SBI Life Insurance Limited posted excellent Q1FY23 results across all parameters

SBI Life is an Indian life insurance business that was established as a joint venture between State Bank of India (SBI) and BNP Paribas Cardif, a French financial organisation. SBI is the largest banking organisation in India due to its unmatched strength of more than 22,414 branches spread throughout the nation.

The business provides savings and protection plans as individual and group products to meet the insurance needs of various consumer segments. Currently, SBI Life is f fast gaining market share in the Indian life insurance industry with strong distribution network, parentage, operating metrics.

SBI Life Insurance Q1FY23 results on 28^th July 2022 announced, where they reported a strong YoY growth across all key insurance metrics with a solvency ratio of 221%. Upon the release of the Q1FY23 results, even the SBI Life shares saw an increase of more than 12% over the course of two trading days. So, let’s examine their Q1FY23 results now to see if there are any investing prospects for potential benefits in the future.

Key Highlights of SBI Life insurance Q1FY23

• SBI Life Insurance’s net profit grew 18% YoY to Rs 263 crore in the Q1FY23, while sequentially it fell 60%
• They reported 33% YoY growth in net premium, led by 67% growth in new business and 14% YoY growth in renewal
• The annualised premium equivalent (APE) was up 80% YoY to Rs 2,900 crore, led by a massive growth of 645% YoY in non-par savings and 46% YoY in
• The insurer’s value of new business (VNB), which represents the present value of future profits from policies issued over a time period, increased by 130% to Rs 880 crore in Q1FY23

SBI Life insurance results Q1FY23: Net profit grew 18% YoY

SBI Life Insurance Q1FY23 results net profit grew 18% YoY to Rs 263 crore in the Q1FY23, aided by a healthy jump in gross written premium, while the insurer’s net profit was to the tune of Rs 223 crore in Q1FY22. On a sequential basis, however, net profit was down almost 60% to Rs 263 crores in Q1FY23 from Rs 223 crores in Q1FY22.

The company has kept an additional reserve of Rs 290 crore towards the Covid-19 pandemic at the end of Q1FY23.

SBI Life’s gross written premium i.e., the sum of new business premium and renewal premium was up 35% YoY to Rs 11,350 crore in Q1FY23. They reported 33% YoY growth in net premium, led by 67% growth in new business and 14% YoY growth in renewal business.

SBI Life insurance results Q1FY23: APE was up 80% YoY, while VBA grew 130% YoY

The annualised premium equivalent (APE) was up 80% YoY to Rs 2,900 crore, led by a massive growth of 645% YoY in non-par savings and 46% YoY in protection. Par products and ULIPs also saw a healthy growth of 42% and 33% YoY, respectively. Surprisingly, annuity was flat after a strong performance in FY22.

The insurer’s value of new business (VNB), which represents the present value of future profits from policies issued over a time period, increased by 130% to Rs 880 crore in Q1FY23 from Rs 380 crore in Q1FY22. Its VNB margins, a gauge of life insurance profitability, were 30.4%, up from 23.7% in the Q1FY22.

The notable improvement in VNB margin was primarily driven by a shift in underlying product mix with a larger share of high-margin products such as non-par savings and protection. Together, they constituted 39% of APE in 1QFY23 v/s 20%, a year ago. Retail protection APE growth of 54% YoY to Rs 200 crores is commendable, considering the muted performance of private peers.

With this, the share of non-par savings in the business mix increased to 28% from 7% in 1QFY22. SBI Life does not have any internal cap on share of this segment and will continue to underwrite as long as it can hedge interest rate risk effectively. However, 25-30% is a sustainable range according to the management. Further, trends in retail protection are encouraging with a growth of 54% YoY. This is quite commendable in our view, given a weak performance by private peers in this segment during the quarter.

SBI Life Insurance results Q1FY23: Management highlights in Concall

• SBI Life aims to grow premiums by 25%+ on a sustainable basis
• Non-par guaranteed savings saw a robust growth as demand for this segment remains strong. The new product, ‘Smart Annuity Plus’, launched in Mar’22 has been well received by the market
• There are no internal targets on the share of this segment and the company will continue to underwrite as long as it can hedge interest rate risk well

Technical analysis of SBI Life insurance share price

The stock is currently trading at its 52 weeks high with 50 EMA above 100 and 200 EMA. In the beginning of 2022, the SBI stock has seen major correction as it reached its 52 weeks low of 1003. Post which the stock has delivered robust returns. Even after the announcement of SBI Life Insurance Q1FY23 results the stock has delivered a return of 15% in just one month. Further, SBI Life is also one of the favourite picks among brokers apart from HDFC Life insurance.

ICICI Direct said, “SBI Life’s share price has grown by ~44% over the past three years. We believe strong growth guidance supported by distribution strength (SBI YoNo added now) and improving high margin product mix should aid overall value. The stock is reasonably priced and currently trades at 2.5x FY24E Embedded Value. We retain our BUY rating on the stock and revise our target price from | 1400 to |1500 per share.”

Motilal Oswal said, “We raise our VNB margin estimates by 340bp and 270bp for FY23 and FY24 to 30.1% and 29.7%, respectively, and raise VNB estimate by 19% each over FY23/24. We expect SBILIFE to deliver 27% CAGR in APE over FY22-24, thus enabling 36% VNB CAGR, while ROEV sustains at ~22%. SBILIFE remains our preferred pick in the Life Insurance space. Maintain BUY with TP of 1500.”

Our view

SBI Life’s diversified distribution network, human capital, ongoing technical advancements, and financial stability offer a solid foundation to assure sustainable development and reliable profits over the long term.

The verdict on the Univest App says that SBI Life has weak fundamentals which are likely to improve over next few quarters while the SBI stock is bullish on short- and long-term time frames. Overall, the Univest app has a buy rating for the insurance stock.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

You may also like: ICICI Bank Q1FY23 results