Shares of SBI life insurance began on a positive note at the start of the year. It set a fresh 52-week high of ₹1,287.95 on January 17, but the stock failed to hold on to this rally and fell almost 20% in just 2 months. The stock quickly bounced back and rallied 14% from March to April. However, since then, the stock has seen a huge volatile period.
SBI Life Insurance is one of the leading insurance companies in India. It has a presence across the country through its 970 offices with a large and productive individual agent network of about 161,923 agents and 56 corporate agents, and 14 bancassurance partners with more than 40,000 partner branches, 119 brokers, and other insurance marketing firms, its website shows.
The company provides individual and group insurance plans, including traditional and unit-linked plans. Its products cover life, health, annuity, pension, and variable insurance.
After reporting robust Q1 results on July 28, the stock witnessed a one-way rally and surpassed its previous 52-week high of ₹1,287.95 on August 19, 2022 at ₹1,334.7, and has risen 15.04% to date. Furthermore, the stock has gained more than 9.6% in the last year, compared to the Nifty50 index, which has gained nearly 3.6% in the same time period.
For the June ending quarter it reported 18% YoY rise in its net profit at ₹263 crore. It posted a net profit of ₹223.16 crore in the corresponding quarter last year. The Gross written premium (GWP) grew 35.5% YoY to Rs. 11,349 crore, mainly driven by 66.9% YoY growth in new business premium and a 14.6% YoY rise in renewal premium.
The company maintained its leadership position in individual new business premiums with 86.4% YoY growth to Rs. 3,430 cr. Also, protection new business premium increased 62.8% YoY to Rs. 700cr, aided by 53.8% YoY growth in individual protection business to Rs. 200cr and 66.7% YoY growth in group protection business to Rs. 500cr, Geojit Financial Services said in a research report.
The Annual Premium Equivalent (APE) product mix for par, non-par, and ULIP stood at 6% and 47%, respectively. The APE channel mix for bancassurance, agency and others was 63%, 26%, and 11%, respectively.
Assets under management expanded 13.3% YoY to Rs. 262,350 crore, with a debt-equity mix of 73:27. Over 97% of the debt and investment was in AAA-rated and sovereign securities.
The cost ratio witnessed a 70 bps YoY reduction at 11.2%, mainly due to an increase in the commission ratio (up 130bps to 4.6%), partly offset by a decrease in the Opex ratio (down 60bps YoY to 6.6%).
On the other hand, the company has a strong solvency ratio of 2.21x (vs. 2.05x in Q4FY22), well above the mandated regulatory requirement of 1.50x. The 13th/61st month persistency ratio stood at 83.0%/51.0% in Q1FY23 (vs. 85.0%/51.1% in Q4FY22).
Following a strong first-quarter performance, domestic brokerages raised their target prices for the stock. Geojit Financial Services in a note dated 04 August said "A diverse distribution network with trained human capital, consistent technological improvements, and financial stability provides a robust base to ensure steady growth for the company with long-term consistent returns." The brokerage firm has given a 'buy' rating for the stock with a revised target price of ₹1,520/share.
Domestic brokerage firm HDFC Securities also retained a 'buy' tag on the stock with a target price of ₹1,660/share, which hints toward an upside of 28 percent from its latest close. It expects SBI Life to deliver a healthy FY22-24E APE/VNB CAGR of 18-25%.
On the other hand, Motilal Oswal also maintained a 'buy' call on the stock with a revised target price of ₹1,500. It expects the VNB margin to remain steady from here to reach 30% in FY24.
An average of 32 analysts polled by MintGenie have a 'buy' call on the stock
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.