Motilal Oswal has reiterated a ‘Buy’ rating on SBI Life Insurance with a target price of Rs 2,400, implying an upside of about 24%. The domestic brokerage house sees the company delivering a stable growth trajectory.
The report noted that annualised premium equivalent is expected to grow at around 15% over the next few years. They expect the tvalue of new business margins to improve gradually, aided by a better product mix and cost discipline, even as regulatory changes around commissions may create some near-term friction.
SBI Life Insurance holds ground with consistent premium growth
Motilal Oswal pointed out that SBI Life Insurance has maintained a steady pace of growth that stands ahead of the broader industry. The company reported a compound annual growth rate of 15% in annualised premium equivalent over FY20 to FY25, compared with about 6% for the industry.
The brokerage attributed this to the strength of the State Bank of India distribution network and a wide agency base, which continues to support customer acquisition across segments.
“SBI Life continues to be a consistent compounder supported by its extensive SBI branch network and one of the largest agency bases in the private life insurance industry,” the report states.
The report also noted that growth in FY26 remained healthy at 15% year-on-year so far, ahead of the industry’s 13%, suggesting that momentum has held up even in a competitive environment.
Product mix moves toward higher margin segments
A key part of the investment case rested on a gradual move toward higher margin traditional products. Motilal Oswal expects SBI Life Insurance to reduce the share of unit-linked insurance plans in the individual annualised premium equivalent from around 67% to about 60%.
This change is expected to support margins over time, even as protection products gain a larger share of the business mix.
“The company is gradually shifting its mix toward higher margin traditional products, aiming to reduce ULIP share and increase protection contribution,” the brokerage says.
The report adds that protection products are seeing strong traction, which should lift overall business quality and profitability in the coming years.
Margins seen improving despite near term pressures
Motilal Oswal estimated that the value of new business margins may remain within a healthy band of 26-28% despite some temporary headwinds.
The brokerage noted that the loss of input tax credit may weigh on margins in the short term, but this impact is expected to ease over time.
“The gradual shift toward higher margin products, robust operational efficiency, and rising rider attachments is expected to help in maintaining VNB margin in the range of 26 to 28%,” the report stated.
It also pointed out that margins may improve by around 50 basis points annually over the next two years, reaching about 28.5% by FY28.
Market share gains continue across private insurers
The report highlighted that SBI Life Insurance has steadily increased its market share within the private life insurance segment.
Data presented on page 2 shows that the company’s private market share has risen to around 22% in FY26 year to date, up from about 20% levels seen in earlier years.
This improvement reflects consistent execution across distribution channels and product positioning.
“The better than industry growth trajectory has resulted in an improvement in market share to 14.2% in FY26(so far),” the brokerage added while referring to overall industry positioning.
The company is the largest private life insurer in India by market share, ahead of peers such as HDFC Life and ICICI Prudential Life.
Commission changes may cause short-term disruption
Motilal Oswal flagged regulatory changes around commissions as a near-term factor to watch.
The Insurance Regulatory and Development Authority of India is considering revisions that could include caps or staggered commission structures. This may lead to some adjustment in product pricing and distributor incentives.
“Commission regulations may create a temporary hiccup with the need for renegotiations and product refilling,” the report says.
However, the brokerage believes the long term demand outlook remains intact, supported by low insurance penetration and improving awareness.
IFRS transition to bring more transparency
The report also discussed the proposed implementation of Indian Accounting Standards for insurers starting April 2026.
This change is expected to improve comparability and transparency across companies, though it may require adjustments during the transition phase.
“IRDAI has proposed to implement Ind AS for all insurers, promoting better transparency, comparability, and alignment with global standards,” Motilal Oswal notes.
Key changes will include recognition of contractual service margins and deferred acquisition costs, which will alter how earnings are reported over time.
Strong distribution remains a core advantage
Motilal Oswal placed significant emphasis on SBI Life Insurance’s distribution strength.
The company benefits from deep access to State Bank of India’s customer base through bancassurance, along with a growing agency network that helps drive growth in individual policies.
“With its strong bancassurance funnel and advisory-led agency channel, SBILIFE stands to disproportionately benefit from industry tailwinds,” the report says.
This dual channel approach gives the company reach across urban and semi-urban markets, helping it sustain growth even when conditions turn uneven.
Growth outlook steady over the medium-term
The brokerage estimated that SBI Life Insurance may maintain annualised premium equivalent growth of around 15% through FY26 to FY28.
This growth is expected to be supported by deeper penetration of the bancassurance ecosystem, improving agent productivity, and continued product innovation.
“We expect APE growth at 15% for FY26, and the momentum is likely to be sustained with a FY26 to FY28 CAGR of 15%,” the report states.
The company is also expected to close FY26 with growth of about 14% in annualised premium equivalent.
Valuation supported by return ratios and consistency
Motilal Oswal believed SBI Life Insurance’s valuation remains justified given its consistent growth and return profile.
The brokerage expected return on embedded value to stay above 18%, supported by steady margins and disciplined cost management.
“The combination of sustained APE growth, stable VNB margins, and disciplined cost management positions SBI Life to achieve over 18% operating RoEV,” the report says.
The target price of Rs 2,400 is based on 2.1 times estimated FY28 embedded value, reflecting confidence in long-term earnings visibility.
Conclusion
Motilal Oswal builds its case on SBI Life Insurance around consistency rather than sudden acceleration. Growth has held steady, margins are expected to improve gradually, and distribution strength continues to provide a reliable base for expansion. The report makes a case for staying with a business that has delivered predictable performance across cycles.