In India, the insurance industry has experienced substantial expansion. There are two different business transaction in a contractual aspect which is based on commercial intent of the parties coming out due investigation and discussion between them that is beneficial to them and in their best interest are MERGER and ACQUISITION. Since its globalization 20 years ago, the Indian insurance business has experienced enormous expansion.
In the year 2019, there were a number of significant acquisitions in the private insurance industry. Following that, the Indian government announced the merger of public banks, which encouraged the growth of the insurance business, making it more competitive and enticing for industrialists to enter. Under the provision of Insurance Act, 1938 some are provided.
Merger and Acquisition Deals in Insurance Industry
AXIS BANK AND MAX FINANCIAL
According to the sources, the insurance regulator recently wrote to the RBI and SEBI seeking their consent on the matter and also received the necessary approval for the structure .
The first announcement was for Axis Bank to buy a 29 percent stake in Max Life Insurance for 1,592 crores, with a put option for Axis Bank to sell all of its shares to Max Financial at 294 per share. This option was later deleted due to opposition from the insurance regulator. The arrangement entails Axis Entities, which include Axis Bank, Axis Capital, and Axis Securities, acquiring a 19 percent share in Max Life Insurance. Furthermore, each of these three organizations will buy 9% (by Axis Bank) and 3% (by Axis Capital and Axis Securities combined). The remaining 7% will be purchased by the Axis company at a later date. Axis Bank may also want to sell its share in Max Life Insurance at a reasonable market price.
Union Bank and Andhra Bank
After the merger of Andhra Bank and Corporation Bank, Union Bank became the country’s fifth largest public sector lender. In turn, the bank will provide a wide range of terms and services throughout India, particularly in southern India. while increasing the number of branches and ATMs available to its diverse customer base. The fusion will alter and generate costs. Over the next three years, it hopes to save Rs 2,500 crore in cost and revenue synergies.
IDBI Bank Deal
IDBI Bank reached an agreement with Ageas Insurance International and Federal Bank, its joint venture partners, to sell up to 27 percent of its interest earlier this month. Ageas will acquire 23 percent of the company, while the remaining 4 percent will be sold to Federal Bank. The remaining 21% of the stock will be handled by IDBI bank.
Bharati AXA’S Non -life insurance and ICICI Lombard General Insurance
Policyholders do not need to be concerned because the merger is subject to IRDAI, SEBI, COI, and other regulatory approvals. The merger will create the country’s third-largest general insurance company. The demerger of Bharati Enterprisers and Bharati AXA would be followed by a merger with ICICI Lombard’s Business. There will be a change in premiums, which policyholders should be aware of. The merger would create a larger network of network providers, which will benefit both insurers’ policyholders.
HDFC and Apollo Munich Health Insurance Company Limited Merger
Apollo Munich was unable to maintain the liquidity ratio as required by IRDA. Synergies, cost-cutting, and capital infusion were all needed to increase profitability. HDFC acquired a 51 percent ownership in Apollo Munich from Apollo Group, and the company was renamed HDFC ERGO Health Insurance Company Limited as a result. The merger of HDFC ERGO general insurance and HDFC ERGO health insurance was approved in November 2020.
HDFC Life Insurance and Man Life Merger Deal
Following the de-merger of Max life insurance from Max India Limited in 2016, a merger with Max finance was planned in 2016. The merger was unable to take place due to IRDAI’s refusal to authorize it, citing the aforesaid section of the Insurance Act. As a result, HDFC Life Insurance Limited has called off the proposed merger of HDFC Life and Max Life Insurance, which was signed through a definitive agreement between HDFC Standard Life Insurance Company and Max Financial Service Limited. An insurance company cannot merge with a non-insurance company, which would be a violation of section 35 of the Insurance Act.
Paytm and Raheja QBE General Insurance
There are just a few players with a significant market share in non-life insurance. Faced with such obstacles, Paytm announced in early July that it will buy Raheja QBE General Insurance. It will be able to better manage operating costs while preserving the solvency ratio as a result of this penetration.
HDFO ERGO General Life Insurance and L AND T General Insurance Acquisition Deal
L&T’s subsidiary, L&T General Insurance Company, acquired a 49 percent share in HDFC ERGO General Insurance Company, which was experiencing difficulties. Following the acquisition, HDFC ERGO was able to extend its policies and policyholders by enrolling L&T insurance policyholders, allowing it to focus on distribution and channelize offices.
Punjab National Bank and Canara HSBC OBC life insurance company Limited (MERGER)
In 2019, when the Government of India amalgamated major public banks, Oriental Bank of Commerce merged with Punjab National Bank. OBC owned a 23 percent promoter ownership in Canara HSBC OBC Life Insurance Company Limited at the time of the merger, which was later acquired by PNB after the merger. PNB MetLife Insurance Firm Limited, a joint venture company, was founded in 2013 with the signing of a formal agreement between PNB and MetLife, a US-based company, and PNB bought 305 interests in the aforementioned insurance company. In all scenarios, IRDA norms state that a promoter cannot own shares in two insurance businesses at the same time.
Union Bank of India And India First Life Insurance Company Acquisition
A combined venture between Bank of Baroda, Andhra Bank, and a UK-based financial institution created India’s first life insurance firm. The Government of India amalgamated Bank of Baroda, Andhra Bank with United Bank Of India, which owns a promoter share in Star Union Dai-Ichi Life Insurance, in 2019 and gained 44 percent of Bank of Baroda’s promoter stakes in India First Life Insurance Company as a result of the merger .According to IRDA guidelines, a promoter cannot own shares in more than one insurance firm, but it recently allowed Union Bank to do so.
In today’s world, when the world is increasingly becoming a global village, larger insurance businesses that can play a key role in global marketplaces, particularly in emerging nations, are needed. Although mergers and acquisitions (M&As) are popular in the insurance industry, they are sometimes frowned upon because it is stifling competitiveness in the industry Insurance firms, on the other hand, must be cautious Carry out mergers and acquisitions if the financial sector is reorganized to allow them to sell existing or new products.