Page 1

SBI Life Insurance Ltd.

RESULT UPDATE 17th October, 2019

 India Equity Institutional Research II Result Update - Q2FY20 II 17th October, 2019 Page 2

SBI Life Insurance Ltd. Challenging the market leader

CMP Target Potential Upside Market Cap (INR Cr) Recommendation Sector
INR 877 INR 1,027 17.0% INR 87,735 BUY Life Insurance
Result Highlights of Q2 FY20:
• SBI Life’s GWP increased 33.3% YoY/53.0% QoQ to INR 10,243 Cr. New Business Premium (NBP) rose by 33.3% YoY (up 47.8% QoQ)
• Value of New Business (VNB) grew by 33.3% on YoY/(+57.6% QoQ) while New business margin expanded by 80 bps YoY to 18.1%.
• In H1FY20 product mix stood at 7%/9%/43%/29%/ 12% for Par/Non-Par /ULIPs/Group/Protection compared to 14%/2%/49%/25%/10% in H1FY19
• Solvency ratio improved by 400 bps QoQ to 220% while Net worth improved by 13.8%YoY/ up 1.6% QoQ to INR 8,070 Cr.
• AUM size stood at INR 1,54,760 Cr. up by 22.66%YoY/5.31% QoQ basis. Debt: Equity mix in AUM stood in the ratio of 77:23
• PAT of INR 130 Cr. down by 48.2% YoY/ (down 65.1% QoQ) impacted by one-offs.

MARKET DATA KEY FINANCIALS

Shares outs (Cr) 100 Particulars (INR Crores) FY17 FY18 FY19 FY20E FY21E
GWP 21,015 25,354 32,989 42,148 53,698
Equity Cap (INR Cr) 7,576
PAT 955 1,150 1,327 1,840 2,262
Mkt Cap (INR Cr) 87,735 EPS (INR/Share) 9.5 11.5 13.3 18.4 22.6
52 Wk H/L (INR) 893/516 NBP (APE basis) 6,727 8,538 9,702 11,331 13,891
Volume Avg (3m K) 1,168 VNB 1,037 1,385 1,720 1,926 2,361
VNB Margin (%) 15.4% 16.2% 17.7% 17.0% 17.0%
Face Value (INR) 10
EVPS (INR/Share) 165.4 190.7 224.1 264.4 311.4
Bloomberg Code SBILife IN Source: Company, KRChoksey Research

Robust growth in new business; improving market share gains among private LifeCos
SHARE PRICE PERFORMANCE
SBI Life delivered a strong set of numbers with NBP increasing 33.3% YoY (up 47.8% QoQ) to INR
150 4,662 Cr while Renewal premium grew by 33.2% YoY (up 57.7% QoQ) to INR 5,581 Cr in Q2FY20
translating into an overall growth of 33.3% YoY/ (+53.0% QoQ) in GWP. Overall, SBI Life has
advanced its market share (on NBP basis) among private players to 21.8% in Q2FY20 (compared
125
to 18.8% in Q2 last year) closing in on private sector market leader HDFC Life. ULIP business
remained strong and contributed ~43% in NBP. Around 57% of NBP was mobilized through the
bancassurance channel while ~18% came via agency channel and the remaining ~25% from other
channels including direct/online sales. While new business acquisition remained robust, SBI Life
100
missed on the earnings front and reported a 48% YoY decline in PAT to INR 130 Cr. in Q2FY20.
PAT was impacted by new business strain and one-off provisioning of INR 70 Cr. (provisioning of
~48% of DHFL exposure).
75
Better product mix; high margin Protection segment driving VNB growth and margin profile
SBI Life successfully placed high margin products with Protection segment NBP growing 59%
50 YoY to INR 930 Cr. in H1FY20. Strong performance was seen in individual protection business
Jan-18

Jan-19

May-19
Dec-17

May-18
Jul-18
Aug-18
Oct-18
Nov-17

Feb-18

Nov-18
Dec-18
Mar-18
Apr-18
Jun-18

Feb-19

Jul-19
Aug-19
Oct-19
Sep-18

Mar-19
Apr-19
Jun-19

Sep-19

(+133% YoY) which also saw higher average ticket size of ~ INR 17,000 in H1FY20 compared to
INR 12,000 in H1FY19. Within protection, home loan portfolio contributed the highest share at
69%. Protection product mix increased to 11.9% in H1FY20 (as against 10.5% in H1FY19). The high
SBILIFE NIFTY
margin protection business translated into VNB growth of 33.3% YoY /(+57.6% QoQ) while VNB
margin expanded by 80 bps YoY to 18.1% in Q2FY20. Overall, Embedded Value increased 24% YoY
to INR 26,150 Cr.
MARKET INFO Impressive operating parameters; new products in the pipeline
SENSEX 38,599 Alongside robust new business acquisition, SBI Life also delivered on several key operating
NIFTY 11,464 parameters. The 13th month persistency ratio improved ~310 bps YoY to 83.1% in Q2FY20 while
61st month persistency ratio improved by 410 bps YoY to 59.6%. Solvency ratio improved by 400
bps QoQ to 220%; expense ratio (to GWP) fell to 9.9% in Q2FY20 (compared to 11.2% in Q1FY20)
while Surrender ratio declined to 3.6% in H1FY20 (from 5.3% in H1FY19). These positive
dimensions reflects quality underwriting operations and high customer satisfaction.
SHARE HOLDING PATTERN (%)

Particulars Sep-19 Jun-19 Mar-19

Promoters
FIIs
62.8
23.72
67.3
19.42
69.8
14.06 19.7% 17.2%
DIIs 6.93 6.15 4.36
Others 6.54 7.13 11.78 APE CAGR between FY19 and VNB CAGR between FY19 and
Total 100 100 100 FY21E FY21E

ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576

Parvati Rai, head-research@krchoksey.com, +91-22-6696 5413 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update - Q2FY20 II 17th October, 2019 Page 3

SBI Life Insurance Ltd.

Key Concall Highlights: (i) SBI Life is targeting to get approval for its HNI traditional saving products that would happen by end of October
2019 and post the approval new products will be launched (ii) VNB margin changes can be bifurcated into improved product mix
contributing ~400 bps which was offset by interest rate decline on 10-year to 15-year bond impacting the margin by ~300 bps (iii) Mortality,
persistency and expense assumptions are in line with March 2019 expectations as assumptions are reviewed at the end of the year (iv) Out
of provisioning of INR 70 Cr., ~INR67 crores were related to DHFL which is in the shareholder’s AUM. The provisioning constituted ~48% of
DHFL exposure and the rest of provisioning will come in subsequent quarters. Management stated that the total exposure to NBFC and HFC
is around INR 15,000 Cr. out of which linked is INR 5,000 Cr and non-linked is INR 10,000 Cr. Currently there is no other stressed assets in the
books (iv) Overall exposure of IndiaBulls Housing Finance, Yes Bank and DHFL taken together is around ~INR 400 Cr. (v) The increase in
Embedded value was mainly due to new business and unwind which are roughly similar. Also unrealized gain on debt amounting to ~INR
600 Cr contributed to the increase in EV (vi) Sensitivity of interest rate sensitivity to VNB reduced to 0.5% in Q2FY20 compared to 3% in
Q1FY20 on a 100 basis points movement due to change in methodology (vii) In the next three years, the company is aspiring a 13th month
persistency of around 90% and for 61st month persistency guidance is 70% (viii) Change in actuarial liability was high primarily due to M2M
gain on unit portfolio wherein 65% of the portfolio is comprised of fixed income securities
Valuation and view
In the backdrop of economic slowdown, SBI Life delivered strong new business growth ~40% YoY on YTD basis outpacing the average
private LifeCos (growth of ~20%) on the back of its vast distribution reach. SBI Life is making commendable market share gains and closing
on its gap with rival HDFC Life in new business acquisition. Strong return ratios in the past (average FY17-19 RoE at 19% and RoEV at 17.4%),
positive variances (through better persistency ratios, low expense ratio) and other assumption changes contributed towards the EV growth
in the past and we expect the trend to remain intact. On the back of improvement in VNB margin through higher protection mix,
improvement in agent productivity, rationalization of distribution channels (lower Opex), we expect SBI Life will continue to deliver RoE at
22.6% and RoEV at 18.5% in FY21E. Since our coverage initiation, the shares of SBI has advanced 9.9%. At 3.6x P/EV, SBI Life shares are trading
at 2.4% premium to sector average. We apply a 3.25x P/EV on FY21E EVPS of INR 311 and a VNB multiple of 35x on FY21E to arrive at a revised
weighted average TP of INR 1,027 per share for SBI Life (50:50 weights on the P-EV and appraisal value methodology); indicating a 17.0%
upside to the current price; accordingly, we reiterate the shares of SBI Life an “BUY”.
Product mix on NBP basis (%): Shifting away from ULIPs Channel mix on APE basis (%): Banca dominates distribution

1% 2% 2% 1%
5%
5% 5% 4% 5% 9% 7%
10% 11% 12% 12%
13%
14% 11%
13% 12% 12% 27% 26%
15% 9% 6% 31% 31% 28% 26%

17%
23% 20%
27% 28%
30%

68% 70% 64% 67%

64% 63%

46% 51% 57% 54% 42% 43%

Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20
ULIPs Group Par Protection Non Par Banca Agency others

NBP Market Share (%): Increasing share among Private Steady improvement in VNB margin
LifeCos 600

560 20%

520 520 20%

23.4% 500

420 19%

21.8% 400 19%

330
18%

18.1%
300

19.9% 19.9% 220 17.9% 18%

17.7%
200 17.5% 17%

17.3%
17.0% 17%

17.3% 100

16%

0 16%

Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20

Source: Company, KRChoksey Research VNB (INR Cr.) VNB margin (%)

ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576

Parvati Rai, head-research@krchoksey.com, +91-22-6696 5413 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update - Q2FY20 II 17th October, 2019 Page 4

SBI Life Insurance Ltd.

KEY FINANCIALS

Exhibit 1: Revenue Account/Policy Holder’s Account

Particulars (Crore INR) FY17 FY18 FY19 FY20E FY21E

Revenue Account / Policyholders' Account
Gross premiums 21,015 25,354 32,989 42,148 53,698
Reinsurance ceded 163 194 99 370 471
Net premiums 20,852 25,160 32,890 41,778 53,227
Net income from investments 9,424 8,600 11,371 12,458 14,728
Total income 30,276 33,761 44,261 54,236 67,955
Commission expenses 783 1,121 1,346 1,770 2,255
Operating expenses 1,645 1,719 2,124 2,866 3,759
Service tax on linked charges 227 348 454 577 779
Operating profit 27,621 30,573 40,337 49,024 61,162
Benefits paid (net) 9,526 11,677 15,233 19,218 24,351
Interim Bonuses Paid 24 35 61 74 101
Change in reserves 17,241 17,595 23,592 27,651 34,186
Provisions 175 243 365 520 631
Surplus/(Deficit) 654 1,023 1,087 1,561 1,893
Source: Company, KRChoksey Research

Exhibit 2: Premium Schedule

Particulars (Crore INR) FY17 FY18 FY19 FY20E FY21E
First year premiums 6,207 8,139 9,057 10,597 12,716
Single premiums 3,937 2,827 4,735 7,339 11,742
New business premium (NBP) 10,144 10,966 13,792 17,936 24,459
NBP growth (%) 43% 8% 26% 30% 36%
Renewal premiums 10,871 14,388 19,197 24,212 29,239
Renewal premiums growth (%) 25% 32% 33% 26% 21%
Total premiums 21,015 25,354 32,989 42,148 53,698
Total premium growth (%) 33% 21% 30% 28% 27%
NBP - APE 6,727 8,538 9,702 11,331 13,891
NBP - APE growth (%) 33% 27% 14% 17% 23%
Source: Company, KRChoksey Research

Exhibit 3: Profit & Loss Account/Shareholder’s Account

Particulars (Crore INR) FY17 FY18 FY19 FY20E FY21E

Profit & Loss Account / Shareholders' Account
Transfer from Technical account 655 829 998 1,461 1,743
Income from investments & other income 410 464 519 559 737
Total income 1,064 1,293 1,518 2,020 2,479
Total expenses 90 108 145 123 148
PBT 975 1,184 1,373 1,897 2,331
Provision for tax 20 34 46 57 70
PAT 955 1,150 1,327 1,840 2,262
Source: Company, KRChoksey Research

ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576

Parvati Rai, head-research@krchoksey.com, +91-22-6696 5413 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update - Q2FY20 II 17th October, 2019 Page 5

SBI Life Insurance Ltd.

Exhibit 4: Balance Sheet
Particulars (INR Cr) FY17 FY18 FY19 FY20E FY21E
Sources of funds
Share capital 1,000 1,000 1,000 1,000 1,000
Reserves and surplus 4,465 5,374 6,460 7,967 9,792
Fair value change account - net 87 153 116 116 116
Shareholders' fund 5,552 6,528 7,576 9,083 10,909
Liabilities (Policyholder's Funds)
Fair value change account - net 776 943 1,056 1,273 1,540
Policy liabilities 48,324 55,556 64,954 78,245 94,676
Provision for linked liabilities 38,856 49,558 60,592 72,990 88,318
Credit/[debit] fair value change account 3,790 3,105 5,161 6,216 7,522
Discontinued due to non-payment of premium 1,927 2,272 3,376 4,067 4,921
Sub-Total 93,673 1,11,434 1,35,140 1,62,790 1,96,976
Funds for future Appropriations 0 193 282 0 1
Total Sources of Funds 99,225 1,18,156 1,42,998 1,71,874 2,07,886
Application of Funds
Investments
- Shareholders' 4,296 5,014 5,723 6,696 8,035
- Policyholders' 46,962 54,486 64,472 78,012 94,394
Asset held to cover linked liabilities 44,573 54,936 69,129 83,646 1,01,212
Loans 178 171 173 270 270
Fixed assets - net block 538 581 595 476 476
Net current assets 2,678 2,968 2,905 2,774 3,499
Total Applications of Funds 99,225 1,18,156 1,42,998 1,71,874 2,07,886
Source: Company, KRChoksey Research

EV Calculation (INR Cr) FY17 FY18 FY19 FY20E FY21E

Opening EV 12,548 16,539 19,071 22,405 26,436
Unwind 1,087 1,406 1,621 1,904 2,247
VNB (or NBAP) 1,037 1,385 1,720 1,926 2,361
Operating variance 764 163 -16 283 283
EV Operating Profit (EVOP) 2,888 2,954 3,325 4,114 4,891
Non-operating variance 1,283 -181 250 250 250
EV Profit 4,171 2,773 3,575 4,364 5,141
Net capital injection -180 -241 -241 -333 -436
Closing EV 16,539 19,071 22,405 26,436 31,141
Source: Company, KRChoksey Research

Key Financials (INR Cr.) FY17 FY18 FY19 FY20E FY21E

Total premium 21,015 25,354 32,989 42,148 53,698
Net premium earned 20,852 25,160 32,890 41,778 53,227
NBP-APE 6,727 8,538 9,702 11,331 13,891
Combined ratio (%) 11.6% 11.2% 10.5% 11.0% 11.2%
Surplus/(Deficit) 654 1,023 1,087 1,561 1,893
VNB margin (%) 15.4% 16.2% 17.7% 17.0% 17.0%
PAT 955 1,150 1,327 1,840 2,262
EPS (INR) 9.5 11.5 13.3 18.4 22.6
EVPS (INR) 165.4 190.7 224.1 264.4 311.4
RoEV (%) 23.0% 17.9% 17.4% 18.4% 18.5%
RoE (%) 18.6% 19.0% 18.8% 22.1% 22.6%

ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576

Parvati Rai, head-research@krchoksey.com, +91-22-6696 5413 is also available on Bloomberg KRCS<GO> www.krchoksey.com
Thomson Reuters, Factset and Capital IQ
India Equity Institutional Research II Result Update - Q2FY20 II 17th October, 2019 Page 6

SBI Life Insurance Ltd.

SBI Life Insurance Rating Legend (Expected over a 12-month period)

Date CMP (INR) TP (INR) Recommendation Our Rating Upside

16-Sept-19 798 972 BUY
Buy More than 15%
Accumulate 5% – 15%
Hold 0 – 5%
Reduce -5% – 0

Sell Less than – 5%

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ANALYST KRChoksey Research Phone: +91-22-6696 5555, Fax: +91-22-6691 9576

Parvati Rai, head-research@krchoksey.com, +91-22-6696 5413 is also available on Bloomberg KRCS<GO> www.krchoksey.com
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