Exclusive: LIC will continue to hold some stake in IDBI Bank even after the sale, says chairman Siddhartha Mohanty

Mohanty also said that Prime Minister Narendra Modi’s appreciation for LIC is a big shot in their arm.

The Life Insurance Corporation of India (LIC) will continue to hold some stake in IDBI Bank even after the sale of the lender, said Chairman Siddhartha Mohanty in an exclusive interview with Moneycontrol on August 14.

"IDBI is our largest bank partner, so we would continue to have some stake in IDBI, (and) our bank partnership continues," said Mohanty.

Presently, the government and LIC, together, hold 94.71 percent stake in the bank. Of this, LIC holds 49.24 percent.

Mohanty also said that Prime Minister Narendra Modi’s appreciation for LIC is a big shot in their arm.

He further added that LIC’s investment is in strong hands and regulated as per the Standard Operating Procedure (SOP). Edited excerpts of the interview:

Could you give an update on the IDBI Bank stake sale?

The government will take a call and decide on the IDBI Bank stake sale. We are a major shareholder in IDBI Bank. It is our largest bank partner. So we would continue to have some stake in IDBI Bank even after the sale, so that our banker partnership continues. But ultimately, the government will take a call about this investment.

Recently, Prime Minister Narendra Modi praised LIC’s performance in parliament. How do you look at it?

The Prime Minister's appreciation for LIC is a big shot in our arm, and we express our gratitude to PM Modi. We reaffirm our commitment to protecting the interests of all stakeholders, creating sustainable, superior value for all stakeholders, and our commitment to the nation as a whole.
And definitely, appreciation by the Prime Minister will boost the morale of everyone associated with LIC.

How do you see competition from private life insurers?

When the market was opened up, we had already been in the market for) about 23 years. Over the last 23 years, there has been competition. Despite that, we have sustained our market share. We have always commanded over 60 percent market share. At one point in time, it fell below 60 percent, but we bounced back. Our objective is to sustain our market share. But at the same time, we'll focus on profitability. So, what we intend to do is gain profitable market share. We continue to be the leader in the insurance space.

For LIC, how important is the protection portfolio (pure term plans)? Do you have any plans to launch a pure term plan?

Recently, we launched one unique term plan ― Jeevan Kiran with ROP. ROP means Return of Premium, which is actually a term insurance plan, but after the end of the term, the total premium paid by the policyholder refunded to the policyholder. So, virtually the policyholder is not paying anything for the risk coverage for that period of 20–25 years. It's a very unique plan, and it's getting traction in the market. We expect good business from this product.

Do you expect term premiums to rise this year?

Post-COVID, because of the experience, the term premium has been revised. But even now, it is most reasonable for policyholders. It is not very high, but has been revised.

Why is the rise in Value of New Business (VNB) margin marginal?

The VNB margin in the first quarter of last year (2022) was 13.6 percent. This year it is 13.7 percent. There has been some stress on VNB margins industry-wide. I am confident that VNB margin will rise in the coming quarters.

What is LIC's investment philosophy at this point in time? What is looking hot?

LIC's investment philosophy is to take advantage of market movements. We have to do this in the best interest of our stakeholders. And LIC is working in that direction.

Is LIC looking at partnering with new-age banks for business?

We have recently partnered with two new-age banks and are looking forward to partnering with more.

What are the product segments that LIC will focus on this year?

Last year, we launched many new products in the non-par segment. We also have guaranteed return products. So, the customer would make an informed decision on how much is being paid today and how much will be received after 10 years, 15 years, or 20 years. So, the customer can calculate the final return.

What's the situation with LIC's exposure to Adani stocks?

As a principle, we do not discuss individual stocks. But since you are talking about this stock, (let me tell you) we have made our stand clear.
I have said many times that LIC has never made any losses. Rather, we have made a good profit on this stock, and the market value of this stock today is much higher than the book value. So absolutely, there is no concern, and I can assure all our stakeholders that LIC's investment is in strong hands and regulated as per SOP. So there is nothing to worry about so far as LIC's investment is concerned.

What is your outlook on the future of the insurance industry in India?

The insurance industry in India is going to grow, and everybody should have total faith in the insurance industry. Everybody should take insurance.
And secondly, LIC is here to deliver as per our commitment.

We are going for a huge digital transformation of all our operations. So, in the current year, we will see a digital transformation. Customer onboarding through digital means will also be implemented in the current year. So, you will find a lot of change in our operations in digital mode.

Customers should have total trust in LIC, and everybody should take on more and more policies.