SBILIFE — earnings call
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Prepared remarks
Moderator · Conference Operator
Ladies and gentlemen, good day, and welcome to the Q3 FY '24 Earnings Conference Call of SBI Life Insurance Company Limited.
As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone.
Please note that this conference is being recorded.
I now hand the conference over to Mr. Amit Jhingran, Managing Director and CEO.
Thank you, and over to you, sir.
Amit Jhingran
Good evening, everyone.
We welcome you all to the results update call of SBI Life Insurance Company Limited for period ended December 31, 2023.
We appreciate and thank you whole heartedly for your time here.
Update on our financial results can be accessed on our website as well as the websites of both the stock exchanges.
Along with me present here today are Mr. S.
Veeraraghavan, Deputy CEO, Mr. Sangramjit Sarangi, President and CFO; Mr. Ravi Krishnamurthy, President, Operations and IT; Mr. Abhijit Gulanikar, President, Business Strategy; Mr. Subhendu Bal, Chief Actuary and Chief Risk Officer; Mr. Prithesh Chaubey, Appointed Actuary; and Ms. Smita Verma, Senior Vice President, Finance and Investor Relations.
With respect to our performance for the period ended December 31, 2023, our comprehensive product suite aligned with customers' need coupled with our continued focus on business growth, maintaining a best-in-class cost ratio and persistency level led to a decent performance on an exceptionally high base of last year's period.
During this year till date, we have strengthened our market position and invested in capacity building for the employees and distributors with respect to handling the emerging needs of the customers and to support long-term growth.
Now let me give brief highlights of our performance for the period ended December 30.
Our new business premium registered a growth of 21% over previous period and stands at INR260.0 billion and maintained private market leadership with a share of 25.3%.
Individual new business premium now stands at INR177.6 billion with a strong growth of 17% and a private market share of 29.1%.
Gross return premium stands at INR561.9 million with a growth of 19%.
Protection new business premium grew by 17% to INR29.7 billion.
Profit after tax stands at INR10.8 billion with 15% growth over corresponding period last year.
Value of new business stands at INR40.4 billion, registering a growth of 11% over last period.
VoNB margin stands at 28.1% for period ended December 31.
Asset under SBI Life Insurance Company Limited January 25, 2024 management grew by 24% to INR3,714.1 billion.
Robust solvency ratio of 2.09 as against the regulatory requirement of 1.50.
We provide comprehensive insurance catering to customers' unique needs and aspirations.
In addition, we enhance their experience through personalized and innovative solutions, and this has been acknowledged by prestigious awards and accolades.
The company had bagged Quality Award in Service Industry, Indian Merchant Chambers Ramakrishna Bajaj National Quality Award 2022 and became eligible for Global Performance Excellence Award.
We are happy to announce that the company was awarded as World-Class in Service Category at 23rd Global Performance Excellence Award 2023 held in November 2023.
These awards demonstrate our commitment to achieve excellence across all spheres of its activities and operations.
Last week, we launched two new return of premium products: Saral Swadhan Supreme and SBI Life Smart Swadhan Supreme, which offers higher sum assured as compared to previous versions at affordable pricing.
As we move forward, we aim to deliver a strong performance and drive positive impact.
We will now update you on each of the key elements in detail.
Let me start with the premium.
Individual new business premium has grown to INR177.6 billion with a year- on-year growth of 17%.
Single premium contribution is 31% of the individual NBP, which is mainly attributed to growth in our individual annuity products.
The company gained in private market share by 184 basis points to 29.1% and industry market share by 173 basis points to 17.8%.
On individual rated new business premium, we stand at INR127.9 billion with a growth of 15% over previous period, and maintaining our leadership position with private market share of 26.5% with a gain of 80 bps. And at industry level, we gained 115 bps with a market share of 17.9%.
Also, group new business premium stands at INR82.4 billion with a share of 32% in new business premium and growth of 31% over previous period.
Having said that, we have collected total new business premium of INR260.0 billion registering private market share of 25.3% with a gain of 219 basis points.
And at industry level also we gained 240 bps and market share stands at 10.4%.
Renewal premium grew by 17% to INR301.9 billion, which accounts for 54% of the gross written premium.
To sum up, the gross written premium stands at INR561.9 billion with a Y-o- Y growth of 19%.
In terms of APE, premium stands at INR143.9 billion, registering a growth of 17%.
Out of this, individual APE stands at INR129.1 million with growth of 15%.
During the period ended December 31, 2023, total 16.42 lakh new policies were issued.
Since 2010, the company has maintained its leadership position amongst private market in number of policies issued and consistently delivered Y-o-Y growth over the SBI Life Insurance Company Limited January 25, 2024 years.
This reflects the clear goal of the company to increase the penetration and achieve holistic growth.
The company is aligned with regulators vision and we'll continue to focus on various reforms, enabling deeper penetration of life insurers industry.
Number of lives covered during the period ended December 31, 2023, is 25.8 million, registering a growth of 104% over corresponding period last year.
Total new business sum insured registered a growth of 32% over corresponding last period as compared to growth of 29% at industry level.
Let me give you details of our product mix.
As on December 23, our guaranteed non- par saving products are contributing 14% of individual new business and on individual APE basis, it attributes 19%.
Individual ULIP new business premium is at INR101.7 billion, which now constitutes 57% of individual new business premium.
Growth in ULIP is attributed to positive movement in equity markets.
Individual protection new business premium is at INR6.7 billion.
Group protection stands at INR23.1 billion with growth of 25%.
Credit life new business premium has grown by 11% and stands at INR16.0 billion.
On APE basis, protection contributes 11% and registered growth of 24%.
Annuity business is at INR44.4 billion and contributes 17% of new business premium.
Under annuity, the company is offering immediate as well as deferred annuity options.
Individual annuity business is growing at 35% over last period, and this is mainly due to new business contribution of smart annuity plans of INR38.7 billion.
Total annuity and pension new business underwritten by the company is INR67.9 billion registering growth of 12% over the same period last year.
Moving to update on distribution partners.
With strength of more than 59,000 CIFs, State Bank of India and RRBs, bancassurance business contributes share of 67% and grew by 13% in individual new business premium, and on individual APE basis, it stands at INR89.6 billion with growth of 15%.
Agency channel registered new business premium growth of 21% and contributes 18% in new business premium.
Agency channel individual APE showed a growth of 14% over same period last year and stands at INR33.7 billion.
As on December 31,2023 the total number of agents stands at 243,590 with a growth of 26% over previous period.
During the period ended, the company added net 34,816 agents.
During the period ended December 31 2023, other channel that is direct, corporate agents, brokers, online and web aggregators grew by 55% in terms of individual NBP and 20% in individual APE.
Linked business through other channel registered growth of 45% on APE basis.
Coming to profitability.
The company's profit after tax for the period ended December 31, 2023, stands at INR10.8 billion with 15% Y-o-Y growth.
Our solvency ratio remains strong at 209% as on December 31,2023.
SBI Life Insurance Company Limited January 25, 2024 The value of new business stands at INR40.4 billion with growth of 11% as against INR36.3 billion in last period.
VoNB margin is at 28.1% for the period ended December 31, 2023.
The shift to VoNB is mainly on account of increase in share of ULIP business as compared to previous year.
Update on Operational efficiency, the opex ratio stands at 5.1% for the period ended December 31,2023.
Our total cost ratio stands at only 9.9% for the same period.
With respect to persistency, our individual regular premium and limited premium paying policy 13th month persistency stands at 85.3%.
The company has registered improvement in 61-month persistency also by 449 basis points.
As mentioned in my opening remarks, asset under management stands at INR3.71 trillion as on December 31st,2023; having a growth of 24% compared to December 31, 2022.
Death claim settlement ratio now stands at 98.8%.
The company has registered an improvement of 148 basis points over last period in claim settlement ratio.
We are committed to deliver need-based solutions that addresses the ever-evolving customer needs based on customer profile, life stage and goal prioritization.
The company continues efficient usage of technology for simplification of processes with 99% of the individual proposals being submitted digitally.
47% of individual proposals are processed through automated underwriting.
Before I conclude, I would like to clearly state that the company's aspiration to expand its distribution reach, branch network, product suite, investment in digital technology bringing larger customers in ambit of insurance coverage and improving customer experience remains unchanged, and our endeavour is to continue delivering better than industry growth.
Our company is well positioned to capitalize the growth opportunity offered in the dynamic insurance landscape.
Thank you all.
And now we are happy to take any questions that you may have.
Moderator · Conference Operator
The next question is from the line of Shreya Shivani from CLSA.
Please go ahead.
Shreya Shivani
Congratulations on a good set of numbers.
Sir, I have two questions over here.
So, we've seen many players are now refocusing or pivoting their business model to enter into the Tier 2, 3, 4 cities, right?
So clearly, the competition in these geographies are set to rise.
Sir, in the backdrop of this, knowing that next year onwards, many more private players who were more metro city focused are going to be in your geographies, what gives us an edge in competition versus these players, what would be our guidance for next year, or at least for the medium term, if you can help us understand that, it will be useful?
Sir, second is on the surrender value regulation.
While we understand that things are currently under discussion, but what is your view on how things are moving?
What will be the timelines?
And what could be the impact on your overall margins with the way the regulation comes in?
These are my two questions.
Moderator · Conference Operator
The next question is from the line of Swarnabh Mukherjee from B&K Securities.
Please go ahead.
Swarnabh Mukherjee
Congrats on a good set of numbers.
Firstly, as a follow-up on previous participants' question, I just wanted to understand from you why agency 4Q generally would be a larger quarter and 3Q would be relatively tepid because if I understand currently in 3Q, particularly in December, it is the MDRT period and agents would also try to focus on increasing volume.
So, is there any difference how the focus would be on banca versus agency in the third quarter from your distribution point of view?
So that is the first question.
SBI Life Insurance Company Limited January 25, 2024 Secondly, sir, I had questions on the protection segment.
So, first of all, in group protection, if you could delineate the growth which has come this time from which segment it has come, credit life or term life, what are the trends you are seeing in those areas?
And in retail protection, given that you have mentioned that you have introduced ROP product that we had a tepid quarter now.
Going ahead, do we expect growth coming back to this segment on the retail production side?
And also, just couple of confirmations I wanted to take was one is on persistency.
So, if I just look at 3Q persistency versus 2Q persistency reported, the numbers in that case look a slight dip.
Is there anything to read into that, apart from the fact that maybe in all third quarters, there is a higher mix of ULIP that hits the persistency number??
Anything else to read into that?
And on the changes in assumptions that we see in the VNB walk, is there anything additional you have done or is this what we had done at the end of 31st March, that is what is visible?
That would be my questions.
Moderator · Conference Operator
Thank you.
The next question is from the line of Madhukar Ladha from Nuvama Wealth.
Please go ahead.
Madhukar Ladha
Hi.
Congratulations on a good set of numbers.
So, most of my questions got answered, but I wanted to understand, first, at the product level, are we seeing any changes in margins?
Because some of the competition in life insurance is talking about that.
Second, within channels, and especially my understanding is also that within the agency channel, there has been some increase in commission payouts.
So, has there been any increase in competitive intensity to acquire business that also probably may have impacted your growth in Q3?
So, I wanted to understand if any of these things are playing out and how do you see that?
And lastly, obviously, again, we see that the proportion of ULIPs had gone up.
And I know that you constantly talk about giving what the customer wants or selling what the customer really wants to buy.
But again, in terms of our margins that will keep our margin subdued.
So, I know that I'm probably asking this question again, but any sense on how our product mix could shape up over the next two, three years?
That will also be helpful.
Thanks.
Moderator · Conference Operator
Thank you.
The next question is from the line of Nischint Chawathe from Kotak.
Please go ahead.
Nischint Chawathe
Hi.
Thanks for taking my question.
Going back to the surrender charges...
Moderator · Conference Operator
Sir, your audio is not clear.
May we request to kindly use your handset, please.
Nischint Chawathe
Sure.
Is this better?
Moderator · Conference Operator
Yes, sir.
Please continue.
Thank you.
Nischint Chawathe
Thanks.
Going back to the surrender charges proposed regulation.
Surrender charges do have kind of a contribution to the overall VNB.
And I guess that's obviously a big point of discussion in the industry.
So why do you think that this kind of does not really have an impact on SBI Life?
Moderator · Conference Operator
Thank you.
The next question is from the line of Dipanjan Ghosh from Citigroup.
Please go ahead.
Dipanjan Ghosh
Hi.
Good evening, sir.
Two questions from my side.
Firstly, if you can kind of mention the product pipeline for the next three months and maybe for next half year.
Second, when you say that your agency payout has been tweaked here and there can you give some colour on that?
Is it like more product mix being changed or you have been doing payouts to operational performance of products, or is it just payouts of change, etcetera?
And lastly, you have added a lot of agents over the last few years and again SBI Life Insurance Company Limited January 25, 2024 market sharing that.
But can you give some colour on how the vintage-wise agent productivity has changed historically versus, let's say, the last one or two years and currently?
Moderator · Conference Operator
Thank you.
The next question is from the line of Rishi Jhunjhunwala from IIFL Institutional Equities.
Please go ahead.
Rishi Jhunjhunwala
Yes, thanks for the opportunity.
A couple of questions.
So firstly, are there any considerations or pressure in terms of increasing payouts for your banca and agency channel?
And one of the reasons I'm saying is because some of your larger peers have SBI Life Insurance Company Limited January 25, 2024 increased commission payouts by 2x to 3x over the year, especially on the traditional plan.
So, any discussions around that for us as well?
Moderator · Conference Operator
Thank you.
The next question is from the line of Sanketh Godha from Avendus Spark.
Please go ahead.
Sanketh Godha
Yes.
Thank you for the opportunity.
Sir, if I see the numbers, your first-year commission ratio in nine months is around 14%.
Last year, it was around 12.4%.
And if I look at the product mix, naturally the product mix has moved in the favour of ULIPs.
And ULIPs typically have lower commissions compared to non-par or par and even protection investment.
Sir, just wanted to understand what led to this increase in commission ratio in first year, again, maybe you are harping on the same point, but whether the payouts to the channels have marginally gone up?
That's point number one.
And related question is, since you report VNB margin based on last year cost.
If the commission payouts have gone up, the current year cost structure will be different compared to the last year.
So, when you will revisit your assumptions in fourth quarter is there a probability of negative impact coming in because of the higher expense towards first year business on the margin?
SBI Life Insurance Company Limited January 25, 2024 And similarly, I just wanted to understand given the surrender rates have gone up, last year, it was benign at 4.3%.
Today, it is at 6.1%.
You might have reported last year margin based on surrender rate of 4.3%.
Today, it's 6.1%.
So, if you bake in 6.1%, whether it will have a negative impact on the margin.
So just wanted to understand this part very clearly why the payouts have gone up in first year?
And second, any implication on the margins given the payouts have gone up and surrender rates have gone up?
Moderator · Conference Operator
Thank you.
The next question is from the line of Neeraj Toshniwal from UBS India.
Please go ahead.
Neeraj Toshniwal
Hi, sir.
Just wanted to understand in terms of product mix, we obviously have moved much higher in the ULIP, but our margins have actually kind of quite sustained and you're saying the margins have been quite similar.
So, there's some disconnect, I just wanted to understand how the margin movement have supported the outcome what we are seeing currently?
Moderator · Conference Operator
Mr. Toshniwal.
I am sorry to interrupt.
Sir I would request you to kindly re-join the queue for follow-up questions please.
There are several others waiting for their turn.
Thank you.
The next question is from the line of Prayesh Jain from Motilal Oswal.
Please go ahead.
Prayesh Jain
Yes, hi.
Good evening.
And congrats on a good set of numbers.
Just a couple of questions.
Firstly, the new product that you've mentioned in the opening remarks, you mentioned that the sum assured is higher and the pricing is lower.
So, do we assume that the margins on this product would be lower and that so how do we look at that?
And secondly, there is a lot of talk about growth in deposits that some of the banks are that would be looking at.
So do you think that the life insurance segment growth in the banca channel could be at some risk in possibly next year or in the next couple of quarters, those are my questions.
Moderator · Conference Operator
Thank you.
The next question is from the line of Supratim Datta from Ambit Capital.
Please go ahead.
Supratim Datta
My first question is on a recent article in the newspaper, which talked about how SBI has stopped promotion in its circles until 31st March.
Just wanted to understand how does this impact our growth in the fourth quarter?
And two, wanted to understand what kind of sales practice or changes in sales practices you will have to bring about to address some of the recurring concerns around big mis- selling, which keeps coming up?
I understand that your ratios are low, but these are concerns which keep coming up.
So, from a sales practice perspective, what are the changes that you are trying to bring about to address these?
Moderator · Conference Operator
Thank you.
The next question is from the line of Ashish Agarwal from BNP Paribas.
Please go ahead.
Ashish Agarwal
I just wanted to catch up on the growth guidance that you gave for FY'24 on the APE part?
Moderator · Conference Operator
Thank you.
The next question is from the line of Shobhit Sharma from HDFC Securities Limited.
Please go ahead.
Shobhit Sharma
I have a few questions.
So firstly, around the cost structure.
So, if I look at our expenses of management other than the renewal commission to the APE ratio, it has moved up from 35% last year, 9-month period to 37% this year despite a huge deterioration in our product mix, if you can help us understand that what is playing over there?
Another thing is you mentioned that despite the equity markets being performing we see higher surrender towards the ULIP side.
So how much of business are we able to channelize back in the form of new business there, means is the churning in the new business -- in the ULIPs surrender helping us in fuelling our growth?
Also, we understand that due to IRDA regulations, we can now attach some of the riders along with the ULIP products.
Are we doing that?
And what is that percentage, if we can understand as an attachment?
Thank you.
Moderator · Conference Operator
Thank you.
The next question is from the line of Mohit from BoB Capital.
Please go ahead.
Mohit
Sir, first is the non-par, wanting to understand what the IRR that you provide?
And have we repriced the products over the last 9 months?
That's point number one.
Point number two.
While we understand that retail protection, you are introducing new products and other things to increase the growth.
But just wanted to understand, is there a scope to reprice the existing product line?
So those were my two questions.
Moderator · Conference Operator
Thank you.
The next question is from the line of Aditi Joshi from JPMorgan.
Please go ahead.
SBI Life Insurance Company Limited January 25, 2024
Aditi Joshi
Most of my questions are answered.
But just one quick one, can you please elaborate the reasons why we saw a good pickup in the non-par business, as you mentioned earlier?
And also, can you also help explain the reasons behind the weakness in the participating products, please?
Yes, that's it.
Thank you.
Moderator · Conference Operator
Thank you.
The next question is from the line of Sahej Mittal from 3P Investment Managers.
Please go ahead.
Sahej Mittal
Sir, just one data keeping question.
What would be your lapse rate for non-par guaranteed policy for 13, 25th and 37 months?
Moderator · Conference Operator
Thank you.
Ladies and gentlemen, we will take that as the last question for today.
I would now request Mr. Amit Jhingran to give us the closing remarks.
Over to you, sir.
Thank you, members of the management.
Ladies and gentlemen, on behalf of SBI Life Insurance Company Limited, that concludes this conference.
We thank you for joining us, and you may now disconnect your lines.
Thank you.
SBI Life Insurance Company Limited January 25, 2024
Safe harbour
Please note that this transcript has been slightly edited for the purpose of clarity.
Except for the historical information contained herein, statements in this release which contain words or phrases such as 'will', 'would', ‘indicating’, ‘expected to’ etc., and similar expressions or variations of such expressions may constitute 'forward-looking statements'.
These statements by the Company and its management are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions and are not guarantees of future performance.
Because forward- looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control, and actual results could differ materially from those presented in the forward-looking statements.
Questions and answers
“SBI Life Insurance Company Limited
Moderator · Conference Operator
Thank you very much, sir.
We will now begin the question-and-answer session.
The question is from the line of Avinash Singh from Emkay Global.
Avinash Singh
Good set of numbers, particularly on the margin, in the backdrop of how the product mix had changed and everything.
A couple of questions here.
First one on agency channel.
I'm cognizant of the fact that the quarter 3 is typically more a banca-dominated, however, on a year-on-year basically the seasonality is added, but somehow agency channel growth seemed to have slowed down meaningfully in quarter 3.
So, what is happening there and how are you trying to improve in the next quarter and going forward on the agency channel?
So that is question one.
Second piece is more on the cost, of course your costs are by far better in the industry and among the peer set.
However, I mean, if we were to look at the numbers, there seems to be certain increase happening.
I mean, of course, in the total premium ratio, it will not reflect, but in the absolute basis, the costs, I mean, commission and rewards as well as the opex seems to be increasing.
SBI Life Insurance Company Limited January 25, 2024 So, what is leading to this, is it because of headcount increase or certain commission reward structure, linking across partners?
So, what is sort of leading and where should one see it going forward?
So, these are my two questions.