New Delhi: Private insurer Aviva Life Insurance Co. India Ltd will focus more on retirement and pension schemes to beat the economic slowdown, according to chief executive officer and managing director T.R. Ramachandran.

High expectations: Aviva India CEO T.R. Ramachandran says the company is looking at 35-40% growth in sales for the next fiscal. Harikrishna Katragadda / Mint

How do you plan to expand?

We are looking at about 35-40% growth in top line for 2009-10. We will grow branches where appropriate. We will invest in our existing relationships. In a typical life insurance company, there are four quadrants in which the business operates: saving, protection, investment and retirement. For the last couple of years, the industry has been skewed towards investment part of it and not as much skewed towards saving, protection and retirement aspects. And therefore, you will see a shift happening. Second, you will see certain players specializing in certain things. Given impending IPOs (initial public offerings), given 49% (foreign direct investment) happening, given valuation happening in next two-three years, you will see a more calibrated approach to P&L (profit and loss) and balance sheet management rather than only top line growth. Social sector, or micro insurance sector, is an exciting possibility like many micro finance institutions have shown us... It is possible to have stand-alone P&L business... So the micro-saving area will be the area we will focus on in the next year.

In these choppy markets, people are opting more for guaranteed products. Do you offer any such products?

We have a quasi-capital guaranteed product, which is called India Bond, which we did in September. At that time returns were around 7%. Depending on how the yield curve looks and how the gsecs (government securities) curve look, we will certainly look at certain products next year. It is not about capital-guaranteed products but about the investors’ appetite at this point of time.

As there are no long-term papers available to support long-term products, do you think focus towards guaranteed products can also lead to an asset liability mismatch (ALM)?

First, guaranteed products are the flavour of the month. Typically, corporate paper is available for a three-five years horizon. And if you have guaranteed products for 10-15 years, then the fund management team or the treasury department has to look very, very carefully both at the policy holders’ funds as well as how the company manages its ALM position... So it needs judicious allocation of debt to equity in the kind of markets...especially given that about 30-35% of the business is in pension type of products, which may be 15-25 years tenure product. Therefore, we are very cautious when we launch such products.

So far, no insurance company has complained of a liquidity crunch. If the Insurance Bill (that seeks to raise foreign investment limit to 49% from 26%) takes time to get Parliament’s approval, do you think it can be a concern for the industry?

Capital positions for 2009 fiscal may not necessarily be as flushed with cash, both from foreign partners’ as well as Indian partners’ perspective. It will have an impact on the type of products sold by the company. It will have an impact on the amount of expansion one is willing to commit to because most of the capital that you have seen is going into distribution expansion. There must be some inflection point because of the stream of revenues in premiums... I suspect there will be more innovations in capital structure to the extent the regulator has allowed.

If the regulator allows trading in debt securities, will it help the insurance companies?

Trading in debt securities has two-three variables to it. In India, market for securitization is very, very less. There is a market for securitization of mortgage paper only. But there is very limited trading in this paper, liquidity of securities is not at an advanced stage in India. Those days will come in India but it is premature at this point of time. Even if companies want to do this, there is not enough corpus available and there is not enough liquidity available in the market.