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SBI Life Insurance - Q1FY21 Result Update - ICICI Securities

Posted On: 2020-07-21 23:19:43

Pace of premium accretion witnessed a revival sequentially though YoY it remained moderate. Recovery in equities and increase in yields led to robust investment gains partially offset by change in actuarial liability, led to higher than expected surplus and earnings. Premium growth witnessed a revival at ~14% YoY to Rs. 7588 crore, led by higher traction in renewal and single premium. Accretion in new business premium came a tad lower YoY at Rs. 3059 crore but was still better given the current scenario. Growth in renewal premium continued to remain healthy at ~30% YoY to Rs. 4584 crore, conservation ratio at 88%. Within NBP, traction in individual business remained moderate at Rs. 1260 crore in Q1FY21 vs. Rs. 1760 crore in Q1FY20, primarily led by a decline in unit linked products. Traction in protection business tapered at Rs. 290 crore vs. Rs. 440 crore in Q1FY20, with proportion of NBP mix declining to 10% vs. 12.5% in FY20.

Valuation & Outlook

Increase in customer appetite towards protection products amid Covid provides potential for long term business growth. Competitive pricing, focus on protection business, excellent operating efficiency remain key drivers. Steady persistency, strong banca partnership and focus on improving digital footprint is seen supporting growth and earnings. We expect business growth at ~16% CAGR and VNB margins at ~18% in FY21-22E. We continue to prefer businesses having lower balance sheet (unlike banks) and healthy fundamentals. We remain structurally positive on the stock. Hence, we maintain BUY on the stock with a revised target price of Rs. 1000/share (earlier Rs. 850) valuing the stock at 2.9x FY22E EV (~Rs. 34500 crore in FY22E).

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Shares of SBI Life Insurance Company Ltd was last trading in BSE at Rs.888.25 as compared to the previous close of Rs. 854.45. The total number of shares traded during the day was 139343 in over 6046 trades.

The stock hit an intraday high of Rs. 896 and intraday low of 844. The net turnover during the day was Rs. 121272216.

Source: Equity Bulls

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