SBI Life Insurance Co.'s cost ratios increased in the June quarter as India's tax exemption on individual life policies and new labour rules raised expenses. Meanwhile, profit rose by 22%.
The operating cost ratio went up to 7.7% from 6.3% a year earlier. The total cost ratio also increased to 12% from 10.8%, according to the company. The GST exemption alone cost the insurer around ₹230 crore in the quarter, reducing its value of new business margin by 1.1 percentage points. The margin stood at 26.2% against 27.4% a year earlier.
Profit After Tax
Profit after tax reached ₹720 crore. New business premium grew by 23% to ₹8,910 crore, helped by a large group protection contract that raised group protection annualized premium equivalent (APE) by 313%. Chief executive officer Amit Jhingran, while addressing analysts, noted the deal impacted margins and that the 14% growth in individual-rated premiums more accurately reflected the underlying momentum.
Chief financial officer Sangramjit Singh Sarangi mentioned that the insurer has no plans to cut commissions or costs to address the tax impact. Instead, the company will rely on a change in product mix. The impact from the exemption, which has been effective since 22 September, will continue into the September quarter before comparisons normalize in the third quarter.
Sarangi said the year-on-year comparison also reflected the impact of the new labour codes on employee costs, along with higher reinsurance costs as the insurer's sum assured increased. Reinsurance premium ceded rose to ₹1,210 crore from ₹640 crore a year earlier.
Growth
Growth was aided by a large group protection deal, which pushed group protection annualised premium equivalent (APE) up 313% to ₹1,230 crore and helped total APE grow 36%.
Unit-linked insurance plans (Ulips) accounted for 45% of individual savings APE during the quarter as the share of participating and non-participating products increased. On an individual rated premium basis, Ulips accounted for 62%.
Jhingran said margins had bottomed out and are expected to move towards the upper end of the insurer's 26-28% guidance range as the product mix normalises.
SBI Life's solvency ratio stood at 1.96 times at the end of the quarter, above the regulatory minimum of 1.5 times.
