After insurance regulator IRDAI (Insurance Regulatory and Development Authority of India) imposed ₹3 crore on Max Life Insurance Company Limited for violations of non-compliance with rules related to the transfer of shares, the company says it has decided to pay the penalty imposed by the regulator. However, the insurer said it believes it didn't “commit any wrongdoing”. Max Life Insurance Company Limited is a joint venture between Axis Bank Ltd and Max Financial Services Ltd, which is a part of the Max group.
In the 2021 Axis Bank-Max Life deal, the IRDAI on Friday said Max Life Insurance undertook and facilitated the transactions of transfer of its shares between the parties in violation of its directives, which allowed Axis Bank Ltd and its group companies to make “undue profits”.
"With a view to pave the way for the future, including strengthening the long partnership with Axis Bank and avoid unnecessary and long legal decided to pay the penalty imposed by the IRDAI wrongdoing," Max Life said in a regulatory filing today.
According to Analjit Singh, chairman, Max Life Insurance, the company has always conducted its affairs in compliance with applicable laws and will continue to do so. "The aforesaid transactions were undertaken in a bonafide manner. However, keeping the best interest of the company and its stakeholders in mind, we have resolved to remit the payment towards the penalty," said Analjit Singh, chairman, Max Life Insurance.
Axis Bank Ltd, together with its subsidiaries Axis Capital Ltd and Axis Securities, is a co-promoter of Max Life Insurance Company after its acquisition of a 12.99% stake in April 2021.
Axis Bank in its clarification said the penalty (on Max Life Insurance) does not have any material impact on the bank or its corporate agency operations.
The Axis Bank stock is up 0.67% or 5.35 points at ₹805.55 today. The Max Financial Services stock surged 0.49% or 3.5% to ₹717.30. In contrast, the BSE benchmark Sensex has risen 0.67% or 391.53 to 58,302.77, while Nifty 50 index is up 0.61% or 104.85 points up at 17,285.85.
As per the 8-page IRDAI order, the regulator said Max Life did not comply with the directions issued by the authority on January 28, 2021. "The said act of the insurer establishes that the insurer has allowed the shareholder Axis Bank Ltd and its group companies to make undue profits/gains from the purchase and sale of equity shares of Max Life Insurance Company Ltd., thereby misusing the dual relationship of the bank as a shareholder and corporate agent."
The regulator also said Max Life in a letter on February 5, 2021, "misrepresented" to the authority regarding compliance with the directions issued by it on January 28, 2021, to obtain approval for the transfer of shares to Axis Bank and its group companies. The insurer has also been directed to place the IRDAI order before its board at its next meeting so it can take necessary steps to avoid such violations in future, says the IRDAI.
Axis Bank, in its 2021 statement, had said the transaction with Max was completed after the IRDAI's formal approval in February 2021. Under the deal, the Axis entities had a right to acquire an additional stake of up to 7% in Max Life, in one or more tranches, subject to regulatory approvals. The total premium generated through the alliance had aggregated to over ₹40,000 crore.
