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FutureStarrSBI Life's Q4 Results Show Steady Growth In Net Profit
The PSU life insurance company reported a 15 per cent year-on-year rise in net profit for the quarter ended March. The company also saw a significant increase in gross written premium (GWP) and new business premium (NBP) during the period. Gross Written Premium (GWP) The Q4 results of SBI Life Insurance Company showed steady growth in net profit. The insurer posted a profit of Rs 532 crore for the quarter, compared to Rs 431 a year ago. During the same period, SBI Life's gross written premium (GWP) increased by 24 percent. The company's GWP is expected to increase by an average of 17 percent per year over the next five years. During the same period, its annualised premium equivalent (APE) rose by 10 percent and new business premium (VoNB) rose 23 percent. SBI Life's VNB margin expanded by 450 basis points year-on-year to 30.1%, aided by higher sales of non-par savings products. The insurer also reported an operating return on embedded value (EREV) of 22.1%, better than analysts' expectations. However, the brokerage is slightly disappointed with APE growth, which grew by 12% year-on-year, lower than management's expectation of about 20%. The brokerage also expects some impact from the taxation changes and a slight risk in key distribution channels. Despite these challenges, the brokerage remains confident about SBI Life's business-as-usual performance in FY24. It is also bullish on the stock, with a price target of Rs 1,410 apiece. SBI Life Insurance Company is one of the leading life insurance companies in India. It has a strong distribution network of 992 offices, 275,374 trained insurance professionals, including agents, CIFs and SPs. The company offers participating and non-participating insurance products. Its participating segment consists of individual and group life policies, while its non-participating segment focuses on protecting wealth through investments. According to the company's website, SBI Life has a robust distribution network of over 992 offices with over 208,774 insurance professionals, including agents, CIFs, and SPs across the country. In addition, the company has a large and productive network of 14 bancassurance partners with over 39,000 partner branches across the country. The company's consolidated net profit for the quarter increased by 26% year-on-year to Rs 235 crore, with new business premium growing 18% year-on-year to Rs 5,635 crore. The company also recorded a four-year CAGR of 20.1% in its consolidated net profit. Net Premium Income (NPI) The Q4 results of SBI Life show steady growth in net profit. Its net premium income jumped 14% in Q4 of fiscal 2022-23 (FY23), with a 15% increase in gross written premium. The company's new business premium also grew 19%. The company reported a net profit of Rs 777 crore for the quarter ended March, which is 15 percent higher than the earnings clocked in the year-ago period. The company's gross written premium grew by 15 percent in the entire fiscal year, with growth driven by regular and renewal business. Management is optimistic on growth momentum in FY24, expecting a growth rate of 20-25%. However, VNB margins are slightly lower than management estimates due to weaker sales ahead of the tax change and a slight risk in key distribution channels. Brokerage Morgan Stanley maintains a 'buy' rating on SBI Life shares with a target price of Rs 1,650 apiece, which implies an upside of 36%. The brokerage expects the company's net profit to grow 23% year-on-year in the next three quarters. The brokerage believes that SBI Life is a secular growth story and will continue to benefit from strong consumer demand. The firm has a well-diversified portfolio that includes life insurance, health insurance, and asset management products. SBI Life's financial results were released on Wednesday, with a 15 percent year-on-year increase in net profit and net premium income. The company also announced a record dividend of Rs 2.50 per equity share, which is equal to 5% of the face value. The insurance firm's net profit climbed 15% to Rs 780 crore in Q4 of fiscal 2023, while net premium income soared 14%. Its net profits for the year soared to Rs 82,085 crore, up from Rs 43,843 crore a year ago. The company's single premium income also rose to Rs 10,286 crore, up from Rs 6,764 crore a year earlier. Profit After Tax (PAT) SBI Life has posted steady growth in net profit after tax (PAT) during the fourth quarter of financial year 2022-23. It reported a profit of Rs 777 crore for the Q4 period, higher by 15% from the year-ago quarter. It also reported a 14% increase in net premium income for the same period to Rs 19,897 crore. The company's underlying profitability has seen steady improvement and management remains optimistic about the business-as-usual performance in the financial year ending March 2023. The company's operating return on embedded value (OREV) jumped to 22.1% in the Q4 period, which was better than estimates. This was mainly due to sales of non-par savings and protection products. In addition, the insurer's VNB margins were higher than expectations and a strong re-booking of non-par products helped boost profits in Q4. A strong distribution network consists of 275,374 trained insurance professionals consisting of agents, CIFs and SPs with 992 offices across the country. The company also has an established brand image and market reputation. This has enabled it to build a strong brand equity and help it sell products across all segments. Moreover, SBI Life has a strong association with State Bank of India, where it acts as a corporate agent to access the bank's extensive network of branches and customers for selling insurance products. This gives the company a wide reach and helps improve its market share in the life insurance industry. As a result, SBI Life has one of the most productive agency networks in the country and a large number of agents. This in turn, has led to a high share of new business originating through the agency channel. SBI Life's agency channel is a key revenue contributor to the company and contributes around 18% of its total new business. This channel focuses on offering insurance products to the unbanked population in India and the company's deep penetration in rural areas is expected to drive growth. In addition, SBI Life has a strong distribution network and a high presence in the urban markets. This in turn has enabled the company to maintain a good persistency ratio and favourable product mix. Net Profit SBI Life's Q4 Results Show Steady Growth In Net Profit Despite the weak macroeconomic backdrop, SBI Life has seen steady growth in its net profit. The company's consolidated profit after tax (PAT) rose 14 per cent to Rs 19,897 crore during the quarter, as against a loss of Rs 17,434 a year ago. The bank also said that it saw positive impact from a decline in provisions on bad loans. The bank's net interest income (NII) grew 28 per cent, while net profit rose 32 percent. The company also reported strong growth in total assets. The company's loan book stood at Rs 11,379 crore as of March 31, 2023, up from Rs 9,287 a year earlier. In terms of revenue, SBI Life's total gross premium income (GWP) grew 10 per cent to Rs 13,879 crore during the quarter, as against a growth of 14 per cent in the same period last year. The insurer's GWP growth was led by the individual rated policy segment. In addition, the insurance company saw healthy growth in non-par saving products. SBI Life's net premium income growth was largely driven by growth in individual rated policies and non-par savings. The insurer's net interest margin was higher than the industry average in the quarter. The company also saw a better-than-expected operating return on embedded value in the quarter. Analysts' sentiment on SBI Life is quite strong, with most of them maintaining a 'buy' rating on the stock. They have 12-month consensus price targets that imply an upside of 36.1%, according to Bloomberg data. The stock is trading at a premium to its peers and offers some compelling growth prospects in the near future. The firm is expected to benefit from increasing demand for life insurance. The stock has a market capitalisation of over Rs 7,700 crore, and it is trading at a price-to-book ratio of 1.04. The company's financial strength has been bolstered by its low debt-to-EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) ratio.