SBI Life Insurance Results Review - Higher margins drive beat! - HDFC Securities

Mr. Krishnan ASV, Institutional Research Analyst, HDFC Securities

VNBM (at ETR) at 23.2% (+250bps YoY vs. FY20) brought a colorful end to a bumpy year, largely led by positive business mix (higher share of NPAR and protection). The company's three growth levers continue to remain in place - (1) the mammoth distribution network of the parent SBI (24k+ branches); (2) the improving share of protection and NPAR; (3) the lowest opex ratio (FY21: 7.9%, -180bps YoY). We expect SBILIFE to deliver a healthy FY21-23E VNB CAGR of 15.8%. We retain our BUY rating on SBILIFE with an increased TP of INR 1,250 (Mar-22E EV + 22x Mar-23E VNB). The stock is currently trading at FY22/23E P/EV of 2.4/2.1x and P/VNB of 19.8/15.6x.

4QFY21 highlights: Total APE at INR 39.7bn (2y CAGR 13.2%/13.3% QoQ) was 8% ahead of estimates. Growth for retail protection continues to remain healthy at 14% QoQ (despite strong base at 16% QoQ in 3Q). ULIPs grew 15.6% QoQ, in line with expectations of recovery in this segment towards the fiscal end coupled with some stability in markets. Persistencies improved across cohorts in the range of 125-365bps except for the 61st month, with 13th month persistency hitting 88%. Total expense ratio was contained at 7.9% (-180/-49bps YoY/QoQ) as the company continues to keep a strong vigil on costs.

Adj. VNB margin (at ETR) at 27.7% improved 643/624bps YoY/QoQ. Reported margin improved 170bps YoY to 20.4%, mainly due to (1) mix change (+340bps, higher share of NPAR and protection), (2) change in operating assumptions (-90bps), and (3) change in economic assumptions (- 100bps, mainly risk-free rate). EV at INR 318bn was positively impacted by economic variance (INR 23.2bn), operating experience (INR 7.1bn, mainly due to better persistencies), partially offset by change in operating assumptions.

Outlook: We expect APE growth to pick up in FY22E to 15% YoY (low base in FY21), driven by banca channel. However, curfew/partial lockdown might result in limited agency movement, posing some challenges in 1QFY22E.

Shares of SBI Life Insurance Company Ltd was last trading in BSE at Rs.983.25 as compared to the previous close of Rs. 959.45. The total number of shares traded during the day was 359068 in over 16962 trades.

The stock hit an intraday high of Rs. 1005.05 and intraday low of 943.65. The net turnover during the day was Rs. 352241892.

Source : Equity Bulls

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