Metlife To Have Total Mgmt Control In Risk Venture

MetLife International Holdings Inc will have total management control of MetLife India, the proposed Indian life insurance venture with Jammu and Kashmir Bank and M Pallonji Group.

This is the first time that a foreign entity with the maximum possible 26 per cent holding has been given a free hand in terms of running the company. Metlife India will also hog the lamplight as the name fails to reflect the Indian partners.

"They understand and know the business. We will be on the board of directors to oversee the insurance venture, but we will not be in the management of the company," said J&K Bank chairman M Y Khan.

 

J&K Bank has a 25 per cent stake, while M Pallonji Group has a higher stake of 31 per cent. The balance gap of 18 per cent has been taken up by three corporate investors on the understanding that, at the time of dilution, most likely through a public offering, they will sell off their holding, Khan said.

Of the seven-member board, three will be from MetLife USA, and two each from J&K Bank and M Pallonji. None of the other smaller partners will have any representation on the board.

The life insurance venture will start with a capital of Rs 100 crore, which will be raised to Rs 300 crore over the next three years. The old private sector bank took a conscious decision not to invest more than 25 per cent in the new insurance company, because ultimately based on the Irda (Insurance Regulatory and Development Authority) regulations, the Indian promoters will have to bring down its stake to 26 per cent. Khan said: "There is no meaning in our putting in more money now when we will need to dilute our stake at a later date".

J&K Bank, on the advise of its consultant Arthur Andersen, has decided to limit its role to that of being a distributor for insurance products. J&K Bank will act as a corporate agent for MetLife India and is in the process of selecting a non-life insurance outfit.

Arthur Andersen has shortlisted three new companies - Tata AIG General Insurance, Reliance General Insurance and Royal Sundaram Alliance - to act as a corporate agent for the distribution of one of these company's products.

J&K Bank's strength and focus in transportation and car finance will decide which of the three general insurance companies J&K Bank will partner with for the distribution.

J&K Bank has identified insurance, depository and the credit card businesses to increase fee-based income. It is also going in for infrastructure financing in a big way.