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Steady margins, growth prospects intact

SBI Life Insurance Company Ltd, a leading life insurance company in India, was incorporated in October 2000. It offers individual and group insurance plans, covering life and health, and annuity, pension and variable products. It also has unit-linked plans.

* Net premium rose a modest 1.1% YoY in Q2FY25 to Rs. 20,266cr, driven by growth in first-year premiums (+6.1% YoY) and renewal premiums (+15.8% YoY), partially mitigating the impact of a 30.3% YoY drop in single premiums.

* In H1FY25, the Value of New Business (VoNB) saw a 2.5% uptick YoY to Rs. 2,420cr. VoNB margin declined to 26.8% (vs 28.5% in Q2FY24), largely attributable to the unfavourable growing contribution of unit-linked insurance products (ULIPs).

* Profit after tax (PAT) rose 39.3% YoY to Rs. 529cr in Q2FY25, driven by operational efficiencies. The Operating expense ratio for the quarter stood at 5.6% (vs 4.4% in Q2FY24), while the total cost ratio was 9.7% (vs 8.4% in Q2FY24), due to the increasing number of agents and digital transformation initiatives.

* In H1FY25, asset under management (AUM) rose to Rs. 4,390bn from Rs. 3,889bn in FY24.

Outlook & Valuation

SBI Life reported a lower single-digit revenue growth during the quarter. However, the company is well-positioned for growth, driven by the new higher-margin product launches expected to revitalise the protection segment. Improving persistency ratios, ongoing investments in the agency network, market leadership, customised offerings in the individual premium segment, digital initiatives and growing demand for financial protection solutions are anticipated to drive future growth. Therefore, we maintain our BUY rating on the stock, based on 2.06x FY26E EV, with a revised target price of Rs. 1,748.

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SEBI Registration Number: INH200000345