SBILIFE reported strong protection trends in both Retail and Group Protection, while the trend in ULIP remained tepid. 1HFY21 VNB margins remained broadly stable at 18.8% (vs 18.7% in 1QFY21), supported by an improving business mix. Persistency improved across cohorts, with the highest improvement seen in 61st month (by 340bp YoY to 60.9% in 1HFY21), which aided growth in the Renewal business. The company continues to maintain cost leadership, with the total expense ratio declining to 7.7% (~220bp YoY improvement). 2QFY21 shareholders’ PAT grew 131% year-on-year to ~Rs 3.0 billion (in-line). Overall, we expect SBILIFE to deliver 17% VNB growth over FY20–23E. We further expect VNB margins to improve to ~21% and operating RoEV to sustain at ~18% by FY23E. Maintain ‘buy’.
SBILIFE posted net premium growth of 27% year-on-year, led by single premium growth of 71% year-on-year and renewal premium growth of 28% year-on-year. Persistency improved across cohorts (barring 49th month), with 25th/61st month improving by 140bp/340bp year-on-year in 1HFY21. In 2QFY21, Total APE declined 3.2% year-on-year (15% year-on-year decline in 1HFY21). This was largely weighed by 15% year-on-year decline in the Individual Savings business, with ULIP declining 13% year-on-year. Thus, the share of ULIP declined to ~60% (v/s 66% in 2QFY20). On the other hand, Protection growth stood robust at 70% year-on-year, led by both Retail and Group Protection. Overall, the share of Protection improved to 12.5% over 2QFY21 (v/s 7.1% in 2QFY20 and 8.9% in FY20).
VNB margins on actual tax rate improved to 18.8%, primarily led by an increase in Retail Protection. However, absolute VNB declined 2% YoY (~12% YoY in 1HFY21). On an effective tax rate basis, VNB margins stood at 20.2%, while absolute VNB declined 5% YoY (15% year-on-year in 1HFY21).
