'We will continue to expand in a controlled fashion'

Q&A: MN Rao, MD & CEO, SBI Life

Unit-linked insurance plans (Ulips), which have created a regulatory turf war, helped SBI Life report a net profit of Rs 276 crore during 2009-10, against a loss in the previous financial year. Despite the uncertainty over Ulips, Managing Director and Chief Executive Officer MN Rao tells Shilpy Sinha he expects growth to be better this year. Excerpts:

You have once again reported a profit. Was it completely due to the upturn in markets?
Our expenses have been one of the lowest in the industry. Our operating expense is around 6 per cent, whereas operating plus direct sales cost is below 14 per cent. The ability to work on low-cost distribution model has helped us. Our Ulip stream contributed significantly to this. A lot of it has come from the market upturn. It contributed around Rs 165 crore last year.

Last year, the losses were mainly because of the market behaviour. Also, we had undertaken some expansion. We routed our mark-to-market losses through our balance sheet. This year, we have been able to control expenses.

What is your focus this year?
We will continue controlled expansion, but certainly be expanding more this year. We will open 75-100 branches, for which we will be finalising our plans in the coming weeks. We plan to hire 1,000-1,500 people. As our top line has increased, we will require more workforce.

What will be your growth target this year?
Last year, we targeted 25 per cent growth in new business and have bettered it. We grew by 31 per cent and our annualised premium equivalent went up 34-35 per cent. This year, when the economy is on an upturn, we expect to see higher growth.

Has the recent controversy over regulation of Ulips affected sales?
It is too early to assess. Traditionally, April is a month of low sales in terms of premium collection. After two-three weeks, we will be in a position to say whether sales have been affected.

How do you look at the recent spat between the two regulators?
Our sales will continue as it is allowed by the regulatory authorities. It is for the two regulators to resolve the matter.

Do you need new Ulips now? When do you plan to file for new products?
We have not applied for any fresh products after April 9. We have no such product in the pipeline. We will decide on filing for new products after setting our agenda for the year after a month. As and when the need arises, we will see.

Since you will be expanding, what will be your capital requirement for the year?
We will definitely not require any capital during the first nine months. After that we will see.

Irda has asked insurance companies to disclose the commission paid to agents. How do you look at it?
Any disclosure is good for the industry.