Merger in Insurance Sector: Prime Life, Union Life, and Gurans Life sign final merger deal

Like the banking sector, the drive for consolidation is also gaining momentum in the insurance sector. While the first two weeks of 2023 were dominated by mergers and acquisitions in the banking sector, the third week saw two merger agreements - one initial agreement and the other final agreement - being signed between insurers. On Sunday, Union Life Insurance Company, and Gurans Life Insurance Company signed a final merger agreement to form Himalayan Life Insurance Company Limited. The final agreement was signed by Sulav Agarwal on behalf of Union Life, Piyush Raj Aryal on behalf of Prime Life, and Vivek Dugar on behalf of Gurans Life. These three companies had inked a preliminary memorandum of understanding (MoU) for the merger on May 12, 2022. The three parties signed the final MoU after the completion of the due diligence audit (DDA) report agreeing on a swap ratio of 1:1:1. Himalayan Life Insurance, which will be formed after the merger, will have paid-up capital of Rs 7.69 billion.

It has been agreed that Sulav Agrawal, the current Chairman of Union Life, will be the Chairman of Himalayan Life. Similarly, Manoj Lal Karn, the current CEO of Union Life, will lead the new entity as the CEO. Bipin Kumar Lal, CEO of Gurans Life and Nirmal Dahal, CEO of Prime Life will take the roles of Senior Deputy CEOs in Himalayan Life.

The final merger deal between the three life insurers followed the signing of the initial agreement for the merger between two non-life insurance companies- Ajod Insurance and United Insurance - on January 11. The Ajod-United merger initiative has come after Ajod's unsuccessful merger attempt with Prabhu Insurance. United and Ajod agreed on a swap ratio of 100:90. The name of the entity formed after the merger will be United Ajod Insurance. Earlier, Ajod and Prabhu Insurance signed a merger agreement in the last week of July 2022. However, the proposed merger did not materialize as both companies could not agree on the swap ratio. With the Nepal Insurance Authority pushing for a consolidation drive by raising the minimum paid-up capital requirements for both life and non-life insurers, insurance companies have ratcheted their merger initiatives. The authority has increased the paid-up capital of non-life insurance companies to Rs 2 billion while it is Rs 5 billion for life insurance companies. The Nepali insurance sector has already seen two successful mergers in 2022. In July, Himalayan General Insurance and Everest Insurance merged to form Himalayan Everest Insurance Co. Ltd. Similarly, in October, Sanima General Insurance and General Insurance Company merged to form Sanima GIC Insurance Ltd.