Motilal Oswal's research report on SBI Life Insurance
SBILIFE reported a soft 4QFY22 with APE growth of 4% YoY and flattish VNB growth (missed our estimate by 2%). VNB margin improved 120bp QoQ to 26.8% while shareholders' PAT grew 26% YoY to INR6.7b. -APE growth was muted in 4QFY22 due to pressure in ULIP and par products. ULIP posted a 6% decline YoY after four quarters of strong double-digit growth. The decline was led by heightened volatility in capital markets due to geopolitical crisis and increase in interest rates. Par products dipped 31% YoY. -Persistency ratio improved across all cohorts with 120bp/110bp QoQ improvement in 13M/61M, respectively. On an ETR basis, EV grew 9% YoY to INR396b in FY22. Operating RoEV was at 20.6% for FY22 with an EVOP of INR69b. This is mainly because it included a positive impact of INR12.2b in operating experience and INR4.1b in VNB due to a change in computation method from ATR to ETR basis.
Outlook
We cut our growth projections marginally as we expect SBILIFE to deliver 22% CAGR in APE over FY22-24. VNB margin is estimated to improve 110bp over the same period to 27.0%, thus enabling 24% VNB CAGR, while RoEV sustains at ~20%. SBILIFE remains our preferred pick in the Life Insurance space. Maintain BUY with a TP of INR1,450.
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