SBI Life Insurance: Profit Surge on Policy Renewals and New Sales

SBI Life Insurance Company, a leading private life insurer in India, reported a strong third-quarter (Q3) performance, driven by robust policy renewals and new sales. The company's profit rose by 71% year-on-year (YoY) to ₹5.51 billion ($63.6 million) for the quarter ended December 31, 2024, from ₹3.22 billion a year earlier. This impressive growth was supported by a 11% increase in net premium income to ₹248.28 billion ($2.9 billion), driven by a 13% rise in renewal premiums and a 12% jump in first-year premiums.



The growth in renewal premiums indicates that SBI Life has successfully retained its existing customers and maintained their loyalty, ensuring a stable income stream. Meanwhile, the increase in first-year premiums reflects the company's ability to attract new customers and expand its customer base. This combination of customer retention and new business acquisition has contributed to SBI Life's long-term profitability.

SBI Life's value of new business (VNB), a key metric for insurers, rose by 6% YoY to ₹42.9 billion ($5.1 billion) for the nine months to the end of December 2024. Additionally, the company's annualised premium equivalent (APE) sales increased by 11% to ₹159.7 billion ($1.9 billion) during the same period. These positive trends suggest that SBI Life is well-positioned for long-term growth and profitability.

However, the rise in the share of unit-linked insurance plans (ULIPs) in SBI Life's product mix has led to a contraction in VNB margins. ULIPs have a lower profit margin compared to term policies, and their increased sales have impacted the company's margins. SBI Life's VNB margins contracted to 26.9% for the April to December period from 28.1% a year earlier. To cushion the impact on margins, insurers like SBI Life have been pushing for higher sales of high-margin policies.



In conclusion, SBI Life Insurance's strong Q3 performance, driven by policy renewals and new sales, bodes well for the company's long-term profitability. While the increasing share of ULIPs has impacted VNB margins, the company's robust growth in renewal and first-year premiums, along with its solid VNB and APE sales, indicates a positive outlook for the insurer. Investors should closely monitor SBI Life's future performance and consider the company's strong financial position and growth prospects.