Having a low cost structure, SBI Life Insurance maintains its cost leadership in the insurance space.

SBI Life Insurance reported a rebound in business premium in the month of October, with annual premium equivalent growing 14% on-year basis. This growth came after months of consecutive decline. Improvement was also seen in policy retention and the ULIP business on the back of improved capital market performance. SBI Life Insurance is now looking to optimize its product mix in the protection/annuity business, according to brokerage firm Motilal Oswal. “This should help in improving profit margins to ~22% by financial year 2023,” said brokerage firm Motilal Oswal. 

Fundamentally strong with cost leadership

With normalcy returning steadily, SBI Life Insurance recorded a growth APE grew 114% on-quarter basis. Meanwhile, the ULIP business improved 166% from the first quarter of this fiscal and protection trends remained to be strong. Motilal Oswal said that the renewal trend for SBI Life Insurance remains strong and way ahead of peers. “With retail disbursements moving towards normalcy, we expect business volumes to revive further in coming months,” the report said. 

Having a low cost structure, SBI Life Insurance maintains its cost leadership in the insurance space. It has one of the lowest Banca commission rates when compared to peers, and has maintained that for several years now. This helps SBI Life Insurance maintain a strong control on cost ratios. The SBI Life is expected to sustain its cost leadership over the years with the management continuing to invest in growing the agency channel, cost-intensive Protection business and digital initiatives. 

In the current fiscal year, Net profit is expected to grow 16.6% despite a marginal fall in total income. The VNB margin has improved to 20.2%, led by an increase in Retail Protection during the second quarter of this fiscal year. “We expect VNB margin to expand in the medium term as SBI Life Insurance further optimizes its product mix with a focus on the Protection/Annuity business, re-bound in premium growth from FY22E onwards and re-pricing of Protection products,” Motilal Oswal said. 

Strong parent backing

With a strong parent in State Bank of India backing SBI life a long-term structural growth story remains intact. The insurance firm also benefits from the revival in credit growth, with SBI indicating that the retail disbursement run-rate is now higher than pre-coronavirus levels. SBI’s strong distribution network aids the company’s strong performance.


The brokerage firm sees a 25% upside for SBI Life Insurance stock with a target price of Rs 1,050 per share. Currently the stock is trading at Rs 837 apiece. Commanding an individual market share of 11.7% at the end of the first half of this fiscal year, SBI Life Insurance is a market leader. “We expect SBI Life Insurance to continue to deliver good persistency and Renewal growth. At the same time, it should maintain its cost leadership,” the report said. With outlook for margin improvement, the brokerage firm expects operating return on embedded value to sustain at 18% by financial year 2023. 

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