New Delhi: Frequent regulatory changes have made India a challenging market for Aviva Plc, a London-based global insurer that has a 26% stake in Aviva Life Insurance Co. India Ltd, its joint venture with the Dabur India Ltd, said Simon Machell, Aviva’s chief executive for Asia Pacific. Machell spoke in an interview about the company’s growth and future plans in India. Edited excerpts:
Are you happy with the way the Indian business has grown?
India has been an interesting market. I am happy with the way the business has grown here. The Indian market has enormous potential due to its demography and its economic growth. So in the long term, it will be a big market. But India is one of the most difficult markets in the world in which we operate. It has been a tough market to make progress in due to the large-scale and frequent regulatory changes. I think the Indian regulator needs to bring about some consistency and some continuity in the way regulations are brought about. Despite the regulatory changes, the performance of our Indian business was good, with sales increasing by 22% in 2010.
Listing plans: Machell says that the company may consider listing the Indian business on stock exchanges in the medium term. Photo by Benjamin Loo/LMPA
Is not having a big bank as a promoter hampering your growth plans in India?
A big bank undoubtedly does help in increasing business volumes. The bancassurance model has been our strength globally. Having said that, in India, the business has grown through a well-formed direct sales force and through tie-ups with smaller banks.
Are promoters open to selling stake to get a big bank as a distribution partner? Aviva had recently proposed a model of corporate agency tie-up with equity participation to Punjab National Bank.
I am not commenting on that at this point of time.
How do you see the Indian business growing?
I see a steady growth in business going forward. In the last four months, we have changed our business mix and moved away from unit-linked plans towards traditional policies. The regulatory changes have made these products more attractive to sell. Top-line growth is an important part of what we do, but return on investments is also important. We are trying to improve the bottom line through cost-control measures and getting better returns from the products we are selling.
The returns from India have been average or slightly below average when compared to our other markets.
It’s been partly because of the regulatory regime and partly because of the competition in the market. The Indian market is not very mature when compared to some of the other markets. As the market matures, the returns will improve.
Are you looking to list the Indian business on the stock exchanges?
Yes, it is something we would consider in the medium term. It will depend on the economic sense it makes at that point of time.
What about increasing your stake to 49%?
We are keen to increase our stake to 49% from 26% as and when regulations allow.
When will the Indian operations break even?
We haven’t stated the timeline publicly, but we will break even in the not-too-distant future.
Any plans of entering the general insurance space in India?
We have no plans of entering the general insurance business. At this point of time, it is hard to make returns in the Indian market. To be profitable in the general insurance space, you need to be a significant scale player and require huge amounts of capital infusion into the business.