SBI Life Q2 Results Review- Value Of New Business Margins Contract Due To Shift In Product Mix: Motilal Oswal

Motilal Oswal Report

SBI Life Insurance Company Ltd. reported a weak performance in Q2 FY25. Annual premium equivalent grew 3% YoY to Rs 53.9 billion (11% miss). For H1 FY25, it grew 9% YoY to Rs 90.3 billion.

Absolute VNB declined 3% YoY to Rs 14.5 billion (14% miss). For H1 FY25, it grew 3% YoY to Rs 24.2 billion. The management expects VNB growth to remain in the range 12-15% in FY25.

VNB margins came in at 26.9% vs. 28.5% in Q2 FY24 and 26.8% in Q1 FY25 (estimate 28%).

However, the management expects margins to remain in the range of 26- 27% in FY25 on the back of new product launches in the protection segment and a minimal impact of surrender charges.

In Q2 FY25, shareholder PAT grew 39% YoY to Rs 5.3 billion (in line). For H1 FY25, it grew 38% YoY to Rs 10.5 billion.

We expect SBI Life to deliver an 18% CAGR each in APE and VNB over FY24- 27E, while return on embedded value is likely to remain at ~20% over FY27.

Due to strong growth in ULIPs and a blip in protection sales, we have cut our APE/VNB estimates for FY25.

We reiterate our Buy rating on the stock with a target price of Rs 2,100 (premised on 2.3 times Sept’26E embedded value).

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