On Thursday, JPMorgan adjusted its price target for SBI Life Insurance Co Ltd (SBILIFE:IN), reducing it to INR 2,000 from INR 2,140, while still maintaining an Overweight rating on the stock. The revision follows the company's second quarter fiscal year 2025 results, which showed an annualized premium equivalent (APE) growth of 3% year-over-year, coming off a strong previous year's growth.
SBI Life's value of new business (VNB) was reported at Rs. 14.5 billion, marking a 3% decline year-over-year and falling 6% short of JPMorgan's projections. The company's 2Q margin decreased by 1 to 5 percentage points year-over-year to 26.9%. However, there was a marginal quarter-over-quarter improvement of 0.1 percentage points. This was attributed to a mix shift towards unit-linked insurance plans (ULIPs), which was balanced out by product repricing in the non-participating segment.
The insurance company saw varied performance across its distribution channels. The agency channel experienced a robust 25% year-over-year growth in APE, while the bancassurance channel continued to grow at a moderate rate of 3% year-over-year, measured against a high base from the previous year.
JPMorgan analysts suggest that the product mix, which shifted this quarter, is likely at its lowest point and expect an increase in the mix of protection and non-participating products in the second half of the year, supported by new product launches, particularly digital offerings.
JPMorgan welcomes SBI Life's strategy aimed at enhancing its product mix to support growth. The firm's management has provided guidance for a 12-15% VNB growth in the fiscal year 2025, which JPMorgan believes is an achievable target. The firm estimates that SBI Life will achieve a 12% year-over-year VNB growth with a margin level of 26.8% for fiscal year 2025, despite a predicted 1.3 percentage point year-over-year decline. The Overweight rating reflects JPMorgan's continued positive outlook on the stock.
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