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IDBI Federal Life CEO says, 'Focus is improving persistency while controlling costs'

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Private life insurance company IDBI Federal Life Insurance reported a 94 percent growth in net profit for FY18, at Rs 101 crore, at a time when one of its promoter IDBI Bank is looking to sell stake in the venture. In an interaction with Moneycontrol, Vighnesh Shahane, CEO, IDBI Federal Life Insurance spoke of growth in the business and their strategy for the current financial year.


Q. The company has posted a 94 percent rise in net profit. What led to the jump?

A. IDBI Federal Life posted a 94 percent growth in FY18 net profit at Rs 101 crore. For the last four to give years, we have been focused on the bottom-line, improving persistency as well as controlling costs. This has reflected in our numbers for the last financial year. Due to this, we have been posting profits for five years in a row and this is the sixth consecutive year of profits.

Q. Your persistency (rate of renewals) has improved for the 13th month, but there has been a dip for the 61st month. What is the reason?

A. Yes, the 61st month persistency has dropped slightly. However, about 12-15 months back we have taken a lot of interventions. This includes increasing ticket sizes, withdrawing products with low persistency and making standing instructions mandatory.

The 13th month persistency has gone up to 81 percent in FY18 from 79 percent in the previous year. However, we expect to see further improvement in due course. But, apart from Life Insurance Corporation of India (LIC), we are the only insurance company to retain more than 50 percent business on the book even beyond the sixth year of the policy being in force.

Q. Has there been a rise in the unit-linked insurance (Ulips) share?

A. In the first half of the financial year, traditional products dominated the portfolio. However, in the second half of the year, falling interest rates and booming stock markets led to the mix shifting towards Ulips. In the second half (H2) of FY18, the mix was 40 percent Ulips, 28 percent non-participating insurance products while the rest was participating products.

Q. Although you have IDBI Bank and Federal Bank as your bancassurance partners, is there a plan to add niche banks?

A. Bancassurance will always be a big area for us. However, we are going in a calibrated manner in the agency business. While for us, IDBI Bank and Federal Bank are big banks, we are in talks with newer banks as well for possible partnerships.

Q. While IDBI Bank is a large bank partner, they are planning to sell its stake in the company. Is that a cause of concern?

A. This is a value-discovery process that shareholders are undertaking. The shareholders will do what it right for them and the investors.

Q. What is the quantum of growth that you are targeting for the current financial year? What segments will the focus be on?

A. In terms of segments, protection as a business is profitable and we will continue to look at that business. However, health and pension two areas where non-life/health companies as well as National Pension Scheme (NPS) offer superior products than life insurers.

In FY19, we are hoping to cross Rs 1000 crore in terms of new business collections for the individual segment.