IRDA restricts IGE, J&K Bank from subscribing to MetLife issue

The Insurance Regulatory and Development Authority (IRDA) has restricted International General Electric Corporation (IGE) and J&K Bank from subscribing to a fresh issue of shares by MetLife India.
Issuing fresh shares is a part of process of inducting state-run Punjab National Bank into the life insurance company. The regulator has cleared the proposal, but with riders. IGE holds a 20.3% stake in the life insurance joint venture while Jammu & Kashmir Bank holds 11.26%.
After performing an exhaustive study, the regulator found that certain regulatory issues do not allow some of the existing shareholders to subscribe to the fresh issue and asked them not to subscribe to it.
The regulator in a circular said, "This constraint (of some existing shareholders to subscribe to new shares) was impacting the solvency position of the insurer and limiting its ability to grow.”
The deal will be cleared after some of the existing shareholders reduce their stake. As per the law, Insurance companies are mandated to maintain a 1.5% solvency margin.
After the induction of Punjab National Bank with 30% stake in the joint venture, the stake of MetLife will drop to 18%. If industry sources are to be believed, Jammu & Kashmir Bank is all set to sell its shares to MetLife. As per the current law, a foreign insurer cannot own more than 26% stake in India.
Industry sources indicate that Punjab National Bank (PNB) is picking up 30% stake in the joint venture life insurance, MetLife India for free. The insurer has already paid an upfront commission of over 500 crore to the bank. The transaction will mark PNB's entry into the life insurance space and will give MetLife a wider reach through bancassurance.
MetLife India is a joint venture between Jammu & Kashmir Bank, the US-based MetLife International (26%) and private investors, including Elpro International (13%) and M Pallonji Group (26.1%).

Now, get your social media accounts insured against hacking

Users of social media such as Facebook, LinkedIn and Twitter, may soon be able to get their accounts insured against the nuisance of hacking. A UK-based company, ALLOW has launched the country's first social media insurance. According to the ‘Daily Mail’ report, the information privacy company is offering services to specifically protect against reputational damage, account hacking and ID theft. Accounts hacking on social media sites are quite common these days, where another user hacks accounts and posts abusive or offensive messages, which lead to a serious damage to an individual or business. "Perhaps, insurance wouldn't have been needed a few years ago,” said Justin Basini, CEO of the company ALLOW. "That's all changed now. Every internet user faces a certain level of risk that one day a digital criminal will target them or that they will suffer damage to their reputation," Basini added. Premium for the cover is 3.99 pounds per month. The cover includes expenses for legal advice if case someone suffers an on-line attack and seeks some form of redress.

Furthermore, the cover also includes the cost of disabling accounts, suppressing offensive material and stopping any legal action triggered by hacking, for example if a hacker posts illegal material under a victim's name.

LIC to invest Rs. 2.4 lac crore this fiscal year

The largest insurer and domestic institutional investor of the country, Life Insurance Corporation (LIC) of India has decided to invest an incremental Rs. 2.4 lac crore in securities this fiscal year against about Rs. 2 lac crore in last fiscal year, an increment by 20%. Out of which, Rs. 45,000 crore is expected to be incremental in equities. The rest will be new investments in debt, and reinvestment of redeemed debt, dividends and profit from sale of equities. As of 31st March’ 2011, total investment in securities was about Rs 11.47 lac crore. “We are a long-term investor. We go by our own norms and do not interfere in their day-to-day working. In any case, we have our nominee directors in companies where we have a significant stake to take care of our interest. They have a clear mandate to protect our interest. Any decision that affects the interests of the organisation, we will definitely have a look at it. If it is a matter internal to them, we are okay with it”, said Mr. D. K. Mehrotra, Chairman of Life Insurance Corporation of India. “Further, our investment is based on the performance of the company vis-a-vis their competitors, market scenario, corporate governance, track record and future earnings. We normally do not get influenced by internal happenings”, he added. In reply to a question, Mr. Mehrotra dismissed all the market speculations that the Life Insurance Corporation of India is the protector of the share markets. “We do not save anybody or pull anybody down. It is a commercial decision. When the market comes down; we get a very good buying opportunity. We get very good scrips at a reasonable price, so we pick it up. And, when the market goes up, we have an opportunity to exit and book profits. We never see ourselves as a saviour when the markets tumble”, said Mr. Mehrotra. According to SEBI rules, one entity should not sponsor two fund houses. LIC was one of the promoters of erstwhile UTI (now UTI AMC). The insurer has also rejected itself from a board seat stating that it is interested only in investment.

MetLife to buy back shares from Srini Raju, J&K Bank

Chintalapati Srinivasa Raju (popularly known as Srini Raju), an IT Professional, Entrepreneur and Private Equity Investor and Jammu & Kashmir Bank are likely to sell shares to MetLife as the American insurance giant aims to induct Punjab National Bank in the joint venture.
Srini Raju is the co-founder and Chairman of Peepul Capital (successor to iLabs Venture Capital Fund). Besides funding and mentoring next generation entrepreneurs, he plays an active role in building educational institutions of higher learning.
Srini Raju plans to exit from the joint venture after selling his entire stake of 5%. His total managing assets is worth $1 billion. While, J&K Bank will offload a part its 11.5% stake, sources close to the development said.
After the induction of Punjab National Bank with 30% stake, the joint venture will be renamed as PNB MetLife. As per the current law, a foreign insurer can own only 26% stake in India.
After the deal, MetLife stake will drop to about 18%, which will allow the insurer to buy back Raju’s stake and some shares of Jammu & Kashmir Bank. Other existing Indian shareholders M Pallonji & Co and Dabriwala family of Elpro, will retain stakes even though the latter's holding may drop from 20% to 14%.
Last month, the Insurance Regulatory and Development Authority approved MetLife's proposal to transfer shares to PNB at market price. MetLife had originally proposed to transfer 30% stake to PNB at notional value.
But the regulator's insistence on issuing fresh shares at market price will lead to stakes of existing investors getting diluted. IRDA wanted a reduction in the equity stake of some shareholders and maintaining of solvency margin according to its directions.

IRDA to provide a comprehensive insurance cover to BPL families

In view to expand the reach of insurance cover to Below Poverty Line (BPL) families in the next five years, the Insurance Regulatory and Development Authority (IRDA) has issued a draft proposal.

According to the draft, every insurer has to undertake such percentage of life insurance and general insurance business in these sectors and design specific standard product for this category of population, as may be specified by IRDA. The standard insurance product would be in addition to the government schemes, which provide insurance cover at concessional rates. These standard products should include minimum sum assured of Rs 40,000 for life term cover and up to Rs 2,00,000. The product can be extended to the family members and the period of cover shall be between 5 years and 25 years. The draft further illustrated, “The objective of mandating a minimum percentage cover to these sections was to extend insurance cover to meet exigencies cast by natural catastrophes, accidental death in particular as also a means of protection for the family and some savings to bolster their financial security.” The regulator said a lead life insurer should tie up with a non-life insurer or vice-versa for the benefit of the people. All insurers, during the year 2012-18 are mandated to fulfil at least 50% of the target group through the standard product sales and the remaining 50 per cent may be fulfilled by any other approved rural and social sector products. The draft also said the policy conditions and prospectus should be clear, simple and transparent language should be used without vague statements. In its 'Composite Package of Standard Insurance Product for Rural and Social Sector' IRDA said weaker sections should be provided cover to meet the exigencies cast by natural catastrophes, accidental death, protection means for the family as well as to promote some savings to bolster their financial security. The product will have defined options and levels to provide choice and flexibility to customers in order to cater to individual circumstances. The regulator has invited suggestions from all stakeholders on the draft within 30 days.