Irda approves MetLife-PNB share transfer deal
The Insurance Regulatory and Development Authority (Irda) on Monday approved the transfer of shares from existing shareholders of MetLife Insurance to Punjab National Bank (PNB), on the condition that shares held by the bank would be locked in for five years from the date of transfer.
MetLife is a joint venture between J&K Bank, the M Pallonji Group, the US-based MetLife International and some private investors. MetLife International holds a 26 per cent stake — the maximum foreign direct investment allowed in the insurance sector — and Indian shareholders own the remaining 74 per cent.
The insurance regulator, after discussing with a consultative committee, has directed MetLife to desist from allotting any further shares to IGE India Ltd, enhance capital to strengthen solvency position by March 31, 2013, and comply with Irda regulations on bancassurance and corporate agency. Faridabad Investment Co is a shareholder in MetLife Insurance, which later merged with IGE India.
Irda also said it was concerned about the company's solvency position, which stands at 1.65 and is under its examination. It said Jammu and Kashmir Bank was presently not in a position to inject capital into the insurance firm, as the Reserve Bank of India has not relaxed its stipulations on J&K Bank, requiring it to exit from the insurance venture.
“The authority is not fully satisfied with the financial due diligence of IGE and has concerns on its ability to meet its commitments towards future capital calls of the insurance company,” said Irda.
In September, Irda approved a proposal for inducting PNB as a shareholder, subject to certain conditions on appointment of directors on the board of the insurer by PNB.
The regulator had said other conditions included reduction in the equity stake by some of the existing shareholders and maintaining solvency margin in line with the directions suggested by Irda. This transaction was pending the insurance regulator's approval for over a year, as Irda was not comfortable with the deal structure and had directed the insurance company to re-work the sale agreement.
Irda also pointed that keeping the above factors in mind, MetLife might be required to cease insurance operations in India in case the issues relating to shareholding structure and financial stability are not suitably addressed. "Such a situation would not be in public interest and may also result in jeopardising protection of the interests of the policyholder," the regulator said.