SBI Life's valuation quadruples to $4.5 bn

SBI Life insurance company has seen its valuation increase nearly four-fold in the last six months to $4.5 billion from $1.2 billion.

Speaking on the reasons that led to an increase in the company's valuation, U S Roy, MD and CEO of SBI Life, said, "We follow a very different business model which is becoming more visible. People are understanding our model (strong bancassurance model), how we made profits and so the relative perception of value has gone up. The valuation market has to mature to give a strong valuation."

Speaking about the holding company that SBI will be forming to hive its insurance and mutual fund businesses, Roy said that we are still discussing on how the holding company will be structured.

SBI life for the first quarter of FY08 has registered a profit of Rs 4.75 crore. SBI Life is so far the only life isnurance company among the 15 private players to be able to break even. The company in FY 06 booked net profit of Rs 2.02 crore and a net profit of Rs 3.88 crore in FY07.

On a question about listing of SBI Life, Roy said, "As per the insurance regulations, an insurance company has to list within 10 years of operations which is 2010 for us. However, as per the regulations, an insurance can list any time if it has been able to register profits for 3 continous years. So by registering a profit next year, we can list anytime from next year onwards."

SBI Life grew by 210 per cent in new business for FY07 and is targetting a growth of over 100 per cent for FY08.

"We believe in profitable growth. We want to sustain the growth of last year. We have a branch network of 14,000 (SBI and associate banks) which we have not fully tapped. Once we start roping our branch network....

SBI Life will be infusing Rs 400 crore for the rest of the year. Currently the company's capital base is Rs 1500 crore.

The agency force will be doubled to 50,000 agents from the present 25,000. For FY06-07, the company's total business premium was Rs 3,000 crore while the new business premium was Rs 2,500 crore.

The company has three channels. As on 31st March 2007, the agency channel contributed 45 per cent to the total premium, group corporate contributed 17 per cent and the remaining 38 per cent came from bancassurance. Ulips constituted 69 per cent of the total business. However, in Group business, 65 per cent was traditional products.

SBI Life will also be launching Group Credit Protection Products-The Dhanaraksha Plus products. These products will cover borrowers to the extent of the loan amount availed of, subject to a minimum of Rs 10,000 cover but no maximum cover limit.

One of the feature is the provision of reducing term cover to the borrowers of a variety of loans such as home loans, vehicle loans and personal loans through a group insurance policy with the lending institution.

SBI Life has partnership with several financial institutions for such products. The product range covers home loans, tractors, auto, two wheeler, personal, consumer durables and credit cards. During FY06-07, home loan protection products alone contributed to more than Rs 225 crore of new business premium income.