SBI Life execution, non-par growth and resilient distribution support earnings outlook

Investment View and Recommendation

ICICI Securities maintained a BUY recommendation on SBI Life Insurance Company in its November 3, 2026 results update, citing strong H1FY27 execution across new business growth, profitability and product mix. H1FY27 APE, VNB and PAT grew 18.4 per cent, 18.9 per cent and 17.0 per cent YoY, respectively. SBI Life reiterated its guidance for 14-15 per cent YoY growth in individual APE for the full year.

ICICI Securities remains constructive on the company because of its execution record, improving product mix, strong return on embedded value and structural opportunities in protection, sum assured and annuity.

New Business Growth and Product Mix

Reported Q2FY27 total APE grew 7.1 per cent YoY to Rs 63.7 billion, while individual APE increased 10.2 per cent to Rs 58.4 billion. Individual savings, which accounted for 84 per cent of total APE, rose 8.8 per cent.

Management expects a proposed regular-premium deferred annuity product, potentially launched in Q3FY27, to be margin-accretive and support non-ULIP growth. The report also notes a shift towards pure protection, with the return-of-premium to non-return-of-premium term-product mix at approximately 58:42.

Value Creation and Profitability

Q2FY27 VNB increased 12.0 per cent YoY to Rs 18.6 billion, while the VNB margin improved 130 basis points YoY to 29.2 per cent. Management maintained its 26-28 per cent VNB-margin range, with the objective of maximising absolute VNB rather than pursuing margin expansion alone. SBI Life plans to continue product repricing and optimise customer returns and profitability.

A reported GST-related impact of Rs 5.3 billion affected H1FY27 PAT, cost ratios and VNB. Reported H1FY27 PAT grew 17 per cent YoY to Rs 12.7 billion; excluding this impact, PAT would have been approximately Rs 16.9 billion, representing 39 per cent YoY growth. The operating expense ratio rose to 6.9 per cent from 6.2 per cent, but was 5.8 per cent excluding the GST impact.

Distribution and Productivity

Distribution remained broad-based. In Q2FY27, bancassurance represented 57.6 per cent of APE and grew 8.6 per cent YoY, while agency represented 30.5 per cent and grew 7.8 per cent. Other channels declined 2.6 per cent. In H1FY27, non-bancassurance channels grew 30.7 per cent, compared with 9.3 per cent growth for bancassurance.

Bancassurance productivity was Rs 6 million per branch and Rs 5 million on individual APE in H1FY27. Agency productivity was Rs 0.25 million on individual NBP, and the company added more than 72,000 agents on a gross basis. SBI Life has reduced its bancassurance dependence in recent years, with the bancassurance mix on NBP falling to 47 per cent in H1FY27 from 60 per cent in FY23.

Persistency, Capital and Investment Strength

Persistency improved for the 13th, 25th, 37th and 49th month cohorts. The 61st-month persistency declined because that cohort originated during Covid.

Solvency improved to 197 per cent in H1FY27. Embedded value was Rs 873.5 billion, operating RoEV was 18.8 per cent and AUM rose 9 per cent YoY to Rs 5.3 trillion. More than 94 per cent of debt investments were in AAA or sovereign instruments.

Valuation and Forecasts

ICICI Securities reduced its target price to Rs 2,217 from Rs 2,345 by lowering the FY28E embedded-value multiple to 2.0 times from 2.1 times. The revised multiple explicitly reflects possible additional regulatory risk.

The broker believes SBI Life's valuation multiple could improve because of its industry-leading RoEV, 18.9 per cent H1FY27 VNB growth, resilient business flows despite regulations and favourable protection and annuity opportunities.

Key Risks

• Adverse regulatory changes, including higher corporate tax rates.
• Fresh restrictions on distribution.