Challenging Years Ahead for Industry Leader: SBILIFE's 4QFY20 performance was marginally below expectations, as NBP/APE declined 11.8/12.6% YoY due to the lockdown

SBI Life Insurance Company Limited, is a joint venture between SBI and BNP Paribas formed in 2001, which offers individual and group insurance plans, including traditional and unit linked plans. Its products cover life, health,...

medical services whereas normal business growth was led by protection (marketing the increase in rates was one factor) and push from online channel sales. We believe, May & Jun should trend with similar de-growth numbers and will pick up only in 2HFY21....

We rate SBILIFE a BUY with a reduced TP of Rs 975 (Mar-21E EV + 28.9x Mar-22E VNB). SBILIFEs 4QFY20 performance was marginally below expectations, as NBP/APE declined 11.8/12.6% YoY due to the lockdown, while VNBM sustained at 20.7% (+90bps YoY). Despite SBILIFEs ambition to post APE growth in FY21E, given the macros, we remain skeptical.

SBI Life reported a largely stable fourth quarter with PAT growth of 16% YoY to Rs 5.3bn on moderation in change in valuation of policy liabilities. APE declined by 13% YoY on ULIP sale decline of 15%.

Premium accretion witnessed moderation amid the Covid-19 lockdown at the end of the quarter. Despite moderation in premium, focus on investments (net MTM loss of ~| 75 crore for shareholders) and higher shareholders surplus enabled better profitability. Opex growth witnessed a dip at 7.9% YoY to | 1180 crore with opex ratio steady at 9.9%. Moderation in new business premium & investment loss led to a decline in topline, offset by a decline in actuarial liability resulting in healthy policyholder surplus at | 659 crore. Such high surplus led to betterthan-expected earnings at | 531 crore; up 16% YoY. Volatility in market led...

SBI Life Insurance (SBIL) has reported a weak quarter due to the national lockdown impacting sales in the last 10-15 days of March20. NBP for the quarter was Rs38bn (9% below our estimate), down 11.9% YoY. APE in 4QFY20 was down 10.8% YoY at Rs26.5bn. Segment wise, ULIP business was down 14% YoY and par business was down 50% YoY. Individual protection sales were subdued, growing by 6% YoY while group protection sales were up 67% YoY. For FY21, the traction on protection is expected to be better, partially on account of higher customer preference. On the other hand, we believe that having a higher debt component in the ULIP business gives company the confidence to keep selling linked products. As per the...

Protection Guaranteed and Annuity Protection is Paving Way to Protection Segment Rise: Value of new business APE has increased

Yet another strong quarter for insurance giant SBI Life Insurance Company Limited, is a joint venture between SBI and BNP Paribas formed in 2001, which offers individual and group insurance plans, including traditional and unit linked plans. Its products cover life, health,...

SBI Life Insurance (SBILIFE) among private life insurers possesses by far the largest bancassurance network, bancassurance network size being most critical for scalability. Its individual agency force is highly productive among key private sector life insurer peers leading to cost efficiencies.

Stable quarter; focus on protection to increase; maintain BUY BUY SBI Life Insurance (SBIL) reported 3QFY20 results with the key pointers being (1) SBIL saw new business APE and new business premium growing 22% YoY and 35% YoY, respectively. Traction in protection to pick up (2) APE margin improved 80 bps YoY to 18.3%, driven by improved product mix (3) SBI Life's cost leadership was reinforced with opex ratio declining by 6bps YoY to 5.5% in 3QFY20. Persistency experience continued to improve rapidly. Also, see comprehensive conference call takeaways on page 2 for significant incremental colour. Per se, on the key financial items, SBIL posted NBP growth of 28% YoY at Rs49,706mn, Surplus growth...

AUM growth remained healthy at 22% YoY to | 164190 crore. Income from investment surged at | 4073 crore in Q3FY20, leading to higher trajectory in topline. Operating expenses (commission and opex related to insurance business) grew 23.8% YoY in Q3FY20 to | 1097 crore. Led by robust...

Given the strong distribution footprint of its parent SBI (24k+ branches), improving protection share (9MFY20: 8.0%, +174bps YoY), lowest operating cost ratios (9.1%), and improving margins (VNBM: 20.5%) we expect SBILIFE to deliver strong FY19-22E VNB CAGR of 23.3% p.a. and RoEVs of ~18-18.5%. Lower than expected growth and protection share remain a key risk to our call. SBILIFEs 3QFY20 performance was a mixed bag, as NBP/APE growth was strong at 26.8/16.3% YoY; however decline in protection/NPAR share to 6.8/5.7% (-27/-573bps QoQ) was disappointing. Strong 9MFY20 adj. VNBM at 20.5% (+30bps vs. 1HFY20) compensated. SBILIFE is our top BUY with a TP of Rs 1,230 (Dec-20 EV + 25.4x Mar-22E VNB).

Broking While competitive intensity remains intense, the quarter witnessed default by Karvy stock broking resulting in SEBI action of debarring the broker to add clients and restricting client trades. This has resulted in risk aversion with retail investors fleeing Karvy for other larger retail brokers. We expect this trend to continue for 1-2 quarters and be beneficial for bank owned brokers. Life insurance and mutual funds Pvt. life insurers continued to grow in 3QFY20, with individual NBP/APE growth of 18.8/16.3% in 3QFY20. On the other hand, equity (ex arbitrage and ETF) flows for 3QFY20 were muted at Rs 26bn (-90.8% YoY).

Retain BUY with an increased TP of Rs 1,230 (+23.4%) implying a DCF derived Dec-20E EV + 25.4x FY22E VNB. SBILIFE continues to be our top pick in the life insurance space. Retain BUY with an increased TP of Rs 1,230 (+23.4%) implying a DCF derived Dec-20E EV + 25.4x FY22E VNB. SBILIFE continues to be our top pick in the life insurance space. Our recent interaction with SBILIFE convinced us that growth surprises will persist. Increasing width (and depth) at activating SBIs branch network and SBILIFEs new partner addition initiatives drive our conviction. Further, a higher than expected APE growth in 8MFY20, leads us to upgrade FY20E-22E APE by 3.4-7.2%.

SBI Life Insurance Company Limited, is a joint venture between SBI and BNP Paribas formed in 2001, which offers individual and group insurance plans, including traditional and unit linked plans. Its products cover life, health,...

Given the strong distribution footprint of its parent SBI (24k+ branches), improving protection share (1HFY20: 8.8%, +340bps YoY), lowest operating cost ratios (10.4%), improving margins (VNBM: 20.2%) and tailwinds from financialisation of savings we expect SBILIFE to deliver strong FY19-22E VNB CAGR of 20.1% p.a. and RoEVs of ~17.3%. Lower than expected growth and protection share remain a key risk to our call. SBILIFEs 2QFY20 performance continues to be strong with NBP/APE growth of 33.8/48.3%. 1HFY20 VNBM came in at 20.2% (+40bps vs. FY19) and VNB at Rs 5.7bn (+24.6% YoY). SBILIFE is our top BUY with a TP of Rs 940 (Sep-20 EV + 21.1x Sep-21E VNB).

Income from investment was healthy YoY but dipped QoQ to | 2623 crore in Q2FY20. Led by robust premium accretion, opex ratio has dipped to 6.5% in H1FY20 vs. 7.8% in H1FY19. Healthy accretion in premium led to higher policyholder surplus at | 349 crore but higher allocation to policyholders at | 293 crore and provision of | 67 crore relates to exposure to DHFL kept earnings lower than our estimate at | 130 crore. Persistency witnessed...

SBI Life Insurance (SBIL) reported 2QFY20 results with the key pointers being (1) SBIL saw new business APE and new business premium growing 18% YoY and 34% YoY, respectively. Growth outlook remains robust (2) APE margin (on effective tax basis) improved ~40 bps QoQ to ~20.3% on the back of improving product mix. (3) SBI Life's cost leadership was reinforced with opex ratio declining 130 bps YoY to 6.5% in 1HFY20. Persistency experience continued to improve rapidly. Also, see comprehensive conference call takeaways on page 2 for significant incremental colour. Per se, on the key financial items, SBIL posted NBP growth of 33% YoY at Rs46,621mn, Surplus growth of 21% at 3,489mn and PAT decline of 48% YoY at Rs1,298mn....

We looked at IRDA data for monthly new business figures and note that (1) HDFC Life Individual New Business APE growth for Sep19 was negative at -19.7% YoY (2) Max Life's growth was relatively flattish at 2.2% YoY. (3) Growth for ICICI Prudential Life continued to be negative at 6.6% YoY (4( Growth for SBI Life was relatively much better at 10.7% YoY. Our interpretation of...