IDBI Federal Life expects flat growth as stake-sale uncertainties fade

IDBI Federal Life Insurance is expecting a flat growth in its new business premium in FY19 on the back of a revival in the last quarter. This comes after witnessing contraction for the most part of the fiscal due to the uncertainties regarding stake sale by IDBI Bank, its promoter.

In the last fiscal (FY18), the life insurance company saw a growth of 18 per cent in the new business premium. In the April-November period of FY 2019, the first year premium of the company declined by 14.12 per cent from Rs 481.13 crore in the same period in FY 18 to Rs 413.20 crore, according to IRDAI data.

However, the company is expecting to make profits of Rs 140 crore in FY 19 as opposed to Rs 102 crore in FY 18 and Rs 52 crore in FY 17.

 “There have been a lot of certainties surrounding the promoter bank for the last two years. The clouds of uncertainties are now blowing over but the sales were hurt. We lost a lot of frontline staff. IDBI bank has been the dominant contributor of business. When they slowed down, the life insurance arm also slowed down”, said Vighnesh Shahane CEO of IDBI Federal Life Insurance.

IDBI Bank, which owns around 48 per cent stake in IDBI Federal Life Insurance, was planning to sell its entire stake in the life insurance arm to raise capital for itself through the sale of its non-core assets.

But now they have put the stake sale on hold as state-owned life insurer – LIC – has got approvals to acquire 51 per cent stake in IDBI bank. The Bank will now decide on its future course of action in regards to their insurance arm after LIC’s acquisition of a stake in the bank is complete.

The other two stakeholders in IDBI Federal Life Insurance who own 26 per cent each in the life insurance company are Federal Bank and Belgian life insurer Ageas.

On Belgian Life insurer planning to increase its stake in IDBI Federal Life Insurance, Shahane said, “There is no real talk about Ageas increasing its stake in the company. But we never know what will happen in the future. Their commitment to India is very strong. As of now, they have not spoken about it”.

On the issue of two life insurance companies in the same group after the acquisition process of LIC is over, Shahane said, "There is no clarity on this at the moment. Maybe IDBI bank will have to pare down its stake in the company. Or may LIC will be asked to pare down its stake or a combination of both".

Shahane added that the company is looking to focus more on their protection business as it is more profitable. Moreover, ULIPs, which constitute 42 per cent of their portfolio presently has seen a growth in their portfolio mix.

“In the last few years it has been 20-25 per cent of our portfolio but because of the buoyancy in the stock market, there has been a lot of retail participation. So, the ULIPs have seen a good growth”, said Shahane.

Recently, the life insurers have made a conscious effort to change their product portfolio in favour of protection products vis-à-vis the market-linked because of the profitability factor attached to these products.