Why SBI Life stock fell 5% despite net profit rising 39% YoY; reasons here

Shares of SBI Life Insurance fell 5.4 per cent at Rs 1,623 per share on the NSE in Thursday’s intraday deals. This came after the company posted its quarterly earnings for the second quarter of the financial year 2024-25 (Q2FY25). 

 

The company’s net premium income rose by just 1 per cent Y-o-Y, totaling Rs 20,266 crore for the July-September 2024 period. On the other hand, first-year premium income grew by 6 per cent to Rs 4,915 crore, up from Rs 4,633 crore a year ago.  The value of new business (VoNB) increased by 2 per cent to Rs 2,420 crore, with margins at 26.8 per cent. The insurer's solvency ratio improved to 2.04 per cent in the July-September quarter of the current financial year, compared to 2.01 per cent in the previous quarter (Q1 FY25).  "SBI Life Insurance reported modest Q2FY25E individual annual premium equivalent (APE) growth of 12 per cent Y-o-Y largely due to growth lagging at SBI (just 5.2 per cent Y-o-Y). Adverse change in business mix—largely due to continued traction towards linked/PAR products hurt margins, down 168 bp Y-o-Y to 26.8 per cent—thereby dragging VNB 3.2 per cent Y-o-Y to Rs 14.4 billion," said analysts at Nuvama Institutional Equities.   The brokerage said that its expects an FY25–27 VNB compound annual growth rate (CAGR) of 16.5 per cent and gave a 'Buy' rating to the stock with a target price of Rs 2,280. 

 

Apart from this the life insurance arm of SBI reported healthy financials with a consolidated net profit increase of 39 per cent year-on-year (Y-o-Y) for the second quarter of FY25, reaching Rs 529 crore compared to Rs 380 crore in the same period last year. 

 

Investment income more than doubled, surging 132 per cent Y-o-Y to Rs 19,753 crore for the quarter.

 

In the first half of FY25, individual new business premiums climbed 13 per cent to Rs 11,490 crore, with protection new business premium reaching Rs 1,720 crore. For the half year of FY25, the new business premium fell by 3 per cent Y-o-Y, the company said in a statement. 

 

Gross written premium (GWP) rose by 7 per cent to Rs 35,990 crore, driven by an 11 per cent increase in new business regular premiums and a 16 per cent growth in renewal premiums.

 

Assets under management jumped 27 per cent to Rs 4.38 lakh crore as of September 2024, up from Rs 3.45 lakh crore as of September 2023.

 

The company has a total market capitalisation of Rs 1.65 trillion. Its shares are trading at a price to earnings multiple of 78.81 times.

 

At 10:07 AM, the stock price of the company pared some of its losses and was down 3.90 per cent at Rs 1,649.05 a piece on the NSE. By comparison, the NSE’s Nifty50 rose 0.05 per cent to 24,447.90 level.