SBI Life Insurance reported a weak performance in Q2FY25.
The annual premium equivalent or APE grew 3 per cent year-on-year (Y-o-Y) to Rs 5,390 crore.
For the first half of financial year 2025 (H1FY25), it grew 9 per cent Y-o-Y to Rs 9,030 crore.
The absolute value of new business or VNB declined 3 per cent Y-o-Y to Rs 1,450 crore. For H1FY25, VNB grew 3 per cent Y-o-Y to Rs 2,420 crore.
VNB margins came in at 26.9 per cent as compared to 28.5 per cent in Q2FY24 and flat versus 26.8 per cent in Q1FY25.
The management expects VNB growth to remain between 12-15 per cent in FY25 with margins to range between 26-27 per cent in FY25 on the back of new product launches in the protection segment and minimal impact of surrender charges.
In Q2FY25, net profit grew 39 per cent Y-o-Y to Rs 530 crore and for H1FY25, it grew 38 per cent Y-o-Y to Rs 1,050 crore.
The ULIP share in total APE increased to 65 per cent in Q2FY25.
There was a decline of 13 per cent Y-o-Y in new business premium or NBP to Rs 8,700 crore. For H1FY25, it declined 3 per cent Y-o-Y to Rs 15,730 crore.
Gross premium grew 1 per cent Y-o-Y to Rs 20,410 crore while renewal premium grew 16 per cent Y-o-Y.
The AUM grew 27 per cent Y-o-Y to Rs 4.4 trillion in Q2FY25.
The VNB margins contracted 160 basis points Y-o-Y on account of a shift in the mix toward ULIPs.
The company expects non-par margins to improve in Q3FY25.
The company issued one million new policies and lives covered were 11 million during H1FY25.
Individual new business sum assured grew 20 per cent Y-o-Y.
The mis-selling ratio at 0.03 per cent was the lowest in the industry.
The total cost ratio was 9.7 per cent (8.4 per cent in Q2FY24).
The commission ratio was 4.1 per cent vs. 3.9 per cent in Q2FY24.
The operating expense ratio was 5.6 per cent vs. 4.4 per cent in Q2FY24.
Costs were high due to higher agent count and investments in digital channel.
ULIPs grew 16 per cent Y-o-Y, contributing 65 per cent of total APE.
The protection business declined 29 per cent Y-o-Y due to delayed product launches.
Credit life was flat but 9-10 per cent growth in credit life is expected for FY25.
The company will continue to invest in growing the agency channel and expects 30 per cent growth in H2FY25.
Slower growth was seen in the bancassurance channel as it is prioritising digital platforms and data analytics, which will help in scaling and improving customer engagement.
The guidance is for 9 per cent growth in the bancassurance channel in H2FY25.
Investing in building the online channel has led to 73 per cent Y-o-Y growth in IRNB (Individual Rated New Business) for digital channel. On a Y-o-Y basis, except for the 49th month (which is flat), persistency improved.
Protection premiums should report strong growth due to the launch of two new products.
A new high-ticket protection product with a minimum sum assured of Rs 2 crore, is highly competitive compared to peers.
The guidance is for a mix of non-par, protection and par products to constitute 40 per cent and ULIP 60 per cent.
New product launches may kick-start recovery in protection.
Continued investments in agency and digital channels will boost growth.
Due to strong growth in ULIPs, analysts are cutting APE and VNB estimates for FY25.
The stock saw a lot of selling but some analysts maintain a buy on the basis of consistent long-term performance and hopes of H2 rebound.
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