SBI Life Insurance Company Limited has informed the Exchange about Transcript of Analysts/Institutional Investor Meet/Con. Call
November 1, 2022
SBIL/F&A-CS/NSE-BSE/2223/260
Assistant Vice President Listing Department, National Stock Exchange of India, Exchange Plaza, Plot No. C/1, G Block, BKC, Bandra (East), Mumbai - 400051
General Manager Listing Department, BSE Limited, Phiroze Jejeebhoy Towers, Dalal Street, Mumbai - 400001
Dear Sir / Madam,
Subject: Transcript of Earnings Call held on October 21, 2022
This is in continuation to our intimation letter ref. no. SBIL/F&A-CS/NSE-BSE/2223/244 dated October 19, 2022 and in compliance with the provision of Regulation 30 read with Schedule III (Part A) (Para A) (15) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Transcript of the earnings call held on October 21, 2022 with analysts/ investors were uploaded on the Company's website at www.sbilife.co.in
You are requested to kindly take the same on records.
Thanking you,
Yours faithfully,
Vinod Koyande Company Secretary ACS No. 33696
SBI Life Insurance Company Ltd. Registered and Corporate Office: Natraj, M.V. Road and Western Express Highway Junction Andheri (East), Mumbai 400 069. Tel.: (022) 6191 0000/ 3968 0000 IRDAI Regn. No. 111. CIN: L99999MH2000PLC129113
www.sbilife.co.in
“SBI Life Insurance Company Limited Q2 FY23 Earnings Conference Call”
October 21, 2022
MANAGEMENT:
MR. MAHESH KUMAR SHARMA – MANAGING DIRECTOR AND CEO. MR. SANGRAMJIT SARANGI – PRESIDENT & CFO. MR. RAVI KRISHNAMURTHY – PRESIDENT OPERATIONS & IT. MR. ABHIJIT GULANIKAR – PRESIDENT BUSINESS STRATEGY. MR. SUBHENDU BAL – CHIEF RISK OFFICER. MR. PRITHESH CHAUBEY – APPOINTED ACTUARY. MS. SMITA VERMA – SVP, FINANCE & INVESTOR RELATIONS.
Moderator: Ladies and gentlemen, good day and welcome to the Q2 FY 2023 Earnings
Conference Call of SBI Life Insurance Company. As a reminder, all participant
lines will be in the listen only mode and there will be an opportunity for you to
ask questions after the presentation concludes. Should you need assistance
during the conference call, please signal an operator by pressing “*” then “0”
on your touchtone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Mahesh Kumar Sharma – Managing
Director and CEO, SBI Life Insurance. Thank you and over to you sir.
Mahesh Kumar Sharma: Thank you very much. Good evening everyone. And we heartily welcome
you all to the results update call of SBI Life Insurance for the half year ended
September 30th, 2022. The update on our financial results can be accessed
on our website, and as well as on the websites of both the stock exchanges. I
have along with me, Sangramjit Sarangi – President and CFO; Ravi
Krishnamurthy – President Operations and IT; Abhijit Gulanikar – President
Business Strategy, Subhendu Bal – Chief Risk Officer; Prithesh Chaubey –
Appointed Actuary; and Smita Verma – SVP, Finance and Investor Relations.
Now, let me give you some key highlights for this half year ended 30th
September 2022: New Business Premium registered a growth of 27% Y-o-Y
and stands at Rs.130.9 billion, leading to private market leadership. Individual
New Business Premium stands at Rs.84.6 billion with a strong growth of 31%
and private market share of 25.3%. Gross written premium stands at Rs.279.7
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SBI Life Insurance Company Limited October 21, 2022
billion a growth of 21%. Protection New Business Premium grew by 32% to
Rs.16 billion. Profit after tax stands at Rs.6.4 billion, 36% growth over
corresponding same period last year. Value of new businesses Rs.21.2 billion
registering a strong growth of 53% over the Rs.13.8 billion in September 2021.
VONB margin is at 31% with an improvement of 630 basis points over 24.7%
in September 21. Embedded value of the Company as of September 30th,
2022, stands at Rs.424.1 billion. Assets under management grew by 16% to
Rs.2.83 trillion, robust solvency ratio of 2.19 as against the regulatory
requirement of 1.5.
I would also like to highlight a few key initiatives taken by the Company,
considering the various requirements of the customers:
We have launched SBI Life Retire Smart Plus product which is a unit linked
pension savings product. This product offers a comprehensive range of
pension savings, with varied fund options with an option to defer the vesting
date as compared to our earlier version of Retire Smart which didn’t have this
feature. With a view to broaden our reach, SBI Life has tied up with India Post
Payments Bank, a leading bank in rural markets. With this, we will be able to
reach to our customers, especially the section living in unbanked and
underserved areas, to become financially secure and empowered.
We will now update you on each of the key elements. Let me start with the
premium, Individual new business has grown to Rs.84.6 billion with the growth
of 31% Y-o-Y. Single premium contribution is 32% of Individual New Business
Premium which can be attributed to growth in our Individual annuity product.
The Company gained private market share of 196 basis points to reach 25.3%
market share. On Individual rated new business premium stand at Rs.60.5
billion with a growth of 21% and private market leadership with a share of
23.7%. Also, Group new business premium stands at Rs.46.3 with a growth of
21%. In all we have collected total New business premium of Rs.130.9 billion
registering private market share of 22.6%. Renewal premium grew by 16% to
Rs.148.8 billion which accounts for 53% of the gross written premium.
To sum up:
GWP stands at Rs.279.7 billion with a growth of 21%. In APE terms, premium
stands at Rs.68.3 billion registering a growth of 22%, of which Individually APE
stands at Rs.61.2 billion with a growth of 22%.
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SBI Life Insurance Company Limited October 21, 2022
During the half year ended, September 30, 2022, 9.29 lakh new policies were
issued and this registered a Y-o-Y growth of 21%. Individual New business
sum assured registered a growth of 14% over the corresponding period last
year, as compared to a growth of 7% at private industry level. Considering our
robust performance for H1 FY23, we continue to expect healthy growth in our
performance in H2 FY23.
Let me give you details about the product mix; we are happy to report that the
Company has steadily moved towards a more balanced product mix. So, on a
half year basis our guaranteed Non-Par savings products are contributing 20%
of the Individual New business and on APE basis, this constitutes 26%. Non-
Par guaranteed new business premium has registered a growth of 221%,
Y-o-Y mainly due to the new business contribution of smart platina plus which
is Rs.12.69 billion in the half year ended September 30, 2022. This product
was launched in March 22, and has seen a strong traction in the new business
premium, mainly due to the product features, which are having a high
acceptance in the market. ULIP has remain one of the flagship segments for
the Company. Individual ULIP premium is at Rs.43 billion, which now
constitutes 51% of Individual new business premium. Individual protection is at
Rs.4.3 billion registering a growth of 17%. Group protection stands at Rs.11.8
billion with growth of 38%. Credit life new business premium has grown by 36%
and stands at Rs.9.1 billion. On APE basis protection contributes 11% of the
new business and has registered a growth of 23%. Annuity business is at
Rs.19.8 billion and contributes 15% of New business premium. Under annuity,
the Company is offering immediate as well as deferred annuities. Individual
annuity business is growing at 136% over the same period last year. Total
annuity and pension underwritten by the Company is Rs.32.8 billion registering
a growth of 7% over the half year ended September 30, 2021. Group Fund
Management business is at Rs.31.1 billion with a growth of 39%.
On our distribution partners with a strength of more than 54,000 CIFs, SBI and
RRB Bancassurance business contributes 67% and grew by 38% in Individual
New business premium. And on
Individual APE basis
it stands at
Rs.41.3 billion with the growth of 24.5%. Agency, our other major channel
registered a new business premium growth of 24% and contributes 18%. In
new business premium, agency channel individually APE stands at 17.1 billion,
with a growth of 12.5%. As on 30 September 2022, the total number of agents
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SBI Life Insurance Company Limited October 21, 2022
stands at 1,78,357. During the half year, the Company added nearly a net of
32,300 agents.
During the half year, other channels grew by 52%, which includes direct,
corporate agents, brokers, online and web aggregators and 45% in Individual
APE. Protection new business premium through other channels registered a
growth of 38%. Partnerships like Indian Bank, UCO Bank, South Indian Bank,
Punjab & Sind Bank and Yes Bank registered a growth of 62%. These
partnerships have started contributing 3% of the Individual new business
premium.
For profitability, the Company’s PAT for the half year ended 30th September
2022 stands at Rs.6.4 billion with 36% growth Y-o-Y. Our solvency remain
strong at 219% as on 30 September 2022. Value of new business is at Rs.21.2
billion with growth of 53% Y-o-Y against Rs.13.8 billion in the corresponding
period last year. VNB margin is at 31% vis-à-vis 24.7% in H1 FY22, with an
improvement of 630 basis points. We have aligned the value of new business
and VNB margin for half year ended 30th September 2021 in-line with 30th
March 2022 disclosures. Growth in VNB margins fueled by change in product
mix with predominantly non-PAR segment has contributed and of course the
business volume. With our growth targets and the product mix shift we expect
to maintain a healthy VNB and VNB growth rates.
Coming to operational efficiency, OEPX ratio reduced to 5.6% for the H1 FY23
from 5.8% for a similar period last year, our total cost ratio stands at 10.2% for
the first half compared to 9.5% for the last year, same period. With respect to
persistency of Individual regular premium and limited premium paying policy,
13-month persistency stands at 85.2%. The Company has registered a
significant improvement in 49th month and 61st month persistency by 276 basis
points and 363 basis points respectively. We have witnessed improvement in
persistency ratios across all the cohort. As mentioned in my opening remarks,
assets under management standards at Rs.2.8 trillion as of September 30,
2022, having grown 16% as compared to September 30, 2021. The Company
continues efficient use of technology for simplification of process. 99% of the
Individual proposals are being submitted digitally, 43% of Individual proposals
are processed through automated underwriting.
To conclude, we continuously endeavor to maintain our leadership position and
continue to further increase our market share by offering innovative products
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SBI Life Insurance Company Limited October 21, 2022
that meets the evolving needs of our customers. With a widespread robust
distribution network complemented by digital technology, our innovation
strength and above all, our people power, we are well placed to make the most
of the abundant growth opportunities offered in India’s under penetrated
insurance sector. We will continue to leverage existing partnerships and
explore new partners and launch new products to meet customers needs.
Thank you very much for a patient listening and we are now happy to take any
questions that you may have.
Moderator:
Thank you very much. The first question is from the line of Swarnabha
Mukherjee from B&K securities. Please go ahead
Swarnabha Mukherjee: I have couple of questions. First one, I would like to have your comments on
how do you see growth panning out in the second half, given that you have
focus on diversification now and what is the expectation on ULIP now as it is
slightly lower proportion of the mix than it used to be earlier. Given that, in Ulip
generally the average ticket size will be higher than your rest of the product
segment, correct me if I’m wrong in case that is not correct. So, how do we see
growth panning out, APE going ahead for the second half that will be my first
question. Second is on the margin side, so this particular quarter sequentially
there has been an increase in contribution for ULIPs. And that has been the
major change in the product mix along with non-PAR contribution also going
down slightly. So, despite that focusing on expansion of the margin, just
wanted your thoughts on how to repump into this. Again a function of the cost
ratios being lowered this quarter, how should I look into this. And what is the
operating assumption changes that have been shared in the VNB if you can
throw some light on that, those are my question sir.
Mahesh Kumar Sharma: If you are looking at growth for the second half, our second half has always
been very, very strong. So, if you see historically, Q3 and Q4 are extremely
strong for SBI Life and we don’t imagine that anything that should actually
change all that. So our own projections are based on our historical trend of Q3,
Q4 being the strongest quarters for us. So we look forward to a good robust
growth there. ULIP have been maintaining earlier also.
Swarnabha Mukherjee: Yes, sir please go ahead, I just wanted if you could quantify what would be
our growth guidance for the year at least.
Page 5 of 22
Mahesh Kumar Sharma: So, I have already said earlier that we would like to grow at 20% to 25%. And
SBI Life Insurance Company Limited October 21, 2022
that remains, and we are working towards that directionally we are going right.
And like I said, Q3, Q4 being strong quarters for us, we are very confident that
we’ll be able to achieve our projections. ULIP, I have said earlier also in, I think
I remember in all my earlier calls I have said this, that ULIP growth will be there,
we see a lot of traction already happening for demand for ULIP, and ULIP will
also continue to grow. Obviously, the non-PAR product that we have launched
was a super hit with our customers and as a result of that, it appears as if the
focus is slightly off ULIP, but ULIP will continue to grow because it’s a very, the
products that we have are very customer friendly products. You will also
recollect that I just shared about a new product that we have launched Retire
Smart Plus and that’s also ULIP linked product and that is also expected to do
very well going forward. So, the growth and the whole idea about ticket sizes
and all you are right, the ticket sizes of non-ULIP products may be slightly
lower. But then our whole idea is that ULIP will also continue to grow according
to its usual pace, that we grow with at least that is the minimum that we would
expect it to grow. And therefore, we don’t see any major reduction in ticket
sizes or in our ability to meet our targets.
Last question about the VNB margins, you were asking about margin how
come the margins continue to be robust, even though you said that non-PAR
has gone down or something like that no such thing has happened, non-PAR
has grown.
Swarnabha Mukherjee: Non-PAR, I was pointing towards the mix change, so non-PAR sharing.
Company Speaker:
Yes, but if the volume grows obviously that thing is going to be there, the
contribution is going to be there. So, the volume has grown overall so if you
see the growth, non-PAR has grown in this quarter.
Company Speaker: Also, just to add what our MD sir has mentioned, that you may see some slight
reduction in this quarter, a quarter in non-PAR thing but within a non-PAR
saving it also depends on the combination because you have several non-PAR
products which having the higher margin, even the new product that last year
we have launched they have a different option and each option has a different
margin. So, there is a shift happening on that part so would optimize those
margin within non-PAR and also in case of annuity we have different annuity
on individual platform, which we launched subsequently and that is also
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SBI Life Insurance Company Limited October 21, 2022
helping us to enhance our margin. So, if you see this does contribute, and help
us to maintain the margin that at current level.
Management:
So, just to clarify the product mix change is only 2% compared to the other
product mix has moved from non-PAR to ULIP only by 2% in this quarter, so
it’s not very material change. And Prithesh has answered the remaining parts.
Swarnabha Mukherjee: Yes, sure that’s very helpful. Just a follow up on the growth side sir, the growth
numbers guidance that you gave, is that on APE basis or NBP basis?
Mahesh Kumar Sharma: You can take it on APE basis.
Moderator:
Thank you. The next question is from the line of Deepika Mundra from JP
Morgan. Please go ahead.
Deepika Mundra:
Sir, just I believe that on the VNB side on the base number there has been
some restatement right for 1H 22?
Mahesh Kumar Sharma: Correct. What we have done is, whatever we had projected in March 22.
That same methodology we have used on September 21, so you will remember
that we had a, we were stating on a different basis, and we changed the
methodology in March 22 and so to compare the September 22 figures, we
have done the same thing with September 21 and come up with these figures.
So, 24.7% that you are seeing is as per the new methodology.
Deepika Mundra:
Right. So, could you help us with this that breakup for June 21 and September
21 or if you have it handy?
Mahesh Kumar Sharma: Breakup of what?
Deepika Mundra:
Sorry, the second quarter number for VNB margin, which equates to the 31.5
in another same methodology.
Mahesh Kumar Sharma: We can calculate and give it to you, but I don’t think we have it, I don’t have
it at this moment. Prithesh will answer.
Company Speaker: So, see earlier what MD sir mentioned that earlier we need to show the base
number and then you have to give some sensitivity and effective price of things
that we are model subsequently in the month of March and model was
reviewed by TW at that point time. So, what we did that, just to be comparable
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SBI Life Insurance Company Limited October 21, 2022
number we have rebased those numbers and that is the reason those numbers
become 24.7 and hence we are comparing our VNB margin growth from 24.7
to 31%. Now if you look into June as well, June Q1 also we have rebased same
approach. So, while June opening number was 21.2 and base we have
reinstated to 23.7 and closing numbers are 2022 was 30.4. So, if you want to
compare the comparative number by June 21 the rebase number by 23.7 and
September 21 it is 24.7.
Deepika Mundra:
Okay, sir very clear. Sir this question on the EV sensitivity, it has gone up to
4% in the first half of versus 1.8 which was in FY22 any clarification on that,
what is driving the higher sensitivity in EV?
Company Speaker: So, this is basically on the base effects. So, if you see the March, if you see
the EV from the March to September has gone up significantly and when you
do the sensitivity from current level base has changed and result you see
higher sensitivity coming from the interest rate side.
Deepika Mundra:
Sir sorry, would you mind elaborating a little bit on that?
Mahesh Kumar Sharma: So, what happens when you the yield is on 31st March was lower and when
you do the sensitivity for 1% up, you do the sensitivity from that level. What
happened from the March to September the yield has gone up and if you look
into the shorter duration, yield has gone up more than 100 basis points and as
a result there would be MTM losses coming from as compared to the March
2022. And that will be become your base and when you do sensitivity, you start
with a lower MTM base. As a result, you’ll see the base number will change.
The major contribution coming from those funds included particularly the
shareholder Fund, where there is no corresponding liability. So, while other
LOB has a corresponding liabilities so it will get offset on that basis. In
shareholder funds there is no subsequent liability so all MTM will impact your
sensitivity. Subsequently, if you also look into this discounting because EVs
are run out of business of future and initial year your base has increased. So,
when you, it is not linear impact on the inforce business or EV. So, when you
go and start looking with the higher number the impact will be different. And
that’s the reason you see higher sensitivity is coming out.
Moderator:
Thank you. The next question is from the line of Avinash Singh from Emkay
Global. Please go ahead.
Page 8 of 22
Avinash Singh:
So, the first question, of course numbers are too good, but in terms of
SBI Life Insurance Company Limited October 21, 2022
improvement of course, you have hired a good amount of agency workforce
over the last one, two years. Now, at this juncture, what kind of productivity
improvement, how do you see the growth across agency channel comparing
vis-à-vis banks that of course has been firing. So, what are your sort of plans
around agency and how do you see this performance improving, that’s one.
And second within Banca, ex-SBI what would be the contribution because
some of the public sector banks, we are already almost with them for two, three
years now. And they have of course a larger account. So, what is overall ex-
SBI contribution in the Banca, these are the two questions. Thank you.
Management:
So, agency, you are right we have recruited so what has happened is that in
the COVID basically there were a lot of agents who were not able to perform,
and we are not actually removed any agents from our rosters in the last, last
year only we started that process once again to rationalize the number so, but
what we have done is, we are going all out to get more and more agents and
to increase the agency business. So, as you can see we have the biggest
agency in the private sector by long margin, and our productivity, per agent
productivity is two and a half lakhs, I don’t think anybody else has got anything
near that. And this is what we would like to grow. And it can go higher also,
there’s already been a growth of about 6%, 7% in productivity. But there is a
lot of scope there and plus the numbers, if you see the net number have gone
up by 32,000 and this is not my target, we are targeting a much higher number.
So, once these agents in the same proportion start getting productive. I’m sure
agency will contribute much more in the future.
The other question regarding the non-SBI Banca, so I can say that right now
we have got 3% of the business comes from these banks. And our idea is that
this should go way up, because if you look at the way SBI has grown, these
public sector banks partnerships that we have if they can only, even take that
same trajectory, the growth is going to be huge but having said that, you will
notice that these relationships have grown by much bigger amounts, so almost
63% growth across the other partners. So, that’s something which we have
already achieved.
Moderator:
Thank you. The next question is from the line of Neeraj Toshniwal from UBS
India. Please go ahead.
Page 9 of 22
Neeraj Toshniwal:
Yes, I wanted to understand our outlook on last quarter we spoke about that
SBI Life Insurance Company Limited October 21, 2022
we’ll be looking for passing on some benefits in terms of yield, over the course
of time so where are we and how much would if any at all effect on our margin
expansion. That is the first question, and second is on the Bima Sugam wanted
to know that, that we are not too active on third party platform but would there
be any change of strategy with the opening of this online exchange by the
regulator?
Mahesh Kumar Sharma: Yes, so see outlook on interest rates it’s a, basically a thing that we keep
calibrating. Now if you look at the movement of interest rates, you really don’t
know whether there are going to be any more interest rate hikes. So, this is
something which we are looking very closely and the product itself has got a
very good demand that we have the non-PAR guaranteed, the guarantee that
we are offering is finding very good uptake. Right now we are evaluating so
we’ll see how it goes. Obviously if I increase guarantee rates, the margin is
going to go down by that much amount. There is no way you can increase the
interest rates paid to the customer and increase the margin. So, that is not
happening, but having it will be, we will keep close look on the interest rate
movements and decide whether we want to do any such thing, obviously the
customer is king and if the customer will buy only if there is a higher guarantee
then obviously we will re-price and we will give a better guarantee there.
Bima Sugam is a good initiative by the regulator, it is going in the right direction
with that kind of a thing we’ll have to see what the contours of the platform are
going to look like. And what kind of business can happen out there. But prima
facie it’s a very good idea and we were not on these earlier platform, because
they were very expensive to be on, frankly speaking. So, I don’t think it has got
anything to do with our reluctance to be on a public platform. But we don’t like
to be on fixed platforms. So, platform which are fixed by somebody else, so
therefore we were reluctant to be on other platforms. But Bima Sugam coming
from the regulator and having all the right credentials, I don’t think we will have
any hesitation in going all out on that platform.
Moderator:
Thank you. The next question is from the line of Anirudh Shetty from Solidarity.
Please go ahead.
Anirudh Shetty:
My first question was on our non-PAR book it’s grown quite well. I just wanted
to get a sense of you see enough availability of hedging instruments to keep
growing this book at the pace that you all would look like to desire. And also,
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SBI Life Insurance Company Limited October 21, 2022
typically what percentage of this book is hedged for us and also, could you give
a sense of what is the average tenure for this book, like how much would be
different and how much is immediate?
Mahesh Kumar Sharma: So, the availability of hedging obviously we would like to hedge any kind of
such a guarantee product, we can’t go ahead without hedging unless you have
a crystal ball and you know exactly how the interest rates are going to behave.
So, failing to do that, we would like to hedge and we will continue to hedge so
long as the availability is there. So, right now we don’t see any problem with
the availability, and we are able to hedge to the extent that we want to cover
and I wouldn’t like to give any percentage out here, it’s something which we do
at our end, but suffice to say that we are well hedged to take care of the
uncertainties of the nature of the product it’s a long term premium paying
product. So, it goes from seven to 10 years, and therefore we are properly
hedged there and we would like to continue to be hedged there and right now
we are able to get what we want.
Anirudh Shetty:
Got it. And sir there’s a lot of opportunity to grow within the SBI branch network,
can you just give us a sense of what is the share of branches that are activated,
what is the long term number that we can kind of get to add and.
Mahesh Kumar Sharma: Almost all branches of SBI are generally active. So, maybe it may vary from
month-to-month but on an average all the branches of SBI would be active with
some minimum number of policies being sold. So, that is something which
contributes to our growth in SBI, and that has been very steady if you can see
over the past.
Management:
And see our number are just under 40 lakhs per branch is what we have
achieved and which is lower number than some of our leading private
competitors, we hope to bridge that gap over years.
Anirudh Shetty:
So, that was very helpful, what do you think is the right this productivity of 40
lakhs how do you see that trending over time, where do you think what is a
more healthy number?
Mahesh Kumar Sharma: It can go up, see what happens is in India it is not a question of the availability
of people to who need insurance, it is a limit of the people to understand that
they need to buy insurance so, you keep talking to people and like any sale,
you talk to 100 people, you get two, three sales. So, in insurance it is probably
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SBI Life Insurance Company Limited October 21, 2022
on the lower side there. So, you have to talk to a lot of people, it is not a very
easy conversation to have. So, when you start the conversation saying that,
suppose you die tomorrow, who will take care of your family. It’s not a very
easy conversation to start. So, that is why insurance business in India is taking
a little while to actually reach that penetration level, which is there in many
advanced countries. But having said that, there’s huge scope. So, there’s a lot
of scope and if you ask me, I will tell you the global figures, overall figures that
you see there is a 82% protection gap in India. So, the amount of protection
that Indians need overall, only 18% of that is fulfilled. So, you know the kind of
potential that exists out there. And that’s true of SBI customers also.
Anirudh Shetty:
Absolutely sir. And one final question, typically at these SBI branches how
many SBI Life employees would be stationed over there as a rule of thumb?
Mahesh Kumar Sharma: So, I would like to say, but every branch should have one person who sells,
who should typically be able to sell insurance.
Management:
So, what happens is, we have support given to each and every branch of SBI.
And unlike other players, we have multiple bank branches being handled by
one BDM, of course there are some
Mahesh Kumar Sharma: No, not our employees he is asking about SBI employee. You are asking
about SBI employees?
Anirudh Shetty:
No sir SBI Life employees.
Mahesh Kumar Sharma: No, sorry I was talk about SBI employees, typically there should be one per
branch at least that is the minimum that we need. And in bigger branches, there
would be more, our own employees we have a very different kind of structure.
So, there would be about one employee per 10 on an average, per 10 branches
on an average, so that can change depending on the distance and all for
example Northeast, I can’t say that I will have 10 branches covered by one
person, because the branches may themselves be 100, 200 kilometers away.
Anirudh Shetty:
Do you see the need to add more because as you mentioned it’s a touch,
protection is a tough product to sell. So, do you think….
Mahesh Kumar Sharma: Our people not, see the whole idea of our model and why our model is
cheaper is because we are following the regulatory instructions of the bank
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SBI Life Insurance Company Limited October 21, 2022
people doing the sale and our people are trading, hand holding them, helping
them with the sale process. So, that is the model that we are following and that
is why we are the lowest cost if I were to put one person per branch to sell from
my side that I would be beating, I will defeating the requirements of regulation
also and at the same time it would be a very, very high cost model.
Moderator:
Thank you. The next question is from the line of the Dipanjan Ghosh from Citi.
Please go ahead.
Dipanjan Ghosh:
Two questions from my side. One is you alluded to the change in product mix
within the non-PAR segment which kind of supported the margins during the
quarter. So, do you like to throw some more color into the mix of the products
in terms of policy term or customer age or tenure. And second, on credit life
last year you have been guiding that you’re focused on increasing the
attachment rates at SBIs counter. So, what is the kind of progress that you see
out there on that particular segment?
Mahesh Kumar Sharma: So, see the non-PAR, basically what Prithesh was trying to say is that there
are products and therefore, you can’t really put a figure from outside on what
it is, we do the exact calculations and then we arrive at the margin. So, there
are different products, there are different tenure for example even the non-PAR
guarantee product it would have a tenure, 10P product and there would be an
8P product, then there would be a 9P product or a 7P product. So, every one
of these will be having different margins. So, even a right shift in that demand
would change the margin and really speaking. So, it’s a very big deal what
Abhijit said very clearly there is only a shift of 2% in the overall mix towards
ULIP, and on top of that their credit life has grown very robustly. And also if
you look at, so that can be explained by the inter product changes in margin,
etc it would be very difficult. We would have to sit with an Excel sheet and talk
about how many of each of those products got sold and all that. We know that
but I don’t think we can, we need to this on the call but the other thing is Credit
Life like to say, yes we would like to increase the attachment rates. And we
have increased the attachment rate from 47% to 48% in the similar period, last
year we ended with 50% attachment rate. And this year, we would want to take
it much higher. SBI has also taken higher targets because they feel that this is
a very good product for their customers to protect themselves and their
families. And in fact, the product itself is called a Smart Family Protect. So, this
is something which we will try to increase the attachments rates.
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SBI Life Insurance Company Limited October 21, 2022
Moderator:
Thank you. The next question is from the line of Sanketh Godha from Spark
Capital. Please go ahead.
Sanketh Godha:
Sir the EBITDA of higher base impacted the growth in second quarter. And we
all also have a higher base problem in third quarter of FY22. So, what makes
you to tell you confidently that the growth of 20% or 25% can be achieved for
full year, because we have a decline in the second quarter and same is
possible in third. Even if we grow by 20%, or in the fourth quarter still the
guidance of 20%, 25% seems to be tough to achieve. So, if you can give a little
more color on that thing it will be useful sir.
Mahesh Kumar Sharma: Yes, absolutely you got a very good question. But, what you probably have
ignored is that there was a peculiar circumstance in the last year in which you
had April, May being totally washed out. So, that pent up demand spilled over
into part of it, of course everything doesn’t get fulfilled because people forget,
people don’t buy, people don’t fulfill, but part of it gets fulfilled in the next
quarter. So, that was the spike that I was talking about and not the normal
spike. Normally, we have a seasonality which we take for the first quarter, the
second quarter, the third quarter and fourth quarter. The third and fourth
quarter generally we get the highest seasonality because the numbers, the
demand and the sale everything happens in the third and fourth quarters, in
fact whole of India works on the basis of a busy second half rather than the
first half. So, the Kharif season is always less busy than the Rabi season. So,
that is where all the money comes, that is where all the harvesting takes place,
that is where all the things happen. And as a result of that, the money flow, the
demand and especially the year end demand, by before the year end people
want to do a lot of things within their budget. So, as a result, naturally during
the last two quarters, there is always more activity and last year also having
it’s not a question of the base, the base is only to explain the lack of, happening
lack of growth in the second quarter. If you look at the numbers, they are very
robust numbers in the second quarter also, only thing is when you compare it
with a quarter of only last year, there is an issue out there where it is not
showing a growth, but if you look at sequentially, it is a very good growth. So,
going forward every quarter three and quarter four has been stronger than
quarter two, always in the past for SBI Life. So, that is where our confidence
comes.
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Sanketh Godha:
Got it sir, and last quarter Q1 quarter you mentioned that income plans of non-
SBI Life Insurance Company Limited October 21, 2022
PAR in Platina contributed almost 30% of the total business, if you can put a
color how much it contributes either for only for second quarter. And can I say
when you said that the product within the product, product within the non-PAR
design helps in margin expansion. So, is it higher contribution of income plan
or higher spreads you made in the current quarter contributed to the margin
expansion?
Management:
So, non-PAR, Prithesh go ahead.
Prithesh Chaubey:
So, are absolutely right that non-PAR income plan is higher margin and has
help us to enhance the margin as well. And you see that, depending on the
premium paying term, we have the seven, eight and 10, so 10 has higher
margin that’s really help us, now we have other non-PAR products which is
endowment, and if you compared to the endowment versus the income plan.
Their income has high demand and this year, this quarter particularly Q2 while
we see this slight decline in the non-PAR proportion overall, the proportion has
increased more towards the Platina Plus with the income plan and that’s really
help us to give this margin.
Sanketh Godha:
Sir what that number sir, last quarter it was 30% if you have that number
handy?
Management:
So, 22 to 25 somewhere around.
Management:
So, if you see this quarter it is around 25%.
Sanketh Godha:
Okay, got it sir. And the another question which I had was sir, we started VNB
based on the revised methodology which you applied for FY22 full year
numbers. Can you restate that which you reported in 1H FY22 not based on
the methodology we use in FY23, because if I use that number of H1 FY22
what you have reported and look at EV growth it looks muted 10% so naturally
the growth should be better than the 10 because assumptions may probably
not appropriately in FY22 on that. So, sir if you can recheck that number would
be very useful sir and, related to it wanted to understand how much EV got
impacted in 1H FY23 because of MTM.
Mahesh Kumar Sharma: So, see we have not published our AOM from a EV and since we have not
published our AOIM work, we have not restated number publicly, we’re not
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SBI Life Insurance Company Limited October 21, 2022
disclosing those numbers. End of the year for the financial year we will go and
do that so you get a right comparison from the March and in next March
because March number are already under new base. So, we have not done
that so we don’t want to force those number at this point in time.
Sanketh Godha:
Okay.
Mahesh Kumar Sharma: And same question on your MTM as well, because again this is economic
variance coming from that. So, since we have not publicly disclosed those
numbers, we do not want to comment on MTM, but the moment you will see
this, our MTM losses would be similar to the sensitivity that we saw in 31st
March not different than that. Second point is, if you look into the EV growth
which you might be seeing as a muted, the first six months of the year EV
growth of 10% is quite significant, because most of the business will keep
improving in the second half. So, EV growth will be much higher every….Third
point though we have not given the AUM, I can confirm that in operating
variance all the aspects including the mortality, expenses, and persistency we
have a very positive variance, we are expecting even better, because we are
putting assumption as far as mortality is concern. And we have not diluted our
COVID provisioning as on 31st March 2022, we still have that carry forward.
So, by end of year we see more operating variance and you might be seeing
more of robust ROAV. But at that point in time, we have to wait till our year end
March 23 we will do that.
Sanketh Godha:
Got it sir. And the last one from my side, see we are seeing improvement in
the cost ratio, we are seeing improvement in the persistency. Our VNB which
is 31% is for first half is still based on last year cost and persistency we have
not touched assumptions yet. Sir, even just wanted to understand that lever
itself is still available for you to report a margin even better than what you had
reported in 1H sir?
Company Speaker: See, we can expect that margin would be better in same product mix, but if you
see the product which will be changing over the next six months. So, while
margin will be more or less similar I do see there will be some investment
coming from but, I don’t see any risk downside margin from the current level.
I’m currently it is not exactly 31%, we are looking for some range of 29%, 28%,
to 30%, 31% range. But definitely in the March sign we expect.
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Mahesh Kumar Sharma: Yes. So, basically, this is largely conjecture because like I keep saying and
SBI Life Insurance Company Limited October 21, 2022
I’ve said this till I will am also bored of saying it that we are basically selling
products which that customer wants. And that doesn’t change, I’m not pushing
anything down anybody’s throat because it has got higher margins. Obviously
the margin will depend a lot on the demand that is there, but we will continue
to give meaningful products to our customers and they will find it useful and as
a result we will grow, we will grow our VNB, we will grow our EV. And margin,
of course, will be a high healthy margin.
Moderator:
Thank you. The next question is from the line of Madhukar Ladha from Elara
Capital. Please go ahead.
Madhukar Ladha:
So, most of my questions have been answered just, I wanted your comments
on the new draft, regulations on commission and expensive of management.
Our expenses of management are significantly lower than that 70% limit, I
believe that will go to 50% to 55%. So, what I wanted to understand is, how
can this impact us and could it lead to a scenario where our largest distribution
partner and parent, then demands for higher commission payouts, your sort of
thoughts.
Mahesh Kumar Sharma: I cannot speak for our distribution partners. But the whole idea is that a
business is good, as long as it is sustainable. And so long as it is, it’s like
nobody would want to kill the golden goose. So, if you’re doing good business
and you’re getting good results out of it, good revenue out of it, I don’t think
you will want to kill the business by saying that you give me everything and
leave nothing for growth. So, I don’t envisage such a situation first thing.
Secondly, what is being attempted is, that there are a lot of companies which
have been constrained because of these regulations. And they would like to
have more freedom in the way they spend the expenses of management. So,
that is where the regulator is looking at giving some higher degree of freedom,
but I’m very, very confident that the regulator will still be looking very carefully
at how it is being spent and how it is being managed. So, that there are no
wrong practices coming in. So, I’m very confident that the regulator would think
about all these things and there would be a good framework for that. Having
said that, we have never been challenged in terms of either UM or commission
payments so we don’t think it is going to affect us directly. But, like you were
saying the scenario that you were thinking about, any such scenario looks like
coming up then you see what we need to do.
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SBI Life Insurance Company Limited October 21, 2022
Madhukar Ladha:
Sir, while SBI may not take all of it as commission, but there can definitely be
a scenario where there is some sort of payout increase, have there been any
discussions, anything on that?
Mahesh Kumar Sharma: This is all very conjectural, because this is very, very conjectural so, I wouldn’t
like to comment on this, if there is something concrete that comes up then we
will discuss this.
Moderator:
Thank you. The next question is from the line of Nitin Aggarwal from Motilal
Oswal. Please go ahead.
Nitin Aggarwal:
I have two questions on the annuity product, so first like what is really driving
such strong market share gain in this business, like I want to understand how
important pricing is behind the growth of this product, like you have always said
that ROP product the customers are not so price sensitive, and they want
money back in return. So, how competitive this product is when it comes to
pricing and if you can also provide some color on distribution mix in respect to
this specific line of business?
Mahesh Kumar Sharma: So, annuity product it is something which is very transparent in the sense
that everybody, a person can go and search for annuity products and he will
know what kind of returns he will get. So, if I’m able to sell a product it has to
be competitive. So, that’s what we have, we have a very competitive product
and we are giving value for money and that’s why it’s selling.
Management:
And all channels are selling, both saving and annuity products.
Mahesh Kumar Sharma: Yes, all channels are selling.
Nitin Aggarwal:
Okay. And sir how do you see the growth going further in this product as
interest rate rises and banks are also increasing deposit rates which can go up
sharply?
Mahesh Kumar Sharma: So, see I don’t think there is a direct connection between deposit rates and
these products, because these products are totally different in structure.
Deposit you will get for three years or maximum 10 years, today you can get a
deposit for 10 years and you can lock in a rate of interest for 10 years back. In
their annuity product you’re getting for life. So, that flavor is totally different, in
the deposit you get the money back and you have to deploy it again. So, there
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SBI Life Insurance Company Limited October 21, 2022
are two things out here, one is liquidity that you have the money, but again you
will have to deploy it, and there is no guarantee what rate you will get it in. So,
if it is a Euro, if you see in the last 30 years, the rates of interest have gone
down to zero and minus also. So, if somebody imagines that after 10 years we
will put it in FD, and then he will put it again at a better rate or something like
that after 10 years, he will not get interest at all, you’ll have to probably pay
interest to do that, in the annuity product I cannot afford to do that, I have to
give him whatever I have committed today, I have to keep paying him till
somebody certifies that he is no longer there. So, there is a huge difference I
don’t think that this is driven only by interest rates. It is driven by the returns
that are generated and the guarantee. So, you are able to give a guarantee
that 50 years down the line if you’re alive, I will give you this much amount.
That is what is driving that business and it’s a totally different demand and
supply thing to fix deposits or any other investment, you can compare it
probably with a 40 year bond or something but that’s about it.
Management:
We do see a lot of growth in this annuity business and particularly we see
the….
Mahesh Kumar Sharma: Yes, because most of the India is not covered….
Management:
It is maturing so we’ll get a lot of NPS is converted to annuity products and
retirement is happening for the people will buy.
Management:
Most people don’t have any pension or protection.
Management:
In terms of demography, so this is on a small base, but the fastest growing
demography in India. People above 50, 60 years age.
Moderator:
Thank you. The next question is from the line of Anshuman Deb from ICICI
Securities. Please go ahead.
Ansuman Deb:
I have two questions, one is that you mentioned you had a tie up with India
Post Payment Bank, and so has been the case for another leading private life
insurers. I just wanted to understand the competitive intensity around, the tier
two distribution or tier two kind of a places, has it increased. And, how
comfortable is SBI sharing an open architecture with a leading private life
insurer that is a question number one. And the question number two is, our
sensitivity have increased, sensitivity interest rates so in terms of strategy do
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SBI Life Insurance Company Limited October 21, 2022
we have a strategy to kind of lower it down, or by changing the what you
mentioned about products being decided by the consumer, but changing the
product mix or changing other things to keep a control on the sensitivity to
interest rates. These are the two questions.
Mahesh Kumar Sharma: So, see when you’re talking about open architecture and with private insurer
you’re already in that kind of a situation with some of the banks. So, we are
already in competition with other insurers in three public sector banks and two
private sector banks, apart from this IPBP relationship that we have just
started. So, there is no question about that we are the leading insurer in all
these relationships, so we have the leading share in all these relationships so
I don’t think we are bothered with open architecture, per se. We got a very
strong brand name, we have got very strong products, and they’ve got very
good servicing and we have got a very good Company. So, I don’t think we are
bothered about that too much and of course we will keep pace with whatever
developments are there.
So, coming to India Post Payment Bank Limited, basically the idea is that these
are, this would expand our reach into the hinterland, into the deep rural areas,
into the unbanked areas or underserved areas. So, State Bank is one such
medium. So, we have about 23,000 branches then we have about 9000
branches of RRBs and so, this is another attempt on our site to cover all those
black dark spots that we would like to think, where we don’t have our complete
presence in rural semi urban areas. And this would help us to do that and also
in the urban areas also, then we could probably expand this whole thing. The
idea is that there are more than 600 branches of 635 plus branches of IPBP,
which are then connected to all the post offices. So, we are trying to have a
model which we can then scale up and this is not going to happen overnight,
we’ll work on it. But we think it’s a very exciting opportunity. And for a country
like ours, we have two purposes out here one is of course, to grow the
Company and to make a sustainable profits and all that, increase the customer
base but very importantly to develop insurance in India, we would like to be
known as a Company that actually grew insurance in India. So, that is
something which we will take a lot of pride in. If we are able to achieve this
objective of giving more and more Indians insurance cover.
Management:
And sensitivity is just to aid that we explained earlier as well. This is a shift on
account of the base effect. And particularly the shift in the is not parallel shift
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SBI Life Insurance Company Limited October 21, 2022
because it has gone up on sizable. And something happened on account FRA
of writing guarantee product. Having said that, we should not be worried about
the sensitivity by interest rate because this investment that we are making, we
are making by held to maturity and in case interest will go subsequently, we
will able to make more money on the side as far as the EV growth is concerned.
So, there is no strategy that we are going to change in the performance,
visually we will be able to manage that.
Mahesh Kumar Sharma: But you have said it yourself very clearly, that the consumer is at the center
and therefore there is no attempt to fix the whole product mix what we would
probably do is we’ll try to introduce more products, which will find a better
acceptability with the customer to try to influence their buying decision, but not
the other way around trying to push our existing product where they are not
suitable. So, firstly we find what is suitable for the customer, what he needs
and then we’ll give it to him. And if his needs are slightly different than we will
develop a product and give it to him.
Ansuman Deb:
I was just coming from the perspective that you also said right, for example in
the first half. If I were to calculate the economic variance, you said you can use
the sensitivity to calculate it.
Mahesh Kumar Sharma: Yes, absolutely.
Ansuman Deb:
So, what I’m trying to say is that let’s say I am projecting a two-year EV and
I’m assuming or let’s say the hypothetical year 200 basis point increase in
interest rates, then your sensitivity is the highest. So, I’m trying to say that on
that perspective as a business strategy we truly have a benchmark sensitivity
that it should not go above that or something like that.
Mahesh Kumar Sharma: But basically the sensitivity is a concern so basically you use it to free what
is likely, what could likely happen in the unlikeliest case, like for example the
sensitivity is done on say plus 2%, minus 2% and all that. And that is not
something which we are anticipating to happen in the next say one year or so.
But if it does happen, what happens so the 4% sensitivity out there is three
gauge maybe, higher than 2%. But it is still not something which will affect the
Company negatively in the long run.
Management:
See, there’s are two point we’d like to mention here. One is that our sensitivity
when 4% is similar to our other peers as well as the market. So, not very high
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SBI Life Insurance Company Limited October 21, 2022
sensitivity. Second point we need to look into that, if you look into our public
disclosure in the past, we have successfully able to reduce our sensitivity vis-
à-vis in last four to five year. This as we mentioned earlier, is the sensitivity at
this point of moment and that also reflects some of the movement in the yield
curve and how the same yield curve had changed. When anyone has to look
into the longer term, you can look into March or even give a longer period. I am
not going to change this strategy because six month we have not seen a lot of
things in fact some impact coming from the FRA. But if you see other side
because non-PAR saving were writing, we’re getting priority valuer. So, this
sensitivity is in our mind while framing our strategy in the product mix and other
though our first preference is to customer. At the same time, we always adopt
a long-term view in each and every places that we mentioned. And hence we
are not to worry about the start or movement in the case of sensitivity and
interest rate and that’s the reason I mentioned that we should not be more
worried about this recent particularly for the interest rate of scenario because
we are writing the product annuity with longer term and able to lock in this thing,
able to cope even the un-hedged book, we are able to reinvest our coupons
on a higher yield, ultimately it is going to help us in the economic positive
variance in future.
Moderator:
Thank you. Ladies and gentlemen this was the last question for today. I would
now like to hand the conference over to Mr. Mahesh Kumar Sharma for closing
comments.
Mahesh Kumar Sharma: Thank you very much everyone. For all the questions, the questions that we
get in the conference always keep us on our toes and it gives us an opportunity
to understand our Company even better than we ourselves could. So, thank
you very much once again, wish you all a very Happy Diwali and hope that
going forward we all keep ourselves insured and safe. Thank you.
Moderator:
Thank you. On behalf of SBI Life Insurance Company that concludes this
conference. Thank you for joining us and you may now disconnect your lines.
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