Annualised premium equivalent or APE (a common sales measure for life insurers) declined by about 13 per cent year-on-year (YoY) to Rs 2,690 crore (11 per cent up to Rs 10,740 crore for FY20).
In fact, the insurers’ gross written premium during the quarter was entirely driven by renewal premium, which rose 15 per cent YoY. New business premium (NBP) fell 12 per cent YoY. For FY20, NBP jumped 20 per cent to Rs 16,590 crore. Gross written premium is a summation of renewal premium and new business premium.
However, strong growth in high-margin protection products (up 27 per cent in FY20 and 10 per cent in Q4), sustained improvement in cost ratio, and good persistency (customers’ stickiness) protected the insurer’s operating profitability in Q4.
Its value of new business (VNB) margin improved 102 bps in FY20 to 20.7 per cent, on effective tax rate basis (18.3 per cent on actual tax basis). VNB margin was 20.5 per cent during April-December 2019. Quarterly margin figures were not available.
The total cost to gross premium ratio drifted down to 9.9 per cent in FY20, from 10.5 per cent in FY19.
How the cost ratio pans out will be key, given that the management — during an analyst call — had indicated higher investment in infrastructure and is aiming at single-digit growth in the June quarter, led mostly by the protection business.
On the growth front, Madhukar Ladha, analyst at HDFC Securities, says: “In light of the present situation, how the firm’s banca channel (65 per cent of APE) performs will be key to growth.”
Persistency and mortality are also crucial, he added. The firm witnessed some slowdown in persistency, during April.
The firm has provided 100 per cent (around Rs 53 crore) for its exposure to debt-ridden mortgage lender Dewan Housing Finance bonds, in its unit-linked portfolio.
Solvency ratio deteriorated to 1.95 per cent at the end of March 2020, from 2.13 per cent a year ago.
However, it is still higher than the regulatory requirement of 1.5 per cent.
The firm has provided an additional reserve of Rs 60 crore, on account of the pandemic, over and above the policy-level liabilities. It will continue to monitor future developments relating to Covid-19.
The SBI Life
stock gained 4 per cent to Rs 715.65 on the BSE, on Tuesday.