Nomura has reaffirmed its Buy rating on SBI Life Insurance and retained its target price of Rs 2,440, expressing confidence that the insurer will achieve mid-teens growth in both Annualised Premium Equivalent (APE) and Value of New Business (VNB) during FY27 despite temporary margin pressures.

The brokerage's view follows SBI Life's Q1FY27 results, where the company reported a 29 percent year-on-year increase in VNB, broadly in line with expectations. However, the VNB margin declined to 26.2 percent, falling short of estimates due to a significant increase in group protection business, where APE surged 313 percent year-on-year. According to Nomura, this business mix reduced the margin by around 60 basis points.

Nomura also noted that changes related to the GST regime continued to weigh on profitability, reducing the VNB margin by around 110 basis points during the quarter. Excluding the GST-related impact, the brokerage estimated that the VNB margin would have been approximately 27.4 percent.

The brokerage highlighted that SBI Life's management has reiterated its guidance of 14 to 15 percent year-on-year growth in individual APE and a VNB margin of 26 to 28 percent for FY27. Management expects margins to gradually recover as the contribution from group business moderates over the coming quarters and the GST-related impact fades.

Nomura identified the company's agency distribution network as a key growth driver. It noted that the Agency 2.0 strategy continues to perform well, with agency APE growth remaining in the 24 to 28 percent range since Q3FY26, including 24 percent growth in Q1FY27. During the quarter, SBI Life expanded its distribution network by adding approximately 34,000 agents and opening 11 new branches.

The brokerage also highlighted a positive outlook for the bancassurance channel after comments from the Chairman of State Bank of India indicated that SBI branches would continue selling products of subsidiary companies. Nomura believes this removes any uncertainty surrounding SBI Life's bancassurance business.

In addition, the brokerage pointed to strong growth in rider attachment and individual sum assured. Rider attachment in new ULIP sales reached 45 to 50 percent during Q1FY27, while individual sum assured increased 47 percent year-on-year. Although these initiatives contributed to a 45 percent increase in other operating expenses, management indicated that expense growth would remain aligned with the expansion in sum assured.

Commenting on the broader life insurance sector, Nomura observed that covered life insurance stocks have corrected between 9 percent and 26 percent so far this year, with SBI Life recording the smallest decline. The brokerage expects the company to deliver mid-teens VNB growth in FY27 and has therefore maintained its Buy recommendation and target price of Rs 2,440.