Shriram Life Insurance
Company Background:Shriram Life Insurance is the subsidiary of Shriram Capital Limited. Financial services are the core business of the group and insurance business is an extension to it. The company has an extensive branch network of over 3800 branches.
Shriram Capital, the promoter entity owns 74% stake and nearly 23% stake is owned by Sanlam, one of the largest insurers in South Africa which has partnered Shriram Group in both its Life and Non-Life Insurance ventures.
Business Performance: The company’s profitability declined in FY20 as income declined over FY19. Profit after tax stood at Rs. 35.3 Crores in FY20 versus Rs. 62.26 crores. The reason for underperformance is unclear as the latest annual report for FY20 is not available for management commentary. However, even if we compare the company with its listed peers, currently it looks attractively priced. Shriram group is known for focusing only on profitable growth which is a good sign of prudence.
Based on financials of FY 2019-20
| Rs. Crores | ||||
| Particulars | Shriram Life Insurance Co. Ltd. | ICICI Prudential Life Insurance Co. Ltd. | SBI Life Insurance Co. Ltd. | HDFC Life Insurance Co. Ltd. |
| Premium Earned (Net) | 1723.75 | 32878.95 | 40324.01 | 32223.60 |
| Annualised Premium Equivalent (APE) | 565.43 | 7381.00 | 10737.00 | 7407.00 |
| Operating Profit | 60.54 | 2186.97 | 1462.65 | 971.42 |
| Operating Profit Margin (%) | 3.51% | 6.65% | 3.63% | 3.01% |
| Profit After Tax | 35.30 | 1068.75 | 1422.18 | 1295.27 |
| PAT Margin (%) | 2.05% | 3.25% | 3.53% | 4.02% |
| Diluted Earnings Per Share (EPS) | 1.97 | 7.43 | 14.22 | 6.41 |
| Book Value Per Share | 34.21 | 50.27 | 87.43 | 33.68 |
| No. Of Shares Outstanding (in crores) | 17.94 | 143.59 | 100.00 | 201.88 |
| Market Price Per Share (as on Nov 20 2020) | 180 | 453.6 | 845.45 | 663.9 |
| Market Capitalisation | 3228.75 | 65130.73 | 84547.22 | 134028.03 |
| Embedded Value (EV) | 1723.75 | 23030.00 | 26291.00 | 20650.00 |
| Embedded Value / Premium Earned (Net) | 1.00 | 1.43 | 1.53 | 1.56 |
| P/B Multiple | 5.26 | 9.02 | 9.67 | 19.71 |
| P/E Multiple | 91.37 | 61.05 | 59.45 | 103.57 |
| Market Capitalisation/Premium Earned (Net) | 1.87 | 1.98 | 2.10 | 4.16 |
| Market Capitalisation/Embedded Value | 1.87 | 2.83 | 3.22 | 6.49 |
| Profit After Tax / Embedded Value (%) | 2.05% | 4.64% | 5.41% | 6.27% |
For detailed numbers and financials please click here (Link – https://www.shriramlife.in/slp/publicdisclosure.aspx)
Summary: The Company maintains a good profitable track record but with a poor growth track record compared to its peers. Not much is known about the group’s future expansion plans but the business model is more around serving the customers of shriram group. So far the company has not entered in a critical area of bancassurance.Hence, although it is valued attractively but future growth holds key to wealth creation.