HDFC Life sees growth outpacing industry despite early-year slowdown

Synopsis

HDFC Life expects to outperform the life insurance industry in H1 FY26, even as sector growth slows due to regulatory changes and weak demand. Recovery is expected in H2.

HDFC Life Insurance expects to continue to grow faster amid the expected slowdown in the life insurance industry in the first half (April-September) of this fiscal year.

“I think our view still remains that the industry will be slightly slow for the first half (H1), but we do expect that we will continue to outperform the industry,” said Vineet Arora, Executive Director & Chief Business Officer in a post earnings call with analysts.

In the June quarter, the total annualized premium equivalent (APE), a metric of sales growth, rose 12.5% year-on-year to Rs 3,225 crore. This translates into a two-year CAGR of 21%, nearly double of 11% for the industry.

According to CareEdge Ratings, the industry slowdown is attributed to the impact of the revised surrender value regulations, which came into effect October 2024, and muted consumer demand.

HDFC Life management expects growth to pick up in the second half (October-March) or H2 of the current financial year. “One is the base effect of last year when the growth in H2 was slower than the growth in H1, so mathematically it should look better. Second, as the fundamentals of the economy move, I think that would be something that we will also have to discover along the way. But so far, we believe that, you know, H2 should be better than H1,” Arora said.

The company’s value of new business (VNB) margin stood at 25.1% in April-June, a slight uptick from the previous year of 25%. The management has guided to maintain margins through the year, balancing short-term dynamics with its long-term agenda of sustainable and profitable growth.

Niraj Shah, Executive Director & Chief Financial Officer, said that margins are expected to be range-bound this year given that overall growth is expected to be soft. “Last year, we were talking about 18-20% kind of growth. This year is likely to be lower than that. So, the fixed cost absorption as such, while it will even out through the year, it will still be slightly lower than last year.”

He added that there is scope for margin expansion from a three to five years perspective.

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