New Delhi, March 25 -- 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 ...