SBI Life Insurance is not likely to raise fresh capital from the market in the next three years to grow its business, according its MD & CEO Mahesh Kumar Sharma.
“As of now we don’t need to raise money. We have enough capital. Our solvency ratio is also very decent, which will allow us to grow for some more time to come. As of now, may be we can say that we don’t need capital for the next three years,” Sharma told FE.
At the end of the third quarter this fiscal, the insurer’s solvency ratio stood at 2.25 as against the regulatory requirement of 1.5. Net premium income for the quarter rose 6.35% year-on-year at Rs 19,170.80 crore compared with Rs 18,025.35 crore in the same period last fiscal. Value of new business (VNB) margin was at 29.6%, with an improvement of 478 basis points y-o-y over 24.8% in the third quarter of FY22.
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“Growth in VNB and VNB margin is driven by change in product mix, predominantly in non-par segment and business volume. With our growth targets and the product mix shift, we expect to maintain a healthy VNB growth rate,” Sharma said during an earnings call held on January 21.
Talking to FE, Sharma said changing product mix is a dynamic process for the company which depends on market and customer demands.
“Our product mix has been slightly fluid and that is because we are not determining what the customers should buy and trying to push it. But what we are seeing is gauging what the customers want and then trying to see we have a good proposition to offer,” the MD explained.
“We see what customers are looking for. One end you have Ulip products, where customers get market-linked returns, and on the other hand you have guaranteed products. And also you have products with predetermined returns. It is a question of what the market is liking today…there is a growing class of people who want the guarantee of what they will get and they don’t mind if it is slightly lower than what markets will deliver. But they want that guarantee,” he said, adding the company last year had seen a huge growth in guaranteed products.
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Asked about the likely impact of government’s proposal to tax income from high-ticket non-linked life insurance products, he said the Budget proposals will affect “portions of the business” and there is a bit of apprehension.
“Some insurers (to be hit) little more, while some insurers little less. But going forward there will be some kind of a rethink on people investing in insurance products. There is a bit of apprehension there…now a lot of people who are in the bracket who pay over Rs 5 lakh premium in a year, will be affected going forward. The only concern is that with this kind of treatment of tax, the returns for these people may be negative. So, then it becomes less attractive compared to some other investment avenues,” he pointed out.
In a stock exchange filing after the Budget announcement, SBI Life
“You cannot really assess the right kind of sense because we will have to see what will happen across the industry. The immediate hit is not that important. The important is that we will have to think creatively for how do we have the other kinds of products which will meet the needs of our customers in that bracket,” Sharma added.