What if a single insurance policy could move a stock’s price target? That’s roughly what just happened with SBI Life Insurance.

The global brokerage house Jefferies has retained its ‘Buy’ rating and raised its target price to Rs 2,600. From current levels, this indicates an upside potential of around 40%.

But what has changed? And can the company sustain this momentum? Let’s look at what is driving the brokerage’s view.

SBI Life Q1FY27: A strong start to the year

SBI Life delivered a better-than-expected performance in Q1FY27. Its Value of New Business (VNB) came in 19% ahead of Jefferies’ estimates and 13% above market expectations.

The key driver was strong Annualised Premium Equivalent (APE) growth, which jumped 36% year-on-year (YoY). A large group term insurance policy played an important role in this growth.

VNB itself grew 29% YoY, making it the fastest growth among life insurers that had reported their results at the time.

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What worked for SBI Life?

One of the biggest positives was the performance of the agency channel.

Agency APE grew 24% YoY during the quarter. Group protection also saw a sharp jump, with APE of Rs 1,230 crore during the quarter, exceeding the amount generated from the product during the entire previous financial year.

Individual products also gained traction. Annualised premiums from participating, non-participating and individual protection policies grew 33%, 26% and 19%, respectively.

Another factor was the improvement in the product mix. The company’s share of unit-linked insurance plans (ULIPs) declined, while protection and non-participating products gained ground.

There are still some pressure points

The quarter was not without challenges.

SBI’s own distribution channel remained relatively soft, with APE from the bank growing 10% YoY. 

The brokerage also flagged pressure on the Value of New Business margin, which declined by around 125 basis points YoY to 26.2%.

Jefferies attributed the decline to the loss of input tax credit, an unfavourable product mix and changes in operating assumptions.

Can margins improve from here?

This is where Jefferies sees another potential trigger.

The brokerage believes SBI Life could benefit from a continued shift towards protection products, stabilising costs and the impact of Goods and Services Tax (GST) becoming part of the base from the second half of the year.

It expects the VNB margin to reach 29% by FY28.

Jefferies said, “We continue to see upside to margin guidance (26-28%) considering ongoing mix shift away from ULIPs, growing share of pure protection, costs stabilizing and GST impact being in the base from 2H.”

Why Jefferies remains bullish

Jefferies has increased its FY27-FY29 VNB estimates by 1-3% and continues to view SBI Life as its preferred stock in the life insurance space.

The brokerage said, “SBI Life remains our top pick in life insurance.”

It also highlighted the company’s distribution strength through State Bank of India (SBI) and its agency network.

Jefferies values SBI Life at 16x September 2028 estimated VNB.

For investors, the key monitorables will be individual premium growth, product mix, margins and the performance of the SBI distribution channel.

Disclaimer: Investment in securities is subject to market risks. The brokerage ratings, target prices, and growth estimates cited in this report are for informational purposes only and do not constitute an offer, solicitation, or investment recommendation to buy or sell any stock. Market conditions and stock valuations are subject to rapid change, and past performance or analyst projections are no guarantee of future returns. Readers should conduct independent evaluation and consult a SEBI-registered financial advisor before making any investment decisions. This disclaimer has been generated using AI to support user well-being and responsible content consumption.