 "Amitabh Chaudhry")
Private life insurer HDFC Life is gearing up for an initial public offering (IPO). Its Managing Director and CEO Amitabh Chaudhry talks to M Saraswathy and Priya Nair about the company’s future strategies. Edited excerpts:
HDFC Life will be the first insurer to list on the exchanges. Has the process begun?
As our chairman (Deepak Parekh) announced in the annual general meeting, the foreign direct investment (FDI) transaction (the proposed stake increase by foreign partner Standard Life) will have to be approved by FIPB (Foreign Investment Promotion Board) and Irdai (Insurance Regulatory and Development Authority of India). He also mentioned there would be no progress on the IPO front for 12 months. However, IPO is something our shareholders have wanted for a long time and, hopefully, we will get there soon.
Your profits in the first quarter have been lower. Why is this?
Overall, we’ve done well. We hope it will grow at a faster pace. Profits are down because of our growth. However, we have reported underwriting profits and total premiums, too, went up by 15 per cent.
Unit-linked insurance plans (Ulips) are a large part of your business. Aren’t they risky?
We have a 66 per cent share of Ulips. The share has gone up as people are still buying. We like to maintain a good business mix. But HDFC Bank being our biggest distributor, if customers want Ulips, we won’t turn them away. After the new regulations, these products are very customer-friendly with low charges.
Insurance FDI hike has taken a long time for players including you. Why is it?
It was clear that even after the Insurance Act was passed, FDI hike would not happen overnight. The regulator (Irdai) has to ensure Indian ownership in the entities that apply for an FDI hike. The process to get final approval would take time since FIPB would have to approve, followed by the Competition Commission of India. Finally, the regulatory body has to give its nod. The overall process could take three-to-five months depending on how complicated the agreement is. Overall, insurers have to fall in line with management control issue, as we understand the regulator does not want any exclusivity for foreign partners in an insurance venture.
Standard Life has decided on raising its stake. How significant is it for you?
The stake increase reiterates the trust and commitment of Standard Life towards the Indian life insurance sector and specifically for HDFC Life. Both promoter shareholders have been very supportive of our strategy and growth over the last few years. This transaction is in line with the long-term vision of shareholders to jointly build a world -class life insurance company.
New regulations around the Insurance Act are being brought out by Irdai. The expense management draft, for instance, has not been taken too well by the industry...
The new draft on expense management looks like a diluted version though some clauses look tough. Although it allows slightly more expenses, it says expenses for participatory and non-participatory segments have to be the same. We have made representations. However, its impact will be quite limited if it comes in the current forms, at least for us.
Bancassurance opening up will no longer be mandatory. Are you happy with this?
The new regulation will lead to a calibrated opening of the bank channel for distribution. It wouldn’t have worked if it had been forced. The regulator has said it would have a dialogue with corporate agents on this. We at HDFC Life are more than willing to face competition if the channel opens up.
