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Margin surprise augurs well for SBI Life

Our view – Agency channel to remain the key driver of growt

APE growth – Individual APE growth was healthy for FY25 and is expected to gain momentum driven by Agency channel: New business APE for 4QFY25 de-grew/grew -21.5%/2.3% QoQ/YoY. Total APE for FY25 was up by 9% YoY to Rs 214.2 bn where Individual APE was up by 12% YoY to Rs 195.9 bn. Going forward, the management has guided that on individual APE basis it will grow by 13-14%, which is slightly ahead of the expected growth for the total industry at 12%. The SBI branch productivity on individual APE terms was Rs. 5.4mn, up 9% YoY. The banca channel, which grew 8% for the year FY25, is expected to grow at 10% or at low double digits for FY26. The agent productivity was at Rs 0.29mn on individual NBP for FY25, up 20% YoY. The management has guided that there will be continued focus on the agency channel and it is expected to grow at 25% YoY.

VNB margin – Calculated VNB margin has risen sequentially, while management guided for stable margin: Calculated VNB margin for 4QFY25 rose 351bps QoQ and 213bps YoY to 30.5%. For 4QFY25, margin was better QoQ mainly due to decrease in share of ULIP business. Within the protection business the share of ROP has declined from 90% to 80%. The Rider attachment on products has also improved for the company. VNB margin stood at 27.8% for FY25, down -30bps YoY. For FY25, margin was impacted largely due to increase in share of ULIP business. On IRP basis, the share of ULIP was about 70% for FY25. This is expected to decline by about 500 bps in FY26. The company has launched products in the non ULIP segment to increase its share since the same is margin accretive. While the company will be working on increasing share of non-par guaranteed, protection and annuities, the share of low-margin Par is also expected to go up. The VNB margin for FY26 is expected to be maintained at 28%.

We maintain ‘BUY’ rating on SBIL with a revised price target of Rs 1975: We value SBIL at 2.0x FY27 P/EV for an FY26/27E RoEV profile of 18.6/18.5%.

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