SBI Life stock scales new high; up 13% in 3 days on strong Q1 performance

The stock of life insurance company was trading higher for the third straight day, and has rallied 11 per cent after the company reported a strong performance in June quarter (Q1FY25).

Shares of SBI Life Insurance hit a new high of Rs 1,777.40, as they surged 5 per cent on the BSE in Friday’s intra-day trade. The stock of life insurance company was trading higher for the third straight day, and has rallied 11 per cent after the company reported a strong performance for the June quarter (Q1FY25).

SBI Life reported a 34.3 per cent year-on-year (YoY) increase in net profit at Rs 519.52 crore during Q1FY25, backed by healthy growth in premiums. Its value of new business (VNB) increased 12 per cent YoY to Rs 970 crore in Q1FY25 as against Rs 870 crore in Q1FY24. VNB is the present value of all future profits to shareholders measured at the time of writing the new business contract.

 

However, the company reported a contraction in VNB margin at 26.8 per cent in Q1FY25 compared to 28.8 per cent in the corresponding period last year. VNB margins are a measure of profitability for life insurance companies.

Meanwhile, the company’s new business premiums grew by 13 per cent YoY to Rs 7,030 crore in Q1FY25 against Rs 6,210 crore in Q1FY24. Its annualised premium equivalent (APE) was up 20 per cent YoY to Rs 3,640 crore, driven by growth in unit linked and non-par segment. APE is the sum of annualised first-year regular premiums and 10 per cent weighted single premiums. The company reported a significant improvement of 150 bps and 229 bps seen in 13M and 61M persistency. 

SBI Life’s Q1FY25 VNB margins at 26.8 per cent, while highest among peers, contracted 200 bps YoY/ 130 bps quarter-on-quarter (QoQ), driven by lower protection APE growth and the company’s decision to not pass on lower interest rates to customers. It expects FY25 VNB margins at 28 per cent with minimal impact from new surrender norms and product-mix shift.

Analyst at BNP Paribas India has an ‘outperform’ rating on SBI Life with a target price of Rs 2,450 per share. The key to positive surprise for the stock lies in further traction in contribution from the SBI channel as well as deeper capability building in the retail pure-protection business.

“On both variable- and fixed-cost economies, SBI Life remains the clear leader in Indian life insurance. Valuations, at 2.5x FY25E P/EV, are attractive given our expectation that a 20 per cent plus RoEV is sustainable. With 50 per cent upside potential, it remains our top pick across our BFSI coverage. Risks relate to any tectonic regulatory shifts and a material alteration in management structure,” the brokerage firm said in result update.

Analysts at Incred Research Services believe that with the introduction of new surrender policy norms of the Insurance Regulatory and Development Authority or IRDA from 1 Oct 2025, the pressure margin would be even higher. However, a management remains firm over improving the share of protection plans to cover up for the margin loss. 

The company intends to launch new products, especially for ultra HNI customers who have low medical procedure. Also, the company is backing on improved demand for home loans and intends to tie up for education loans to target young customers for its protection plans. Management has maintained its guidance of VNB margin in the range of ~28 per cent for FY25F, the brokerage firm said in result update. 

The stock however, was trading above analysts target price of Rs 1,750 per share. “We like SBI Life for its leadership strength and superior operating efficiency.  However, we remain concerned over the slowing growth trajectory due to the levy of tax on maturity in the case of large-ticket premium products,” the brokerage firm said.