TREND: Despite mkt volatility, SBI Life outperforms in ULIP business

Thursday, May 7


By Shreejit Nair


MUMBAI – Equity markets have been highly volatile for the last few months due to the outbreak of the coronavirus pandemic. Despite this, SBI Life Insurance Ltd has managed to report strong earnings for the quarter and the year ended March, as most policyholders remained invested in the insurer's unit-linked insurance schemes. 

This helped the insurer's new business premium grow 11% on year to 80.5 bln rupees in 2019-20 (Apr-Mar). SBI Life Insurance's unit-linked portfolio contributes the most to the total business premium, with a share of 49% in the overall portfolio.


In 2019-20, SBI Life's annualised premium equivalent grew 11% on year to 107.4 bln rupees, led by 9% growth in the unit-linked insurance portfolio at 74.8 bln rupees. This accounted for 70% share of the total annualised premium equivalent.


If one compares it to listed life insurers, the share of unit-linked portfolio in the annualised premium equivalent of HDFC Prudential Life Insurance fell to 28% in 2019-20 from 55% in 2018-19. Likewise, ICICI Prudential Life Insurance's share of linked products fell to 64.7% from 79.6% the previous year.


SBI Life Insurance offers eight plans under the unit-linked portfolio–eWealth Insurance Plan, Smart Performer Plan, Unit Plus Super Plan, Saral Maha Anand, Smart Elite, Smart Scholar, Smart Horizon Plan, and Smart Wealth Assure Plan.


According to analysts, SBI Life Insurance has a higher share of debt investments in its linked portfolio, which has helped it withstand the volatility in the markets. 


"Despite weak sentiment for the ULIP business in general, the company managed to outperform the industry due to lower ticket size and a greater share of debt in ULIP funds," said Santanu Chakrabarti, lead analyst at Edelweiss Securities Ltd.


As on Mar 31, the insurer's assets under management were at 1.6 trln rupees, up 14% on year, with 79% of investments in the fixed income market.


Though the outbreak of COVID-19 has led individuals to prefer protection products, policyholders remained invested in unit-linked portfolios, analysts said. This helped the private life insurer report low surrender ratios.


"Slowdown in ULIP has been lesser than peers due to relatively higher debt component which makes it fairly profitable and has seen falling surrender ratios though participating products would rise if there is discomfort on ULIP-end," brokerage firm Prabhudas Lilladher said in a report.


In 2019-20, SBI Life Insurance's surrender ratio fell to 3.9% from 5.2% the previous year. This has helped maintain the persistency ratio in the unit-linked portfolio at over 85% and for par-products at above 80%, according to an investor presentation.


In a conference call with analysts and investors, SBI Life Insurance highlighted that a cautious strategy to reduce equity exposure over time and simultaneously increase the debt component in the ULIP segment has helped it sell linked products to customers, and that they were comfortable buying them, according to brokerage reports.


The management said it was confident of maintaining and substituting ULIP with par products in case there of a drop in demand for linked products. 



SBI Life Insurance is also backed by its parent State Bank of India–the country's largest public lender–which helps the life insurer sell market-linked products through its bancassurance channels. This helped SBI Life improve its annualised premium equivalent, a measure of new business written.


For the unit-linked portfolio, the contribution from bancassurance rose 9% on year to 53.4 bln rupees.


The company's management said its new partnership with UCO Bank should also help increase the contribution towards the operating performance.


Though SBI Life Insurance suffered a huge loss from net investments at 66.8 bln rupees in the quarter ended March, brokerage firms say the performance of the unit-linked portfolio will continue to be favourable, and that it will witness strong demand in the second half of 2020-21.  End


Edited by Maheswaran Parameswaran


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