Banks has been playing in Max Life new business growth.

Axis Bank to Acquire 29% Stake in Max Life Insurance for Rs.1,600 Cr

Max Life Insurance to become 70:30 Joint Venture between MFS & Axis Bank
Max Life Insurance to become 70:30 Joint Venture between MFS & Axis Bank
  • On April 28, 2020, Axis Bank announced that it would acquire an additional 29% stake in Max Life Insurance for Rs.1,600 Cr.
  • This acquisition will raise its total holding in the life insurer to 30% after the completion of the deal. Max Financial Services will hold the remaining 70% in the joint venture.
  • Thus, Max Life Insurance to become 70 : 30 Joint Venture between MFS and Axis Bank.
  • The proposed transactions were subject to approval of requisite corporate and regulatory authorities (including the Insurance Regulatory and Development Authority of India, the Reserve Bank of India and the Competition Commission of India)
  • Max Life Insurance will include Axis Bank’s name in its tag line to further enhance customer trust in the brand and highlight the strength of the partnership.
  • Amitabh Chaudhry, Axis Bank’s MD & CEO said, “We continue to believe in the long-term prospects of India’s under-penetrated life insurance space, the current environment notwithstanding. We see this joint venture creating immense value for our stakeholders, given our long-standing, high-performing partnership with Max Life.”
  • The primary aim of the acquisition was to build the Axis franchise as a financial service provider. Max Life will include Axis Bank’s name in its tag line.

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