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SBI Life’s Q1FY26 performance was impressive, with healthy VNB margin of 27.4% (up by 60bps YoY) vs consensus/our estimate of 27.5%/27%, respectively. The improvement in VNB margin was largely driven by the shift in product mix, from ULIP toward Non-Par and Protection products. The company maintains focus on growing these two segments, while diversifying the product mix. The management targets expanding the agency channel, driving deeper penetration into tier-2 and beyond markets; also, with a shift toward a diversified product mix, Agency channel margins are likely to witness improvement. Overall, the management re-iterated its guidance of growing Individual APE in the mid-teens, while maintaining VNB margin within the ~27- 28% range. We keep our estimates unchanged and, given the favorable risk reward, we re-iterate BUY on SBILIFE with unchanged Jun-26E TP of Rs2,100, implying FY27E P/EV of 2.2x. The market seems to be underappreciating its sustained performance delivery, which echoes in its FY17-25 numbers – it has compounded EV and VNB at 19.8% and 24.4%, respectively, without any external capital infusion while seeing interest rate movements, equity volatilities, and the Covid-19 shock.

Product mix shift drives healthy margin delivery

SBILIFE delivered a robust and largely in-line results in Q1FY26 – APE (Rs39.7bn), VNB (Rs10.9bn), VNB margin (27.4%) and EV (Rs742.6bn), largely in-line with consensus/our estimates (Exhibit 1). Product mix shift toward Non-Par and Protection products from ULIPs drove a 60bps YoY margin expansion. Resultantly, VNB at Rs10.9bn grew 12.1% YoY and was in line with our/consensus estimate of Rs10.8bn/Rs10.9bn, respectively. Persistency ratio across the 13M and 61M cohorts saw improvement, whereas opex ratio witnessed a slight elevation.

Focus remains on growing the agency while diversifying the product mix

While Banca has remained the primary contributor to the distribution mix, the management has strategically prioritized expanding the agency channel. During the quarter, 36 new branches were opened with an aim to deepen penetration in tier 2 and beyond markets. Despite the investments in distribution, the management believes productivity improvement and growth in the agency channel should offset the impact on VNB margin. Although agency growth was muted during the quarter, the management remains confident of driving ~25% retail APE growth in the agency channel. Additionally, the company is committed to diversify the product mix toward Non-Par and Protection products. Some green shoots in the banca channel further drive the management optimism around banca growth.

Favorable risk reward, re-iterate BUY

With its warhorse distribution channel, strong brand, and low cost structure, SBI Life is poised to deliver sustainable EV compounding. We keep our estimates unchanged; reiterate BUY, with unchanged Jun-26E TP of Rs2,100, implying FY27E P/EV of 2.2x

Earnings Conference Call Highlights

• The company witnessed improvement in VNB margin, largely on account of a shift in product mix from ULIP toward Par, Non-Par, and Protection products. The management maintains focus on diversifying the product mix.
• The protection segment saw strong traction driving ~53% growth in APE, reflecting customer demand for financial protection. The credit life segment witnessed ~25% growth, whereas the Group Term Insurance segment saw lumpy growth during the quarter. Ahead, the management expects growth momentum in the Credit Life business to continue, driven by ~10-15% growth in credit disbursals by the bank and higher attachment rates.
• The company saw aggressive pricing in the Non-Par Savings segment, in terms of IRRs. Despite the price aggression, the company delivered modest growth in the Non-Par savings segment.
• During the quarter, the company added >31,000 agents on gross basis, and opened 36 branches during the quarter. The company’s branch expansion plans deepening its presence in the tier-2 and beyond markets.
• The product mix achieved in the agency channel is in line with the company’s expectations; the management remains confident that growth in the channel will bounce back with improved productivity.
• The company has faced on-ground competition for recruiting agents. It is not the first time that competition is also focused on the agency channel. Over the years, investments in the agency channel have paid off and, going forward, the management remains confident of the momentum continuing.
• MTM gains on account of healthy movement in the equity market has contributed to EV growth. The management mentioned that there is no major variance in the EV.
• The product launches in recent months have been in the Non-Par and Protection segments. The management remains confident that the company will be able to maintain the current product mix in the agency channel.
• The management stated that there are some green shoots visible in the banca channel and is confident of the growth continuing. During the quarter, the Banca product mix improved and, going ahead, the product mix should move in a healthier direction.
• The management reiterated its guidance of delivering a mid-teens Retail APE growth, while VNB margins are likely to remain in the 27-28% range.
• The company has revamped the products in the Retail Protection segment, to meet customer requirements and to enhance margins too. Protection growth was seen across all geographies from both, the bank and Agency channels.
• SBI Life plans to launch a money-back plan in coming quarters and continues enhancing its protection offerings, particularly in the health segment. Rider offerings are expected to expand further, including availability for existing policyholders during renewal.

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