Nomura has maintained its 'Buy' rating on SBI Life Insurance, retaining the stock as its top pick in the life insurance sector, despite cutting its target price to Rs 2,340 from Rs 2,440 after raising its risk-free rate assumption.
The brokerage said SBI Life's value of new business (VNB) margin stood at 29.2% in Q2FY27, beating its estimate by 50 basis points. Excluding the impact of GST, VNB margins in the September quarter and first half of FY27 would have been 30% and 28.8%, respectively.
Total annualised premium equivalent (APE) grew 7.4% year-on-year in Q2FY27, led by non-participating products, which rose 27%, annuity products, up 28%, and individual protection, up 14%. Nomura said the scale-up in high-margin products was a key driver of the expansion in VNB margins.
SBI Life Insurance's individual APE growth stood at 12% year-on-year in the first half of FY27, below its full-year guidance of 14-15%. However, management reaffirmed its growth guidance, with the third quarter typically a strong period for the insurer, driven by the bancassurance channel.
Nomura expects APE to grow 16% and VNB to rise 17% year-on-year in FY27. It believes sustained momentum in non-par products, annuity and individual protection could support VNB margins of 26-29% in Q3 and Q4FY27, translating into a 27.6% margin for the full year.