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The stock of SBI Life Insurance Company, India’s largest private life insurer by market capitalization, has gained 17% over the past year. In contrast, HDFC Life Insurance Company and ICICI Prudential Life Insurance Company—the second and third largest—have declined 11% and 10%, respectively, and hit fresh 52-week lows on Tuesday.

The divergence is being driven by differences in valuation and growth trajectories.

Valuing life insurers is challenging. Earnings per share (EPS) or reported profit after tax does not fully capture performance, as costs are recognised upfront while profits from policies accrue over several years.

Instead, economic profit—or value of new business (VNB)—is a more relevant metric. VNB is used to derive the Price/VNB ratio, similar to the price-to-earnings (P/E) ratio.

Despite its stock outperformance, SBI Life remains the cheapest among peers. Based on Motilal Oswal Financial Services’ FY26 estimates, SBI Life trades at a Price/VNB of 27x, compared with 30x for HDFC Life and 29x for ICICI Prudential.

SBI Life’s valuation advantage is supported by stronger operating performance in 9MFY26.

Its annualized premium equivalent (APE)—a proxy for topline or revenue in life insurance—is calculated by adding regular premiums and one-tenth of single premiums. It grew 16% year-on-year to ₹18,520 crore. In comparison, APE grew 11% for HDFC Life and declined 1% for ICICI Prudential.

SBI Life also reported the highest VNB growth at 17%, versus 7% for HDFC Life and 6% for ICICI Prudential.

A key driver of SBI Life’s outperformance is its ability to leverage its parent’s extensive branch network.

State Bank of India operates about 23,000 branches, far more than roughly 9,000 for HDFC Bank and 7,000 for ICICI Bank, according to their FY25 annual reports.

This gives SBI Life a significant edge in bancassurance—selling insurance through bank channels.

The bank’s large customer base also enables cross-selling of credit insurance, which protects lenders if borrowers default due to death or disability.

SBI Life’s commission ratio, at about 5% of net premium in 9MFY26, is significantly lower than 12% for HDFC Life and 11% for ICICI Prudential. Lower commissions help boost profitability.

Despite its current lead, SBI Life may face a tougher growth trajectory in FY27.

Unit-linked insurance plans (ULIPs) contributed 62% of its total APE in 9MFY26—significantly higher than 38% for HDFC Life and 49% for ICICI Prudential.

ULIPs are closely linked to equity market performance. If markets remain weak amid geopolitical tensions and other factors, selling ULIPs could become more challenging.

In this context, SBI Life’s standalone valuation at a Price/VNB of 27x would require at least 15% VNB growth in FY27 to keep its Price/VNB-to-growth ratio (similar to PEG) below 2x.

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