SBIL's VNB margins improved by 80bps yoy (-140bps qoq) to ~18.7% during Q1FY20, with the increasing share of group protection plans and savings products. Absolute VNB de-grew by ~29.7% in Q1FY21 amid Covid-19-related lockdowns. However, renewable premium witnessed growth of ~29.5% yoy. Management remains firm in increasing the share of protection plans by increasing focus on credit protection. However, like IPRU, SBIL also depends heavily on bancassurance (~62% of distribution), which could trigger steady growth for ULIPs, especially during H2FY20 as the overall equity market is witnessing stabilizing trends. We believe that SBIL's margin will improve due to a gradual rise in the share of protection plans and a high share of non-par products. However, management needs to re-price its existing protection plans amid a rise in pricing for reinsurance.
OutlookWe expect VNB margins to improve to ~24.7% by FY23E against ~20.9% in FY20E with a 15.9% CAGR in absolute VNB to Rs35bn. We introduce FY23 estimates and roll forward to Sept'22E with a revised TP of Rs1084 (Rs892 earlier), corresponding to 2.8x P/Sept'22E EV. We maintain Buy and OW stance in Insurance EAP.
For all recommendations report, click hereDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
Read More
