SBI Life hits new high; rallies 24% in 2 months on strong business outlook

With SBI Life's distribution channels firing on all cylinders, expanding product offerings and increasing acceptance, analysts expects robust growth to continue in FY23 and beyond

Shares of SBI Life Insurance Company hit a new high of Rs 1,332.30, up 2 per cent on the BSE in Thursday's intra-day trade, in an otherwise subdued market on expectation of robust growth outlook. The stock of the insurance company has rallied 24 per cent in the past two months, while it has surged 16 per cent in the past six months. This compares with a 4 per cent rise in the S&P BSE Sensex during the six-month period. SBI Life is a subsidiary company of State Bank of India (SBI).

SBI Life reported an impressive all-round performance in the first quarter (April-June quarter) of the current fiscal 2022-23 with both growth and margins surprising positively. In terms of overall annual premium equivalent (APE) growth and retail protection APE growth, SBI Life bucked the trend of slowdown seen across peers.

Driven by the exceptionally strong growth in non-par guaranteed saving products, value of new business (VNB) margins grew 6.7ppts YoY to 30.4 per cent, while APE saw 79.0 per cent YoY growth on a favorable base (3Y CAGR: 16.0 per cent).

"The solid Q1 performance underscores the strength of the formidable combination of brand and distribution reach in terms of geography and demography that SBI Life has. Management remained confident about delivering growth and maintaining margin trajectory," analysts at Emkay Global Financial Services said in a result update report.

With its distribution channels firing on all cylinders, expanding product offerings and increasing acceptance, the brokerage firm expects robust growth to continue in FY23 and beyond.

"The company has three growth levers stay in place (1) SBI's massive distribution network (over 24,000 branches); (2) healthy mix of protection and NPAR; and (3) lowest opex ratio among peers (FY22: 8.8 per cent). We raise VNB estimates by 12/11 per cent to factor in the beat on APE and VNB margins. We expect SBI Life to deliver a healthy FY22-24E APE/VNB CAGR of 18/25 per cent," analysts at HDFC Securities said.

Meanwhile, SBI Life, in its FY22 annual report, said that the Company has adopted smarter ways of on-boarding partners, identifying prospective customers and faster system integration. The Company is constantly using and enhancing analytics capabilities by using Machine Learning and Artificial Intelligence (Al) for improving efficiency, reducing risk while growing business. An emphasis on technology initiatives across the value chain of agency channel has resulted in improved business performance.

With a focus on financial inclusion for allowing lower-income groups of society to gain access to the products that enable them to protect their life and savings, the Company offers various insurance products such as “Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Grameen Bima and Grameen Super Suraksha policies, in order to protect the most economically vulnerable section of the society.

The low product penetration in India will continue to provide significant headroom for the sector to grow. Given these developments, FY23 will see strong demand for suitable life insurance offerings, which means that company's long-term opportunities for growth will be as powerful as ever, SBI Life said.

Tech outlook

Target: Rs 1,371

Support: Rs 1,245

After hitting record high of Rs 1,332, the next immediate hurdle for SBI Life's stock is seen at Rs 1,371 apiece. This is the stock's higher end of the Bollinger Band on the daily charts. Beyond this, the next target for the stock could be Rs 1,382, as per monthly Fibonnaci chart.

On the downside, its immediate support stays at Rs 1,245 per share -- its 20-day moving average (20-DMA). 

That said, while the stock's 20, 50, and 100-DMAs have positive crossovers, the 100-DMA and 200-DMA have negative crossover, which warrants slight caution.

(With inputs from Nikita Vashisht)