Shares of SBI Life climbed over 5 percent to touch an all-time of Rs 881.95 on NSE on Wednesday. The stock has been among the biggest gainers this year, rising over 60 percent in value as its business shows consistent growth.
On Tuesday, SBI Life Insurance Company reported a 48.2 percent year-on-year fall in its net profit for the September-ended quarter at Rs 129.84 crore. Earnings were hurt from a provision of Rs 70.3-crore for diminution in value of investments in the quarter under review. Such a provision was not made in the same period of the previous year.
Brokerages are optimistic on the stock and have maintained a "buy" call following the quarterly results.
Why the optimism?
Experts say that when a life insurance company does not make a profit, it means that its business has increased which causes an increase in the cost of acquisition. Investors are hopeful about the prospects of future profits rather than the present.
SBI Life's 34 percent increase in new business premium was a more important factor to investors than an increase in its quarterly profits.
The company's gross written premium (GWP) and annual premium equivalent (APE) growth on a year-on-year basis were strong at 33.3 percent and 17.5 percent, respectively.