HDFC Life Insurance Company Ltd delivered a decent performance in the December quarter (Q3FY26), broadly in line with expectations. New business premium expanded 10% year-on-year to ₹24,550 crore, with retail protection and unit-linked insurance plan (Ulip) products leading from the front.
Higher rider attachment and increased sum-assured multiples in Ulips translated into a 70% year-on-year increase in the segment’s annualized premium equivalent (APE) and a 55% expansion in retail sum assured.
HDFC Life’s year-on-year APE growth of around 11% was ahead of the industry’s nearly 10% rise, noted Elara Capital (Securities).
But reacting to Q3FY26 earnings, the stock fell around 1.6% on Friday and is down 11% from its 52-week high of ₹820 seen in June 2025. Regulatory headwinds-led volatility has weighed on investor sentiment, mainly stoking fears of margin compression.
The recent quarters have been marked by significant regulatory upheaval. On one hand, goods and services tax (GST) 2.0 brought down individual insurance policies into the zero GST slab, making them more affordable.
Protection and Ulip products have seen strong momentum post the GST rehash. On the other hand, however, insurers can no longer claim input tax credit, have been shelling out more under the new surrender penalty norms introduced by the regulator Irdai in October 2024, and must incur higher employee costs under the new labor codes introduced late last year.
In the open-architecture system where banks partner with multiple insurers, aggressive pricing has led to a slowdown in non-par products. Margins have also been affected.
Though the value of new business (VNB) clocked a 7% increase in first nine months of FY26, new business margin was lower at 24.4% against 25.1% a year ago.
Expansion, higher employee costs, and buildout of the agency channel have also contributed to the decline in operating return on embedded value (RoEV) from 17% to 15.6%.
Excluding these one-off factors, “growth would have been 13% for 9MFY26”, according to the management. Profit would have been 15% higher on-year. That said, operational adjustments and distribution realignments are underway.
The estimated annualized impact from GST 2.0 on margins has already moderated from 300 basis points (bps) to 200 bps in Q3, and is expected to shrink further to 100 bps in Q4. Margins can be expected to stabilize by FY26-end and reach 25%, while growth should normalize by FY27. According to Antique Stock Broking, the worst in terms of growth/profitability seems to be behind HDFC Life.
Among other earnings highlights, coupled with stable 13-month persistence and improved 61-month persistence, which enabled a 15% rise in renewal premium, the company clocked total premium at ₹52,965 crore, a 13% increase over the same quarter last year.
Profit after tax increased 7% year-on-year to ₹Rs 1,414 crore. Market share inched up to 10.9% for the nine-month period ended December 2025, from 10.8% in the year-ago period. This was decent against the current backdrop.
Further, aided by ₹₹749 crore of subordinated debt raised during the quarter, solvency ratio came in at 180%. Its product mix is favourable, tilted towards the high-margin protection products.
Despite competition in bancassurance, the insurer’s wallet-share within HDFC Bank has been stable. Along with agency and branch network expansion which lend deep presence in tier-3 cities, the insurer seems set for faster growth and margin expansion.
The stock is trading at 2.2x FY27 enterprise value based on Antique’s estimates.
