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Informist, Wednesday, Jul. 15, 2026

 

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--HDFC Life: Macro outlook in FY27 positive for our business
--HDFC Life's management's comments in post-earnings call with analysts 
--HDFC Life: Prioritising profitable customer gains in FY27 
--HDFC Life: Protection business growth to be robust Q2, slow in H2
--HDFC Life: Margins should improve with scalability, product mix 
--HDFC Life: To prioritise growth over margins FY27 
--HDFC Life: See VNB margins to be range-bound in coming quarters 
--HDFC Life: To grow in line with or faster than industry FY27 
--HDFC Life: Looking for clarity on implementation of risk weight framework
--HDFC Life: Impact of 60 bps on margins from GST change still to come 
--HDFC Life: Don't see big change in product mix from Q1 in rest of FY27 
--HDFC Life:Have comfortable capital position for growth over next 15-18 mos 
--HDFC Life: Unit-linked business gives better profitability now vs earlier 
--HDFC Life: Slowed down branch expansion after robust growth in last 2 yrs

 

NEW DELHI – HDFC Life Insurance Co. Ltd. will focus on growth over margin expansion in 2026-27 (Apr-Mar) as it seeks to stabilise market share. If the industry grows at around 15% in FY27, the management aims to grow its annualised premium equivalent by around 16%, keeping pace with or slightly beating the industry, top officials told analysts in a conference call post the company's Apr-Jun earnings.

 

Even as the internal rate of margin accretion improves, Managing Director and Chief Executive Officer Vibha Padalkar said the insurer would look to reinvest it in its products and operations to maintain the growth momentum. Margins should improve with the life insurer's scability and product mix. However, the value of new business margin is likely to be range-bound in the rest of the year from the 25.0% reported for Apr-Jun, the management of the country's largest private sector life insurance company said. 

 

The company also guided for the value of new business growth being in line with annualised premium equivalent growth. Value of new business rose to INR 8.8 billion in the June quarter from INR 8.1 billion a year ago, while the total annualised premium equivalent was up 9% at INR 35.15 billion. However, should the pace of growth slacken, the company may allow margins to expand, though that is not the priority currently. 

 

"If our growth is at about industry levels (in FY27), then the margin could be anywhere between last year and where we are today," the management said. In FY26, the new business margin was 24.2%. "If the growth is on the lower side, then the margin expansion basically will get us to the same outcome." 

 

Another boost to the growth story is HDFC Life's strong solvency ratio, which improved to 185% as on Jun. 30 from 177% a quarter ago after HDFC Bank invested in its preferential share issue worth INR 10 billion. With another INR 5 billion-INR 10 billion of subordinated debt issuance, the capital base was strong enough to sustain growth over the next 15-18 months, Chief Financial Officer Niraj Shah said. 

 

The life insurer also cited recent regulatory and legal changes as a reason for its margins being subdued, including an overhaul in goods and services tax effective from September last year. While customers no longer have to pay GST on insurance policies, margins were squeezed as insurers had to pay GST on their activities. The management said it had digested about 60 basis points of a hit on the margin in the June quarter, with another 60 bps to take effect still before the base normalises from September.

 

HDFC Life also expects its 13th month persistency ratio to rise in the coming quarters as operations normalise. The persistency ratio had fallen due to a shift in the product mix to lower-ticket sizes and unit-linked insurance plans, along with the inability of the insurer to convert all of its customers acquired in the busy March quarter, the management said. The 13th month persistency ratio fell to 84% in the June quarter from 86% a year ago. In addition to persistency, Padalkar said the focus was on profitable customer gains in FY27. 

 

The current macroeconomic backdrop is improving and conducive to long-term savings and protection business like HDFC Life, the MD said, though the management remains watchful of material shifts in the volatile global environment. The insurer was on track to implement accounting based on International Financial Reporting Standards, in line with regulations. The management also looked for more clarity on a proposed risk-based solvency framework but is looking forward to the implementation of the risk-based capital framework enacted by the Insurance Regulatory and Development Authority of India.

 

The regulator's proposed to allow insurers to participate in the repo and tri-party repo markets would also allow the company to manage risk in a more diversified way rather than being dependent on counterparties, the managemenet said. In the reporting quarter, HDFC Life Insurance posted a net profit of INR 6.11 billion, up 12% on year and 23% on quarter. Its net premium income rose over 14% on year to INR 165.48 billion in the June quarter. 

 

PRODUCT MIX

The management said HDFC Life's product mix would not shift significantly from the June quarter heading into the rest of the financial year. Its non-participating, term and annuity products have shown significant growth, while unit-linked insurance plans had picked up due to greater customer preference after shying away from participatory products due to volatility in the equity market.

 

The share of participating products fell to 15% in the June quarter from 32% a year ago, while non-participating, term and annuity products made up 41% of the mix, up from 30%. Unit-linked plans rose to 44% of the mix from 38% a year ago, the largest individual share of the mix. The protection business may continue its quick pace of growth in the September quarter but go slow in Oct-Mar as the tailwinds behind its growth slow and the base normalises, the management said.

 

The rise in bond yields over the past year has also helped push guaranteed, non-participating products as they offer higher returns. HDFC Life has also increased its presence in this segment after FY26 was characterised by unprofitable competitive intensity. As the environment turns more benign, the insurer has seen the share pick up, which should continue to be significant in the rest of the financial year. 

 

"We had mentioned that basically the customer mindset moved towards unit products in a fairly big way," the management said. "The customer thought process on asset allocation will, in our minds, always be a very significant guiding factor on product mix. So, we just want to ensure that we are well positioned across each of these categories and competing on sensible terms."

 

The company's new variable annuity product innovations launched earlier in 2026 had also been gaining traction, with the target audience being younger customers putting in money over a longer period but in smaller ticket sizes. HDFC Life is also working with the regulator to gauge how comfortable it is on opening up the segment, with product development ongoing. In addition, the asset side of the market must also develop through direct instruments as well as derivative participation, helping to manage risk, the management said.

 

DISTRIBUTION MIX

Going ahead, the life insurer will slow down the pace of opening new branches even though the robust growth in the past two years led to increased success. The agency business is likely to grow around 20% on year in FY27, similar to the 21% pace sustained in the June quarter, the management said. The uptake was led by protection and annuity business. Around 70-75% of its new policies written come from tier-II and tier-III cities, with the push led by both agency and bank distributors. Branches opened over the past 24 months contributed around 16% of the annualised premium equivalent sourced through the agency route, the management said.

 

Distribution through HDFC Bank would also revive from the September quarter after sluggish annualised growth in the segment, though the two-year compounded annual growth rate of just over 10%, the management said. The bancassurance route through the parent bank had seen a slowdown in growth both due to competitive intensity as well as a high base from FY26. However, the management did not answer questions from analysts on whether HDFC Life would recover its position of contributing around 65% of the private sector lender's insurance product sales, from the current percentage in the low 60s. 

 

In terms of regulation, the life insurer was working to implement the Reserve Bank of India's regulations on best practices with third-party product distributors by the effective date of Jan. 1, the  management said. HDFC Life is also awaiting IRDAI's discussion paper on distribution regulation.  End

 

Edited by Avishek Dutta

 

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