About the Company

SBI Life Insurance is a joint venture life insurance company between State Bank of India (SBI), the largest state-owned banking and financial services company in India, and BNP Paribas Cardif. BNP Paribas is a French multinational bank and financial services company with global headquarters in Paris. SBI owns 62.1% of the total capital and BNP Paribas Cardif 22% of the capital. Other investors are Value Line Pte. Ltd. and MacRitchie Investments Pte. Ltd., holding 1.95% of the total capital each and remaining 12% with Public.

Q2 FY21 Updates

Financial Results & Highlights

 

Consolidated Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 18458 12745 44.83% 16178 14.09% 34636 22389 54.70%
PBT 300 119 152.10% 388 -22.68% 687 497 38.23%
PAT 300 130 130.77% 391 -23.27% 691 502 37.65%

Detailed Results

  1. There was a 15% YoY fall in the Value of New Business (VNP). GWP rose by 22% YoY.
  2. IRP (Individual Rated Premium) and APE (Annualized Premium Equivalent) declined 20% & 15% YoY while Total Protection NBP fell by 2% YoY.
  3. The new business premium rose 15% YoY. The new business Margin was at 18.8%.
  4. The company maintained a solvency ratio of 245%.
  5. The company saw a fall in its private market share based on IRP to 20.7% from 23.1% a year ago.
  6. Total AUM and Net Worth grew 20% and 20% YoY respectively in the half.
  7. India Embedded Value rose 20% YoY.
  8. As of 30th Sep 2020, the AUM was at Rs 1863.6 billion and had a 76:24 debt to equity mix. Over 90% of debt investments were in AAA-rated bonds.
  9. The operating expense to the gross premium ratio declined 100 bps YoY to 5.4%.
  10. The total Cost to gross premium ratio was at 8.6% from 10.4% a year ago.
  11. The company reported minor improvement in persistency across all time periods.
  12. 61st-month persistency has improved to 60.87% in H1 FY 2021 as compared to 57.48% in H1 FY 2020.
  13. The company achieved market leadership in Total NBP with 24.5% private market share improving 270 bps YoY.
  14. ULIP maintains an overall NBP share at 30% in H1.
  15. In distribution channels, Banca channels account for 49% of APE while Agency and other accounts for 13% and 38% respectively.

Investor Conference Call Highlights

  1. ULIPs saw a good recovery in Q2 with ticket sizes rising.
  2. The company tied up with Yes Bank during the quarter.
  3. The company will not be pushing specific products such as guaranteed or par products very aggressively as it wants to avoid negative consequences in the future. Given falling interest rates, the company will go slow on non-par products.
  4. The management has stated that the overall product mix will be guided by the strategy in terms of what is suitable for the customer.
  5. The management has stated that the company is not interested in selling long-term par products.
  6. Agency channels are seeing growth reviving.
  7. Although the overall value contribution of business from the YONO app is very small, its volumes are large and growing fast. YONO covered 4 lac lives and showed 58% growth in terms of Individual premium.
  8. Business from online aggregators is still very small compared to other channels.
  9. The credit protection business was flat YoY in Q2 while individual protection grew by 58% YoY.
  10. The growth in the protection business is mainly volume-driven.
  11. The company has filed the repriced product with the regulator to seek approval. As per management, the pricing will remain competitive.
  12. Margins remained stable QoQ despite rising of ULIP in Q2 mainly due to Individual protection and credit protection products which yield high margins.
  13. Within retail protection, the share of ROP is 85% while the rest is pure protection.
  14. The ticket size of Individual protection remains at Rs 18,000 to Rs 20,000.
  15. In ULIP, customer preference is towards debt investment (ULIP AUM mix ‐ Debt 63%, equity 27%).
  16. The number of agents on the field was 154,158 as of Sep 2020.
  17. The interest rate sensitivity has changed mainly due to the change in the product mix.
  18. The company is looking to develop its own online platform.

Analyst’s View

SBI Life is one of the front runners in the life insurance industry in India. The company has done well to establish itself as the biggest private insurance company in India in terms of AUM and market share. The company has seen good growth in New business premium and ULIPs have seen good recovery with ticket sizes higher than last year. Despite the resurgence of ULIP, the margin profile remains stable due to the rise of high margin products in the product mix. The company is doing well to use the Yono app by SBI to drive volumes and is also planning to develop its own platform. The focus of the management remains to focus on products based on customer requirement & stay competitive and drive volumes in these segments. It remains to be seen whether the situation ahead unfolds within the company’s expectations or whether we may see more uncertainty ahead. Nonetheless, given the company’s market positioning, its emphasis on cautious capital allocation, and the rapid proliferation of the company’s products through digital channels, SBI Life remains one of the most preferred life-insurance companies in the country.

 


Q1 FY21 Updates

Financial Results & Highlights

Consolidated Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 16178 9644 67.75% 5675 185.07%
PBT 388 378 2.65% 522 -25.67%
PAT 391 372 5.11% 531 -26.37%

 

Detailed Results

    1. There was a 31% decline in the Value of New Business (VNP).
    2. IRP (Individual Rated Premium) and APE (Annualized Premium Equivalent) declined 36% & 32% YoY while Total Protection NBP fell by 33% YoY.
    3. The new business premium fell 3% YoY. The new business Margin was at 19.9%.
    4. The company maintained a solvency ratio of 239%.
    5. The company saw a fall in its private market share based on IRP to 18% from 21.5% a year ago.
    6. Total AUM and Net Worth grew 19% and 17% YoY respectively in the quarter.
    7. As of 30th June 2020, the AUM was at Rs 1469.5 billion and had a 76:24 debt to equity mix. Over 90% of debt investments were in AAA-rated bonds.
    8. The operating expense to the gross premium ratio declined 30 bps YoY to 7%.
    9. Total Cost to gross premium ratio was at 10.1% from 11.2% a year ago.
    10. The company reported minor drops improvement in persistency across all time periods.
    11. The company achieved market leadership in Total NBP with 23.9% private market share improving 398 bps YoY.
    12. Individual NBP from Non- par segment has increased by 50% YoY.
    13. increase in GWP by 14% to 76.4 billion in Q1 FY 2021 mainly due to strong growth in renewal premium by 30% from 35.4 billion in Q1 FY 2020 to 45.8 billion in Q1FY 2021.
    14. Protection and annuity market share were at 26% which is up 656 bps YoY.
    15. ULIP maintains a dominant revenue share at 48%.
    16. In distribution channels, Banca channels account for 56% of APE while Agency and other accounts for 26% and 18% respectively.

Investor Conference Call Highlights

  1. Share of individual premium in new business stands at 24% mainly due to higher sales in the annuity.
  2. The annuity business grew 171% YoY.
  3. Instant protection product sold through Yono app has covered more than 1,96,000 lives in the quarter.
  4. Other channels grew 76% YoY in terms of new business premium.
  5. 97% of individual proposals are submitted digitally and 22% of proposals are processed through automated underwriting.
  6. The management is targeting marginal growth over the last year. They expect to catch up on the lost business for the rest of the year.
  7. The company provided an additional grace period of one month for the repayment of premiums.
  8. The management expects to achieve individual targets. It expects strong demand for protection space and the company will be looking to launch new products in these segments.
  9. The company is also eyeing good numbers for individual and group segments.
  10. Total group protection business done is Rs 324 Cr out of which Rs 274 Cr is for credit life.
  11. Price increases have been lower than peers to balance affordability for customers and to maintain a certain profit margin. Overall margins are expected to stay stable and increase after the repricing as volumes will rise due to competitive pricing and margins will be better than before the repricing.
  12. The management sees good potential in the Yono app as it has already exceeded the premium earned in the whole of last year in Q1 only.
  13. The company will not be stopping existing products to push new protection products.
  14. Similarly, guaranteed products will also be sold as long as demand is there for the product. The management does expect the demand for this product going down due to return going down but it still remains uncertain as to how the situation will pan out.
  15. June accounted for 60% of the protection premium earned in Q1.
  16. The conservative assumptions taken in March 2020 are still in place for making any estimations for the company.
  17. The management expects approval to sell new protection products by the end of Q2.
  18. In individual protection, 80-85% is from the ROP product.
  19. The company was able to cover for the shortfall in new inquiries in credit life by selling this product to loan takers who have taken loans in the past 1-2 years. This is because a customer may be in a better state of mind to take this product once some time has passed since the initiation of the loan. This represents a good opportunity for the company to leverage the existing customer base in its bank channels.
  20. The non-par business was at Rs 350 Cr out of Rs 155 was for individual annuity and Rs 194 Cr was for a non-par guaranteed savings plan.
  21. The board mandated requirement for solvency is at 180%. The company’s solvency in March was at 1.95 times which could be considered to be at its lowest as asset prices were at their lowest at that time.
  22. The management will keep products as long as margins are protected. If margins are adversely impacted, then the company may scale back or discontinue the particular product.
  23. Without the change from product mix and the risk-free rate, margins would have appreciated substantially in the quarter.
  24. Internally the management tracks persistency in a rolling 12-month basis which helps normalize volatility in certain months.
  25. VoNB margin is calculated in the month of inception at a risk-free rate for 12 months. For savings businesses, when interest rate rises, margins rise. For the protection business, the impact of an interest rate rise is neutral. For ULIP, the interest rate rise causes margins to fall. In overall margin will be dependent on the product mix and change in interest rate.

Analyst’s View

SBI Life is one of the front runners in the life insurance industry in India. The company has done well to establish itself as the biggest private insurance company in India in terms of AUM and market share. The company has seen a big drop in APE but the growth in non-par has been very encouraging. The company has done well to use the Yono app by SBI to get new customers in a period where physical channels have stayed subdued due to COVID-19. The focus of the management remains to focus on protection products as it sees good potential in this product segment and the company aims to stay competitive and drive volumes in this segment. It remains to be seen whether the situation ahead unfolds within the company’s expectations or whether we may see more uncertainty arising from COVID-19. Nonetheless, given the company’s market positioning, its emphasis on cautious capital allocation, and the rapid proliferation of the company’s products through digital channels, SBI Life remains one of the most preferred life-insurance companies in the country.


Q4 2020 Updates

Financial Results & Highlights

 

Consolidated Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 5675 15601 -63.62% 15779 -64.03% 43843 44261 -0.94%
PBT 522 482 8.30% 395 32.15% 1415 1373 3.06%
PAT 531 458 15.94% 390 36.15% 1422 1327 7.16%

 

Detailed Results

    1. The company saw an income decline of 64% YoY in Q4 periods. PAT grew 16% YoY in the same period.
    2. This fall in income is mainly due to the impairment in investments due to the recent fall in Indian equity markets.
    3. There was a 17% growth in the Value of New Business (VNP).
    4. IRP (Individual Rated Premium) and APE (Annualized Premium Equivalent) grew 9% & 11% YoY while Total Protection NBP grew by 27% YoY.
    5. The new business premium grew 20% YoY. The new business Margin was at 18.7%.
    6. Total AUM and Net Worth grew 14% and 25% YoY respectively in the year.
    7. Indian Embedded Value grew 17% YoY.
    8. The company maintained a solvency ratio of 195%.
    9. The company increased its private market share based on IRP to 23.2% from 22.3% a year ago.
    10. As of 31st March 2020, the AUM was at Rs 1.41 Lac Cr and had a 79:21 debt to equity mix. 93% of debt investments were in AAA-rated bonds.
    11. The total no of lives insured rose 19% YoY to 6.1 Cr in FY20.
    12. The operating expense to the gross premium ratio declined 40 bps to 5.9%.
    13. Total Cost to gross premium ratio was at 9.9% from 10.5% a year ago.
    14. The company reported improvement in persistency across all time periods with 13-month figures improving to 86.14% vs 85.07% a year ago. 61st-month persistency also improved to 59.9% vs 57.23% a year ago.
    15. The company has now covered more than 8.9 million lives

Investor Conference Call Highlights

  1. ULIP grew 10% YoY with a share of 49% in New Business Premium for the company.
  2. Non-par grew 56% YoY with a share of 44% in New Business Premium.
  3. The Individual Protection business grew 42% YoY and contributes to 5% of individual new business.
  4. Group Protection business grew 22% YoY with credit life business 20% YoY.
  5. The traditional savings business grew 33% YoY.
  6. The bancassurance channel grew premiums by 14% with a share of 60% of total sales.
  7. The total number of CIS was at more than 56000 on March 31, 2020.
  8. Instant insurance through the SBI Yuno App has covered around 1.38 Lac lives in FY20.
  9. The total number of agents was at 1,30,418 at the end of FY20.
  10. The direct corporate aggregators and web channels grew by 60% YoY.
  11. Protection premium through online channels grew 41% YoY.
  12. The AUM for the company is the highest for any private life insurance company in India.
  13. The company has 96% of policies processed digitally and 37% of policies being underwritten digitally.
  14. The individual non-par business will not be a focus area for the company. The management states that the company will moderate this product and the hedging required for this product will determine the extent of how the company will push for this product.
  15. The management expects the first quarter to be muted but it is confident of some amount of growth after Q1FY21. The management is confident of the online channel participation and of the company’s ability to innovate and make new products.
  16. The management expects protection to grow going forward and may outpace the segment growth shown in FY20.
  17. The management has stated that it will concentrate on cost optimization and it is comfortable with the current opex ratios.
  18. The focus area for the coming year for the company will be digital sales.
  19. The company has stressed assets in DHFL only and the company has prepared provisions for this.
  20. The company had reduced its allocation to midcaps in FY20 and it was cautious in investing in equities given the high valuations. This is what helped the company maintain AUM growth according to the management.
  21. The management has admitted that its protection schemes are currently higher than HDFC life but is cheaper than ICICI Prudential. The company will be looking to apply feature expansion into its protection products and will align the rates marginally.
  22. The VNB has improved mainly due to the improved product mix with higher non-par sales.
  23. The management has assured that repricing will take place as interest rates go down and whenever the management sees any requirement for it.
  24. The management feels strongly that the protection business should do well post COVID-19.
  25. The management has stated that the target for policy renewal in the month of April has already been achieved. Although this target was lower than normal to account for the current economic environment, the renewals had exceeded the estimated target.
  26. The management is happy with the current ROP (Return of Premium) levels.
  27. The management has stated that the company sees reinsurance at least 60-70% of the protection products.
  28. The unwind rate currently for the company is at 8.5% and it is expected to go down as benchmark interest rates go down in the future.
  29. The management does not expect protection margins to go down in FY21. The company should also not undergo too big a repricing as well as going forward.
  30. The management has clarified that the company shall keep a single-digit growth for aspirational purposes and it is in no way a guidance given the uncertainty ahead.
  31. The company has had only 200+ branches open post-March 20, 2020.
  32. The management clarified that overall solvency should not be affected too much considering the product mix.

Analyst’s View

SBI Life is one of the front runners in the life insurance industry in India. The company has done well to establish itself as the biggest private insurance company in India in terms of AUM. The company has seen a big drop in investment income due to the fall in the investment portfolio from the fall in Indian equity markets. The focus of the management remains to maintain the company’s excellent cost structure during the upcoming economic down period. It remains to be seen whether the situation ahead unfolds within the company’s expectations or whether we may see more uncertainty arising from COVID-19. Nonetheless, given the company’s market positioning, its emphasis on cautious capital allocation, and the rapid proliferation of the company’s products through digital channels, SBI Life remains one of the most preferred life-insurance companies in the country.

 

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