PNB to rope in actuarial firm to find embedded value of CHOICE ahead of divestment in insurance JV

Punjab National Bank will select an actuarial firm on Monday for calculating the embedded value of insurance joint venture CHOICE, in which the state-owned bank has to divest its stake as per regulatory requirements.

The New Delhi-based lender will open financial bids on July 11, 2022, to select the actuarial firm.

At present, PNB has stakes in two insurance firms -- PNB MetLife India Insurance Company Limited (PNB MetLife) and Canara HSBC OBC Life Insurance Company Ltd (CHOICE).

PNB MetLife, a joint venture between MetLife International Holdings LLC (MIHL), Punjab National Bank (PNB), M Pallonji and Company Pvt Ltd, Jammu & Kashmir Bank (JKB), and other investors, has been operational since 2001, with MIHL and PNB being the promoters of the company.

PNB also became a stakeholder in CHOICE after the erstwhile Oriental Bank of Commerce merged with it.

In March 2020, OBC and the United Bank of India were amalgamated into PNB. As all assets and liabilities of OBC were subsumed into PNB by such amalgamation, PNB became a shareholder of CHOICE to the extent of OBC's stake of 23 percent.

Established in 2008, Canara HSBC Life Insurance Company is a joint venture between Canara Bank (51 percent), HSBC Insurance (Asia Pacific) Holdings Limited (26 percent), and Punjab National Bank (23 percent).

HSBC's stake in CHOICE is held through INAH, a wholly-owned subsidiary of Hong Kong and Shanghai Banking Corporation Limited, which in turn, is a wholly-owned subsidiary of HSBC Holdings plc -- the holding company of the HSBC Group.

''On account of OBC's merger with PNB...and PNB's existing promoter stake in PNB MetLife India Insurance Company Ltd, PNB is required to divest its stake in CHOICE (proposed transaction) to comply with the extant regulations of the Insurance Regulatory and Development Authority of India (Irdai),'' PNB said in a request for proposal, inviting actuarial firms to determine the embedded value of the insurance company.

According to the guidelines of Irdai, one promoter cannot hold more than a 10 percent stake in two insurance ventures.

Embedded Value (EV) measures the value of a business currently on the books of an insurance company. It is the sum of the net asset value and the present value of future profits of a life insurance company.

PNB said the interested actuarial firms should have a significant domestic and global presence, experience, and expertise in undertaking the valuation processes of public sector undertakings, and reputed private and public sector companies engaged in the insurance business.

The selected bidder will be impaneled for six months, which may be extended, said the lender.

The selected actuarial firm will be required to submit a draft of the valuation report to PNB within 30 days of the date of appointment as the actuarial firm.

''Thereafter, the SOW (Scope Of Work) has to be completed and the final valuation report (after revising/ providing clarifications to the draft valuation report) has to be submitted within 45 days of the date of appointment as the actuarial firm,'' the bank said.

Earlier in February this year, PNB had said that HSBC Insurance (Asia Pacific) Holdings Ltd (INAH) had expressed its intention to acquire Punjab National Bank's stake in the insurance joint venture.

''The bank has received a communication from HSBC Insurance (Asia Pacific) Holdings Ltd (INAH), one of the shareholders of the company, conveying its intention to acquire Bank's stake in the company,'' PNB had said.