SBI Life trades lower ahead of Q1 results: What investors should expect?

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SBI Life shares fell 1 percent soon after opening flat on July 25, hours before the insurer declaring its earnings for the first quarter of fiscal 2023-24.

According to analysts at Kotak Institutional Equities, the company's APE is expected to grow 10 percent year-on-year to Rs 3,177.5 crore. APE, or Annualised premium equivalent, is a measure of new business written by a life insurance company.

VNB, or value of new business, for the quarter has been pegged at Rs 973 crore, indicating a 10.7 percent jump over last year, but a 32 percent slump on-quarter.

This is in-line with what peers HDFC Life and ICICI Prudential Life reported in Q1. Much of the purchases of high-value insurances policies came through in the March quarter following the change in tax rules from the new fiscal.

In Budget 2023, Finance Minister Nirmala Sitharaman scrapped the tax exemption on income from traditional insurance policies with premium of over Rs 5 lakh, effective April 1. This led to a rush for high-value policies in the March quarter, and took away sales that would have otherwise happened in the June quarter.

Since high-value policies have better margins, the drop in sales is likely to impact margins for the June quarter. For SBI Life Insurance, analysts at Kotak Institutional Equities expect VNB margin expansion to be muted at 30 basis points YoY to 30.6 percent.

"We expect margin expansion to be muted due to lower share of high-margin non-par products in the product mix," they said.

As for key monitorables, investors and analysts will keenly watch out for the management guidance on integration of policies of Sahara India Life Insurance Co Ltd.

Also Read: SBI Life to acquire Sahara India's life insurance business: IRDAI

SBI Life in a statement had clarified that IRDAI’s directive is not a merger between the two companies but only a transfer of policyholder related assets and liabilities of Sahara Life Insurance to SBI Life.

At 9:45am, the stock was quoting at Rs 1,296.10 on the NSE, lower by 1.6 percent from previous close.