What Helped SBI Life Outgrow HDFC Life, ICICI Prudential In First Half Of 2019-20
A customer uses an automated teller machine (ATM) at a State Bank of India Ltd. (SBI) branch at night in Bengaluru, India. (Photographer: Karen Dias/Bloomberg)

What Helped SBI Life Outgrow HDFC Life, ICICI Prudential In First Half Of 2019-20

The insurance arm of India’s largest lender saw its new business premium grow more than its private listed peers in the first six months of the ongoing fiscal.

Brokerages expect SBI Life Insurance Co. Ltd. to sustain its performance as it diversifies into newer segments and leverages its bancassurance channel with State Bank of India, among other factors.

Shares of SBI Life rose nearly 61 percent in the past 12 months as investors bet on insurers. HDFC Life Insurance Co. Ltd.’s jumped 60 percent ICICI Prudential Life Insurance Co. Ltd. rose 40 percent during the period.

Here’s what driving SBI Life’s growth:

New Business Premium

The new business premium growth and solvency ratio—an indicator of financial health—of SBI Life was better than that of its private peers during the first half of the ongoing fiscal, according to exchange filings. Premium grew by 26 percent in 2019 as against 22 percent for private peers and 11 percent for the entire industry.

The growth was driven by higher sales of savings products, especially non-participating products, according to the filings.

Emkay Global expects the growth to continue. According to the brokerage, the company’s annualised premium equivalent might grow nearly 20 percent over the next three years, driven by 47.2 percent jump in non-participating policy category and 42.8 percent in the protection segment.

HDFC Securities pegged the growth higher at nearly 23.3 percent between FY19 and FY22.

Non-Participating Segment Boost

SBI Life’s new business premium rose in the first half of the fiscal, driven by individual savings, according to its filings. Contributions from group, non-participating and Ulip segments followed.

While the non-participating policy category—in which dividends aren’t shared with policyholders—is a small business, new business premium in the category rose nearly 610 percent. SBI Life’s non-participating policy products include Smart Platina Assure, Smart Samriddhi and unit-linked non-participatory products like Smart Insurewealth Plus and Saral Insurewealth Plus. According to Nirmal Bang Securities, the segment’s margin is higher than the company’s overall margin.

Strong Distribution Channel

The company’s bancassurance channel, selling plans through State Bank of India’s 22,000 branches, lends it an edge over its peers.

The channel accounts for about 57 percent of the insurer’s product mix—or the new business premium earned. SBI Life’s ticket-size—individual new business premium per policy sold—through the channel rose to Rs 77,000 in the first of the ongoing fiscal from Rs 67,000 a year ago, according to its half-year earnings statement.

That means customers are willing to pay a higher premium for products.

The insurer, according to its presentation, also has more than 1.2 lakh individual agents, 65 corporate agents, 99 brokers and more than 12,000 branches—helping the company sell a higher number of policies.

SBI Life sold as many as 4.5 lakh policies in the quarter ended December, more than what its two private peers sold together.

At its meeting with analysts last month, the insurer said SBI isn’t looking to opt for the open architecture—where banks can tie up with a maximum of nine insurers to sell their products as it would create a brand conflict. This exclusive partnership, SBI Life said, would benefit it in the long run.

Emkay Global, however, perceives the overdependence on SBI for distribution as a risk, should open architecture be made mandatory. But the brokerage doesn’t expect that any time soon.

Lower Cost

The insurer’s cost ratio—total cost incurred to gross premium earned—is lower that that of its peers.

Among the private insurers, SBI Life’s opex ratio—operating expense to gross written premium—has remained consistently low, indicating that its earnings have been high and expenditure low. That was led by momentum in its new business and renewal premiums.

Cutting operational costs by focusing on online operations also helped. Nearly 96 percent of the insurer’s customers were on-boarded digitally, it said in its earnings statement for the first six months of the ongoing fiscal.

Continuous renewal of policies and improving persistency, the measure of business that an insurer retains over a fixed time period, also helped cut costs.


The insurer expects to outperform the industry on the back of its presence outside metros and urban centres, among other factors, Nirmal Bang said in an October report.

SBI Life said its recent tie-ups with Allahabad Bank, Syndicate Bank, Repco Home Finance Ltd. and Punjab & Sind Bank are outperforming expectations. It expects these banks to contribute nearly 10 percent of its new business sales by FY22. And it plans to add new partners soon.

SBI Life is also betting on its lower-priced term policies in the fourth quarter, it told analysts, adding that it expects large growth in credit-protection plans that cover loan borrowers against the risk of death.

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