Money & Banking

IDBI Bank’s stake sale agreement ends uncertainty around IDBI Federal Life Insurance

Surabhi Mumbai | Updated on August 07, 2020 Published on August 07, 2020

Business as usual, want to tie up with more banks, says MD and CEO

IDBI Federal Life Insurance is confident that the uncertainty surrounding its operations will now abate after IDBI Bank signed an agreement to sell 27 per cent of its stake in the insurance joint venture to the other two partners.

“From an operational standpoint, nothing changes for the company, we will focus on the job at hand and continue to focus on solvency, cost, new business, product profitability. But the announcement puts an end to all the uncertainty the organisation has been through the last three years,” said Vighnesh Shahane, Managing Director and Chief Executive Officer, IDBI Federal Life Insurance.

Stake sale pact

IDBI Bank had on August 6 said it has executed an agreement to sell up to 27 per cent of its stake in the life insurer to its joint venture partners — Ageas Insurance International and Federal Bank. While 23 per cent stake would be sold to Ageas, Federal Bank would acquire up to four per cent stake, leaving IDBI Bank with 21 per cent stake. At present, it owns 48 per cent stake in IDBI Federal Life Insurance.

Shahane said IDBI Bank may look to monetise its entire stake and completely exit the insurance joint venture eventually if it finds a buyer for its remaining stake or if the foreign direct investment norms for insurance is liberalised, in which case Ageas could acquire more stake.

Life Insurance Corporation of India now holds majority stake of 51 per cent in loss-making IDBI Bank. Since insurance regulations do not permit an insurer to hold more than 10 per cent stake in the another insurer, IDBI Bank has to divest its stake in the insurance joint venture.

More tie-ups

Shahane said the life insurer will also focus on increasing its distribution footprint and plans to tie up with one or more banks.

“Bancassurance will be the dominant channel in India and efforts are on also to get one more bank partners in our distribution franchise,” he said, adding that sales of its products by IDBI Bank had become negligible.

“Sales through IDBI had de-grown by 95 per cent and are almost at zero. Sales by Federal Bank grew by 40 per cent,” he noted.

The insurer is also looking at growing proprietary channels like agency, direct sales team and online sales.

The insurer has been profitable for eight consecutive years and reported a 22 per cent increase in its net profit to ₹162 crore in 2019-20.

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Published on August 07, 2020
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