The trailing impact of disruptions related to goods and services tax (GST) and recent policy changes dulled the March quarter for life insurers. HDFC Life Insurance and ICICI Prudential Life Insurance, India's second and third largest private life insurers respectively, reporting softer growth and lower margins in what is usually their strongest premium season. Analysts expect the pressure to spill into the first half of the current fiscal year.
HDFC Life and ICICI Pru Life posted their earnings on 16 April and 14 April, respectively. Life Insurance Corporation (LIC) of India and SBI Life Insurance are yet to do so.
HDFC Life’s value of new business (VNB) margin moderated to 24.2% in FY26 from 25.6% in the previous year. For Q4, the VNB margin moderated to 23.9% from 26.5% in the corresponding quarter of the previous year.
“HDFC Bank’s counter share went down to low 60s in 4QFY26 from mid-60s at start of the year, and this affected bancassurance sales which were weak. Management attributed this to aggressive pricing of products by competitors which resulted in lower sales for HDFC Life through HDFC Bank channel,” Macquarie Research said in a note.
HDFC Life posted a consolidated net profit of ₹498 crore for Q4 FY26, up 4.7% from a year ago. For FY26, the net profit was up 6% at ₹1,910 crore. ICICI Pru Life posted a 58% rise in net profit for Q4 to ₹609 crore and a 35% increase in FY26 profit to ₹1,600 crore.
Diverging trends
While ICICI Prudential Life’s VNB margin rose to 24.7% from 22.8%, its annualized premium equivalent (APE) grew a muted 2.2% on year for FY26 and 9.4% for Q4.
In the post earnings analyst call, ICICI Pru Life's management said that the 21% on year decline in APE of traditional saving products was owing to an inflated base in the previous year and uncertainty due to the West Asia war. Annuity APE also declined 5.8% year-on-year, whereas protection sales rose 30.4%, led by 60.5% rise in retail protection plans following the removal of GST on retail plans.
Brokerage firm BNP Paribas, in a note, said ICICI Pru Life's APE growth has slowed after two years of “sharp acceleration”, with sales of unit-linked insurance plans also slowing down in the last two quarters of FY26.
“Unfortunately, while acknowledging the strategic agility on display, we continue to hold reservations about its sustainability,” BNP Paribas said, adding that parent ICICI Bank’s “unenthusiastic stance” on sale of participating, credit-product and unit-linked insurance policies (ULIPs) could lead to sustained slowdown in APE growth, going ahead.
“This has long-term competitive implications within the privileged cohort of skin-in-the-game banca-blessed insurers,” BNP Paribas said, adding that ULIP scale is critical to competitiveness in the life insurance business given the advantage over pure agency distribution players such as state-owned Life Insurance Corporation (LIC) of India.
APE growth for ICICI Pru Life was highest through partnership distribution growing 23.4% on year for FY26 and 17.9% in Q4. Growth via the bancassurance channel slowed to 3.6% for the full year and 4.7% for Q4. Direct sales were 0.9% higher for Q4 and 4.9% lower on year, whereas agency sales were 3.4% lower for the quarter and 10.5% for the full year.
Pressure to persist, valuations converge
In the analyst conference, HDFC Life’s management said it expects the impact from the loss of input tax credit to normalize over another two quarters, indicating that margins will remain under pressure in the first half of the current fiscal year.
Stocks of life insurance companies are down 8-22% from their 52-week highs, with some weakness on a year-to-date basis for HDFC Life and ICICI Pru Life, Bernstein Research highlighted in a note on 16 April. “Key questions in our mind include FY27 growth (GST base effect), potential price hikes as an offset, commission regulations & IFRS implementation (accounting will change materially),” the note said, adding that the current prices reflect “some opportunity but also some concerns”.
“The valuation premium that HDFC Life has enjoyed vs. peers has disappeared over the last few months,” Bernstein Research said, adding that the expected growth and margin trajectory for the three large players—SBI Life, HDFC Life and ICICI Prudential—has now become similar, and valuations have converged. As such, ICICI Prudential will need to deliver consistent topline growth momentum to see an upgrade in its rating, it added.