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Need to get a credible bank as replacement for IDBI Bank: Ageas Federal Life CEO

Since IDBI Bank is now owned by LIC, it won’t be selling Ageas Federal insurance policies anymore. Ageas acquired an additional stake of 23% from IDBI Bank in Ageas Federal Life Insurance for around Rs 460 crore. Now, Ageas holds 49% in the insurer, and Federal Bank 26%.

March 31, 2021 / 12:28 PM IST
Vighnesh Shahane, managing director and chief executive officer of Ageas Federal Life Insurance

Vighnesh Shahane, managing director and chief executive officer of Ageas Federal Life Insurance

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Private life insurer Ageas Federal Life Insurance is now looking to get a bancassurance replacement for IDBI Bank.

“Since we have lost IDBI Bank as a bancassurance partner, we will need a quick replacement,” Vighnesh Shahane, MD & CEO of Ageas Federal Life Insurance, told Moneycontrol.

Why did IDBI Bank lose bancassurance partnership?

IDBI Bank had earlier held a 48 percent stake in what was IDBI Federal Life, now renamed Ageas Federal Life. Since IDBI Bank is now owned by Life Insurance Corporation of India (LIC), the bank sells LIC products. This affected Ageas Federal Life policy sales via Ageas Federal Life Insurance.

“We are looking to have two new bank partners -- one for IDBI Bank replacement and the other to further help fuel growth,” Shahane added.


The Belgian multinational insurer had acquired an additional 23 percent stake from IDBI Bank in Ageas Federal Life Insurance for around Rs 460 crore. Now, Ageas holds 49 percent stake in the insurer while Federal Bank holds 26 percent.

After the stake sale, IDBI Bank holds 25 percent in Ageas Federal Life Insurance. The bank was also planning to sell a 4 percent stake to Federal Bank to bring down its stake to 21 percent. However, this deal is yet to get approval from the Reserve Bank of India.

What is bancassurance?

A bancassurance model is where insurance is sold through bank branches. The insurance regulator allows banks to tie up with three life, three non-life and three standalone health insurers for policy sales.

“IDBI Bank used to contribute close to Rs 100 crore in insurance policy sales. But this came down to almost zero. This makes it crucial for us to get a partner quickly,” added Shahane.

Ageas Federal Life ended FY20 with new premiums of Rs 560.50 crore.

Business seeing recovery

Between April 1, 2020, and February 28, 2021, Ageas Federal Life saw an 8.44 percent YoY growth in new premiums to Rs 530.85 crore.

The Coronavirus outbreak has led to an impact on insurance policy sales in the country. Between April 2020 and February-end 2021, there was just a 0.59 percent YoY rise in new business premium to Rs 2.34 lakh crore.

In the same period, LIC saw a 3 percent YoY drop in new premiums to Rs 1.56 lakh crore while ICICI Prudential Life Insurance saw a 4.3 percent YoY drop to Rs 10,875.07 crore.

Shahane explained that the earlier uncertainty is over in the company. IDBI Bank was in talks to divest its stake in the life insurer for close to two years, which affected the business.

“We are seeing growth in the business from both Ulips and savings products. This could also be a function of rising insurance awareness amidst COVID-19,” he added.

On the bancassurance front, he added that the recovery was also being led by Federal Bank sales that saw a 40 percent growth as also a 40 percent growth in the agency channel.

FDI stake hike

The Insurance (Amendment) Act, 2021, now allows foreign partners to hold up to 74 percent in an Indian insurance company, subject to some caveats.

Shahane explained that this move will help cash-strapped Indian promoters to exit and foreign partners to buy out their stake.

“When it comes to our promoters, there will be a positive intent by the foreign partner on the FDI changes. But hike decisions will depend on several factors,” he added.

Under the new law, even if there is a 74 percent foreign shareholding in an Indian insurer, the majority of directors on the boards and key management positions have to be resident Indians. Further, a specified percentage of profit will be retained as general reserve.

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M Saraswathy is a business journalist with 10 years of reporting experience. Based in Mumbai, she covers consumer durables, insurance, education and human resources beat for Moneycontrol.
first published: Mar 31, 2021 12:28 pm
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