Insurance intermediaries having majority foreign holding cannot repatriate dividend more than 75 per cent of the net profit and if there is any extra-ordinary profits or income, the dividend payout ratio should be calculated after excluding that, regulator IRDAI said on Friday.
Issuing guidelines on ‘repatriation of dividends by insurance intermediaries having majority by foreign investors’, Irdai said such entities should seek prior approval from the Authority for the payout.
On the quantum of dividend payable, it said: “The dividend payout ratio shall not exceed 75 per cent. Dividend payout ratio shall be calculated as a percentage of ‘dividend payable in a year’ (excluding dividend tax) to ‘profit after tax during the year’.
“ln case the profit for the relevant period includes any extra-ordinary profits/ income, the payout ratio shall be computed after excluding such extra-ordinary items for reckoning compliance with prudential payout ratio”.
Besides, the financial statements pertaining to the financial year for which the insurance intermediary is declaring a dividend should be free of any qualifications by the statutory auditors, which have an adverse bearing on the profit during that year.
“ln case of any qualification to that effect, the net profit should be suitably adjusted while computing the dividend payout ratio.”
The Insurance Regulatory and Development Authority of India (Irdai) also said that it will take into account the factor that the intermediary should have a net-worth of 1.5 times of the statutory required minimum paid-up capital after the proposed payout, when the request for dividend payout comes to the Authority.
The insurance intermediary should not have made any payments (other than dividends) beyond 10 per cent of the total expenses of the company in the financial year to its related related parties taken as a whole, it said.
It will also consider factors such as latest technological, managerial and other skills brought by the insurance intermediary and that no restrictions have been placed on the company for declaring dividends.
IRDAI (lnsurance lntermediaries) (Amendment) Regulations, 2019 allows 100 per cent foreign direct investment (FDI) in insurance intermediaries.
One of the conditions specified in the regulation is that the insurance intermediary that has majority shareholding of foreign investors should take prior permission of the Authority for repatriating dividend.