SBILIFE - SBI Life Insurance Company Limited Share Price

Management Outlook and Key Highlights from SBI Life's Q3 FY25 Earnings Call

Outlook:
Management remains confident in sustaining 15-17% growth in Individual APE (Annual Premium Equivalent), driven by agency expansion, bancassurance productivity, and digital initiatives. They aim to maintain VONB (Value of New Business) margins at 27-29% long-term, balancing ULIP growth with higher-margin non-par products. Focus areas include enhancing agency productivity, expanding Tier 3/4 presence via 40+ new branches, and leveraging digital platforms (e.g., YONO for protection sales).

Major Points:

1. Growth Metrics:

   • Individual New Business Premium: Rs.198.6B (+12% YoY), with private market leadership (27.8% share).
   • VONB: Rs.42.9B (+6% YoY); margins at 26.9% (impacted by ULIP mix shift).
   • Embedded Value: Rs.681.4B (+17% vs. March 2024).

2. Channel Performance:

   • Agency: 36% YoY growth in new business; productivity up 27%. Added 75,000+ agents (gross) and plans to sustain focus.
   • Bancassurance: 63% APE share, with SBI branch productivity at Rs.5.5M (+9% YoY).

3. Product Mix:

   • ULIPs: 64% of individual new business (+25% YoY), driven by equity market trends.
   • Non-PAR Savings: Launched Smart Platina Supreme (Rs.2.5B premium in 20 days), contributing to margin resilience.
   • Protection: Shift toward pure protection (43% of policies vs. ROP).

4. Operational Strength:

   • Assets Under Management: Rs.4.42T (+19% YoY).
   • Persistency: 13th month at 86.1% (+83 bps YoY).
   • Cost Efficiency: Opex ratio at 5.3%; solvency ratio of 2.04 (vs. 1.5 regulatory).

5. Digital Initiatives: 99% digital proposal submissions; 50% automated underwriting.

Management expects steady growth in H2 FY25, supported by product diversification, agency/banca synergies, and stable equity markets. Challenges include group savings headwinds and regulatory adjustments (e.g., surrender value norms).

What were the major questions asked and their answers?

Question 1: Can you provide guidance for FY25 growth and margins, including the impact of new surrender regulations?
The company maintains its guidance of ~15% growth in Individual Rated Premium (IRP). Surrender regulation impact is minimal due to product repricing, with no immediate margin effect. Banca and agency channels are expected to grow at ~10% and ~30%, respectively.

Question 2: Why did agency deletions spike in Q3?
Agency deletions rose due to stricter enforcement of activation guidelines, removing ~40,000"“45,000 inactive agents. This was a one-time exercise; net additions are projected to improve.

Question 3: Why is individual protection premium growth muted despite product launches?
A shift toward pure protection policies (43% of mix vs. 57% for return-of-premium) reduced average ticket sizes, suppressing premium growth. Over 73,000 pure protection policies were sold via digital channels, driving policy count growth.

Question 4: Is there regulatory risk to the banca channel?
No formal regulatory communication or task force findings have impacted the channel. Growth remains stable (~10%), with continued focus on diversification and digital initiatives (e.g., YONO app).

Question 5: When can agency contribute 50% of APE, and what drives banca growth?
Agency's share is rising via branch expansion and productivity improvements (17% active agent growth). Banca growth (~10%) is sustained via SBI's vast customer base and digital penetration. ULIPs remain resilient despite market volatility.

Question 6: Why did EV decline sequentially in Q3?
EV grew 3.1% QoQ, aided by operational variances. The perceived decline was a typo; sensitivity to equity market corrections was within expectations.

Question 7: How does the new non-par product (Smart Platina Supreme) affect margins?
The product contributed Rs.2.5B premium in 20 days, with margins above company average. It is expected to improve mix and stabilize VoNB margins (26"“29% long-term target).

Question 8: Why is PAT growth robust (~48% YoY)?
Strong investment income (traditional book) and renewal premium growth (15%) drove profits. PAT growth may moderate to 10"“15% annually, depending on product mix.

Question 9: Can agency sustain 25%+ growth without margin pressure?
Agency growth relies on mass recruitment and activation (241,251 agents, 75,000 added in 9M), not commission competition. Trust in the SBI brand and rural expansion support sustainable growth.

Question 10: How does channel mix impact costs and margins?
Banca is more profitable, but agency's product mix (higher non-par/protection) offsets costs. Commission structures are similar; agency's scalability and segmentation drive margin stability.