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SBI Life reported a broadly in-line 9MFY24 performance , with APE coming ~2% above our estimates, while VNB margin logging at 28.1%, lower by ~0.4ppts, leading to 9M VNB of Rs40.4bn (in line with our estimate). Overall, the 9M VNB margin of 28.1% and VNB growth of 11% YoY are best-in-class among peers and are a testimony to Company’s strength in brand and distribution, coupled with its cost leadership. Despite the increase in share of ULIPs in the APE products mix (+4.7ppts YoY in 9M), the company contained the VNB margin compression to 1.5ppts. Management expects SBI Life to clock robust growth in the medium term, growing above the industry rate, and VNB margins to track at around 28% for FY24, depending on the product mix. Baking-in the Q3FY24 developments, we tweak our FY24-26 estimates which results in a ~1% cut in VNB. We reiterate our BUY rating on the stock, with unchanged Dec-24E TP of Rs1,750/share (implying a FY25 P/EV of 2.7x).

Satisfactory performance; best in class VNB margin and VNB growth

SBI posted a robust 17.4% APE growth during 9MFY24 to Rs143.9bn (Emkay: Rs140.8bn), driven by 27% YoY growth in the ULIP business against the backdrop of strong equity market movement. The company logged VNB margin of 28.1% for 9MFY24 (9MFY23: 29.6%), led by 27.4% VNB margin for Q3FY24 vs. our estimate of 27.8%. The YoY dip in margin was driven by higher share of ULIPs which was offset by repricing in several non-par products. SBI Life’s PAT for 9MFY24 grew 14.8% YoY to Rs10.8bn – a 2.7% miss on our estimate; but Q3FY24 PAT came in at Rs3.2bn vs. our estimate of Rs3.5bn. The company witnessed slight elevation in commissions owing to higher sales of long-term plans vs. short-term plans in the non-par segment. Persistency improved across cohorts, whereas the surrender ratio saw some elevation on account of higher discontinuation in certain cohorts of ULIPs with no surrender charges.

Strong execution and brand value continue to drive the robust performance

SBI Life has delivered a consistent performance, in terms of robust APE growth and sustained margin delivery (with relatively limited volatility), despite the regulatory shocks and changing customer demand. While the share of ULIPs in the APE product mix increased to 61% in 9M (+4.7ppts YoY), the management is focused on growing the nonpar and protection business. In the group protection segment, Group Term Life witnessed faster growth, while the company plans to launch several online products, with aim to grow the retail protection business. Given a strong brand, widespread distribution network, and low-cost advantage, SBI Life is on the right track to register better-thanindustry growth and superior VNB margin. Management has guided to 18% APE growth during FY24, and VNB margin to stand out, at around 28%.

We reiterate BUY, with unchanged TP of Rs1,750/share

Accouting for the Q3FY24 developments, we tweak our FY24-26 estimates that results in 1-1.5% increase in APE estimates and a 0.5-0.7ppts cut in VNB margin, leading to ~1% cut in VNB estimates. We reiterate our BUY rating on the stock, with unchanged Dec-24E TP of Rs1,750/share (implying FY25E P/EV of 2.7x). SBI Life’s superb execution by leveraging on its brand, distribution and cost advantage to sell products that meet customer & channel demand make it our preferred pick in the sector, where it is strongly positioned to respond to any changing regulations or customer preference.

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