HDFC Life Insurance Company Limited reported business growth below its budgeted mid-teens new sales growth target during Q3, according to management commentary from the earnings call. The company posted net profit after tax of ₹421.00 crores for the quarter, marking a 1.00% increase from the previous year, though underlying growth excluding one-time impacts stood at 15.00%.

Financial Performance Overview

The company's Q3 performance was impacted by GST changes and labour code revisions. Revenue for the quarter reached ₹18,240.00 crores, representing an 8.57% year-on-year growth. Managing Director and CEO Vibha Padalkar explained that backing out GST and wage code impacts, the actual profit growth would be 15.00%.

Growth Performance vs Targets

During the earnings call, management acknowledged that business growth has been lower than the budgeted mid-teens new sales growth target. Individual annualised premium equivalent climbed 12.00% in the quarter, driven by significant growth in term insurance following GST exemption on individual protection plans. Term APE jumped 70.00% year-on-year, taking the share of protection in retail business to 11.00%, the highest achieved so far.

Strong Growth in Protection Business

The company maintained its market position as number two in the private space and number three overall, while gaining market share. For the nine-month period, retail protection business grew 42.00%, significantly ahead of the broader industry. Notably, 80.00% of customers buying term plans were new to HDFC Life.

Margin Impact and Recovery Strategy

Value of New Business margin declined about 200 basis points from a year ago to 24.00% in the quarter due to removal of input tax credit post GST exemption on individual life insurance policies. CEO Padalkar noted that excluding GST impact, margins would have been flat, and expects Q4 to perform better than Q3.

The company is implementing a multi-pronged strategy to neutralize GST impact, having already reduced it from an initial 300 basis points to about 190 basis points. The strategy includes distributor commission adjustments, cost rationalization, vendor renegotiations, and product mix optimization towards more profitable unit-linked products.

The life insurance sector is showing early signs of recovery after a challenging start to FY26, according to Pankaj Pandey, Head of Research at ICICI Securities, who has identified select stocks as attractive investment opportunities despite sector-wide headwinds. In an exclusive interaction with ET Now, Pandey highlighted HDFC Life Insurance , LTIM, and KPIT as his top investment picks.

Life Insurance Sector Performance

The life insurance industry faced significant challenges in the opening quarter of FY26, with Pandey characterizing the period as "pretty soft." The sector recorded modest growth of approximately 5.5% during this period, reflecting the subdued market conditions that have impacted the broader insurance landscape.

Market Outlook and Investment Strategy

Despite the challenging operating environment, Pandey noted that early signs of recovery are beginning to emerge in life insurance growth patterns. However, he cautioned that margin pressures are likely to continue affecting the sector in the near term, suggesting that investors should remain selective in their approach to insurance sector investments.

The identification of HDFC Life Insurance, LTIM, and KPIT as top picks indicates ICICI Securities' confidence in these companies' ability to navigate the current market challenges and deliver value to investors despite broader sector headwinds.

Strategic Positioning

The research head's comments suggest that while the life insurance sector faces near-term challenges, certain companies are well-positioned to benefit from the emerging recovery trends. The selection of these specific stocks reflects a strategic approach to identifying value opportunities within a recovering but still pressured market environment.

The mixed outlook for the life insurance sector, combining early recovery signals with persistent margin pressures, underscores the importance of selective stock picking and thorough fundamental analysis in the current market conditions.

Source: https://www.etnownews.com/markets/hdfc-life-ltim-kpit-top-picks-by-pankaj-pandey-of-icici-securities-article-153435085