SBI Life Insurance Company (SBIL.NS) announced a significant increase in its third-quarter profit, fueled by robust sales of both new and renewed insurance policies. The company’s profit for the quarter ending December 31 rose by a substantial 71%, reaching 5.51 billion rupees ($63.6 million), a notable increase from 3.22 billion rupees in the same period the previous year.
This financial upswing was supported by an 11% rise in net premium income, which totaled 248.28 billion rupees. Driving this growth were a 13% increase in renewal premiums, indicating continued policyholder engagement, and a 12% surge in first-year premiums, reflecting strong acquisition of new customers.
Insurance penetration in India has historically been low, but the landscape is changing. Rising financial awareness and increased demand for insurance, particularly life and health policies, following the COVID-19 pandemic have created a favorable environment for policy sales.
One of the key performance indicators for insurers, the value of new business (VNB), which represents the expected profit from new policies, saw a 6% year-on-year increase to 42.9 billion rupees for the nine months concluding in December. Furthermore, the annualised premium equivalent (APE) sales, a closely watched metric that combines the annualised value of all single and recurring premium policies, experienced an 11% increase, reaching 159.7 billion rupees over the same nine-month period.
Market- or unit-linked insurance plans (ULIP), which generally yield lower profit margins compared to term policies, accounted for 67% of SBI Life’s overall product mix based on individual APE during the quarter. This is up from 61% a year prior. The popularity of ULIPs has been especially strong, particularly in the first half of the current fiscal year, supported by India’s buoyant stock market.
However, the increasing share of ULIPs led to a contraction in VNB margins, which fell to 26.9% for the period from April to December, compared to 28.1% a year earlier. On a sequential basis, VNB margins remained largely stable.
In an effort to cushion margins, insurance providers have prioritized the sale of high-margin policies. Peer company HDFC Life (HDFL.NS) also reported improved quarterly profits and improvements in VNB margins on a sequential basis.
Following the release of the financial results, SBI Life’s shares closed 1.8% higher.
($1 = 86.5910 Indian rupees)
