IDEA2ACT - Buy: SBI Life Insurance


CMP (NSE) 15:56, 18 Jun

982.55 -0.75-0.08%




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Last updated on

04 May, 2021

SBI Life Insurance Company Ltd. (SBI Life) started off as a joint venture between State Bank of India (SBI) and BNP Paribas Cardif S.A. SBI Life is India’s largest private life insurer on a retail APE basis. The company has a product mix of participating, non-participating, and linked policies with the mix skewed towards linked products. The company leverages a strong agency network of over 100,000 independent agents and bancassurance partners (State Bank group) to source business. 

Leading the way on VNB growth and protection! 
Retail protection growth remains an outlier: Retail protection APE grew 47% YoY, a third consecutive quarter of strong growth even as peers struggle to show growth, while group protection NBP grew 28% YoY. Management indicated that growth in retail was driven by their customer demand, which is a competitive advantage for SBILI, in our view. SBILI registered 50% YoY growth in savings APE with non-par/ ULIPs growing 100%/47% resp., showing strong product diversity.

VNB margin expansion outclasses peers: VNB margin expanded by 210bps YoY while VNB grew 63% YoY outclassing peers. The solvency ratio at 215% remains comfortably high. Despite ULIP share at 70% of APE, SBILI’s renewal premium growth was healthy at 16% YoY and was not impacted by tax changes around high ticket ULIPs and new tax regime. Surrender ratios were also at just 3.95% in FY21 

Comforting Valuations: We maintain SBILI as our top pick. The stock is currently trading at 2.1X FY23ii P/EV, at a 43% discount to HDFCLI.  We forecast 25%/16% VNB/EV Cagr over FY21-23ii. We recommend a Buy rating on the stock with a target price of Rs1144 implying a ~2.5X 2YF P/EV

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