SBI Life Insurance Company is likely to see 10 percent on-year growth in annual premium equivalent (APE) - a key measure of sales for a life insurer - in the October-December quarter, aided by life annuity products, said analysts. The strong APE growth, coupled with steady margins, may lift the value of new business (VNB) - the profitability metric - by 13 percent YoY during the fiscal third quarter.
India's third biggest life insurer is scheduled to announce Q3 results on January 25.
According to an average estimate of five brokerages, SBI Life's APE is expected to come in at Rs 5,963 crore in Q3FY24 as compared to Rs 5,430 crore in Q3FY23. APE essentially measures life insurer's new business value written during the quarter.
On the other hand, VNB is expected to be at Rs 1,702 crore in Q3FY24 as against Rs 1,150 crore in the year-ago period, according to the average estimates. VNB assesses present value of future profits associated with new business written during the quarter for a life insurer.
A healthy growth in SBI Life's VNB is also expected to help expand VNB margins by 84 basis points (bps) to 28.64 percent in Q3FY24, compared to 27.8 percent in Q3FY23.
Gross premium income is expected to grow two percent YoY in Q3FY24, said analysts at Motilal Oswal. The firm’s first year premium will likely fall eight percent YoY, renewal premium will grow seven percent YoY, and single premium will clock a whopping 35 percent YoY growth.
Some of the key factors to watch in the SBI Life's Q3 performance would be management’s commentary on product mix, outlook on VNB margin, and if there is any expected change in commissions payable to SBI.
Further, analysts at Kotak Institutional Equities said that clarity on proposed insurance regulatory development authority (IRDA) guidelines on surrender penalty caps would be a key watch out. "We need clarity on the final guidelines, estimated impact and the strategies to be adopted by life insurance companies thereon," they said.
The cap on surrender penalty will limit the charges imposed on policyholders after they voluntarily terminate an insurance policy before its maturity period. In this manner, a policyholder would receive a higher premium for the insurance they paid and surrender charges would be waived off. This, analysts believe, could take a toll on insurance companies margins.
In the October-December period, SBI Life shares surged over nine percent as compared to nine percent rise in the benchmark Sensex. On a yearly basis, the stock of this life insurer gained eight percent, underperforming Sensex, which jumped by 15 percent.
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