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SBI Life’s APE grew 9% to Rs214bn in FY25, but Q4FY25 remained muted (+2% YoY). ULIP declined by 5% YoY in Q4 whereas Non-par grew 62% YoY, showing a drift towards more profitable products. VNB margin stood at 27.8% in FY25 and we increase our estimate by 80bps/65bps to include positive numbers. The company continues to be the market leader with a competitive cost advantage and total expense ratio of 9.7% in FY25. EV grew 21% YoY to Rs702.5bn. We have made minor changes to our estimates with a target price at Rs1,910 (vs Rs1,920), based on 2.0x FY27E EV; maintain BUY.

Focus on traditional products

Owing to the volatile equity markets in Q4FY25, ULIPs demand was subdued, constituting 54% of total APE (64% in FY25) compared to 59% in Q4FY24. Non-par business grew 21% YoY to Rs39bn in FY25, causing its share in total APE to increase to 18% (vs. 16% in FY24). Specifically, Q4FY25 growth of 17% YoY led to its share increasing from 15% to 24%. The management also stated that traditional products will be in more demand in FY26. Total Protection business formed 10% of APE in FY25 vs. 11% in the year-ago period. Individual Protection APE declined 12% YoY whereas Group Protection grew 5% YoY. Pure Protection has been growing faster than ROP (Return of Premium), aiding higher margins. Persistency in the 13th month and 61st month cohort improved in FY25.

Market leader in private space; APE marginally below estimate

SBI Life’s APE grew 9% to Rs214bn in FY25 (+2% YoY to Rs54bn in Q4FY25) compared to our estimate of Rs217bn. Individual APE increased by 12% YoY to Rs193.5bn. The company has maintained its market leadership in private life insurance space, commanding 17.5% share in individual APE in Q4FY25 and 22.8% in FY25. We have trimmed our APE estimates by 3%/6% for FY26/FY27 to Rs238bn/Rs268bn.

VNB margin above estimate

SBI Life’s VNB increased 7% to Rs60bn in FY25 whereas Q4FY25 growth rate remained high at 10% YoY. VNB margin fell from 28.1% last year to 27.8% in FY25 (vs our estimate of 26.8%). We have increased our VNB margin estimates by 80bps/65bps for FY26/FY27 to 28%/27.9% as the focus remains on profitable Non-par business, partially offset by expected growth in Par products that offer margins similar to ULIP. VNB is expected to clock 12% CAGR over FY25-FY27.

Agency channel improves productivity; expense ratio trimmed for forecasts

SBI Life’s agency channel is the most productive in the private space with Rs0.27mn per agent in individual NBP terms (+20%) in FY25. The company added 90,000 agents on gross basis in FY25 but weeded out the inefficient ones, leading to ineffective net agent addition. It added 70 branches in FY25 and plans to add another 87 branches in FY26. The expense ratio was 8.4% in Q4FY25 (9.7% in FY25) (our estimate of 11.2%). Baking in these, we have reduced our total expense ratio estimate by 35-40bps to 10.5%/10.7% for FY26/FY27.

One of our top picks – BUY

We have trimmed our EV estimates marginally for FY26/FY27. SBI Life is trading at 1.7x FY27E P/EV. Considering the company’s consistent performance and market leadership, we have assigned an unchanged multiple of 2.0x on FY27E P/EV (-1SD to long term mean). Our target price has been marginally changed to Rs1,910 (vs Rs1,920) and carries 18% upside. SBI Life continues to be among our top picks in life insurance – maintain BUY. Key risks: Change in regulations, adverse economic events and change in persistency.

Valuation

SBI Life had muted APE growth in Q4FY25, but its VNB margin was a positive surprise. The focus remains on traditional products as market volatility makes ULIP less attractive. The banca channel had lower growth but agency growth remained solid. We lower our APE estimate by 3%/6% for FY26/FY27 but increase VNB margin estimate based on a solid Q4. EV has been marginally tweaked and is expected to clock 17% CAGR over FY25-FY27E to Rs959bn. The stock is currently trading at 1.7x FY27E P/EV. We continue to value SBI Life at 2.0x (-1SD to long term mean) to arrive at a target price of Rs1,910 (vs Rs1,920). Maintain BUY. Downside triggers: Regulation change and market share loss.

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