Punjab National Bank, a state-run lender, will choose from a list of life insurance companies - Bharti Axa Life, Aviva Life and MetLife - to buy an equity stake, after dropping Reliance Life and Birla Sun Life , among others, from potential investments. The bank will call for commercial bids this week and evaluate on the tie-up.
The bank will finalize a partner based on the evaluation of the proposals submitted by these insurance companies. "We had divided the companies in three bands. Aviva, Bharti Axa and MetLife are in band 1. We will call for commercial bids this week and decide on a partner," said PNB chairman KR Kamath. Sources close to the development said the bank was interested in taking a substantial stake, and therefore , opted for smaller companies.
In order to achieve scale within the new distribution cost structure prescribed by the regulator, the smaller players are willing to offer a high stake. Off late, it has become essential for insurers to bring down their distribution cost. Bancassurance provides low cost of distribution as insurers sell policies through bank branches. Aviva, MetLife and Bharti Axa had a market share of 2.4%, 2.1% and 1.4%, respectively, at the end of February.
On a year up to February, Aviva saw its new business income slip by 13% while MetLife saw a drop of 45% in new business income. Bharti Axa Life Insurance registered a fall of 1.4% in income by selling new policies. Mr Kamath said the bank would look at non-life venture after forming a life insurance venture.
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