SBI Life Insurance has reported its fourth-quarter results, showing a 4.4% increase in profit after tax (PAT) to Rs 811 crore, despite facing challenges in its new business margins. The company’s Value of New Business (VNB) saw a notable 9% increase, reaching Rs 55.50 billion ($666.1 million) for the year ended March 31. However, the VNB margin contracted to 28.1% from 30.1% in the previous year, reflecting the impact of shifting customer preferences towards low-margin products.
The rise in low-margin Unit-Linked Insurance Plans (ULIPs) has been a trend across the industry, driven by a robust domestic equity market. SBI Life’s ULIP segment now constitutes 60% of its product mix by Annualised Premium Equivalent (APE), up from 55% the previous year. Despite having the highest ULIP share among its peers, SBI Life has managed to maintain better margins due to its efficient cost structure, according to analysts.
APE, a critical metric for insurers, indicates the annualized total value of all single premium and recurring premium policies. SBI Life witnessed a significant growth in APE sales, rising by 17% to Rs 197.20 billion for the year.
For the quarter ended March 31, SBI Life recorded a 26% increase in net premium income, reaching Rs 251.16 billion. Meanwhile, investment income experienced a remarkable nine-fold surge, reaching Rs 108.12 billion.
The scenario mirrors that of competitors HDFC Life Insurance Co and ICICI Prudential Life Insurance, both of whom reported weaker new business margins due to a higher share of ULIPs. This trend underscores the challenges faced by life insurers in balancing profitability with changing market dynamics.
Despite the margin pressures, SBI Life’s resilience in maintaining profitability reflects its strategic positioning and ability to navigate market challenges. With a focus on innovation and cost-efficiency, the company continues to drive growth and remain competitive in India’s dynamic insurance sector.
While the rise in ULIPs presents challenges, it also offers opportunities for insurers to innovate and tailor products that meet evolving customer needs. As the industry adapts to these shifts, companies like SBI Life are poised to capitalize on emerging trends and sustain their growth trajectory in the long term.
In conclusion, SBI Life’s Q4 results demonstrate a mixed picture of growth and margin pressures, highlighting the complexities of operating in India’s insurance landscape. As the company navigates through these challenges, its focus on customer-centric strategies and operational efficiency will be key to sustaining its leadership position in the market.
