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MOSL: SBI LIFE INSURANCE (Buy)-Robust VNB growth; NBP growth/margin steady

SBI LIFE INSURANCE: Robust VNB growth; NBP growth/margin steady

(SBILIFE IN, Mkt Cap USD15.8b, CMP INR1184, TP INR1500, 27% Upside, Buy)

 

 

Agency channel witnessing strong momentum

• SBILIFE reported a strong 2QFY22, with APE growth of 46% YoY (5% beat) and VNB growth at a stellar 91% YoY (10% beat). VNB margin improved to 25.9% (up ~560bp YoY). However, shareholders' PAT declined by ~18% YoY on account of higher claims settled in 2QFY22.
• Among segments, ULIP saw a strong rebound, up 67% YoY. Non-PAR/Protection grew better than its peers, up 68%/21% YoY. Persistency has improved across cohorts, with 13th month persistency improving by ~180bp YoY to 87.7% and steady trends in the 61st month at 60.7%.
• We estimate 23% CAGR in APE over FY21-24E. VNB margin is estimated to reach 26.2% by FY24E, thus enabling 28% VNB CAGR and ~18% EV CAGR over FY21-24E. We maintain our Buy rating. 

Robust growth in APE and VNB; persistency trends improve

• SBILIFE posted a 14% YoY growth in net premium, dragged by sluggish growth in renewal premium at 9% YoY. Shareholders' PAT declined by ~18% YoY on account of higher claims settled in 2QFY22.
• Total APE growth was robust ~46% YoY (5% beat) in 2QFY22. Among segments, Non-PAR growth stood strong at 68% YoY. There was a strong bounce back in ULIP (67% YoY). Growth in Protection stood at 21% YoY, which was better v/s other peers. The share of Non-PAR increased to 10.6% (v/s 9.3% in FY21) while ULIP stood ~68%. The share of Protection stood at 10.3% (v/s 10.5% in FY21).
• COVID-19 update: SBILIFE reported a 1.49x QoQ increase in the number of claims. Total COVID-19 claims settled in 2Q stood at 13,650 (v/s 8,956 in 1QFY22). It settled COVID-19 claims net of reinsurance of INR7.7b (v/s INR5.7b in 1QFY22). It also holds additional COVID-19 reserves of ~INR2.7b (v/s INR4.4b in 1QFY22) for potential future claims.