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Strong performance, positive outlook

SBI Life Insurance Company Limited, incorporated in 2001, is a joint venture between State Bank of India and BNP Paribas. It provides individual and group insurance plans, including traditional and unit-linked plans. Its products cover life, health, annuity, pension, and variable insurance

• Gross written premium (GWP) grew 35.5% YoY to Rs. 11,349cr, mainly driven by 66.9% YoY growth in new business premium and 14.6% YoY rise in renewal premium

. • Value of new business (VNB) improved 2.3x YoY and VNB margin widened 670bps YoY owing to change in product mix.

• Resilient business model, wide distribution reach, trained workforce, technological innovation, and digitalisation auger well for the company’s performance. We remain positive on the stock and reiterate our BUY rating with a revised target price of Rs. 1,520 based on 2.7x FY24E EV.

Sustainable growth across premium accounts

GWP grew 35.5% YoY to Rs. 11,349cr in Q1FY23, largely owing to 66.9% YoY growth in new business premium to Rs. 5,590cr, while renewal premium rose 14.6% YoY to Rs. 5,759cr. The company maintained its leadership position in individual new business premium, with 86.4% YoY growth to Rs. 3,430cr. Also, protection new business premium increased 62.8% YoY to Rs. 700cr, aided by 53.8% YoY growth in individual protection business to Rs. 200cr and 66.7% YoY growth in group protection business to Rs 500cr. Annual Premium Equivalent (APE) product mix for par, non-par and ULIP stood at 6%, 47% and 47%, respectively. APE channel mix for bancassurance, agency and others was 63%, 26% and 11%, respectively.

Key highlights

• The company launched SBI Life-Smart Annuity Plus, an individual, non-linked, non-participating, general annuity product offering immediate and deferred annuity options, as well as joint life options.

• It has a strong solvency ratio of 2.21x (vs. 2.05x in Q4FY22), well above the mandated regulatory requirement of 1.50x. The 13th/ 61st month persistency ratio stood at 83.0%/ 51.0% in Q1FY23 (vs. 85.0%/ 51.1% in Q4FY22).

• Additional reserve of Rs. 289cr kept aside for the Covid-19 pandemic was well above the policy liabilities, based on IRDAI regulations

Outlook and valuation

Diverse distribution network with trained human capital, consistent technological improvements, and financial stability provides a robust base to ensure steady growth for the company with long-term consistent returns. The stock is currently trading at attractive valuations. Hence, we reiterate our BUY rating on the stock with a revised target price of Rs. 1,520 based on 2.7x FY24E EV.

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