SBI Life Q4 Review: Analysts Bet On Better Product Mix, Distribution

Most analysts retained their 'buy' ratings on SBI Life Insurance Co. Ltd. after the fourth quarter, citing improved value of new business margin, distribution expansion and a shift toward higher-margin products such as non-participating and protection.

The private insurer saw its quarterly profit rise 26% over the year earlier, beating estimates. Its revenue was up 3% on higher net premiums even as investment income fell. Its VNB margin for the fiscal ended March 2022 stood at 25.9% against 23.2% a year ago.

Motilal Oswal and Emkay Global list SBI Life Insurance as their preferred pick in the sector.

Of the 38 analysts tracking the insurer, 35 maintain a 'buy' and three suggest a 'hold', according to Bloomberg data. The average of the 12-month consensus price target implies an upside of 32.8%.

Here's what brokerages have to say about SBI Life's Q4 FY22 results:

• Maintains ‘buy’ with a target price of Rs 1,450 apiece, implying an upside of 30%.

• The company witnessed soft annualised premium equivalent growth of 4% year-on-year and flattish value of new business growth that missed their estimates.

• APE growth was muted in Q4 FY22 due to pressure in unit-liked insurance products and participating products.

• ULIP declined by heightened volatility in capital markets due to geopolitical crisis and increase in interest rates.

• Though cost ratio inched up marginally to 5.1% in FY22 from 4.8% in FY21, SBI Life continued to retain cost leadership versus peers.

• The shift in product mix towards higher margin products such as non-participating and protection should continue to drive an improvement in VNB margin as ULIP growth moderates due to volatile capital markets.

• The management said the response toward the new product launched in the quarter has been positive and the company witnessed record flows in a short span of time.

• The company will continue to grow non-par products that can witness an increase in its overall mix.

• SBI Life remains preferred pick in the life insurance space.

• Maintains ‘buy’ with a target price of Rs 1,645 apiece, implying an upside of 47%.

• With all its distribution channels firing, expanding product offerings and widening acceptance, the brokerage expects robust growth to continue in FY23 and beyond.

• The formidable combination of brand and distribution reach in terms of geography and demography makes SBI Life a formidable force in the Indian life insurance sector.

• Based on the risk-reward proposition, the insurer remains our top pick in the sector.

• VNB margin expansion was largely on account of the increasing share of non-par (saving and annuity) in the portfolio.

• Both the distribution channels, the bank and the agency, have delivered a strong performance.

• SBI Life remains the cost leader in the industry.

• Management expects VNB margin to continue to improve gradually on the back of an improving product mix and operating leverage.

• Maintains ‘buy’ with a target price of Rs 1,642 apiece, implying an upside of 47%.

• SBI Life delivered strong APE growth year-on-year led by non-par products.

• Q4 FY22 growth was affected by high growth in Q4 FY21 as well as due to the adverse impact of third Covid-wave induced lockdown.

• Looking at FY22 performance, the company has delivered on its guidance of improving the share of non-par savings products while protection segment has also done well.

• Segment-wise, individual non-par savings saw the strongest growth at 96.9% year-on-year.

• Management commentary throughout FY22 has been around putting thrust on non-par savings and improving its share in the overall mix.

• With non-par growth expected to remain strong, the management

  remains confident of improving margin.

• Management remains optimistic about new product launches (Smart Platina and eShield Next) doing well.

• The company expects to sell more of pure protection.

• With supply-side constraints now behind and given the large protection gap, the brokerage expects individual protection to continue to do well for the company.

• Overall product mix improved, leading to margin expansion in FY22.

• The company has completely moved its VNB/EV reporting to effective tax rate basis.