MetLife may not get to exit India that soon
MUMBAI: US insurer MetLife's plan to exit its Indian joint venture may have hit a roadblock, as state-run Punjab National Bank has decided to stick on with its ownership in the company.
With nearly half-a-dozen other stake holders also dragging their feet, finding a buyer for just a 26% stake that MetLife owns in PNB Metlife may be difficult, as a potential buyer will seek a larger holding and control.
Metlife recently initiated a process to exit the Indian venture, as did global insurers New York Life and ING. “In a recent board meeting, PNB has communicated that it would want to stay in the insurance venture," said a source. “Other investors who were exploring an exit with Metlife are likely to stay back in the company post PNB's decision."
Punjab National Bank owns 30% of PNB Metlife. The other investors are Elpro (21%), M Pallonji & Co (18%) and Jammu and Kashmir Bank (5%). It had a share capital of Rs 2,128 crore at the end of March 31, 2016.
PNB did not respond to an email seeking comment.
A senior PNB official, on the condition of anonymity , said the bank is committed to staying in the venture. PNB Metlife is the second largest life insurance firm promoted by a state-run bank, after State Bank of India-led SBI Life.
PNB had bought the stake in Metlife in 2013 with a lock-in of five years. The insurer is present in 7,000 locations, including through branches of Punjab National Bank.
In October 2016, the board of Tata Sons had discussed a proposal for Tata AIA Life Insurance Co to buy 70% of PNB Metlife for Rs 2,700 crore.As per the proposed structure, PNB would sell its stake in the merged entity through a put option within three years, or else, Tata and AIA could exercise a call option in fourfive years.
PNB Metlife had seen an 8% expansion in individual new business income during April-January 2017, when other insurers led by state-run banks grew at a much faster speed. Post demonitisation, life insurance companies have seen increased sale of new insurance policies. Star Union Dai-Chi and IndiaFirst have grown at 30% and 70%, respectively, in that period.
Growth in individual new business income is up 20% the recent months for the insurance industry and 25% for the private sector. PNB Metlife's market share has fallen to 3.1% from 3.6% at the end of January 2017.
Both Indian and foreign partners have been reassessing their strategies due to low margins and slowing growth. New business margins for Indian insurers are 8-17% compared with 15-50% for their regional peers, a Credit Suisse report had said.
The insurance industry is going through a phase of consolidation after legislation enabled foreign insurers to raise their stake to 49%.Post change in law, two large insurance companies, HDFC Life and Max Life, have announced plan to merge.
The largest private sector life insurance company , ICICI Prudential Life, listed its shares on stock exchanges in September.
With nearly half-a-dozen other stake holders also dragging their feet, finding a buyer for just a 26% stake that MetLife owns in PNB Metlife may be difficult, as a potential buyer will seek a larger holding and control.
Metlife recently initiated a process to exit the Indian venture, as did global insurers New York Life and ING. “In a recent board meeting, PNB has communicated that it would want to stay in the insurance venture," said a source. “Other investors who were exploring an exit with Metlife are likely to stay back in the company post PNB's decision."
Punjab National Bank owns 30% of PNB Metlife. The other investors are Elpro (21%), M Pallonji & Co (18%) and Jammu and Kashmir Bank (5%). It had a share capital of Rs 2,128 crore at the end of March 31, 2016.
PNB did not respond to an email seeking comment.
A senior PNB official, on the condition of anonymity , said the bank is committed to staying in the venture. PNB Metlife is the second largest life insurance firm promoted by a state-run bank, after State Bank of India-led SBI Life.
PNB had bought the stake in Metlife in 2013 with a lock-in of five years. The insurer is present in 7,000 locations, including through branches of Punjab National Bank.
In October 2016, the board of Tata Sons had discussed a proposal for Tata AIA Life Insurance Co to buy 70% of PNB Metlife for Rs 2,700 crore.As per the proposed structure, PNB would sell its stake in the merged entity through a put option within three years, or else, Tata and AIA could exercise a call option in fourfive years.
PNB Metlife had seen an 8% expansion in individual new business income during April-January 2017, when other insurers led by state-run banks grew at a much faster speed. Post demonitisation, life insurance companies have seen increased sale of new insurance policies. Star Union Dai-Chi and IndiaFirst have grown at 30% and 70%, respectively, in that period.
Growth in individual new business income is up 20% the recent months for the insurance industry and 25% for the private sector. PNB Metlife's market share has fallen to 3.1% from 3.6% at the end of January 2017.
Both Indian and foreign partners have been reassessing their strategies due to low margins and slowing growth. New business margins for Indian insurers are 8-17% compared with 15-50% for their regional peers, a Credit Suisse report had said.
The insurance industry is going through a phase of consolidation after legislation enabled foreign insurers to raise their stake to 49%.Post change in law, two large insurance companies, HDFC Life and Max Life, have announced plan to merge.
The largest private sector life insurance company , ICICI Prudential Life, listed its shares on stock exchanges in September.
