SBI Life Insurance - Q1FY21 First Cut - ICICI Securities

(CMP - Rs. 870, MCap- Rs. 87068 crore)

For SBI Life Insurance, pace of premium accretion witnessed revival sequentially, though YoY remained moderate. Recovery in equities and increase in yields led to robust investment gains partially offset by change in actuarial liability, led to higher than expected surplus and earnings.

Q1FY21 Earnings Summary

- Premium growth has witnessed revival at ~14% YoY to Rs. 7588 crore, led by higher traction in renewal and single premium. In light of the current scenario, accretion of new business premium came better at Rs. 3059 crore, though a tad lower compared to Rs. 3154 crore in Q1FY20. Growth in renewal premium continued to remain healthy at ~30% YoY to Rs. 4584 crore, with renewal rate at 88% in Q1FY21, above our estimate. Within NBP, traction in individual business remained moderate at Rs. 1260 crore in Q1FY21 vs Rs. 1760 crore in Q1FY20, primarily led by decline in premium in unit linked products. Traction in protection business (individual + group) also witnessed moderation at Rs. 290 crore in Q1FY21 vs Rs. 440 crore in Q1FY20. Consequently, proportion of total protection NBP to total NBP declined to 10% vs 12.5% in FY20 and 11.9% in FY19.

- Post witnessing a decline in Q4FY20, AUM witnessed revival in Q1FY21 at 19.3% YoY to Rs. 175350 crore. Shareholders and policyholders (excluding linked liabilities) assets witnessed sequential growth at ~18% and ~6% YoY, respectively. Assets held in lieu of linked products jumped ~12% QoQ to Rs. 87868 crore. Recovery in equity market and decline in yields led to strong investment income at Rs. 8583 crore in Q1FY21, supporting total revenue trajectory.

- Moderation in accretion of new business kept commission expense lower by 9.6% YoY to Rs. 225 crore, leading to overall opex (commission and opex related to insurance business) growth at ~3% YoY to Rs. 771 crore. Opex ratio remained a tad lower at 7.2% in Q1FY21 vs 7.5% in Q1FY20.

- While renewals supported revival in premium accretion, strong investment income provided a boost to traction in top-line. Post adjusting gains on investments through actuarial liability, policyholder surplus came higher than our estimate at Rs. 610 crore. Healthy surplus led to higher allocation to shareholders at Rs. 282 crore resulting in better than expected earnings at Rs. 391 crore vs our estimate of Rs. 290 crore.

- Solvency ratio witnessed a revival to normalized level of 2.39x, post a steep decline witnessed in Q4FY20.

We would be shortly coming out with a detailed report.

Shares of SBI Life Insurance Company Ltd was last trading in BSE at Rs.888.25 as compared to the previous close of Rs. 854.45. The total number of shares traded during the day was 139343 in over 6046 trades.

The stock hit an intraday high of Rs. 896 and intraday low of 844. The net turnover during the day was Rs. 121272216.

Source : Equity Bulls

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