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Worst-Performing Life Insurer Is Analysts’ Favourite Bet

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SBI Life Insurance Co. is the analysts’ favourite bet despite being the worst performer among peers.

The subsidiary of India’s largest bank is the only life insurer to decline since listing. Yet, all analysts tracked by Bloomberg have a ‘Buy’ rating on the story.

SBI Life trades at 2.8 times its one-year forward embedded value—the present value of future profits. That’s cheaper than HDFC Standard Life Insurance Co.’s 4.8 times and nearly the same as ICICI Prudential Life Insurance Co.’s 2.7 times, according to a Kotak report.

It has the lowest expense ratio—another measure of profitability— of 11 percent compared with HDFC Life’s 19 percent and ICICI Pru’s 13.1 percent.

Kotak Institutional Equities recently initiated coverage on SBI Life with a target of Rs 800, an upside of 23 percent over the current price. Higher operating leverage, focus on group term policies, better productivity, and higher persistency—renewal rate— will drive margin improvement, the brokerage said.

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