Q3FY23 Review: SBI Life Insurance Company: Well-positioned for another strong year

23 Jan 2023 , 12:12 PM

In Q3FY23, SBI Life Insurance Company (SBI Life) reported 19% YoY growth in APE, while renewal premium grew 13% YoY. Retail savings APE grew 22% YoY, with strength in Non-Par and surprising resilience in ULIPs. Retail Protection APE moderated to 4% YoY; Group Protection APE grew strongly by 18% YoY. VNB margin saw expansion of 220 basis points YoY to 27.8%. This was lower than expectations of IIFL Capital Services, on higher share of ULIP mix this quarter even as Retail Protection growth moderated to 4% YoY, while VNB grew 29% YoY.

An analysis of SBI Life’s geographical distribution suggests that it is even better-penetrated than LIC in non-urban areas and beyond the top-7 premium paying states, earning 53% of premiums there in FY22.

SBI Life is the top pick for 2023 of IIFL Capital Services, having outperformed peers in FY22. Analysts at IIFL Capital Services believe SBI Life will continue to deliver top quartile growth in 2023, backed by well-diversified distribution, rational cost structure, strong brand pull and an underpenetrated mass customer base. 

They are forecasting 18%/20% VNB/EV CAGR over FY23-25. Their 12-month Target Price of Rs1,800 implies 2.9x 2YF EV, offering 39% potential upside. Stock is trading at 20% discount to HDFC Life, despite offering similar growth.

Analysts at IIFL Capital Services have maintained their Buy recommendation on the stock.