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Photo: Reuters
Photo: Reuters

SBI Life’s Q4 results show virus effect, digital push key to growth

  • As 68% of its biz comes from bancassurrance channel, how digitally savvy is its parent will play big role in growth
  • SBI Life’s biggest challenge is to push products digitally as physical engagements would be restricted

SBI Life Insurance Co. Ltd’s March quarter (Q4) results showed glimpses of how much the covid-19 outbreak could hurt business. India’s largest private sector life insurer reported a 13% fall in business on an annualized premium equivalent (APE) basis for Q4 because of disruptions due to the lockdown enforced to curb the pandemic.

Kotak Institutional Equities said business volume contributed just 28% to APE in the quarter, unlike the 40-60% in Q4 of previous years. Understandably, the management gave a benign outlook for FY21 in an analyst call post results. The insurer expects growth to be in single digits for FY21.

Although business growth has been slowing (see chart) for SBI Life, access to a formidable distribution network of its parent and direct agents has helped. The might of this distribution network was visible in the full-year growth numbers. SBI Life’s new business premium grew by 20% for FY20, closely matching that of nearest rival HDFC Life Insurance Co. Ltd’s 21.5%.

For FY21, however, growth is unlikely to match that of the previous year. As such, SBI Life may not be an outlier as the slowdown will hit the entire industry. What may set private life insurers apart is the profit they can squeeze from a business that’s growing slower than before. In that, SBI Life’s track record gives comfort.

Rising share of protection business meant that profitability metrics shined in FY20. Value of new business grew by 20.1%, faster than 17.2% in FY19. Value of new business margin rose from 17.7% in FY19 to 18.7% for FY20. “We believe SBI Life’s margin will improve owing to a gradual rise in protection plans’ share along with the elevated share of non-par products," said analysts at Emkay Global Financial Services Ltd.

Graphic: Sarvesh Kumar Sharma/Mint
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Graphic: Sarvesh Kumar Sharma/Mint


Investors have taken note of the healthy profitability metrics, visible in the nearly 2% rise in the stock price on Wednesday. That said, SBI Life’s biggest challenge is to push products digitally as physical engagements would be restricted. As 68% of its business comes from bancassurrance channel, how digitally savvy is its parent will play a big role in SBI Life’s growth.

Investors should watch the insurer’s new business growth from digital channels in FY21 to know whether the current valuation multiple of 2.4 times estimated embedded value for FY21 is justified.

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