IGI Logo

Healthy premium growth: SBI Life’s Q1FY24 gross premium income (GWP) increased by 19% YoY to Rs 135.6bn driven by renewal premium (RP) growth of 28% YoY and new business premium (NBP) growth of 11% YoY despite strong previous year growth. Annualized premium equivalent (APE) growth was moderate at 4% YoY as individual rated premium (IRP) remained muted with growth of 3% YoY.

Growth in ULIP segment: The ULIP segment displayed healthy growth in Q1FY24 after the decline in the previous quarters. On APE basis, the segment increased by 17% YoY while on NBP basis it grew by 10% YoY. The management attributed ULIP growth to the strong return in the capital markets and its higher product returns. On the other hand, the non-par segment declined by 29% YoY on APE basis and 28% YoY on NBP basis. The management believes that non-par segment performance may remain muted in this FY and expects ULIPs demand to sustain.

Protection and annuity continue growth momentum: Protection plans continue to see healthy growth as the demand remains remained vigorous. The growth in protection plan was driven by both individual and growth plans. On APE basis, protection plan increased by 16% YoY while on NBP basis it was up by 13% YoY. Along with protection plans, the annuity p

Margins remained subdued: New business margin for the quarter declined by 160bps YoY to 28.8% which is attributed to the increasing demand of ULIPs. Traditionally, non-par segments have higher margin while products such as ULIPs and protection plan have lesser margins. On account of increasing demand for ULIPs and declining non-par segments the margins remained muted. The management expects margin to improve going ahead and expects margin of ~30% in FY24. Value of new business (VoNB) declined by 1% YoY as margins remained muted.

Strong partners in Banca channel: The bancassurance channel continued to be the main driver for policy sales for the insurance company. On APE basis, it contributed 65% of the total premium and out of which SBI contributes ~60% of the premium income. The company continues to have strong partners in SBI and other banks to reach out to the customers. However, the agency network premium declined by 3% YoY on APE basis and 5% on individual APE basis. The decline in agency network is due to the structural changes made by the company and expects to see its results in next few quarters.

Valuation: We remain positive on the private insurance company on the back of its stable top-line growth, increasing demand for products such as ULIPs, protection and annuity and growing profitability. We expect the company to continue its penetration in newer geographies and also increase its market share. We estimate APE/NBP/VNB to grow at a CAGR of 19%/21%/23% over FY23-25E. We maintain Buy rating and revise our target price upwards to Rs 1,644 valuing the company at 2.6x of its FY25E embedded value.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.religareonline.com/disclaimer

SEBI Registration number is INZ000174330

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer