There is no question of an IPO right now: Amitabh Chaudhry

Interview with MD and CEO, HDFC Standard Life Insurance

At a time when the life insurance sector is struggling to keep business going, HDFC Standard Life Insurance has been showing a rise in its premium numbers. Amitabh Chaudhry, managing director and chief executive officer, shares his strategy and plan for going forward with M Saraswathy. Edited excerpts:

Do you think the market is ready for a product like an index-linked insurance plan?
There are people who want to buy products linked to an index. It is similar to Ulips (unit-linked insurance products), though a fund works slightly differently. I understand the concern of the regulator, when it says it does not want complicated products that the customer does not understand. But this is a simple product, a market-rated benchmark.

What is your product mix?
There has been a clear shift in product portfolio from Ulip to Par. But the shift has been gradual and from the 80-20 ratio that we had for Ulip and Par in early 2011, it is down to 54-45 for Ulip-Par.

What is your strategy on pension products?
There are no products to sell, so the pension market is not doing well. With the non-zero per cent return, I can’t sell any product. We filed for our (new) product in June.

It is a huge segment and huge demand for it. We are hoping approvals will happen in the next two to three months. Hopefully, from the third quarter, some sale of pension will happen. For some of us, about 30 per cent of our sales used to come from pension. I don’t think it will go up to that amount. But for it to go up to 15-20 per cent shouldn’t be difficult.

How have you been able to maintain your growth momentum?
We reacted first to Ulips, faster than others. We anticipated the (regulatory) change and planned things and executed post the changes in a better manner. We never stopped investment to improve productivity. We continued to invest in channels where we did not have a presence.

Our bancassurance partner, HDFC Bank, also added branches, which helped us. We have also done well on the renewal side. There was 35 per cent growth in 2010-11 and 26 per cent growth in 2011-12. Even in this quarter, while our actual numbers show only a one to two per cent growth. So if you do an apple to apple comparison, we have grown to 11 per cent. Our expense ratio has also come down.

What changes in policies governing insurance are you looking forward to this year?
FDI (foreign direct investment) seems difficult in this environment. There is a disconnect on this issue between government and opposition.

Also, if volumes could come back, a lot of problems could be solved. And, if there could be a more stable regulatory environment, where we could plan and execute well, it would be helpful. Further, a lot of work needs to be done on areas like mis-selling and improving persistency. The biggest thing needed is growth.

At this juncture, would you be looking to bring out an IPO?
There is no question of an IPO (Initial Public Offer) right now. We will continue to evaluate it but I don’t see any visibility right now. I don’t see any visibility for an IPO in the next nine to 12 months.

I believe FDI is not a precondition for a public issue. If other factors fall into place, the only IPO we can do is a domestic one. We can also look at an IPO with a foreign institutional investor, if (UK-headquartered) Standard Life is ready to dilute its stake.