SBI Life Insurance rallies 9.5%, hits new 52-week high on strong Q1 results

The company displayed a strong show in Q1FY23 with 80 per cent YoY growth in APE along with a sharp jump of 132 per cent YoY in VNB.

Shares of SBI Life Insurance Company rallied 9.6 per cent to Rs 1,304.45 on the BSE in Friday's intra-day trade, thus hitting a new 52-week high. The insurer, on Thursday, reported 18 per cent year-on-year (YoY) growth in its net profit at Rs 263 crore in the April–June quarter (first quarter, or Q1) of 2022-23 (FY23), aided by a healthy jump in gross written premium. In the corresponding period a year ago, the company's net profit was to the tune of Rs 223 crore.

At 10:49 AM, the stock traded 9.1 per cent higher at Rs 1,298, as compared to 0.8 per cent rise in the S&P BSE Sensex. The previous 52-week high for the stock stood at Rs 1,293, registered on January 7, 2022.

On a sequential basis, however, net profit was down almost 60 per cent. Its gross written premium - the sum of new business premium and renewal premium - was up 35 per cent YoY to Rs 11,350 crore in Q1FY23.

The annualised premium equivalent (APE) was up 80 per cent YoY to Rs 2,900 crore. APE is the sum of the total value of regular - or recurring - premiums plus 10 per cent of any new single premiums written for the financial year.

The value of new business (VNB) - the present value of the future earnings from policies issued during a period - of the insurer rose 130 per cent to Rs 880 crore in Q1FY23, compared with Rs 380 crore in the corresponding period. Its VNB margins - a measure of profitability of life insurers - stood at 30.4 per cent, against 23.7 per cent in the year-ago period.

"The notable improvement in VNB margin was primarily driven by a shift in underlying product mix with a larger share of high-margin products such as non-par savings and protection. Together, they constituted 39 per cent of APE in 1QFY23 v/s 20 per cent, a year ago. Retail protection APE growth of 54 per cent YoY to Rs 200 crore is commendable, considering the muted performance of private peers," Motilal Oswal Financial Services said.

SBI Life displayed a strong show in 1QFY23 with 80 per cent YoY growth in APE along with a sharp jump of 132 per cent YoY in VNB. VNB margin spiked ~665bp YoY fueled by a shift in underlying product mix in favor of high-margin products such as Non-PAR and Protection. Despite volatility in capital markets, ULIPs grew 33 per cent YoY. All distribution channels contributed to the growth along with a rise in productivity of banca and agency channels. This led to a better cost ratio and SBI Life continues to maintain cost leadership. Persistency improved across all key cohorts, the brokerage firm added.

Technical View

Bias: Positive

Support: Rs 1,226

Resistance: Rs 1,340

With today's sharp 9 per cent rally, SBI Life has given a fresh breakout on the daily and the weekly charts. The stock currently trades above the higher-end of the Bollinger Band on the daily and the weekly chart placed at Rs 1,234 and Rs 1,226, respectively.

Thus, the very near term bias is likely to remain bullish as long as the stock sustains above Rs 1,226. On the upside, the stock can rally to Rs 1,340 - which is the higher end of the Bollinger Band on the monthly chart.

Among the key momentum oscillators on the daily chart, the DI (Directional Index), MACD and the Slow Stochastic are clearly in favour of the bulls, while the 14-day RSI has entered overbought zone.

(With inputs from Rex Cano)