SBI Life Insurance Stock Hits Record High Post Q1 As Analyst Retain Bullish Call

Shares of SBI Life Insurance Co. jumped to a record high as the private life insurer’s focus on non-par plans and profitable product mix kept analysts bullish even as claims spiked due to mounting Covid-19 cases.

The company, however, saw its profit slump by more than half sequentially in the quarter ended June as income from premiums dropped. Its revenue, too, declined over the preceding three months and operating margin contracted.

Still, the insurance stock gained as much as 2.74% to a record high of Rs 1,106.20 apiece on Tuesday. Of the 37 analysts tracking the company, 35 recommend a ‘buy’ and two suggest a ‘hold’, according to Bloomberg data. The average of the 12-month consensus price targets implies an upside of 14.7%.

Here’s what brokerages have to say about SBI Life’s first-quarter performance:

• Maintains ‘buy’ rating with a target price of Rs 1,250 apiece.

• Balanced product mix with focus on opex ratio ahead of industry.

• Strong parentage-led distribution remains key catalyst.

• Focus on non-par and annuity products to aid overall growth and value of new business in future.

• Strong distribution network remains core to maintain business momentum.

• Product mix and improvement in persistency to aid VNB margin at 21-22%.

• Higher Covid-19 claims remain a near term overhang; reserves at Rs 445 crore.

• Recommends ‘buy’ with a price target of Rs 1,230 per share.

• Gradual shift to a profitable product mix, relatively comfortable valuations, steady growth and favourable risk-reward.

• Overall opex ratio remained steady following bancassurance distribution and with push for digitalisation, management expects further improvement in the matrix.

• Witnessed jump in Covid claims like peers, but management remains firm over SBI Life’s ability to cope with incremental claims.

• Sequential dip in VNB margin amid rise in unit-linked insurance plans; improvement likely.

• Re-pricing of existing protection plans is key as most of the reinsurance companies have already opted for a price hike.

• Retains ‘buy’, hikes target price to Rs 1,250 apiece from Rs 1,150.

• SBI Life’s new business premium was slower led by a slower group business.

• Margin improvement has been on good mix change mainly from continued protection (best growth among listed players — 62% YoY in new business premium and 86% in APE).

• Covid claims and reserving of Rs 440 crore (including Rs 180 crore of Q4FY22) is near to industry trends.

• Claim absorption was quite good and in line with expectation of the company, hence not witnessing high impact on profit and loss.

• SBI Life has underperformed peers with valuations lowest in the sector.

• Gradual margin improvement, better cost metrics and growth prospects (strong distribution) could help catch up on valuations.

• Continue to maintain medium-long term margins could gradually move towards 25-26% with new product push and controlled cost metrics.

• Maintains a ‘buy’ with a target price of Rs 1,257 apiece.

• The VNB margin improvement was a function of higher sales and a favourable product mix.

• Expects growth trends in FY22 to be margin accretive and hence, the brokerage has increased VNB margin estimates.

• Persistency across most cohorts improved or remained stable except 25th/61st month.

• Increased Covid reserves expected to cover for any adverse mortality experience.

• Channel-wise, focus remains broadly distributed across SBI, agency and other channels with company’s focus higher on customers who are below the age of 50 years.

• Management’s effort would be to scale up the share of non-par savings to double-digit by the end of FY22.

• This would be supported by revised pricing across (non-par) products.

• Recommends ‘buy’ with a price target of Rs 1,250 apiece.

• SBI Life reported a steady quarter, with robust VNB growth.

• This was led by an improving product mix and margin expansion.

• That was despite overall new business growth being relatively modest against a benign base.

• SBI Life continues to maintain its cost leadership.

• Persistency trends have improved on a year-on-year basis.

• VNB margins have shown steady improvement.

• Company expects the non-par business to reflect improving trends in the coming quarters and expects the share to reach the double digits by end-FY22.

• Focus is on increasing the penetration of insurance in SBI’s large customer base.

• Recommends ‘buy’ with a target price of Rs 1,600 apiece.

• Covid claims and reserves a minor blip (1.3% of Embedded Value) in an otherwise steady quarter of business performance.

• Among the top three, SBI Life was the only private life insurer to grow the individual protection pie (76% YoY) as others posted decline in Q1FY22.

• Management remains confident that premium pricing and stricter underwriting standards augur well for mortality outcomes.

• Sales of non-par savings/guaranteed products should improve over the coming weeks.

• Best in class cost ratio, improved persistency and strong premium growth have led to another sound operating quarter

• While margin has expanded, it still lag peers and hence has highest room for improvement over FY21–23.

• Recommends ‘buy’ with a target price of Rs 1,150.

• Posted VNB in line with estimates.

• Covid claims were up driving lower PAT.