India’s SBI Life Insurance reported a 7% fall in second-quarter profit on Friday, hurt by higher commissions paid to boost sales and a drop in income from investments.
The insurer, backed by State Bank of India – the country’s largest lender – posted a net profit of 4.95 billion rupees ($56.3 million) for the quarter ended September 30.
Insurance demand has remained strong in India, bolstered by rising financial awareness. However, competition has also increased, resulting in insurers paying higher commissions to agents to drive sales of policies.
SBI Life’s expenses, which include operating costs and commissions paid, rose 28% to 27.59 billion rupees.
Its net premium income jumped 22.6% to 248.48 billion rupees, driven by a near 20% rise in premiums from old policies that were renewed.
Separately, its investment income for the half-year ended September 30, which includes the second quarter, dropped to 200.6 billion rupees from 396.3 billion rupees a year earlier.
Life insurers in India have been diversifying their product mix, targeting non-participating products to protect margins, as a slowdown in equity markets has dampened demand for market-linked insurance plans.
The benchmark Nifty 50 traded in a narrow range during the quarter and remained below record highs hit last year.
Business Highlights
Market-linked policies (ULIPs), which typically generate lower margins, accounted for 57% of SBI Life’s product mix as of September-end, down from 63% a year earlier, as the company focused more on higher-margin, non-participating products.
The value of new business (VNB) rose 14.5% to 16.6 billion rupees for the quarter, according to Reuters’ calculations, while the VNB margin improved to 27.8% from 26.8% a year ago.
Annualised premium equivalent (APE) sales, a key metric for new policy growth, climbed 10% to 59.5 billion rupees during the quarter.
